As filed with the Securities and Exchange Commission on February 9, 1998
Registration No. 333-43697
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 6035 Applied For
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
52 North Main Street, Gloversville, New York 12078-3084 (518) 725-6335
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-------------
Lewis E. Kolar
President and Chief Executive Officer
Adirondack Financial Services Bancorp, Inc.
52 North Main Street
Gloversville, New York 12078-3084
(518) 725-6335
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------
Please send copies of all communications to:
Kip A. Weissman, P.C.
Daniel L. Torbenson, Esq.
SILVER, FREEDMAN & TAFF, L.L.P.
(A limited liability partnership including professional corporations)
1100 New York Avenue, N.W.
Seventh Floor, East Tower
Washington, DC 20005
(202) 414-6100
-------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum
Class of Securities to be Offering Price Aggregate Offering Amount of
to be Registered Registered (1) Per Share (1) Price (1) Registration Fee
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 661,250 shares $10.00 $6,612,500 $1,951(2)
Interests in Gloversville
Federal Savings and Loan
Association 401(k) Profit
Sharing Plan and Trust N/A(3) N/A N/A N/A(3)
======================================================================================================
</TABLE>
- -----------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously submitted in conjunction with the filing of Form S-1 on January
2, 1998.
(3) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, as
amended, this Registration Statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the employee benefit plan
described in the Prospectus Supplement. In accordance with Rule 457(h)(2)
no separate fee calculation is made for plan interests.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS SUPPLEMENT
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
401(K) PROFIT SHARING PLAN AND TRUST
This Prospectus Supplement relates to the offer and sale to
participants (the "Participants") in the Gloversville Federal Savings and Loan
Association 401(K) Profit Sharing Plan and Trust (the "Plan") of up to 30,000
shares of Adirondack Financial Services Bancorp, Inc.'s (the "Holding Company")
common stock, par value $.01 per share (the "Holding Company Stock") and related
participation interests in the Plan, as set forth herein.
In connection with the proposed conversion of Gloversville Federal
Savings and Loan Association ("Gloversville") from mutual to stock form (the
"Conversion") and the formation of the Holding Company as the holding company of
Gloversville, the Plan was amended on January 1, 1998 to provide for an
investment fund (the "Employer Stock Fund") consisting of Holding Company Stock
as an investment option for the Participants in the Plan. The Plan permits
Participants in the Plan to direct the trustee (the "Trustee") of the Employer
Stock Fund to purchase Holding Company Stock with amounts in the Plan
attributable to the accounts of such Participants.
This Prospectus Supplement relates solely to the initial election of a
Participant to direct the purchase of Holding Company Stock in the Conversion
and not to any future purchases under the Plan or otherwise.
The Prospectus dated February __, 1998 of the Holding Company (the
"Prospectus"), which is being delivered with this Prospectus Supplement,
includes detailed information with respect to the Holding Company, the
Conversion, the Holding Company Stock and the financial condition, results of
operations and business of Gloversville. This Prospectus Supplement, which
provides detailed information with respect to the Plan, should be read only in
conjunction with the Prospectus. Capitalized terms not defined in this
Prospectus Supplement have the meanings ascribed to them in the Prospectus.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY EACH PARTICIPANT, SEE "RISK FACTORS"
IN THE PROSPECTUS.
----------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT
FEDERALLY INSURED OR GUARANTEED.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS SUCH COMMISSION, OFFICE, OR
CORPORATION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is February __, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representation other than as contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
any such other information or representation must not be relied upon as having
been authorized by the Holding Company, Gloversville or the Plan. This
Prospectus Supplement does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any jurisdiction in
which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, or to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction. Neither
the delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall under any circumstance create any implication that there has
been no change in the affairs of the Holding Company, Gloversville or the Plan
since the date hereof or that the information herein contained or incorporated
herein by reference is correct as of any time subsequent to the date hereof.
This Prospectus Supplement should be read only in conjunction with the
Prospectus that is delivered herewith and should be retained for future
reference.
TABLE OF CONTENTS
Page
----
The Offering .................................................................1
Securities Offered ..................................................1
Election to Purchase Holding Company Stock in the Conversion ........1
Method of Directing Transfer ........................................1
Time for Directing Transfer .........................................2
Irrevocability of Transfer Direction ................................2
Subsequent Elections ................................................2
Purchase Price of Holding Company Stock .............................2
Nature of a Participant's Interest in the Holding Company Stock .....2
Voting and Tender Rights of Holding Company Stock ...................3
Description of the Plan ......................................................3
Introduction ........................................................3
Eligibility and Participation .......................................3
Investment of Contributions .........................................4
Financial Data ......................................................6
Administration of the Plan ..........................................7
Reports to Plan Participants ........................................7
Amendment and Termination ...........................................7
Federal Tax Aspects of the Plan .....................................7
Restrictions on Resale ..............................................9
Legal Opinions ...............................................................9
Financial Statements .........................................................9
Summary Plan Description, Form of Prototype Plan and Adoption Agreement .....A-1
Financial Statements ........................................................B-1
Election Form ...............................................................C-1
i
<PAGE>
THE OFFERING
Securities Offered
Up to 30,000 shares of Holding Company Stock which may be acquired by
the Plan for the accounts of employees participating in the Plan, and related
participation interests, are offered hereby. The Holding Company is the issuer
of such securities. Only employees of Gloversville may participate in the Plan.
Information relating to the Plan is contained in this Prospectus Supplement and
information relating to the Holding Company, the Conversion and the financial
condition, results of operations and business of Gloversville is contained in
the Prospectus delivered herewith. Capitalized terms not otherwise defined shall
have the definition provided in the Prospectus. The address of the principal
executive office of the Holding Company is 52 North Main Street, Gloversville,
New York 12078-3084 and its telephone number is (518) 725-6331. The address and
telephone number of Gloversville's principal office are the same as the Holding
Company's address and telephone number.
Election to Purchase Holding Company Stock in the Conversion
In connection with Gloversville's Conversion, the Plan has been amended
to permit each Participant to direct that all or part of the funds in his or her
accounts under the Plan (hereinafter referred to in the aggregate as a
Participant's "Accounts") be transferred to the Employer Stock Fund and used to
purchase Holding Company Stock in the Conversion. The Trustee of the Employer
Stock Fund will follow the Participants' directions and exercise the
Participant's Subscription Rights to purchase Holding Company Stock in the
Conversion to the extent provided in Gloversville's Plan of Conversion. See "The
Conversion - Subscription Offering" in the Prospectus. Funds not allocated to
the purchase of Holding Company Stock will remain invested in accordance with
the investment instructions of Participants in effect at such time.
Respective purchases by the Plan in the Conversion will be counted as
purchases by the individual Participants at whose election they are made to the
extent of the funds directed by such Participants to purchase Holding Company
Stock, and will be subject to the purchase limitations applicable to such
individuals. See "The Conversion - Subscription Offering" in the Prospectus.
Method of Directing Transfer
Included with this Prospectus Supplement is an election and investment
form (the "Election Form"). If a Participant wishes to direct some or all the
funds in his or her Accounts into the Employer Stock Fund to purchase Holding
Company Stock in the Conversion, he or she should indicate that decision by
checking the appropriate box of the Election Form and completing this Part of
the Election Form. If a Participant does not wish to make such an election, he
or she should so indicate by checking the appropriate box of the Election Form.
See also "Investment of Contributions - Holding Company Stock Investment
Election Procedures" below.
<PAGE>
Time for Directing Transfer
The deadline for submitting a direction to transfer amounts to the
Employer Stock Fund in order to purchase Holding Company Stock in the Conversion
is _______, 1998, unless extended (the "Election Deadline"). A Participant's
completed Election Form must be returned to the Stock Information Center at
Gloversville by 12:00 Noon, Gloversville, New York time on such date.
Irrevocability of Transfer Direction
Once received in proper form, an executed Election Form may not be
modified, amended or revoked without the consent of Gloversville unless the
Conversion has not been completed within 45 days after the end of the
Subscription and Community Offering. See also "Investment of Contributions -
Holding Company Stock Investment Election Procedures" below.
Subsequent Elections
After the Election Deadline, Participants initially will not be
permitted to direct or redirect any portion of their Accounts into Holding
Company Stock; however, Gloversville may provide such an opportunity in the
future. Participants will be notified when and to what extent future investments
in the Employer Stock Fund may be permitted. Participants may direct the Trustee
to sell their shares of Holding Company Stock purchased in the Conversion
through the Plan pursuant to the procedures outlined in the Plan by filing a
request form with the Plan Administrator. See "Investment of Contributions -
Adjusting Your Investment Strategy" below.
Purchase Price of Holding Company Stock
The funds transferred to the Employer Stock Fund for the purchase of
the Holding Company Stock in the Conversion will be used to purchase Holding
Company Stock through the exercise of Subscription Rights, if any, granted to
each individual Participant of the Plan under Gloversville's Plan of Conversion.
Accordingly, only Participants with subscription rights as described in the
Prospectus will be eligible to purchase shares during the Election Period. See
"The Conversion - Subscription Offering". The price paid for such shares of
Holding Company Stock will be $10.00 per share, the same price as is paid by all
other persons who purchase Holding Company Stock in the Conversion.
Nature of a Participant's Interest in the Holding Company Stock
The Holding Company Stock will be held in the name of the Trustee of
the Employer Stock Fund, in its capacity as trustee. The Trustee will maintain
individual accounts reflecting each Participant's individual interest in the
Employer Stock Fund.
2
<PAGE>
Voting and Tender Rights of Holding Company Stock
The Trustee will exercise voting and tender rights attributable to all
Holding Company Stock held by the Plan Trust (the "Trust"). It is expected that
the Trustee will vote shares attributable to a Participant pursuant to
directions received from such Participant.
DESCRIPTION OF THE PLAN
Introduction
The Plan, was adopted by Gloversville on January 1, 1995 as a profit
sharing plan with a cash-or-deferred feature described at Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), to encourage employee
savings and to allow eligible employees to supplement their income upon
retirement. As of January 1, 1998, the Plan was amended as reflected above and
below to permit the purchase of Holding Company Stock.
Reference to Full Text of Plan. The following statements are summaries
of certain provisions of the Plan. They are not a complete description of such
provisions and are qualified in their entirety by the full text of the Plan and
Declaration of Trust (the "Plan") which is filed as an exhibit to the
registration statement of which this Prospectus Supplement is a part and which
is incorporated by reference herein. Copies of the Plan are available to all
employees upon request to the Plan Administrator. Each employee is urged to read
carefully the full text of the Plan.
Reference to Summary Plan Description. Certain information regarding
the Plan is contained in the Summary Plan Description (the "Summary Plan
Description"), a copy of which is attached to, and made a part of, this
Prospectus Supplement.
Tax and Securities Laws. Participants should consult with legal counsel
regarding the tax and securities laws implications of participation in the Plan.
Any directors, officers or beneficial owners of more than 10% of the outstanding
shares of Common Stock should consider the applicability of Sections 16(a) and
16(b) of the Securities Exchange Act of 1934, as amended, to his or her
participation in the Plan.
Eligibility and Participation
All employees of Gloversville, who have met the eligibility
requirements of the Plan may participate in the Plan. See "Eligibility
Requirements and Participation" in the Summary Plan Description attached hereto.
As of _________ __, 1998, there were approximately __ employees
eligible to participate in the Plan, and __ employees had elected to participate
in the Plan.
3
<PAGE>
Investment of Contributions
Investment Options. All amounts credited to Participants' Accounts
under the Plan are held in the Trust, which is administered by the Trustees
appointed by Gloversville's Board of Directors.
Each Participant must instruct the Trustee as to how funds held in his
or her Accounts are to be invested. In addition to the Employer Stock Fund,
Participants may elect to instruct the Trustee to invest such funds in any or
all of the following investment options ("Investment Options") (1) SEI Stable
Asset Fund which seeks to provide high fixed income returns while preserving
principal and reducing risk; (2) Dodge & Cox Income Fund which seeks to provide
a high and stable rate of current income, consistent with long-term preservation
of capital; (3) Federated High Yield Trust which seeks current income by
investing primarily in a professionally managed, diversified portfolio of fixed
income securities; (4) Warburg Pincus Global Fixed Income Fund which is a bond
fund seeking to maximize total investment return consistent with prudent
investment management, consisting of a combination of interest income, currency
gains and capital appreciation; (5) Federated Max-Cap Fund which seeks to
provide investment results that correspond to the aggregate price and dividend
performance of publicly traded common stock as represented by the Standard &
Poor's 500 Composite Stock Price Index; (6) Manager Special Equity Fund which
seeks capital appreciation by investing primarily in the securities of small to
medium capitalization companies expected to have superior earnings growth
potential; (7) Warburg Pincus International Equity Fund which seeks long-term
capital appreciation by investing in international equity securities that are
considered by its investment advisor to have above-average potential for
appreciation; and (8) the Employer Stock Fund. A brief description of the
Employer Stock Fund is set forth below. For detailed descriptions of the other
Investment Options available to Plan Participants, Participants may request a
prospectus for each of the investment options from Gloversville. Community Bank,
N.A. is the Trustee for all funds including the Employer Stock Fund, and
Gloversville will be the Plan Administrator.
Employer Stock Fund. Effective until ________, 1998 or such later date
as elected by the Holding Company, Participants in the Plan may elect to direct
the Trustee to transfer some or all of the funds in their Accounts to the
Employer Stock Fund to purchase Holding Company Stock in the Conversion. The
price paid for shares of Holding Company Stock will be the same price as is paid
by all other persons who purchase Holding Company Stock in the Conversion. The
number of shares, if any, subject to purchase for the Accounts of each
Participant who may elect to invest in Holding Company Stock is not currently
determinable. Any cash dividends received on Holding Company Stock held by the
Plan will be reinvested in accordance with the Participant's investment
instructions then in effect.
The investment in Holding Company Stock involves certain risks. No
assurance can be given that shares of Holding Company Stock purchased pursuant
to the Plan will thereafter be able to be sold at a price equal to or in excess
of the purchase price. See also "Risk Factors" in the Prospectus.
4
<PAGE>
Holding Company Stock Investment Election Procedures. Participants may
instruct the Trustee to purchase Holding Company Stock by redirecting funds from
their existing Accounts into the Employer Stock Fund by filing an Election Form
with the Plan Administrator on or prior to the Election Deadline. Total funds
redirected by each Participant into the Employer Stock Fund must represent whole
share amounts (i.e., must be divisible by the $10.00 per share purchase price)
and must be allocated in whole percentage increments from Investment Options
containing the Participant's Plan funds. When a Participant instructs the
Trustee to redirect the funds in his or her existing Accounts into the Employer
Stock Fund in order to purchase Holding Company Stock, the Trustee will
liquidate funds from the appropriate Investment Option(s) and apply such
redirected funds as requested, in order to effect the new allocation.
For example, a Participant may fund an election to purchase 100 shares
of Holding Company Stock by redirecting the aggregate purchase price of $1,000
for such shares from the following Investment Options (provided the necessary
funds are available in such Investment Options): (i) 10% from the Dodge & Cox
Income Fund, (ii) 30% from the Warburg Pincus Global Fixed Income Fund, and
(iii) 60% from the Federated Max-Cap Fund. In such case, the Trustee would
liquidate $100 of the Participant's funds from the Dodge & Cox Income Fund, $300
from funds in the Warburg Pincus Global Fixed Income Fund and $600 from funds in
the Federated Max-Cap Fund to raise the $1,000 aggregate purchase price. If a
Participant's instructions cannot be fulfilled because the Participant does not
have the required funds in one or more of the Investment Options to purchase the
shares of Holding Company Stock subscribed for, the Participant will be required
to file a revised Election Form with the Plan Administrator by the Election
Deadline. Once received in proper form, an executed Election Form may not be
modified, amended or rescinded without the consent of Gloversville unless the
Conversion has not been completed within 45 days after the end of the
Subscription and Community Offering.
Adjusting Your Investment Strategy. Until changed in accordance with
the terms of the Plan, future allocations of a Participant's contributions would
remain unaffected by the election to purchase Holding Company Stock through the
Plan in the Conversion. A Participant may modify a prior investment allocation
election or request the transfer of funds to another investment vehicle by
filing a written notice, with such modification or request taking effect after
the valuation of accounts, which occurs daily. However, unless provided for in
the future, purchases of the Employee Stock Fund are not permitted and sales of
the Employer Stock Fund are permitted only during an "Investment Change Period."
An "Investment Change Period" opens at the beginning of the third day after the
Holding Company issues a "Quarterly Earnings Release" and closes at the end of
the twelfth business day after such release. The term "Quarterly Earnings
Release" means any press release issued by the Holding Company for general
distribution which announces, for the first time, the Holding Company's Results
of operations for a particular fiscal quarter. Gloversville anticipates these
opportunities will occur four times per year. Gloversville will attempt to
notify Participants of the commencement of each Investment Change Period but
will not assume responsibility for doing so.
Valuation of Accounts. The net gain (or loss) of the Trust from
investments (including interest payments, dividends, realized and unrealized
gains and losses on securities, and any expenses paid from the Trust) are
determined daily and are allocated among the accounts of Participants according
to the balance of each such accounts as of the end of each day. For purposes of
such allocations, all assets of the Trust are valued at their fair market value
pursuant to the method described in the Plan.
5
<PAGE>
Financial Data
Employer Contributions. For the Plan Year ended ____ __, 1997,
Gloversville made matching contributions totaling approximately $________.
Gloversville made discretionary contributions to the Plan for the fiscal year
ended ___________, 1997 of approximately $______. See generally "Employer
Contributions" in the Summary Plan Description attached hereto. Gloversville may
determine to reduce its matching contribution under the Plan in the future.
Performance of Holding Company Stock. As of the date of this Prospectus
Supplement, no shares of Holding Company Stock have been issued or are
outstanding and there is no established market for the Holding Company Stock.
Accordingly, there is no record of the historical performance of the Holding
Company Stock.
Performance of Investment Options. The following table provides
performance data with respect to the Investment Options available under the
Plan, based on information provided to the Company by Benefit Plans
Administrators ("BPA").
The information set forth below with respect to the Investment Options
has been reproduced from materials supplied by BPA; Gloversville and the Holding
Company take no responsibility for the accuracy of such information.
Additional information regarding the Investment Options may be
available from BPA or Gloversville. Participants should review any available
additional information regarding these investments before making an investment
decision under the Plan.
<TABLE>
<CAPTION>
Net Investment Performance
--------------------------------------------------
For
Twelve-Month
Period
Ended December 31, 1997 Annualized
December 31, -----------------------------------
1997 5 Years 3 Years 1 Year
---- ------- ------- ------
<S> <C> <C> <C> <C>
SEI Stable Asset Fund 6.41% 6.23% 6.29% 6.41%
Dodge & Cox Income Fund 10.00 8.18 11.07 10.00
Federated High Yield Trust 13.25 11.75 15.02 13.25
Warburg Pincus Global Fixed Income Fund 2.17 8.07 9.24 2.17
Federated Max Cap Fund 32.69 19.77 30.53 32.69
Managers Special Equity Fund 24.45 19.05 27.64 24.45
Warburg Pincus International Fund -4.40 12.06 5.26 -4.40
</TABLE>
Each Participant should note that past performance is not necessarily
an indicator of future results.
6
<PAGE>
Administration of the Plan
Trustees. The trustee is appointed by the Board of Directors of
Gloversville to serve at its pleasure (the "Trustee"). The Trustee for all funds
including the Employer Stock Fund is Community Bank, N.A.
The Trustee receives and holds the contributions to the Plan in trust
and distributes them to Participants and beneficiaries in accordance with the
provisions of the Plan. The Trustee is responsible, following Participant
direction, for effectuating the investment of the assets of the Trust in the
Holding Company Stock and the other Investment Options.
Reports to Plan Participants
As soon as practicable after the end of each calendar quarter, the Plan
Administrator will furnish to each Participant a statement showing (i) balances
in the Participant's accounts as of the end of that period, (ii) the amount of
contributions allocated to his or her accounts for that period, and (iii) the
number of units in each of the funds.
Amendment and Termination
It is the intention of Gloversville to continue its participation in
the Plan. Nevertheless, Gloversville may terminate the Plan at any time. If the
Plan is terminated in whole or in part, then, regardless of other provisions in
the Plan, each Participant affected by such termination shall become fully
vested in all of his Accounts.
Federal Tax Aspects of the Plan
The Plan will be administered to comply in operation with the
requirements of Section 401(a) of the Code and the requirements which are
applicable to a qualified cash-or-deferred arrangement under Section 401(k) of
the Code. Assuming that the Plan is administered in accordance with such
Sections of the Code, participation in the Plan should have the following
implications for federal income tax purposes:
(a) Amounts contributed to Participants' Accounts, and the investment
earnings on these Accounts, are not includable in Participants' federal taxable
income until such contributions or earnings are actually distributed or
withdrawn from the Plan. Special tax treatment may apply to the taxable portion
of any distribution that includes Holding Company Stock or qualifies as a Lump
Sum Distribution (as described below).
(b) Income earned on assets by the Trust will not be taxable to the
Trust.
Lump Sum Distributions. A distribution from the Plan to a Participant
or the beneficiary of a Participant will qualify as a Lump Sum Distribution if
it is made: (i) within one taxable year to the Participant or beneficiary; (ii)
on account of the Participant's death or separation from service, or after the
Participant attains age 59-1/2; and (iii) consists of the balance to the credit
of the Participant under this Plan and all other profit sharing plans, if any,
maintained by Gloversville or the Holding Company. The portion of any Lump Sum
Distribution that is required to be included in the Participant's or
beneficiary's taxable income for federal income tax purposes (the "total taxable
amount") consists of the entire amount of such Lump Sum Distribution made by the
Participant to this Plan and the amount of after-tax contributions, if any, made
by the Participant to any other profit sharing plans maintained by Gloversville
which is included in such distribution.
7
<PAGE>
Averaging Rules. Except as described below with respect to
distributions of Holding Company Stock, the portion of the total taxable amount
of a Lump Sum Distribution that is attributable to participation after 1973 in
this Plan or in any other profit-sharing plan maintained by Gloversville (the
"ordinary income portion") will be taxable generally as ordinary income for
federal income tax purposes. However, a Participant who has completed five years
of participation in this Plan and each other profit-sharing plan making the Lump
Sum Distribution prior to the taxable year in which the distribution is made, or
a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in this Plan or any other profit-sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to special averaging rules. The election of the special averaging
rules must apply to all Lump Sum Distributions received by the Participant or
beneficiary from this Plan and all other qualified plans during the taxable
year. Furthermore, if a Lump Sum Distribution includes employer securities, the
recipient is not currently taxable on the net unrealized appreciation of such
securities at the time of the distribution, unless the recipient otherwise
elects to pay the tax on the net unrealized appreciation at the time of the
distribution.
Rollover to Another Qualified Plan or to an IRA. A Participant may
defer federal income taxation of all or any portion of the total taxable amount
of a Lump Sum Distribution (including the proceeds from the sale of any Holding
Company Stock included in the Lump Sum Distribution) to the extent that such
amount, or a portion thereof, is contributed, within 60 days after the date of
its receipt by the Participant, to another qualified plan or to an individual
retirement account ("IRA"). The beneficiary of a Participant who is the
Participant's surviving spouse also may defer federal income taxation of all or
any portion of the total taxable amount of a Lump Sum Distribution to the extent
that such amount, or a portion thereof, is contributed, within 60 days after the
date of its receipt by the surviving spouse, to an IRA. If less than the total
taxable amount of a Lump Sum Distribution is contributed to another qualified
plan or to an IRA within the applicable 60-day period, the amount not so
contributed must be included in the Participant's or beneficiary's taxable
ordinary income for federal income tax purposes and will not be eligible for the
special averaging rules or capital gain treatment. If all or any portion of the
total taxable amount of a Lump Sum Distribution is contributed by a Participant
or beneficiary to an IRA within the applicable 60-day period, any subsequent
distribution from the IRA will not be eligible for the special averaging rules
or capital gain treatment.
Additional Tax on Early Distributions. For taxable years beginning
after December 31, 1986, a Participant who receives a distribution from the Plan
prior to attaining age 55 will be subject to an additional income tax equal to
10% of the amount of the distribution. The 10% additional income tax will not
apply, however, to the extent the distribution is rolled over into an IRA or
another qualified plan or the distribution is (i) made to a beneficiary (or to
the estate of a Participant) on or after the death of the Participant, (ii)
attributable to the Participant's being disabled within the meaning of Section
72(m)(7) of the Code, (iii) part of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Participant or the joint lives (or joint life expectancies)
of the Participant and his beneficiary, (iv) made to the Participant after
separation from service under the Plan after attainment of age 55, (v) made to
pay medical expenses to the extent deductible for federal income tax purposes,
(vi) pursuant to a qualified domestic relations order, or (vii) made to effect
the distribution of excess contributions or excess deferrals.
8
<PAGE>
The foregoing is only a brief summary of certain federal income tax
aspects of the Plan which are of general application under the Code and is not
intended to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan.
Accordingly, each Participant may wish to consult a tax advisor concerning the
Federal, state and local tax consequences of participating in and receiving
distributions from the Plan.
Participants subject to taxes imposed by state, local and other taxing
authorities, including foreign governments, should also consult with their own
attorneys or tax advisers regarding the tax consequences thereunder.
Restrictions on Resale
Any person receiving shares of Holding Company Stock under the Plan who
is an "affiliate" of Gloversville or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933 (e.g., directors,
officers and substantial shareholders of the Holding Company and Gloversville)
may re-offer or resell such shares only pursuant to a registration statement or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
of the registration requirements of the Securities Act of 1933. Any person who
may be an "affiliate" of Gloversville or the Holding Company may wish to consult
with counsel before transferring any Holding Company Stock owned by him or her.
In addition, Participants are advised to consult with counsel as to the
applicability of Section 16 of the Securities Exchange Act of 1934 which may
restrict the sale of Holding Company Stock acquired under the Plan, or other
sales of Holding Company Stock.
LEGAL OPINIONS
The validity of the issuance of the Holding Company Stock will be
passed upon by Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W.,
Washington, D.C. 20005, which firm acted as special counsel for the Holding
Company and Gloversville in connection with Gloversville's Conversion.
FINANCIAL STATEMENTS
The financial statements and schedules of the Plan have been prepared
by management in accordance with the applicable provisions of ERISA and are
included in this Prospectus Supplement.
9
<PAGE>
EXHIBIT A
<PAGE>
CASH OR DEFERRED
PROFIT-SHARING PLAN AND TRUST
SUMMARY PLAN DESCRIPTION
For
GLOVERSVILLE FEDERAL
SAVINGS & LOAN ASSOCIATION
Prepared by
BENEFIT PLANS ADMINISTRATORS
<PAGE>
I INTRODUCTION
Your Employer has established a retirement plan to help supplement your
retirement income. Under the program, the Employer makes contributions to a
Trust Fund which will pay you a benefit at retirement. Details about how the
Plan works are contained in this summary. While the summary describes the
principal provisions of the Plan, it does not include every limitation or
detail. Every attempt has been made to provide concise and accurate information.
If, however, there is a discrepancy between this booklet and the official Plan
Document, the Plan Document shall govern. You may obtain a copy of the Plan
Document from the Plan Administrator. The Plan Administrator may charge a
reasonable fee for providing you with the copy.
II PLAN DATA
A. Agent for Service of Legal Process : THE PLAN ADMINISTRATOR
B. Effective Date : This is an amended Plan. The effective date of the
original Plan was JANUARY 1, 1995. The effective date of the amended
Plan is JANUARY 1, 1998.
C. Employer : GLOVERSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION
52 NORTH MAIN STREET
GLOVERSVILLE, NEW YORK 12078
Telephone: (518) 725-6331
Tax I.D.: 14-0697913
D. Plan Administrator : The Employer is the Plan Administrator.
E. Plan Year : The 12-month period beginning on JANUARY 1 and ending on
DECEMBER 31.
F. Trustees : COMMUNITY BANK, N. A.
201 NORTH UNION STREET
P.O. BOX 690
OLEAN, NEW YORK 14760-0690
G. Type of Administration : TRUST FUND
H. Type of Plan : CASH OR DEFERRED PROFIT SHARING PLAN
I. Plan Name : GLOVERSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION
401(K) PROFIT SHARING PLAN AND TRUST
J. Plan Number : 002
1
<PAGE>
III DEFINITIONS
A. Break in Service . A Plan Year during which you are not credited with
or are not paid for more than 500 hours. If you go into the military
service of the United States, you are not considered terminated as
long as you return to work within the time required by law. If you
separate from employment and incur a Break in Service, all
contributions to your various accounts are suspended. [See special
rules relating to maternity and paternity leave below.] If a Break in
Service occurs and you return to full time employment with the
Employer, your rights are explained in the section entitled "Vesting".
B. Compensation . Your total salary, pay, or earned income from the
Employer, as reflected on tax Form W-2, which is subject to
withholding when earned (Code Section 3401(a) Compensation).
Compensation, as defined above, will include amounts received by you
during the Plan Year, while you are a Participant in the Plan.
Compensation includes Employer Contributions made to (if applicable) a
401(k) or Simplified Employee Pension Plan, a Flexible Benefit
(Cafeteria) Plan, and Tax-Deferred Annuities.
Compensation, for purposes of making a discretionary profit-sharing
contribution includes overtime, bonuses and commissions earned.
C. Disability . A potentially permanent illness or injury, as certified
to by a physician who is approved by the Employer, which prevents you
from engaging in work for which you are qualified for a period of at
least 12 months.
D. Early Retirement . Early Retirement is not provided under this Plan.
E. Effective Date . The date on which the Plan starts or an amendment is
effective.
F. Elective Deferral . Employer Contributions made to the Plan at your
election, instead of being given to you in cash as part of your
salary. You can elect to defer a portion of your salary, instead of
receiving it in cash, and your Employer will contribute it to the Plan
on your behalf.
G. Entry Date . You will begin participation in the Plan on the Entry
Date. The Entry Date for all Contributions for this Plan is the first
day of the month following the date on which an Employee meets the
eligibility requirements.
H. Family Member . The Spouse or lineal ascendant or descendant (or
Spouse thereof) of either a more than 5% owner of the Employer or one
of the ten highest compensated Employees of the Employer.
I. Highly Compensated Employee . Any Employee who, during the current or
prior Plan Year
(i) was a more than 5% owner,
(ii) received more than $75,000 in compensation, as adjusted for
inflation,
(iii)received more than $50,000 in compensation, as adjusted for
inflation, and was in the top 20% of Employees when ranked by
compensation; or
(iv) was an officer receiving more than $45,000 in compensation, as
adjusted for inflation.
2
<PAGE>
Family members of any 5% owner, or Highly Compensated Employee in
the group of the ten (10) Employees with the greatest
Compensation, will be combined as if they were one person for
purposes of Compensation and contributions.
If you are not currently or never were Highly Compensated, or a
family member of a Highly Compensated Employee, you are a
Non-highly Compensated Employee.
J. Hour of Service . You will receive credit for each hour you are:
(1) paid for being on your job,
(2) paid even if you are not at work (vacation, sickness, leave of
absence, or disability); or
(3) paid for back pay if hours were not already counted.
A maximum of 501 hours will be credited for any year you are not at
work but are paid. Hours of Service will be calculated based on actual
hours for which you are paid or entitled to payment.
K. Maternity/Paternity Leave . You may be eligible for additional Hours
of Service if you leave employment, even if temporarily, due to
childbirth or adoption. If this is the case, you will be credited with
enough Hours (up to 501) of Service to prevent a Break in Service,
either in the year you leave employment or the following year.
For example, if you have 750 Hours of Service when your child is born,
you would not get any more hours credited for that Plan Year since you
do not have a Break in Service. Therefore, if you do not return to
employment the following year, you will get 501 Hours of Service so
you will not have a Break in Service in that year. Alternatively, if
you do return the following year, but only work 300 hours, you will
receive an additional 201 hours in order to prevent a Break in
Service.
These Hours of Service for Maternity or Paternity Leave must all be
used in one Plan Year. They are used only to prevent a Break in
Service and not for calculating your Years of Service for eligibility,
vesting, or benefits.
L. Normal Retirement Age . Normal Retirement Age shall Age 65.
M. Spouse . The person to whom you are or were legally married, or your
common law Spouse if common law marriage is recognized by the state in
which you live. A former Spouse may be treated as a "Spouse" under
this definition if recognized as such under a Qualified Domestic
Relations Order as explained at Section XV(F) of this Summary Plan
Description.
3
<PAGE>
N. Year of Service .
Eligibility. For purposes of becoming eligible to participate in the
Plan, a Year of Service is a 12-consecutive month period beginning on
your date of hire during which you are credited with at least 1,000
Hours of Service.
Contribution. For purposes of determining whether or not you are
entitled to have a contribution allocated to your account, a Year of
Service is a 12-consecutive month period, which is the same as the
Plan Year, during which you are credited with at least 1 Hour(s) of
Service for the Employer Matching Contribution and 1,000 Hour(s) for
the Qualified Non-elective Contribution, and 1,000 Hour(s) for all
other Employer Contributions.
Vesting. For purposes of determining whether or not you are vested in
your account balance, a Year of Service is a 12-consecutive month
period during which you are credited with 1,000 Hours of Service.
IV ELIGIBILITY REQUIREMENTS AND PARTICIPATION
A. Service .
If you have completed 6 months Year(s) of Service you are eligible for
participation in the Plan.
You are considered to have completed one (1) Year of Service for purposes
of eligibility on the anniversary of your first day of employment, provided
that you worked at least 1,000 hours [or such lesser number of hours as
specified at Section III(N)] during that 12-month period.
B. Age .
If you have attained Age 21 you are eligible for participation in the Plan.
C. Classification .
The Plan shall cover all Employees who have met the age and service
requirements with the following exceptions:
The Plan shall exclude Employees covered by a collective bargaining
agreement between the Employer and Employee Representatives.
The plan shall exclude Employees who are nonresident aliens who received no
earned income from the Employer.
The plan shall exclude from participation any nondiscriminatory
classification of Employees determined as Independent Contractors.
Your participation in the Plan will begin on the Entry Date specified at
Section III(G). If you are employed on the Plan's Effective Date you must
satisfy the Age and Service Requirements specified above.
4
<PAGE>
V EMPLOYEE CONTRIBUTIONS
A. Elective Deferrals
As an eligible Employee, you may authorize the Employer to withhold
from 1 % up to 15% of your Compensation, not to exceed $7,000 as
adjusted for inflation, and to deposit such amount in the Plan fund.
If you participated in a similar plan of an unrelated Employer and
your Elective Deferrals under this Plan and the other Plan exceed the
$7,000 limit for a given year, you must designate one of the Plans as
receiving an excess amount. If you choose this Plan as the one
receiving the excess, you must notify the Plan Administrator by March
1st of the following year so that the excess and any income thereon
may be returned to you by April 15th. You may increase, decrease, or
terminate your Elective Deferral percentage on the Anniversary Date of
the Plan and on the first day following any Valuation Date.
If you terminate contributions, you may not reinstate payroll
withholding until the first day of the next valuation period following
termination.
The Employer may also reduce or terminate your withholding if required
to maintain the Plan's Qualified status.
B. Voluntary Contributions
You may not make Voluntary after-tax contributions to the Plan in any
amount.
C. Rollover and Transfer Contributions
Rollover Contributions are permitted under the Plan. You may make
Rollover Contributions prior to meeting the eligibility requirements
for participation in the Plan. Transfer Contributions are permitted
under the Plan. You may make Transfer Contributions prior to meeting
the eligibility requirements for participation in the Plan. An
Employer can refuse to allow Transfer Contributions to its Profit
Sharing Plan if the transfer will affect the Plan's ability to offer
lump sum distributions as the normal form of distribution.
A Rollover or Transfer of your retirement benefits may occur from
another Qualified Retirement Plan or special individual retirement
arrangement (known as a "conduit" IRA) to this Plan. If you have
already received a lump sum payment from another Qualified Retirement
Plan, or if you received payment from another Qualified Plan and
placed it in a separate "conduit" IRA, you may be eligible to
re-deposit that payment (plus earnings in the IRA) to this Plan.
If you believe you qualify for a Rollover or Transfer, see the Plan
Administrator for more details. The last day you may make a Rollover
Contribution to this Plan is the sixtieth (60th) day after you receive
the distribution from the other plan (or IRA). A Transfer occurs when
the Trustee of the old Plan transfers your assets to this Plan,
without allowing the exercise of Spousal consent rights, if
applicable. Also, see Section XI(F) on direct rollovers.
5
<PAGE>
VI EMPLOYER CONTRIBUTIONS
A. Contribution Formula
(1) Elective Deferrals:
The Employer will contribute all Compensation which you elected
to defer to the Plan, within the limits outlined in Section V(A).
(2) Matching Contributions:
The Employer shall make a discretionary Matching Contribution to
each Participant based on their Elective Deferral in a percentage
set by the Employer prior to the end of each Plan Year. The
Employer shall not match your Elective Deferrals in excess of 5 %
of your Compensation.
Matching Contributions are fully vested when contributed. The
Employer has the right to designate all or a portion of the
Matching Contributions as "Qualified". To the extent Matching
Contributions are so designated, they are nonforfeitable and may
not be withdrawn from the Plan prior to separation from Service
or attainment of Age 59 1/2. The time period which will be used
for determining the amount of Matching Contributions owed shall
be monthly.
(3) Qualified Non-Elective Contributions:
The Employer may also contribute an additional amount determined
in its sole judgment. This additional contribution, if any, will
be allocated to non-Highly Compensated Participants in proportion
to each eligible Participant's Compensation. These contributions
are nonforfeitable and subject to withdrawal restrictions.
(4) Discretionary:
The Employer may also contribute an additional amount determined
in its sole judgment. Such additional contribution, if any, shall
be allocated to Participants in proportion to each Participant's
Compensation and is subject to the Plan's vesting schedule.
B. Eligibility for Allocation
Although the Employer will generally not make contributions to
Participants who terminate Service with the Employer before the
last day of the Plan Year, the following Employer Contributions
will be made to Participants who terminate before the last day of
the Plan Year as a result of:
MATCHING OTHER
[X] [X] (i) Retirement.
[X] [X] (ii) Disability.
[X] [X] (iii) Death.
6
<PAGE>
[ ] [ ] (iv) Other termination of employment
provided that Participant has
completed a Year of Service defined
for Allocation Accrual Purposes.
[X] [ ] (v) Other termination of employment
even though the Participant has not
completed a Year of Service.
[ ] [ ] (vi) Termination of employment (for any
reason) provided that the
Participant had completed a of
Service for Allocation Accrual
Purposes.
Matching Contributions will only be allocated to
Participants who actually defer Compensation under the Plan.
VII GOVERNMENT REGULATIONS
The federal government sets certain limitations on the level of
contributions which may be made to a Plan such as this. There is also a
"percentage" limitation which means that the percentage of Compensation
which you may contribute (both Elective Deferrals and, if applicable,
Voluntary Contributions) depends on the average percentage of Compensation
that the other Participants are contributing. Simply stated, all
Participants are divided into two categories: Highly Compensated and
Non-highly Compensated. The average contribution for each group is
calculated.
The average contribution that the Highly Compensated Participant group may
make is based on the average contribution that the Non-highly Compensated
make. If a Highly Compensated Participant is contributing more than he or
she is allowed, the excess plus or minus any gain or loss will either be
returned or if permitted, re-characterized as Voluntary Contributions. Keep
in mind that if you are a 5% owner of the business or one of the ten
highest paid Highly Compensated Employees, your Family Member's
contribution percentage and Compensation will be combined with yours for
purposes of determining your contributions under the Plan.
VIII PARTICIPANT ACCOUNTS
The Employer will set up a record keeping account in your name to show the
value of your retirement benefit.
The Employer will make the following additions to your account:
(1) Your allocated share of the Employer's Contribution, (including your
Elective Deferrals),
(2) The amount of your Rollover Contributions and Transfer Contributions,
if any,
7
<PAGE>
(3) Your share of forfeited accounts of former employees. (These are
amounts left behind by employees who terminated before becoming 100%
vested in their benefit); and
(4) Your share of investment earnings and appreciation in the value of
investments.
The Employer will make the following subtractions from your account:
(5) Any withdrawals or distributions made to you,
(6) Your share of investment losses and depreciation in the value of
investments; and
(7) Your share of administrative fees and expenses paid out of the Plan,
if applicable.
The Employer will value the following types of contributions in your
account as indicated:
Valuation
Type of Contribution(s) Date(s)
- ----------------------- -------
Elective Deferrals [Section 7(b)] Quarterly
Matching Contributions [Section 7(c)] Quarterly
Qualified Non-Elective Contributions [Section 7(d)] Annually
Non-Elective Contributions [Section 7(e), (f), (g)] Annually
Minimum Top-Heavy Contributions [Section 7(i)] Annually
IX VESTING
A. Determining Vested Benefit
Vesting refers to your earning or acquiring a nonforfeitable right to
the full amount of your account(s). Any Qualified Non-elective
Contribution, Qualified Matching Contribution, Employee Contribution
(including Elective Deferrals), Rollover Contribution, or Transfer
Contribution, plus or minus any earnings or losses, is always 100%
vested and cannot be forfeited for any reason.
Any Employer Contribution and the earnings or losses thereon, not
fully vested when contributed, will vest in accordance with the
following table:
Year of Service Vesting
--------------- -------
1 0%
2 0%
3 20%
4 50%
5 100%
8
<PAGE>
You are considered to have completed one Year of Service, for purposes
of vesting, upon the completion of 1,000 Hours of Service as specified
at Section III(N). Service prior to the Effective Date of the Plan is
counted for purposes of vesting. Service prior to age 18 is counted
for purposes of vesting.
You automatically become fully vested, regardless of the vesting
table, upon attainment of Normal Retirement Age, Early Retirement Age,
upon retirement due to Disability, upon death, and upon termination of
the Plan.
B. Payment of Vested Benefit
If you separate from Service before your Retirement, Death, or
Disability, you may not request early payment of your vested benefit.
If your Vested Account Balance at the time of termination or at the
time of any prior distributions exceeds or exceeded $3,500, you may
defer the payment of your benefit until April 1 of the calendar year
following the calendar year during which you attain age 70 1/2.
If you do not separate from Service you may not obtain a distribution
of your vested Employer contributions. Distribution can only be made
if you are 100% vested.
The portion of your account balance to which you are not entitled is
called a "forfeiture" and remains in the Plan for the benefit of other
Participants.
C. Loss of Benefits
There are only two events which can cause loss of all or a portion of
your account. One is termination of employment before you are 100%
vested according to the vesting table described at IX(A), and the
other is a decrease in the value of your account from investment
losses or administrative expenses and other costs of maintaining the
Plan.
D. Reallocation of Forfeitures
The Employer will forfeit and reallocate the nonvested portion of your
account as of the Plan Year during which you incur your 1st
consecutive one year Break in Service. If you have not received a
distribution of your vested balance, your nonvested portion will be
forfeited at the end of the Plan year during which you incur your
fifth consecutive one-year Break in Service.
E. Re-employment
If you terminate service with your Employer and then are later
re-employed, you will become a Participant as of the earlier of the
next Valuation Date or the next Entry Date [See Section III(G)] upon
returning to employment. If you are not a member of an eligible class
and later become a member of an eligible class, you shall participate
immediately if you have satisfied the minimum age and service
requirements. Should you become ineligible to participate because you
are no longer a member of an eligible class, you shall participate
upon your return to an eligible class. All Years of Service will be
counted when calculating your vested percentage in your new account
balance. The following rules apply in connection with re-employed
Participants.
9
<PAGE>
(1) Terminated Partially Vested Participants. If you had a vested
interest, received a distribution of that interest and your nonvested
interest was forfeited away, you have the right to repay the amount
you received. If you choose to repay, the nonvested portion of your
Employer Account will be reinstated. Such repayment must be made
within five (5) years after your date of re-employment, or if earlier,
prior to your incurring five (5) consecutive 1-year Breaks in Service.
If you do not repay the amount you received, the nonvested portion of
your Employer Accounts will be permanently forfeited. Whether you
repay or not, your prior Service will count toward vesting service for
future Employer Contributions.
For example, assume that you terminate your job with your current
Employer. At the time of termination you had accrued a total benefit
of $10,000 under the Retirement Plan. Although this amount had been
allocated to your account, you were only 40% vested in that amount
when you left. You decided to take a distribution of your vested
account balance (40% of $10,000, or $4,000) when you quit. The
nonvested balance of your account ($6,000) was forfeited. Three years
later, you became re-employed by the same Employer. Since you were
re-employed within 5 years, you have the right to repay the $4,000
distribution you received when you quit. You would have to repay the
$4,000 within 5 years of being rehired. If you do so, the nonvested
portion of your account ($6,000) will be restored to your account.
After restoration, you will be vested in 40% of this account, but your
vested percentage will increase based on your Years of Service after
your re-employment. Your prior Service will always count towards
vesting of Employer Contributions which you receive after
re-employment, whether or not you decide to repay and restore your
prior account.
(2) Terminated Non-Vested Participants. If you were not vested in any
portion of your Employer Contribution sub-account prior to your
separation from service, and if you have a Break in Service, but then
are re-employed before incurring five (5) consecutive 1-year Breaks in
Service, you will be credited for vesting with all pre-break and post
break service. Your prior account balance will automatically be
restored and you will continue to vest in that account. If you are
re-employed after incurring five (5) consecutive 1-year Breaks in
Service, you will lose your prior account balance but your prior
Service will still count towards vesting in your new account balance.
X TOP-HEAVY RULES
A "Top-Heavy" Plan is one in which more than 60% of the contributions or
benefits are attributable to certain "key employees," such as owners,
officers and stockholders. The Plan Administrator is responsible for
determining each year if the Plan is "Top-Heavy." If the Plan becomes
Top-Heavy special rules apply to the allocation of the Employer's
Contribution. These special rules require that all eligible Participants
will generally receive an allocation of the Employer's Contribution equal
to the lesser of 3% of Compensation or a uniform percentage of Compensation
for all Participants.
For example, the minimum allocation requirement would be satisfied if all
Participants received an allocation equal to 2% of their Compensation. All
Participants are entitled to receive a minimum allocation upon completing
at least one Hour of Service in the Top-Heavy Plan Year provided they are
employed on the last day of the Plan Year. The Employer's minimum
contribution can be satisfied by another Employer sponsored retirement
plan, if so elected by the Employer.
10
<PAGE>
XI RETIREMENT BENEFITS AND DISTRIBUTIONS
A. Retirement Benefits
The full value of your account balance is generally payable at Normal
Retirement Age. If you work beyond your Normal Retirement Age, and
have not separated from service, you may request commencement of
benefit payments. In either event, you will continue to fully
participate in the Plan. The latest commencement date for payment of
your benefits is generally April 1 of the year following your
attainment of age 70-1/2, even if you are still employed.
B. Distributions During Employment
Benefits are not normally payable prior to your separation from
employment. There are possible exceptions to this rule as follows:
First, you can always withdraw all or any part of your personal
Employee Voluntary Contributions, Rollover Contributions, and the
earnings thereon. Transfer Contributions may be withdrawn only if they
originate from plans meeting certain safe-harbor provisions.
Second, Hardship withdrawals are allowed. If permitted, you may file a
written request for a Hardship withdrawal of Employer-related
contributions (to the extent vested and if not prohibited by the Plan
Administrator) and the investment earnings thereon, and Elective
Deferrals and the earnings thereon as of the last day of the Plan Year
ending before July 1, 1989. You must have your Spouse's written
consent for a Hardship withdrawal unless the Plan is a safe-harbor
Plan (i.e., lump sum is the normal form of distribution). Prior to
receiving a Hardship distribution, you must take any other nontaxable
distribution and borrow the maximum nontaxable loan amount allowed
under this and other Plans of the Employer.
Note, however, that if the effect of the loan would be to increase the
amount of your financial need, you are not required to take the loan.
For example, if you need funds to purchase a principal residence, and
a Plan loan would disqualify you from obtaining other necessary
financing, you do not have to take the loan. Hardship withdrawals may
be authorized by the Employer for the following reasons:
(1) To assist you in purchasing a personal residence which is your
primary place of residence (not including mortgage payments);
(2) To assist you in paying tuition expenses for you, your Spouse, or
your dependents for the next twelve (12) months of post-secondary
education;
(3) To assist you in paying expenses incurred or necessary on behalf
of you, your Spouse, or your dependents for hospitalization,
doctor, or surgery expenses which are not covered by insurance;
or
(4) To prevent your eviction for or foreclosure on your principal
residence.
11
<PAGE>
Any Hardship withdrawal is limited to the amount needed to meet the
financial need. Hardship withdrawals must be approved by the Employer
and will be administered in a nondiscriminatory manner. Such
withdrawals will not affect your eligibility to continue to
participate in Employer contributions to the Plan, but there will be a
one year mandatory suspension of your right to make Elective Deferrals
and Voluntary Contributions under the Plan.
Any withdrawals you receive under these rules may not be recontributed
to the Plan and may be subject to taxation, as well as an additional
10% penalty tax if the withdrawal is received before you reach Age
591/2. These withdrawals may also be subject to a mandatory 20%
withholding for income tax purposes, depending on the law as then in
effect.
C. Beneficiary
Every Participant or former Participant may designate a person or
persons who are to receive benefits under the Plan in the event of his
or her death. The designation must be made on a form provided by and
returned to the Plan Administrator. You may change your designation at
any time. If you are married, your beneficiary will automatically be
your Spouse. If you and your Spouse wish to waive this automatic
designation, you must complete a Beneficiary Designation form. The
form must be signed by you and your Spouse in front of a Plan
Representative or a Notary Public.
D. Death Benefits
In the event of your death, the full value of your account is payable
to your beneficiary in a lump sum.
E. Form of Payment
When benefits become due, you or your representative should apply to
the Employer requesting payment of your account and specifying the
manner of payment. The normal or automatic form of payment is a Joint
and Survivor Annuity. [See special annuity rules at (H) below]. If you
do not wish to receive the normal form of payment when your payments
are due to start, you may request to receive your benefit in any of
the forms indicated:
(1) Lump Sum
(2) Installment Payments
(3) Life Annuity
(4) Life Annuity Term Certain with payments guaranteed for a
10-YEAR period.
Selection of an optional form of payment may require the written
consent of your Spouse. Payments may not be made over any period which
exceeds the life expectancy of you and your beneficiary. A
distribution of your benefits is required if benefits still remain in
the Plan after you attain Age 70 1/2. At this time the life expectancy
of both the Participant and the Spouse may be recalculated. This
determination is made by the Participant. F. Rollover of Payment
12
<PAGE>
F. Rollover of Payment
If your benefits qualify as eligible rollovers, you have the option of
having them paid directly to you when they become due or of having
them directly rolled over to another qualified plan or an IRA. If you
do not choose to have the benefits directly rolled over, the Plan is
required to automatically withhold 20% of your payment for tax
purposes and distribute the remaining 80% to you. If you choose to
have the payment made to you, you still have the option of rolling
over the 80% payment yourself to a qualified plan or an IRA within
sixty (60) days. You may also roll over the 20% that was withheld for
tax by adding that amount from your own funds. Before you do this,
however, check with a tax advisor to make sure the transaction still
qualifies for rollover treatment.
Certain benefit payments are not eligible for rollover and therefore
will also not be subject to the 20% mandatory withholding. They are as
follows:
(1) annuities paid over life,
(2) installments for a period of at least ten years; and
(3) minimum required distributions at age 70 1/2.
There are also several operational exceptions and a "de minimis"
exception for payments of less than $200. Also, Employee Voluntary
Contributions are not eligible for rollover.
G. Time of Payment
(1) In cases of termination for a reason other than death, disability
or retirement, payments will start as soon as administratively
feasible following the date in which a distribution is requested
by you or is otherwise payable.
(2) In cases of death, disability, or retirement, payments will start
as soon as administratively feasible following the date in which
a distribution is requested by you or is otherwise payable.
H. Annuity Rules
Retirement Benefits. If the benefit under the Plan is payable in the
form of an annuity, the Plan is subject to the annuity rules. Under
these rules, there are two automatic methods of payment for vested
Participants, depending on your marital status. If you do not choose
another form of payment (such as a lump sum or installments), the
normal form to be paid is a straight life annuity if you are not
married at the commencement of your benefit, or a qualified joint and
survivor annuity if you are married. Under a straight life annuity,
you will receive equal monthly payments for as long as you live. No
further payments will be made after your death. Under a qualified
joint and survivor annuity, you will receive a reduced benefit each
month for your lifetime. After you die, 50% of that amount will be
paid each month to your Spouse for his or her lifetime.
The amount of your monthly benefit is reduced under a joint and
survivor annuity because it is expected that payments will be made
over two lifetimes instead of one. You may choose another form of
payment by filling out the proper form and returning it to the Plan
Administrator. In order to choose another form of payment or a
beneficiary other than your Spouse, you must make a proper election,
with your Spouse's written consent. Your Spouse's consent must be
witnessed by a Notary Public. Written notice of these rules will be
provided to you on a timely basis.
13
<PAGE>
Death Benefits. If you die while still employed by the Employer, or
die after you retire or terminate employment but before benefit
payments start, your surviving Spouse will be entitled to a life
annuity based on the value of your account. These payments will
continue for your Spouse's lifetime unless he or she chooses to
accelerate such payments. Again, you and your Spouse can waive this
coverage by obtaining the proper form from the Plan Administrator and
completing it.
XII INVESTMENTS
A. Trust Fund
The monies contributed to the Plan may be invested in any security or
form of property considered prudent for a retirement plan. Such
investments include, but are not limited to, common and preferred
stocks, exchange traded put and call options, bonds, money market
instruments, mutual funds, savings accounts, certificates of deposit,
Treasury bills, or insurance contracts. An institutional Trustee may
invest in its own deposits or those of affiliates which bear a
reasonable interest rate, or in a group or collective trust maintained
by such Trustee.
B. Employee Investment Direction
Employee investment direction is permitted. You may direct the
investments among funds offered by the Trustee. The investment funds
available to you and the procedures for making an election are shown
in a separate election form which can be obtained from the Plan
Administrator. You may change your investment selection and move
monies from one fund to another by filing an election form with the
Plan Administrator.
C. Insurance Policies
Insurance policies are not permitted as an investment of this Plan.
D. Participant Loans
Participant loans are not permitted under this Plan.
XIII ADMINISTRATION
The Plan will be administered by the following parties:
A. Plan Administrator
The Employer is the party who has established the Plan and who has
overall control and authority over administration of the Plan. The
Employer's duties as Plan Administrator include:
14
<PAGE>
(1) appointing the Plan's professional advisors needed to administer
the Plan including, but not limited to, an accountant, attorney,
actuary, or administrator,
(2) directing the Trustee with respect to payments from the Fund,
(3) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all
claims procedures and domestic relations orders,
(4) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency,
(5) reviewing and approving any financial reports, investment
reviews, or other reports prepared by any party appointed by the
Employer,
(6) establishing a funding policy and investment objectives
consistent with the purposes of the Plan and the Employee
Retirement Income Security Act of 1974; and
(7) construing and resolving any question of Plan interpretation. The
Plan Administrator's interpretation and application thereof is
final.
B. Trustee(s)
The Trustee(s) shall be responsible for the administration of
investments held in the Fund. These duties shall include:
(1) receiving contributions under the terms of the Plan,
(2) investing Plan assets, unless investment responsibility is
delegated to another party,
(3) making distributions from the Fund in accordance with written
instructions received from the Plan Administrator,
(4) keeping accounts and records of the financial transactions of the
Fund; and
(5) rendering an annual report of the Fund showing the financial
transactions for the Plan Year.
XIV AMENDMENT AND TERMINATION
The Employer or the Sponsor may amend the Plan at any time, provided that
no amendment will divert any part of the Plan's assets to any purpose other
than for the exclusive benefit of you and the other Participants in the
Plan or eliminate an optional form of distribution. The Employer may also
terminate the Plan. In the event of a full or partial termination, all
amounts credited to your account will be fully vested and will be paid to
you as directed by the Employer. Depending on the facts
15
<PAGE>
and circumstances, a partial termination may be found to occur where a
significant number of Employees are terminated by the Employer or excluded
from Plan participation. In case of a partial termination, only those
affected will become 100% vested.
XV LEGAL PROVISIONS
A. Rights of Participants
As a Plan Participant, you have certain rights and protections under
the Employee Retirement Income Security Act of 1974 (ERISA). The law
says that you are entitled to:
(1) Examine, without charge, all documents relating to the operation
of the Plan and any documents filed with the U.S. Department of
Labor. These documents are available for review in the Employer's
offices during regular business hours.
(2) Obtain copies of all Plan documents and other Plan information
upon written request to the Employer. The Employer may make a
reasonable charge for producing the copies.
(3) Receive from the Employer at least once each year a summary of
the Plan's annual financial report.
(4) Obtain, at least once a year, a statement of the total benefits
accrued for you, and your nonforfeitable (vested) benefits, if
any. The Plan provides that you will receive this statement
automatically. If you are not vested, you may request a statement
showing the date when your account will begin to become
nonforfeitable.
(5) File suit in a federal court, if any materials requested are not
received within thirty (30) days of your request, unless the
materials were not sent because of matters beyond the control of
the Employer. If you are improperly denied access to information
you are entitled to receive, the Employer may be required to pay
up to $100 for each day's delay until the information is provided
to you.
B. Fiduciary Responsibility
ERISA also imposes obligations upon the persons who are responsible
for the operation of the Plan. These persons are referred to as
"fiduciaries." Fiduciaries must act solely in your interest as a Plan
Participant and they must exercise prudence in the performance of
their duties. Fiduciaries who violate ERISA may be removed and
required to reimburse any losses they have caused you or other
Participants in the Plan.
C. Employment Rights
Participation in the Plan is not a guarantee of employment. However,
the Employer may not fire you or discriminate against you to prevent
you from becoming eligible for the Plan or from obtaining a benefit or
exercising your rights under ERISA.
16
<PAGE>
D. Benefit Insurance
Your benefits under this Plan are not insured by the Pension Benefit
Guaranty Corporation since the law does not require plan termination
insurance for this type of Plan.
E. Claims Procedure
If you feel you are entitled to a benefit under the Plan, mail or
deliver your written claim to the Plan Administrator. The Plan
Administrator will notify you, your beneficiary, or authorized
representative of the action taken within sixty (60) days of receipt
of the claim. If you believe that you are being improperly denied a
benefit in full or in part, the Employer must give you a written
explanation of the reason for the denial. If the Employer denies your
claim, you may, within sixty (60) days after receiving the denial,
submit a written request asking the Employer to review your claim for
benefits. Any such request should be accompanied by documents or
records in support of your appeal. You, your beneficiary, or your
authorized representative may review pertinent documents and submit
issues and comments in writing. If you get no satisfaction from the
Employer, you have the right to request assistance from the U.S.
Department of Labor or you can file suit in a state or federal court.
Service of legal process may be made upon the Plan Trustee or the Plan
Administrator. If you are successful in your lawsuit, the Court may
require the Employer to pay your legal costs, including your
attorney's fees. If you lose, and the Court finds that your claim is
frivolous, you may be required to pay the Employer's legal fees.
F. Assignment
Your rights and benefits under this Plan cannot be assigned, sold,
transferred or pledged by you or reached by your creditors (subject to
state law) or anyone else except under a Qualified Domestic Relations
Order. A Qualified Domestic Relations Order (QDRO) is a court order
issued under state domestic relations law relating to divorce, legal
separation, custody, or support proceedings. The QDRO recognizes the
right of someone other than you to receive your Plan benefits. You
will be notified if a QDRO on your Plan benefits is received. Receipt
of a Qualified Domestic Relations Order will allow for an earlier than
normal distribution to the person(s) other than the Participant listed
in the order.
G. Questions
If you have any questions about this statement of your rights under
ERISA, please contact the Employer or the nearest Area Office of the
U.S. Labor-Management Service Administration, Department of Labor.
H. Conflicts with Plan
This booklet is not the Plan Document, but only a Summary Plan
Description of its principal provisions, and not every limitation or
detail of the Plan is included. Every attempt has been made to provide
concise and accurate information. However, if there is a discrepancy
between this booklet and the official Plan Document, the Plan Document
shall prevail.
17
<PAGE>
REGIONAL PROTOTYPE DEFINED CONTRIBUTION
PLAN AND TRUST
Sponsored By
BENEFIT PLANS ADMINISTRATORS
BASIC PLAN DOCUMENT #R1
FEBRUARY 1993
Copyright 1993 McKAY HOCHMAN CO., INC.
<PAGE>
THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. UNAUTHORIZED
USE, DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS
PROHIBITED BY LAW WITHOUT THE EXPRESS CONSENT OF THE AUTHOR.
TABLE OF CONTENT
PARAGRAPH PAGE
ARTICLE I
DEFINITIONS
1.1 Actual Deferral Percentage 1
1.2 Adoption Agreement 1
1.3 Aggregate Limit 1
1.4 Annual Additions 2
1.5 Annuity Starting Date 2
1.6 Applicable Calendar Year 2
1.7 Applicable Life Expectancy 2
1.8 Average Contribution Percentage (ACP) 2
1.9 Average Deferral Percentage (ADP) 2
1.10 Break In Service 2
1.11 Code 2
1.12 Compensation 2
1.13 Contribution Percentage 4-a
1.14 Defined Benefit Plan 5
1.15 Defined Benefit (Plan) Fraction 5
1.16 Defined Contribution Dollar Limitation 5
1.17 Defined Contribution Plan 5
1.18 Defined Contribution (Plan) Fraction 5
1.19 Designated Beneficiary 5
1.20 Disability 6
1.21 Distribution Calendar Year 6
1.22 Early Retirement Age 6
1.23 Earned Income 6
1.24 Effective Date 6
1.25 Election Period 6
1.26 Elective Deferral 6
1.27 Eligible Participant 7
1.28 Employee 7
1.29 Employer 7
1.30 Entry Date 7
1.31 Excess Aggregate Contributions 7
1.32 Excess Amount 7
1.33 Excess Contribution 8
i
<PAGE>
PARAGRAPH PAGE
1.34 Excess Elective Deferrals 8
1.35 Family Member 8
1.36 First Distribution Calendar Year 8
1.37 Fund 8
1.38 Hardship 8
1.39 Highest Average Compensation 8
1.40 Highly Compensated Employee 8
1.41 Hour Of Service 9
1.42 Key Employee 10
1.43 Leased Employee 10
1.44 Limitation Year 11
1.45 Master Or Prototype Plan 11
1.46 Matching Contribution 11
1.47 Maximum Permissible Amount 11
1.48 Net Profit 11
1.49 Normal Retirement Age 11
1.50 Owner-Employee 11
1.51 Paired Plans 11
1.52 Participant 11
1.53 Participant's Benefit 11
1.54 Permissive Aggregation Group 12
1.55 Plan 12
1.56 Plan Administrator 12
1.57 Plan Year 12
1.58 Present Value 12
1.59 Projected Annual Benefit 12
1.60 Qualified Deferred Compensation Plan 12
1.61 Qualified Domestic Relations Order 13
1.62 Qualified Early Retirement Age 13
1.63 Qualified Joint And Survivor Annuity 13
1.64 Qualified Matching Contribution 13
1.65 Qualified Non-Elective Contributions 13
1.66 Qualified Voluntary Contribution 13
1.67 Regional Prototype Plan 13
1.68 Required Aggregation Group 13
1.69 Required Beginning Date 14
1.70 Rollover Contribution 14
1.71 Salary Savings Agreement 14
1.72 Self-Employed Individual 14
1.73 Service 14
1.74 Shareholder Employee 14
1.75 Simplified Employee Pension Plan 14
1.76 Sponsor 14
ii
<PAGE>
PARAGRAPH PAGE
1.77 Spouse (Surviving Spouse) 14-a
1.78 Super Top-Heavy Plan 14-a
1.79 Taxable Wage Base 14-a
1.80 Top-Heavy Determination Date 14-a
1.81 Top-Heavy Plan 14-a
1.82 Top-Heavy Ratio 15
1.83 Top-Paid Group 16
1.84 Transfer Contribution 17
1.85 Trustee 17
1.86 Valuation Date 17
1.87 Vested Account Balance 17
1.88 Voluntary Contribution 17
1.89 Welfare Benefit Fund 17
1.90 Year Of Service 17
ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 Participation 18
2.2 Change In Classification Of Employment 18
2.3 Computation Period 18
2.4 Employment Rights 18
2.5 Service With Controlled Groups 18
2.6 Owner-Employees 19
2.7 Leased Employees 19
2.8 Thrift Plans 20
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 Amount 21
3.2 Expenses And Fees 21
3.3 Responsibility For Contributions 21
3.4 Return Of Contributions 21
ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 Voluntary Contributions 22
4.2 Qualified Voluntary Contributions 22
4.3 Rollover Contribution 22
iii
<PAGE>
PARAGRAPH PAGE
4.4 Transfer Contribution 23
4.5 Employer Approval Of Transfer
Contributions 23
4.6 Elective Deferrals 23
4.7 Required Voluntary Contributions 24
4.8 Direct Rollover Of Benefits 24
ARTICLE V
PARTICIPANT ACCOUNTS
5.1 Separate Accounts 25
5.2 Adjustments To Participant Accounts 25
5.3 Allocating Employer Contributions 26
5.4 Allocating Investment Earnings And Losses 26
5.5 Participant Statements 27
ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 Normal Retirement Benefits 28
6.2 Early Retirement Benefits 28
6.3 Benefits On Termination Of Employment 28
6.4 Restrictions On Immediate Distributions 29
6.5 Normal Form Of Payment 30
6.6 Commencement Of Benefits 31
6.7 Claims Procedures 31
6.8 In-Service Withdrawals 32
6.9 Hardship Withdrawal 33
ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 Joint And Survivor Annuity Requirements 35
7.2 Minimum Distribution Requirements 35
7.3 Limits On Distribution Periods 35
7.4 Required Distributions On Or After The
Required Beginning Date 35
7.5 Required Beginning Date 36
7.6 Transitional Rule 37
7.7 Designation Of Beneficiary For Death
Benefit 38
7.8 Nonexistence Of Beneficiary 39
7.9 Distribution Beginning Before Death 39
iv
<PAGE>
PARAGRAPH PAGE
7.10 Distribution Beginning After Death 39
7.11 Distribution Of Excess Elective Deferrals 40
7.12 Distributions Of Excess Contributions 40
7.13 Distribution Of Excess Aggregate
Contributions 41
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Applicability Of Provisions 43
8.2 Payment Of Qualified Joint And Survivor
Annuity 43
8.3 Payment of Qualified Pre-Retirement
Survivor Annuity 43
8.4 Qualified Election 43
8.5 Notice Requirements For Qualified Joint
And Survivor Annuity 44
8.6 Notice Requirements For Qualified
Pre-Retirement Survivor Annuity 45
8.7 Special Safe-Harbor Exception For
Certain Profit-Sharing Plans 45
8.8 Transitional Joint And Survivor Annuity
Rules 45
8.9 Automatic Joint And Survivor Annuity
And Early Survivor Annuity 46
8.10 Annuity Contracts 47
ARTICLE IX
VESTING
9.1 Employee Contributions 48
9.2 Employer Contributions 48
9.3 Computation Period 48
9.4 Requalification Prior To Five Consecutive
One-Year Breaks In Service 48
9.5 Requalification After Five Consecutive
One-Year Breaks In Service 48
9.6 Calculating Vested Interest 48
9.7 Forfeitures 49
9.8 Amendment Of Vesting Schedule 49
9.9 Service With Controlled Groups 50
9.10 Application Of Prior Vesting Rules 50
ARTICLE X
LIMITATIONS ON ALLOCATIONS AND
ANTIDISCRIMINATION TESTING
10.1 Participation In This Plan Only 51
10.2 Disposition Of Excess Annual Additions 51
v
<PAGE>
PARAGRAPH PAGE
10.3 Participation In This Plan And Another
Regional Prototype Defined
Contribution Plan, Welfare Benefit
Fund, Or Individual Medical Account
Maintained By The Employer 52
10.4 Disposition Of Excess Annual Additions
Under Two Plans 53
10.5 Participation In This Plan And Another
Defined Contribution Plan Which Is Not
A Regional Prototype Plan 53
10.6 Participation In This Plan And A Defined
Benefit Plan 54
10.7 Limitations On Allocations 54
10.8 Average Deferral Percentage (ADP) Test 54
10.9 Special Rules Relating To Application Of
ADP Test 54
10.10 Recharacterization 55
10.11 Average Contribution Percentage (ACP) Test 56
10.12 Special Rules Relating To Application Of
ACP Test 56
ARTICLE XI
ADMINISTRATION
11.1 Plan Administrator 58
11.2 Trustee 58
11.3 Administrative Fees And Expenses 59
11.4 Division Of Duties And Indemnification 59
ARTICLE XII
TRUST FUND ACCOUNT
12.1 The Fund 61
12.2 Control Of Plan Assets 61
12.3 Exclusive Benefit Rules 61
12.4 Assignment And Alienation Of Benefits 61
12.5 Determination Of Qualified Domestic
Relations Order (QDRO) 61
ARTICLE XIII
INVESTMENTS
13.1 Fiduciary Standards 63
13.2 Trustee Appointment 63
13.3 Investment Alternatives Of The Trustee 63
13.4 Participant Loans 64
13.5 Insurance Policies 66
13.6 Employer Investment Direction 67
13.7 Employee Investment Direction 68
vi
<PAGE>
PARAGRAPH PAGE
ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 Applicability Of Rules 69
14.2 Minimum Contribution 69
14.3 Minimum Vesting 69
ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment By Sponsor 71
15.2 Amendment By Employer 71
15.3 Termination 71
15.4 Qualification Of Employer's Plan 72
15.5 Mergers And Consolidations 72
15.6 Resignation And Removal 72
15.7 Qualification Of Prototype 72
ARTICLE XVI
Governing Law 73
Section 401(a)(17) Limitation 74
vii
<PAGE>
REGIONAL PROTOTYPE DEFINED CONTRIBUTION
PLAN AND TRUST
Sponsored By
BENEFIT PLANS ADMINISTRATORS
The Sponsor hereby establishes the following Regional Prototype Defined
Contribution Plan and Trust for use by those of its adopting Employers who
qualify and wish to provide a qualified retirement program for its Employees.
Any Plan and Trust Account established hereunder shall be administered for the
exclusive benefit of Participants and their beneficiaries under the following
terms and conditions:
ARTICLE I
DEFINITIONS
1.1 Actual Deferral Percentage The ratio (expressed as a percentage and
calculated separately for each Participant) of:
(a) the amount of Employer contributions [as defined at (c) and (d)]
actually paid over to the Fund on behalf of such Participant for the
Plan Year to
(b) the Participant's Compensation for such Plan Year. Compensation will
only include amounts for the period during which the Employee was
eligible to participate.
Employer contributions on behalf of any Participant shall include:
(c) any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective
Deferrals that are taken into account in the Contribution Percentage
test (provided the ADP test is satisfied both with and without
exclusion of these Elective Deferrals) or are returned as excess
Annual Additions; and
(d) at the election of the Employer, Qualified Non-Elective Contributions
and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated as
a Participant on whose behalf no Elective Deferrals are made.
1.2 Adoption Agreement The document attached to this Plan by which an Employer
elects to establish a qualified retirement plan and trust account under the
terms of this Regional Prototype Defined Contribution Plan and Trust.
1.3 Aggregate Limit The sum of:
(a) 125 percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the Plan subject to Code Section 401(m) for the Plan
Year beginning with or within the Plan Year of the cash or deferred
arrangement as described in Code Section 401(k) or Code Section
402(h)(1)(B) and
1
<PAGE>
(b) the lesser of 200% or two plus the lesser of such ADP or ACP.
Alternatively, the Aggregate Limit may be expressed by substituting the word
"lesser" for the word "greater" where it appears in the first line of
sub-paragraph (a) and substituting the word "greater" for the word "lesser"
where it appears for the second time in the first line of sub-paragraph (b).
1.4 Annual Additions The sum of the following amounts credited to a
Participant's account for the Limitation Year:
(a) Employer Contributions,
(b) Employee Contributions (under Article IV),
(c) forfeitures, and
(d) amounts allocated after March 31, 1984 to an individual medical
account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer (these amounts are
treated as Annual Additions to a Defined Contribution Plan though they
arise under a Defined Benefit Plan), and
(e) amounts derived from contributions paid or accrued after 1985, in
taxable years ending after 1985, which are either attributable to
post-retirement medical benefits, allocated to the account of a Key
Employee, or a Welfare Benefit Fund maintained by the Employer are
also treated as Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee if he or she
meets the requirements of paragraph 1.42 at any time during the Plan
Year or any preceding Plan Year. Welfare Benefit Fund is defined at
paragraph 1.89.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 Annuity Starting Date The first day of the first period for which an amount
is paid as an annuity or in any other form.
1.6 Applicable Calendar Year The first Distribution Calendar Year, and in the
event of the recalculation of life expectancy, such succeeding calendar year. If
payments commence in accordance with paragraph 7.4(e) before the Required
Beginning Date, the Applicable Calendar Year is the year such payments commence.
If distribution is in the form of an immediate annuity purchased after the
Participant's death with the Participant's remaining interest, the Applicable
Calendar Year is the year of purchase.
1.7 Applicable Life Expectancy Used in determining the required minimum
distribution. The life expectancy (or joint and last survivor expectancy)
calculated using the attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's) birthday in the applicable
calendar year reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is being
recalculated, the Applicable Life Expectancy shall be the life expectancy as so
recalculated. The life expectancy of a non-Spouse Beneficiary may not be
recalculated.
2
<PAGE>
1.8 Average Contribution Percentage (ACP) The average of the Actual Contribution
Percentages for each Highly Compensated Employee and for each non-Highly
Compensated Employee.
1.9 Average Deferral Percentage (ADP) The average of the Percentages for each
Highly Compensated Employee and for each non-Highly Compensated Employee.
1.10 Break In Service A 12-consecutive month period during which an Employee
fails to complete more than 500 Hours of Service.
1.11 Code The Internal Revenue Code of 1986, including any amendments.
1.12 Compensation The Employer may select one of the following three safe-harbor
definitions of Compensation in the Adoption Agreement. Compensation shall only
include amounts earned while a Participant if Plan Year is chosen as the
applicable computation period.
(a) Code Section 3401(a) Wages. Compensation is defined as wages within
the meaning of Code Section 3401(a) for the purposes of Federal income
tax withholding at the source but determined without regard to any
rules that limit the remuneration included in wages based on the
nature or location of the employment or the services performed [such
as the exception for agricultural labor in Code Section 3401(a)(2)].
(b) Code Section 6041 and 6051 Wages. Compensation is defined as wages as
defined in Code Section 3401(a) and all other payments of Compensation
to an Employee by the Employer (in the course of the Employer's trade
or business) for which the Employer is required to furnish the
Employee a written statement under Code Section 6041(d) and
6051(a)(3). Compensation must be determined without regard to any
rules under Code Section 3401(a) that limit the remuneration included
in wages based on the nature or location of the employment or the
services performed [such as the exception for agricultural labor in
Code Section 3401(a)(2)].
(c) Code Section 415 Compensation. For purposes of applying the
limitations of Article X and Top-Heavy Minimums, the definition of
Compensation shall be Code Section 415 Compensation defined as
follows: a Participant's Earned Income, wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible in
gross income [including, but not limited to, commissions paid
salesmen, Compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits and reimbursements or other expense allowances under a
nonaccountable plan (as described in Regulation 1.62-2(c)], and
excluding the following:
3
<PAGE>
1. Employer contributions to a plan of deferred compensation which
are not includible in the Employee's gross income for the taxable
year in which contributed, or Employer contributions under a
Simplified Employee Pension Plan or any distributions from a plan
of deferred compensation,
2. Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture,
3. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
4. other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the
contributions are actually excludible from the gross income of
the Employee).
For purposes of applying the limitations of Article X and Top-Heavy Minimums,
the definition of Compensation shall be Code Section 415 Compensation described
in this paragraph 1.12(c). Also, for purposes of applying the limitations of
Article X, Compensation for a Limitation Year is the Compensation actually paid
or made available during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a Participant in a defined contribution plan who is
permanently and totally disabled [as defined in Code Section 22(e)(3)] is the
Compensation such Participant would have received for the Limitation Year if the
Participant had been paid at the rate of Compensation paid immediately before
becoming permanently and totally disabled. Such imputed Compensation for the
disabled Participant may be taken into account only if the Participant is not a
Highly Compensated Employee [as defined in Code Section 414(q)] and
contributions made on behalf of such Participant are nonforfeitable when made.
If the Employer fails to pick the applicable period in the Adoption Agreement,
the Plan Year shall be used. Unless otherwise specified by the Employer in the
Adoption Agreement, Compensation shall be determined as provided in Code Section
3401(a) [as defined in this paragraph 1.12(a)]. In nonstandardized Adoption
Agreements 004, 005 and 006, the Employer may choose to eliminate or exclude
categories of Compensation which do not violate the provisions of Code Sections
401(a)(4), 414(s) the regulations thereunder and Revenue Procedure 89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under Article XIV) for any year shall not exceed
$200,000, as adjusted under Code Section 415(d). In determining the Compensation
of a Participant for purposes of this limitation, the rules of Code Section
414(q)(6) shall apply, except in applying such rules, the term "family" shall
include only the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the end of the Plan year. If, as
a result of the application of such rules the adjusted $200,000 limitation is
exceeded, then (except for purposes of determining the portion of Compensation
up to the integration level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion to
each such individual's Compensation as determined under this section prior to
the application of this limitation.
4
<PAGE>
If a Plan has a Plan Year that contains fewer than 12 calendar months, then the
annual Compensation limit for that period is an amount equal to the $200,000 as
adjusted for the calendar year in which the Compensation period begins,
multiplied by a fraction the numerator of which is the number of full months in
the Short Plan Year and the denominator of which is 12. If Compensation for any
prior Plan Year is taken into account in determining an Employee's contributions
or benefits for the current year, the Compensation for such prior year is
subject to the applicable annual Compensation limit in effect for that prior
year. For this purpose, for years beginning before January 1, 1990, the
applicable annual Compensation limit is $200,000.
Compensation shall not include deferred Compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV. When applicable to a Self-Employed Individual,
Compensation shall mean Earned Income.
1.13 Contribution Percentage The ratio (expressed as a percentage and calculated
separately for each Participant) of:
(a) the Participant's Contribution Percentage Amounts [as defined at
(c)-(f)] for the Plan Year, to
(b) the Participant's Compensation for the Plan Year. Compensation will
only include amounts for the period during which the Employee was
eligible to participate.
Contribution Percentage Amounts on behalf of any Participant shall include:
(c) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made under the Plan
on behalf of the Participant for the Plan Year,
(d) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated,
(e) at the election of the Employer, Qualified Non-Elective Contributions,
and
(f) the Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and continues to be
met following the exclusion of those Elective Deferrals that are used
to meet the ACP test.
4-a
<PAGE>
1.14 Defined Benefit Plan A Plan under which a Participant's benefit is
determined by a formula contained in the Plan and no individual accounts are
maintained for Participants.
1.15 Defined Benefit (Plan) Fraction A fraction, the numerator of which is the
sum of the Participant's Projected Annual Benefits under all the Defined Benefit
Plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar limitation
determined for the Limitation Year under Code Sections 415(b) and (d) or 140
percent of the Highest Average Compensation, including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after December 31, 1986, in one or
more Defined Benefit Plans maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not be less than 125 percent
of the sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the plan after May
5, 1986. The preceding sentence applies only if the Defined Benefit Plans
individually and in the aggregate satisfied the requirements of Section 415 for
all Limitation Years beginning before January 1, 1987.
1.16 Defined Contribution Dollar Limitation Thirty thousand dollars ($30,000) or
if greater, one-fourth of the defined benefit dollar limitation set forth in
Code Section 415(b)(1)(A) as in effect for the Limitation Year.
1.17 Defined Contribution Plan A Plan under which individual accounts are
maintained for each Participant to which all contributions, forfeitures,
investment income and gains or losses, and expenses are credited or deducted. A
Participant's benefit under such Plan is based solely on the fair market value
of his or her account balance.
1.18 Defined Contribution (Plan) Fraction A Fraction, the numerator of which is
the sum of the Annual Additions to the Participant's account under all the
Defined Contribution Plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the Annual
Additions attributable to the Participant's nondeductible Employee contributions
to all Defined Benefit Plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all Welfare Benefit Funds, as
defined in paragraph 1.89 and individual medical accounts, as defined in Code
Section 415(1)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
Limitation Years of service with the Employer (regardless of whether a Defined
Contribution Plan was maintained by the Employer). The maximum aggregate amount
in the Limitation Year is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code Section
415(c)(1)(A) or 35 percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more Defined
Contribution Plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (a)
the excess of the sum of the fractions over 1.0 times (b) the denominator of
this fraction will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 6, 1986, but using the Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987. The Annual Addition for
any Limitation Year beginning before January 1, 1987, shall not be re-computed
to treat all Employee Contributions as Annual Additions.
5
<PAGE>
1.19 Designated Beneficiary The individual who is designated as the beneficiary
under the Plan in accordance with Code Section 401(a)(9) and the regulations
thereunder.
1.20 Disability An illness or injury of a potentially permanent nature, expected
to last for a continuous period of not less than 12 months, certified by a
physician selected by or satisfactory to the Employer which prevents the
Employee from engaging in any occupation for wage or profit for which the
Employee is reasonably fitted by training, education or experience.
1.21 Distribution Calendar Year A calendar year for which a minimum distribution
is required.
1.22 Early Retirement Age The age set by the Employer in the Adoption Agreement
(but not less than 55), which is the earliest age at which a Participant may
retire and receive his or her benefits under the Plan.
1.23 Earned Income Net earnings from self-employment in the trade or business
with respect to which the Plan is established, determined without regard to
items not included in gross income and the deductions allocable to such items,
provided that personal services of the individual are a material
income-producing factor. Earned income shall be reduced by contributions made by
an Employer to a qualified plan to the extent deductible under Code Section 404.
For tax years beginning after 1989, net earnings shall be determined taking into
account the deduction for one-half of self-employment taxes allowed to the
Employer under Code Section 164(f) to the extent deductible.
1.24 Effective Date The date on which the Employer's retirement plan or
amendment to such plan becomes effective. For amendments reflecting statutory
and regulatory changes post Tax Reform Act of 1986, the Effective Date will be
the earlier of the date upon which such amendment is first administratively
applied or the first day of the Plan Year following the date of adoption of such
amendment.
1.25 Election Period The period which begins on the first day of the Plan Year
in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from Service prior to the first
day of the Plan Year in which age 35 is attained, the Election Period shall
begin on the date of separation, with respect to the account balance as of the
date of separation.
1.26 Elective Deferral Employer contributions made to the Plan at the election
of the Participant, in lieu of cash Compensation. Elective Deferrals shall also
include contributions made pursuant to a Salary Savings Agreement or other
deferral mechanism, such as a cash option contribution. With respect to any
taxable year, a Participant's Elective Deferral is the sum of all Employer
contributions made on behalf of such Participant pursuant to an election to
defer under any qualified cash or deferred arrangement as described in Code
Section 401(k), any simplified employee pension cash or deferred arrangement as
described in Code Section 402(h)(1)(B), any eligible deferred compensation plan
under Code Section 457, any plan as described under Code Section 501(c)(18), and
any Employer contributions made on the behalf of a Participant for the purchase
of an annuity contract under Code Section 403(b) pursuant to a Salary Savings
Agreement. Elective Deferrals shall not include any deferrals properly
distributed as Excess Annual Additions.
6
<PAGE>
1.27 Eligible Participant Any Employee who is eligible to make a Voluntary
Contribution, or an Elective Deferral (if the Employer takes such contributions
into account in the calculation of the Contribution Percentage), or to receive a
Matching Contribution (including forfeitures) or a Qualified Matching
Contribution. If a Voluntary Contribution or Elective Deferral is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant even though no Voluntary Contributions or Elective
Deferrals are made.
1.28 Employee Any person employed by the Employer (including Self-Employed
Individuals and partners), all Employees of a member of an affiliated service
group [as defined in Code Section 414(m)], Employees of a controlled group of
corporations [as defined in Code Section 414(b)], all Employees of any
incorporated or unincorporated trade or business which is under common control
[as defined in Code Section 414(c)], Leased Employees [as defined in Code
Section 414(n)] and any Employee required to be aggregated by Code Section
414(o). All such Employees shall be treated as employed by a single Employer.
1.29 Employer The Self-Employed Individual, partnership, corporation or other
organization which adopts this Plan including any firm that succeeds the
Employer and adopting this Plan. For purposes of Article X, Limitations shall
mean the Employer that adopts this Plan, and all members of a controlled group
of corporations [as defined in Code Section 414(b) as modified by Code Section
415(h)], all commonly controlled trades or businesses [as defined in Code
Section 414(c) as modified by Code Section 415(h)] or affiliated service groups
[as defined in Code Section 414(m)] of which the adopting Employer is a part,
and other entities required to be aggregated with the Employer pursuant to
Regulations under Code Section 414(o).
1.30 Entry Date The date on which an Employee commences participation in the
Plan as determined by the Employer in the Adoption Agreement. Unless the
Employer specifies otherwise in the Adoption Agreement, Entry into the Plan
shall be on the first day of the Plan Year or the first day of the seventh month
of the Plan Year coinciding with or following the date on which an Employee
meets the eligibility requirements.
1.31 Excess Aggregate Contributions The excess, with respect to any Plan Year,
of:
(a) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made
on behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.34 and then determining Excess Contributions
pursuant to paragraph 1.33.
1.32 Excess Amount The excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
7
<PAGE>
1.33 Excess Contribution With respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such
Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the highest
of such percentages).
1.34 Excess Elective Deferrals Those Elective Deferrals that are includible in a
Participant's gross income under Code Section 402(g) to the extent such
Participant's Elective Deferrals for a taxable year exceed the dollar limitation
under such Code Section. Excess Elective Deferrals shall be treated as Annual
Additions under the Plan, unless such amounts are distributed no later than the
first April 15 following the close of the Participant's taxable year.
1.35 Family Member The Employee's Spouse, any lineal descendants and ascendants
and the Spouse of such lineal descendants and ascendants.
1.36 First Distribution Calendar Year For distributions beginning before the
Participant's death, the First Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Participant's
Required Beginning Date. For distributions beginning after the Participant's
death, the First Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to paragraph 7.10.
1.37 Fund All contributions received by the Trustee under this Plan and Trust
Account, investments thereof and earnings and appreciation thereon.
1.38 Hardship An immediate and heavy financial need of the Employee where such
Employee lacks other available resources.
1.39 Highest Average Compensation The average compensation for the three
consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month period
defined in the Adoption Agreement.
1.40 Highly Compensated Employee Any Employee who performs service for the
Employer during the determination year and who, during the immediate prior year:
(a) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Code Section 415(d)]; or
(b) received Compensation from the Employer in excess of $50,000 [as
adjusted pursuant to Code Section 415(d)] and was a member of the
Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year unless such Employee is a
member of the 100 Employees paid the greatest Compensation during the year for
which such determination is being made.
8
<PAGE>
(d) Employees who are five percent (5%) Owners at any time during the
immediate prior year or determination year.
Highly Compensated Employee includes Highly Compensated active Employees and
Highly Compensated former Employees.
For purposes of determining those employees that are to be treated as Highly
Compensated for a determination year, an Employer maintaining a fiscal year Plan
may elect to make the look-back year calculation as defined in ss.1.414(q)-1T,
Q&A 14(b) of the Treasury Regulations for a determination year on the basis of
the calendar year ending with or within the applicable determination year. For
purposes of this election, a determination year that is shorter than twelve (12)
months, the look-back year calculation may be made based upon the calendar year
ending with or within the twelve-month period ending with the end of the
applicable determination year. Where such election is made, the employer shall
make its determination year calculation pursuant to the provisions of Treasury
Regulation ss.1.414(q)-1T, Q&A 14(b).
1.41 Hour Of Service
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours shall be
credited to the Employee for the computation period in which the
duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than 501 Hours of Service shall be credited under this paragraph
for any single continuous period (whether or not such period occurs in
a single computation period). Hours under this paragraph shall be
calculated and credited pursuant to Department of Labor Regulations
Section 2530.200b-2 which are incorporated herein by this reference;
and
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c). These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.
(d) Hours of Service shall be credited for employment with the Employer
and with other members of an affiliated service group [as defined in
Code Section 414(m)], a controlled group of corporations [as defined
in Code Section 414(b)], or a group of trades or businesses under
common control [as defined in Code Section 414(c)] of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code Section 414(o) and the
regulations thereunder. Hours of Service shall also be credited for
any individual considered an Employee for purposes of this Plan under
Code Section 414(n) or Code Section 414(o) and the regulations
thereunder.
9
<PAGE>
(e) Solely for purposes of determining whether a Break in Service, as
defined in paragraph 1.10, for participation and vesting purposes has
occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such
individual but for such absence, or in any case in which such hours
cannot be determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence by reason of the pregnancy of the
individual, by reason of a birth of a child of the individual, by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or for purposes of
caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this
paragraph shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a Break in
Service in that period, or in all other cases, in the following
computation period. No more than 501 hours will be credited under this
paragraph.
(f) Unless specified otherwise in the Adoption Agreement, Hours of Service
shall be determined on the basis of the actual hours for which an
Employee is paid or entitled to pay.
1.42 Key Employee Any Employee or former Employee (and the beneficiaries of such
employee) who at any time during the determination period was an officer of the
Employer if such individual's annual Compensation exceeds 50% of the dollar
limitation under Code Section 415(b)(1)(A) (the defined benefit maximum annual
benefit), an owner (or considered an owner under Code Section 318) of one of the
ten largest interests in the employer if such individual's Compensation exceeds
100% of the dollar limitation under Code Section 415(c)(1)(A), a 5% owner of the
Employer, or a 1% owner of the Employer who has an annual Compensation of more
than $150,000. For purposes of determining who is a Key Employee, annual
Compensation shall mean Compensation as defined for Article X, but including
amounts deferred through a salary reduction agreement to a cash or deferred plan
under Code Section 401(k), a Simplified Employee Pension Plan under Code Section
408(k), a cafeteria plan under Code Section 125 or a tax-deferred annuity under
Code Section 403(b). The determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with Code Section 416(i)(1) and the
regulations thereunder.
1.43 Leased Employee Any person (other than an Employee of the recipient) who,
pursuant to an agreement between the recipient and any other person ("leasing
organization"), has performed services for the recipient [or for the recipient
and related persons determined in accordance with Code Section 414(n)(6)] on a
substantially full-time basis for a period of at least one year, and such
services are of a type historically performed by Employees in the business field
of the recipient Employer.
10
<PAGE>
1.44 Limitation Year The calendar year or such other 12-consecutive month period
designated by the Employer in the Adoption Agreement for purposes of determining
the maximum Annual Addition to a Participant's account. All qualified plans
maintained by the Employer must use the same Limitation Year. If the Limitation
Year is amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
1.45 Master Or Prototype Plan A plan, the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
1.46 Matching Contribution An Employer contribution made to this or any other
defined contribution plan on behalf of a Participant on account of an Employee
Voluntary Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a Plan maintained by the Employer.
1.47 Maximum Permissible Amount The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation, or
(b) 25% of the Participant's Compensation for the Limitation Year.
The Compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different
12-consecutive month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the number of months in the
short Limitation Year divided by 12.
1.48 Net Profit The current and accumulated operating earnings of the Employer
before Federal and State income taxes, excluding nonrecurring or unusual items
of income, and before contributions to this and any other qualified plan of the
Employer. Alternatively, the Employer may fix another definition in the Adoption
Agreement.
1.49 Normal Retirement Age The age, set by the Employer in the Adoption
Agreement, at which a Participant may retire and receive his or her benefits
under the Plan.
1.50 Owner-Employee A sole proprietor, or a partner owning more than 10% of
either the capital or profits interest of the partnership.
1.51 Paired Plans Two or more Plans maintained by the Sponsor designed so that a
single or any combination of Plans adopted by an Employer will meet the
antidiscrimination rules, the contribution and benefit limitations, and the
Top-Heavy provisions of the Code.
1.52 Participant Any Employee who has met the eligibility requirements and is
participating in the Plan.
1.53 Participant's Benefit The account balance as of the last Valuation Date in
the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the account balance as of the dates in the valuation
calendar year after the valuation date and decreased by distributions made in
the valuation calendar year after the Valuation Date. A special exception exists
for the second distribution Calendar Year. For purposes of this paragraph, if
any portion of the minimum distribution for the First Distribution Calendar Year
is made in the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding Distribution Calendar Year.
11
<PAGE>
1.54 Permissive Aggregation Group Used for Top-Heavy testing purposes, it is the
Required Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Code Sections 401(a)(4) and 410.
1.55 Plan The Employer's qualified retirement plan as embodied herein and in the
Adoption Agreement.
1.56 Plan Administrator The Employer.
1.57 Plan Year The 12-consecutive month period designated by the Employer in the
Adoption Agreement.
1.58 Present Value Used for Top-Heavy test and determination purposes, when
determining the Present Value of accrued benefits, with respect to any Defined
Benefit Plan maintained by the Employer, interest and mortality rates shall be
determined in accordance with the provisions of the respective plan. If
applicable, interest and mortality assumptions will be specified in the section
of the Adoption Agreement entitled "Limitations on Allocations".
1.59 Projected Annual Benefit Used to test the maximum benefit which may be
obtained from a combination of retirement plans, it is the annual retirement
benefit (adjusted to an actuarial equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or Qualified
Joint and Survivor Annuity) to which the Participant would be entitled under the
terms of a Defined Benefit Plan or plans, assuming:
(a) the Participant will continue employment until Normal Retirement Age
under the plan (or current age, if later), and
(b) the Participant's Compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the plan will
remain constant for all future Limitation Years.
1.60 Qualified Deferred Compensation Plan Any pension, profit-sharing, stock
bonus, or other plan which meets the requirements of Code Section 401 and
includes a trust exempt from tax under Code Section 501(a) or any annuity plan
described in Code Section 403(a).
An Eligible Retirement Plan is an individual retirement account (IRA) as
described in Code Section 408(a), an individual retirement annuity (IRA) as
described in Code Section 408(b), an annuity plan as described in Code Section
403(a), or a qualified trust as described in Code Section 401(a), which accepts
Eligible Rollover Distributions. However in the case of an Eligible Rollover
Distribution to a Surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
12
<PAGE>
1.61 Qualified Domestic Relations Order A QDRO is a signed Domestic Relations
Order issued by a State Court which creates, recognizes or assigns to an
alternate payee(s) the right to receive all or part of a Participant's Plan
benefit and which meets the requirements of Code Section 414(p). An alternate
payee is a Spouse, former Spouse, child, or other dependent who is treated as a
beneficiary under the Plan as a result of the QDRO.
1.62 Qualified Early Retirement Age Qualified Early Retirement Age is the latest
of:
(a) the earliest date, under the Plan, on which the Participant may elect
to receive retirement benefits, or
(b) the first day of the 120th month beginning before the Participant
attains Normal Retirement Age, or
(c) the date the Participant begins participation.
1.63 Qualified Joint And Survivor Annuity An immediate annuity for the life of
the Participant with a survivor annuity for the life of the Participant's Spouse
which is at least one-half of but not more than the amount of the annuity
payable during the joint lives of the Participant and the Participant's Spouse.
The exact amount of the Survivor Annuity is to be specified by the Employer in
the Adoption Agreement. If not designated by the Employer, the Survivor Annuity
will be one-half of the amount paid to the Participant during his or her
lifetime. The Qualified Joint and Survivor Annuity will be the amount of benefit
which can be provided by the Participant's Vested Account Balance.
1.64 Qualified Matching Contribution Matching Contributions which when made are
subject to the distribution and nonforfeitability requirements under Code
Section 401(k).
1.65 Qualified Non-Elective Contributions Contributions (other than Matching
Contributions or Qualified Matching Contributions) made by the Employer and
allocated to Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; and that are distributable only in accordance with the distribution
provisions that are applicable to Elective Deferrals and Qualified Matching
Contributions.
1.66 Qualified Voluntary Contribution A tax-deductible voluntary Employee
contribution. Qualified Voluntary Contributions are not permitted in this Plan.
1.67 Regional Prototype Plan A plan, the form of which is subject to a favorable
notification letter from the Internal Revenue Service.
1.68 Required Aggregation Group Used for Top-Heavy testing purposes, it consists
of:
(a) each qualified plan of the Employer in which at least one Key Employee
participates or participated at any time during the determination
period (regardless of whether the plan has terminated), and
(b) any other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Code Sections 401(a)(4)
or 410.
13
<PAGE>
1.69 Required Beginning Date The date on which a Participant is required to take
his or her first minimum distribution under the Plan. The rules are set forth at
paragraph 7.5.
1.70 Rollover Contribution A contribution made by a Participant of an amount
distributed to such Participant from another Qualified Deferred Compensation
Plan in accordance with Code Sections 402(a)(5), (6), and (7).
An Eligible Rollover Distribution is any distribution of all or any portion of
the balance to the credit of the Participant except that an Eligible Rollover
Distribution does not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and the Participant's
Designated Beneficiary, or for a specified period of ten years or
more;
(b) any distribution to the extent such distribution is required under
Code Section 401(a)(9); and
(c) the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
1.71 Salary Savings Agreement An agreement between the Employer and a
participating Employee where the Employee authorizes the Employer to withhold a
specified amount or percentage of his or her Compensation for deposit to the
Plan on behalf of such Employee.
1.72 Self-Employed Individual An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established
including an individual who would have had Earned Income but for the fact that
the trade or business had no Net Profit for the taxable year.
1.73 Service The period of current or prior employment with the Employer. If the
Employer maintains a plan of a predecessor employer, Service for such
predecessor shall be treated as Service for the Employer.
1.74 Shareholder Employee An Employee or Officer who owns [or is considered as
owning within the meaning of Code Section 318(a)(1)], on any day during the
taxable year of an electing small business corporation (S Corporation), more
than 5% of such corporation's outstanding stock.
1.75 Simplified Employee Pension Plan An individual retirement account which
meets the requirements of Code Section 408(k), and to which the Employer makes
contributions pursuant to a written formula. These plans are considered for
contribution limitation and Top-Heavy testing purposes.
1.76 Sponsor Benefit Plans Administrators, or any successor(s) or assign(s).
14
<PAGE>
1.77 Spouse (Surviving Spouse) The Spouse or Surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic Relations
Order as described in Code Section 414(p).
1.78 Super Top-Heavy Plan A Plan under which the Top-Heavy Ratio [as defined at
paragraph 1.81] exceeds 90%.
1.79 Taxable Wage Base For plans with an allocation formula which takes into
account the Employer's contribution under the Federal Insurance Contributions
Act (FICA), the maximum amount of earnings which may be considered wages for
such Plan Year under the Social Security Act [Code Section 3121(a)(1)], or the
amount selected by the Employer in the sub-section of the Adoption Agreement
entitled "Taxable Wage Base".
1.80 Top-Heavy Determination Date For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan Year of the
Plan, the last day of that year.
1.81 Top-Heavy Plan For any Plan Year beginning after 1983, the Employer's Plan
is top-heavy if any of the following conditions exist:
(a) If the Top-Heavy Ratio for the Employer's Plan exceeds 60% and this
Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of Plans.
(b) If the Employer's plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60%.
14-a
<PAGE>
(c) If the Employer's plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
1.82 Top-Heavy Ratio
(a) If the Employer maintains one or more Defined Contribution plans
(including any Simplified Employee Pension Plan) and the Employer has
not maintained any Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had accrued benefits,
the Top-Heavy Ratio for this Plan alone, or for the Required or
Permissive Aggregation Group as appropriate, is a fraction,
(1) the numerator of which is the sum of the account balances of all
Key Employees as of the Determination Date(s) [including any part
of any account balance distributed in the 5-year period ending on
the Determination Date(s)], and
(2) the denominator of which is the sum of all account balances
[including any part of any account balance distributed in the
5-year period ending on the Determination Date(s)], both computed
in accordance with Code Section 416 and the regulations
thereunder.
Both the numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into account on
that date under Code Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Contribution Plans
(including any Simplified Employee Pension Plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination Date(s) has or
has had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction,
(1) the numerator of which is the sum of account balances under the
aggregated Defined Contribution Plan or Plans for all Key
Employees, determined in accordance with (a) above, and the
Present Value of accrued benefits under the aggregated Defined
Benefit Plan or Plans for all Key Employees as of the
Determination Date(s), and
(2) the denominator of which is the sum of the account balances under
the aggregated Defined Contribution Plan or Plans for all
Participants, determined in accordance with (a) above, and the
Present Value of accrued benefits under the Defined Benefit Plan
or Plans for all Participants as of the Determination Date(s),
all determined in accordance with Code Section 416 and the
regulations thereunder. The accrued benefits under a Defined
Benefit Plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an accrued
benefit made in the 5-year period ending on the Determination
Date.
15
<PAGE>
(c) For purposes of (a) and (b) above, the value of account balances and
the Present Value of accrued benefits will be determined as of the
most recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in Code
Section 416 and the regulations thereunder for the first and second
plan years of a Defined Benefit Plan. The account balances and accrued
benefits of a participant (1) who is not a Key Employee but who was a
Key Employee in a prior year, or (2) who has not been credited with at
least one hour of service with any Employer maintaining the Plan at
any time during the 5-year period ending on the Determination Date
will be disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Code Section 416 and the
Regulations thereunder. Qualified Voluntary Employee Contributions
will not be taken into account for purposes of computing the Top-Heavy
Ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year. The
accrued benefit of a Participant other than a Key Employee shall be
determined under (1) the method, if any, that uniformly applies for
accrual purposes under all Defined Benefit Plans maintained by the
Employer, or (2) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Code Section 411(b)(1)(C).
1.83 Top-Paid Group The group consisting of the top 20% of Employees when ranked
on the basis of Compensation paid during such year. For purposes of determining
the number of Employees in the group (but not who is in it), the following
Employees shall be excluded:
(a) Employees who have not completed 6 months of Service.
(b) Employees who normally work less than 17-1/2 hours per week.
(c) Employees who normally do not work more than 6 months during any year.
(d) Employees who have not attained age 21.
(e) Employees included in a collective bargaining unit, covered by an
agreement between employee representatives and the Employer, where
retirement benefits were the subject of good faith bargaining and
provided that 90% or more of the Employer's Employees are covered by
the agreement.
(f) Employees who are nonresident aliens and who receive no earned income
which constitutes income from sources within the United States.
16
<PAGE>
1.84 Transfer Contribution A non-taxable transfer of a Participant's benefit
directly from a Qualified Deferred Compensation Plan to this Plan.
1.85 Trustee Shall be the individual, individuals or institution appointed by
the Employer to serve as Trustee of the Plan. In the event the Employer does not
name an individual, individuals or institution to serve as Trustee of the Plan,
the Employer will be deemed to be the Trustee.
1.86 Valuation Date The last day of the Plan Year or such other date as agreed
to by the Employer and the Trustee on which Participant accounts are revalued in
accordance with Article V hereof. For Top-Heavy purposes, the date selected by
the Employer as of which the Top-Heavy Ratio is calculated.
1.87 Vested Account Balance The aggregate value of the Participant's vested
account balances derived from Employer and Employee contributions (including
Rollovers), whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The provisions of
Article VIII shall apply to a Participant who is vested in amounts attributable
to Employer contributions, Employee contributions (or both) at the time of death
or distribution.
For purposes of paragraph 8.7, Vested Account Balance shall mean, in the case of
a money purchase pension plan, the Participant's separate account balance
attributable solely to Qualified Voluntary Contributions. For profit-sharing
plans the above definition shall apply.
1.88 Voluntary Contribution An Employee contribution by or on behalf of a
Participant that is included in the Participant's gross income in the year in
which made and that is maintained under a separate account to which earnings and
losses are allocated. For Plan Years beginning after the Plan Year in which this
Plan is adopted (or restated) by the Employer, Voluntary Contributions are only
permitted in Standardized Adoption Agreement 003 or Nonstandardized Adoption
Agreement 006 whether or not the Employer utilizes the salary deferral
provisions. Voluntary Contributions for Plan Years beginning after 1986,
together with any Matching Contributions as defined in Code Section 401(m), will
be limited so as to meet the nondiscrimination test of Code Section 401(m).
1.89 Welfare Benefit Fund Any fund that is part of a plan of the Employer, or
has the effect of a plan, through which the Employer provides welfare benefits
to Employees or their beneficiaries. For these purposes, Welfare Benefit means
any benefit other than those with respect to which Code Section 83(h) (relating
to transfers of property in connection with the performance of services), Code
Section 404 (relating to deductions for contributions to an Employee's trust or
annuity and Compensation under a deferred payment plan), Code Section 404A
(relating to certain foreign deferred compensation plans) apply. A "Fund" is any
social club, voluntary employee benefit association, supplemental unemployment
benefit trust or qualified group legal service organization described in Code
Section 501(c)(7), (9), (17) or (20); any trust, corporation, or other
organization not exempt from income tax, or to the extent provided in
regulations, any account held for an Employer by any person.
1.90 Year Of Service A 12-consecutive month period during which an Employee is
credited with not less than 1,000 (or such lesser number as specified by the
Employer in the Adoption Agreement) Hours of Service.
17
<PAGE>
ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 Participation Employees who meet the eligibility requirements in the
Adoption Agreement on the Effective Date of the Plan shall become Participants
as of the Effective Date of the Plan. If so elected in the Adoption Agreement,
all Employees employed on the Effective Date of the Plan may participate, even
if they have not satisfied the Plan's specified eligibility requirements. Other
Employees shall become Participants on the Entry Date coinciding with or
immediately following the date on which they meet the eligibility requirements.
Depending on the Plan's eligibility requirements, the entry date may actually be
earlier than the date on which the Employee satisfies the eligibility
requirements. The Employee must satisfy the eligibility requirements specified
in the Adoption Agreement and be employed on the Entry Date to become a
Participant in the Plan. In the event an Employee who is not a member of the
eligible class of Employees becomes a member of the eligible class, such
Employee shall participate immediately if such Employee has satisfied the
minimum age and service requirements and would have previously become a
Participant had he or she been in the eligible class. Employees may waive
participation in the Plan. However, this is only permitted if the Employer's
adoption is on Nonstandardized Adoption Agreement 004, 005 or 006, and the Plan
will meet the minimum coverage requirements in Code Section 410(b) and the
minimum participation requirements of Code Section 401(a)(26). [To the extent so
provided by regulations, a partner (or other employee) waiving participation in
the Plan may cause Code Section 401(k) and the regulations thereunder to apply.]
A former Participant shall again become a Participant upon returning to the
employ of the Employer at the next Entry Date or if earlier, the next Valuation
Date. For this purpose, Participant's Compensation and Service shall be
considered from date of rehire.
2.2 Change In Classification Of Employment In the event a Participant becomes
ineligible to participate because he or she is no longer a member of an eligible
class of Employees, such Employee shall participate upon his or her return to an
eligible class of Employees.
2.3 Computation Period To determine Years of Service and Breaks in Service for
purposes of eligibility, the 12-consecutive month period shall commence on the
date on which an Employee first performs an Hour of Service for the Employer and
each anniversary thereof, such that the succeeding 12-consecutive month period
commences with the employee's first anniversary of employment and so on. If,
however, the period so specified is one year or less, the succeeding
12-consecutive month period shall commence on the first day of the Plan Year
prior to the anniversary of the date they first performed an Hour of Service
regardless of whether the Employee is entitled to be credited with 1,000 (or
such lesser number as specified by the Employer in the Adoption Agreement) Hours
of Service during their first employment year.
2.4 Employment Rights Participation in the Plan shall not confer upon a
Participant any employment rights, nor shall it interfere with the Employer's
right to terminate the employment of any Employee at any time.
2.5 Service With Controlled Groups All Years of Service with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
credited for purposes of determining an Employee's eligibility to participate.
18
<PAGE>
2.6 Owner-Employees If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the Plan
established for other trades or businesses must, when looked at as a single
Plan, satisfy Code Sections 401(a) and (d) for the Employees of this and all
other trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
401(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the capital
interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
2.7 Leased Employees Any Leased Employee shall be treated as an Employee of the
recipient Employer; however, contributions or benefits provided by the leasing
organization which are attributable to services performed for the recipient
Employer shall be treated as provided by the recipient Employer. A Leased
Employee shall not be considered an Employee of the recipient if such Employee
is covered by a money purchase pension plan providing:
(a) a non-integrated Employer contribution rate of at least 10% of
Compensation, [as defined in Code Section 415(c)(3) but including
amounts contributed by the Employer pursuant to a salary reduction
agreement, which are excludable from the Employee's gross income under
a cafeteria plan covered by Code Section 125, a cash or deferred
profit-sharing plan under Code Section 401(k), a Simplified Employee
Pension Plan under Code Section 408(k) and a tax-sheltered annuity
under Code Section 403(b)],
(b) immediate participation, and
(c) full and immediate vesting.
19
<PAGE>
This exclusion is only available if Leased Employees do not constitute more than
twenty percent (20%) of the recipient's non-highly compensated work force.
2.8 Thrift Plans If the Employer makes an election in Adoption Agreements 003 or
006 to require Voluntary Contributions to participate in this Plan, the Employer
shall notify each eligible Employee in writing of his or her eligibility for
participation at least 30 days prior to the appropriate Entry Date. The Employee
shall indicate his or her intention to join the Plan by authorizing the Employer
to withhold a percentage of his or her Compensation as provided in the Plan.
Such authorization shall be returned to the Employer at least 10 days prior to
the Employee's Entry Date. The Employee may decline participation by so
indicating on the enrollment form or by failure to return the enrollment form to
the Employer prior to the Employee's Entry Date. If the Employee declines to
participate, such Employee shall be given the opportunity to join the Plan on
the next Entry Date. The taking of a Hardship Withdrawal under the provisions of
paragraph 6.9 will impact the Participant's ability to make these contributions.
20
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 Amount The Employer intends to make periodic contributions to the Plan in
accordance with the formula or formulas selected in the Adoption Agreement.
However, the Employer's contribution for any Plan Year shall be subject to the
limitations on allocations contained in Article X. A Participant may elect to
waive an Employer contribution on his or her behalf for a given Plan Year.
However, a Participant may only make this election if the Employer's adoption is
on Nonstandardized Adoption Agreement 004, 005 or 006. [In the event a partner
in a partnership makes this election, in accordance with Proposed Regulations
Section 1.401(k)-1(a)(6), the Plan will be deemed to constitute a cash or
deferred arrangement with respect to the partners. Thus, contributions made on
behalf of any partners may be limited to $7,000 indexed as set forth in Code
Section 402(g)]. Any waiver made pursuant to this paragraph will be made prior
to the time such Participant accrues a benefit for that Plan Year.
3.2 Expenses And Fees The Employer shall also be authorized to reimburse the
Fund for all expenses and fees incurred in the administration of the Plan or
Trust Account and paid out of the assets of the Fund. Such expenses shall
include, but shall not be limited to, fees for professional services, printing
and postage. Brokerage Commissions may not be reimbursed.
3.3 Responsibility For Contributions Neither the Trustee nor the Sponsor shall
be required to determine if the Employer has made a contribution or if the
amount contributed is in accordance with the Adoption Agreement or the Code. The
Employer shall have sole responsibility in this regard. The Trustee shall be
accountable solely for contributions actually received by it.
3.4 Return Of Contributions Contributions made to the Fund by the Employer shall
be irrevocable except as provided below:
(a) Any contribution forwarded to the Trustee because of a mistake of
fact, provided that the contribution is returned to the Employer
within one year of the contribution.
(b) In the event that the Commissioner of Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code,
any contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
(c) Contributions forwarded to the Trustee are presumed to be deductible
and are conditioned on their deductibility. Contributions which are
determined to not be deductible will be returned to the Employer.
21
<PAGE>
ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 Voluntary Contributions An Employee may make Voluntary Contributions to the
Plan established hereunder if so authorized by the Employer in a uniform and
nondiscriminatory manner. Such contributions are subject to the limitations on
Annual Additions and are subject to antidiscrimination testing. Voluntary
Contributions are permitted only in Adoption Agreements 003 and 006.
4.2 Qualified Voluntary Contributions A Participant may no longer make Qualified
Voluntary Contributions to the Plan. Such amounts already contributed may remain
in the Trust Fund Account until distributed to the Participant.
4.3 Rollover Contribution Unless provided otherwise in the Adoption Agreement, a
Participant may make a Rollover Contribution to any Defined Contribution Plan
established hereunder of all or any part of an amount distributed or
distributable to him or her from a Qualified Deferred Compensation Plan
provided:
(a) the amount distributed to the Participant is deposited to the Plan no
later than the sixtieth day after such distribution was received by
the Participant,
(b) the amount distributed is not one of a series of substantially equal
periodic payments made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's Designated Beneficiary, or for a
specified period of ten years or more;
(c) the amount distributed is not required under section 401(a)(9) of the
Code;
(d) if the amount distributed included property such property is rolled
over, or if sold the proceeds of such property may be rolled over,
(e) the amount distributed is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
In addition, if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.70) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally meet
the requirements of paragraph (f):
(f) The distribution from the Qualified Deferred Compensation Plan
constituted the Participant's entire interest in such Plan and was
distributed within one taxable year to the Participant:
22
<PAGE>
(1) on account of separation from Service, a Plan termination, or in
the case of a profit-sharing or stock bonus plan, a complete
discontinuance of contributions under such plan within the
meaning of Section 402(a)(6)(A) of the Code, or
(2) in one or more distributions which constitute a qualified lump
sum distribution within the meaning of Code Section 402(e)(4)(A),
determined without reference to subparagraphs (B) and (H).
Such Rollover Contribution may also be made through an Individual Retirement
Account qualified under Code Section 408 where the IRA was used as a conduit
from the Qualified Deferred Compensation Plan, the Rollover Contribution is made
in accordance with the rules provided under paragraphs (a) through (e) and the
Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions, which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f) and additional
requirements as provided in the previous sentence. The Trustee shall not be held
responsible for determining the tax-free status of any Rollover Contribution
made under this Plan.
4.4 Transfer Contribution Unless provided otherwise in the Adoption Agreement a
Participant may, subject to the provisions of paragraph 4.5, also arrange for
the direct transfer of his or her benefit from a Qualified Deferred Compensation
Plan to this Plan. For accounting and record keeping purposes, Transfer
Contributions shall be treated in the same manner as Rollover Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
4.5 Employer Approval Of Transfer Contributions The Employer maintaining a
Safe-Harbor Profit-Sharing Plan in accordance with the provisions of paragraph
8.7, acting in a nondiscriminatory manner, may in its sole discretion refuse to
allow Transfer Contributions to its profit-sharing plan, if such contributions
are directly or indirectly being transferred from a defined benefit plan, a
money purchase pension plan (including a target benefit plan), a stock bonus
plan, or another profit-sharing plan which would otherwise provide for a life
annuity form of payment to the Participant.
4.6 Elective Deferrals A Participant may enter into a Elective Deferrals
Agreement with the Employer authorizing the Employer to withhold a portion of
such Participant's Compensation not to exceed $7,000 per calendar year as
adjusted for inflation or, if lesser, the percentage of Compensation specified
in the Adoption Agreement and to deposit such amount to the Plan. No Participant
shall be permitted to have Elective Deferrals made under this Plan or any other
qualified plan maintained by the Employer, during any taxable year, in excess of
the dollar limitation contained in Code Section 402(g) in effect at the
beginning of such taxable year. Thus, the $7,000 limit may be reduced if a
Participant contributes pre-tax contributions to qualified plans of this or
other Employers. Any such contribution shall be credited to the Employee's
Elective Deferrals Account. Unless otherwise specified in the Adoption
Agreement, a Participant may amend his or her Elective Deferrals Agreement to
increase, decrease or terminate the percentage upon 30 days written notice to
the Employer. If a Participant terminates his or her agreement, such Participant
shall not be permitted to put a new Elective Deferrals Agreement into effect
until the first pay period in the next Plan Year, unless otherwise stated in the
Adoption Agreement. The Employer may also amend or terminate said agreement on
written notice to the Participant. If a Participant has not authorized the
Employer to withhold at the maximum rate and desires to increase the total
withheld for a Plan Year, such Participant may authorize the Employer upon 30
days notice to withhold a supplemental amount up to 100% of his or her
23
<PAGE>
Compensation for one or more pay periods. In no event may the sum of the amounts
withheld under the Elective Deferrals Agreement plus the supplemental
withholding exceed 25% of a Participant's Compensation for a Plan Year. The
Employer may also recharacterize as after-tax Voluntary Contributions all or any
portion of amounts previously withheld under any Elective Deferrals Agreement
within the Plan Year as provided for at paragraph 10.10. This may be done to
insure that the Plan will meet one of the antidiscrimination tests under Code
Section 401(k). Elective Deferrals shall be deposited in the Trust within 30
days after being withheld from the Participant's pay. Elective Deferrals are
permitted only in Standardized Adoption Agreement 003, Nonstandardized Adoption
Agreement 006, and Standardized Adoption Agreement 009.
4.7 Required Voluntary Contributions If the Employer makes a thrift election in
the Adoption Agreement, each eligible Participant shall be required to make
Voluntary Contributions to the Plan for credit to his or her account as provided
in the Adoption Agreement. Such Voluntary Contributions shall be withheld from
the Employee's Compensation and shall be transmitted by the Employer to the
Trustee as agreed between the Employer and Trustee. A Participant may
discontinue participation or change his or her Voluntary Contribution percentage
by so advising the Employer at least 10 days prior to the date on which such
discontinuance or change is to be effective. If a Participant discontinues his
or her Voluntary Contributions, such Participant may not again authorize
Voluntary Contributions for a period of one year from the date of
discontinuance. A Participant may voluntarily change his or her Voluntary
Contribution percentage once during any Plan Year and may also agree to have a
reduction in his or her contribution, if required to satisfy the requirements of
the ACP test. Voluntary Contributions are permitted only in Standardized
Adoption Agreement 003 and Nonstandardized Adoption Agreement 006.
4.8 Direct Rollover Of Benefits Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Participant's election under this
paragraph, for distributions made on or after January 1, 1993, a Participant may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Participant in a Direct Rollover. Any
portion of a distribution which is not paid directly to an Eligible Retirement
Plan shall be distributed to the Participant. For purposes of this paragraph, a
Surviving Spouse or a Spouse or former Spouse who is an alternate payee under a
Qualified Domestic Relations Order as defined in Code Section 414(p), will be
permitted to elect to have any Eligible Rollover Distribution paid directly to
an individual retirement account (IRA) or an individual retirement annuity
(IRA).
The Plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
24
<PAGE>
ARTICLE V
PARTICIPANT ACCOUNTS
5.1 Separate Accounts The Employer shall establish a separate bookkeeping
account for each Participant showing the total value of his or her interest in
the Fund. Each Participant's account shall be separated for bookkeeping purposes
into the following sub-accounts:
(a) Employer Contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(b) Voluntary Contributions (and additional amounts including, required
contributions and if applicable, either repayments of loans previously
defaulted on and treated as "deemed distributions" on which a tax
report has been issued, and amounts paid out upon a separation from
service which have been included in income and which are repaid after
being re-hired by the Employer).
(c) Qualified Voluntary Contributions (if the Plan previously accepted
these).
(d) Rollover Contributions.
(e) Transfer Contributions.
5.2 Adjustments To Participant Accounts As of each Valuation Date of the Plan,
the Employer shall add to each account:
(a) the Participant's share of the Employer's contribution and forfeitures
as determined in the Adoption Agreement,
(b) any Elective Deferrals, Voluntary, Rollover or Transfer Contributions
made by the Participant.
(c) any repayment of amounts previously paid out to a Participant upon a
separation from Service and repaid by the Participant since the last
Valuation Date, and
(d) the Participant's proportionate share of any investment earnings and
increase in the fair market value of the Fund since the last Valuation
Date, as determined at paragraph 5.4.
25
<PAGE>
The Employer shall deduct from each account:
(e) any withdrawals or payments made from the Participant's account since
the last Valuation Date, and
(f) the Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date, as determined
at paragraph 5.4.
5.3 Allocating Employer Contributions The Employer's contribution shall be
allocated to Participants in accordance with the allocation formula selected by
the Employer in the Adoption Agreement, and the minimum contribution and
allocation requirements for Top-Heavy Plans. Beginning with the 1990 Plan Year
and thereafter, for plans on Standardized Adoption Agreements 001, 002, 003,
007, 008 and 009, Participants who are credited with more than 500 Hours of
Service or are employed on the last day of the Plan Year must receive a full
allocation of Employer contributions. In Nonstandardized Adoption Agreements
004, 005, and 006, Employer contributions shall be allocated to the accounts of
Participants employed by the Employer on the last day of the Plan Year unless
indicated otherwise in the Adoption Agreement. In the case of a non-Top-Heavy,
Nonstandardized Plan, Participants must also have completed a Year of Service
unless otherwise specified in the Adoption Agreement. For Nonstandardized
Adoption Agreements 004, 005, and 006, the Employer may only apply the last day
of the Plan Year and Year of Service requirements, if the Plan satisfies the
requirements of Code Sections 401(a)(26) and 410(b) and the regulations
thereunder including the exception for 401(k) plans. If, when applying the last
day and Year of Service requirements, the Plan fails to satisfy the
aforementioned requirements, additional Participants will be eligible to receive
an allocation of Employer Contributions until the requirements are satisfied.
Participants who are credited with a Year of Service, but not employed at Plan
Year end, are the first category of additional Participants eligible to receive
an allocation. If the requirements are still not satisfied, Participants
credited with more than 500 Hours of Service and employed at Plan Year end are
the next category of Participants eligible to receive an allocation. Finally, if
necessary to satisfy the said requirements, any Participant credited with more
than 500 Hours of Service will be eligible for an allocation of Employer
Contributions.
5.4 Allocating Investment Earnings And Losses A Participant's share of
investment earnings and any increase or decrease in the fair market value of the
Fund shall be based on the proportionate value of all active accounts (other
than accounts with segregated investments) as of the last Valuation Date less
withdrawals since the last Valuation Date. If Employer and/or Employee
contributions are made monthly, quarterly, or on some other systematic basis,
the adjusted value of such accounts for allocation of investment income and
gains or losses shall include one-half the Employer contributions for such
period. If Employer and/or Employee contributions are not made on a systematic
basis, it is assumed that they are made at the end of the valuation period and
therefore will not receive an allocation of investment earnings and gains or
losses for such period.
Alternatively, at the Plan Administrator's option, all Employer contributions
will be credited with an allocation of the actual investment earnings and gains
and losses from the actual date of deposit of each such contribution until the
end of the period. Accounts with segregated investments shall receive only the
income or loss on such segregated investments. In no event shall the selection
of a method of allocating gains and losses be used to discriminate in favor of
the Highly Compensated Employees.
26
<PAGE>
5.5 Participant Statements Upon completing the allocations described above for
the Valuation Date coinciding with the end of the Plan Year, the Employer shall
prepare a statement for each Participant showing the additions to and
subtractions from his or her account since the last such statement and the fair
market value of his or her account as of the current Valuation Date. Employers
so choosing may prepare Participant statements for each Valuation Date.
27
<PAGE>
ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 Normal Retirement Benefits A Participant shall be entitled to receive the
balance held in his or her account from Employer contributions upon attaining
Normal Retirement Age or at such earlier dates as the provisions of this Article
VI may allow. If the Participant elects to continue working past his or her
Normal Retirement Age, he or she will continue as an active Plan Participant and
no distribution shall be made to such Participant until his or her actual
retirement date unless the employer elects otherwise in the Adoption Agreement,
or a minimum distribution is required by law. Settlement shall be made in the
normal form, or if elected in one of the optional forms of payment provided
below.
6.2 Early Retirement Benefits If the Employer so provides in the Adoption
Agreement, an Early Retirement benefit will be available to individuals who meet
the age and Service requirements. An individual who meets the Early Retirement
Age requirements and separates from Service, will become fully vested,
regardless of any vesting schedule which otherwise might apply. If a Participant
separates from Service before satisfying the age requirements, but after having
satisfied the Service requirement, the Participant will be entitled to elect an
Early Retirement benefit upon satisfaction of the age requirement.
6.3 Benefits On Termination Of Employment
(a) If a Participant terminates employment prior to Normal Retirement Age,
such Participant shall be entitled to receive the vested balance held
in his or her account payable at Normal Retirement Age in the normal
form, or if elected, in one of the optional forms of payment provided
hereunder. If applicable, the Early Retirement Benefit provisions may
be elected. Notwithstanding the preceding sentence, a former
Participant may, if allowed in the Adoption Agreement, make
application to the Employer requesting early payment of any deferred
vested and nonforfeitable benefit due.
(b) If a Participant terminates employment, and the value of that
Participant's Vested Account Balance derived from Employer and
Employee contributions is not greater than $3,500, the Participant may
receive a lump sum distribution of the value of the entire vested
portion of such account balance and the non-vested portion will be
treated as a forfeiture. The Employer shall continue to follow their
consistent policy, as may be established, regarding immediate
cash-outs of Vested Account Balances of $3,500 or less. For purposes
of this article, if the value of a Participant's Vested Account
Balance is zero, the Participant shall be deemed to have received a
distribution of such Vested Account Balance immediately following
termination. Likewise, if the Participant is reemployed prior to
incurring 5 consecutive 1-year Breaks in Service they will be deemed
to have immediately repaid such distribution. For Plan Years prior to
1989, a Participant's Vested Account Balance shall not include
Qualified Voluntary Contributions. Notwithstanding the above, if the
Employer maintains or has maintained a policy of not distributing any
amounts until the Participant's Normal Retirement Age, the Employer
can continue to uniformly apply such policy.
(c) If a Participant terminates Service with a Vested Account Balance
derived from Employer and Employee contributions in excess of $3,500,
and elects (with his or her Spouse's consent) to receive 100% of the
value of his or her Vested Account Balance in a lump sum, the
non-vested portion will be treated as a forfeiture. Except as provided
at paragraph 6.4(c), the Participant (and his or her Spouse) must
consent to any distribution, when the Vested Account Balance described
above exceeds $3,500 or if at the time of any prior distribution it
exceeded $3,500. For purposes of this paragraph, a Participant's
Vested Account Balance shall not include Qualified Voluntary
Contributions, for Plan Years beginning prior to 1989.
28
<PAGE>
(d) Distribution of less than 100% of the Participant's Vested Account
Balance shall only be permitted if the Participant is fully vested
upon termination of employment.
(e) If a Participant who is not 100% vested receives or is deemed to
receive a distribution pursuant to this paragraph, and such
Participant's non-vested benefit is forfeited hereunder, and if such
Participant resumes employment covered under this Plan, the
Participant shall have the right to repay to the Plan the full amount
of the distribution attributable to Employer contributions on or
before the earlier of the date that the Participant incurs 5
consecutive 1-year Breaks in Service following the date of
distribution or five years after the first date on which the
Participant is subsequently reemployed. In such event, the
Participant's forfeiture shall be restored to his or her account as of
the Valuation Date at the end of the Plan Year following the date on
which repayment of the distribution is received. Restoration of the
forfeiture amount shall be accomplished in accordance with the
procedure selected by the Employer in the Adoption Agreement.
(f) A Participant shall also have the option, to postpone payment of his
or her Plan benefits until the first day of April following the
calendar year in which he or she attains age 70-1/2. Any balance of a
Participant's account resulting from his or her Employee contributions
not previously withdrawn, if any, may be withdrawn by the Participant
immediately following separation from Service.
(g) If a Participant ceases to be an active Employee as a result of a
Disability as defined at paragraph 1.20, such Participant shall be
able to make an application for a disability retirement benefit
payment. The Participant's account balance will be deemed "immediately
distributable" as set forth in paragraph 6.4, and will be fully vested
pursuant to paragraph 9.2.
6.4 Restrictions On Immediate Distributions
(a) An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained whether
or not deceased) the later of the Normal Retirement Age or age 62.
29
<PAGE>
(b) If the value of a Participant's Vested Account Balance derived from
Employer and Employee Contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and his or her Spouse (or
where either the Participant or the Spouse has died, the survivor)
must consent to any distribution of such account balance. The consent
of the Participant and the Spouse shall be obtained in writing within
the 90-day period ending on the annuity starting date, which is the
first day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's account balance is no longer
immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under the
plan in a manner that would satisfy the notice requirements of Code
Section 417(a)(3), and shall be provided no less than 30 days and no
more than 90 days prior to the annuity starting date.
(c) Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a qualified Joint
and Survivor Annuity while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified
Joint and Survivor Annuity is not required with respect to the
Participant pursuant to paragraph 8.7 of the Plan, only the
Participant need consent to the distribution of an account balance
that is immediately distributable. Neither the consent of the
Participant nor the Participant's Spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or Code Section 415. In addition, upon termination of this
Plan if the Plan does not offer an annuity option (purchased from a
commercial provider), the Participant's account balance may, without
the Participant's consent, be distributed to the Participant or
transferred to another Defined Contribution Plan [other than an
employee stock ownership plan as defined in Code Section 4975(e)(7)]
within the same controlled group.
(d) For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
Plan Year beginning after 1988, the Participant's Vested Account
Balance shall not include amounts attributable to Qualified Voluntary
Contributions.
6.5 Normal Form Of Payment The normal form of payment for a profit- sharing plan
satisfying the requirements of paragraph 8.7 hereof shall be a lump sum with no
option for annuity payments. For all other plans, the normal form of payment
hereunder shall be a Qualified Joint and Survivor Annuity as provided under
Article VIII. A Participant whose Vested Account Balance derived from Employer
and Employee contributions exceeds $3,500, or if at the time of any prior
distribution it exceeds $3,500, shall (with the consent of his or her Spouse)
have the right to receive his or her benefit in a lump sum or in monthly,
quarterly, semi-annual or annual payments from the Fund over any period not
extending beyond the life expectancy of the Participant and his or her
Beneficiary. For purposes of this paragraph, a Participant's Vested Account
Balance shall not include Qualified Voluntary Contributions, for Plan Years
beginning prior to 1989. The normal form of payment shall be automatic, unless
the Participant files a written request with the Employer prior to the date on
which the benefit is automatically payable, electing a lump sum or installment
payment option. No amendment to the Plan may eliminate one of the optional
distribution forms listed above.
30
<PAGE>
6.6 Commencement Of Benefits
(a) Unless the Participant elects otherwise, distribution of benefits will
begin no later than the 60th day after the close of the Plan Year in
which the latest of the following events occurs:
(1) the Participant attains age 65 (or normal retirement age if
earlier),
(2) occurs the 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) the Participant terminates Service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and Spouse
(if necessary) to consent to a distribution while a benefit is
immediately distributable, within the meaning of paragraph 6.4 hereof,
shall be deemed an election to defer commencement of payment of any
benefit sufficient to satisfy this paragraph.
(c) Unless the Employer provides otherwise in the Adoption Agreement,
distributions of benefits will be made within 60 days following the
close of the Plan Year during which a distribution is requested or
otherwise becomes payable.
6.7 Claims Procedures Upon retirement, death, or other severance of employment,
the Participant or his or her representative may make application to the
Employer requesting payment of benefits due and the manner of payment. If no
application for benefits is made, the Employer shall automatically pay any
vested benefit due hereunder in the normal form at the time prescribed at
paragraph 6.6. If an application for benefits is made, the Employer shall
accept, reject, or modify such request and shall notify the Participant in
writing setting forth the response of the Employer and in the case of a denial
or modification the Employer shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on which the
denial is based,
(c) provide a description of any additional material or information
necessary for the Participant or his representative to perfect the
claim and an explanation of why such material or information is
necessary, and
(d) explain the Plan's claim review procedure as contained in this Plan.
In the event the request is rejected or modified, the Participant or his
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative stating specific reasons for such decision. If
the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a federal
court of competent jurisdiction; for this purpose, process would be served on
the Employer.
31
<PAGE>
6.8 In-Service Withdrawals An Employee may withdraw all or any part of the fair
market value of his or her Mandatory Contributions, Voluntary Contributions,
Qualified Voluntary Contributions or Rollover Contributions, upon written
request to the Employer. Transfer Contributions, which originate from a Plan
meeting the safe-harbor provisions of paragraph 8.7, may also be withdrawn by an
Employee upon written request to the Employer. Transfer Contributions not
meeting the safe-harbor provisions may only be withdrawn upon retirement, death,
Disability, termination or termination of the Plan, and will be subject to
Spousal consent requirements contained in Code Sections 411(a)(11) and 417. No
such withdrawals are permitted from a money purchase plan until the Participant
reaches Normal Retirement Age. Such request shall include the Participant's
address, social security number, birthdate, and amount of the withdrawal. If at
the time a distribution of Qualified Voluntary Contributions is received the
Participant has not attained age 59-1/2 and is not disabled, as defined at Code
Section 22(e)(3), the Participant will be subject to a federal income tax
penalty, unless the distribution is rolled over to a qualified plan or
individual retirement plan within 60 days of the date of distribution. A
Participant may withdraw all or any part of the fair market value of his or her
pre-1987 Voluntary Contributions with or without withdrawing the earnings
attributable thereto. Post-1986 Voluntary Contributions may only be withdrawn
along with a portion of the earnings thereon. The amount of the earnings to be
withdrawn is determined by using the formula: DA[1-(V / V + E)], where DA is the
distribution amount, V is the amount of Voluntary Contributions and V + E is the
amount of Voluntary Contributions plus the earnings attributable thereto. A
Participant withdrawing his or her other contributions prior to attaining age
59-1/2, will be subject to a federal tax penalty to the extent that the
withdrawn amounts are includible in income. Unless the Employer provides
otherwise in the Adoption Agreement, any Participant in a profit-sharing plan
who is 100% fully vested in his or her Employer contributions may withdraw all
or any part of the fair market value of any of such contributions that have been
in the account at least two years, plus the investment earnings thereon, without
separation from Service. Such distributions shall not be eligible for redeposit
to the Fund. A withdrawal under this paragraph shall not prohibit such
Participant from sharing in any future Employer Contribution he or she would
otherwise be eligible to share in. A request to withdraw amounts pursuant to
this paragraph must if applicable, be consented to by the Participant's Spouse.
The consent shall comply with the requirements of paragraph 6.4 relating to
immediate distributions.
Elective Deferrals, Qualified Non-elective Contributions, and Qualified Matching
Contributions, and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary's or Beneficiaries' election, earlier than upon
separation from Service, death, or Disability. Such amounts may also be
distributed upon:
(a) Termination of the Plan without the establishment of another Defined
Contribution Plan.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets [within the meaning of Code Section
409(d)(2)] used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
32
<PAGE>
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary [within the meaning of Code
Section 409(d)(3)] if such corporation continues to maintain this
plan, but only with respect to Employees who continue employment with
such subsidiary.
(d) The attainment of age 59-1/2.
(e) The Hardship of the Participant as described in paragraph 6.9.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the Spousal and Participant consent
requirements, if applicable, contained in Code Sections 401(a)(11) and 417.
6.9 Hardship Withdrawal If permitted by the Employer in the Adoption Agreement,
a Participant in a profit-sharing plan may request a hardship withdrawal prior
to attaining age 59-1/2. If the Participant has not attained age 59-1/2, the
Participant may be subject to a federal income tax penalty. Such request shall
be in writing to the Employer who shall have sole authority to authorize a
hardship withdrawal, pursuant to the rules below. Hardship withdrawals may
include Elective Deferrals and any earnings accrued and credited thereon as of
the last day of the Plan Year ending before July 1, 1989 and Employer related
contributions, including but not limited to Employer Matching Contributions,
plus the investment earnings thereon to the extent vested. Qualified Matching
Contributions, Qualified Non-Elective Contributions and Elective Deferrals
reclassified as Voluntary Contributions, plus the investment earnings thereon
are only available for a Hardship Withdrawal prior to age 59-1/2 to the extent
that they were credited to the Participant's Account as of the last day of the
Plan Year ending prior to July 1, 1989. The Plan Administrator may limit
withdrawals to Elective Deferrals and the earnings thereon as stipulated above.
Hardship withdrawals are subject to the Spousal consent requirements contained
in Code Sections 401(a)(11) and 417. Only the following reasons are valid to
obtain hardship withdrawal:
(a) medical expenses [within the meaning of Code Section 213(d)] of the
Participant, his or her Spouse, children and other dependents,
(b) the purchase (excluding mortgage payments) of the principal residence
for the Participant,
(c) payment of tuition and related educational expenses for the next
twelve (12) months of post-secondary education for the Participant,
his or her Spouse, children or other dependents, or
(d) the need to prevent eviction of the Employee from or a foreclosure on
the mortgage of, the Employee's principal residence.
Furthermore, for Plans on Adoption Agreements 003 and 006, the following
conditions must be met in order for a withdrawal to be authorized:
33
<PAGE>
(e) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by
the Employer,
(f) all plans maintained by the Employer provide that the Employee's
Elective Deferrals and Voluntary Contributions will be suspended for
twelve months after the receipt of the Hardship distribution,
(g) the distribution is not in excess of the amount of the immediate and
heavy financial need [(a) through (d)] above, and
(h) all plans maintained by the Employer provide that an Employee may only
make Elective Deferrals for the Employee's taxable year immediately
following the taxable year of the hardship distribution of the
applicable limit under Code Section 402(g) for such taxable year, less
the amount of such Employee's pre-tax contributions for the taxable
year of the hardship distribution.
If a distribution is made from any Plan at a time when a Participant has a
nonforfeitable right to less than 100% of the account balance derived from
Employer contributions and the Participant may increase the nonforfeitable
percentage in the account:
(a) A separate account will be established for the Participant's interest
in the Plan as of the time of the distribution, and
(b) At any relevant time the Participant's nonforfeitable portion of the
separate account will be equal to an amount ("X") determined by the
formula:
X = P [AB + (R X D)] - (R X D)
For purposes of applying the formula: "P" is the nonforfeitable percentage at
the relevant time, "AB" is the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the account balance at the
relevant time to the account balance after distribution.
34
<PAGE>
ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 Joint And Survivor Annuity Requirements All distributions made under the
terms of this Plan must comply with the provisions of Article VIII including, if
applicable, the safe harbor provisions thereunder.
7.2 Minimum Distribution Requirements All distributions required under this
Article shall be determined and made in accordance with the minimum distribution
requirements of Code Section 401(a)(9) and the regulations thereunder, including
the minimum distribution incidental benefit rules found at Regulations Section
1.401(a)(9)-2. The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's Required Beginning Date. Life
expectancy and joint and last survivor life expectancy are computed by using the
expected return multiples found in Tables V and VI of Regulations Section
1.72-9.
7.3 Limits On Distribution Periods As of the First Distribution Calendar Year,
distributions if not made in a single-sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a Designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
7.4 Required Distributions On Or After The Required Beginning Date
(a) If a participant's benefit is to be distributed over (1) a period not
extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the First Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the Applicable Life Expectancy.
(b) For calendar years beginning before 1989, if the Participant's Spouse
is not the Designated Beneficiary, the method of distribution selected
must have assured that at least 50% of the Present Value of the amount
available for distribution was to be paid within the life expectancy
of the Participant.
(c) For calendar years beginning after 1988, the amount to be distributed
each year, beginning with distributions for the First Distribution
Calendar Year shall not be less than the quotient obtained by dividing
the Participant's benefit by the lesser of (1) the Applicable Life
Expectancy or (2) if the Participant's Spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of Regulations Section 1.401(a)(9)-2. Distributions
after the death of the Participant shall be distributed using the
Applicable Life Expectancy as the relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
35
<PAGE>
(d) The minimum distribution required for the Participant's First
Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution
Calendar Year in which the Participant's Required Beginning Date
occurs, must be made on or before December 31 of that Distribution
Calendar Year.
(e) If the Participant's benefit is distributed in the form of an annuity
purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of Code Section 401(a)(9) and
the regulations thereunder.
(f) For purposes of determining the amount of the required distribution
for each Distribution Calendar Year, the account balance to be used is
the account balance determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be increased by the
amount of any contributions or forfeitures allocated to the account
balance after the valuation date in such preceding calendar year. Such
balance will also be decreased by distributions made after the
Valuation Date in such preceding Calendar Year.
(g) For purposes of subparagraph 7.4(f), if any portion of the minimum
distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 Required Beginning Date
(a) General Rule. The Required Beginning Date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
(b) Transitional Rules. The Required Beginning Date of a Participant who
attained age 70-1/2 before 1988, shall be determined in accordance
with (1) or (2) below:
(1) Non-5-percent owners. The Required Beginning Date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in which
the later of retirement or attainment of age 70-1/2 occurs. The
Required Beginning Date of a Participant who is not a 5-percent
owner, who attains age 70-1/2 during 1988 and who has not retired
as of 1989, is April 1, 1990.
36
<PAGE>
(2) 5-percent owners. The Required Beginning Date of a Participant
who is a 5-percent owner during any year beginning after 1979, is
the first day of April following the later of:
(i) the calendar year in which the Participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant
retires.
(c) A Participant is treated as a 5-percent owner for purposes of this
Paragraph if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during
the Plan Year ending with or within the calendar year in which such
Owner attains age 66-1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under this
paragraph, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
7.6 Transitional Rule
(a) Notwithstanding the other requirements of this article and subject to
the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
5-percent owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(i) The distribution by the trust is one which would not have
disqualified such trust under Code Section 401(a)(9) as in effect
prior to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the employee whose interest in the trust is being
distributed or, if the employee is deceased, by a beneficiary of
such employee.
(iii)Such designation was in writing, was signed by the employee or
the beneficiary, and was made before January 1, 1984.
(iv) The Employee has accrued a benefit under the Plan as of December
31, 1983.
37
<PAGE>
(v) The method of distribution designated by the Employee or the
beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Employee's death, the
beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the beneficiary,
to whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in sub-paragraphs (a)(i)
and (a)(v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code Section 401(a)(9) and the Regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy Code Section
401(a)(9) and the Regulations thereunder, but for the Tax Equity and
Fiscal Responsibility Act Section 242(b)(2) election. For calendar
years beginning after December 31, 1988, such distributions must meet
the minimum distribution incidental benefit requirements in
Regulations Section 1.401(a)(9)-2. Any changes in the designation will
be considered to be a revocation of the designation. However, the mere
substitution or addition of another beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another plan, the rules
in Q&A J-2 and Q&A J-3 of Regulations Section 1.401(a)(9)-2 shall
apply.
7.7 Designation Of Beneficiary For Death Benefit Each Participant shall file a
written designation of beneficiary with the Employer upon qualifying for
participation in this Plan. Such designation shall remain in force until revoked
by the Participant by filing a new beneficiary form with the Employer. The
Participant may elect to have a portion of his or her account balance invested
in an insurance contract. If an insurance contract is purchased under the Plan,
the Trustee must be named as Beneficiary under the terms of the contract.
However, the Participant shall designate a Beneficiary to receive the proceeds
of the contract after settlement is received by the Trustee. Under a
profit-sharing plan satisfying the requirements of paragraph 8.7 hereof, the
Designated Beneficiary shall be the Participant's Surviving Spouse, if any,
unless such Spouse properly consents otherwise.
38
<PAGE>
7.8 Nonexistence Of Beneficiary Any portion of the amount payable hereunder
which is not disposed of because of the Participant's or former Participant's
failure to designate a beneficiary, or because all of the Designated
Beneficiaries are deceased, shall be paid to his or her Spouse. If the
Participant had no Spouse at the time of death, payment shall be made to the
personal representative of his or her estate in a lump sum.
7.9 Distribution Beginning Before Death If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
7.10 Distribution Beginning After Death If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (a) or (b)
below:
(a) If any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the
Designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died;
(b) If the Designated Beneficiary is the Participant's Surviving Spouse,
the date distributions are required to begin in accordance with (a)
above shall not be earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year in which the
participant died, or (2) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this paragraph by the
time of his or her death, the Participant's Designated Beneficiary must elect
the method of distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin under this
section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, then distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
For purposes of this paragraph if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if the preceding
sentence is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an annuity described in
paragraph 7.4(e) irrevocably commences to the Participant before the Required
Beginning Date, the date distribution is considered to begin is the date
distribution actually commences.
39
<PAGE>
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor or
incompetent individual, unless the court which appointed the guardian has
ordered otherwise.
7.11 Distribution Of Excess Elective Deferrals
(a) Notwithstanding any other provision of the Plan, Excess Elective
Deferrals plus any income and minus any loss allocable thereto, shall
be distributed no later than April 15, 1988, and each April 15
thereafter, to Participants to whose accounts Excess Elective
Deferrals were allocated for the preceding taxable year, and who claim
Excess Elective Deferrals for such taxable year. Excess Elective
Deferrals shall be treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first April 15th
following the close of the Participant's taxable year. A Participant
is deemed to notify the Plan Administrator of any Excess Elective
Deferrals that arise by taking into account only those Elective
Deferrals made to this Plan and any other plans of this Employer.
Furthermore, a Participant who participates in another plan allowing
Elective Deferrals may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant, by notifying
the Plan Administrator of the amount of the Excess Elective Deferrals
to be assigned.
(b) The Participant's claim shall be in writing; shall be submitted to the
Plan Administrator not later than March 1 of each year; shall specify
the amount of the Participant's Excess Elective Deferrals for the
preceding taxable year; and shall be accompanied by the Participant's
written statement that if such amounts are not distributed, such
Excess Elective Deferrals, when added to amounts deferred under other
plans or arrangements described in Code Sections 401(k), 408(k)
[Simplified Employee Pensions], or 403(b) [annuity programs for public
schools and charitable organizations] will exceed the $7,000 limit as
adjusted under Code Section 415(d) imposed on the Participant by Code
Section 402(g) for the year in which the deferral occurred.
(c) Excess Elective Deferrals shall be adjusted for any income or loss up
to the end of the taxable year, during which such excess was deferred.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(d) If the Participant receives a return of his or her Elective Deferrals,
the amount of such contributions which are returned must be brought
into the Employee's taxable income.
7.12 Distributions of Excess Contributions
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan Year
in which such excess amounts arose, a ten (10) percent excise tax will
be imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess
Contributions shall be allocated to Participants who are subject to
the Family Member aggregation rules of Code Section 414(q)(6) in the
manner prescribed by the regulations thereunder.
40
<PAGE>
(b) Excess Contributions (including the amounts recharacterized) shall be
treated as Annual Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or loss up to
the end of the Plan Year. Income or loss will be calculated under the
method used to calculate investment earnings and losses elsewhere in
the Plan.
(d) Excess Contributions shall be distributed from the Participant's
Contribution account and Qualified Matching Contribution account (if
applicable) in proportion to the Participant's Elective Deferrals and
Qualified Matching Contributions (to the extent used in the ADP test)
for the Plan Year. Excess Contributions shall be distributed from the
Participant's Qualified Non-Elective Contribution account only to the
extent that such Excess Contributions exceed the balance in the
Participant's Elective Deferral account and Qualified Matching
Contribution account.
7.13 Distribution Of Excess Aggregate Contributions
(a) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated
to Participants who are subject to the Family Member aggregation rules
of Code Section 414(q)(6) in the manner prescribed by the regulations.
If such Excess Aggregate Contributions are distributed more than 2-1/2
months after the last day of the Plan Year in which such excess
amounts arose, a ten (10) percent excise tax will be imposed on the
Employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as Annual Additions under the
plan.
(b) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the end of the Plan Year. The income or loss allocable to
Excess Aggregate Contributions is the sum of income or loss for the
Plan Year allocable to the Participant's Voluntary Contribution
account, Matching Contribution account, (if any, and if all amounts
therein are not used in the ADP test) and, if applicable, Qualified
Non-Elective Contribution account and Elective Deferral account.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
41
<PAGE>
(c) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the accounts of non-Highly Compensated Employees or
applied to reduce Employer contributions, as elected by the employer
in the Adoption Agreement.
(d) Excess Aggregate Contributions shall be forfeited if such amount is
not vested. If vested, such excess shall be distributed on a pro-rata
basis from the Participant's Voluntary Contribution account (and, if
applicable, the Participant's Qualified Non-Elective Contribution
account or Elective Deferral account, or both).
42
<PAGE>
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Applicability Of Provisions The provisions of this Article shall apply to
any Participant who is credited with at least one Hour of Service with the
Employer on or after August 23, 1984 and such other Participants as provided in
paragraph 8.8.
8.2 Payment Of Qualified Joint And Survivor Annuity Unless an optional form of
benefit is selected pursuant to a Qualified Election within the 90-day period
ending on the Annuity Starting Date, a married Participant's Vested Account
Balance will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's Vested Account Balance will be paid in the form of a
life annuity. The Participant may elect to have such annuity distributed upon
attaining Early Retirement Age under the Plan.
8.3 Payment Of Qualified Pre-Retirement Survivor Annuity Unless an optional form
of benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before benefits have commenced then one-half of
the Participant's Vested Account Balance shall be paid to the Surviving Spouse
in the form of a life annuity. The Surviving Spouse may elect to have such
annuity distributed within a reasonable period after the Participant's death.
A Participant who does not meet the age 35 requirement set forth in the Election
Period as of the end of any current Plan Year may make a special qualified
election to waive the qualified Pre-retirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives a written explanation of the Qualified
Pre-retirement Survivor Annuity in such terms as are comparable to the
explanation required under paragraph 8.5. Qualified Pre-retirement Survivor
Annuity coverage will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
8.4 Qualified Election A waiver of a Qualified Joint and Survivor Annuity or a
qualified pre-retirement survivor annuity. Any waiver of a Qualified Joint and
Survivor Annuity or a qualified pre-retirement survivor annuity shall not be
effective unless:
(a) the Participant's Spouse consents in writing to the election;
(b) the election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the election; and
(d) the Spouse's consent is witnessed by a Plan representative or notary
public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent). If
it is established to the satisfaction of the Plan Administrator that there is no
43
<PAGE>
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election. Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this provision shall
be valid unless the Participant has received notice as provided in paragraphs
8.5 and 8.6 below.
8.5 Notice Requirements For Qualified Joint And Survivor Annuity In the case of
a Qualified Joint and Survivor Annuity, the Plan Administrator shall, no less
than 30 days and no more than 90 days prior to the Annuity Starting date,
provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant's right to make and the effect of an election to waive
the qualified Joint and Survivor Annuity form of benefit;
(c) the rights of a Participant's Spouse; and
(d) the right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity.
8.6 Notice Requirements For Qualified Pre-Retirement Survivor Annuity In the
case of a qualified pre-retirement survivor annuity as described in paragraph
8.3, the Plan Administrator shall provide each Participant within the applicable
period for such Participant a written explanation of the qualified
pre-retirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of paragraph
8.5 applicable to a Qualified Joint and Survivor Annuity. The applicable period
for a Participant is whichever of the following periods ends last:
(a) the period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
(b) a reasonable period ending after the individual becomes a Participant;
(c) a reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from Service in the
case of a Participant who separates from Service before attaining age
35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two-year period
beginning one-year prior to the date the applicable event occurs, and ending
one-year after that date. In the case of a Participant who separates from
Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant subsequently returns to
employment with the Employer, the applicable period for such Participant shall
be re-determined.
44
<PAGE>
8.7 Special Safe-Harbor Exception For Certain Profit-Sharing Plans
(a) To the extent that the following conditions are met, the Qualified
Joint and Survivor Annuity requirements of this Article VIII shall be
inapplicable to a Participant in a profit-sharing plan, and to any
distribution, made on or after the first day of the first plan year
beginning after 1988, from or under a separate account attributable
solely to Qualified Voluntary contributions, as maintained on behalf
of a Participant in a money purchase pension plan, (including a target
benefit plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the form of
a life annuity; and
(2) on the death of a Participant, the Participant's Vested Account
Balance will be paid to the Participant's Surviving Spouse, but
if there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to
the Participant's Designated Beneficiary.
The Surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the 90-day period following the date
of the Participant's death. The account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of account
balances for other types of distributions. These safe-harbor rules
shall not be operative with respect to a Participant in a
profit-sharing plan if that Plan is a direct or indirect transferee of
a Defined Benefit Plan, money purchase plan, a target benefit plan,
stock bonus plan, or profit-sharing plan which is subject to the
survivor annuity requirements of Code Section 401(a)(11) and Code
Section 417, and would therefore have a Qualified Joint and Survivor
Annuity as its normal form of benefit.
(b) The Participant may waive the spousal death benefit described in this
paragraph at any time provided that no such waiver shall be effective
unless it satisfies the conditions (described in paragraph 8.4) that
would apply to the Participant's waiver of the Qualified
Pre-Retirement Survivor Annuity.
(c) If this paragraph 8.7 is operative, then all other provisions of this
Article other than paragraph 8.8 are inoperative.
8.8 Transitional Joint And Survivor Annuity Rules Special transition rules apply
to Participants who were not receiving benefits on August 23, 1984.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
paragraphs of this Article, must be given the opportunity to elect to
have the prior paragraphs of this Article apply if such Participant is
credited with at least one Hour of Service under this Plan or a
predecessor Plan in a Plan Year beginning on or after January 1, 1976
and such Participant had at least 10 Years of Service for vesting
purposes when he or she separated from Service.
45
<PAGE>
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor Plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with paragraph 8.9.
(c) The respective opportunities to elect [as described in (a) and (b)
above] must be afforded to the appropriate Participants during the
period commencing on August 23, 1984 and ending on the date benefits
would otherwise commence to said Participants.
8.9 Automatic Joint And Survivor Annuity And Early Survivor Annuity Any
Participant who has elected pursuant to paragraph 8.8(b) and any Participant who
does not elect under paragraph 8.8(a) or who meets the requirements of paragraph
8.8(a), except that such Participant does not have at least 10 years of vesting
Service when he or she separates from Service, shall have his or her benefits
distributed in accordance with all of the following requirements if benefits
would have been payable in the form of a life annuity.
(a) Automatic Joint and Survivor Annuity. If benefits in the form of a
life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age, or
(2) dies on or after Normal Retirement Age while still working for
the Employer, or
(3) begins to receive payments on or after the Qualified Early
Retirement Age, or
(4) separates from Service on or after attaining Normal Retirement
(or the Qualified Early Retirement Age) and after satisfying the
eligibility requirements for the payment of benefits under the
Plan and thereafter dies before beginning to receive such
benefits,
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has
elected otherwise during the Election Period. The Election Period must
begin at least 6 months before the Participant attains Qualified Early
Retirement Age and end not more than 90 days before the commencement
of benefits. Any election hereunder will be in writing and may be
changed by the Participant at any time.
46
<PAGE>
(b) Election of Early Survivor Annuity. A Participant who is employed
after attaining the Qualified Early Retirement Age will be given the
opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the
payments which would have been made to the Spouse under the Qualified
Joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The
Election Period begins on the later of:
(1) the 90th day before the Participant attains the Qualified Early
Retirement Age, or
(2) the date on which participation begins, and ends on the date the
Participant terminates employment.
8.10 Annuity Contracts Any annuity contract distributed under this Plan must be
nontransferable. The terms of any annuity contract purchased and distributed by
the Plan to a Participant or Spouse shall comply with the requirements of this
Plan.
47
<PAGE>
ARTICLE IX
VESTING
9.1 Employee Contributions A Participant shall always have a 100% vested and
nonforfeitable interest in his or her Elective Deferrals, Voluntary
Contributions, Qualified Voluntary Contributions, Rollover Contributions, and
Transfer Contributions plus the earnings thereon. No forfeiture of Employer
related contributions (including any minimum contributions made under paragraph
14.2 hereof) will occur solely as a result of an Employee's withdrawal of any
Employee contributions.
9.2 Employer Contributions A Participant shall acquire a vested and
nonforfeitable interest in his or her account attributable to Employer
contributions in accordance with the table selected in the Adoption Agreement,
provided that if a Participant is not already fully vested, he or she shall
become so upon attaining Normal Retirement Age, Early Retirement Age, on death
prior to normal retirement, on retirement due to Disability, or on termination
of the Plan.
9.3 Computation Period The computation period for purposes of determining Years
of Service and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from Employer
contributions shall be determined by the Employer in the Adoption Agreement. If
the Employer provides for other than full and immediate vesting and does not
designate otherwise, the computation period will be the Plan Year. In the event
a former Participant with no vested interest in his or her Employer contribution
account requalifies for participation in the Plan after incurring a Break in
Service, such Participant shall be credited for vesting with all pre-break and
post-break Service.
9.4 Requalification Prior To Five Consecutive One-Year Breaks In Service The
account balance of such Participant shall consist of any undistributed amount in
his or her account as of the date of re-employment plus any future contributions
added to such account plus the investment earnings on the account. The Vested
Account Balance of such Participant shall be determined by multiplying the
Participant's account balance (adjusted to include any distribution or redeposit
made under paragraph 6.3) by such Participant's vested percentage. All Service
of the Participant, both prior to and following the break, shall be counted when
computing the Participant's vested percentage.
9.5 Requalification After Five Consecutive One-Year Breaks In Service If such
Participant is not fully vested upon re-employment, a new account shall be
established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and post-break Service shall be counted. However, notwithstanding this
provision, no such former Participant who has had five consecutive one-year
Breaks in Service shall acquire a larger vested and nonforfeitable interest in
his or her prior account balance as a result of requalification hereunder.
9.6 Calculating Vested Interest A Participant's vested and nonforfeitable
interest shall be calculated by multiplying the fair market value of his or her
account attributable to Employer contributions on the Valuation Date preceding
distribution by the decimal equivalent of the vested percentage as of his or her
termination date. The amount attributable to Employer contributions for purposes
of the calculation includes amounts previously paid out pursuant to paragraph
6.3 and not repaid. The Participant's vested and nonforfeitable interest, once
calculated above, shall be reduced to reflect those amounts previously paid out
to the Participant and not repaid by the Participant. The Participant's vested
and nonforfeitable interest so determined shall continue to share in the
investment earnings and any increase or decrease in the fair market value of the
Fund up to the Valuation Date preceding or coinciding with payment.
48
<PAGE>
9.7 Forfeitures Any balance in the account of a Participant who has separated
from Service to which he or she is not entitled under the foregoing provisions,
shall be forfeited and applied as provided in the Adoption Agreement. If not
specified otherwise in the Adoption Agreement, forfeitures will be allocated to
Participants in the same manner as the Employer's contribution. A forfeiture may
only occur if the Participant has received a distribution from the Plan or if
the Participant has incurred five consecutive 1-year Breaks in Service.
Forfeitures shall inure only to the accounts of Participants of the adopting
Employer's plan. If not specified otherwise in the Adoption Agreement,
forfeitures shall be allocated at the end of the Plan Year during which the
former Participant incurs five consecutive one-year Breaks in Service.
Furthermore, a Highly Compensated Employee's Matching Contributions may be
forfeited, even if vested, if the contributions to which they relate are Excess
Deferrals, Excess Contributions or Excess Aggregate Contributions.
9.8 Amendment Of Vesting Schedule No amendment to the Plan shall have the effect
of decreasing a Participant's vested interest determined without regard to such
amendment as of the later of the date such amendment is adopted or the date it
becomes effective. Further, if the vesting schedule of the Plan is amended, or
the Plan is amended in any way that directly or indirectly affects the
computation of any Participant's nonforfeitable percentage, or if the Plan is
deemed amended by an automatic change to or from a Top-Heavy vesting schedule,
each Participant with at least three Years of Service with the Employer may
elect, within a reasonable period after the adoption of the amendment or change,
to have his or her nonforfeitable percentage computed under the Plan without
regard to such amendment or change. For Participants who do not have at least
one Hour of Service in any Plan Year beginning after 1988, the preceding
sentence shall be applied by substituting "Five Years of Service" for "Three
Years of Service" where such language appears. The period during which the
election may be made shall commence with the date the amendment is adopted or
deemed to be made and shall end on the later of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of the
amendment by the Employer or the Trustee. If the Trustee is asked to
so notify, the Fund will be charged for the costs thereof unless the
Employer pays the charges as permitted in paragraph 11.3.
No amendment to the Plan shall be effective to the extent that it has the effect
of decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's account balance may be reduced to the extent permitted
under section 412(c)(8) of the Code (relating to financial hardships). For
purposes of this paragraph, a Plan amendment which has the effect of decreasing
a Participant's account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment shall be
treated as reducing an accrued benefit.
49
<PAGE>
9.9 Service With Controlled Groups All Years of Service with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
considered for purposes of determining a Participant's nonforfeitable
percentage.
9.10 Application Of Prior Vesting Rules This Article reflects the vesting rules
in effect after amendment for the Tax Reform Act of 1986. Any Participant who
separated from Service prior to rendering an Hour of Service in the 1989 Plan
Year, will continue to have his or her vesting governed by the Plan's prior
vesting rules, including, if applicable, the "rules of parity" which would allow
for certain Years of Service to be disregarded.
50
<PAGE>
ARTICLE X
LIMITATIONS ON ALLOCATIONS
AND ANTIDISCRIMINATION TESTING
10.1 Participation In This Plan Only If the Participant does not participate in
and has never participated in another qualified plan, a Welfare Benefit Fund (as
defined in paragraph 1.89) or an individual medical account, as defined in Code
Section 415(l)(2), maintained by the adopting Employer, which provides an Annual
Addition as defined in paragraph 1.4, the amount of Annual Additions which may
be credited to the Participant's account for any Limitation Year will not exceed
the lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be contributed
or allocated to the Participant's account would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. Prior to determining
the Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of a
reasonable estimate of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.2 Disposition Of Excess Annual Additions If pursuant to paragraph 10.1 or as
a result of the allocation of forfeitures, there is an Excess Amount, the excess
will be disposed of under one of the following methods as determined in the
Adoption Agreement. If no election is made in the Adoption Agreement then method
"(a)" below shall apply.
(a) Suspense Account Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's
account will be used to reduce Employer contributions (including
any allocation of forfeitures) for such Participant in the next
Limitation Year, and each succeeding Limitation Year if
necessary;
51
<PAGE>
(3) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is not covered by the Plan at the end
of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be
applied to reduce future Employer contributions (including
allocation of any forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding Limitation Year if
necessary;
(4) If a suspense account is in existence at any time during the
Limitation Year pursuant to this paragraph, it will not
participate in the allocation of investment gains and losses. If
a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to Participants' accounts
before any Employer contributions or any Employee or Voluntary
Contributions may be made to the Plan for that Limitation Year.
Excess amounts may not be distributed to Participants or former
Participants.
(b) Spillover Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) Any Excess Amount which would be allocated to the account of an
individual Participant under the Plan's allocation formula will
be reallocated to other Participants in the same manner as other
Employer contributions. No such reallocation shall be made to the
extent that it will result in an Excess Amount being created in
such Participant's own account.
(3) To the extent that amounts cannot be reallocated under (1) above,
the suspense account provisions of (a) above will apply.
10.3 Participation In This Plan And Another Regional Prototype Defined
Contribution Plan, Welfare Benefit Fund, Or Individual Medical Account
Maintained By The Employer The Annual Additions which may be credited to a
Participant's account under this Plan for any Limitation Year will not exceed
the Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under the other Regional Prototype Defined Contribution
plans and Welfare Benefit Funds and individual medical accounts as defined in
Code Section 415(l)(2), maintained by the Employer, which provide an Annual
Addition as defined in paragraph 1.4, for the same Limitation Year. If the
Annual Additions, with respect to the Participant under other Defined
Contribution Plans and Welfare Benefit Funds maintained by the Employer, are
less than the Maximum Permissible Amount and the Employer contribution that
would otherwise be contributed or allocated to the Participant's account under
this Plan would cause the Annual Additions for the Limitation Year to exceed
52
<PAGE>
this limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under such other Defined Contribution Plans and Welfare Benefit
Funds in the aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the Participant's account
under this Plan for the Limitation Year. Prior to determining the Participant's
actual Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described in
paragraph 10.1. As soon as administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
10.4 Disposition Of Excess Annual Additions Under Two Plans If, pursuant to
paragraph 10.3 or as a result of forfeitures, a Participant's Annual Additions
under this Plan and such other plans would result in an Excess Amount for a
Limitation Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated except that Annual Additions attributable to a Welfare
Benefit Fund or an individual medical account as defined in Code Section
415(l)(2) will be deemed to have been allocated first regardless of the actual
allocation date. If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributed to this Plan will be the product of:
(a) the total Excess Amount allocated as of such date, times
(b) the ratio of:
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under the Plan, to
(2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other
qualified Master or Prototype Defined Contribution Plans.
Any Excess Amount attributed to this Plan will be disposed of in the manner
described in paragraph 10.2.
10.5 Participation In This Plan And Another Defined Contribution Plan Which Is
Not A Regional Prototype Plan If the Participant is covered under another
qualified Defined Contribution Plan maintained by the Employer which is not a
Regional Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be limited in
accordance with paragraphs 10.3 and 10.4 as though the other plan were a Master
or Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
53
<PAGE>
10.6 Participation In This Plan And A Defined Benefit Plan If the Employer
maintains, or at any time maintained, a qualified Defined Benefit Plan covering
any Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. For any Plan Year during which the Plan is Top-Heavy, the
Defined Benefit and Defined Contribution Plan Fractions shall be calculated in
accordance with Code Section 416(h). The Annual Additions which may be credited
to the Participant's account under this Plan for any Limitation Year will be
limited in accordance with the provisions set forth in the Adoption Agreement.
10.7 Limitations On Allocations In any Plan Year in which the Top-Heavy Ratio
exceeds 90% (i.e., the Plan becomes Super Top-Heavy), the denominators of the
Defined Benefit Fraction (as defined in paragraph 1.15) and Defined Contribution
Fraction (as defined in paragraph 1.18) shall be computed using 100% of the
dollar limitation instead of 125%.
10.8 Average Deferral Percentage (ADP) Test With respect to any Plan Year, the
Average Deferral Percentage for Participants who are Highly Compensated
Employees and the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees must satisfy one of the following tests:
(a) Basic Test - The Average Deferral Percentage for Participants who are
Highly Compensated Employees for the Plan Year is not more than 1.25
times the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year, or
(b) Alternative Test - The Average Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year does not exceed
the Average Deferral Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year by more than 2 percentage
points provided that the Average Deferral Percentage for Participants
who are Highly Compensated Employees is not more than 2.0 times the
Average Deferral Percentage for Participants who are non-Highly
Compensated Employees.
10.9 Special Rules Relating To Application Of ADP Test
(a) The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
54
<PAGE>
(b) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b), only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(k) only if they have the same Plan Year.
(c) For purposes of determining the Actual Deferral Percentage of a
Participant who is a 5-percent owner or one of the ten most
highest-paid Highly Compensated Employees, the Elective Deferrals (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include
the Elective Deferrals (and, if applicable, Qualified Non-Elective
Contributions and Qualified Matching Contributions, or both) for the
Plan Year of Family Members as defined in paragraph 1.35 of this Plan.
Family Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate Employees in determining the ADP both
for Participants who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees. In the event of
repeal of the family aggregation rules under Code Section 414(q)(6),
all applications of such rules under this Plan will cease as of the
effective date of such repeal.
(d) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(e) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(f) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
10.10 Recharacterization If the Employer allows for Voluntary Contributions in
the Adoption Agreement, a Participant may treat his or her Excess Contributions
as an amount distributed to the Participant and then contributed by the
Participant to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals. Amounts may
not be recharacterized by a Highly Compensated Employee to the extent that such
amount in combination with other Employee Contributions made by that Employee
would exceed any stated limit under the Plan on Voluntary Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
55
<PAGE>
10.11 Average Contribution Percentage (ACP) Test If the Employer makes Matching
Contributions or if the Plan allows Employees to make Voluntary Contributions
the Plan must meet additional nondiscrimination requirements provided under Code
Section 401(m). If Employee Contributions (including any Elective Deferrals
recharacterized as Voluntary Contributions) are made pursuant to this Plan, then
in addition to the ADP test referenced in paragraph 10.8, the Average
Contribution Percentage test is also applicable. The Average Contribution
Percentage for Participants who are Highly Compensated Employees for each Plan
Year and the Average Contribution Percentage for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of the following
tests:
(a) The Average Contribution Percentage for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the Average Contribution Percentage for
Participants who are non-Highly Compensated Employees for the same
Plan Year multiplied by two (2), provided that the Average
Contribution Percentage for Participants who are Highly Compensated
Employees does not exceed the Average Contribution Percentage for
Participants who are non-Highly Compensated Employees by more than two
(2) percentage points.
10.12 Special Rules Relating To Application Of ACP Test
(a) If one or more Highly Compensated Employees participate in both a cash
or deferred arrangement and a plan subject to the ACP test maintained
by the Employer and the sum of the ADP and ACP of those Highly
Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the ADP or ACP of those Highly Compensated
Employees who also participate in a cash or deferred arrangement will
be reduced (beginning with such Highly Compensated Employee whose ACP
is the highest) as set forth in the Adoption Agreement so that the
limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts is reduced shall be treated
as an Excess Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections required to
meet the ADP and ACP tests. Multiple use does not occur if both the
ADP and ACP of the Highly Compensated Employees does not exceed 1.25
multiplied by the ADP and ACP of the non-Highly Compensated Employees.
(b) For purposes of this Article, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each Plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
56
<PAGE>
(c) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Contribution
Percentage of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if the aggregated plans have the same
Plan Year.
(d) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highest-paid, Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall include
the Contribution Percentage Amounts and Compensation for the Plan Year
of Family Members as defined in paragraph 1.35 of this Plan. Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are non-Highly Compensated
Employees and for Participants who are Highly Compensated Employees.
In the event of repeal of the family aggregation rules under Code
Section 414(q)(6), all applications of such rules under this Plan will
cease as of the effective date of such repeal.
(e) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in
which contributed to the trust. Matching Contributions and Qualified
Non-Elective Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(g) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(h) Qualified Matching Contributions and Qualified Non-Elective
Contributions used to satisfy the ADP test may not be used to satisfy
the ACP test.
57
<PAGE>
ARTICLE XI
ADMINISTRATION
11.1 Plan Administrator The Employer shall be the named fiduciary and Plan
Administrator. These duties shall include:
(a) appointing the Plan's attorney, accountant, actuary, custodian or any
other party needed to administer the Plan or the Fund,
(b) directing the Trustee or custodian with respect to payments from the
Fund,
(c) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all claims
procedures,
(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency,
(e) reviewing and approving any financial reports, investment reviews, or
other reports prepared by any party appointed by the Employer under
paragraph (a),
(f) establishing a funding policy and investment objectives consistent
with the purposes of the Plan and the Employee Retirement Income
Security Act of 1974, and
(g) construing and resolving any question of Plan interpretation. The Plan
Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and unless it can be
shown to be arbitrary and capricious will not be subject to "de novo"
review.
11.2 Trustee The Trustee shall be responsible for the administration of
investments held in the Fund. These duties shall include:
(a) receiving contributions under the terms of the Plan,
(b) making distributions from the Fund in accordance with written
instructions received from an authorized representative of the
Employer,
(c) keeping accurate records reflecting its administration of the Fund and
making such records available to the Employer for review and audit.
Within 90 days after each Plan Year, and within 90 days after its
removal or resignation, the Trustee shall file with the Employer an
accounting of its administration of the Fund during such year or from
the end of the preceding Plan Year to the date of removal or
resignation. Such accounting shall include a statement of cash
receipts and disbursements since the date of its last accounting and
shall contain an asset list showing the fair market value of
investments held in the Fund as of the end of the Plan Year. The value
of marketable investments shall be determined using the most recent
price quoted on a national securities exchange or over the counter
market. The value of non-marketable investments shall be determined in
the sole judgement of the Trustee which determination shall be binding
and conclusive. The value of investments in securities or obligations
of the Employer in which there is no market shall be determined in the
sole judgement of the Employer and the Trustee shall have no
responsibility with respect to the valuation of such assets. The
Employer shall review the Trustee's accounting and notify the Trustee
in the event of its disapproval of the report within 90 days,
providing the Trustee with a written description of the items in
question. The Trustee shall have 60 days to provide the Employer with
a written explanation of the items in question. If the Employer again
disapproves, the Trustee shall file its accounting in a court of
competent jurisdiction for audit and adjudication, and
58
<PAGE>
(d) employing such agents, attorneys or other professionals as the Trustee
may deem necessary or advisable in the performance of its duties.
The Trustee's duties shall be limited to those described above. The Employer
shall be responsible for any other administrative duties required under the Plan
or by applicable law.
11.3 Administrative Fees And Expenses All reasonable costs, charges and expenses
incurred by the Trustee in connection with the administration of the Fund and
all reasonable costs, charges and expenses incurred by the Plan Administrator in
connection with the administration of the Plan (including fees for legal
services rendered to the Trustee or Plan Administrator) may be paid by the
Employer, but if not paid by the Employer when due, shall be paid from the Fund.
Such reasonable compensation to an institutional Trustee as may be agreed upon
from time to time between the Employer and the Trustee and such reasonable
compensation to the Plan Administrator as may be agreed upon from time to time
between the Employer and Plan Administrator may be paid by the Employer, but if
not paid by the Employer when due shall be paid by the Fund. The Trustee shall
have the right to liquidate trust assets to cover its fees. Notwithstanding the
foregoing, no compensation other than reimbursement for expenses shall be paid
to a Trustee or Plan Administrator who is the Employer or a full-time Employee
of the Employer. In the event any part of the Trust Account becomes subject to
tax, all taxes incurred will be paid from the Fund unless the Plan Administrator
advises the Trustee not to pay such tax.
11.4 Division Of Duties And Indemnification
(a) The Trustee shall have the authority and discretion to manage and
govern the Fund to the extent provided in this instrument, but does
not guarantee the Fund in any manner against investment loss or
depreciation in asset value, or guarantee the adequacy of the Fund to
meet and discharge all or any liabilities of the Plan.
(b) The Trustee shall not be liable for the making, retention or sale of
any investment or reinvestment made by it, as herein provided, or for
any loss to, or diminution of the Fund, or for any other loss or
damage which may result from the discharge of its duties hereunder
except to the extent it is judicially determined that the Trustee has
failed to exercise the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character with like aims.
59
<PAGE>
(c) The Employer warrants that all directions issued to the Trustee by it
or the Plan Administrator will be in accordance with the terms of the
Plan and not contrary to the provisions of the Employee Retirement
Income Security Act of 1974 and Regulations issued thereunder.
(d) The Trustee shall not be answerable for any action taken pursuant to
any direction, consent, certificate, or other paper or document on the
belief that the same is genuine and signed by the proper person. All
directions by the Employer or the Plan Administrator shall be in
writing. The Employer shall deliver to the Trustee certificates
evidencing the individual or individuals authorized to act as set
forth in the Adoption Agreement or as the Employer may subsequently
inform the Trustee in writing and shall deliver to the Trustee
specimens of their signatures.
(e) The duties and obligations of the Trustee shall be limited to those
expressly imposed upon it by this instrument or subsequently agreed
upon by the parties. Responsibility for administrative duties required
under the Plan or applicable law not expressly imposed upon or agreed
to by the Trustee shall rest solely with the Employer.
(f) The Trustee shall be indemnified and saved harmless by the Employer
from and against any and all liability to which the Trustee may be
subjected, including all expenses reasonably incurred in its defense,
for any action or failure to act resulting from compliance with the
instructions of the Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary to the Plan, and for
any liability arising from the actions or nonactions of any
predecessor trustee, custodian or other fiduciaries of the Plan.
(g) The Trustee shall not be responsible in any way for the application of
any payments it is directed to make or for the adequacy of the Fund to
meet and discharge any and all liabilities under the Plan.
60
<PAGE>
ARTICLE XII
TRUST FUND ACCOUNT
12.1 The Fund The Fund shall consist of all contributions made under Article III
and Article IV of the Plan and the investment thereof and earnings thereon. All
contributions and the earnings thereon less payments made under the terms of the
Plan, shall constitute the Fund. The Fund shall be administered as provided in
this document.
12.2 Control Of Plan Assets The assets of the Fund or evidence of ownership
shall be held by the Trustee under the terms of the Plan and Trust Account. If
the assets represent amounts transferred from another trustee or custodian under
a former plan, the Trustee named hereunder shall not be responsible for the
propriety of any investment under the former plan.
12.3 Exclusive Benefit Rules No part of the Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, former
Participants with a vested interest, and the beneficiary or beneficiaries of a
deceased Participant having a vested interest in the Fund at the death of the
Participant.
12.4 Assignment And Alienation Of Benefits No right or claim to, or interest in,
any part of the Fund, or any payment from the Fund, shall be assignable,
transferable, or subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any kind. The
Trustee shall not recognize any attempt to assign, transfer, sell, mortgage,
pledge, hypothecate, commute, or anticipate the same, except to the extent
required by law. The preceding sentences shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a Qualified Domestic Relations Order, as defined in Code
Section 414(p), or any domestic relations order entered before January 1, 1985
which the Plan attorney and Plan Administrator deem to be qualified.
12.5 Determination Of Qualified Domestic Relations Order (QDRO) A domestic
relations order shall specifically state all of the following in order to be
deemed a Qualified Domestic Relations Order ("QDRO"):
(a) The name and last known mailing address (if any) of the Participant
and of each alternate payee covered by the domestic relations order.
However, if the domestic relations order does not specify the current
mailing address of the alternate payee, but the Plan Administrator has
independent knowledge of that address, the domestic relations order
may still be a valid QDROs.
(b) The dollar amount or percentage of the Participant's benefit to be
paid by the Plan to each alternate payee, or the manner in which the
amount or percentage will be determined.
(c) The number of payments or period for which the domestic relations
order applies.
(d) The specific plan (by name) to which the domestic relations order
applies.
61
<PAGE>
A domestic relations order shall not be deemed a QDRO if it requires the Plan to
provide:
(e) any type or form of benefit, or any option not already provided for in
the Plan;
(f) increased benefits, or benefits in excess of the Participant's vested
rights;
(g) payment of a benefit earlier than allowed by the Plan's earliest
retirement provisions or in the case of a profit-sharing plan, prior
to the allowability of in-service withdrawals, or
(h) payment of benefits to an alternate payee which are required to be
paid to another alternate payee under another QDRO.
Promptly, upon receipt of a domestic relations order ("Order") which may or may
not be "Qualified", the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to the
Plan's legal counsel for an opinion as to whether or not the Order is in fact
"Qualified" as defined in Code Section 414(p). Within a reasonable time after
receipt of the Order, not to exceed 60 days, the Plan's legal counsel shall make
a determination as to its "Qualified" status and the Participant and any
alternate payee(s) shall be promptly notified in writing of the determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee including the Participant, until the status is resolved.
In such event, the Plan Administrator shall segregate the amount that would have
been payable to the alternate payee(s) if the Order had been deemed a QDRO. If
the Order is not Qualified, or the status is not resolved (for example, it has
been sent back to the Court for clarification or modification) within 18 months
beginning with the date the first payment would have to be made under the Order,
the Plan Administrator shall pay the segregated amounts plus interest to the
person(s) who would have been entitled to the benefits had there been no Order.
If a determination as to the Qualified status of the Order is made after the
18-month period described above, then the Order shall only be applied on a
prospective basis. If the Order is determined to be a QDRO, the Participant and
alternate payee(s) shall again be notified promptly after such determination.
Once an Order is deemed a QDRO, the Plan Administrator shall pay to the
alternate payee(s) all the amounts due under the QDRO, including segregated
amounts plus interest which may have accrued during a dispute as to the Order's
qualification.
Unless specified otherwise in the Adoption Agreement, the earliest retirement
age with regard to the Participant against whom the order is entered shall be
the date the order is determined to be qualified. This will only allow payouts
to alternate payee(s) and not the Participant.
62
<PAGE>
ARTICLE XIII
INVESTMENTS
13.1 Fiduciary Standards The Trustee shall invest and reinvest principal and
income in the same Fund in accordance with the investment objectives established
by the Employer, provided that:
(a) such investments are prudent under the Employee Retirement Income
Security Act of 1974 and the regulations promulgated thereunder,
(b) such investments are sufficiently diversified or otherwise insured or
guaranteed to minimize the risk of large losses, and
(c) such investments are similar to those which would be purchased by
another professional money manager for a like plan with similar
investment objectives.
13.2 Trustee Appointment Shall be appointed by the Employer in accordance with
paragraph 1.85.
13.3 Investment Alternatives Of The Trustee The Trustee shall implement an
investment program based on the Employer's investment objectives and the
Employee Retirement Income Security Act of 1974. In addition to powers given by
law, the Trustee may:
(a) invest the Fund in any form of property, including common and
preferred stocks, exchange traded put and call options, bonds, money
market instruments, mutual funds (including funds for which the
Trustee or its affiliates serve as investment advisor), savings
accounts, certificates of deposit, Treasury bills, insurance policies
and contracts, or in any other property, real or personal, having a
ready market. The Trustee may invest in time deposits (including, if
applicable, its own or those of affiliates) which bear a reasonable
interest rate. No portion of any Qualified Voluntary Contribution, or
the earnings thereon, may be invested in life insurance contracts or,
as with any Participant-directed investment, in tangible personal
property characterized by the IRS as a collectible, other than U.S.
Government or State issued gold and silver coins,
(b) transfer any assets of the Fund to a group or collective trust
established to permit the pooling of funds of separate pension and
profit-sharing trusts, provided the Internal Revenue Service has ruled
such group or collective trust to be qualified under Code Section
401(a) and exempt under Code Section 501(a) or to any other common,
collective, or commingled trust fund. Such commingling of assets of
the Fund with assets of other qualified trusts is specifically
authorized, and to the extent of the investment of the Fund in such a
group or collective trust, the terms of the instrument establishing
the group or collective trust shall be a part hereof as though set
forth herein,
63
<PAGE>
(c) invest up to 100% of the Fund in the common stock, debt obligations,
or any other security issued by the Employer or by an affiliate of the
Employer within the limitations provided under Sections 406, 407, and
408 of the Employee Retirement Income Security Act of 1974 and further
provided that such investment does not constitute a prohibited
transaction under Code Section 4975. Any such investment in Employer
securities shall only be made upon written direction of the Employer
who shall be solely responsible for propriety of such investment,
(d) hold cash uninvested and deposit same with any banking or savings
institution,
(e) join in or oppose the reorganization, recapitalization, consolidation,
sale or merger of corporations or properties, including those in which
it is interested as Trustee, upon such terms as it deems wise,
(f) hold investments in nominee or bearer form,
(g) vote proxies and, if appropriate, pass them on to any investment
manager which may have directed the investment in the equity giving
rise to the proxy,
(h) exercise all ownership rights with respect to assets held in the Fund.
13.4 Participant Loans If permitted by the Employer in the Adoption Agreement, a
Plan Participant may make application to the Employer requesting a loan from the
Fund. The Employer shall have the sole right to approve or disapprove a
Participant's application provided that loans shall be made available to all
Participants on a reasonably equivalent basis. Loans shall not be made available
to Highly Compensated Employees [as defined in Code Section 414(q)] in an amount
greater than the amount made available to other Employees. Any loan granted
under the Plan shall be made subject to the following rules:
(a) No loan, when aggregated with any outstanding Participant loan(s),
shall exceed the lesser of (i) $50,000 reduced by the excess, if any,
of the highest outstanding balance of loans during the one year period
ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made or (ii)
one-half of the fair market value of a Participant's Vested Account
Balance built up from Employer Contributions, Voluntary Contributions,
and Rollover Contributions. If the Participant's Vested Account
Balance is $20,000 or less, the maximum loan shall not exceed the
lesser of $10,000 or 100% of the Participant's Vested Account Balance.
For the purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Code Sections 414(b), 414(c), and 414(m) are aggregated. An assignment
or pledge of any portion of the Participant's interest in the Plan and
a loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this
paragraph.
(b) All applications must be made on forms provided by the Employer and
must be signed by the Participant.
64
<PAGE>
(c) Any loan shall bear interest at a rate reasonable at the time of
application, considering the purpose of the loan and the rate being
charged by representative commercial banks in the local area for a
similar loan unless the Employer sets forth a different method for
determining loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal and
interest be amortized in level payments not less frequently than
quarterly.
(d) The term of such loan shall not exceed five years except in the case
of a loan for the purpose of acquiring any house, apartment,
condominium, or mobile home (not used on a transient basis) which is
used or is to be used within a reasonable time as the principal
residence of the Participant. The term of such loan shall be
determined by the Employer considering the maturity dates quoted by
representative commercial banks in the local area for a similar loan.
(e) The principal and interest paid by a Participant on his or her loan
shall be credited to the Fund in the same manner as for any other Plan
investment. If elected in the Adoption Agreement, loans may be treated
as segregated investments of the individual Participants. This
provision is not available if its election will result in
discrimination in operation of the Plan.
(f) If a Participant's loan application is approved by the Employer, such
Participant shall be required to sign a note, loan agreement, and
assignment of one-half of his or her interest in the Fund as
collateral for the loan. The Participant, except in the case of a
profit-sharing plan satisfying the requirements of paragraph 8.7 must
obtain the consent of his or her Spouse, if any, within the 90 day
period before the time his or her account balance is used as security
for the loan. A new consent is required if the account balance is used
for any renegotiation, extension, renewal or other revision of the
loan, including an increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent
shall subsequently be binding with respect to the consenting Spouse or
any subsequent Spouse.
(g) If a valid Spousal consent has been obtained, then, notwithstanding
any other provision of this Plan, the portion of the Participant's
Vested Account Balance used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the
reduction is used as repayment of the loan. If less than 100% of the
Participant's vested account balance (determined without regard to the
preceding sentence) is payable to the Surviving Spouse, then the
account balance shall be adjusted by first reducing the Vested Account
Balance by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the Surviving Spouse.
(h) The Employer may also require additional collateral in order to
adequately secure the loan.
65
<PAGE>
(i) A Participant's loan shall immediately become due and payable if such
Participant terminates employment for any reason or fails to make a
principal and/or interest payment as provided in the loan agreement.
If such Participant terminates employment, the Employer shall
immediately request payment of principal and interest on the loan. If
the Participant refuses payment following termination, the Employer
shall reduce the Participant's Vested Account Balance by the remaining
principal and interest on his or her loan. If the Participant's Vested
Account Balance is less than the amount due, the Employer shall take
whatever steps are necessary to collect the balance due directly from
the Participant. However, no foreclosure on the Participant's note or
attachment of the Participant's account balance will occur until a
distributable event occurs in the Plan.
13.5 Insurance Policies If permitted by the Employer in the Adoption Agreement,
Employees may elect the purchase of life insurance policies under the Plan. If
elected, the maximum annual premium for a whole life policy shall not exceed 50%
of the aggregate Employer contributions allocated to the account of a
Participant. For profit-sharing plans the 50% test need only be applied against
Employer contributions allocated in the last two years. Whole life policies are
policies with both nondecreasing death benefits and nonincreasing premiums. The
maximum annual premium for term contracts or universal life policies and all
other policies which are not whole life shall not exceed 25% of aggregate
Employer contributions allocated to the account of a Participant. The two year
rule for profit-sharing plans again applies. The maximum annual premiums for a
Participant with both a whole life and a term contract or universal life
policies shall be limited to one-half of the whole life premium, plus the term
premium, but shall not exceed 25% of the aggregate Employer contributions
allocated to the account of a Participant, subject to the two year rule for
profit-sharing plans. Any policies purchased under this Plan shall be held
subject to the following rules:
(a) The Trustee shall be applicant and owner of any policies issued.
(b) All policies or contracts purchased, shall be endorsed as
nontransferable, and must provide that proceeds will be payable to the
Trustee; however, the Trustee shall be required to pay over all
proceeds of the contracts to the Participant's Designated Beneficiary
in accordance with the distribution provisions of this Plan. Under no
circumstances shall the Trust retain any part of the proceeds.
(c) Each Participant shall be entitled to designate a beneficiary under
the terms of any contract issued; however, such designation will be
given to the Trustee which must be the named beneficiary on any
policy. Such designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary designation form with the
Trustee. A Participant's Spouse will be the Designated Beneficiary of
the proceeds in all circumstances unless a Qualified Election has been
made in accordance with paragraph 8.4. The beneficiary of a deceased
Participant shall receive in addition to the proceeds of the
Participant's policy or policies, the amount credited to such
Participant's investment account.
66
<PAGE>
(d) A Participant who is uninsurable or insurable at substandard rates,
may elect to receive a reduced amount of insurance, if available, or
may waive the purchase of any insurance.
(e) All dividends or other returns received on any policy purchased, shall
be applied to reduce the next premium due on such policy, or if no
further premium is due, such amount shall be credited to the Fund as
part of the account of the Participant for whom the policy is held.
(f) If Employer contributions are inadequate to pay all premiums on all
insurance policies, the Trustee may, at the option of the Employer,
utilize other amounts remaining in each Participant's account to pay
the premiums on his or her respective policy or policies, allow the
policies to lapse, reduce the policies to a level at which they may be
maintained, or borrow against the policies on a prorated basis,
provided that the borrowing does not discriminate in favor of the
policies on the lives of officers, shareholders, and Highly
Compensated Employees.
(g) On retirement or termination of employment of a Participant, the
Employer shall direct the Trustee to cash surrender the Participant's
policy and credit the proceeds to his or her account for distribution
under the terms of the Plan. However, before so doing, the Trustee
shall first offer to transfer ownership of the policy to the
Participant in exchange for payment by the Participant of the cash
value of the policy at the time of transfer. Such payment shall be
credited to the Participant's account for distribution under the terms
of the Plan. All distributions resulting from the application of this
paragraph shall be subject to the Joint and Survivor Annuity Rules of
Article VIII, if applicable.
(h) The Employer shall be solely responsible to see that these insurance
provisions are administered properly and that if there is any conflict
between the provisions of this Plan and any insurance contracts issued
that the terms of this Plan will control.
13.6 Employer Investment Direction If approved by the Employer in the Adoption
Agreement, the Employer shall have the right to direct the Trustee with respect
to investments of the Fund, may appoint an investment manager (registered as an
investment advisor under the Investment Advisors Act of 1940) to direct
investments, or may give the Trustee sole investment management responsibility.
The Employer may purchase and sell interests in a registered investment company
(i.e., mutual funds) for which the Sponsor, its parent, affiliates, or
successors, may serve as investment advisor and receive compensation from the
registered investment company for its services as investment advisor. The
Employer shall advise the Trustee in writing regarding the retention of
investment powers, the appointment of an investment manager, or the delegation
of investment powers to the Trustee. Any investment directive shall be made in
writing by the Employer or investment manager, as the case may be. In the
absence of such written directive, the Trustee shall automatically invest the
available cash in its discretion in an appropriate interim investment until
specific investment directions are received. Such instructions regarding the
delegation of investment responsibility shall remain in force until revoked or
amended in writing. The Trustee shall not be responsible for the propriety of
any directed investment made and shall not be required to consult with or advise
the Employer regarding the investment quality of any directed investment held
hereunder. If the Employer fails to designate an investment manager, the Trustee
shall have full investment authority. If the Employer does not issue investment
directions, the Trustee shall have authority to invest the Fund in its sole
discretion. While the Employer may direct the Trustee with respect to Plan
investments, the Employer may not:
68
<PAGE>
(a) borrow from the Fund or pledge any of the assets of the Fund as
security for a loan,
(b) buy property or assets from or sell property or assets to the Fund,
(c) charge any fee for services rendered to the Fund, or
(d) receive any services from the Fund on a preferential basis.
13.7 Employee Investment Direction If approved by the Employer in the Adoption
Agreement, Participants shall be given the option to direct the investment of
their personal contributions and their share of the Employer's contribution
among alternative investment funds established as part of the overall Fund,
unless otherwise specified by the Employer in the Adoption Agreement. Such
investment funds shall be under the full control of the Trustee. If investments
outside the Trustee's control are allowed, Participants may not direct that
investments be made in collectibles, other than U.S. Government or State issued
gold and silver coins. In this connection, a Participant's right to direct the
investment of any contribution shall apply only to selection of the desired
fund. The following rules shall apply to the administration of such funds.
(a) At the time an Employee becomes eligible for the Plan, he or she shall
complete an investment designation form stating the percentage of his
or her contributions to be invested in the available funds.
(b) A Participant may change his or her election with respect to future
contributions by filing a new investment designation form with the
Employer in accordance with the procedures established by the Plan
Administrator.
(c) A Participant may elect to transfer all or part of his or her balance
from one investment fund to another by filing an investment
designation form with the Employer in accordance with the procedures
established by the Plan Administrator.
(d) The Employer shall be responsible when transmitting Employee and
Employer contributions to show the dollar amount to be credited to
each investment fund for each Employee.
(e) Except as otherwise provided in the Plan, neither the Trustee, nor the
Employer, nor any fiduciary of the Plan shall be liable to the
Participant or any of his or her beneficiaries for any loss resulting
from action taken at the direction of the Participant.
68
<PAGE>
ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 Applicability Of Rules If the Plan is or becomes Top-Heavy in any Plan Year
beginning after December 31, 1983, the provisions of this Article will supersede
any conflicting provisions in the Plan or Adoption Agreement.
14.2 Minimum Contribution Notwithstanding any other provision in the Employer's
Plan, for any Plan Year in which the Plan is Top-Heavy or Super Top-Heavy, the
aggregate Employer contributions and forfeitures allocated on behalf of any
Participant (without regard to any Social Security contribution) under this Plan
and any other Defined Contribution Plan of the Employer shall be the lesser of
3% of such Participant's Compensation or the largest percentage of Employer
contributions and forfeitures, as a percentage of the first $200,000, as
adjusted under Code Section 415(d), of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that year.
Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies even though
under other Plan provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because the Participant fails to make Voluntary Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top-Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees. Unless the
Employer specifies otherwise in the Adoption Agreement, the minimum Top-Heavy
contribution will be allocated to the accounts of all eligible Participants even
if they are Key Employees. For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in paragraph 1.12(c) of the
Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer and
the Employer has provided in the Adoption Agreement that the minimum allocation
or benefit requirements applicable to Top-Heavy Plans will be met in the other
plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
contributions made to his or her account, a Top-Heavy minimum will be required
for all non-Key Employees who are Participants. However, neither Elective
Deferrals by nor Matching Contributions to non-Key Employees may be taken into
account for purposes of satisfying the Top-Heavy minimum contribution
requirement.
14.3 Minimum Vesting For any Plan Year in which this Plan is Top-Heavy, the
minimum vesting schedule elected by, or deemed elected by, the Employer in the
Adoption Agreement will automatically apply to the Plan. If the vesting schedule
selected by the Employer in the Adoption Agreement is less liberal than the
allowable schedule, the schedule will be automatically modified. If the vesting
schedule under the Plan shifts in or out of the Top-Heavy schedule for any Plan
Year, such shift is an amendment to the vesting schedule and the election in
paragraph 9.8 of the Plan applies. The minimum vesting schedule applies to all
accrued benefits within the meaning of Code Section 411(a)(7) except those
attributable to Employee contributions, including benefits accrued before the
effective date of Code Section 416 and benefits accrued before the Plan became
69
<PAGE>
Top-Heavy. Further, no reduction in vested benefits may occur in the event the
Plan's status as Top-Heavy changes for any Plan Year. However, this paragraph
does not apply to the account balances of any Employee who does not have an Hour
of Service after the Plan initially becomes Top-Heavy and such Employee's
account balance attributable to Employer contributions and forfeitures will be
determined without regard to this paragraph.
70
<PAGE>
ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment By Sponsor The Sponsor of this Regional Prototype may amend any
or all provisions of this Plan and Trust Account at any time without obtaining
the approval or consent of any Employer which has adopted this Plan and Trust
Account provided that no amendment shall authorize or permit any part of the
corpus or income of the Fund to be used for or diverted to purposes other than
for the exclusive benefit of Participants and their beneficiaries, or eliminate
an optional form of distribution. In the case of a mass-submitted plan, the
mass-submitter shall amend the Plan on behalf of the Sponsor.
15.2 Amendment By Employer The Employer may amend any option in the Adoption
Agreement, and may include language as permitted in the Adoption Agreement,
(a) to satisfy Code Section 415,
(b) to avoid duplication of minimums under Code Section 416 because of the
required aggregation of multiple plans,
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as individually designed.
An Employer that has adopted a Standardized Regional Prototype Plan (Adoption
Agreements 001, 002, 003, 007, or 008) may amend the trust document provided
such amendment merely involves the specifications of the names of the Plan,
Employer, Trustee, Plan Administrator and other fiduciaries, the Trust year or
the name of any pooled Trust in which the Plan's Trust will participate.
An Employer that has adopted a Nonstandardized Regional Prototype Plan (Adoption
Agreement 004, 005 or 006) will not be considered to have an individually
designed plan merely because the Employer amends administrative provisions of
the Trust document (such as provisions relating to investments and duties of
Trustees) so long as the amended provisions are not in conflict with any other
provision of the Plan and do not cause the plan to fail to qualify under Code
Section 401(a).
If the Employer amends the Plan and Trust Account other than as provided above,
the Employer's Plan shall no longer participate in this Prototype Plan and will
be considered an individually designed plan for which the Employer must obtain a
separate determination letter.
15.3 Termination Employers shall have the right to terminate their Plans upon 60
days notice in writing to the Trustee. If the Plan is terminated, partially
terminated, or if there is a complete discontinuance of contributions under a
profit-sharing plan maintained by the Employer, all amounts credited to the
accounts of Participants shall vest and become nonforfeitable. In the event of
termination, the Employer shall direct the Trustee with respect to the
distribution of accounts to or for the exclusive benefit of Participants or
their beneficiaries. In the event of a partial termination, only those who are
affected by such partial termination shall be fully vested. In the event of
termination, the Trustee shall dispose of the Fund in accordance with the
written directions of the Plan Administrator, provided that no liquidation of
assets and payment of benefits, (or provision therefore), shall actually be made
by the Trustee until after it is established by the Employer in a manner
satisfactory to the Trustee, that the applicable requirements, if any, of the
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code
governing the termination of employee benefit plans, have been or are being,
complied with, or that appropriate authorizations, waivers, exemptions, or
variances have been, or are being obtained.
71
<PAGE>
15.4 Qualification Of Employer's Plan If the adopting Employer fails to attain
or retain Internal Revenue Service qualification, such Employer's Plan shall no
longer participate in this Regional Prototype Plan and will be considered an
individually designed plan.
15.5 Mergers And Consolidations
(a) In the case of any merger or consolidation of the Employer's Plan
with, or transfer of assets or liabilities of the Employer's Plan to,
any other plan, Participants in the Employer's Plan shall be entitled
to receive benefits immediately after the merger, consolidation, or
transfer which are equal to or greater than the benefits they would
have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.
(b) In the event that the Trustee is an institution, that corporation into
which the Trustee or any successor trustee may be merged or with which
it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Trustee or any successor trustee may be
a party, or any corporation to which all or substantially all the
trust business of the Trustee or any successor trustee may be
transferred, shall be the successor of such Trustee without the filing
of any instrument or performance of any further act, before any court.
15.6 Resignation And Removal The Trustee may resign by written notice to the
Employer or may be removed by written notice from the Employer. Either such
notification shall be effective 60 days after delivery. The Employer may
discontinue its participation in this Prototype Plan and Trust Account effective
upon 60 days written notice to the Sponsor. In such event the Employer shall,
prior to the effective date thereof, amend the Plan to eliminate any reference
to this Prototype Plan and Trust Account and appoint a successor trustee or
arrange for another funding agent. The Trustee shall deliver the Fund to its
successor on the effective date of the resignation or removal, or as soon
thereafter as practicable, provided that this shall not waive any lien the
Trustee, if an institution, may have upon the Fund for its compensation or
expenses. If the Employer fails to appoint a successor trustee with the said 60
days, or such longer period as the Trustee may specify in writing, the Employer
shall be deemed the successor trustee. The Employer must then obtain its own
determination letter.
15.7 Qualification Of Prototype The Sponsor intends that this Regional Prototype
Plan will meet the requirements of the Code as a qualified Prototype Retirement
Plan and Trust Account. Should the Commissioner of Internal Revenue or any
delegate of the Commissioner at any time determine that the Plan and Trust
Account fails to meet the requirements of the Code, the Sponsor will amend the
Plan and Trust Account to maintain its qualified status.
72
<PAGE>
ARTICLE XVI
GOVERNING LAW
Construction, validity and administration of the Regional Prototype Retirement
Plan and Trust, and any Employer Plan and Trust as embodied in the Regional
Prototype document and accompanying Adoption Agreement, shall be governed by
Federal law to the extent applicable and to the extent not applicable by the
laws of the State/Commonwealth in which the principal office of the Employer is
located.
73
<PAGE>
PART I - SECTION 401(a)(17) LIMITATION
[MAY BE ADOPTED BY DEFINED CONTRIBUTION
AND DEFINED BENEFIT PLANS]
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
74
<PAGE>
MODEL AMENDMENT
Revenue Procedure 93-47
(This model amendment allows Participants receiving distribution from
safe-harbored profit sharing plans to waive the 30-day period required under the
Unemployment Compensation Act of 1992. Non-safe harbored plans must still
provide notice not less than 30 days and not more than 90 days prior to the
distribution.)
If a distribution is one to which Section 401(a)(11) and 417 of the Internal
Revenue Code do not apply, such distribution may commence less than 30 days
after the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the plan administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(2) the Participant, after receiving the notice, affirmatively elects a
distribution.
75
<PAGE>
NONSTANDARDIZED
ADOPTION AGREEMENT
REGIONAL PROTOTYPE
CASH OR DEFERRED
PROFIT-SHARING PLAN AND TRUST
For
GLOVERSVILLE FEDERAL
SAVINGS & LOAN ASSOCIATION
Sponsored by
BENEFIT PLANS ADMINISTRATORS
[GRAPHIC OMITTED]
Girard H. Mayer 1500 Genesee Street
(315) 735-8322 Utica, NY 13502
<PAGE>
Name: GLOVERSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION Regional Prototype
BPA No: 735612 C/D Plan #006
The Employer named below hereby establishes a Cash or Deferred
Profit-Sharing Plan for eligible Employees as provided in this Adoption
Agreement and the accompanying Regional Prototype Plan and Trust Basic Plan
Document #R1.
1. EMPLOYER INFORMATION
NOTE: If multiple Employers are adopting the Plan, complete this section
based on the lead Employer. Additional Employers may adopt this Plan by
attaching executed signature pages to the back of the Employer's
Adoption Agreement.
(a) NAME AND ADDRESS:
GLOVERSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION
52 NORTH MAIN STREET
GLOVERSVILLE, NEW YORK 12078
(b) TELEPHONE NUMBER: (518) 725-6331
(c) TAX ID NUMBER: 14-0697913
(d) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[X] (iii) Corporation
[ ] (iv) "S" Corporation (formerly known as Subchapter S)
[ ] (v) Other:
(e) NAME(S) OF INDIVIDUAL(S) AUTHORIZED TO
ISSUE INSTRUCTIONS TO THE TRUSTEE:
MENZO D. CASE LEWIS E. KOLAR
------------- --------------
JOHN F. VON AHN
---------------
(f) NAME OF PLAN: GLOVERSVILLE FEDERAL
SAVINGS & LOAN ASSOCIATION
401(K) PROFIT SHARING PLAN AND TRUST
(g) THREE DIGIT PLAN NUMBER
FOR ANNUAL RETURN/REPORT: 002
1
<PAGE>
2. EFFECTIVE DATE
(a) This is a new Plan having an effective date of N/A .
(b) This is an amended Plan.
The effective date of the original Plan was JANUARY 1, 1995 .
The effective date of the amended Plan is JANUARY 1, 1998 .
(c) If different from above, the Effective Date for the Plan's Elective
Deferral provisions shall be .
3. DEFINITIONS
(a) "Collective or Commingled Funds"
[X] (i) Not Applicable - Non-Institutional Trustee.
[ ] (ii) Investment in collective or commingled funds as permitted at
paragraph 13.3(b) of the Basic Plan Document #R1 shall only be
made to the following specifically named fund(s):
Funds made available after the execution of this Adoption Agreement
will be listed on schedules attached to the end of this Adoption
Agreement.
(b) "Compensation" [Paragraph 1.12]
(i) Compensation Definition:
Compensation Measurement Period - Compensation shall be
determined on the basis of the:
[X] (1) Plan Year.
[ ] (2) Employer's Taxable Year.
[ ] (3) Calendar Year.
Compensation shall be determined on the basis of the following
safe-harbor definition of Compensation in IRS Regulation Section
1.414(s)-1(c):
[ ] (4) Code Section 6041 and 6051 Compensation,
2
<PAGE>
[X] (5) Code Section 3401(a) Compensation; or
[ ] (6) Code Section 415 Compensation.
(ii)Application of Salary Savings Agreements:
Compensation shall exclude Employer Contributions made pursuant
to a Salary Savings Agreement under:
[ ] (1) Not applicable, no such agreement exists.
[X] (2) Not applicable, no Employer contributions made pursuant
to a Salary Savings Agreement shall be excluded.
[ ] (3) A Cash or Deferred Profit-Sharing Plan under Code
Section 401(k) or Simplified Employee Pension under Code
Section 402(h)(1)(B).
[ ] (4) A flexible benefit plan under Code Section 125.
[ ] (5) A tax deferred annuity under Code Section 403(b).
(iii)Exclusions From Compensation:
(1) overtime
(2) bonuses
(3) commissions
(4) ________________
Type of Contribution(s) Exclusions
Elective Deferrals [Section 7(b)] _______
Matching Contributions [Section 7(c)] _______
Qualified Non-Elective Contributions [Section 7(d)] _______
and Non-Elective Contributions [Section 7(e)]
3
<PAGE>
(iv) Maximum Compensation:
For purposes of the Plan, Compensation shall be limited to $ N/A,
the maximum amount which will be considered for Plan purposes.
[If an amount is specified, it will limit the amount of
contributions allowed on behalf of higher compensated Employees.
Completion of this section is not intended to coordinate with the
$200,000 of Code Section 415(d), thus the amount should be less
than the $200,000 limit as adjusted for cost-of-living
increases.]
(c) "Entry Date" [Paragraph 1.30]
(i) The first day of the Plan Year during which an Employee meets the
eligibility requirements.
(ii) The first day of the Plan Year nearest the date on which an
Employee meets the eligibility requirements.
(iii)The earlier of the first day of the Plan Year or the first day
of the seventh month of the Plan Year coinciding with or
following the date on which an Employee meets the eligibility
requirements.
(iv) The first day of the Plan Year following the date on which the
Employee meets the eligibility requirements. If this election is
made, the Service requirement at 4(a)(ii) may not exceed 1/2 year
and the age requirement at 4(b)(ii) may not exceed 20-1/2.
(v) The first day of the month coinciding with or following the date
on which an Employee meets the eligibility requirements.
(vi) The first day of the Plan Year, or the first day of the fourth
month, or the first day of the seventh month or the first day of
the tenth month of the Plan Year coinciding with or following the
date on which an Employee meets the eligibility requirements.
Indicate Entry Date(s) to be used by specifying option from list
above:
Type of Contribution(s) Entry Date(s)
For Discretionary Profit Sharing Contributions
under 7(e), (f) and (g) v
------
For all other contributions (Option (i) not
available for these contributions) v
------
4
<PAGE>
(d) "Hour of Service" [Paragraph 1.41]
Shall be determined on the basis of the method selected below. Only
one method may be selected. The method selected shall be applied to
all Employees covered under the Plan as follows:
[X] (i) On the basis of actual hours for which an Employee is paid or
entitled to payment.
[ ] (ii) On the basis of days worked. An Employee shall be credited
with ten (10) Hours of Service if under Paragraph 1.41 of the
Basic Plan Document #R1 such Employee would be credited with at
least one (1) Hour of Service during the day.
[ ] (iii) On the basis of weeks worked. An Employee shall be credited
with forty-five (45) Hours of Service if under Paragraph 1.41 of
the Basic Plan Document #R1 such Employee would be credited with
at least one (1) Hour of Service during the week.
[ ] (iv) On the basis of semi-monthly payroll periods. An Employee
shall be credited with ninety-five (95) Hours of Service if under
Paragraph 1.41 of the Basic Plan Document #R1 such Employee would
be credited with at least one (1) Hour of Service during the
semi-monthly payroll period.
[ ] (v) On the basis of months worked. An Employee shall be credited
with one hundred ninety (190) Hours of Service if under Paragraph
1.41 of the Basic Plan Document #R1 such Employee would be
credited with at least one (1) Hour of Service during the month.
(e) "Limitation Year" [Paragraph 1.44]
The 12-consecutive month period commencing on JANUARY 1 and ending on
DECEMBER 31 .
If applicable, the Limitation Year will be a short Limitation Year
commencing on and ending on . Thereafter, the Limitation Year shall
end on the date last specified above.
(f) "Net Profit"
[X] (i) Not applicable (profits will not be required for any
contributions to the Plan).
[ ] (ii) As defined in Paragraph 1.48 of the Basic Plan Document #R1.
5
<PAGE>
[ ] (iii) Shall be defined as:
____________________________
____________________________
(Only use if definition in Paragraph 1.48 of the Basic Plan
Document #R1 is to be superseded.)
(g) "Plan Year" [Paragraph 1.57]
The 12-consecutive month period commencing on JANUARY 1 and ending on
DECEMBER 31 .
If applicable, the Plan Year will be a short Plan Year commencing on
and ending on . Thereafter, the Plan Year shall end on the date last
specified above.
(h) "Qualified Early Retirement Age"
For purposes of making distributions under the provisions of a
Qualified Domestic Relations Order, the Plan's Qualified Early
Retirement Age with regard to the Participant against whom the order
is entered [X] shall [ ] shall not be the date the order is determined
to be qualified. If "shall" is elected, this will only allow payout to
the alternate payee(s).
(i) "Qualified Joint and Survivor Annuity"
The safe-harbor provisions of Paragraph 8.7 of the Basic Plan Document
#R1 [ ] are [X] are not applicable. If not applicable, the survivor
annuity will be 50 % (50%, 66 2/3%, 75% or 100%) of the annuity
payable during the lives of the Participant and Spouse. If no answer
is specified, 50% will be used.
(j) "Taxable Wage Base" [Paragraph 1.79]
[X] (i) Not Applicable - Plan is not integrated with Social Security.
[ ] (ii) The maximum earnings considered wages for such Plan Year
under Code Section 3121(a).
[ ] (iii) % (not more than 100%) of the amount considered wages for
such Plan Year under Code Section 3121(a).
[ ] (iv) $_______ , provided that such amount is not in excess of the
amount determined under Paragraph 3(j)(ii) above.
6
<PAGE>
[x] (v) For the 1989 Plan Year, $10,000. For all subsequent Plan
Years, 20% of the maximum earnings considered wages for such Plan
Year under Code Section 3121(a).
NOTE: Using less than the maximum at (ii) may result in a change in
the allocation formula in Section 7.
(k) "Valuation Date(s)"
Allocations to Participant Accounts will be done in accordance with
Article V of the Basic Plan Document #R1:
(i) Daily (v) Quarterly
(ii) Weekly (vi) Semi-Annually
(iii) Monthly (vii) Annually
(iv) Bi-Monthly
Indicate Valuation Date(s) to be used by specifying option from list
above:
Type of Contribution(s) Valuation Date(s)
----------------------- -----------------
After-Tax Voluntary Contributions [Section 6]
Elective Deferrals [Section 7(b)] v
Matching Contributions [Section 7(c)] v
Qualified Non-Elective Contributions [Section 7(d)] vii
Non-Elective Contributions [Section 7(e), (f), (g)] vii
Minimum Top-Heavy Contributions [Section 7(i)] vii
(l) "Year of Service"
(i) For Eligibility Purposes: The 12-consecutive month period during
which an Employee is credited with 1,000 (not more than 1,000)
Hours of Service.
(ii) For Allocation Accrual Purposes: The 12-consecutive month period
during which an Employee is credited with the Hours of Service
(not more than 1,000) for each type of contribution listed below.
Type of Contribution Hours of Service
-------------------- ----------------
(1) Matching [Section 7(c)] 1,000
(2) Qualified Non-Elective [Section 7(d)] 1,000
(3) Non-Elective [Section 7(e), (f), (g)] 1,000
7
<PAGE>
(iii)For Vesting Purposes: The 12-consecutive month period during
which an Employee is credited with 1,000 (not more than 1,000)
Hours of Service.
4. ELIGIBILITY REQUIREMENTS [Article II]
(a) Service:
(i) For Elective Deferrals, and Required Voluntary Contributions or
Employer Contributions [unless specified otherwise at (ii)
below]:
[ ] (1) The Plan shall have no service requirement.
[X] (2) The Plan shall cover only Employees having completed at
least 6 months (not more than three (3)) Years of Service.
If more than one (1) year is specified, for Plan Years
beginning in 1989 and later, the answer will be deemed to be
one (1).
(ii) For contributions [not covered at (i) above] specify the Service
requirements below:
Type of Contribution Service Requirement
(1) Elective Deferrals ___________________
(2) Employer Matching ___________________
(3) Qualified Non-Elective ___________________
(4) Discretionary Profit-Sharing ___________________
(5) Required Voluntary ___________________
Not more than three (3) years may be specified. If more than two
(2) years is specified, for Plan Years beginning in 1989 and
later, the requirement will be deemed to be two (2) years.
NOTE:If the eligibility period selected is or includes a fractional
year, an Employee will not be required to complete any specified
number of Hours of Service to receive credit for such period.
Participants will be eligible for Top-Heavy minimum contributions
after the period in (i) above, assuming they satisfy the other
requirements of this Section 4.
(b) Age:
[ ] (i) The Plan shall have no minimum age requirement.
[X] (ii) The Plan shall cover only Employees having attained age 21
(not more than age 21).
8
<PAGE>
(c) Classification:
The Plan shall cover all Employees who have met the age and service
requirements with the following exceptions:
[ ] (i) No exceptions.
[X] (ii) The Plan shall exclude Employees included in a unit of
Employees covered by a collective bargaining agreement between
the Employer and Employee Representatives, if retirement benefits
were the subject of good faith bargaining. For this purpose, the
term "Employee Representative" does not include any organization
more than half of whose members are Employees who are owners,
officers, or executives of the Employer.
[X] (iii) The Plan shall exclude Employees who are nonresident aliens
and who receive no earned income from the Employer which
constitutes income from sources within the United States.
[X] (iv) The Plan shall exclude from participation any
nondiscriminatory classification of Employees determined as
follows: Independent Contractors
(d) Employees on Effective Date:
[X] (i) Not Applicable. All Employees will be required to satisfy
both the Age and Service requirements specified above.
[ ] (ii) Employees employed on the Plan's Effective Date do not have
to satisfy the Service requirements specified above at [ ]
(a)(i), [ ] (a)(ii), [ ] both.
[ ] (iii) Employees employed on the Plan's Effective Date do not have
to satisfy the age requirements specified above.
5. RETIREMENT AGES
(a) Normal Retirement Age:
If the Employer imposes a requirement that Employees retire upon
reaching a specified age, the Normal Retirement Age selected below may
not exceed the Employer imposed mandatory retirement age.
[X] (i) Normal Retirement Age shall be 65 (not to exceed age 65).
[ ] (ii) Normal Retirement Age shall be the later of attaining age
(not to exceed age 65) or the (not to exceed the 5th) anniversary
of the first day of the first Plan Year in which the Participant
commenced participation in the Plan.
9
<PAGE>
(b) Early Retirement Age:
[ ] (i) Not Applicable.
[X] (ii)The Plan shall have an Early Retirement Age of 62 (not less
than 55) and completion of N/A Years of Service.
6. EMPLOYEE CONTRIBUTIONS [Article IV]
[X] (a) Participants shall be permitted to make Elective Deferrals in any
amount from 1 % up to 15 % of their Compensation.
If (a) is applicable, Participants shall be permitted to amend their
Salary Savings Agreements to change the contribution percentage as
provided below:
[ ] (i) On the Anniversary Date of the Plan
[ ] (ii) On the Anniversary Date of the Plan and on the first day of
the seventh month of the Plan Year
[X] (iii) On the Anniversary Date of the Plan and on the first day
following any Valuation Date
[ ] (iv) Upon thirty (30) days notice to the Employer
[ ] (b) Participants shall be permitted to make after tax Voluntary
Contributions.
[ ] (c) Participants shall be required to make after tax Voluntary
Contributions as follows (Thrift Savings Plan):
[ ] (i) % of Compensation.
[ ] (ii) A percentage determined by the Employee on his or her
enrollment form.
[ ] (d) If necessary to pass the Average Deferral Percentage Test,
Participants [ ] may [ ] may not have Elective Deferrals
re-characterized as Voluntary Contributions.
NOTE:The Average Deferral Percentage Test will apply to contributions
under (a) above. The Average Contribution Percentage Test will apply
to contributions under (b) and (c) above, and may apply to (a).
10
<PAGE>
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
NOTE:The Employer shall make contributions to the Plan in accordance with
the formula or formulas selected below. The Employer's contribution
shall be subject to the limitations contained in Articles III and X.
For this purpose, a contribution for a Plan Year shall be limited for
the Limitation Year which ends with or within such Plan Year. Also,
the integrated allocation formulas below are for Plan Years beginning
in 1989 and later. The Employer's allocation for earlier years shall
be as specified in its Plan prior to Amendment for the Tax Reform Act
of 1986.
(a) Profits Requirement:
(i) Current or Accumulated Net Profits are required for:
[ ] (A) Matching Contributions
[ ] (B) Qualified Non-Elective Contributions
[ ] (C) Discretionary Contributions
(ii) No Net Profits are required for:
[X] (A) Matching Contributions
[X] (B) Qualified Non-Elective Contributions
[X] (C) Discretionary Contributions
NOTE:Elective Deferrals can always be contributed regardless of
profits.
[X] (b) Salary Savings Agreement:
The Employer shall contribute and allocate to each Participant's
account an amount equal to the amount withheld from the
Compensation of such Participant pursuant to his or her Salary
Savings Agreement. If applicable, the maximum percentage is
specified in Section 6 above.
An Employee who has terminated his or her election under the
Salary Savings Agreement other than for Hardship reasons may not
make another Elective Deferral:
[ ] (i) until the first day of the next Plan Year.
[X] (ii) until the first day of the [X] next valuation period. [
] second valuation period following termination. [ ] third
valuation period following termination.
11
<PAGE>
[ ] (iii) for a period of month(s) (not to exceed twelve (12)
months).
[X] (c) Matching Employer Contribution [See Paragraphs (h) and (i)]:
[ ] (i) Percentage Match: The Employer shall contribute and allocate
to each eligible Participant's account an amount equal to ___% of
the amount contributed and allocated in accordance with Paragraph
7(b) above and (if checked) ___% of [ ] the amount of Voluntary
Contributions made in accordance with Paragraph 4.1 of the Basic
Plan Document #R1. The Employer shall not match Participant
Elective Deferrals as provided above in excess of ___$ or in
excess of ___% of the Participant's Compensation or if
applicable, Voluntary Contributions in excess of $ or in excess
of ___% of the Participant's Compensation. In no event will the
match on both Elective Deferrals and Voluntary Contributions
exceed a combined amount of $____ or ___%.
[X] (ii) Discretionary Match: The Employer shall contribute and
allocate to each eligible Participant's account a percentage of
the Participant's Elective Deferral contributed and allocated in
accordance with Paragraph 7(b) above. The Employer shall set such
percentage prior to the end of the Plan Year. The Employer shall
not match Participant Elective Deferrals in excess of $N/A or in
excess of 5 % of the Participant's Compensation.
[ ] (iii) Tiered Match: The Employer shall contribute and allocate to
each Participant's account an amount equal to % of the first % of
the Participant's Compensation, to the extent deferred.
___% of the next ___% of the Participant's Compensation, to the
extent deferred.
___% of the next ___% of the Participant's Compensation, to the
extent deferred.
NOTE:Percentages specified in (iii) above may not increase as the
percentage of Participant's contribution increases.
[ ] (iv) Flat Dollar Match: The Employer shall contribute and
allocate to each Participant's account ___$ if the Participant
defers at least 1% of Compensation.
[ ] (v) Percentage of Compensation Match: The Employer shall
contribute and allocate to each Participant's account ___% of
Compensation if the Participant defers at least 1% of
Compensation.
12
<PAGE>
[ ] (vi) Proportionate Compensation Match: The Employer shall
contribute and allocate to each Participant who defers at least
1% of Compensation, an amount determined by multiplying such
Employer Matching Contribution by a fraction the numerator of
which is the Participant's Compensation and the denominator of
which is the Compensation of all Participants eligible to receive
such an allocation. The Employer shall set such discretionary
contribution prior to the end of the Plan Year.
[X] (vii) Qualified Match: Employer Matching Contributions will be
treated as Qualified Matching Contributions to the extent
specified below:
[ ] (A) All Matching Contributions
[X] (B) None
[ ] (C) ___% of the Employer's Matching Contribution
[ ] (D) Up to ___% of each Participant's Compensation
[ ] (E) The amount necessary to meet the [ ] Average Deferral
Percentage (ADP) Test, [ ] Average Contribution Percentage
(ACP) Test, [ ] Both the ADP and ACP tests
Matching Contribution Computation Period: The time period upon
which matching contributions will be based shall be:
[ ] (A) weekly [ ] (E) quarterly
[ ] (B) bi-weekly [ ] (F) semi-annually
[ ] (C) semi-monthly [ ] (G) annually
[X] (D) monthly
Eligibility for Match: Employer Matching Contributions, whether
or not Qualified, will only be made on Employee Contributions not
withdrawn prior to the end of the [ ] valuation period [ ] Plan
Year.
[X] (d) Qualified Non-Elective Employer Contribution - [See Paragraphs (h)
and (i)] These contributions are fully vested when contributed.
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
Employee contributions made hereunder. The amount of Qualified
Non-Elective Contributions taken into account for purposes of meeting
the ADP or ACP test requirements is:
13
<PAGE>
[ ] (i) All such Qualified Non-Elective Contributions
[X] (ii)The amount necessary to meet [ ] the ADP test [ ] the
ACP test [X] both the ADP and ACP tests.
Qualified Non-Elective Contributions will be made to:
[ ] (iii) All Employees eligible to participate
[X] (iv) Only non-Highly Compensated Employees eligible to
participate
[X] (e) Additional Employer Contribution Other Than Qualified Non-Elective
Contributions - Non-Integrated [See Paragraphs (h) and (i)]
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
Employee contributions made hereunder.
[ ] (f) Additional Employer Contribution - Integrated Allocation Formula
[See Paragraphs (h) and (i)]
The Employer shall have the right to make an additional discretionary
contribution. The Employer's contribution for the Plan Year plus any
forfeitures shall be allocated to the accounts of eligible
Participants as follows:
(i) First, to the extent contributions and forfeitures are
sufficient, all Participants will receive an allocation equal to
3% of their Compensation.
(ii) Next, any remaining Employer Contributions and forfeitures will
be allocated to Participants who have Compensation in excess of
the Taxable Wage Base (excess Compensation). Each such
Participant will receive an allocation in the ratio that his or
her excess Compensation bears to the excess Compensation of all
Participants. Participants may only receive an allocation of 3%
of excess Compensation.
(iii)Next, any remaining Employer contributions and forfeitures will
be allocated to all Participants in the ratio that their
Compensation plus excess Compensation bears to the total
Compensation plus excess Compensation of all Participants.
Participants may only receive an allocation of up to 2.7% of
their Compensation plus excess Compensation, under this
allocation method. If the Taxable Wage Base defined at Section
3(j) is less than or equal to the greater of $10,000 or 20% of
the maximum, the 2.7% need not be reduced. If the amount
specified is greater than the greater of $10,000 or 20% of the
maximum Taxable Wage Base, but not more than 80%, 2.7% must be
reduced to 1.3%. If the amount specified is greater than 80% but
less than 100% of the maximum Taxable Wage Base, the 2.7% must be
reduced to 2.4%.
14
<PAGE>
NOTE:If the Plan is not Top-Heavy, or if the Top-Heavy minimum
contribution or benefit is provided under another plan [see
Section 11 (c)(ii)] covering the same employees, subparagraphs
(i) and (ii) above may be disregarded and 5.7%, 4.3%, or 5.4% may
be substituted for 2.7%, 1.3% or 2.4% where it appears in (iii)
above.
(iv) Next, any remaining Employer contributions and forfeitures will
be allocated to all Participants (whether or not they received an
allocation under the preceding paragraphs) in the ratio that each
Participant's Compensation bears to all Participants'
Compensation.
[ ] (g) Additional Employer Contribution - Alternative Integrated
Allocation Formula [See Paragraph (h) and (i)]
The Employer shall have the right to make an additional discretionary
contribution. To the extent that such contributions are sufficient,
they shall be allocated as follows:
___% of each eligible Participant's Compensation, plus ___% of
Compensation in excess of the Taxable Wage Base defined at Section
3(j) hereof. The percentage on excess compensation may not exceed the
lesser of (i) the amount first specified in this paragraph; or (ii)
the greater of 5.7% or the percentage rate of tax under Code Section
3111(a) as in effect on the first day of the Plan Year attributable to
the Old Age (OA) portion of the OASDI provisions of the Social
Security Act. If the Employer specifies a Taxable Wage Base in Section
3(j) which is lower than the Taxable Wage Base for Social Security
purposes (SSTWB) in effect as of the first day of the Plan Year, the
percentage contributed with respect to excess Compensation must be
adjusted. If the Plan's Taxable Wage Base is greater than the larger
of $10,000 or 20% of the SSTWB but not more than 80% of the SSTWB, the
excess percentage is 4.3%. If the Plan's Taxable Wage Base is greater
than 80% of the SSTWB but less than 100% of the SSTWB, the excess
percentage is 5.4%.
NOTE:Only one Plan maintained by the Employer may be integrated with
Social Security.
(h) Allocation of Excess Amounts (Annual Additions)
In the event that the allocation formula above results in an Excess
Amount, such excess shall be:
[ ] (i) placed in a suspense account accruing no gains or losses for
the benefit of the Participant.
[ ] (ii) reallocated as additional Employer contributions to all
other Participants to the extent that they do not have any Excess
Amount.
15
<PAGE>
(i) Minimum Employer Contribution Under Top-Heavy Plans:
For any Plan Year during which the Plan is Top-Heavy, the sum of the
contributions and forfeitures as allocated to eligible Employees under
Paragraphs 7(d), 7(e), 7(f), 7(g) and 9 of this Adoption Agreement
shall not be less than the amount required under Paragraph 14.2 of the
Basic Plan Document #R1. Top-Heavy minimums will be allocated to:
[X] (i) all eligible Participants.
[x] (ii) only eligible non-Key Employees who are Participants.
(j) Return of Excess Contributions and/or Excess Aggregate Contributions:
In the event that one or more Highly Compensated Employees are subject
to both the ADP and ACP tests and the sum of such tests exceeds the
Aggregate Limit, the limit will be satisfied by reducing:
[X] (i) the ADP of the affected Highly Compensated Employees
[ ] (ii) the ACP of the affected Highly Compensated Employees
[ ] (iii) a combination of the ADP and ACP of the affected Highly
Compensated Employees
8. ALLOCATIONS TO TERMINATED EMPLOYEES [Paragraph 5.3]
[ ] (a) The Employer will not allocate Employer related contributions to
Employees who terminate during a Plan Year, unless required to satisfy
the requirements of Code Section 401(a)(26) and 410(b). (These
requirements are effective for 1989 and subsequent Plan Years.)
[X] (b) The Employer will allocate Employer matching and other related
contributions as indicated below to Employees who terminate during the
Plan Year as a result of:
MATCHING OTHER
[X] [X] (i) Retirement.
[X] [X] (ii) Disability.
[X] [X] (iii) Death.
[ ] [ ] (iv) Other termination of employment
provided that the Participant has
completed a Year of Service as
defined for Allocation Accrual
Purposes.
16
<PAGE>
[X] [ ] (v) Other termination of employment
even though the Participant has
not completed a Year of Service
as defined for Allocation Accrual
Purposes.
[ ] [ ] (vi) Termination of employment (for
any reason) provided that the
Participant had completed a Year
of Service for Allocation Accrual
Purposes.
9. ALLOCATION OF FORFEITURES
NOTE:Subsections (a), (b) and (c) below apply to forfeitures of amounts
other than Excess Aggregate Contributions.
(a) Allocation Alternatives:
If forfeitures are allocated to Participants, such allocation shall be done
in the same manner as the Employer's contribution.
[ ] (i) Not Applicable. All contributions are always fully vested.
[X] (ii) Forfeitures shall be allocated to Participants in the same
manner as the Employer's contribution.
If allocation to other Participants is selected, the allocation
shall be as follows:
(1) Amount attributable to Employer discretionary
contributions and Top-Heavy minimums will be allocated to:
[X]all eligible Participants under the Plan.
[ ] only those Participants eligible for an allocation of
Employer contributions in the current year.
[ ] only those Participants eligible for an allocation of
matching contributions in the current year.
(2) Amounts attributable to Employer matching contributions
will be allocated to:
[X] all eligible Participants.
[ ] only those Participants eligible for allocations of
matching contributions in the current year.
17
<PAGE>
[X] (iii) Forfeitures shall be applied to reduce the Employer's
contribution for such Plan Year.
[ ] (iv) Forfeitures shall be applied to offset administrative
expenses of the Plan. If forfeitures exceed these expenses (iii)
above shall apply.
(b) Date for Reallocation:
NOTE:If no distribution has been made to a former Participant,
subsection (i) below will apply to such Participant even if the
Employer elects (ii), (iii) or (iv) below as its normal
administrative policy.
[ ] (i) Forfeitures shall be reallocated at the end of the Plan
Year during which the former Participant incurs his or her
fifth consecutive one year Break in Service.
[ ] (ii) Forfeitures will be reallocated immediately (as of the
next Valuation Date).
[X] (iii) Forfeitures shall be reallocated at the end of the
Plan Year during which the former Participant incurs his or
her 1st (1st, 2nd, 3rd, or 4th) consecutive one year Break
in Service.
[ ] (iv) Forfeitures will be reallocated immediately (as of the
Plan Year end).
(c) Restoration of Forfeitures:
If amounts are forfeited prior to five (5) consecutive one year Breaks
in Service, the Funds for restoration of account balances will be
obtained from the following resources in the order indicated (fill in
the appropriate number).
[1] (i) Current year's forfeitures
[3] (ii) Additional Employer contribution
[2] (iii) Income or gain to the Plan
(d) Forfeitures of Excess Aggregate Contributions shall be:
[X] (i) Applied to reduce Employer contributions
[ ] (ii) Allocated, after all other forfeitures under the Plan, to
the Matching Contribution account of each non-Highly Compensated
Participant who made Elective Deferrals or Voluntary
Contributions in the ratio which each such Participant's
Compensation for the Plan Year bears to the total Compensation of
all Participants for such Plan Year. Such forfeitures cannot be
allocated to the account of any Highly Compensated Employee.
18
<PAGE>
Forfeitures of Excess Aggregate Contributions will be so applied
at the end of the Plan Year in which they occur.
10. CASH OPTION
[ ] (a) The Employer may permit a Participant to elect to defer to the
Plan, an amount not to exceed % of any Employer paid cash bonus made
for such Participant for any year. A Participant must file an election
to defer such contribution at least fifteen (15) days prior to the end
of the Plan Year. If the Employee fails to make such an election, the
entire Employer paid cash bonus to which the Participant would be
entitled shall be paid as cash and not to the Plan. Amounts deferred
under this Section shall be treated for all purposes as Elective
Deferrals. Notwithstanding the above, the election to defer must be
made before the bonus is made available to the Participant.
[X] (b) Not Applicable.
11. LIMITATIONS ON ALLOCATIONS [Article X]
[ ] This is the only Plan the Employer maintains or ever maintained;
therefore, this Section is not applicable.
[X] The Employer does maintain or has maintained another Plan (including a
Welfare Benefit Fund or an individual medical account [as defined in
Code Section 415(1)(2)], under which amounts are treated as Annual
Additions) and has completed the proper sections below.
Complete (a), (b) and (c) only if the Employer maintains or ever
maintained another qualified Plan, including a Welfare Benefit Fund or
an individual medical account (as defined in Code Section 415(1)(2)),
in which any Participant in this Plan is (or was) a Participant or
could possibly become a Participant.
(a)Ifthe Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a
Regional Prototype Plan:
[ ] (i) The provisions of Article X of the Basic Plan Document
#R1 will apply, as if the other Plan were a Regional
Prototype Plan.
[ ] (ii) Attach provisions stating the method under which the
Plans will limit total Annual Additions to the Maximum
Permissible Amount, and will properly reduce any Excess
Amounts, in a manner that precludes Employer discretion.
(b) If a Participant is or ever has been a Participant in a Defined
Benefit Plan maintained by the Employer:
19
<PAGE>
Attach provisions which will satisfy the 1.0 limitation of Code
Section 415(e). Such language must preclude Employer discretion.
The Employer must also specify the interest and mortality
assumptions used in determining Present Value in the Defined
Benefit Plan.
(c) The minimum contribution or benefit required under Code Section
416 relating to Top-Heavy Plans shall be satisfied by:
[X] (i) This Plan.
[ ] (ii)________________________________
________________________________
(Name of other Qualified Plan of the Employer)
[ ] (iii) Attach provisions stating the method under which the
minimum contribution and benefit provisions of Code Section
416 will be satisfied. If a Defined Benefit Plan is or was
maintained, an attachment must be provided showing interest
and mortality assumptions used in the Top-Heavy Ratio.
12. VESTING [Article IX]
Employees shall have a fully vested and nonforfeitable interest in any
Employer contribution and the investment earnings thereon made in
accordance with Paragraphs (select one or more options):
[ ] 7(c) Matching Employer Contribution
[ ] 7(e) Other than Qualified Non-Elective
Contributions - Non-Integrated Formula
[ ] 7(f) Integrated Allocation Formula
[ ] 7(g) Alternative Integrated Allocation Formula
[ ] 7(i) Minimum Employer Contribution - Top-Heavy Plans
Contributions under Paragraph 7(b) 7(c)(vii) and 7(d) are always fully
vested. If one or more of the foregoing options are not selected, such
Employer contributions shall be subject to the vesting table selected
by the Employer.
Each Participant shall acquire a vested and nonforfeitable percentage
in his or her account balance attributable to Employer contributions
and the earning thereon under the procedures selected below except with
respect to any Plan Year during which the Plan is Top-Heavy, in which
case the Two-twenty vesting schedule [option (b)(iv)] shall
automatically apply unless the Employer has already elected a faster
vesting schedule. If the Plan is switched to option (b)(iv), because of
its Top-Heavy status, that vesting schedule will remain in effect even
if the Plan later becomes non-Top-Heavy until the Employer executes an
amendment of this Adoption Agreement indicating otherwise.
20
<PAGE>
(a) Computation Period:
The computation period for purposes of determining Years of Service
and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from
Employer contributions:
[ ] (i) shall not be applicable since Participants are always fully
vested,
[ ] (ii) shall commence on the date on which an Employee first
performs an Hour of Service for the Employer and each subsequent
12-consecutive month period shall commence on the anniversary
thereof; or
[X] (iii) shall commence on the first day of the Plan Year during
which an Employee first performs an Hour of Service for the
Employer and each subsequent 12-consecutive month period shall
commence on the anniversary thereof.
A Participant shall receive credit for a Year of Service if he or she
completes at least 1,000 Hours of Service (or if lesser, the number of
hours specified at 3(1)(iii) of this Adoption Agreement) at any time
during the 12-consecutive month computation period. Consequently, a
Year of Service may be earned prior to the end of the 12-consecutive
month computation period and the Participant need not be employed at
the end of the 12-consecutive month computation period to receive
credit for a Year of Service.
(b) Vesting Schedules:
NOTE:The vesting schedules below only apply to a Participant who has at
least one Hour of Service during or after the 1989 Plan Year. If
applicable, Participants who separated from Service prior to the 1989
Plan Year will remain under the vesting schedule as in effect in the
Plan prior to amendment for the Tax Reform Act of 1986.
(i) Full and immediate vesting.
Years of Service
----------------
1 2 3 4 5 6 7
- - - - - - -
(ii) __% 100%
(iii) __% __% 100%
(iv) __% 20% 40% 60% 80% 100%
(v) __% __% 20% 40% 60% 80% 100%
(vi) 10% 20% 30% 40% 60% 80% 100%
(vii) 0% 0% 20% 50% 100%
(viii) __% __% __% __% __% __% 100%
21
<PAGE>
NOTE:The percentages selected for Schedule (viii) may not be less for any
year than the percentages shown at Schedule (v).
[X] All contributions other than those which are fully vested when
contributed will vest under schedule vii above.
[ ] Contributions other than those which are fully vested when contributed
will vest as provided below:
Vesting Option Selected Type of Employer Contribution
----------------------- -----------------------------
____________ 7(c) Employer Match on Salary Savings
____________ 7(c) Employer Match on Employee Voluntary
____________ 7(e) Employer Discretionary
____________ 7(f) and 7(g) Employer Discretionary - Integrated
(c) Service disregarded for Vesting:
[X] (i) Not Applicable. All Service shall be considered.
[ ] (ii) Service prior to the Effective Date of this Plan or a
predecessor Plan shall be disregarded when computing a
Participant's vested and nonforfeitable interest.
[ ] (iii) Service prior to a Participant having attained age 18 shall
be disregarded when computing a Participant's vested and
nonforfeitable interest.
13. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility, Hours
of Service shall include Service with the following predecessor
organization(s): (These hours will also be used for vesting purposes).
N/A
-----------------------------------------------------------------
N/A
-----------------------------------------------------------------
22
<PAGE>
14. ROLLOVER/TRANSFER CONTRIBUTIONS
(a) Rollover Contributions, as described at Paragraph 4.3 of the Basic
Plan Document #R1, [X] shall [ ] shall not be permitted. If permitted,
Employees [X] may [ ] may not make Rollover Contributions prior to
meeting the eligibility requirements for participation in the Plan.
(b) Transfer Contributions, as described at Paragraph 4.4 of the Basic
Plan Document #R1 [X] shall [ ] shall not be permitted. If permitted,
Employees [X] may [ ] may not make Transfer Contributions prior to
meeting the eligibility requirements for participation in the Plan.
NOTE:Even if available, the Employer may refuse to accept such
contributions if its Plan meets the safe-harbor rules of Paragraph 8.7
of the Basic Plan Document #R1.
15. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in Paragraph 6.9 of the Basic Plan
Document #R1 [X] are [ ] are not permitted.
16. PARTICIPANT LOANS
Participant loans, as provided for in Paragraph 13.4 of the Basic Plan
Document #R1, [ ] are [X] are not permitted. If permitted, repayments of
principal and interest shall be repaid to [ ] the Participant's segregated
account; or [ ] the general Fund.
17. INSURANCE POLICIES
The insurance provisions of Paragraph 13.5 of the Basic Plan Document #R1,
[ ] shall [X] shall not be applicable.
18. EMPLOYER INVESTMENT DIRECTION
The Employer investment direction provisions, as set forth in Paragraph
13.6 of the Basic Plan Document #R1, [X] shall [ ] shall not be applicable.
23
<PAGE>
19. EMPLOYEE INVESTMENT DIRECTION
(a) The Employee investment direction provisions, as set forth in
Paragraph 13.7 of the Basic Plan Document #R1, [X] shall [ ] shall not
be applicable.
If applicable, Participants may direct their investments:
[X] (i) among funds offered by the Trustee.
[ ] (ii)among any allowable investments.
(b) Participants may direct the following kinds of contributions and the
earnings thereon (check all applicable):
[X] (i) All Contributions
[ ] (ii)Elective Deferrals
[ ] (iii)Employee Voluntary Contributions (after-tax)
[ ] (iv)Employee Mandatory Contributions (after-tax)
[ ] (v)Employer Qualified Matching Contributions
[ ] (vi)Other Employer Matching Contributions
[ ] (vii)Employer Qualified Non-Elective Contributions
[ ] (viii)Employer Discretionary Contributions
[ ] (ix)Rollover Contributions
[ ] (x)Transfer Contributions
[ ] (xi)All above which are checked, but only to the extent that
Participant is vested in those contributions.
NOTE:To the extent that Employee investment direction was
previously allowed, it shall continue to be allowed on those
amounts and the earnings thereon.
20. EARLY PAYMENT OPTION
a) A Participant who separates from Service prior to retirement, death or
disability [ ] may [X] may not make application to the Employer
requesting an early payment of his or her vested account balance.
b) A Participant who has not separated from Service [ ] may [X] may not
obtain a distribution of his or her vested Employer contributions.
Distribution can only be made if the Participant is 100% vested.
c) A Participant who has attained the Plan's Normal Retirement Age and
who has not separated from Service [X] may [ ] may not receive a
distribution of his or her vested account balance.
24
<PAGE>
NOTE:If the Participant has had the right to withdraw his or her account balance
in the past, this right may not be taken away. Notwithstanding the above,
to the contrary, required minimum distributions will be paid. For timing of
distribution see Item 21(a) below.
21. DISTRIBUTION OPTIONS
(a) Timing of Distributions:
In cases of termination for other than death, disability or retirement,
benefits shall be paid:
[ ] (i) As soon as administratively feasible following the close of
the valuation period during which a distribution is requested or
is otherwise payable.
[ ] (ii) As soon as administratively feasible following the close of
the Plan Year during which a distribution is requested or is
otherwise payable.
[X] (iii) As soon as administratively feasible, following the date on
which a distribution is requested or is otherwise payable.
[ ] (iv) As soon as administratively feasible after the close of the
Plan Year during which the Participant incurs consecutive
one-year Breaks in Service.
[ ] (v) Only after the Participant has achieved the Plan's Normal
Retirement Age, or Early Retirement Age, if applicable.
In cases of death, disability or retirement, benefits shall be paid:
[ ] (vi) As soon as administratively feasible, following the close of
the valuation period during which a distribution is requested or
is otherwise payable.
[ ] (vii) As soon as administratively feasible, following the close
of the Plan Year during which a distribution is requested or is
otherwise payable.
[X] (viii) As soon as administratively feasible, following the date
on which a distribution is requested or is otherwise payable.
(b) Optional Forms of Payment:
[X] (i) Lump Sum.
[X] (ii) Installment Payments.
[X] (iii) Life Annuity.*
[X] (iv) Life Annuity Term Certain.* Life Annuity with payments
guaranteed for 10-YEAR period. (not to exceed 20 years. Specify
all applicable).
[ ] (v) Joint and [ ] 50%, [ ] 66-2/3%, [ ] 75% or [ ] 100% survivor
annuity.* (Specify all applicable).
25
<PAGE>
[ ] (vi) Other form(s) as specified:
*Not available in Plan meeting provisions of Paragraph 8.7 of
Basic Plan Document #R1.
(c) Recalculation of Life Expectancy:
In determining required distributions under the Plan, Participants
and/or their Spouse (Surviving Spouse) [X] shall [ ] shall not have
the right to have their life expectancy recalculated.
If "shall",
[ ] only the Participant shall be recalculated
[ ] both the Participant and Spouse shall be recalculated
[X] who is recalculated shall be determined by the Participant
26
<PAGE>
22. SIGNATURES
Due to the significant tax ramifications, the Sponsor recommends that
before executing this Adoption Agreement you contact your attorney or tax
advisor.
(a) EMPLOYER:
Name and address of Employer if different than specified in Section 1
above.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
This agreement and the corresponding provisions of the Plan and Trust
Basic Plan Document #R1 were adopted by the Employer the ____ day of
JANUARY, 1998.
Signed for the Employer by: MENZO D. CASE
Title: EXECUTIVE VICE PRESIDENT
Signature: ________________________
The Employer understands that its failure to properly complete the
Adoption Agreement may result in disqualification of its Plan.
Employer's Reliance: The adopting Employer may not rely on a
notification letter issued by the National Office of the Internal
Revenue Service as evidence that this Plan is qualified under Code
Section 401. In order to obtain reliance with respect to Plan
qualification, the Employer must apply to the appropriate Key District
Office for a determination letter.
This Adoption Agreement may only be used in conjunction with Basic
Plan Document #R1.
27
<PAGE>
(b) TRUSTEE:
Name of Trustee(s):
COMMUNITY BANK, N.A.
201 NORTH UNION STREET
P.O. BOX 690
OLEAN, NEW YORK 14760-0690
The Employer's plan, as contained herein, was accepted by the
Trustee(s) the 30th day of JANUARY, 1998.
Signatures of Trustees:
BARRY S. KUBLIN TRUST OFFICER /s/BARRY S. KUBLIN
- --------------------------------------------------------------------------------
Name Title Signature
- --------------------------------------------------------------------------------
Name Title Signature
- --------------------------------------------------------------------------------
Name Title Signature
(c) SPONSOR:
The Employer's Agreement and the corresponding provisions of the Plan and
Trust Basic Plan Document #R1 were accepted by the Sponsor the 30th day of
JANUARY, 1998.
Signed for the Sponsor by: GIRARD H. MAYER
Title: PRESIDENT/CEO
Signature: /s/GIRARD H. MAYER
------------------
28
<PAGE>
EXHIBIT B
<PAGE>
Form 5500-C/R 1996
Return/Report of Employee Benefit Plan
(With Fewer than 100 Participants)
This form is required to be filed under Sections 104 and
4065 of the Employee Retirement Income Security Act of
1974 and Sections 6039D,
6047(a), 6057(b), and 6058(a) of the Internal Revenue Code.
For the calendar plan year 1996 or fiscal plan year beginning 1/1 and ending
12/31 1996.
If A(1) through A(4), B, C, and/or D do not apply to this year's return/report,
leave the spaces unmarked.
You must check either space A(5) or A(6), whichever is applicable. See
Instructions.
(1) the first return/report filed for the plan;
(2) an amended return/report;
(3) the final return/report filed for the plan; or
(4) a short plan year return/report (less than 12 months).
(5) Form 5500-C filer check here (complete only pages 1 and 3 though 6).
(6) X Form 5500-R filers check here (Complete only pages 1 and 2. Detach
pages 3 though 6 before filing.)
IF ANY INFORMATION ON A PREPRINTED PAGE 1 IS INCORRECT, CORRECT IT. IF ANY
INFORMATION IS MISSING, ADD IT. PLEASE USE RED INK WHEN MAKING THESE CHANGES AND
INCLUDE THE PREPRINTED PAGE 1 WITH YOUR COMPLETED RETURN/REPORT.
B Check here if any information reported in 1a, 2a, 2b, or 5a changed since
the last return/report for this plan.
C If your plan year changed since the last return/report, check here.
D If you filed for an extension of time to file this return/report, check
here and attach a copy of the approved extension.
1a Name and address of plan sponsor (employer, if for a single-employer plan)
(Address should include room and suite no.)
Gloversville Federal Savings & Loan Association
52 N. Main Street
Gloversville, New York 12078
1b Employer Identification Number (EIN) 14:0697913
1c Sponsor's telephone number (518) 725-6331
1d Business code (see instructions, Page 17) 6120
1e CUSIP Issuer Number N/A
2a Name and address of plan administrator (if same as plan sponsor, enter
"Same") Same
1
<PAGE>
2b Administrator's EIN
2c Administrator's telephone number
3 If you are filing this page without the preprinted historical plan
information and the name, address and EIN of the plan sponsor or plan
administrator has changed since the last return/report filed for this plan,
enter the information from the last return/report on lines 3a and/or 3b and
complete line 3c.
3a Sponsor EIN Plan Number
3b Administrator EIN
3c If line 3a indicates a change in the sponsor's name, address, and EIN, is
this a change in sponsorship only? (See line 3c on page 8 of the
instructions for the definition of sponsorship) Yes No
4 ENTITY CODE.(If not shown, enter applicable code from page 8 of the
instructions.)
5a Name of Plan Gloversville Federal Savings & Loan Association 401(k)
Profit Sharing Plan & Trust
5b Effective Date of Plan (Mo., Day, Yr.) 01/01/95
5c Three-digit Plan number 002
All filers must complete 6a through 6d, as applicable.
6a Welfare benefit plan
6b Pension benefit plan X
(If the correct codes are not preprinted below, enter the applicable codes from
page 8 of the instructions.)
6c Pension plan features. (If the correct codes are not preprinted below,
enter the applicable pension plan feature codes from page 8 of the
instructions.)
6d Fringe benefit plan Attach Schedule F (Form 5500).
CAUTION: A penalty for the late or incomplete filing of this return/report will
be assessed unless reasonable cause is established.
Under penalty of perjury and other penalties set forth in the instructions, I
declare that I have examined this return/report, including accompanying
schedules and statements, and to the best of my knowledge and belief, it is
true, correct, and complete.
Signature of employer/plan sponsor /s/ Menzo D. Case Date July 14, 1997
Type or print name of individual signing above Menzo D. Case
Signature of plan administrator /s/ Menzo D. Case Date July 14, 1997
Type or print name of individual signing above Menzo D. Case
2
<PAGE>
6e Check investment arrangement(s): (1) Master Trust (2)Conversion/Collective
Trust (3) Pooled Separate Account X
7a Total participants: (1) At the beginning of plan year 27(2) At the end of
plan year 26
7b Enter number of participants with account balances at the end of the plan
year (defined benefit plans do not complete this item) 26
7c (1)Were any participants in the pension benefit plan separated from service
with a deferred vested benefit for which a Schedule SSA (Form 5500) is
required to be attached? (See instructions.) Yes X No
(2) If "Yes", enter the number of separated participants required to be
reported. 1
8a Was this plan terminated during this plan year or any prior plan year?
Yes No X If "Yes", enter the year.
8b Were all the plan assets either distributed to participants or
beneficiaries, transferred to another plan, or brought under the control of
PBGC? Yes No X
8c If line 8a is "Yes" and the plan is covered by PBGC, is the plan continuing
to file PBGC Form 1 and pay premiums until the end of the plan year in
which assets are distributed or brought under the control of PBGC? Yes No
9 Is this a plan established or maintained pursuant to one or more collective
bargaining agreements? Yes No X
10 If any benefits are provided by an insurance company, insurance service, or
similar organization, enter the number of Sehedules A (Form 5500),
Insurance Information, that are attached. If none, enter -0- 1
11a (1) Where any plan amendments adopted during this plan year? Yes X No
(2) Enter the date the most recent amendment was adopted Month 1 Day 4
Year 1996
11b If line 11a is "Yes", did any amendment result in a retroactive reduction
of accrued benefits for any participant? Yes No X
11c If line 11a is "Yes", did any amendment change the information contained in
the latest summary plan description or summary description of modifications
available at the time of the amendment? Yes X No
11d If line 11c is "Yes", has a summary plan description or summary description
of modifications that reflects the plan amendments referred to on line 11c
been both furnished to participants and filed with the Department of Labor?
Yes X No
12a If this is a pension benefit plan subject to the minimum funding standards,
has the plan experienced a funding deficiency for this plan year? (See
instructions.) Yes No
3
<PAGE>
12b if line 12a is "Yes", have you filed Form 5330 to pay the excise tax?
Yes No
12c Is the plan administrator making an election under section 412(o)(8) for an
amendment adopted after the end of the plan year? (See instructions.)
Yes No X
12d If a change in the actuarial funding method was made for the plan year
pursuant to a Revenue Procedure providing automatic approval for the
change, indicate whether the plan sponsor/administrator agrees to the
change. Yes No
13a Total plan assets as of the beginning 107,329 and end 177,858 of
the plan year.
13b Total liabilities as of the beginning 0 and end 0 of the plan year.
13c Net assets as of the beginning 107,329 and end 177,858 of the plan year.
14 For this plan year, enter: (a) Plan Income 75,429 (b) Expenses 4,900
(c) Net Income 70,529 (d) Plan contributions 67,036 (e) Total benefits
paid 4,890
15 You may NOT use N/A in response to lines 15a through 15o, if you check,
"Yes", you must enter a dollar amount in the amount column. During this
plan year:
15a Was this plan covered by a fidelity bond? Yes X No 1,000,000
15b If line 15a is "Yes", enter the name of the surety company. Russell Bond &
Company, Inc.
15c Was there any loss to the plan, whether or not reimbursed, caused by fraud
or dishonesty? Yes No X
15d Was there any sale, exchange, or lease of any property between the plan and
the employer, any fiduciary, any of the five most highly paid employees of
the employer, any owner of a 10% or more interest in the employer, or
relatives of any such persons? Yes No X
15e Was there any loan or extension of credit by the plan to the employer, any
fiduciary, any of the five most highly paid employees of the employer, any
owner of a 10% or more interest in the employer, or relatives of any such
persons? Yes No X
15f Did the plan acquire or hold any employer security or employer real
property? Yes No X
15g Has the plan granted an extension on any delinquent loan owed to the plan?
Yes No X
15h Were any participant contributions transmitted to the plan more than 31
days after receipt or withholding by the employer? Yes No X
4
<PAGE>
15i Were any loans by the plan or fixed income obligations due the plan
classified as uncollectible or in default as of the close of the plan year?
Yes No X
15j Has any plan fiduciary had a financial interest in excess of 10% in any
party providing services to the plan or received anything of value from any
such party? Yes No X
15k Did the plan at any time hold 20% or more of its assets in any single
security, debt, mortgage, parcel of real estate, or partnership/joint
venture interests? Yes No X
15l did the plan at any time engage in any transaction or series of related
transactions involving 20% or more of the current value of plan assets?
Yes No X
15m Were there any noncash contributions made to the plan the value of which
was set without any appraisal by an independent third party? Yes No X
15n Were there any purchases of nonpublicly traded securities by the plan the
value of which was set without an appraisal by an independent third party?
Yes No X
15o Has the plan reduced or failed to provide any benefit when due under the
plan because of insufficient assets? Yes No X
16a Is the plan covered under the Pension Benefit Guaranty Corporation
termination insurance program? Yes No X Not Determined
16b If line 16a is "Yes" or "Not Determined", enter the employer identification
number and the plan number used to identify it. Employer Identification
Number Plan Number
5
<PAGE>
Gloversville Federal Savings & Loan
GLOVERSVILLE FEDERAL SAVINGS & LOAN ASSOC. 401(K) PS PLAN
Summary of Participant Accounts
From 10/01/97 to 12/31/97
<TABLE>
<CAPTION>
Loan Premium/
Beginning Payments/ Loan Distr./ Ending
Accounts Balance Contributions Forfeitures Gains/Losses Transfers Distributions Balance
-------- ------- ------------- ----------- ------------ --------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity Magellan
Employer-Fidelity Magellan $58,224.61 $10,100.06 $ (187.18) $ (808.17) $2,016.27 $(46.79) $69,298.80
Vested 40,055.77
401(k)-Fidelity Magellan 19,433.58 3,651.75 --- (332.74) 53.13 (70.19) 22,235.53
Vested 22,735.53
Rollover-Fidelity Magellan 18,741.20 --- --- (122.08) 836.30 --- 19,455.42
Vested 19,455.42
Total 96,399.39 13,751.81 (187.18) (1,262.99) 2,905.70 (116.98) 111,489.75
Vested 82,246.72
Fidelity Puritan
Employer-Fidelity Puritan 31,819.60 4,659.72 --- 689.74 --- --- 37,169.06
Vested 12,526.75
401(k)-Fidelity Puritan 12,259.10 1,718.56 --- 265.40 --- --- 14,243.06
Vested 14,243.06
Rollover-Fidelity Puritan 7,160.87 --- --- 145.59 --- --- 7,306.46
Vested 7,306.46
Total 51,239.57 6,378.28 --- 1,100.73 --- --- 58,718.58
Vested 41,076.27
N&B Ltd. Maturity Bond Fund
Employer-N&B Ltd. Maturity Bond 4,611.14 823.85 --- 44.34 (935.19) --- 4,544.04
Vested 1,394.74
401(k) N&B Ltd. Maturity Bond 976.69 212.12 --- 9.53 (119.35) --- 1,078.99
Vested 1,078.99
Rollover N&B Ltd. Maturity Bond 2,308.70 --- --- 20.70 (836.30) --- 1,493.10
Vested 1,493.10
Total 7,896.53 1,035.97 --- 74.47 (1,890.84) --- 7,116.13
Vested 3,966.83
Nationwide MMF 24,196.82 1,757.76 (1,397.70) 102.79 2,200.95 (349.43) 26,511.19
Employer-MMF Vested 5,819.98
401(k) MMF 10,340.00 733.53 --- 39.79 1,160.39 (910.01) 11,363.70
Vested 11,363.70
Rollover-MMF 233.50 --- --- 2.19 --- --- 235.69
Vested 235.69
Total 34,770.32 2,491.29 (1,397.70) 144.77 3,361.34 (1,259.44) 38,110.38
Vested 17,419.37
Oppenheimer Global 18,545.51 3,837.42 (1,670.92) (1,498.20) (1,109.14) (417.73) 17,686.94
Employer-Oppenheimer Global Vested 11,294.48
401(k) Oppenheimer Global 8,436.73 1,791.96 --- (673.47) (594.46) (1,089.64) 7,871.12
Vested 7,871.12
Rollover-Oppenheimer Global 13,501.25 --- --- (529.80) --- --- 12,971.45
Vested 12,971.45
Total 40,483.49 5,629.38 (1,670.92) (2,701.47) (1,703.60) (1,507.37) 38,529.51
Vested 32,137.05
Virtuoso II
Employer Virtuoso 14,116.51 880.74 --- 187.09 (2,172.89) --- 13,011.45
Vested 8,551.95
401(k)-Virtuoso 3,465.67 305.23 --- 46.45 (499.71) --- 3,317.64
Vested 3,317.64
Rollover-Virtuoso 11,936.56 --- --- 165.06 --- --- 28,430.71
Vested 23,971.21
Grand Total Account Balances 260,308.04 30,473.70 (3,255.80) (2,245.89) --- (2,883.79) 282,395.26
Vested 200,817.45
Current base suspense account is ---
Current pre-tax match suspense ---
account is
Current post-tax match suspense
account is ---
Total all accounts including
suspense accounts 282,395.26
</TABLE>
<PAGE>
EXHIBIT C
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
401(k) PROFIT SHARING PLAN AND TRUST
PARTICIPANT ELECTION TO INVEST IN HOLDING COMPANY STOCK
1. PARTICIPANT DATA
- --------------------------------------------------------------------------------
Print your full name above (Last, first, middle initial) Social Security Number
- --------------------------------------------------------------------------------
Street Address City State Zip
$
- ----------------------------------------------------------- -------------------
Balance of Participant's Plan Accounts at December 31, 1997 Date of Birth
- -------------------
Date of Hire
2. INVESTMENT DIRECTION
The Plan is giving participants a special opportunity to invest their
account balances in common stock ("Holding Company Stock") issued by Adirondack
Financial Services Bancorp, Inc. (the "Holding Company") in connection with the
conversion of Gloversville Federal Savings and Loan Association ("Gloversville")
from the mutual to the stock form. This election may be made during the
Subscription and Community Offering, with respect to the balance in your
accounts under the Plan (hereinafter referred to as your "Accounts") as of
__________ __, 1998. Please review the Subscription and Community Prospectus
dated ______, 1998 (the "Prospectus") and the Prospectus Supplement (the
"Supplement") dated _______, 1998 before making any decision.
Investing in Holding Company Stock entails some risks, and we encourage
you to discuss this investment decision with your spouse and your investment
advisor. The Plan's Trustee and the Plan Administrator are not authorized to
make any representations about this investment other than what appears in the
Prospectus and Supplement, and you should not rely on any information other than
what is contained in the Prospectus and Supplement.
Any shares purchased by the Plan pursuant to your election will be
subject to the conditions or restrictions otherwise applicable to Holding
Company Stock, as discussed in the Prospectus and Supplement. In addition, once
you have elected to have your account invested in Holding Company Stock, you may
have limited opportunities to change this investment decision. Any part of your
Account invested in Holding Company Stock may be changed to an alternative
authorized investment under the Plan only during an "Investment Change Period."
An "Investment Change Period" opens at the beginning of the third day
after the Holding Company issues a "Quarterly Earnings Release" and closes at
the end of the twelfth business day after such release. The term "Quarterly
Earnings Release" means any press release issued by the Holding Company for
general distribution which announces, for the first time, the Holding Company's
results of operations for a particular fiscal quarter. Gloversville anticipates
these opportunities will occur four times per year. Gloversville will attempt to
notify Participants of the commencement of each Investment Change Period but
will not assume responsibility for doing so.
o I choose to invest in _______ shares (25 share minimum) of Holding
Company Stock at $10.00 per share, with the aggregate purchase price to
be obtained by the Trustee's use of assets currently held in my
Accounts. I hereby direct the Trustee to obtain the funds necessary to
purchase such shares of Holding Company Stock by using funds in my
current Accounts from among the following Investment Options in the
following percentages (in not less than whole percentage increments):
o SEI Stable Asset Fund ______%
o Dodge & Cox Income Fund ______%
o Federated High Yield Trust ______%
<PAGE>
o Warburg Pincus Global Fixed Income Fund ______%
o Federated Max Cap Fund ______%
o Managers Special Equity Fund ______%
o Warburg Pincus International Fund ______%
o I choose not to invest any of my Accounts in Holding Company Stock.
3. PARTICIPANT SIGNATURE AND ACKNOWLEDGMENT - REQUIRED
By signing this PARTICIPANT INVESTMENT ELECTION, I authorize and direct the Plan
Administrator and Trustee to carry out my instructions. I acknowledge that I
have been provided with and read a copy of the Prospectus and Supplement
relating to the issuance of Holding Company Stock, and I have read the
explanation provided in Part 2 of this form. I am aware of the risks involved in
the investment in Holding Company Stock, and understand that the Trustee and
Plan Administrator are not responsible for my choice of investment.
- --------------------------------------------------------------------------------
Participant's Signature Date Signed
Signed before me this day of , 1998
----------- ---------------------
Notary Public
- ---------------------
My Commission Expires
-----------------------------
PLEASE COMPLETE AND RETURN BY 12:00 NOON ON _______, 1998
<PAGE>
Prospectus
[LOGO]
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
(Proposed Holding Company for Gloversville Federal Savings and Loan Association)
$10.00 Per Share
575,000 Shares of Common Stock
(Anticipated Maximum)
Adirondack Financial Services Bancorp, Inc. (the "Holding Company") is
offering up to 575,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), in connection with the conversion of Gloversville Federal
Savings and Loan Association ("Gloversville Federal" or the "Association") from
a federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association and the issuance of all of
Gloversville Federal outstanding stock to the Holding Company (the
"Conversion"). Pursuant to the Association's plan of conversion (the "Plan of
Conversion" or the "Plan"), non-transferable rights to subscribe for the Common
Stock ("Subscription Rights") have been given to (i) Gloversville Federal's
depositors with account balances of $50 or more as of September 30, 1996
("Eligible Account Holders"), (ii) tax-qualified employee plans of Gloversville
Federal and the Holding Company ("Tax-Qualified Employee Plans"), provided,
however, that the Tax-Qualified Employee Plans shall have first priority
Subscription Rights to the extent that the total number of shares of Common
Stock sold in the Conversion exceeds the maximum of the Estimated Valuation
Range as defined below, (iii) Gloversville Federal's depositors with account
balances of $50 or more as of ___________, 1998 ("Supplemental Eligible Account
Holders"), (iv) certain of its other members ("Other Members"), and (v) its
employees, officers and directors (the "Subscription Offering.) (continued on
next page)
FOR ADDITIONAL INFORMATION ON HOW TO SUBSCRIBE, PLEASE CALL THE STOCK
INFORMATION CENTER AT (518) ___-____.
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED, SEE "RISK
FACTORS" AT PAGE __.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION OR THE FEDERAL DEPOSIT
INSURANCE CORPORATION, NOR HAS SUCH COMMISSION, OFFICE OR CORPORATION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
<TABLE>
<CAPTION>
Estimated Underwriting Fees,
Commissions and Other Estimated Net
Purchase Price(1) Expenses(2) Conversion Proceeds(3)
----------------- ----------- ----------------------
<S> <C> <C> <C>
Per Share(4).................................... $10.00 $1.02 $8.98
Minimum Total................................... $4,250,000 $508,000 $3,742,000
Midpoint Total.................................. $5,000,000 $508,000 $4,492,000
Maximum Total................................... $5,750,000 $508,000 $5,242,000
Maximum Total, As Adjusted(5)................... $6,612,500 $508,000 $6,104,500
</TABLE>
(1) Determined on the basis of an appraisal prepared by RP Financial, L.C. ("RP
Financial) dated [Appraisal Date], which states that the estimated pro
forma market value of the Common Stock ranged from $4,250,000 to $5,750,000
or between 425,000 shares and 575,000 shares, of Common Stock at $10.00 per
share. See "The Conversion - Stock Pricing and Number of Shares to be
Issued."
(2) Consists of the estimated costs to the Association and the Holding Company
arising from the Conversion, including the payment to Capital Resources,
Inc. ("Capital Resources") of a fee of $90,000 and estimated expenses of
$418,000 in connection with the sale of shares in the Offering. Such fees
may be deemed to be underwriting fees. The Holding Company has agreed to
indemnify Capital Resources against certain liabilities, including
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). See "The Conversion - Marketing Arrangements" for a more
detailed description of underwriting fees and expenses.
(3) Net Conversion proceeds may vary from the estimated amounts, depending on
the Purchase Price and the number of shares issued. The Purchase Price and
the actual number of shares of Common Stock to be issued in the Conversion
will not be determined until after the close of the Offering.
(4) Assumes the sale of the midpoint number of shares. If the minimum, maximum
or 15% above the maximum number of shares are sold, estimated expenses per
share would be $1.20, $0.88 or $0.77, respectively, resulting in estimated
net Conversion proceeds per share of $8.80, $9.12 or $9.23, respectively.
<PAGE>
(5) As adjusted to give effect to the sale of up to an additional 86,250 shares
(15% above the maximum of the Estimated Valuation Range) which may be
offered in the Conversion without the resolicitation of subscribers or any
right of cancellation, to reflect changes in market and financial
conditions following the commencement of the Offering. See "Pro Forma
Data," and "The Conversion - Stock Pricing and Number of Shares to be
Issued."
Capital Resources, Inc.
The date of this Prospectus is February __, 1998
<PAGE>
(continued from prior page)
Subscription Rights are non-transferrable. Persons found to be selling or
otherwise transferring their right to purchase stock in the Subscription
Offering or purchasing Common Stock on behalf of another person will be subject
to forfeiture of such rights and possible further sanctions and penalties
imposed by the Office of Thrift Supervision (the "OTS"), an agency of the United
States Government. Subject to the prior rights of holders of Subscription Rights
and to market conditions at or near the completion of the Subscription Offering,
the Holding Company may also offer the Common Stock for sale through Capital
Resources on a best efforts basis in a public offering to selected persons to
whom this prospectus is delivered (the "Public Offering"). Depending on market
conditions and availability of shares, the shares of Common Stock may be offered
for sale in the Public Offering on a best-efforts basis by a selling group of
selected broker-dealers to be managed by Capital Resources. Finally, depending
on market conditions, the Holding Company may also offer the Common Stock for
sale through Capital Resources to persons residing in communities near the
Association's offices in a direct community offering (the "Direct Community
Offering"). The Association and the Holding Company reserve the right, in their
absolute discretion, to accept or reject, in whole or in part, any or all orders
in the Public Offering.
The total number of shares to be issued in the Conversion will be based upon an
appraised valuation of the estimated aggregate pro forma market value of the
Holding Company and the Association as converted. The purchase price per share
("Purchase Price") has been fixed at $10.00. Based on the current aggregate
valuation range of $4,250,000 to $5,750,000 (the "Estimated Valuation Range"),
the Holding Company is offering up to 575,000 shares. Depending upon the market
and financial conditions at the time of the completion of the Subscription
Offering and the Direct Community and/or Public Offering (when referred to
together with the Subscription Offering, the "Offering"), if any, the total
number of shares to be issued in the Conversion may be increased or decreased
from the 575,000 shares offered hereby, provided that the product of the total
number of shares multiplied by the price per share remains within, or does not
exceed by more than 15% the maximum of the Estimated Valuation Range. If the
aggregate Purchase Price of the Common Stock sold in the Conversion is below
$4,250,000 or above $6,612,500 , or if the Offering is extended beyond , 1998,
subscribers will be permitted to modify or cancel their subscriptions and to
have their subscription funds returned promptly with interest. Under such
circumstances, if subscribers take no action, their subscription funds will be
promptly returned to them with interest. In all other circumstances,
subscriptions are irrevocable by subscribers. See "The Conversion - Offering of
Holding Company Common Stock."
With the exception of the Tax-Qualified Employee Plans, no Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member may purchase in
their capacity as such in the Subscription Offering more than $150,000 of Common
Stock; no person, together with associates of and persons acting in concert with
such person, may purchase more than $150,000 of Common Stock in the Public
Offering and no person, together with associates of and persons acting in
concert with such person, may purchase more than $150,000 of Common Stock
offered in the Conversion based on the Estimated Valuation Range (as calculated
without giving effect to any increase in the Estimated Valuation Range
subsequent to the date hereof). Under certain circumstances, the maximum
purchase limitations may be increased or decreased at the sole discretion of the
Association and the Holding Company up to 9.99% of the total number of shares of
Common Stock sold in the Conversion or to one percent of shares of Common Stock
offered in the Conversion. The minimum purchase is 25 shares. See "The
Conversion - Additional Purchase Restrictions." The Association and the Holding
Company have engaged Capital Resources as financial advisor and agent to
consult, advise and assist in the distribution of shares of Common Stock, on a
best-efforts basis in the Offering including, if necessary, managing selected
broker-dealers to assist in selling stock in the Public Offering. For such
services, Capital Resources will receive a marketing fee of $90,000. If selected
dealers are used, the selected dealers will receive a fee estimated to be up to
% of the aggregate Purchase Price for all shares of Common Stock sold in the
Offering through such selected dealers. Such fees may be deemed to be
underwriting commissions. Capital Resources and the selected dealers may be
deemed to be underwriters. See "The Conversion - Marketing Arrangements" and
"The Conversion - Offering of Holding Company Common Stock."
<PAGE>
To subscribe for shares of Common Stock in the Subscription Offering, the
Holding Company must receive a stock order form ("Order Form") and certification
form, together with full payment at $10.00 per share (or appropriate
instructions authorizing a withdrawal from a deposit account at the Association)
for all shares for which subscription is made, at any office of the Association,
by noon, Gloversville, New York time, on _______, 1998, unless the Subscription
Offering is extended, at the discretion of the Board of Directors, up to an
additional 45 days with the approval of the OTS, if necessary, but without
additional notice to subscribers (the "Expiration Date"). The date by which
orders must be received in the Public Offering, if any, will be set by the
Holding Company at the time of such offering provided that, if the Offering is
extended beyond _________, 1998, each subscriber will have the right to modify
or rescind his or her subscription. Subscription funds will be returned promptly
with interest to each subscriber unless he or she affirmatively indicates
otherwise. See "The Conversion Offering of Holding Company Common Stock."
Subscriptions paid by check, bank draft or money order will be placed in a
segregated account at the Association and will earn interest at the
Association's passbook rate from the date of receipt until completion or
termination of the Conversion. Payments authorized by withdrawal from deposit
accounts at the Association will continue to earn interest at the contractual
rate until the Conversion is completed or terminated; these funds will be
otherwise unavailable to the depositor until such time. Authorized withdrawals
from time accounts for the purchase of Common Stock will be permitted without
the imposition of early withdrawal penalties or loss of interest.
2
<PAGE>
The Holding Company has never issued capital stock. Consequently, there is no
existing market for the Holding Company Common Stock at this time. Therefore, no
assurance can be given that an established and liquid trading market for the
Holding Company Common Stock will develop or that resales of the Common Stock
can be made at or above the Purchase Price. Following the Conversion the Holding
Company Common Stock will be traded in the over-the-counter market. Although it
has no obligation to do so, Capital Resources intends to make a market for the
Holding Company Common Stock, depending upon the volume of trading activity in
the common stock. See "Market for Common Stock" and "The Conversion - Stock
Pricing and Number of Shares to be Issued."
3
<PAGE>
[MAP OMITTED]
4
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by the detailed information and financial statements appearing
elsewhere herein.
Adirondack Financial Services Bancorp, Inc.
The Holding Company, Adirondack Financial Services Bancorp, Inc. was
recently formed by Gloversville Federal under the laws of Delaware for the
purpose of becoming a savings and loan holding company which will own all of the
outstanding capital stock that Gloversville Federal will issue in connection
with the Conversion. Immediately following the Conversion, the only significant
assets of the Holding Company will be the capital stock of Gloversville Federal,
a note evidencing the Holding Company's loan to the ESOP and up to approximately
50% of the net proceeds from the Conversion. See "Use of Proceeds." Upon
completion of the Conversion, the Holding Company's business initially will
consist only of the business of Gloversville Federal. See "Adirondack Financial
Services Bancorp, Inc."
Gloversville Federal
General. Gloversville Federal is a federally chartered mutual savings
and loan association headquartered in Gloversville, New York. Gloversville
Federal was originally chartered in 1923. Gloversville Federal currently serves
the financial needs of communities in its market area through its main office
located in Gloversville and its branch office located in the city of Saratoga
Springs, New York. Its deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC"). At September 30, 1997,
Gloversville Federal had total assets of $61.0 million, deposits of $56.1
million and equity of $3.3 million. See "Business - Market Area" and "
Competition."
Gloversville Federal's business has historically involved attracting
deposits from the general public and using such deposits, together with other
funds, to originate primarily one- to four-family residential mortgages and, to
a lesser extent, multi-family and commercial real estate, commercial business,
home equity and other loans in its market area. The Association also invests in
securities and other permissible investments. See "Business - Investment
Activities - Securities." The Association has suffered significant losses in
recent years on its residential lending program, in part due to loan
underwriting and monitoring deficiencies. In order to address these issues, the
Board of Directors has revised the Association's loan underwriting and
monitoring procedures and hired new personnel to perform such functions. In
addition, in fiscal 1995, the Association hired a new President and Chief
Executive Officer experienced in residential mortgage lending, income producing
property and business lending and determined to expand the Association's
multi-family and commercial real estate and commercial business lending. See
"Business - Lending Activities -Multi-family and Commercial Real Estate Lending"
and "- Commercial Business Lending." However, loan losses continued in the
residential loan portfolio into fiscal 1997 and there can be no assurance that
any of these new programs can successfully address the Association's loan
problems.
5
<PAGE>
Financial and operational highlights of the Association include the
following:
o Capital Strength. At September 30, 1997, the Association had total equity
of $3.3 million and exceeded all of the applicable regulatory capital
requirements with tangible, core and total risk-based capital ratios of
5.41%, 5.41% and 10.01%, respectively. Assuming on a pro forma basis that
$5.0 million, the midpoint of the Estimated Valuation Range, of shares were
sold in the Conversion and approximately 50% of the net proceeds were
retained by the Holding Company, as of September 30, 1997, the
Association's tangible capital would have been $6.5 million (10.0% of
assets). See "Pro Forma Regulatory Capital Analysis."
o Losses from Operations. The Association has recorded a net loss from
operations in three out of its last five fiscal years, primarily due to
significant additions to its allowance for loan losses as well as, in 1996,
a significant charge to operations for delinquent property taxes on certain
non-performing residential loans and a special FDIC assessment. The
Association's income (loss) was ($583,000), ($1.0 million), $251,000,
$272,000 and ($239,000) for the years ended September 30, 1997, 1996, 1995,
1994 and 1993, respectively. While the Board believes that it has addressed
most of the problems which have caused these losses, the Association
continues to have significant credit risk in its loan portfolio and its
general and administrative expenses have increased as a result of new
lending procedures and personnel. Accordingly, there can be no assurance
that the Association's results of operations will reach favorable levels in
the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
o Income Producing Property and Business Lending Activities. In order to
increase the yield and interest rate sensitivity of the Association's loan
portfolio, the Association recently has increased its multi-family and
commercial real estate and commercial business lending. While no such loans
were delinquent at September 30, 1997, a number of underwriting,
documentation and monitoring deficiencies have been noted. As a result,
while no multi- family and commercial real estate or commercial business
loans have been classified as non- performing, $1.1 million of such loans
have been classified as "of concern" as of September 30, 1997. Based on the
above and in view of the higher level of credit risk generally associated
with such loans, there can be no assurance that such new lending programs
will be successful. See "Risk Factors - Credit Risk Related to Income
Producing Property and Business Lending Activities; Limited Experience in
Non-Residential Lending."
o Asset Quality. As a result of residential loan underwriting and monitoring
deficiencies which the Board believes have now been addressed, as well as
the relatively weak economy and weak real estate market in the
Association's market area, the Association has experienced significant
delinquencies and loan losses on its one- to four-family residential loans.
In addition, since fiscal 1995, the Association has significantly increased
its multi- family and commercial real estate and commercial business
lending. At September 30, 1997, the Association's non-performing loans, all
of which were one- to four- family residential loans, stood at $3.8 million
or 7.4% of gross loans, while "other loans of concern" stood at $1.1
million. On the same date, the Association's loan loss reserves stood at
$1.6 million or 3.1% of gross loans and 42.5% of non-performing loans and
33.0% of non-performing
6
<PAGE>
loans and other loans of concern. At September 30, 1997, the Association's
total non-performing assets stood at $4.1 million or 6.7% of assets.
While the Association currently believes that its current allowance for
loan losses is adequate, there can be no assurance that the Association
will not continue to experience significant loan delinquencies and losses
in the future. See "Business - Delinquencies and Non-Performing Assets."
o Interest Rate Sensitivity. The Association's profitability, like that of
most financial institutions, is dependent to a large extent upon its net
interest income, which is the difference between its interest income and
interest expense. In managing its asset/liability mix, Gloversville Federal
generally, depending on the relationship between long and short- term
interest rates, market conditions and consumer preference, places greater
emphasis on maximizing its net interest margin than on matching the
interest rate sensitivity of its assets and liabilities. At September 30,
1997, the net value of the Association's portfolio equity was projected to
decline by 22.9% and 53.5% if there were instantaneous increases in
interest rates of 200 and 400 basis points, respectively. See "Risk Factors
- Interest Rate Risk Exposure" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Market Risk Analysis."
The Conversion
The Offering is being made in connection with the conversion of
Gloversville Federal from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association and the
formation of Adirondack Financial Services Bancorp, Inc. as the holding company
of Gloversville Federal. The Conversion is subject to certain conditions,
including the prior approval of the Plan by the Association's members at a
Special Meeting to be held on January 21, 1998. After the Conversion, the
Association's current voting members (who include certain deposit account
holders and borrowers) will have no voting rights in Gloversville Federal and
will have no voting rights in the Holding Company unless they become Holding
Company stockholders. Eligible Account Holders and Supplemental Eligible Account
Holders, however, will have certain liquidation rights in the Association. See
"The Conversion - Effects of Conversion to Stock Form on Depositors and
Borrowers of the Association - Liquidation Rights."
The Offering. The shares of Common Stock to be issued in the Conversion
are being offered at a Purchase Price of $10.00 per share in 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 Association totaled $50.00 or more on September 30, 1996); (ii)
Tax-Qualified Employee Plans; provided, however, that the Tax Qualified Employee
Plans shall have first priority Subscription Rights to the extent that the total
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range; (iii) Supplemental Eligible Account Holders
(i.e., depositors whose accounts in the Association totaled $50.00 or more on
___________, 1998); (iv) Other Members (i.e., depositors as of ___________ __,
1998 and certain borrowers of the Association as of ________ __, ____ and
_______ __, 1998); and (v) employees, officers and directors of the Association.
Subscription Rights received in any of the
7
<PAGE>
foregoing categories will be subordinated to the Subscription Rights received by
those in a prior category. Subscription Rights will expire if not exercised by
noon, Gloversville, New York time, on ____________ __, 1998, unless extended
(the "Expiration Date").
Subject to the prior rights of holders of Subscription Rights and
market conditions at or near the completion of the Subscription Offering, any
shares of Common Stock not subscribed for in the Subscription Offering may be
offered at the same price in a Public Offering and/or Direct Community Offering
through Capital Resources on a best efforts basis to selected persons to whom
this prospectus is delivered. To order Common Stock in connection with the
Public Offering and/or Direct Community Offering, if any, an executed stock
order form and account withdrawal authorization and certification must be
received by Capital Resources prior to the termination of such offerings. The
date by which orders must be received in the Public Offering and/or Direct
Community Offering, if any, will be set by the Holding Company at the time of
such offering provided that if the Offering is extended beyond __________ __,
1998, each subscriber will have the right to modify or rescind his or her
subscription. The Holding Company and the Association reserve the absolute right
to accept or reject any orders in the Public Offering and Direct Community
Offering, if any, in whole or in part.
If necessary, shares of Common Stock may also be offered in connection
with the Public Offering for sale on a best-efforts basis by selected dealers
managed by Capital Resources. See "The Conversion - Public Offering and Direct
Community Offering."
The Association and the Holding Company have engaged Capital Resources
to consult with and advise the Holding Company and the Association with respect
to the Offering, and Capital Resources has agreed to solicit subscriptions and
purchase orders for shares of Common Stock in the Offering. Neither Capital
Resources nor any selected broker-dealers will have any obligation to purchase
shares of Common Stock in the Offering. Capital Resources will receive for its
services a marketing fee of $90,000. To the extent selected broker-dealers are
utilized in connection with the sale of shares in the Public Offering, the
selected dealers will receive a fee of up to _____% and Capital Resources will
receive a fee of _____% of the aggregate Purchase Price for all shares of Common
Stock sold through such broker-dealers. Capital Resources will also receive
reimbursement for certain expenses incurred in connection with the Offering. The
Holding Company has agreed to indemnify Capital Resources against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended ("Securities Act"). See "The Conversion Marketing Arrangements."
The Association has established a Stock Information Center, which will
be managed by Capital Resources, to coordinate the Offering, and answer
questions about the Offering received by telephone. All subscribers will be
instructed to mail payment to the Stock Information Center or deliver payment
directly to the Association's office. 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 Association. Such funds
will not be available for withdrawal and will not be released until the
Conversion is completed or terminated. See "The Conversion - Method of Payment
for Subscriptions."
8
<PAGE>
Purchase Limitations. The Plan of Conversion places limitations on the
number of shares which may be purchased in the Conversion by various categories
of persons. With the exception of the Tax-Qualified Employee Plans, no Eligible
Account Holder, Supplemental Eligible Account Holder, Other Member or director,
officer or employee may purchase in their capacity as such in the Subscription
Offering more than $150,000 of Common Stock; no person, together with associates
of and persons acting in concert with such person, may purchase more than
$150,000 of Common Stock in the Public Offering; and no person or group of
persons acting in concert (other than the Tax-Qualified Employee Plans) may
purchase more than $150,000 of Common Stock in the Conversion. The minimum
purchase limitation is 25 shares of Common Stock. These purchase limits may be
increased or decreased consistent with the Office of Thrift Supervision ("OTS")
regulations at the sole discretion of the Holding Company and the Association.
See "The Conversion - Offering of Holding Company Common Stock."
Restrictions on Transfer of Subscription Rights. Prior to the
completion of the Conversion, no person may transfer or enter into any agreement
or understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the Plan or the shares of Common Stock to be
issued upon their exercise. Persons found to be selling or otherwise
transferring their right to purchase stock in the Subscription Offering or
purchasing Common Stock on behalf of another person will be subject to
forfeiture of such rights and possible federal penalties and sanctions. See "The
Conversion - Restrictions on Transfer of Subscription Rights and Shares."
Stock Pricing and Number of Shares of Common Stock to be Issued in the
Conversion. The Purchase Price of the Common Stock is $10.00 per share and is
the same for all purchasers. The aggregate pro forma market value of the Holding
Company and Gloversville Federal, as converted, was estimated by RP Financial,
which is experienced in appraising converting thrift institutions, to be the
Estimated Valuation Range. The Board of Directors has reviewed the Estimated
Valuation Range as stated in the appraisal and compared it with recent stock
trading prices as well as other recent pro forma market value estimates. The
Board of Directors has also reviewed the appraisal report, including the
assumptions and methodology utilized therein, and determined that it was not
unreasonable.
Depending on market and financial conditions at the time of the
completion of the Offering, the total number of shares of Common Stock to be
issued in the Conversion may be increased or decreased significantly from the
575,000 shares offered hereby and the Purchase Price may be decreased. However,
subscribers will be permitted to modify or rescind their subscriptions if the
product of the total number of shares to be issued multiplied by the price per
share is less than $4,250,000 or more than $6,612,500. The appraisal is not
intended to be, and must not be interpreted as, a recommendation of any kind as
to the advisability of voting to approve the Conversion or of purchasing shares
of Common Stock. The appraisal considers Gloversville Federal and the Holding
Company only as going concerns and should not be considered as any indication of
the liquidation value of Gloversville Federal or the Holding Company. Moreover,
the appraisal is necessarily based on many factors which change from time to
time. There can be no assurance that persons who purchase shares in the
Conversion will be able to sell such shares at prices at or above the Purchase
Price. See "Pro Forma Data" and "The Conversion - Stock Pricing and Number
9
<PAGE>
of Shares to be Issued" for a description of the manner in which such valuation
was made and the limitations on its use.
Purchases by Directors and Executive Officers
The directors and executive officers of Gloversville Federal intend to
purchase, for investment purposes and at the same price as the shares are sold
to other investors in the Conversion, approximately $385,500 of Common Stock, or
9.1%, 7.7% or 6.7% of the shares to be sold in the Conversion at the minimum,
midpoint and maximum of the Estimated Valuation Range, respectively. In
addition, an amount of shares equal to an aggregate of 8% of the shares to be
issued in the Conversion is anticipated to be purchased by the ESOP. See "The
Conversion - Participation by the Board and Executive Officers."
Potential Benefits of Conversion to Directors and Executive Officers
Employee Stock Ownership Plan. The Board of Directors of the
Association has adopted an ESOP, a tax-qualified employee benefit plan for
officers and employees of the Holding Company and the Association. All employees
of the Association are eligible to participate in the ESOP after they attain age
21 and complete one year of service. The Association's contribution to the ESOP
is allocated among participants on the basis of their relative compensation.
Each participant's account will be credited with cash and shares of Holding
Company Common Stock based upon compensation earned during the year with respect
to which the contribution is made. The ESOP intends to buy up to 8% of the
Common Stock issued in the Conversion (approximately $340,000 to $460,000 of the
Common Stock based on the issuance of the minimum and the maximum of the
Estimated Valuation Range and the $10.00 per share Purchase Price). The ESOP
will purchase the shares with funds borrowed from the Holding Company, and it is
anticipated that the ESOP will repay the loans through periodic tax-deductible
contributions from the Association over a ten-year period. These contributions
will increase the compensation expense of the Association. See "Management
Benefit Plans - Employee Stock Ownership Plan" for a description of this plan.
Stock Option and Incentive Plan and Recognition and Retention Plan. The
Board of Directors of the Holding Company intends to adopt a Stock Option and
Incentive Plan (the "Stock Option Plan") and a Recognition and Retention Plan
("RRP") to become effective upon ratification by stockholders following the
Conversion. Certain of the directors and executive officers of the Holding
Company and the Association will receive awards under these plans. It is
currently anticipated that an amount of shares equal to 10% and 4% of the shares
sold in the Conversion will be reserved for issuance under the Stock Option Plan
and RRP, respectively. Depending upon market conditions in the future, the
Holding Company may purchase shares in the open market to fund these plans. See
"Management - Benefit Plans" for a description of these plans.
Under the proposed Stock Option Plan, it is presently intended that the
directors and executive officers be granted options to purchase, in addition to
the shares to be issued in the Conversion, an amount of shares equal to __% of
the shares sold in the Conversion (or ______ and ______ shares, respectively, of
Common Stock based on the minimum and maximum of the Estimated Valuation Range)
at an exercise price equal to the market value per share of the Common
10
<PAGE>
Stock on the date of grant. Such options will be awarded at no expense to the
recipients and pose no financial risk to the recipients until exercised. It is
presently anticipated that Lewis Kolar, President and Menzo Case, Executive Vice
President will each receive an option to purchase an amount of shares equal to
2.0% of the shares sold in the Conversion (or 8,500 and 11,500 shares, assuming
the minimum and maximum of the Estimated Valuation Range, respectively). See
"Management - Benefit Plans - Stock Option and Incentive Plan."
The award and exercise of options pursuant to the Stock Option Plan
will not result in any expense to the Holding Company; however, when the options
are exercised (or, depending on market conditions, potentially prior to
exercise) , the per share earnings and book value of existing stockholders will
likely be diluted.
It is also intended that directors and executive officers be granted
(without any requirement of payment by the grantee) an amount of shares of
restricted stock awards equal to ___% of the shares sold in the Conversion (or
_________ and ________ shares, respectively, based on the minimum and maximum of
the Estimated Valuation Range) which will vest over five years commencing one
year from stockholder ratification and which will have a total value of
$________ and $__________ based on the Purchase Price of $10.00 per share at the
minimum and maximum of the Estimated Valuation Range, respectively. It is
presently anticipated that President Kolar will receive a restricted stock award
equal to 1.0% of the shares sold in the Conversion (or 4,250 and 5,750 shares,
assuming the minimum and maximum of the Estimated Valuation Range) and that
Executive Vice President Case will receive a restricted stock award equal to .6%
of the conversion shares. The restricted stock award to President Kolar and
Executive Vice President Case would have an aggregate value ranging from $42,500
and $57,500, and $25,500 and $34,500, respectively, (at the minimum and maximum
of the Estimated Valuation Range) based upon the original Purchase Price of
$10.00 per share. See "Risk Factors - Takeover Defensive Provisions; Dilution of
Per Share Value" and "Management Benefit Plans - Recognition and Retention
Plan."
Following stockholder ratification of the RRP, the RRP will be funded
either with shares purchased in the open market or with authorized but unissued
shares. Based upon the Purchase Price of $10.00 per share, the amount required
to fund the RRP through open-market purchases would range from approximately
$_______ (based upon the sale of shares at the minimum of the Estimated
Valuation Range) to approximately $_______ (based upon the sale of shares at the
maximum of the Estimated Valuation Range). In the event that the per share price
of the Common Stock increases above the $10.00 per share Purchase Price
following completion of the Offering, the amount necessary to fund the RRP would
also increase. The expense related to the cost of the RRP will be recognized
over the five-year vesting period of the awards made pursuant to such plan. The
use of authorized but unissued shares to fund the RRP would dilute the holdings
of stockholders who purchase Common Stock in the Conversion. See "Management -
Benefit Plans - Recognition and Retention Plan."
The Holding Company intends to submit the RRP and the Stock Option Plan
to stockholders for ratification following completion of the Offering, but in no
event prior to six months following the completion of the Conversion. These
plans will only be effective if ratified by the stockholders. In the event the
Stock Option Plan and the RRP are not ratified by stockholders, management may
11
<PAGE>
consider the adoption of alternate incentive plans, although no such plans are
currently contemplated. While the Association believes that the RRP and the
Stock Option Plan will provide important incentives for the performance and
retention of management, the Association has no reason to believe that the
failure to obtain shareholder ratification of such plans would result in the
departure of any members of senior management.
Change in Control Severance Agreements. The Association intends to
enter into change in control agreements with President Kolar and Executive Vice
President Case. It is anticipated that such agreements will have initial terms
of 24 and 12 months, respectively, and become effective upon completion of the
Conversion. In the event that President Kolar or Executive Vice President Case
is terminated following a "change in control" (as defined in the agreements),
such officer will be entitled to a severance payment of 200% and 100%,
respectively, of his current compensation. See "Management - Executive
Compensation - Change in Control Severance Agreements" for the definition of
"change in control" and a more detailed description of these agreements.
Use of Proceeds
The net proceeds from the sale of Common Stock in the Conversion
(estimated at $3.7 million, $4.5 million, $5.2 million and $6.1 million based on
sales at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively) will substantially increase the capital
of Gloversville Federal. See "Pro Forma Data." The Holding Company will utilize
approximately 50% of the net proceeds from the issuance of the Common Stock to
purchase all of the common stock of Gloversville Federal to be issued upon
Conversion and will retain approximately 50% of the net proceeds; provided that
the amount retained by the Holding Company will be reduced to the extent
required that, upon the completion of the transaction, the Association's ratio
of capital to assets is at least 10%. The proceeds retained by the Holding
Company will be invested initially in short-term investments. Such proceeds will
subsequently be invested in one- to four-family residential and multi-family and
commercial real estate and commercial business loans and investment securities
and will be available for general corporate purposes, including the possible
repurchase of shares of the Common Stock, as permitted by the OTS. The Holding
Company currently has no specific plans to make any such repurchases of any of
its Common Stock. In addition, the Holding Company intends to provide the
funding for the ESOP loan. Based upon the initial Purchase Price of $10.00 per
share, the dollar amount of the ESOP loan would range from $340,000 (based upon
the sale of shares at the minimum of the Estimated Valuation Range) to $460,000
(based upon the sale of shares at the maximum of the Estimated Valuation Range).
It is anticipated that the ESOP will repay the loan through periodic
tax-deductible contributions from the Association over a ten-year period. The
interest rate to be charged by the Holding Company on the ESOP loan will be
based upon the Internal Revenue Service ("IRS") prescribed applicable federal
rate at the time of origination.
Finally, the Holding Company currently intends to use a portion of the
proceeds to fund a Recognition and Retention Plan ("RRP"), subject to
stockholder ratification. Compensation expense related to the RRP will be
recognized as share awards vest. See "Pro Forma Data." Following stockholder
ratification of the RRP, the RRP will be funded either with shares purchased in
the open market or with authorized but unissued shares. Based upon the Purchase
Price of $10.00 per share, the amount required to fund the RRP through
open-market purchases would range from
12
<PAGE>
approximately $170,000 (based upon the sale of shares at the minimum of the
Estimated Valuation Range) to approximately $230,000 (based upon the sale of
shares at the maximum of the Estimated Valuation Range). In the event that the
per share price of the Common Stock increases above the $10.00 per share
Purchase Price following completion of the Offering, the amount necessary to
fund the RRP would also increase. The use of authorized but unissued shares to
fund the RRP could dilute the holdings of stockholders who purchase Common Stock
in the Conversion. See "Management - Benefit Plans - Recognition and Retention
Plan."
The net proceeds received by Gloversville Federal will become part of
Gloversville Federal's general funds for use in its business and will be used to
support the Association's existing operations, subject to applicable regulatory
restrictions. Immediately upon the completion of the Conversion, it is
anticipated that the Association will invest such proceeds into short-term
assets. Subsequently, the Association intends to redirect the net proceeds to
the origination of residential loans and, to a lesser extent, multi-family and
commercial real estate, commercial business and home equity loans, subject to
market conditions. In addition, such proceeds may also be utilized to repay
borrowings.
See "Use of Proceeds" for additional information on the utilization of
the offering proceeds as well as OTS restrictions on repurchases of the Holding
Company's stock.
Dividends
The declaration and payment of dividends are subject to, among other
things, the Holding Company's financial condition and results of operations,
Gloversville Federal's compliance with its regulatory capital requirements,
including the fully phased-in capital requirements, tax considerations, industry
standards, economic conditions, regulatory restrictions, general business
practices and other factors. There can be no assurance as to whether or when the
Holding Company will pay a dividend. See "Dividends."
Market for Common Stock
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. Following the
completion of the offering, it is anticipated that the Common Stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. Capital Resources has indicated its intention to make a market
in the Common Stock. If the Common Stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that transactions in the Common Stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Capital Resources will not be
subject to any obligation with respect to such efforts.
There can be no assurance that an active or liquid trading market will
develop for the Common Stock, or if a market develops, that it will continue. A
public market having the desirable characteristics of depth, liquidity and
orderliness depends upon the presence in the marketplace of both willing buyers
and sellers of the Common Stock at any given time, which is not within the
control of the Holding Company or any market maker. Accordingly, there can be no
assurance that
13
<PAGE>
purchasers will be able to sell their shares at or above the Purchase Price. See
"Market for Common Stock."
Risk Factors
See "Risk Factors" for information regarding certain factors which
should be considered by prospective investors, including the Association's
recent operating results, adverse market conditions in market area, credit risk
related to income producing property and business lending activities and limited
experience in non-residential lending, interest rate risk exposure, competition,
takeover defensive provisions contained in the Holding Company's certificate of
incorporation and bylaws and dilution of per share value, post-conversion
overhead expenses, regulatory oversight, the risk of a delayed offering, the
absence of an active market for the Common Stock, possible increase in estimated
valuation range and number of shares issued and related earnings dilution and
the possible consequences of amendment of the Plan of Conversion.
14
<PAGE>
SELECTED FINANCIAL INFORMATION
Set forth below are selected financial and other data of the
Association. The financial data is derived in part from, and should be read in
conjunction with, the Financial Statements and Notes of the Association
presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Selected Financial Information
At September 30,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
- ----------------------------------
Total assets..................................... $61,022 $61,006 $63,073 $69,597 $61,894
Cash and cash equivalents........................ 1,922 1,198 3,181 6,509 18,184
Loans receivable, net............................ 49,526 49,636 48,239 45,645 40,896
Mortgage-backed securities available for sale.... 3,562 4,044 993 3,968 --
Other securities available for sale.............. 3,455 3,395 4,138 5,781 581
-------- -------- -------- -------- ---------
Total securities available for sale........... 7,017 7,439 5,131 9,749 581
-------- -------- -------- -------- ---------
Investment securities held to maturity........... -- -- 4,402 5,459 --
Deposits......................................... 56,117 55,716 57,866 64,703 57,346
Borrowings....................................... 1,300 300 -- -- --
Total equity..................................... 3,280 3,790 4,854 4,705 4,397
For the Years Ended September 30,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
Selected Operations Data:
- -------------------------
Interest income.................................. 4,905 4,733 4,816 4,805 4,853
Interest expense................................. 2,447 2,416 2,527 2,148 2,586
-------- -------- -------- -------- --------
Net interest income.............................. 2,458 2,317 2,289 2,657 2,267
Provision for loan losses........................ 792 714 129 211 843
--------- --------- --------- --------- ---------
Net interest income after provision for loan
losses......................................... 1,666 1,603 2,160 2,446 1,424
-------- -------- ------- -------- --------
Net gain on sale of securities................... -- -- 204 -- --
Other non-interest income........................ 155 109 188 69 30
-------- --------- --------- ---------- ----------
Total non-interest income........................ 155 109 392 69 30
-------- --------- --------- ---------- ----------
Non-interest expense............................. 2,319 2,970 2,199 2,119 1,755
------- ------- ------- ------- -------
(Loss) income before income tax expense
(benefit) .................................... (498) (1,258) 353 396 (301)
Income tax expense (benefit)..................... 85 (222) 102 124 (62)
--------- --------- -------- -------- ---------
Net (loss) income................................ $ (583) $(1,036) $ 251 $ 272 $ (239)
======== ======= ======== ======== ========
</TABLE>
15
<PAGE>
Selected Financial Ratios and Other Data
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Performance ratios:
- -------------------
Return (Loss) on average assets.................... (0.94)% (1.69)% 0.38% 0.42% (0.37)%
Return (Loss) on average equity.................... (16.30) (22.22) 5.30 5.97 (5.11)
Interest rate spread information:
- ---------------------------------
Average during period.............................. 3.96 3.68 3.35 4.43 3.87
End of period...................................... 4.19 4.21 3.61 4.05 4.18
Net interest margin.............................. 4.11 3.91 3.55 4.42 3.82
Other Operating ratios:
- -----------------------
Ratio of operating expenses to average total
assets(1)......................................... 3.63 3.61 3.11 3.17 2.63
Efficiency ratio(2)................................ 85.94 91.10 86.67 75.85 74.46
Ratio of average interest-earning assets to
average interest-bearing liabilities.............. 103.76 105.53 105.01 99.70 98.73
Asset Quality ratios:
- ---------------------
Non-performing assets to total assets
at end of period................................... 6.73 3.74 4.38 5.53 4.22
Allowance for loan loss to non-performing loans
at end of period................................... 42.53 56.53 30.20 24.34 41.63
Allowance for loan losses to gross loans
receivable at end of period........................ 3.14 2.45 1.58 1.83 2.08
Capital ratios:
- ---------------
Equity to total assets at end of period............ 5.38 6.21 7.70 6.76 7.10
Average equity to average assets................... 5.78 7.62 7.11 6.99 7.17
Other data:
- -----------
Number of full service offices....................... 2 2 2 2 2
</TABLE>
(1) Operating expenses exclude OREO expenses of $73,000, $27,000, $127,000,
$52,000 and $44,000 for years ended September 30, 1997, 1996, 1995, 1994
and 1993, respectively. In addition, operating expenses for the year ended
September 30, 1996 exclude expenses incurred by the Association for
delinquent property taxes on collateral secured by certain nonperforming
one- to four-family residential loans paid on behalf of borrowers of
$318,000 and the special one-time SAIF assessment of $415,000.
(2) The efficiency ratio represents operating expenses (as defined in footnote
1 above) divided by the sum of net interest income and other operating
income (excluding a gain on sale of building of $86,000 and net gains from
security transactions of $204,000 for the year ended September 30, 1995).
16
<PAGE>
RECENT DEVELOPMENTS
Summarized below is certain selected financial data for the Association
at December 31, 1997 and 1996 and September 30, 1997 and for the three-month
periods ended December 31, 1997 and 1996. Information at December 31, 1997 and
1996, and for each of the three month periods, is derived from unaudited
financial statements. This financial data should be read in conjunction with the
financial statements of the Association presented elsewhere in this Prospectus.
In the opinion of management of the Association, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation have
been included. The results of operations and other data for the three-month
period ended December 31, 1997 are not necessarily indicative of the results of
operations which may be expected for the fiscal year ending September 30, 1998
or any other period.
Selected Financial Condition Information
At December 31, At September 30,
--------------- ----------------
1997 1997
---- ----
(In Thousands)
Total assets...................................... $59,623 $61,022
Cash and cash equivalents......................... 1,435 1,922
Loans receivable, net............................. 48,880 49,526
Mortgage-backed securities available for sale..... 3,416 3,562
Other securities available for sale............... 3,454 3,455
------- -------
Total securities available for sale............ 6,870 7,017
------- -------
Deposits.......................................... 54,271 56,117
Borrowings........................................ 1,700 1,300
Total equity...................................... 3,321 3,280
Selected Operations Data
For Three Months Ended
----------------------------
December 31, September 30,
------------ -------------
1997 1997
---- ----
(In Thousands)
Interest and dividend income........................$ 1,184 $ 1,254
Interest expense.................................... 627 613
Net interest income................................. 557 641
Provision for loan losses........................... 15 198
Net interest income after provision for loan losses. 542 443
Total non-interest income........................... 54 44
Non-interest expense................................ 557 586
Income (loss) before income tax expense............. 39 (99)
Income tax expense.................................. 16 14
Net income (loss)................................... 23 (113)
17
<PAGE>
Selected Financial Ratios (Annualized) and Other Data
At or For the Years
Ended December 31,
------------------
1997 1996
---- ----
Performance Ratios:
Return on average assets................................. 0.15% (0.73)%
Return on average equity................................. 2.78 (12.01)
Interest rate spread information:
Average during period.................................... 3.72% 4.13%
End of Period............................................ 4.03 4.19
Other Operating Ratios:
Net interest margin...................................... 3.82% 4.29%
Ratio of operating expenses to average total assets(1)... 3.62 3.76
Efficiency Ratio......................................... 89.82 84.82
Ratio of average interest-earning assets to average
interest-bearing liabilities 102.54 104.06
Asset Quality ratios:
Non-performing assets to total assets at end of
period 6.10% 3.51%
Allowance for loan loss to non-performing loans
at end of period 44.32 69.60
Allowance for loan losses to gross loans receivable
at end of period 3.09 2.56
Capital ratios:
Equity to total assets at end of period 5.57% 5.97%
Average equity to average assets 5.46 6.09
Other data:
Number of full service offices 2 2
(1) Operating expenses exclude OREO expenses of $8,000 and $5,000 for periods
ended December 31, 1997 and 1996, respectively.
(2) The efficiency ratio represents operating expenses (as defined above)
divided by the sum of net interest income and other operating income.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RECENT OPERATING RESULTS
Financial Condition
Total assets declined $1.4 million or 2.29% to $59.6 million at
December 31, 1997 from $61.0 million at September 30, 1997.
Gross loans declined from $51.3 million at September 30, 1997 by
$707,000 or 1.38% to $50.6 million at December 31, 1997. The majority of the
loan decline was in one-to-four family loans which were $36.9 million at
September 30, 1997 and $594,000 or 1.61% less at December 31, 1997 with a
balance of $36.3 million. The decline in gross loans outstanding from September
30, 1997 to December 31, 1997 was attributable to the highly competitive nature
of the residential mortgage market where rates offered by competitors were lower
than those offered by the Association. The Association pricing its mortgage
loans more aggressively in December 1997.
Cash and cash equivalents declined $487,000 or 25.36% from $1.9 million
at September 30, 1997 to $1.4 million at December 31, 1997. Securities available
for sale declined $147,000 or 2.10% from $7.0 million to $6.9 million from
September 30, 1997 to December 31, 1997.
Deposits declined during the three months ended December 31, 1997 by
$1.8 million or 3.29%. The decline in deposits was primarily in time deposits
which were $25.7 million at December 31, 1997 as compared to $28.0 million at
September 30, 1997. The $2.3 million or 8.11% decline in time deposits
outstanding was partially offset by an increase of $682,000 or 6.23% in money
market accounts during the same time period. The outflow of deposits exceeded
the Association's immediate sources of funding; therefore, borrowings increased
$400,000 or 30.77% from $1.3 million at September 30, 1997 to $1.7 million at
December 31, 1997. Time deposit outflows during the three month period were
consistent with management's decision to not aggressively price new or maturing
time deposits when alternative funding, such as FHLB borrowings and security
repurchase agreements, were priced less expensively and effectively met the
short term funding needs.
The Association's allowance for loan losses declined $48,000 or 2.95%
during the three month period ended December 31, 1997. The decline was the
result of net charge-offs totaling $63,000 exceeding the $15,000 provision made
during the quarter. Charge-offs taken during the period from September 30, 1997
to December 31, 1997 were primarily against residential properties either
foreclosed upon or deemed uncollectible. At December 31, 1997, the allowance for
loan losses was 3.09% of gross loans receivable (down from 3.14% at September
30, 1997) and 44.32% of non-performing loans (up from 42.53% at September 30,
1997). Non-performing loans decreased from $3.8 million at September 30, 1997 to
$3.5 million at December 31, 1997. OREO declined from $313,000 at September 30,
1997 to $107,000 at December 31, 1997.
Total equity increased by $41,000 during the three month period ended
December 31, 1997 and was $3.3 million at both September 30, 1997 and December
31, 1997. The increase was attributable to net income of $23,000 recognized for
the three month period ended
19
<PAGE>
December 31,1997 and an $18,000 decline in the after-tax net unrealized loss on
available for sale securities.
Non-performing assets. Non-performing assets decreased $468,000 or
11.40% from $4.1 million at September 30, 1997 to $3.6 million at December 31,
1997. The decrease is attributable to non-performing loans decreasing $262,000
or 6.91% from $3.8 million at September 30, 1997 to $3.5 million at December 31,
1997 and by a decline in OREO of $206,000 during the same period. Non-performing
loans at December 31, 1997 consisted of one-to-four family mortgages of $3.5
million, home equity loans of $34,000 and other consumer loans of $12,000. OREO
at both December 31, 1997 and 1996 consisted entirely of one-to-four family
residences.
In addition to non-performing loans discussed above, at December 31,
1997, the Association had $1.1 million of other loans, all of which were
multi-family and commercial real estate or commercial business loans, with
respect to which known information about the possible credit problems of the
borrowers or the cash flows of the security properties have caused management to
have concerns as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such loans in
the non-performing asset categories. While none of these loans were more than 30
days delinquent as of December 31, 1997, weak or negative cash flows, failure to
attain budgeted income projections or declines in collateral values have been
the primary reasons which have caused the Association to monitor such loans more
carefully.
Comparison of Operating Results for the Three-Month Periods Ended December 31,
1997 and 1996
General. Net income for the three months ended December 31, 1997 was
$23,000, compared to a net loss of $113,000 for the same period in 1996. The
$136,000 increase was primarily attributable to a decline of $85,000 in net
interest income, offset by a $183,000 decrease in the provision for loan losses,
an increase of $10,000 in non-interest income and a decline of $30,000 in
non-interest expense.
Net interest income. Net interest income, or the difference between
interest and dividend income and interest expense, declined $85,000 or 13.18 %
from the three month period ended December 31, 1996 to the three month period
ended December 31, 1997. The negative effect of a 26 basis point decrease in the
average net interest-earning assets yield from 8.40% for the quarter ended
December 31, 1996 to 8.14% for the quarter ended December 31, 1997 was further
exasperated by a 16 basis point increase in the average interest-bearing
liabilities cost from 4.27% for the quarter ended December 31, 1996 to 4.43% for
the quarter ended December 31, 1997.
Interest and dividend Income. Interest and dividend income totaled $1.2
million for the three months ended December 31, 1997, a decrease of $70,000 or
5.61% compared to interest and dividend income of $1.3 million for the three
months ended December 31, 1996. This decrease reflects a decrease of $1.6
million in total average interest-earning assets and a 26 basis point decrease
in the average yield on such assets to 8.14% for the three months ended December
31, 1997 from 8.40% for the same period in the prior year. Interest income on
loans decreased $50,000 or 4.49% to $1.1 million for the three month period
ended December 31, 1997 from $1.1 million for
20
<PAGE>
the three months ended December 31, 1996, reflecting a $588,000 decline in the
average balance of loans and a 29 basis point decline in average yield. The
decline in the average balance of loans is primarily due to the decline in
one-to-four family mortgages. The decrease in the average yield on loans is due
to the continued amortization and prepayment of higher yielding one-to-four
family mortgages with replacement by newly originated lower yielding one-to-four
family mortgages, slightly offset by the continued growth in higher yielding
multi-family and commercial real estate and commercial business loans. Interest
income from securities decreased $14,000 or 11.34% from $122,000 for the three
months ended December 31, 1996 to $108,000 for the three months ended December
31, 1997. The decline was attributable to the $558,000 or 7.39% decrease in the
average balance of securities due to the continued amortization of the
portfolio.
Interest expense. Interest expense increased from $613,000 for the
three month period ended December 31, 1996 by $14,000 or 2.31% to $627,000 for
the three month period ended December 31, 1997. This increase reflects an
increase of 16 basis points in the average rate paid on deposits and borrowings
to 4.43% for the three months ended December 31, 1997 from 4.27% for the same
period in the prior year offset by a decline of $660,000 in the average balance
outstanding. The decrease in the average interest-bearing liabilities was the
result of the combined average demand and N.O.W. accounts, savings and money
market account balances outstanding increasing $679,000 or ____% from $27.9
million to $28.6 million and an increase of $960,000 in the average borrowings
outstanding from $636,000 to $1.6 million offset by a decrease of $2.3 million
or ____% in the average balance of time deposits from $28.8 million to $26.5
million. The increased interest expense reflects an increase in the rates paid
on money market accounts, time deposits and borrowings. The average rate paid on
money market accounts increased 13 basis points from 4.05% to 4.18% for the
three months ended December 31, 1996 and December 31, 1997, respectively. The
cost of time deposits also increased during the same time period by 32 basis
points from 5.29% to 5.61%.
Provision for loan losses. The provision for loans losses was $15,000
for the three months ended December 31, 1997 compared to $198,000 for the same
period in 1996. Although the Association maintains its allowance for loan losses
at a level it considers adequate to provide for losses, there can be no
assurance that such losses will not exceed the estimated amounts or that
additional substantial provisions for loan losses will not be required in future
periods. The allowance for loan losses totaled $1.6 million (3.09% of gross
loans and 44.32% of non-performing loans) at December 31, 1997 compared with
$1.3 million (2.56% of gross loans and 69.60% of non-performing loans).
Other income. Other income for the three months ended December 31, 1997
increased $10,000 or 21.83% from $44,000 during the same period in 1996 to
$54,000. This increase was primarily attributable to a $8,000 increase in
service charges and fees, reflecting newly implemented fees being collected from
customers.
Other expense. Other expenses decreased $30,000 or 5.13% to $557,000
for the three month period ended December 31, 1997 from $587,000 for the three
month period ended December 31, 1996. Compensation and employee benefits
increased $17,000 or 8.26% from $217,000 for the three month period ended
December 31, 1996 to $234,000 for the same period in 1996. The increase
21
<PAGE>
was primarily attributable to annual salary increases and increased pension and
health insurance expenses. Federal deposit insurance premiums were $13,000 for
the three months ended December 31, 1997 compared to $32,000 for the same period
in 1996, reflecting a decrease of $19,000 or 58.48%. The decrease is
attributable to the reduced premiums charged for insurance on deposits.
Advertising expense decreased $7,000 or 23.50% from $29,000 for the three months
ended December 31, 1996 to $22,000 for the three months ended December 31, 1997,
as the amount of advertising used was reduced during the first quarter of fiscal
1998. All other operating expenses decreased $16,000 or 6.72% from $248,000 for
the three months ended December 31, 1996 to $231,000 for the three months ended
December 31, 1997.
Income tax expense. Income tax expense was $16,000 for the three months
ended December 31, 1997, or 40.40% of pre-tax income compared to $14,000 on a
pre-tax loss of $99,000 for the three months ended December 31, 1996. A benefit
was not recognized for the pre-tax loss incurred during the three months ended
December 31, 1996 due to an evaluation of the realizability of the Association's
deferred tax assets. The deferred tax asset valuation allowance was increased
$43,000 during the three months ended December 31, 1996.
22
<PAGE>
The following tables sets forth the Association's compliance with its
regulatory capital requirements at December 31, 1997. See "Pro Forma Regulatory
Capital Analysis" for information regarding the Association's pro forma capital
compliance upon completion of the Conversion.
Selected Financial Ratios (Annualized) and Other Data
At December 31, 1997
-------------------------------
Amount Percent(1)
------ ----------
(Dollars in Thousands)
Tangible Capital:
Actual $3,325 5.58%
Requirement 894 1.50
-------- ----
Excess $2,431 4.08%
====== ====
Core Capital:
Actual(2) $3,325 5.58%
Requirement 1,789 3.00%
------ -----
Excess $1,536 2.58%
====== ====
Risk-Based Capital:
Actual(3) $3,764 11.05%
Requirement 2,726 8.00
------ -----
Excess $1,038 3.05%
====== ====
(1) Tangible and core capital levels are shown as a percentage of total
adjusted assets; risk-based capital levels are shown as a percentage of
risk-weighted assets. Unrealized gains and losses on debt securities
available for sale are excluded from tangible, core and risk-based capital.
(2) In April 1991, the OTS proposed a core capital requirement for savings
associations comparable to the requirement for national banks that became
effective on November 30, 1990. This proposed core capital ratio is 3% of
total adjusted assets for thrifts that receive the highest supervisory
rating for safety and soundness ("CAMEL" rating), with a 4% to 5% core
capital requirement for all other thrifts. See "Regulation Regulatory
Capital Requirements."
(3) Includes $486,000 of the allowance for loan losses which qualifies as
supplementary capital. See "Regulation - Regulatory Capital Requirements."
23
<PAGE>
RISK FACTORS
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered by investors before deciding whether to
purchase the Common Stock offered in the Offering.
Recent Operating Losses
The Association has recorded significant losses from operations over
the last several years due primarily to losses related to loans (including
additions to the allowance for loan losses, a charge to operations for past due
property taxes on certain non-performing residential loans on which tax payments
were not effectively monitored and valuation adjustments and expenses related to
foreclosed real estate). The Association's provision for loan losses were
$792,000, $714,000 and $129,000 for fiscals 1997, 1996 and 1995, respectively.
In addition, other real estate expenses totaled $73,000, $27,000 and $127,000
for fiscal 1997, 1996 and 1995, respectively. Finally, during fiscal 1996, the
Association recorded a $318,000 charge to operations from past due real estate
taxes on certain non-performing residential loans. In addition to these real
estate lending related expenses, the Association recorded a $415,000 pre tax
accrual for a special FDIC assessment.
The Association's net income (loss) was ($583,000), ($1.0 million) and
$251,000 for the years ended September 30, 1997, 1996 and 1995, respectively.
The Association has attempted to address these losses through increased loan
monitoring (including the hiring of an internal auditor and credit analyst),
tightened loan underwriting standards and enhanced collection procedures. In
addition, in fiscal 1995, the Association began to focus a portion of its
lending on multi-family and commercial real estate, and commercial business
loans. In view of (i) the higher level of credit risk inherent in the
Association's new multi-family and commercial real estate and commercial
business lending activities, (ii) the relatively low level of loan demand and
high level of competition in much of the Association's market area, (iii) the
decline in real estate values in much of the Association's market area, (iv) the
higher level of expense required for the increased monitoring of the portfolio
and the expansion of the types of lending products offered and (v) the
Association's continued vulnerability to changes in interest rates, there can be
no assurance that the Association's results of operations will return to
satisfactory levels in the future. 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."
Adverse Market Conditions in Market Area
The Association maintains an office in Fulton County, New York, which
is located approximately 50 miles northwest of Albany, and in Saratoga County,
New York, which is located approximately 30 miles north of Albany. The
Association considers its primary market area to include Fulton and Saratoga
counties as well as portions of the surrounding counties of Montgomery and
Hamilton, New York. As a result of a decline in the local manufacturing base
over the last 15 years, the employment and economic growth rates of much of the
Association's market area (with the partial exception of Saratoga County) have
been less favorable than the United States and New York State averages. As a
result of these conditions, the Association believes that real estate values
have declined through much of its market area. Based in part on the above, the
Association has experienced a significant level of losses related to its lending
activities. In addition, there can be no assurance that such conditions will not
contribute to losses related to its lending activities in the future. See
"Business - Market Area."
24
<PAGE>
Credit Risk Related to Income Producing Property and Business Lending
Activities; Limited Experience in Non-Residential Lending
In fiscal 1995, the Board of Directors hired a new President and Chief
Executive Officer with a commercial banking background as well as a residential
lending background, and directed him to develop a new strategy to improve the
Association's operations. After due consideration and consultation with the new
President, in order to increase the yield and interest rate sensitivity of the
Association's loan portfolio and in view of the relatively low demand for
residential loans in the Association's market area, the Board determined to
expand the Association's multi-family and commercial real estate and commercial
business lending activities and began to implement new procedures to accommodate
such activities. Later that year, the Association hired a commercial lending
officer with experience in multi-family and commercial real estate and
commercial business lending.
Despite the Association's limited experience in income producing
property and business lending and the untested nature of the Association's new
lending procedures, the Association's multi-family and commercial real estate
loans, and its commercial business loans, have increased from $878,000 and $0 at
September 30, 1994, respectively, to $8.0 million and $1.4 million at September
30, 1997, respectively. The Board of Directors has not set any targets as to the
percentage of the Association's loan portfolio consisting of multi-family and
commercial real estate and commercial business loans. However, the Board
believes that, under current market conditions, it may be appropriate to
increase this percentage somewhat.
A number of financial weaknesses as well as underwriting, documentation
and monitoring deficiencies have been discovered in the Association's
multi-family and commercial real estate and commercial business loans.
Accordingly, while no multi-family and commercial real estate or commercial
business loans were classified as non-performing at September 30, 1997, the
Association determined to classify $1.1 million of such loans as "of concern" as
of such date. See "Business Lending Activities - Other Loans of Concern."
Multifamily and commercial real estate and commercial business lending
is generally believed to involve a higher degree of credit risk than one- to
four-family residential lending. This higher risk is due to several factors,
including the greater concentration of principal and the smaller number of loans
and borrowers, the effects of general economic conditions on income-producing
ventures and properties and the increased difficulty of evaluating and
monitoring these types of loans. In addition, the Association's multi-family,
commercial real estate and commercial business loans, particularly those
originated when the Association first expanded these product lines, may be
subject to an additional level of risk related to the Association's relative
inexperience with this type of lending (including the absence of tested
procedures with respect thereto). Accordingly, while none of the Association's
multi-family and commercial real estate and commercial business loans were 60
days or more delinquent as of the date hereof, there can be no assurance that
the Association will not experience significant losses on such loans in the
future. See "Business - Lending Activities - Multi-family and Commercial Real
Estate Lending" and "Commercial Business Lending."
Interest Rate Risk Exposure
The Association's profitability is dependent to a large extent upon its
net interest income, which is the difference between its interest income on
interest-earning assets, such as loans and investments, and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. When interest
rates rise, the Association's net interest income tends to be adversely impacted
since its liabilities tend to reprice more quickly than its assets. Conversely,
in a declining rate environment the Association's net interest income is
generally positively impacted since its assets tend to reprice more slowly than
its liabilities. Changes in the level of interest rates also affect the amount
of loans originated by the Association and, thus, the amount of loan and
commitment fees, as well as the
25
<PAGE>
market value of the Association's interest-earning assets. Moreover, increases
in interest rates also can result in disintermediation, which is the flow of
funds away from savings institutions into direct investments, such as corporate
securities and other investment vehicles, which generally pay higher rates of
return than savings institutions. Finally, a flattening of the "yield curve"
(i.e., a decline in the difference between long and short term interest rates),
could adversely impact net interest income to the extent that the Association's
assets have a longer average term than its liabilities.
In managing its asset/liability mix, the Association generally,
depending on the relationship between long- and short-term interest rates,
market conditions and consumer preference, places more emphasis on managing net
interest margin than on better matching the interest rate sensitivity of its
assets and liabilities in an effort to enhance net interest income. As a result,
the Association will continue to be significantly vulnerable to changes in
interest rates and to decreases in the difference between long and short term
interest rates.
At September 30, 1997, the Association's net portfolio value would have
declined by 23% and 53%, respectively, in the event of a 200 and a 400 basis
point increase in general interest rates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Market Risk
Analysis."
Competition
Gloversville Federal experiences significant competition in its local
market area in both originating real estate and other loans and attracting
deposits. This competition arises from other savings institutions as well as
commercial banks, mortgage banks, credit unions and national and local
securities firms. The Association's competitors include many significantly
larger banks, including several large regional banks with offices in
Gloversville Federal's primary market area. Due to their size, these large banks
can achieve certain economies of scale and as a result offer a broader range of
products and services than are currently available at the Association. The
Association attempts to mitigate the effect of such factors by emphasizing
customer service. Such competition may limit Gloversville Federal's growth in
the future. See "Business - Competition."
In view of the increasing cost and complexity of operating a financial
institution, the Board of Directors believes that moderate growth of the
Association's assets and liabilities is important for maintaining profitability.
In addition, the Board of Directors believes that growth will be needed in the
future to leverage the new capital raised by the Conversion. See "Use of
Proceeds."
Unfortunately, as a result of competition from both depository as well
as non-depository firms (such as mutual funds), the Association has found it
very difficult to increase its deposits on a cost effective basis. Based on the
above, the Board believes that future internal growth can be effectively
sustained only at modest levels. See "Pro Forma Data" and "Use of Proceeds."
Takeover Defensive Provisions; Dilution of Per Share Value
Holding Company and Association Governing Instruments. Certain
provisions of the Holding Company's Certificate of Incorporation and Bylaws
assist the Holding Company in
26
<PAGE>
maintaining its status as an independent publicly owned corporation. However,
such provisions may also block stockholders from approving a potential takeover
of the Holding Company which a majority of such stockholders believe to be in
their best interests. These provisions provide for, among other things, limiting
voting rights of beneficial owners of more than 10% of the Common Stock,
staggered terms for directors, noncumulative voting for directors, limits on the
calling of special meetings, a fair price/supermajority vote requirement for
certain business combinations and certain notice requirements. The 10% vote
limitation would not affect the ability of an individual who is not the
beneficial owner of more than 10% of the Common Stock to solicit revocable
proxies in a public solicitation for proxies for a particular meeting of
stockholders and to vote such proxies. In addition, provisions in the
Association's federal stock Charter that have an anti-takeover effect could also
be applicable to changes in control of the Holding Company as the sole
shareholder of the Association. The Association's Charter includes a provision
applicable for five years which prohibits acquisitions and offers to acquire,
directly or indirectly, the beneficial ownership of more than 10% of the
Association's securities. Any person violating this restriction may not vote the
Association's securities in excess of 10%. Any or all of these provisions may
discourage potential proxy contests and other takeover attempts, particularly
those which have not been negotiated with the Board of Directors. In addition,
the Holding Company's certificate of incorporation also authorizes preferred
stock with terms to be established by the Board of Directors which may rank
prior to the Common Stock as to dividend rights, liquidation preferences, or
both, may have full or limited voting rights and may have a dilutive effect on
the ownership interests of holders of the Common Stock. See "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions."
Regulatory and Statutory Provisions. Federal regulations prohibit, for
a period of three years following the completion of the Conversion, any person
from offering to acquire or acquiring the beneficial ownership of more than 10%
of the stock of a converted savings institution or its holding company without
prior OTS approval. Federal law also requires OTS approval prior to the
acquisition of "control" (as defined in OTS regulations) of an insured
institution, including a holding company thereof. See "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions."
Change in Control Severance Agreements and Other Benefit Plans. The
change in control severance agreements and the proposed Stock Option Plan also
contain provisions that could have the effect of discouraging takeover attempts
of the Holding Company.
The Association intends to enter into change in control severance
agreements with President Kolar and Executive Vice President Case. Such
agreements become effective upon completion of the Conversion and have initial
terms of 24 and 12 months, respectively. In the event the applicable officer is
terminated following a change in control (as defined in the agreements), such
officer will be entitled to a severance payment equal to 200% and 100%,
respectively, of his annual compensation. For more information regarding these
agreements, see "Management - Change in Control - Severance Agreements."
The proposed Stock Option Plan contains a provision allowing the
Holding Company to issue "Limited Stock Appreciation Rights" which are
exercisable only with a change in control and which could have an anti-dilutive
effect. However, the Holding Company does not currently intend to issue any
Limited Stock Appreciation Rights. See "Management - Stock Option Plan."
Possible Dilutive Effects. The issuance of additional shares pursuant
to the proposed Stock Option Plan and RRP will result in a dilution in the
percentage of ownership of the Holding
27
<PAGE>
Company of those persons purchasing Common Stock in the Conversion, assuming
that the shares utilized to fund the proposed Stock Option Plan and RRP awards
come from authorized but unissued shares. Assuming the exercise of all options
available under the Stock Option Plan and the award of all shares available
under the RRP, and assuming the use of authorized but unissued shares, the
interest of stockholders will be diluted by approximately 9.1% and 3.8%,
respectively. See "Pro Forma Data," "Management - Benefit Plans - Stock Option
and Incentive Plan," and "- Recognition and Retention Plan" and "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions." The ownership
dilution caused by these plans will result in a lower level of (fully diluted)
earnings per share than would be the case if these plans were not implemented.
Also, for financial accounting purposes, certain incentive grants under the
proposed RRP will result in the recording of compensation expense over the
vesting period. See "Pro Forma Data."
Voting Control of Directors and Executive Officers. The directors and
executive officers (8 persons) of the Association are anticipated to purchase an
aggregate of approximately $385,000 or approximately .90% of the shares offered
in the Conversion at the minimum of the Estimated Valuation Range, or .67% of
the shares offered in the Conversion at the maximum of the Estimated Valuation
Range. Directors and executive officers will also receive awards under the
proposed Stock Option Plan and the proposed RRP. Assuming the purchase of
$385,500 of Common Stock in the Conversion by directors and executive officers
in the aggregate, the full vesting of the restricted stock to be awarded under
the proposed RRP and the issuance of shares from authorized but unissued shares
in connection with the exercise of all options intended to be awarded under the
proposed Stock Option Plan the Conversion and approval of the Stock Option Plan
and the RRP by the stockholders, the shares owned by the directors and executive
officers in the aggregate would be between ____% (at the maximum of the
Estimated Valuation Range) and ____% (at the minimum of the Estimated Valuation
Range) of the outstanding shares. In addition, the ESOP is expected to purchase
8% of the shares sold in the Conversion. This stock ownership, if voted as a
block, could defeat takeover attempts or other actions favored by other
stockholders.
Post Conversion Overhead Expense
After completion of the Conversion, the Holding Company's noninterest
expense is likely to increase as a result of the financial accounting, legal and
tax expenses usually associated with operating as a public company. See
"Regulation - Federal and State Taxation" and "Additional Information." In
addition, it is currently anticipated that the Holding Company will record
additional expense based on the proposed RRP. See "Pro Forma Data" and
"Management - Benefit Plans Recognition and Retention Plan." Finally, the
Holding Company will also record additional expense as a result of the adoption
of the ESOP. See "Management - Benefit Plans - Employee Stock Ownership Plan."
Statement of Position 93-6 "Employers' Accounting for Employee Stock
Ownership Plans" ("SOP 93-6") requires an employer to record compensation
expense in an amount equal to the fair value of shares committed to be released
to employees from an employee stock ownership plan. Assuming shares of Common
Stock appreciate in value over time, the adoption of SOP 93-6 may increase
compensation expense relating to the ESOP to be established in connection with
the Conversion as compared with prior guidance which required the recognition of
compensation expense based on the cost of shares acquired by the ESOP. It is
impossible to determine at this time the extent of such impact on future net
income. See "Management's Discussion and Analysis of
28
<PAGE>
Financial Condition and Results of Operations - Impact of New Accounting
Standards" and "Pro Forma Data."
Regulatory Oversight
The Association is subject to extensive regulation, supervision and
examination by the OTS as its chartering authority and primary federal
regulator, and by the FDIC, which insures its deposits up to applicable limits.
The Association is a member of the Federal Home Loan Bank (the "FHLB") of New
York and is subject to certain limited regulation by the Board of Governors of
the Federal Reserve System ("Federal Reserve Board"). As the savings and loan
holding company of the Association, the Holding Company will be subject to
regulation and oversight by the OTS. See "Regulation." Such regulation and
supervision governs the activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors.
Regulatory authorities have been granted extensive discretion in connection with
their supervisory and enforcement activities which are intended to strengthen
the financial condition of the banking industry, including the imposition of
restrictions on the operation of an institution, the classification of assets by
the institution and the adequacy of an institution's allowance for loan losses.
See "Regulation - Federal Regulation of Savings Associations" and "- Regulatory
Capital Requirements." Any change in such regulation and oversight, whether by
the OTS, the Federal Reserve Board, the FDIC or Congress, could have a material
impact on the Holding Company, the Association and their respective operations.
Risk of Delayed Offering
The Subscription Offering will expire at noon, Gloversville, New York
time, on ___________ __, 1998 unless extended by the Association and the Holding
Company. Depending on the availability of shares and market conditions at or
near the completion of the Subscription Offering, the Holding Company may
conduct a Public Offering through Capital Resources. If the Offering is extended
beyond __________ __, 1998, all subscribers will have the right to modify or
rescind their subscriptions and to have their subscription funds returned with
interest. There can be no assurance that the Offering will not be extended as
set forth above.
A material delay in the completion of the sale of all unsubscribed
shares in the Public Offering or otherwise may result in a significant increase
in the costs in completing the Conversion. Significant changes in the
Association's operations and financial condition, the aggregate market value of
the shares to be issued in the Conversion and general market conditions may
occur during such material delay. In the event the Conversion is not consummated
within 24 months after the date of the Special Meeting, OTS regulations would
require the Association to charge accrued Conversion costs to then-current
period operations. See "The Conversion - Risk of Delayed Offering."
Absence of Active Market for the Common Stock
The Holding Company has never issued capital stock. Consequently, there
is no existing market for the Holding Company Common Stock at this time.
Therefore, no assurance can be given that an established and liquid trading
market for the Holding Company Common Stock will develop
29
<PAGE>
or that resales of the Common Stock can be made at or above the Purchase Price.
Following the Conversion the Holding Company Common Stock will be traded in the
over-the-counter market. Although it has no obligation to do so, Capital
Resources intends to make a market for the Holding Company Common Stock,
depending upon the volume of trading activity in the common stock. See "Market
for Common Stock."
Possible Increase in Estimated Valuation Range and Number of Shares Issued and
Related Earnings Dilution
The number of shares to be sold in the Conversion may be increased as a
result of an increase in the maximum of the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following the
commencement of the Subscription Offering. An increase in the number of shares
issued would decrease the pro forma net earnings per share and stockholders'
equity per share but would increase the Company's pro forma consolidated
stockholders' equity and net earnings. See "Pro Forma Data."
Possible Consequences of Amendment to Plan of Conversion
The Plan of Conversion provides that, if deemed necessary or desirable
by the Boards of Directors of the Association and the Holding Company, the Plan
of Conversion may be substantively amended by a two-thirds vote of the
respective Boards of Directors of the Association and the Holding Company, as a
result of comments from regulatory authorities or otherwise, at any time with
the concurrence of the Securities and Exchange Commission ("SEC") and the OTS.
Moreover, if the Plan of Conversion is amended, subscriptions which have been
received prior to such amendment will not be refunded unless otherwise required
by the SEC or the OTS. If the Plan of Conversion is amended in a manner that is
deemed to be material to the subscribers by the Holding Company, subscription
funds will be returned to subscribers with interest unless they affirmatively
elect to increase, decrease or maintain their subscriptions. No such amendments
are currently contemplated, although the Association reserves the right to
increase or decrease purchase limitations without a subscriber resolicitation.
See "The Conversion - Approval, Interpretation, Amendment and Termination."
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
The Holding Company was formed at the direction of Gloversville Federal
in December 1997 for the purpose of becoming a savings and loan holding company
and owning all of the outstanding stock of the Association issued in the
Conversion. The Holding Company is incorporated under the laws of the State of
Delaware. The Holding Company is authorized to do business in the State of New
York, and generally is authorized to engage in any activity that is permitted by
the Delaware General Corporation Law. The business of the Holding Company
initially will consist only of the business of Gloversville Federal. The holding
company structure will, however, provide the Holding Company with greater
flexibility than the Association has to diversify its business activities,
through existing or newly formed subsidiaries, or through acquisitions or
mergers of stock financial institutions, as well as, other companies. Although
there are no current arrangements, understandings or agreements regarding any
such activity or acquisition, the Holding
30
<PAGE>
Company will be in a position after the Conversion, subject to regulatory
restrictions, to take advantage of any favorable acquisition opportunities that
may arise.
The assets of the Holding Company will consist initially of the stock
of Gloversville Federal, a note evidencing the Holding Company's loan to the
ESOP and up to 50% of the net proceeds from the Conversion (less the amount used
to fund the ESOP loan). See "Use of Proceeds." Initially, any activities of the
Holding Company are anticipated to be funded by such retained proceeds and the
income thereon and dividends from Gloversville Federal, if any. See "Dividends"
and "Regulation Holding Company Regulation." Thereafter, activities of the
Holding Company may also be funded through sales of additional securities,
through borrowings and through income generated by other activities of the
Holding Company. At this time, there are no plans regarding such other
activities other than the intended loan to the ESOP to facilitate its purchase
of Common Stock in the Conversion. See "Management - Benefit Plans - Employee
Stock Ownership Plan."
The executive office of the Holding Company is located at 52 North Main
Street, Gloversville, New York. Its telephone number at that address is (518)
725-6331.
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Gloversville Federal serves the financial needs of communities in its
market area through its main office located at 52 North Main Street,
Gloversville, New York and its branch office located at 295 Broadway, Saratoga
Springs, New York. Its deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC"). At September 30, 1997
Gloversville Federal had total assets of $61.0 million, deposits of $56.1
million and equity of $3.3 million (or 5.4% of total assets).
Gloversville Federal has been, and intends to continue to be, an
independent, community oriented, financial institution. Gloversville Federal's
business involves attracting deposits from the general public and using such
deposits, together with other funds, to originate one- to four-family
residential mortgage loans and, to a lesser extent, multi-family and commercial
real estate, commercial business, and home equity and other loans primarily in
its market area. The Association also invests in securities and other
permissible investments. See "Business - Investment Activities - Securities."
The executive office of the Association is located at 52 North Main
Street, Gloversville, New York. Its telephone number at that address is (518)
725-6331.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
anticipated that such net proceeds will be between $3.7 million and $5.2 million
(or up to $6.1 million in the event of an increase in the aggregate pro forma
market value of the Common Stock of up to 15% above the maximum of the Estimated
31
<PAGE>
Valuation Range). See "Pro Forma Data" and "The Conversion - Stock Pricing and
Number of Shares to be Issued" as to the assumptions used to arrive at such
amounts.
In exchange for all of the common stock of Gloversville Federal issued
upon conversion, the Holding Company will contribute approximately 50% of the
net proceeds from the sale of the Holding Company's Common Stock to Gloversville
Federal; provided that the amount retained by the Holding Company will be
reduced to the extent required, so that, upon the completion of the transaction,
the Association's ratio of capital to assets is at least 10%. On an interim
basis, the proceeds will be invested by the Holding Company in short-term
investments. The specific types and amounts of short-term assets will be
determined based on market conditions at the time of the completion of the
Conversion. In addition, the Holding Company intends to provide the funding for
the ESOP loan. Based upon the initial Purchase Price of $10.00 per share, the
dollar amount of the ESOP loan would range from $340,000 (based upon the sale of
shares at the minimum of the Estimated Valuation Range) to $460,000 (based upon
the sale of shares at the maximum of the Estimated Valuation Range). The
interest rate to be charged by the Holding Company on the ESOP loan will be
based upon the IRS prescribed applicable federal rate at the time of
origination. It is anticipated that the ESOP will repay the loan through
periodic tax-deductible contributions from the Association over a ten-year
period.
The net proceeds received by Gloversville Federal will become part of
Gloversville Federal's general funds for use in its business and will be used to
support the Association's existing operations, subject to applicable regulatory
restrictions. Immediately upon the completion of the Conversion, it is
anticipated that the Association will invest such proceeds into short-term
assets. Subsequently, the Association will redirect the net proceeds to the
origination of loans, subject to market conditions. In addition, a portion of
the net proceeds may also be utilized to pay down borrowings, subject to future
market conditions.
After the completion of the Conversion, the Holding Company will
redirect the net proceeds invested by it in short-term assets into a variety of
mortgage-backed securities and other securities similar to those already held by
the Association. Also, the Holding Company may use a portion of the proceeds to
fund the RRP, subject to shareholder approval of such plan. Compensation expense
related to the RRP will be recognized as share awards vest. See "Pro Forma
Data." Following stockholder ratification of the RRP, the RRP will be funded
either with shares purchased in the open market or with authorized but unissued
shares. Based upon the initial Purchase Price of $10.00 per share, the amount
required to fund the RRP through open-market purchases would range from
approximately $170,000 (based upon the sale of shares at the minimum of the
Estimated Valuation Range) to approximately $340,000 (based upon the sale of
shares at the maximum of the Estimated Valuation Range). In the event that the
per share price of the Common Stock increases above the $10.00 per share
Purchase Price following completion of the Offering, the amount necessary to
fund the RRP would also increase. The use of authorized but unissued shares to
fund the RRP could dilute the holdings of stockholders who purchase Common Stock
in the Conversion. See "Business Lending Activities" and " - Investment
Activities" and "Management - Benefit Plans - Employee Stock Ownership Plan" and
"- Recognition and Retention Plan."
32
<PAGE>
The proceeds may also be utilized by the Holding Company to repurchase
(at prices which may be above or below the initial offering price) shares of the
Common Stock through an open market repurchase program subject to limitations
contained in OTS regulations, although the Holding Company currently has no
specific plan to repurchase any of its stock. In the future, the Board of
Directors of the Holding Company will make decisions on the repurchase of the
Common Stock based on its view of the appropriateness of the price of the Common
Stock as well as the Holding Company's and the Association's investment
opportunities and capital needs. Under current OTS regulations, no repurchases
may be made within the first year following Conversion except with OTS approval
under "exceptional circumstances." During the second and third years following
Conversion, OTS regulations permit, subject to certain limitations, the
repurchase of up to five percent of the outstanding shares of stock during each
twelve-month period with a greater amount permitted with OTS approval. In
general, the OTS regulations do not restrict repurchases thereafter, other than
limits on the Association's ability to pay dividends to the Holding Company to
fund the repurchase. For a description of the restrictions on the Association's
ability to provide the Holding Company with funds through dividends or other
distributions, see "Dividends" and "The Conversion - Restrictions on Repurchase
of Stock."
DIVIDENDS
The Board of Directors of the Holding Company has not yet established a
policy with respect to the payment of cash dividends on the Common Stock.
Dividends, when and if paid, will be subject to determination and declaration by
the Board of Directors at its discretion. The Holding Company may also consider
making a one time only special dividend or distribution (including a tax-free
return of capital) provided that the Holding Company will take no steps toward
making such a distribution for at least one year following the completion of the
Conversion. While the Holding Company's Board of Directors has not established
any quantitative factors to utilize in making decisions regarding dividends, it
currently anticipates that it will take into account the Holding Company's
consolidated financial condition, the Association's regulatory capital
requirements, relevant tax considerations, industry standards, economic
conditions, regulatory restrictions, general business practices and other
factors. In no event will the Holding Company pay a cash dividend if the
Association is not meeting its regulatory capital requirements.
It is not presently anticipated that the Holding Company will conduct
significant operations independent of those of Gloversville Federal for some
time following the Conversion. As such, the Holding Company does not expect to
have any significant source of income other than earnings on the net proceeds
from the Conversion retained by the Holding Company (which proceeds are
currently estimated to range from $3.7 million to $5.2 million based on the
minimum and the maximum of the Estimated Valuation Range, respectively) and
dividends from Gloversville Federal, if any. Consequently, the ability of the
Holding Company to pay cash dividends to its stockholders will be dependent upon
such retained proceeds and earnings thereon, and upon the ability of
Gloversville Federal to pay dividends to the Holding Company. See "Description
of Capital Stock Holding Company Capital Stock - Dividends." Gloversville
Federal, like all savings associations regulated by the OTS, is subject to
certain restrictions on the payment of dividends based on its net income, its
capital in excess of the regulatory capital requirements and the amount of
regulatory capital required for the liquidation account to be established in
connection with the Conversion. See "The Conversion - Effects of Conversion to
Stock Form on Depositors and Borrowers of the Association - Liquidation Rights"
and "Regulation - Regulatory Capital Requirements" and
33
<PAGE>
"- Limitations on Dividends and Other Capital Distributions." Earnings allocated
to Gloversville Federal's "excess" bad debt reserves and deducted for federal
income tax purposes cannot be used by Gloversville Federal to pay cash dividends
to the Holding Company without adverse tax consequences. See "Regulation -
Federal and State Taxation."
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. Following the
completion of the Conversion, it is anticipated that the Common Stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. Capital Resources has indicated its intention to make a market
in the Common Stock. If the Common Stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that transactions in the Common Stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Capital Resources will not be
subject to any obligation with respect to such efforts.
There can be no assurance that an active or liquid trading market will
develop for the Common Stock, or if a market develops, that it will continue. A
public market having the desirable characteristics of depth, liquidity and
orderliness depends upon the presence in the marketplace of both willing buyers
and sellers of the Common Stock at any given time, which is not within the
control of the Holding Company or any market maker. Accordingly, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price.
PRO FORMA DATA
The following table sets forth the historical net loss, equity and per
share data of Gloversville Federal at and for the fiscal year ended September
30, 1997, and after giving effect to the Conversion, the pro forma net loss,
capital stock and stockholders' equity and per share data of the Holding Company
at and for the fiscal year ended September 30, 1997. The pro forma data has been
computed on the assumptions that (i) the specified number of shares of Common
Stock was sold at the beginning of the specified period and yielded net proceeds
to the Holding Company as indicated, (ii) 50% of such net proceeds were retained
by the Holding Company and the remainder were used to purchase all of the stock
of Gloversville Federal, and (iii) such net proceeds, less the amount of the
ESOP and RRP funding, were invested by the Association and Holding Company at
the beginning of the period to yield a pre-tax return of 5.44% for the fiscal
year ended September 30, 1997. The after-tax rate of return is 3.26% assuming a
combined state and federal income tax rate of 40%. The assumed return is based
upon the market yield rate of one-year U.S. Government Treasury Securities as of
September 30, 1997. The use of this current rate is viewed to be more relevant
in the current interest rate environment than the use of an arithmetic average
of the weighted average yield earned by the Association on its interest-earning
assets and the weighted average rate paid on its deposits during such periods.
Expenses (including the Capital Resources marketing fee) are estimated to be
$508,200. The pro forma net loss amounts derived from the assumptions set forth
herein should not be considered indicative of the actual results of operations
of the Holding
34
<PAGE>
Company that would have been attained for any period if the Conversion had been
actually consummated at the beginning of such period, and the assumptions
regarding investment yields should not be considered indicative of the actual
yields expected to be achieved during any future period.
The total number of shares to be issued in the Conversion may be
increased or decreased significantly, or the price per share decreased, to
reflect changes in market and financial conditions prior to the close of the
Offering. However, if the aggregate Purchase Price of the Common Stock sold in
the Conversion is below $4,250,000 (the minimum of the Estimated Valuation
Range) or more than $6,612,500 (15% above the maximum of the Estimated Valuation
Range), subscribers will be offered the opportunity to modify or cancel their
subscriptions. See "The Conversion - Stock Pricing and Number of Shares to be
Issued."
35
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended September 30, 1997
---------------------------------------------------------------
15% Above
Minimum Midpoint Maximum Maximum
425,000 500,000 575,000 661,250
Shares at Shares at Shares at Shares at
$10.00 per $10.00 per $10.00 per $10.00 per
Share Share Share Share
-------------- --------------- --------------- ----------------
(Dollars in Thousands, Except Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds................................................ $ 4,250 $ 5,000 $ 5,750 $ 6,613
Less offering expenses and commissions........................ 508 508 508 508
Estimated net conversion proceeds............................ 3,742 4,492 5,242 6,105
Less ESOP shares.............................................. (340) (400) (460) (529)
Less RRP shares............................................... (170) (200) (230) (265)
---------- --------- ---------- ---------
Estimated proceeds available for investment(1)............... $ 3,232 $ 3,892 $ 4,552 $ 5,311
======== ======== ========= ========
Net Loss:
Historical................................................. (583) (583) (583) (583)
Pro Forma Adjustments:
Net earnings from proceeds(2).............................. 105 127 149 173
ESOP(3).................................................... (20) (24) (28) (32)
RRP(4)..................................................... (20) (24) (28) (32)
----------- --------- ----------- -----------
Pro forma net loss(5).................................... $ (518) $ (504) $ (490) $ (474)
========= ======== ========= ==========
Net Loss Per Share:
Historical(6)............................................. $ (1.48) $ (1.26) $ (1.10) $ (0.95)
Pro forma Adjustments:
Net earnings from proceeds................................ 0.27 0.27 0.28 0.28
ESOP(3)................................................... (0.05) (0.05) (0.05) (0.05)
RRP(4).................................................... (0.05) (0.05) (0.05) (0.05)
---------- --------- ---------- ----------
Pro forma net loss per share(4)......................... $ (1.31) $ (1.09) $ (0.92) $ (0.77)
========= ========= ========= =========
Number of shares using SOP 93-6(3)................. 392,700 462,000 531,300 610,995
Stockholders' Equity (Book Value)(7):
Historical.................................................. $ 3,280 $ 3,280 $ 3,280 $ 3,280
Pro Forma Per Share Adjustments:
Estimated net Conversion proceeds........................... 3,742 4,492 5,242 6,105
Less common stock acquired by:
ESOP(3).................................................... (340) (400) (460) (529)
RRP(4)..................................................... (170) (200) (230) (265)
---------- ---------- ---------- ----------
Pro forma book value(4)................................ $ 6,512 $ 7,172 $ 7,832 $ 8,591
========= ========= ======== =========
Stockholders' Equity (Book Value)(7):
Per Share(6):
Historical.................................................. 7.72 6.56 5.70 4.96
Pro Forma Per Share Adjustments:
Estimated net Conversion proceeds........................... 8.80 8.98 9.12 9.23
Less common stock acquired by:
ESOP(3).................................................... (0.80) (0.80) (0.80) (0.80)
RRP(4)..................................................... (0.40) (0.40) (0.40) (0.40)
------ ------ ---------- -----------
Pro forma book value per share(5)...................... 15.32 14.34 13.62 12.99
====== ===== ========= ===========
Offering Price per share as a percentage of Pro Forma
Stockholders' equity per share............................. 65.27% 69.74% 73.42% 76.98%
====== ====== ========= ==========
Offering price per share as a percentage of Pro Forma net
loss per share............................................. (7.63)% (9.17) (10.87) (12.99)
====== ====== ========= ==========
Number of shares.............................................. 425,000 500,000 575,000 661,250
</TABLE>
36
<PAGE>
(1) Reflects a reduction to net proceeds for the cost of the ESOP and the RRP
(which is subject to shareholder ratification) which it is assumed will be
funded from the net proceeds retained by the Holding Company.
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Conversion. For purposes of
calculating pro forma net income, proceeds attributable to purchases by the
ESOP and RRP, which purchases are to be funded by the Holding Company and
the Association, have been deducted from net proceeds.
(3) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP from the net proceeds from the
Conversion retained by the Holding Company. The Association intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. The Association's payment of the ESOP
debt is based upon equal installments of principal and interest over a
ten-year period. However, assuming the Holding Company makes the ESOP loan,
interest income earned by the Holding Company on the ESOP debt will offset
the interest paid by the Association. Accordingly, only the principal
payments on the ESOP debt are recorded as an expense (after giving effect
to a combined Federal and state income tax rate of 40%) to the Holding
Company on a consolidated basis. The amount of ESOP debt is reflected as a
reduction of stockholders' equity. In the event that the ESOP were to
receive a loan from an independent third party, both ESOP expense and
earnings on the proceeds retained by the Holding Company would be expected
to increase.
(4) Adjustments to both book value and net earnings have been made to give
effect to the proposed open market purchase (based upon an assumed purchase
price of $10.00 per share) following Conversion by the RRP (subject to
stockholder ratification of such plan) of an amount of shares equal to 4%
of the shares of Common Stock sold in the Conversion for the benefit of
certain directors, officers and employees. Funds used by the RRP to
purchase the shares will be contributed to the RRP by the Holding Company
if the RRP is ratified by stockholders following the Conversion. Therefore,
this funding is assumed to reduce the proceeds available for reinvestment.
For financial accounting purposes, the amount of the contribution will be
recorded as a compensation expense (after giving effect to a combined
Federal and state income tax rate of 40%) over the period of vesting. These
grants are scheduled to vest in equal annual installments over the five
years following stockholder ratification of the RRP. However, all unvested
grants will be forfeited in the case of recipients who fail to maintain
continuous service with the Holding Company or its subsidiaries. In the
event the RRP is unable to purchase a sufficient number of shares of Common
Stock to fund the RRP, the RRP may issue authorized but unissued shares of
Common Stock from the Holding Company to fund the remaining balance. In the
event the RRP is funded by the issuance of authorized but unissued shares
in an amount equal to 4% of the shares sold in the Conversion, the
interests of existing stockholders would be diluted by approximately 3.8%.
In the event that the RRP is funded through authorized but unissued shares,
for the year ended September 30, 1997, pro forma net income per share would
be $(1.25), $(1.03), $(0.87) and $(0.72), respectively, and pro forma
stockholders' equity per share would be $15.12, $14.18, $13.48 and $12.88,
respectively, in each case at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range.
(5) No effect has been given to the shares to be reserved for issuance under
the proposed Stock Option Plan which is expected to be adopted by the
Holding Company following the Conversion, subject to stockholder approval.
In the event the Stock Option Plan is funded by the issuance of authorized
but unissued shares in an amount equal to 10% of the shares sold in the
Conversion, at $10.00 per share and all options are vested and exercised
immediately, the interests of existing stockholders would be diluted as
follows: pro forma net income per share for the year ended September 30,
1997 would be $(1.17), $(0.96), $(0.81) and $(0.67), respectively, and pro
forma stockholders' equity per share would be $14.84, $13.95, $13.30 and
$12.72 , respectively, in each case at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range. In the alternative,
the Holding Company may purchase shares in the open market to fund the
Stock Option Plan following stockholder approval of such plan. To the
extent, the entire 10% of the shares to be reserved for issuance under the
Stock Option Plan were funded through open market purchases at the Purchase
Price of $10.00 per share, proceeds available for reinvestment would be
reduced by $425,000, $500,000, $575,000 and $661,250 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range. See "Management - Benefit Plans - Stock Option and Incentive Plan."
(6) Historical pro forma per share amounts have been computed as if the shares
of Common Stock indicated had been outstanding at the beginning of the
periods or on the dates shown, but without any adjustment of historical net
income or historical equity to reflect the investment of the estimated net
proceeds of the sale of shares in the Conversion as described above. All
ESOP shares have been considered outstanding for purposes of computing book
value per share. Pro forma share amounts have been computed by dividing the
pro forma net income or stockholders' equity (book value) by the number of
shares indicated as outstanding under SOP 93-6.
(7) "Book value" represents the difference between the stated amounts of the
Association's assets and liabilities computed in accordance with generally
accepted accounting principles. The amounts shown do not reflect the effect
of the Liquidation Account which will be established for the benefit of
Eligible and Supplemental Eligible Account Holders in the Conversion, or
the federal income tax consequences of the restoration to income of the
Association's special bad debt reserves for income tax purposes which would
be required in the unlikely event of liquidation. See "The Conversion -
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association" and "Regulation - Federal and State Taxation." The amounts
shown for book value do not represent fair market values or amounts, if
any, distributable to stockholders in the unlikely event of liquidation.
37
<PAGE>
PRO FORMA REGULATORY CAPITAL ANALYSIS
At September 30, 1997, the Association would have exceeded each of the OTS
capital requirements on both a current and a fully phased-in basis. Set forth
below is a summary of the Association's compliance with the OTS capital
standards as of September 30, 1997 based on historical capital and also assuming
that the indicated number of shares were sold as of such date using the
assumptions contained under the caption "Pro Forma Data."
<TABLE>
<CAPTION>
Pro Forma at September 30, 1997
-------------------------------------------------------------------------------------
661,750 Shares
425,000 Shares 500,000 Shares 575,000 Shares 15% above
Historical Minimum Midpoint Maximum Maximum
------------------- ------------------- -------------------- -------------------- -----------------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
--------- --------- --------- --------- --------- ---------- --------- ---------- --------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital(2)........... $3,280 5.37% $5,902 9.27% $6,459 10.00% $6,469 10.00% $6,481 10.00%
====== ==== ====== ==== ====== ===== ====== ===== ====== =====
Tangible Capital(3):
Capital level........... $3,301 5.41% $5,923 9.23% $6,480 10.00% $6,490 10.00% $6,502 10.00%
Requirement............. 915 1.50 962 1.50 972 1.50 974 1.50 975 1.50
-------- ---- ------- ---- ------- ------ -------- ------ ------
Excess.................. $2,386 3.91% $4,961 7.73% $5,508 8.50% $5,516 8.50% $5,527 8.50%
====== ==== ====== ==== ====== ==== ====== ====== ====== ======
Core Capital(3):
Capital level........... $3,301 5.41% $5,923 9.23% $6,480 10.00% $6,490 10.00% $6,502 10.00%
Requirement(4).......... 1,830 3.00 1,924 3.00 1,944 3.00 1,947 3.00 1,950 3.00
------- ---- ------ ---- ------ ------ ------- ------ ------- ------
Excess.................. $1,471 2.41% $3,999 6.23% $4,536 7.00% $4,543 7.00% $4,552 7.00%
====== ==== ====== ==== ====== ====== ====== ====== ====== ======
Risk-Based Capital(3):
Capital level(5)........ $3,788 10.01% $6,410 16.66% $6,966 18.05% $6,976 18.07% $6,988 18.09%
Requirement(1).......... 3,027 8.00 3,077 8.00 3,088 8.00 3,089 8.00 3,091 8.00
------ ------ ------ ------ ----- ------ ------- ------ ------- ------
Excess.................. $ 761 2.01% $3,333 8.66% $3,878 10.05% $3,887 10.07% $3,897 10.09%
======= ====== ====== ====== ====== ===== ====== ===== ====== =====
</TABLE>
(1) Pro forma amounts and percentages assume net proceeds are invested in
assets that carry a 20% risk-weight, such as short-term interest-bearing
deposits.
(2) Total equity as calculated under generally accepted accounting principles
("GAAP"). Assumes that the Association receives 50% of the net proceeds or
such amount as will give the Association, upon completion of the
transaction, a capital to assets ratio of 10% when possible, offset in
part, by the aggregate Purchase Price of Common Stock acquired at a price
of $10.00 per share by the ESOP in the Conversion and the RRP (assuming
stockholder ratification of such plan following completion of the
Conversion).
(3) Tangible and core capital figures are determined as a percentage of
adjusted total assets; risk-based capital figures are determined as a
percentage of risk-weighted assets. Unrealized gains and losses on debt
securities available for sale are excluded from tangible, core and
risk-based capital. Adjusted total assets at the minimum, midpoint, maximum
and 15% above the maximum were $64,133, $64,800, $64,933 and $65,000,
respectively. Risk weighted assets at the minimum, midpoint, maximum and
15% above the maximum were $38,462, $38,600, $38,612 and $38,637,
respectively.
(4) In April 1991, the OTS proposed a core capital requirement for savings
associations comparable to the requirement for national banks that became
effective on November 30, 1990. This proposed core capital ratio is 3% of
total adjusted assets for thrifts that receive the highest supervisory
rating for safety and soundness ("CAMEL" rating), with a 4% to 5% core
capital requirement for all other thrifts. See "Regulation - Regulatory
Capital Requirements."
(5) Includes $486,000 of the allowance for loan losses which qualifies as
supplementary capital. See "Regulation - Regulatory Capital Requirements."
38
<PAGE>
CAPITALIZATION
Set forth below is the capitalization, including deposits, of
Gloversville Federal as of September 30, 1997, and the pro forma capitalization
of the Holding Company at the minimum, the midpoint, the maximum and 15% above
the maximum of the Estimated Valuation Range, after giving effect to the
Conversion and based on other assumptions set forth in the table and under the
caption "Pro Forma Data."
<TABLE>
<CAPTION>
Holding Company - Pro Forma Based
Upon Sale at $10.00 per share
---------------------------------------------------------
Maximum
Actual, As of Minimum Midpoint Maximum as adjusted
September 30, 425,000 500,000 575,000 661,250
1997 Shares Shares Shares Shares
--------------- ------------- ------------ -------------- ---------------
(In Thousands, Except Share Amounts)
<S> <C> <C> <C> <C> <C>
Deposits(1)................................. $56,117 $56,117 $56,117 $56,117 $56,117
Borrowings.................................. 1,300 1,300 1,300 1,300 1,300
--------- --------- --------- --------- ---------
Total deposits and borrowed funds....... $57,417 $57,417 $57,417 $57,417 $57,417
======= ======= ======= ======= =======
Stockholders' Equity:
Common Stock ($0.01 par value)
5,000,000 shares authorized; shares to be
Issued as reflected(2)................... -- 4 5 6 7
Additional paid-in capital................ -- 3,738 4,487 5,236 6,098
Retained earnings, substantially
restricted(3)............................. 3,301 3,301 3,301 3,301 3,301
Net unrealized loss on securities available
for sale............................... (21) (21) (21) (21) (21)
Preferred Stock.............................
Less:
Common Stock acquired by ESOP(4).......... -- (340) (400) (460) (529)
Common Stock acquired by RRP(4)........... -- (170) (200) (230) (265)
----------- -------- --------- --------- ---------
Total Stockholders' Equity.............. $ 3,280 $ 6,512 $ 7,172 $ 7,832 $ 8,591
======= ======= ======= ======= =======
</TABLE>
(1) No effect has been given to withdrawals from deposit accounts for the
purpose of purchasing Common Stock in the Conversion. Any such withdrawals
will reduce pro forma deposits by the amount of such withdrawals.
(2) Does not reflect the shares of Common Stock that may be reserved for
issuance pursuant to the Stock Option Plan.
(3) See "Dividends" and "Regulation - Limitations on Dividends and Other
Capital Distributions" regarding restrictions on future dividend payments
and "The Conversion - Effects of Conversion to Stock Form on Depositors and
Borrowers of the Association" regarding the liquidation account to be
established upon Conversion.
(4) Assumes that 8% of the shares sold in the Conversion will be purchased by
the ESOP. The funds used to acquire the ESOP shares will be borrowed from
the Holding Company. The Association intends to make contributions to the
ESOP sufficient to service and ultimately retire the ESOP's debt over a
ten-year period. Also assumes that an amount of shares equal to 4% of the
amount of shares sold in the Conversion will be acquired by the RRP,
following shareholder ratification of such plan after completion of the
Conversion. In the event that the RRP is funded by the issuance of
authorized but unissued shares in an amount equal to 4% of the shares sold
in the Conversion, the interest of existing stockholders would be diluted
by approximately 3.8%. The amount to be borrowed by the ESOP and the Common
Stock acquired by the RRP is reflected as a reduction of stockholders'
equity. See "Management - Benefit Plans - Employee Stock Ownership Plan"
and "- Recognition and Retention Plan."
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Association's financial statements and related notes and with the
statistical information and financial data included in this document.
39
<PAGE>
When used in this document, the words or phrases "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "project", or
similar expressions are intended to identify "forward looking statements." Such
statements are subject to certain risks and uncertainties-including, changes in
economic conditions in the Association's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Association's market area, and competition that could cause actual results to
differ materially from historical results and those presently anticipated or
projected. The Association wishes to caution readers not to place undue reliance
on any such forward looking statements, which speak only as of the date made.
The Association wishes to advise readers that the factors listed above could
affect the Association's financial performance and could cause the Association's
actual results for future periods to materially differ from any opinions or
statements expressed with respect to future periods in any current statements.
General
The Company has only recently been formed and, accordingly, has no
results of operations at this time. Therefore, the following discussion
principally reflects the operations of the Association. The Association's
results of operations are predominantly dependent on its net interest income,
which is the difference between the interest income earned on its
interest-earning assets, primarily loans and securities available for sale, and
the interest expense on its interest-bearing liabilities, primarily deposits and
borrowings. Net interest income may be affected significantly by general
economic and competitive conditions and policies of regulatory agencies,
particularly those with respect to market interest rates. The results of
operations are also significantly influenced by the level of non-interest
expenses, such as employee compensation and benefits, non-interest income, such
as fees and service charges, and the Association's provision for loan losses.
The Board of Directors believes that post-conversion non-interest expense levels
will likely rise significantly from historical levels as a result of the
implementation of ESOP and RRP as well as the accrual of additional expenses
related to operations as a public company.
The Association operates as a community-oriented financial
institution, obtaining deposits from its local community and investing those
deposits principally in residential one-to-four-family mortgage loans, and, to a
lesser extent, multi-family and commercial real estate, commercial business,
home equity and other loans. In addition, the Association invests excess funds
not used for loan originations in securities issued by the United States
government or its agencies, and mortgage backed securities.
The Association has recorded significant losses from operations over
the last several years due primarily to losses related to loans (including
additions to the allowance for loan losses, a charge to operations for past due
property taxes on certain non-performing residential loans on which tax payments
were not effectively monitored and valuation adjustments and expenses related to
foreclosed real estate). The Association's provisions for loan losses were
$792,000, $714,000 and $129,000 for fiscals 1997, 1996, and 1995, respectively.
In addition, other real estate expenses totaled $73,000, $27,000 and $127,000
for fiscal 1997, 1996 and 1995, respectively. Finally, during fiscal 1996, the
Association recorded a $318,000 change to operations from past due real estate
taxes on certain non performing residential loans. In addition to these real
estate lending related expenses, in 1996 the Association recorded a $415,000 pre
tax accrual for a special FDIC assessment.
The Association's net income (loss) was ($583,000), ($1.0 million) and
$251,000 for the years ended September 30, 1997, 1996 and 1995, respectively.
The Association has attempted to address these losses through increased loan
monitoring (including the hiring of an internal auditor and credit analyst),
tightened loan underwriting standards and enhanced collection procedures. In
addition, in fiscal 1995, the Association began to focus a portion of its
lending on multi-family and commercial real estate, and commercial business
loans. In view of (i) the higher level of credit risk inherent in the
Association's new multi-family and commercial real estate and commercial
business lending activities, (ii) the relatively low level of loan demand and
high level of competition in much of the Association's market area, (iii) the
decline in real estate values in much of the Association's market area, (iv) the
higher level of expense required for the increased monitoring of the portfolio
and the expansion of the types of lending products offered and (v) the
Association's continued vulnerability to changes in interest rates, there can be
no assurance that the Association's results of operations will return to
satisfactory levels in the future.
40
<PAGE>
Market Risk Analysis
The Association's net interest income is sensitive to changes in
interest rates, as the rates paid on its interest-bearing liabilities generally
change faster than the rates earned on its interest-earning assets. As a result,
net interest income will frequently decline in periods of rising interest rates
and increase in periods of decreasing interest rates.
In managing its asset/liability mix, Gloversville Federal, depending
on the relationship between long- and short-term interest rates, market
conditions and consumer preference, often places more emphasis on managing short
term net interest margin than on better matching the interest rate sensitivity
of its assets and liabilities. Management believes that the increased net
interest income resulting from a mismatch in the maturity of its asset and
liability portfolios can, during periods of declining or stable interest rates,
provide high enough returns to justify the increased exposure to sudden and
unexpected increases in interest rates.
The Board has taken a number of steps to manage the Association's
vulnerability to changes in interest rates. First, in connection with the
Association's decision to increase the Association's multi-family and commercial
real estate and commercial business lending as well as its increased emphasis in
home equity lending, the Association has increased its interest rate sensitive
lending (which includes all loans which reprice in five years or less). The
Association's interest rate sensitive loans have increased from none at
September 30, 1993 to $15.4 million or 30.0% of the portfolio at September 30,
1997. Second, the Association has used community outreach, customer service and
marketing efforts to acquire the proportion of its deposits consisting of money
market and other transaction accounts. These deposits are believed to be less
interest rate sensitive than other types of deposit accounts. The Association's
money market and transaction accounts have increased from $23.9 million or 41.3%
of deposits at September 30, 1995 to $28.1 million or 50.1% of deposits at
September 30, 1997. Finally, the Association has focused a significant portion
of its investment activities on securities with adjustable interest rates or
terms of five years or less. At September 30, 1997, $3.6 million or 100% of the
Association's mortgage-backed securities had adjustable interest rates or terms
to maturity of five years or less and $2.0 million or 67.0% of the Association's
other securities had adjustable interest rates or terms to maturity of five
years or less based on their amortized cost.
The asset and liability strategies are implemented by the
Association's asset/liability management committee that meets periodically to
determine the rates of interest for loans and deposits and consists of the
President, the Executive Vice President, and the Vice President of Lending.
Interest rates on loans in the short-term are primarily based on the interest
rates offered by other financial institutions in the Association's market area
as well as on the availability of funds. Rates on deposits in the short-term are
primarily based on the Association's need for funds and on a review of rates
offered by other financial institutions in the Association's market area.
Ultimately, the customer plays a significant role in the establishment of both
loan and deposit rates, as it is necessary to remain competitive in both loan
and deposit markets in order to maintain or further expand the customer base.
The Committee develops longer-term pricing strategies based on review
of interest rate sensitivity reports produced quarterly. The Committee also
monitors the impact of the interest rate risk and earnings consequences of such
strategies for consistency with the Association's liquidity needs, growth, and
capital adequacy. The Board of Directors receive and review the Association's
estimated interest rate sensitivity report every quarter.
In order to encourage savings associations to reduce their interest
rate risk, the OTS adopted a rule incorporating an interest rate risk ("IRR")
component into the risk-based capital rules. For various technical reasons, the
OTS has delayed the effectiveness of the rule. Under the rule, the IRR
41
<PAGE>
component is measured in terms of the sensitivity of the net portfolio value
("NPV") to changes in interest rates. NPV is the difference between incoming and
outgoing discounted cash flows from assets, liabilities, and off-balance sheet
contracts. 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. When
the rule becomes effective, 50% of any resulting change in NPV as a percentage
of the present value of total assets of more than 2% of the estimated present
value of total assets ("PV") must be deducted from capital. If this rule had
been in effect at September 30, 1997, the Association would have been required
to deduct $44,000 from its capital in determining its risk-based capital.
The following table presents the Association's NPV at September 30,
1997, as calculated by the OTS, based on quarterly information provided to the
OTS by the Association.
NPV
Estimated to
Assumed Basis Point NPV PV of Change % Change
Change in Interest Rates Amount Total Assets in NPV in NPV
- ------------------------------------------------------------------------------
(Basis Points)
(Dollars in Thousands)
+400 $2,762 4.62% $(3,176) (53.49)%
+300 3,676 6.04% (2,262) (38.09)%
+200 4,578 7.39% (1,360) (22.90)%
+100 5,378 8.55% (560) (9.43)%
--- 5,938 9.33% -- --
-100 6,179 9.65% 241 4.06%
-200 6,441 9.99% 503 8.47%
-300 6,802 10.46% 864 14.55%
-400 7,388 11.23% 1,450 24.42%
Certain assumptions utilized by the OTS in assessing the interest rate
risk of savings associations were employed in preparing the previous table.
These assumptions related to interest rates, loan prepayment rates, deposit
decay rates, and the market values of certain assets under the various interest
rate scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Association's assets and liabilities would perform
as set forth above.
Financial Condition
Comparison of Financial Condition at September 30, 1997 and September
30, 1996. Total assets were $61.0 million at both September 30, 1997 and 1996. A
$724,000 or 60.5% increase in cash and cash equivalents and a $243,000 increase
in other real estate owned, from September 30, 1996 to September 30, 1997, were
offset by a decrease during these same periods in securities available for sale
of $422,000 or 5.7%, a net decrease in premises and equipment of $255,000 or
14.2% and a decrease in prepaid expenses and other assets of $167,000 or 30.9%.
While gross loans receivable increased by only $204,000, there were
substantial changes in the composition of the loan portfolio. Residential one-
to four-family loans declined by $3.4 million
42
<PAGE>
or 8.4% from September 30, 1996 to September 30, 1997. Multi-family and
commercial real estate loans increased $3.3 million or 71.5% from September 30,
1996 to September 30, 1997. Construction loans declined $399,000 or 42.5%, and
home equity loans increased by $511,000 or 17.8% from September 30, 1996 to
September 30, 1997. Commercial business loans increased by $192,000 or 15.6%
while other consumer loans decreased by $43,000 or 3.7%. The loan composition
change reflected the Association's efforts to improve the yield earned on the
loan portfolio and increase the percentage of adjustable rate loans in the loan
portfolio. See "Business Lending Activities."
Securities available for sale decreased primarily from principal
payments received on mortgage-backed securities. There were no securities held
to maturity at September 30, 1997 or 1996.
Prepaid expenses and other assets decreased $167,000 or 30.9%
primarily from tax refunds received and a decline in the Association's net
deferred tax assets. Net premises and equipment decreased $255,000 or 14.2%
through normal depreciation.
Cash and cash equivalents increased $724,000 or 60.5% from $1.2
million at September 30, 1996 to $1.9 million at September 30, 1997 primarily as
a result of a new requirement to maintain a $500,000 compensating balance at a
correspondent bank.
The Association's total deposits showed little change from September
30, 1996 to September 30, 1997, increasing by $401,000, or approximately 1.0%,
to $56.1 million from $55.7 million. Within the various deposit classifications,
from September 30, 1996 to September 30, 1997, time deposit increases of $1.0
million or 3.7%, and money market account increases of $558,000 or 5.4% were
partially offset by a $1.1 million or 8.6% decrease in savings account balances.
Borrowings increased from $300,000 at September 30, 1996 to $1.3
million at September 30, 1997. The increase in borrowings was the result of the
Association taking advantage of alternative funding sources whose maturity and
pricing were more closely aligned with the Association's funding needs.
Accrued expenses and other liabilities declined by $875,000 or 72.9%
from September 30, 1996 to September 30, 1997. Approximately $415,000 of the
accrued expenses and other liabilities at September 30, 1996 was the special
one-time assessment levied by the FDIC to recapitalize the Savings Association
Insurance Fund ("SAIF") which was paid during fiscal year ended September 30,
1997. See Note 11 to the Financial Statements. In addition, $210,000 of the
accrued expenses and other liabilities at September 30, 1996, which related to
the Association's computer conversion and the newly constructed Gloversville
office drive-thru, was also paid in fiscal 1997. Lastly, approximately $318,000
was expensed, of which $249,000 remained unpaid at September 30, 1996, for past
due property taxes on collateral securing certain one- to four-family
residential non-performing loans. These past due taxes were subsequently paid
during the fiscal year ended September 30, 1997.
The Association's equity decreased $510,000 or 13.5% from $3.8 million
at September 30, 1996 to $3.3 million at September 30, 1997. The decrease was
primarily the result of the
43
<PAGE>
Association's net loss for fiscal 1997 offset by a reduction in the net
unrealized loss on its portfolio of securities available for sale.
Comparison of Operating Results for the Years Ended September 30, 1997 and 1996.
Net Loss. The Association's fiscal 1997 net loss of $583,000 was
$453,000 or 43.8% less than the fiscal 1996 net loss of $1.0 million. The net
loss for fiscal 1997 was reduced from fiscal 1996 primarily as a result of an
increase of $141,000 or 6.1% in net-interest income, and a $652,000 or 21.9%
reduction in other expenses consisting primarily of $415,000 related to the
one-time SAIF assessment and $318,000 expense related to past due property taxes
on certain non-performing one-to four-family residential loans, partially offset
by a decrease in income tax benefit of $307,000 or 138%.
Interest income. Interest and fees on loans increased by approximately
$277,000 or 6.7% to $4.4 million for fiscal 1997, from $4.1 million for fiscal
1996. The increase for fiscal 1997 was largely the result of an increase of $2.1
million or 4.2% in the average balance of loans outstanding during fiscal 1997,
to $51.3 million, as compared to $49.2 million in fiscal 1996. This increase was
primarily in the area of multi-family and commercial real estate, home equity
and commercial business loans offset by decreases in the average balance of
residential one-to-four-family loans. At September 30, 1997, multi-family and
commercial real estate, home equity and commercial business loans totaled $12.8
million as compared to $8.7 million at September 30, 1996. This increase
reflects management's plan to diversify the loan portfolio, increase portfolio
yield, and increase the amount of adjustable rate loans. Originated with various
terms and repricing schedules, these loans generally provide reduced interest
rate risk due to their shorter terms and provide higher yields compared to
longer term, fixed rate residential one-to-four-family loans. However,
multi-family and commercial real estate and commercial business loans generally
have higher outstanding loan balances and increased credit risk relative to
residential one-to-four-family loans. In addition to the increase in the average
balance of loans, the yield earned on the average balance of loans receivable
increased by 20 basis points to 8.59% in fiscal 1997 as compared to 1996 due in
part to the higher yielding nature of multi-family and commercial real estate
and commercial business loans. See "Business - Lending Activities."
Interest income on securities available for sale decreased by $8,000
or 1.7%. There were no investment purchases or sales during fiscal 1997.
Accordingly, the reduction in interest income on securities available for sale
is solely attributable to reduced average balances as a result of principal
repayments. The average balance decreased $427,000 or 5.5% during fiscal 1997.
Interest income on interest-bearing deposits decreased $98,000 or
72.7% as a result of reduced average balances, coupled with lower contracted
rates. Periodically in fiscal 1996, interest-bearing deposits were invested on a
longer term basis, resulting in a higher yielding investment in 1996 as compared
to 1997. Interest-bearing deposits were primarily invested on an overnight basis
in fiscal 1997.
The yield on the average balance of interest-earning assets was 8.21%
and 7.98% for fiscal 1997 and 1996, respectively.
44
<PAGE>
Interest Expense. Interest expense of $2.4 million remained relatively
consistent for the years ended September 30, 1997 and 1996, increasing only
$30,000 or 1.3% in 1997. While total interest expense did not change
dramatically from year to year, the components of interest expense reflected
management's progress in increasing the level of lower costing money market
accounts. While the amount of year-end deposits only increased $401,000, or
1.0%, the average balance of money market accounts increased $3.4 million or
46.5% to $10.7 million while the average balance of time deposits decreased $1.7
million or 5.4% to $28.7 million. The average cost on money market accounts was
4.09% in 1997 as compared to 3.39% in fiscal 1996, and the average cost of time
deposits was 5.30% in fiscal 1997 versus 5.49% in fiscal 1996. Overall money
market rates increased due to the introduction in 1996 of a tiered money market
account with checking which proved popular with consumers but carried a somewhat
higher cost than the Association's other money market products. The changes in
the average balances of savings, demand, and NOW accounts and the related rates
paid were not significant from fiscal 1996 to 1997.
Interest expense on borrowings increased to $22,000 in fiscal 1997, as
the average amount of borrowed funds increased from $6,000 for fiscal 1996 to
$391,000 in fiscal 1997. Fiscal 1996 interest expense on borrowed funds was less
than $1,000.
The rate paid on the average balance of interest-bearing liabilities
was 4.25% and 4.30% for fiscal 1997 and 1996, respectively.
Net Interest Income. Net interest income increased by approximately
$141,000 or 6.1% to $2.5 million for fiscal 1997 from $2.3 million for fiscal
1996. The average interest rate spread increased to 3.96% for fiscal 1997 from
3.68% for fiscal 1996. The increase in interest rate spread is primarily the
result of an increase in higher yielding multi-family and commercial real estate
loans and the repricing of home equity loans.
Provision for Loan Losses. The Association continually monitors and
adjusts its allowance for loan losses based upon its analysis of the loan
portfolio. The allowance is increased by the recording of a provision for loan
losses, the amount of which depends on an analysis of the changing risks
inherent in the Association's loan portfolio. The provision for loan losses
increased $78,000 or 10.9% to $792,000 for fiscal year 1997 from $714,000 for
fiscal year 1996. The increase in the amount of the provision for fiscal 1997
was based on management's evaluation of the inherent risk in the Association's
loan portfolio; a $1.6 million or 71.4% increase in non-performing loans to $3.8
million at September 30, 1997 as compared to $2.2 million at September 30, 1996;
significantly increased net loan charge offs amounting to $430,000 in fiscal
1997, $187,000 or 77.0% greater than in 1996; continued expansion of commercial
business and multi-family and commercial real estate lending; the continued
economic weakness in the Association's market area; declining real estate values
collateralizing much of the Association's loan portfolio; as well as
management's evaluation of the prospects in the Association's market areas.
While the Association believes that it uses the best information
available to determine the allowance for loan losses, unforeseen economic and
market conditions could result in adjustments to the allowance for loan losses,
and net earnings could be significantly affected, if circumstances differ
substantially from the assumptions used in making the final determination.
Management believes its allowance for loan losses is adequate at September 30,
1997; however, future adjustments could be necessary and net income could be
adversely affected if circumstances differ substantially from the assumptions
used in the determination of the allowance for loan losses. For a discussion of
the factors considered by the Association in determining the provision for loan
losses, see "Business - Delinquencies and Non-Performing Assets."
45
<PAGE>
Other Income. Other income increased by $46,000 or 42.0% to $155,000
during fiscal year 1997 from $109,000 for fiscal year 1996. This increase was
primarily due to increases in fees and service charges of $22,000 or 18.4% as
well as the inclusion in fiscal 1996 of a $15,000 loss on the writedown of
premises and equipment.
Other Expense. Other expenses decreased $652,000 or 21.9% to $2.3
million in fiscal year 1997 from $3.0 million in fiscal year 1996. Compensation
and benefits expenses increased by $66,000 or 8.0% to $892,000 for fiscal year
1997 from $826,000 for fiscal year 1996. The increase in compensation and
benefits expenses in fiscal year 1997 was primarily the result of the general
cost of living and merit raises to Association employees, coupled with increased
pension and health insurance expenses. Director's fees increased by $27,000 or
34.9% from $76,000 in fiscal year 1996 to $103,000 in fiscal year 1997,
reflecting increased meeting frequency and an increase in per meeting fees.
Other real estate expenses increased $46,000 or 170% to $73,000 reflecting
increased costs associated with foreclosures and disposition of other real
estate owned. See "Business Delinquencies and Non-Performing Assets."
More than offsetting these increases were reductions in the special
one-time FDIC assessment, federal deposit insurance premiums, advertising
expenses and other operating expenses. In fiscal 1996 the Association accrued a
special assessment to recapitalize the SAIF in the amount of $415,000. As a
result of the recapitalization, the Federal deposit insurance premiums decreased
in fiscal 1997 by $74,000 or 56.6 % to $57,000. Advertising expenses decreased
in fiscal 1997 by $29,000 or 21.0% to $111,000. This decrease is due to the
inclusion in fiscal 1996 of significant costs associated with the implementation
of a new logo and brochures and initial use of television advertising which was
not repeated in fiscal 1997. Occupancy expenses and equipment and data
processing expenses were slightly greater in fiscal 1997 as compared to fiscal
1996 with increases of $13,000 or 5.9% and $9,000 or 2.9%, respectively.
As of the end of fiscal 1996, the Association first became aware that,
as of such date, a number of one- to four-family residential loans which were
delinquent as to principal and interest were also delinquent as to the payment
of property taxes. Because some of the related borrowers were unable or
unwilling to pay promptly these taxes, the Association incurred approximately
$318,000 in expenses for the purpose of paying such taxes in order to preserve
its collateral interest in these loans, many of which were subsequently
foreclosed upon. The decline in other expense in 1997 was based on the
non-reoccurrence in 1997 of this expense.
As a result of the above, during 1997, the Association performed an in
depth review of all loans without a tax escrow requirement. This review
indicated that a number of loans which were current as to principal and interest
were delinquent as to the payment of property taxes. The Association contacted
all of the borrowers on these loans. Where the borrowers promptly brought the
real estate taxes current, no actions were taken with respect to the loan terms.
However, where the borrowers were unable to promptly bring real estate taxes
current, the Association restructured the loans or otherwise advanced additional
funds (which advances were added to the loan principal) in order to pay the
delinquent property taxes. As a result, all restructured or rewritten loans were
classified as non-performing as of September 30, 1997. To date, all such loans
have performed in accordance with their revised terms. See "Business - Lending
Activities" and "- Delinquencies and Non-Performing Assets."
46
<PAGE>
Income Taxes. The provision for income taxes increased $307,000 from a
fiscal year 1996 benefit of $222,000 to a fiscal year 1997 expense of $85,000.
The increase in tax expense for fiscal year 1997 as compared to fiscal year 1996
was primarily the result of a $760,000 decrease in the loss before income taxes,
coupled with a $25,000 increase in the change in the valuation allowance for
deferred tax assets. In assessing whether the deferred tax assets will more
likely than not be realized, the Association considers the historical level of
taxable income, the time period over which the temporary differences are
expected to reverse, as well as estimates of future taxable income. In 1997, as
a result of the Association experiencing a second year of significant losses
before taxes (loss before taxes of $498,000 and $1.3 million in fiscal 1997 and
1996, respectively), continued economic weakness in the Association's market
area, including declining real estate values collateralizing much of the
Association's loan portfolio, and reduced expectations of earnings in the
future, as well as a reduction in the amount of historical taxes available for
carryback in 1997, the Association increased its deferred tax valuation
allowance by $274,000 to $625,000 at September 30, 1997. As of September 30,
1997, the net deferred tax asset is considered to be more likely than not
realizable based upon the remaining amount of historical taxes available for
carryback, amounting to approximately $50,000, the reversal of temporary taxable
items and reliance on future taxable income amounting to approximately $175,000.
Comparison of Operating Results for the Years Ended September 30, 1996 and 1995.
Net Income. The 1995 net income of $251,000 decreased by $1.3 million
to a fiscal year 1996 net loss of $1.0 million. The net loss for fiscal year
1996 is primarily the result of a $585,000 increase in the provision for loan
losses, the above referenced $415,000 one-time SAIF assessment, and the above
mentioned expense of approximately $318,000 related to delinquent property taxes
on property collateralizing certain non-performing loans. Additionally, fiscal
1995 included a $204,000 net gain on sales of securities and a $86,000 gain on
the sale of premises and equipment.
There were no such gains in fiscal 1996.
Interest Income. Interest and fees on loans increased by approximately
$203,000 or 5.2% to $4.1 million for fiscal year 1996 from $3.9 million for
fiscal year 1995. The increase for fiscal year 1996 was partially the result of
an increase of $514,000 or 1.0% in the average balance of loans outstanding, to
$49.2 million, as compared to $48.7 million in fiscal year 1995. This increase
was primarily in the area of multi-family and commercial real estate loans.
During fiscal year 1996 the Association continued to increase the multi-family
and commercial real estate as well as commercial business portfolios. At
September 30, 1996 multi-family and commercial real estate loans totaled $4.6
million as compared to $1.7 million at September 30, 1995 and commercial
business loans grew to $1.2 million at September 30, 1996 compared to $1.1 at
September 30, 1995. Offsetting these increases was a decrease in residential
one-to-four-family loans. In addition to the increase in the average balance of
loans, the yield earned on the average balance of loans receivable increased by
33 basis points to 8.39% in fiscal year 1996 as compared to 8.06% in fiscal year
1995 due in part to the higher yielding nature of multi-family and commercial
real estate, home equity and commercial business loans.
Interest income on securities available for sale decreased by $234,000
or 33.3% to $467,000 in fiscal year 1996 from $701,000 in fiscal year 1995.
During fiscal year 1995, the Association sold securities with an amortized cost
of approximately $13.4 million. Accordingly, the reduction in
47
<PAGE>
interest income is largely attributable to reduced average balances as a result
of the fiscal year 1995 sales. The average balance in securities available for
sale decreased $4.9 million or 38.5% from $12.6 million in fiscal 1995 to $7.8
million in fiscal year 1996. Interest income on interest-bearing time deposits
decreased $53,000 or 28.0% primarily as a result of a $832,000 or 26.6% decrease
in the average balance.
The yield on the average balance of interest-earning assets was 7.98%
and 7.47% for fiscal years 1996 and 1995, respectively.
Interest Expense. Interest expense on deposits and borrowings
decreased by approximately $111,000 or 4.4% to $2.4 million for fiscal year 1996
as compared to $2.5 million for fiscal year 1995. This decrease was primarily
the result of a $5.5 million or 15.3% decrease in the average balance of time
deposits, offset by an increase in the cost of time deposits in fiscal year 1996
because the cost of time deposit accounts maintained or acquired carried a
higher rate than time deposits maturing. The average cost on time deposits was
5.49% in 1996 versus 5.01% in fiscal year 1995.
The rate paid on the average balance of interest-bearing liabilities
was 4.30% and 4.12%, for fiscal years 1996 and 1995, respectively.
Net Interest Income. In fiscal 1996 net interest income increased from
fiscal 1995 by approximately $28,000 or 1.2%, to $2.3 million. The average
interest rate spread increased to 3.68% for fiscal year 1996 from 3.35% for
fiscal year 1995. The increase in interest rate spread is primarily the result
of an increase in higher yielding multi-family and commercial real estate loans,
and a reduction in the average balance in of certain lower yielding securities
available for sale offset by an increase in the rate on interest bearing
liabilities.
Provision for Loan Losses. The provision for loan losses increased
$585,000 to $714,000 for fiscal year 1996 from $129,000 for fiscal year 1995.
The significant increase in the amount of the provision for fiscal year 1996 was
based on management's evaluation of the inherent risk in the Association's loan
portfolio, the continued expansion of commercial business and multi-family and
commercial real estate lending, a 18.0% increase in net loan charge offs in
fiscal 1996 compared to fiscal 1995, increased delinquencies, continued economic
weakness in the Association's market area, declining real estate values
collateralizing much of the Association's loan portfolio, and management's
evaluation of the prospects in the Association's market areas. In addition, as
noted above, the Association became aware that as of the end of fiscal 1996 a
significant number of its non-performing residential one- to four- family loans
were past due on the payment of property taxes collateralizing its loans. For a
discussion of the factors considered by the Association in determining the
provision for loan losses, see "Business - Delinquencies and Non-Performing
Assets."
Other Income. Other income decreased by $282,000 or 72.1% to $109,000
in fiscal year 1996 from $392,000 for fiscal year 1995. This decrease was
primarily due to fiscal year 1995 including net gains on sales of securities
available for sale of $204,000 and a gain on the sale of premises and equipment
of $86,000.
Other Expense. Other expenses increased $772,000 or 35.1% to $3.0
million in fiscal year 1996 from $2.2 million in fiscal year 1995. Compensation
and benefits expenses decreased by
48
<PAGE>
$42,000 or 4.8% to $826,000 for fiscal year 1996 from $868,000 for fiscal year
1995. The decrease in compensation and benefits expenses in fiscal year 1996 was
the result of the fiscal year 1995 expense including an expense of approximately
$64,000 related to the termination of the Association's defined benefit pension
plan. Special one-time FDIC assessment increased $415,000 due to the previously
mention SAIF recapitalization. Advertising expense increased $48,000 or 52.2% to
$140,000 in fiscal year 1996 from $92,000 in fiscal year 1995 associated with
the implementation of a new logo and brochures and initial use of television
advertising in fiscal year 1996. Directors fees increased $34,000 or 82.3% from
$42,000 in fiscal year 1995 to $76,000 in fiscal year 1996 due to increases in
per meeting fees and meeting frequency. Other real estate expenses decreased
$100,000 or 78.6% to $27,000 as fiscal year 1995 included several large Other
Real Estate Owned ("OREO") writedowns. Occupancy expense increased $55,000 or
35.3% in fiscal 1996, which is the result of additional depreciation and
expenses related to the Gloversville drive-thru. Equipment and data processing
expenses increased $28,000 or 9.9% in fiscal 1996 as the result of additional
costs incurred attributable to the Association's system conversion. As
previously mentioned, included in the fiscal year 1996 other operating expenses
was an expense of approximately $318,000 for delinquent property taxes on the
property securing certain non-performing residential one-to-four-family loans.
Accordingly, other operating expenses increased $346,000 or 71.1% in fiscal year
1996 from $487,000 in fiscal year 1995 to $833,000 in fiscal year 1996.
Income Taxes. The provision for income taxes decreased $325,000 from a
fiscal year 1995 expense of $102,000 to a fiscal year 1996 benefit of $222,000
which was primarily the result of a $1.6 million increase in the loss before
income taxes, offset by a $248,000 increase in the valuation allowance for
deferred tax assets. In 1996, as a result of experiencing a significant loss
before taxes of $1.3 million, combined with the significant reduction in the
amount of historical taxes available for carryback, the Association increased
its deferred tax valuation allowance by $248,000 to $352,000. As of September
30, 1996, the net deferred tax asset is considered to be more likely than not
realizable based upon the remaining amount of historical taxes available for
carryback, amounting to $90,000, the reversal of temporary taxable items, and
reliance on future taxable income amounting to approximately $380,000.
49
<PAGE>
The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances. Non-accruing loans
have been included in the average loan amounts.
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------------------------------
1997 1996 1995
-------------------------- --------------------------- ----------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Outstanding Earned/ Outstanding Earned/
Balance Paid Yield/Rate Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---- ---------- ------- ---- ---------- ------- ---- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable, net of deferred loan fees.. $51,303 $4,409 8.59% $49,222 $4,132 8.39% $48,708 $3,928 8.06%
Securities at amortized cost ................ 7,337 459 6.26 7,764 467 6.01 12,616 701 5.56
Interest-earning deposits.................... 1,113 37 3.32 2,298 134 5.83 3,130 187 5.97
-------- -------- -------- -------- -------- -------
Total earning assets....................... 59,753 4,905 8.21 59,284 4,733 7.98 64,454 4,816 7.47
------- ------- -------
Non-interest earning assets.................. 1,954 1,866 2,158
-------- -------- --------
Total assets............................... $61,707 $61,150 $66,612
======= ======= =======
Interest-earning liabilities:
Savings deposits............................. $12,503 401 3.21 $13,724 433 3.16 $13,655 413 3.02
Demand and NOW............................... 5,316 65 1.22 4,805 69 1.44 4,520 85 1.88
MMDA......................................... 10,676 437 4.09 7,287 247 3.39 7,353 232 3.16
Time deposits................................ 28,704 1,522 5.30 30,358 1,667 5.49 35,848 1,797 5.01
Borrowings................................... 391 22 5.63 6 -- 5.56 -- -- --
--------- -------- -------- --------- -------- --------
Total interest-bearing liabilities......... 57,590 2,447 4.25% 56,180 2,416 4.30% 61,376 2,527 4.12%
------- ------- -------
Non-interest-bearing liabilities............. 541 306 499
--------- -------- --------
Total liabilities.......................... 58,131 56,486 61,875
Total equity............................... 3,576 4,664 4,737
--------- -------- --------
Total liabilities and equity............... $61,707 $61,150 $66,612
======= ======= =======
Net interest/spread............................ $2,458 3.96% $2,317 3.68% $2,289 3.35%
====== ==== ====== ==== ====== ====
Margin......................................... 4.11% 3.91% 3.55%
==== ==== ====
Assets to liabilities.......................... 103.76% 105.53% 105.01%
====== ====== ======
</TABLE>
50
<PAGE>
The following table presents the weighted average contractual yields
earned on loans and securities, the combined weighted average yield on
interest-earning assets, the weighted average rates paid on deposits and
borrowings, the combined weighted average rate paid on interest-bearing
liabilities and the resultant interest rate spreads at the date indicated.
Weighted Average Yields Earned/Rates Paid
September 30, 1997
- --------------------------------------------------------------------------------
Weighted average yield on:
Loans receivable, net of deferred fees.................. 8.73%
Securities at amortized cost............................ 6.18
Combined weighed average yield on interest-earning
assets.............................................. 8.43
Weighted average rate paid on:
Savings ................................................ 3.24
Demand and NOW.......................................... 1.35
MMDA.................................................... 4.03
Time deposits........................................... 5.46
Borrowings.............................................. 5.80
Combined weighted average rate paid
on interest-bearing liabilities...................... 4.24
----
Spread..................................................... 4.19%
51
<PAGE>
The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It distinguishes between the changes
related to outstanding balances and that due to the changes in interest rates.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
Year Ended September 30, Year Ended September 30,
1997 vs. 1996 1996 vs. 1995
-------------------------------------- -----------------------------------
Increase Total Increase Total
(Decrease) Increase (Decrease) Increase
Due to (Decrease) Due to (Decrease)
------------------------ ---------- ----------------------- ----------
Volume Rate Volume Rate
------------- ---------- ----------- -----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable, net of deferred loan fees $ 178 $ 99 $277 $41 $163 $ 204
Securities at amortized cost............... (27) 19 (8) (288) 54 (234)
Interest-bearing deposits................... (44) (53) (97) (50) (3) (53)
----- ----- ----- ------ ------ ------
Total interest-earning assets............ 107 65 172 (297) 214 (83)
----- ---- ---- ----- ---- ------
Interest-bearing liabilities:
Savings deposits.......................... (39) 7 (32) 2 18 20
Demand and NOW............................ 7 (11) (4) 5 (21) (16)
MMDA...................................... 132 58 190 (2) 17 15
Time Deposits.............................. (89) (56) (145) (291) 161 (130)
Borrowings................................. 22 --- 22 --- --- ---
------ ----- ----- ------- ------ -------
Total interest-bearing liabilities....... 33 (2) 31 (286) 175 (111)
------ ----- ----- ----- ---- -----
Net interest income......................... $ 74 $ 67 $141 $(11) $ 39 $ 28
====== ==== ==== ==== ===== =====
</TABLE>
52
<PAGE>
Liquidity and Capital Funds
The Association's primary sources of funds are deposits, principal and
interest payments on loans and securities, and to a lesser extent, borrowings.
While maturities and scheduled amortization of loans and securities provide an
indication of the timing of the receipt of funds, other sources of funds such as
loan prepayments and deposit inflows are less predictable due to the effects of
changes in interest rates, economic conditions and competition.
Liquidity may be adversely affected by the unexpected deposit outflows,
higher interest rates paid by competitors and similar matters. Further, the
disparity in insurance premiums as described herein could result in the
Association losing deposits to BIF members that have lower cost of funds and
therefore are able to pay higher rates of interest on deposits. See
"Regulation." Management monitors projected liquidity needs and determines the
level desirable, based in part on the Association's commitments to make loans
and management's assessment of the Association's ability to generate funds.
The primary investing activities of the Association are the origination
of real estate and other loans and the purchase of securities. During the years
ended September 30, 1997, 1996 and 1995, the Association's disbursements for
loan originations totaled $8.9 million, $8.8 million and $10.2 million,
respectively. The Association did not purchase any securities during the year
ended September 30, 1997. For the years ended September 30, 1996 and 1995,
purchases of securities totaled $4.6 million and $11.0 million, respectively.
These activities were funded primarily by net deposit inflows, borrowings and
principal repayments on loans and securities.
For years ended September 30, 1997, 1996 and 1995, net deposit inflows
(outflows) (including the effect of interest credited) were $401,000, ($2.2)
million and ($6.8) million. The increase in fiscal 1997 reflects the net effect
of a $1.1 million and $26,000 decline in savings and demand and NOW accounts,
respectively, offset by increases of $558,000 and $1.0 million for money market
accounts and time deposits, respectively. The decline in savings accounts is the
result of a general increase in market interest rates which made passbook
savings less attractive investment alternatives for the Association's customers.
Conversely, the increased market interest rates made deposit products, such as
money market accounts and shorter term time deposits, more attractive to the
Association's customers. During fiscal 1996, the net decrease of $2.2 million in
deposits was primarily driven by management's attempts to reduce the dependence
of funding with time deposits. During fiscal 1996, time deposits declined $6.9
million while non-time deposits increased $4.8 million. The non-time deposit
increase in fiscal 1996 was primarily the result of the introduction of new
deposit products such as a tiered money market account. During fiscal 1995,
deposit levels declined overall by $6.8 million. The decline was the result of
efforts by management to price deposit products to reduce overall cost of funds.
Short-term borrowings under repurchase agreements were $1.3 million at
September 30, 1997. The repurchase agreements were entered into to provide a
less expensive short-term funding source to meet immediate liquidity needs.
There were no outstanding repurchase agreement balances at September 30, 1996
and 1995.
53
<PAGE>
The Association may borrow funds from the FHLB of New York subject to
certain limitations. Based on the level of qualifying collateral available to
secure advances at September 30, 1997, the Association's borrowing limit from
the FHLB of New York was approximately $9.2 million, with no advances
outstanding at that date. Proceeds from FHLB advances were $300,000 at September
30, 1996. There were no FHLB borrowings made in fiscal year 1995 (See note 7 of
the financial statements.).
The Association is required by OTS regulations to maintain an average
daily balance of liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings. The minimum required liquidity ratio is
currently 4.0%. The liquidity requirement may be changed from time to time by
the OTS to any amount within the range of 4% to 10%. The Association's liquidity
ratio at September 30, 1997 was 10.3%.
The Association's most liquid assets are cash and cash equivalents,
which include interest-bearing deposits and short-term highly liquid investments
(such as federal funds) with original maturities of less than three months that
are readily convertible to known amounts of cash. The level of these assets is
dependent on the Association's operating, financing and investing activities
during any given period. At September 30, 1997, 1996 and 1995, cash and cash
equivalents totaled $1.9 million, $1.2 million and $3.2 million, respectively.
The Association is required to maintain a compensating balance of
$500,000 at one of its correspondent banks at September 30, 1997. There were no
compensating balance requirements in prior fiscal years.
At September 30, 1997, the Association had outstanding loan origination
commitments, undisbursed construction loans in process and unadvanced lines of
credit of $3.1 million. The Association anticipates that it will have sufficient
funds available to meet its current loan origination and other commitments. Time
deposits scheduled to mature in one year or less from September 30, 1997 totaled
$23.3 million. Based on the Association's most recent experience and pricing
strategy, management believes that a significant portion of such deposits will
remain with the Association.
The Association is subject to federal regulations that impose certain
minimum capital requirements. At September 30, 1997, the Association had
tangible and core capital of $3.3 million compared to required levels of
$900,000 and $1.8 million, respectively. Total risk-based capital was $3.8
million compared to a required level of $3.0 million. See "Historical and Pro
Forma Capital Compliance" for a discussion of the Association's compliance with
OTS capital requirements.
Year 2000
The Association is aware of the issues associated with the programming
code in existing computer systems as the millennium (year 2000) approaches. The
"year 2000" problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two digit year
value to 00. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
54
<PAGE>
Since the Association recently converted to a year 2000 compliant core
system, the Association does not anticipate significant additional year 2000
costs. It is anticipated that any additional reprogramming efforts will be
complete by December 31, 1998, allowing adequate time for testing. To date,
confirmations have been received from the Company's primary processing vendors
that plans are being developed to address processing of transactions in the year
2000.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
generally require the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation. The primary impact of
inflation on the operations of the Association is reflected in increased
operating costs. Unlike most industrial companies, virtually all of the assets
and liabilities of a financial institution are monetary in nature. As a result,
interest rates, generally, have a more significant impact on a financial
institution's performance than does inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the prices of goods and
services.
Impact of New Accounting Standards
FASB Statement on Accounting for Mortgage Servicing Rights. In May,
1995, FASB issued SFAS No. 122, which became effective on a prospective basis,
for fiscal years beginning after December 31, 1995. This Statement requires
mortgage banking enterprises to recognize as separate assets rights to service
mortgage loans, however those servicing rights are acquired. When mortgage
loans, acquired either through a purchase transaction or by origination, are
sold or securitized with servicing rights retained, an allocation of the total
cost of the mortgage loans should be made between the mortgage servicing rights
and the loans based upon their relative fair values. In Subsequent periods, all
mortgage servicing rights capitalized must be periodically evaluated for
impairment based on the fair value of those rights, and any impairments
recognized through a valuation allowance. The impact of adopting this Statement
was not material to the Association's financial statements. Effective January 1,
1997, this Statement was superseded by SFAS No. 125, which is discussed below.
FASB Statement on Accounting for Stock Based Compensation. In October
1995, the FASB issued SFAS No. 123. SFAS No. 123 defines a "fair value based
method" of accounting for an employee stock option whereby compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period. FASB encouraged all entities to adopt the fair value
based method, however it will allow entities to continue the use of the
"intrinsic value based method" prescribed by Accounting Principles Board ("APB")
Opinion No. 25. Under the intrinsic value based method, compensation cost is the
excess of the market price of the stock at the grant date over the amount an
employee must pay to acquire the stock. However most stock option plans have no
intrinsic value at the grant date and, as such, no compensation cost is
recognized under APB Opinion No. 25. Entities electing to continue the use of
APB Opinion No. 25 must make certain pro forma disclosures as if the fair value
based method had been applied. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years beginning after December
15, 1995. The Association expects to utilize the "intrinsic value based method"
as
55
<PAGE>
prescribed by APB Opinion No. 25. Accordingly, the impact of adopting this
Statement will not be material to the Association's financial statements.
FASB Statement on Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. In June 1996, FASB issued SFAS No.
125, which became effective on a prospective basis for fiscal years beginning
after December 31, 1996. SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components approach
that focuses on control. SFAS No. 125 extends the "available for sale" and
"trading" approach of SFAS No. 115 to non-security financial assets that can be
contractually prepaid or otherwise settled in such a way that the holder of the
asset would not recover substantially all of its recorded investment. In
addition, SFAS No. 125 amends SFAS No. 115 to prevent a security from being
classified as held to maturity if the security can be prepaid or settled in such
a manner that the holder of the security would not recover substantially all of
its recorded investment. The extension of the SFAS No. 115 approach to certain
non-security financial assets and the amendment to SFAS No. 115 are effective
for financial assets held on or acquired after January 1, 1997. Effective
January 1, 1997, SFAS No. 125 superseded SFAS No. 122, which is discussed above.
The impact of adopting this Statement was not material to the Association's
financial statements.
In November 1993, the American Institute of Certified Public
Accountants ("AICPA"), issued SOP 93-6 Employers' Accounting for Employee Stock
Ownership Plans. SOP 93-6 addresses accounting for shares of stock issued to
employees by an employee stock ownership plan. SOP 93-6 requires that the
employer record compensation in an amount equal to the fair value of the shares
committed to be released from the ESOP to employees. SOP 93-6 is effective for
fiscal years beginning after December 15, 1993 and relates to shares purchased
by an ESOP after December 31, 1992. Management has determined that, assuming the
Common Stock appreciates over time, the adoption of SOP 93-6 will likely
increase compensation expense relative to the ESOP, as compared with prior
guidance that required recognition of compensation expense based on the cost of
the shares acquired by the ESOP. The amount of any such increase, however,
cannot be determined at this time because the expense will be based on the fair
value of the shares committed to be released to employees, which amount is not
determinable.
FASB Statement on Earnings Per Share. In February 1997, the FASB issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 establishes standards for
computing and presenting earnings per share and applies to all entities with
publicly held common stock or potential common stock. SFAS No. 128 is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods. Management will report earnings per share data, when
appropriate, in accordance with this Statement. Management does not believe that
the impact of adopting this Statement will be material to the Company's or the
Association's financial condition or results of operations.
FASB Statement on Capital Structure. In February 1997, the FASB issued
SFAS No. 129, "Disclosure of Information About Capital Structure" which
establishes standards for disclosure about a company's capital structure. In
accordance with SFAS No. 129, companies will be required to provide in the
financial statements a complete description of all aspects of their capital
structure, including call and put features, redemption requirements and
conversion options. The disclosure required by SFAS No. 129 are for financial
statements for periods ending after December 15, 1997.
56
<PAGE>
Management does not believe that the impact of adopting this Statement will be
material to the Association's financial condition or results of operations.
FASB Statement on Comprehensive Income. In June 1997, the FASB issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 states that
comprehensive income includes the reported net income of a company adjusted for
items that are currently accounted for as direct entries to equity, such as the
mark to market adjustment on securities available for sale, foreign currency
items and minimum pension liability adjustments. This statement is effective for
fiscal years beginning after December 15, 1997. Management does not believe that
the impact of adopting this Statement will be material to the Company's or the
Association's financial condition or results of operations.
FASB Statement on Segment Reporting In June 1997, the FASB issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 131 establishes standards for reporting by public companies about
operating segments of their business. SFAS No. 131 also establishes standards
for related disclosures about products and services, geographic areas and major
customers. This statement is effective for periods beginning after December 15,
1997. Management does not believe that the impact of adopting this Statement
will be material to the Company's or the Association's financial condition or
results of operations.
BUSINESS
General
As a community-oriented financial institution, Gloversville Federal
seeks to serve the financial needs of the communities in its market area.
Gloversville Federal's business involves attracting deposits from the general
public and using such deposits, together with other funds, to originate
primarily one- to four-family residential mortgage loans, and, to a lesser
extent, multi-family and commercial real estate, commercial business, home
equity and other loans in its market area. The Association also invests in
mortgage-backed and other securities and other permissible investments. See
"Risk Factors."
The Association offers a variety of accounts having a range of interest
rates and terms. The Association's deposits include passbook, statement savings,
demand and NOW accounts, money market accounts and time deposit accounts with
terms of six months to five years. The Association solicits deposits only in its
primary market area.
Market Area
The Association conducts business through its main office located at 52
North Main Street, Gloversville, New York and a branch office located at 295
Broadway, Saratoga Springs, New York. The Association's market area for deposits
consists primarily of Fulton and Saratoga Counties. The Association's primary
market area for lending activities consist of communities within Fulton and
Saratoga Counties, as well as portions of Hamilton and Montgomery Counties, New
York.
57
<PAGE>
Gloversville, New York is located in Fulton County approximately 50
miles northwest of Albany, New York. Gloversville and the surrounding
communities include a population of low- and moderate-income neighborhoods.
Gloversville has undergone significant economic hardships as the major leather
industries that were once the focal point of industrial strength for the region
have relocated to other parts of the world. Gloversville, with its neighboring
city Johnstown, have recently experienced some revitalization as a number of
manufacturing entities have opened plants in the area, capitalizing on the
region's lower labor and operating costs. The housing in the Gloversville area
consists mainly of one- to four-family residences within the city limits.
Outside Gloversville, in the rural areas leading into the Adirondack Mountains,
there are many nonconforming properties which are generally used as summer homes
and camps. Real estate values in much of these areas have experienced a
significant decline in recent years.
Saratoga Springs, New York is located in Saratoga County approximately
30 miles north of Albany, New York. Saratoga Springs and the surrounding
communities include a diverse population of low income neighborhoods, as well as
middle class and more affluent neighborhoods. The housing market has been
relatively strong in much of Saratoga County. This part of the Association's
market also includes commercial areas supporting manufacturing, industrial and
professional service companies.
Lending Activities
General. Historically, the Association originated 30-year, fixed-rate
mortgage loans secured by one- to four-family residences. In fiscal 1995, the
Association began to diversify its portfolio by more actively originating
multi-family and commercial real estate and commercial business loans.
Currently, all loans originated by the Association are held as portfolio loans.
At September 30, 1997, the Association's loans receivable, net, totaled $49.5
million. See "- Origination of Loans" and "Use of Proceeds."
Under federal law, the aggregate amount of loans that the Association
is permitted to make to any one borrower is generally limited to the greater of
15% of unimpaired capital and surplus (25% if the security for such loan has a
"readily ascertainable" value or 30% for certain residential development loans)
or $500,000. At September 30, 1997, based on the above, the Association's
regulatory loans-to-one borrower limit was approximately $737,000. On the same
date, the Association had no borrowers with outstanding balances in excess of
this amount. As of September 30, 1997, the largest dollar amount outstanding or
committed to be lent to one borrower, or group of related borrowers, related to
a commercial real estate loan totaling $539,000 secured by a warehouse located
in Saratoga County, and food preparation and related equipment used by the
borrower. The Association's next largest loan as of September 30, 1997 totaled
$527,000 and was secured by an office building located in Saratoga Springs, New
York. At September 30, 1997, both of these loans were performing in accordance
with their terms. The Association has obtained personal guarantees (or direct
personal liability) from the principals in both these loans. As of the same
date, there were 11 other multi-family and commercial real estate or commercial
business loans with carrying values in excess of $300,000.
The Association has incurred significant problems in recent years on
its residential lending portfolio, in part due to inadequate loan underwriting
and monitoring procedures and policies. In
58
<PAGE>
order to address these issues, the Board of Directors revised the Association's
procedures and policies and hired new personnel to perform such functions. The
Association has also undertaken a review of its residential loan portfolio in
order to determine the full extent of the problems and is currently taking
action to address and work out these problems. All of the Association's current
lending is subject to its revised written underwriting standards and to loan
origination procedures.
Decisions on loan applications are made on the basis of detailed
applications and property valuations (consistent with the Association's
appraisal policy) by independent appraisers. Under the Association's loan
policy, the individual processing an application is responsible for ensuring
that all documentation is obtained prior to the submission of the application to
a loan officer for approval. In addition, the loan officer verifies that the
application meets the Association's underwriting guidelines described below.
Also, each application file is reviewed to assure its accuracy and completeness.
The President and the Vice President of Lending have been given lending
authority, and their lending limit authority has been defined, by the Board of
Directors of the Association. The lending authority limits are applied based on
aggregate loan balances due the Association, including any pending loan
requests. The approval of the Association's Board of Directors is required for
any loans where aggregate borrowings of the subject entity or individual exceed
$250,000. Loan Committee approval is required for all loans where the aggregate
borrowings of the subject entity or individual exceed $150,000 but are less than
$250,000. The Loan Committee includes the President and Chief Executive Officer,
the Vice President of Lending, two outside Board members and two other
Association officers.
For multi-family and commercial real estate and commercial business
loans, the President and Vice President of Lending each have the authority to
approve secured loans of up to $100,000 and unsecured loans of up to $50,000.
Joint approval by the President and Vice President of Lending is required for
multi-family and commercial real estate and commercial business loans greater
than $100,000 ($50,000 for unsecured loans) but not exceeding $150,000.
The President or the Vice President of Lending have the authority to
approve residential mortgages of up to $150,000. The President also has the
authority to approve secured consumer loans up to $150,000 and unsecured
consumer loans of up to $50,000. The Vice President of Lending has the authority
to approve secured consumer loans of up to $50,000 and unsecured consumer loans
of up to $10,000.
The Association requires title insurance on its mortgage loans, as well
as fire and extended coverage casualty insurance in amounts at least equal to
the principal amount of the loan or the value of improvements on the property,
depending on the type of loan. The Association also requires flood insurance to
protect the property securing its interest when the property is located in a
flood plain.
Since May 1995, the Association has required escrow for property taxes,
insurance and flood insurance (if required) on its one- to four-family mortgage
loans and multi-family and commercial real estate loans.
59
<PAGE>
The following table shows the composition of the Association's loan
portfolio by loan type at the dates indicated.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------------------------
1997 1996 1995
----------------------- ------------------------ -------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
<S> <C> <C> <C> <C> <C> <C>
One- to four-family....................... $36,891 71.92% $40,262 78.80% $42,578 86.41%
Multi-family and commercial............... 7,950 15.50 4,635 9.07 1,712 3.47
One- to four-family construction.......... 539 1.05 938 1.84 742 1.51
------- -------- -------- -------- -------- --------
Total real estate loans................ 45,380 88.47 45,835 89.71 45,032 91.39
------ -------- ------ ------- ------ ------
Other loans:
Commercial business....................... 1,422 2.77 1,230 2.41 1,052 2.14
Home equity............................... 3,379 6.59 2,869 5.62 2,265 4.60
Other consumer............................ 1,111 2.17 1,154 2.26 920 1.87
------- -------- -------- -------- --------- --------
Total loans............................ 5,912 11.53 5,253 10.29 4,237 8.61
------- ------- -------- ------- -------- --------
Gross loans 51,292 100.00% 51,088 100.00% 49,269 100.00%
====== ====== ======
Less:
Net deferred loan fees.................... (153) (201) (251)
Allowance for loan losses................. (1,613) (1,251) (779)
-------- -------- --------
Total loans receivable, net............. $49,526 $49,636 $48,239
======= ======= =======
</TABLE>
September 30,
-----------------------------------------------
1994 1993
----------------------- -----------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
One- to four-family............ $42,973 91.89% $40,633 96.64%
Multi-family and commercial.... 878 1.88 -- --
One- to four-family
construction................. 701 1.50 139 0.33
-------- -------- --------- --------
Total real estate loans..... 44,552 95.27 40,772 96.97
------ ------- ------- -------
Other loans:
Commercial business............ -- -- -- --
Home equity.................... 1,352 2.89 -- --
Other consumer................. 861 1.84 1,276 3.03
-------- -------- -------- --------
Total loans................. 2,213 4.73 1,276 3.03
------- -------- -------- --------
Gross loans 46,765 100.00% 42,048 100.00%
====== ======
Less:
Net deferred loan fees......... (264) (277)
Allowance for loan losses...... (856) (875)
-------- --------
Total loans receivable, net.. $45,645 $40,896
======= =======
60
<PAGE>
The following table shows the composition of the Association's loan
portfolio by fixed and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------------------------
1997 1996 1995
--------------------------- ------------------------ ------------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans:
Real estate:
One- to four-family.................. $31,732 61.86% $34,929 68.37% $37,356 75.82%
Multi-family and commercial.......... 1,206 2.35 924 1.81 1,527 3.10
One- to four-family construction..... 392 0.76 423 0.83 293 0.59
--------- -------- --------- -------- --------- --------
Total real estate loans............ 33,330 64.97 36,276 71.01 39,176 79.51
Commercial business.................... 283 0.55 23 0.05 -- --
Home equity............................ 1,244 2.43 645 1.26 14 0.03
Other consumer......................... 1,056 2.06 1,058 2.07 916 1.86
-------- -------- -------- -------- --------- --------
Total fixed-rate loans............. 35,913 70.01 38,002 74.39 40,106 81.40
Adjustable-Rate Loans
Real estate:
One-to four-family................... 5,159 10.06 5,333 10.44 5,222 10.60
Multi-family and commercial.......... 6,744 13.15 3,711 7.26 1,052 2.14
One- to four-family construction..... 147 0.29 515 1.01 449 0.91
--------- -------- --------- -------- --------- --------
Total real estate loans.......... 12,050 23.50 9,559 18.71 6,723 13.65
Commercial business.................... 1,139 2.22 1,207 2.36 185 0.38
Home equity............................ 2,135 4.16 2,224 4.35 2,251 4.56
Other consumer......................... 55 0.11 96 0.19 4 0.01
---------- -------- --------- ------- ---------- ---------
Total adjustable rate loans 15,379 29.99 13,086 25.61 9,163 18.60
Gross loans 51,292 100.00% 51,088 100.00% 49,269 100.00%
====== ====== ======
Less:
Net deferred loan fees............... (153) (201) (251)
Allowance for loan losses............ (1,613) (1,251) (779)
-------- --------- ---------
Total loans receivable, net....... $49,526 $49,636 $48,239
======= ======= =======
</TABLE>
September 30,
-----------------------------------------------
1994 1993
------------------------- ---------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
One- to four-family............ $39,632 84.75% $40,633 96.64%
Multi-family and commercial.... 878 1.88 -- --
One- to four-family
construction................. 485 1.04 139 0.33
---------- -------- --------- --------
Total real estate loans...... 40,995 87.67 40,772 96.97
Commercial business.............. -- -- -- --
Home equity...................... -- -- -- --
Other consumer................... 861 1.84 1,276 3.03
--------- -------- -------- --------
Total fixed-rate loans....... 41,856 89.51 42,048 100.00%
Adjustable-Rate Loans
Real estate:
One-to four-family............. 3,341 7.14 -- --
Multi-family and commercial.... -- -- -- --
One- to four-family
construction................. 216 0.46 -- --
--------- -------- ---------- --------
Total real estate loans.... 3,557 7.60 -- --
Commercial business.............. -- -- -- --
Home equity...................... 1,352 2.89 -- --
Other consumer................... -- -- -- --
---------- --------- ---------- --------
Total adjustable rate loans 4,909 10.49 -- --
Gross loans 46,765 100.00% 42,048 100.00%
====== ======
Less:
Net deferred loan fees......... (264) (277)
Allowance for loan losses...... (856) (875)
--------- ---------
Total loans receivable, net. $45,645 $40,896
======= =======
61
<PAGE>
The following schedule illustrates the interest rate sensitivity of the
Association's loan portfolio at September 30, 1997. Mortgages which have
adjustable or renegotiable interest rates are shown as maturing in the period
during which the contracts are due. The schedule does not reflect the effects of
possible prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
Real Estate
--------------------------------------------------------------
Multi-family One- to four-family Home Equity and
One- to four-family and Commercial Construction Commercial Business Other Consumer
------------------- ------------------- ------------------ ------------------- ------------------
Due During Weighted Weighted Weighted Weighted Weighted
Years Ending Average Average Average Average Average
September 30, Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------------- ------ ---- ------ ---- ------ ---- ------ ---- ------ ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998................. $ 710 8.59% $ -- -- $539 8.34% $ 173 9.15% $ 184 7.88%
1999................. 732 7.18 -- -- -- -- 367 9.76 127 10.26
2000................. 237 9.45 -- -- -- -- 56 10.00 192 10.46
2001 to 2002......... 1,072 8.79 11 8.50 -- -- 81 10.50 427 8.94
2003 to 2007......... 3,959 8.81 2,278 9.87 -- -- 656 9.86 420 8.77
2008 to 2022......... 22,158 8.51 5,661 9.42 -- -- 14 10.50 3,119 9.11
2023 and following... 8,023 8.09 -- -- -- -- 75 10.16 21 7.23
-------- --------- ------- -------- --------
Total............. $36,891 $7,950 $539 $1,422 $4,490
======= ====== ==== ====== ======
</TABLE>
The total amount of loans due after September 30, 1997 which have
predetermined interest rates is $35.9 million while the total amount of loans
due after such dates which have floating or adjustable interest rates is $15.4
million.
62
<PAGE>
One- to Four-Family Residential Real Estate Lending. The cornerstone of
the Association's lending program has historically been the origination of loans
secured by mortgages on owner-occupied one- to four-family residences. At
September 30, 1997, $36.9 million, or 71.9%, of the Association's total loan
portfolio consisted of mortgage loans secured by one- to four- family
residences. Until recently, the Association focused its residential lending
activities on fixed rate loans. with 30 year terms. Beginning in fiscal 1994,
the Association began to originate adjustable rate loans. Substantially all of
the Association's one- to four-family residential mortgage originations are
secured by properties located in its market area. All mortgage loans currently
originated by the Association are retained and serviced by it.
The Association currently offers conventional fixed-rate mortgage loans
with maturities up to 30 years. Interest rates and fees charged on these
fixed-rate loans are established on a regular basis according to market
conditions. The Association underwrites its fixed-rate one- to four-family loans
in accordance with Federal Home Loan Mortgage Corporation ("FHLMC") and Federal
National Mortgage Association ("FNMA") standards. As of September 30, 1997, the
Association had $31.7 million of fixed rate loans secured by one- to four-family
residential properties. During fiscal 1997, the Association began to accept
fixed and adjustable rate Federal Home Authority ("FHA") guaranteed loan
applications; however, at September 30, 1997, the Association had no FHA loans
outstanding. See "- Originations of Loans."
The Association also offers ARMs which carry interest rates which
adjust annually at a margin (generally 275 basis points) over the yield on the
One Year Average Monthly U.S. Treasury Constant Maturity Index ("one year CMT").
Such loans may carry terms to maturity of up to 30 years. The ARM loans
currently offered by the Association provide for up to 200 basis point annual
interest rate change cap and a lifetime cap generally 600 basis points over the
initial rate. Initial interest rates offered on the Association's ARMs may be
100 to 350 basis points below the fully indexed rate, although borrowers are
generally qualified at the fully indexed rate. As a result, the risk of default
on these loans may increase as interest rates increase. In addition, the
Association's ARMs typically do not adjust below the initial rate. At September
30, 1997, one- to four-family ARMs totaled $5.2 million or 10.1% of the
Association's total loan portfolio.
The Association also originates loans secured by non-conforming second
homes and vacation homes. The rates charged for these loans are generally higher
than that offered for conventional one-to four-family loans. Generally, the same
underwriting criteria is used when evaluating applications made for mortgages on
second homes and vacation homes as used for applications taken for mortgages on
one- to four-family residences.
Gloversville Federal will generally lend up to 97% of the lesser of the
sales price or appraised value of the security property on owner occupied one-
to four-family loans. For loans exceeding an 80% loan-to-value ratio, the
Association requires private mortgage insurance in amounts intended to reduce
the Association's exposure to 80% or less. Borrowers are required to purchase
the mortgage insurance protection provided by the FHA for FHA mortgages where
loan-to-value ratios exceed 80%. The maximum loan-to-value ratio for non-owner
occupied one-to four-family residences is 75% (65% where there is a cash out
refinancing). For mortgages on second homes and vacation homes, the
loan-to-value ratio cannot exceed 80% for one-family residences and 75% for two-
to four-family residences. Mortgages on non-owner occupied second homes and
vacation
63
<PAGE>
homes cannot exceed 70% loan-to-value and non-owner occupied cash out refinances
for non-conforming second homes and vacation homes cannot exceed 50%
loan-to-value.
In underwriting one- to four-family residential real estate loans, the
Association currently evaluates the borrower's ability to make principal,
interest, and escrow payments, and the value of the property that will secure
the loan.
Residential loans do not currently include prepayment penalties, are
non-assumable and do not produce negative amortization. Although the Association
currently originates mortgage loans only for its portfolio, the Association's
loans are now generally underwritten according to secondary market standards.
While the Association seeks to originate most of its one- to
four-family residential loans in amounts which are less than or equal to the
applicable FHLMC maximum, the Association may, on an exception basis, make one-
to four-family residential loans in amounts in excess of such maximum.
The Association's residential mortgage loans customarily include
due-on-sale clauses giving the Association the right to declare the loan
immediately due and payable in the event that, among other things, the borrower
sells or otherwise disposes of the property subject to the mortgage.
Multi-family and Commercial Real Estate Lending. In order to increase
the yield of its loan portfolio and to complement residential lending
opportunities, since fiscal 1995, the Association has significantly increased
its originations of permanent multi-family and commercial real estate loans
secured by properties in its primary market area. At September 30, 1997, the
Association had multi-family and commercial real estate loans totaling $8.0
million, or 15.5% of the Association's total loan portfolio. See Management's
Discussion and Analysis of Financial Condition and Results of Operations - Asset
Liability Management."
The Association's multi-family and commercial real estate loan
portfolio includes loans secured by apartment buildings, office buildings,
warehouses and other income producing properties located in its market area. In
addition, at September 30, 1997, the Association had $891,000 of commercial
construction loans.
The Association's multi-family and commercial real estate loans
generally carry a maximum term of 20 years and, more often than not, have
interest rates which are fixed for three to five years and adjust periodically
thereafter.
The Association's multi-family and commercial real estate loans are
generally made in amounts up to 75% of the lesser of the appraised value or the
purchase price of the property, with a projected debt service coverage ratio
generally of at least 120%. The Association's current multi-family and
commercial real estate loan originations generally include operating covenants
requiring the borrower to maintain specified debt coverage, liquidity and other
ratios, although most multi-family and commercial real estate loans originated
in prior years did not have such operating covenants, which could reduce the
Association's leverage in the event of delinquency.
64
<PAGE>
Appraisals on properties securing multi-family and commercial real
estate loans are performed by independent appraisers designated by the
Association at the time the loan is made. All appraisals on multi-family and
commercial real estate loans are reviewed by the Association's management. In
addition, the Association's underwriting procedures require verification of the
borrower's credit history, income and financial statements, banking
relationships, references and income projections for the property. Where
feasible, the Association seeks to obtain personal guarantees on these loans and
key man life insurance on individuals critical to the success of the borrower's
business.
65
<PAGE>
Set forth below is a summary of the Association's multi-family and
commercial real estate loans which had an outstanding principal balance in
excess of $300,000 at September 30, 1997.
<TABLE>
<CAPTION>
Date of Collateral Interest Rate Maturity Personal Balance at
Origination Description Terms Date Guarantee September 30, 1997 Status
----------- ----------- ----- ---- --------- ------------------ ------
<S> <C> <C> <C> <C> <C> <C>
July 1996 Warehouse located Interest rate July 2016 Yes 538,955 Current; $250,000 second lien on
in Saratoga County. adjusts every same collateral.
five years.
July 1996 Office building Interest rate July 2016 Yes 526,889 Current; new business commenced
located in Saratoga adjusts every March 1997; building fully
County. year. occupied with assignment of leases
to Association.
April 1997 Land located in Interest rate April 2017 Yes 448,848 Current; $760,000 mortgage on
Albany County. adjusts every building subordinated to
year. Association loan; direct
assignment of monthly rental
income, which is double amount
required for debt service.
July 1995 Trooper barracks in Interest rate July 2010 Yes 438,625 Current; loan represents a
Saratoga County adjusts every refinance of subject properties to
and 12 unit five years fund new venture which is not
residential complex subject to the Association's lien.
in Saratoga County
October 1996 Restaurant/marina Interest rate October 2008 Yes 432,179 Current; borrower prepaying
located in Fulton adjusts every principle; exclusive location on
County five years major lake.
June 1997 Warehouse/office Fixed interest Construction: Yes 411,000 Current; SBA second mortgage
located in Saratoga during June 1998 anticipated to reduce Association's
County and construction; Permanent: exposure $205,000 by the end of
warehouse in interest rate June 2018 March 1998.
Albany county adjusts every
three years,
thereafter
April 1996 3 story, 16 unit Interest rate April 2016 Yes 390,394 Current; "Of concern" due to
apartment complex adjusts every inadequate cash flow by subject
in Saratoga County five years property.
May 1996 Newly renovated Fixed Interest Construction: Yes 383,786 Current, "Of concern" due to
takeout restaurant during May 1997 collateral value concern and new
in Saratoga County construction, Permanent: venture; SBA second mortgage
interest rate May 2017 anticipated to reduce Association's
adjusts every exposure $160,000 by the end of
year thereafter March 1998.
January 1971 25+ residential Interest rate April 2003 No 363,200 Repaid in December 1997.
rental units located fixed
in Saratoga County
April 1994 Three residential Interest rate is April 2009 Yes 339,922 Current; full occupancy at
rental units located fixed September 30, 1997.
in Saratoga County
</TABLE>
66
<PAGE>
Multi-family and commercial real estate loans are generally believed to
present a higher level of risk than loans secured by one- to four-family
residences. This greater risk is due to several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions (which are not particularly favorable in
much of the Association's market areas) on income producing properties and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by multi-family and commercial real
estate is dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed), the borrower's ability to repay the loan may be
impaired. In addition, the Association's multi-family and commercial real estate
and commercial business loans, particularly those originated when the
Association first expanded this product line, may be subject to additional risks
related to the Association's relative inexperience with this type of lending
(including the absence of tested procedures with respect thereto). While the
Association has not experienced any significant losses on its multi-family and
commercial real estate loans in recent years, this portfolio is relatively
unseasoned and no assurance can be given that it will continue to perform as it
has, especially based on the Association's intention to continue to emphasize
growth in this portfolio in the future. As a result of the above as well as
financial concerns with respect to the borrowers, the Association rated $1.1
million of its multi-family and commercial real estate loans as "of concern" as
of September 30, 1997. See " - Market Area."
One- to Four-Family Residential Construction Lending. The Association
offers residential single family construction loans to persons who intend to
occupy the property upon completion of construction. Upon completion of
construction, these loans are automatically converted into permanent residential
mortgage loans and are classified as such. The proceeds of the construction loan
are advanced in stages on a percentage of completion basis as construction
progresses. The loans generally provide for a construction period of not more
than twelve months during which the borrower pays interest only. Loan terms and
underwriting criteria for construction loans are consistent with those for one-
to four-family residential mortgage loans. In recognition of the risks involved
with such loans, the Association carefully monitors construction through regular
inspections and the borrower must qualify for the permanent mortgage loan before
the construction loan is made. At September 30, 1997, the Association had
$539,000 in construction loans outstanding, or 1.1% of gross loans. There were
no nonperforming construction loans at September 30, 1997.
Construction lending is generally considered to involve a higher level
of credit risk than permanent one- to four-family residential lending. The
nature of these loans is such that they are more difficult to evaluate and
monitor. The Association's risk of loss on a construction loan is dependent
largely upon the accuracy of the initial estimate of the property's value upon
completion of the project and the essential cost (including interest) of the
project. If the cost estimate proves to be inaccurate, the Association may be
required to advance funds beyond the amount originally committed in order to
permit completion of the project.
Commercial Business Lending. Subject to the restrictions contained in
federal laws and regulations, the Association is authorized to make secured and
unsecured commercial business loans. At September 30, 1997, $1.4 million, or
2.8%, of the Association's total loan portfolio consisted of commercial business
loans. The Association has recently begun to emphasize commercial business
67
<PAGE>
lending to qualified individuals as part of its policy of servicing customers
and consolidating banking relationships, and also to further its asset/liability
management goals.
The Association's commercial business loans are generally structured as
short-term time notes and term loans. Time notes generally have terms of less
than one year to accommodate seasonal peaks and valleys in the borrower's
business cycle. Commercial business term loans generally have terms of ten years
or less and, more often than not, have adjustable interest rates.
The Association's commercial business loans generally are secured by
equipment, machinery or other corporate assets including real estate and
inventory. Like the multi-family and commercial real estate loans discussed
above, the Association's current commercial business loan originations generally
have covenants requiring the borrowers to maintain certain financial ratios,
although many loans originated in past years do not have such covenants, which
could reduce the Association's leverage in the event of a credit deterioration.
In addition, the Association generally obtains personal guarantees from the
principals of the borrower with respect to all commercial business loans.
Generally, the Association's commercial business lending has been limited to
borrowers headquartered, or doing business, in the Association's market area.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real property whose value tends to be
more easily ascertainable, commercial business loans are of higher risk and
typically are made on the basis of the borrower's ability to make repayment from
the cash flow of the borrower's business. As a result, the availability of funds
for the repayment of commercial business loans may be substantially dependent on
the success of the business itself, which in turn may be dependent on the local
economy, which is currently not performing at a high level. Further, the
collateral securing the loans, if any, may depreciate over time, may be
difficult to appraise and may fluctuate in value based on the success of the
business. In addition, commercial business lending generally requires
substantially greater oversight efforts compared to residential real estate
lending. Finally, the Association's relative inexperience with this type of
lending (including the relatively untested nature of its new procedures related
to this type of lending) may be deemed to add to the risks of this type of
lending. At September 30, 1997, all commercial business loans were performing
and none were rated "of concern."
Set forth below is a description of the Association's only commercial
business loan which had an outstanding principal balance in excess of $300,000
at September 30, 1997.
<TABLE>
<CAPTION>
Date of Collateral Interest Rate Maturity Personal Balance at
Origination Description Terms Date Guarantee September 30, 1997 Status
- ----------- ----------- ----- ---- --------- ------------------ ------
<S> <C> <C> <C> <C> <C> <C>
May 1997 11 fully equipped Interest adjusts May 1998 Yes $352,198 Current; insurance on vehicles
1998 29-foot daily based on with Association as beneficiary;
Coachman established quarterly inspections performed
Pathfinder RVs index on collateral by Association
</TABLE>
Consumer Lending. Management believes that offering consumer loan
products helps to expand the Association's customer base and to create stronger
ties to its existing customer base. In addition, because consumer loans
generally have shorter terms to maturity and carry higher rates of interest than
do residential mortgage loans, they can be valuable asset/liability management
tools. The Association originates a variety of different types of consumer
loans, including home equity
68
<PAGE>
loans and lines of credit, automobile and deposit account loans for household
and personal purposes. The Association has focused its recent consumer lending
activities on home equity lending. At September 30, 1997 consumer loans totaled
$4.4 million or 8.7% of total loans outstanding.
Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. The Association's
consumer loans are made with fixed or adjustable interest rates, with terms of
up to 25 years.
The Association has offered home equity loans since fiscal year 1994.
Home equity loans are secured by second mortgages on one- to four-family
owner-occupied residences. The Association's home equity loans are written so
that the total commitment amount, when combined with the balance of the first
mortgage lien, may not exceed 80% of the appraised value of the property or
$50,000. These loans are written with fixed terms of up to 15 years and carry
fixed interest rates. Home equity lines of credit ("HELOCS") are written so that
the total commitment amount, when combined with the balance of the first
mortgage lien, may not exceed 80% of the appraised value of the property, with a
maximum of $100,000. HELOCs are written for terms up to 25 years (with the first
5 year period requiring only interest payments and the last 20 year period being
fully amortized) and carry a prime-based floating rate of interest after the
first year. At September 30, 1997, the Association's home equity loans and
HELOCS totaled $3.4 million, or 6.6% of the Association's total loan portfolio.
The Association also makes short-term, fixed-rate and adjustable-rate
consumer loans either unsecured or secured by savings and time accounts,
automobiles, or other consumer assets. These loans generally have an average
term of not more than five years and have interest rates higher than mortgage
loans. The shorter terms to maturity are helpful in managing the Association's
interest rate risk.
The underwriting standards employed by the Association for consumer
loans include a determination of the applicant's payment history on other debts
and ability to meet existing obligations and payments on the proposed loan.
Although creditworthiness of the applicant is of primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount. Consumer loans may entail greater
credit risk than do residential mortgage loans, particularly in the case of
consumer loans which are unsecured or are secured by rapidly depreciable assets,
such as automobiles. In such cases, any 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. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans.
Originations of Loans
The lending activities of the Association are subject to written,
non-discriminatory, underwriting standards and loan origination procedures
established by the Association's Board of Directors and management. Loan
originations come from a number of sources. Residential loan
69
<PAGE>
originations can be attributed to depositors, retail customers, telephone
inquiries, advertising, the efforts of the Association's loan officers and
referrals from other borrowers, real estate brokers and builders. The
Association originates loans through its own efforts and does not compensate
mortgage brokers, mortgage bankers or other loan finders. However the
Association frequently obtains multi-family, commercial real estate and
commercial business loans through commercial loan brokers paid by the borrower.
Beginning with fiscal 1998, an Association employee will be assigned the sole
task of originating residential mortgages and home equity loans.
All loans held in portfolio at September 30, 1997 were originated by
the Association. The Association does not purchase whole loans. There have been
no loan sales made by the Association, and it is the Association's intention
that all loans originated be held in portfolio.
While the Association originates both fixed and adjustable rate loans,
its ability to originate loans is dependent upon the relative customer demand
for loans in its market. Demand is affected by the local economy and the
interest rate environment. From time to time, in order to supplement loan demand
in the Association's market area, the Association has acquired mortgage-backed
securities which are held in the "available for sale" portfolio. See "-
Investment Activities -Mortgage-Backed Securities" and Note 2 of the Notes to
Financial Statements.
70
<PAGE>
The following table shows the loan origination and repayment activities
of the Association for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Originations by type:
Fixed rate:
Real estate: One- to four-family......................... $1,577 $2,140 $1,900
Multi-family and commercial................. 978 955 923
One- to four-family construction............ 683 428 447
Non-real estate:Commercial business......................... 436 76 218
Home equity................................. 215 865 14
Other consumer.............................. 348 449 257
------- ------- ---------
Total fixed rate............................ 4,237 4,913 3,759
------ ------ --------
Adjustable rate:
Real estate: One- to four-family......................... 24 243 2,409
Multi-family and commercial................. 3,115 1,795 112
One- to four-family construction............ 40 125 527
Non-real estate: Commercial business........................ 456 1,078 1,493
Home equity................................. 773 530 1,906
Other consumer.............................. 206 97 4
------- -------- -----------
Total adjustable rate....................... 4,614 3,868 6,451
------ ------ --------
Total loans originated...................... 8,851 8,781 10,210
Principal repayments.......................................... (7,670) (6,173) (7,315)
Decrease in other terms, net.................................. (977) (552) (391)
------- ------- ---------
Net increase................................ $ 204 $2,056 $ 2,504
======= ====== =======
</TABLE>
Delinquencies and Non-Performing Assets
Delinquency Procedures. When a borrower fails to make a required
payment on a loan, the Association attempts to cause the deficiency to be cured
by contacting the borrower. Late notices are generally sent when a payment on a
residential or consumer loan is more than 15 days past due and a late charge is
generally assessed at that time. For multi-family and commercial real estate
loans and commercial business loans, the Association sends a late notice on the
11th day after payment is due and a late fee is assessed at that time. For
residential and consumer loans, the Association's asset review officer attempts
to contact personally any borrower who is more than 30 days past due. For
multi-family and commercial real estate loans and commercial business loans, the
Vice President of Lending telephones the borrower when payment is 15 days
delinquent. For all loans past due 60 days or more principal and interest, and,
beginning in July 1997, for all loans where the borrower is delinquent in the
payment of real estate taxes regardless of payment status, the asset review
officer or the Vice President of Lending contacts the borrower on a regular
basis to seek to cure the delinquency. If a loan becomes past due 90 days, the
Association refers the matter to an attorney, who first seeks to obtain payment
without litigation and, if unsuccessful, generally commences a foreclosure
action and other appropriate legal action to collect the loan. The Association
also seeks to recover any shortfall by pursuing the borrower on the note. A
foreclosure
71
<PAGE>
action, if the default is not cured, typically leads to a judicial sale of the
mortgaged real estate. The judicial sale is normally delayed if the borrower
files a bankruptcy petition because the foreclosure action cannot be continued
unless the Association first obtains relief from the automatic stay provided by
the Bankruptcy Code.
If the Association acquires the mortgaged property at foreclosure sale
or accepts a voluntary deed in lieu of foreclosure, the acquired property is
then classified as OREO until it is sold. When OREO is acquired, the property is
recorded at the lower of cost (defined as fair value of the foreclosed property
at initial foreclosure) or fair value of the asset acquired less estimated costs
to sell the property. The shortfall (if any) between the fair value of the
property and the carrying value of the loan is charged to the allowance for loan
losses. The Association also seeks to recover any shortfall by pursuing the
borrower on the note. Thereafter, changes in the value of the OREO are taken as
current expenses.
The Association is permitted to finance sales of OREO by "loans to
facilitate," which may involve a lower down payment or a longer repayment term
or other more favorable features than generally would be granted under the
Association's underwriting guidelines. At September 30, 1997, there was one
"loan to facilitate" outstanding for $128,000 which was classified as
substandard and non-accruing at September 30, 1997, as the new borrower was more
than 90 days delinquent as to payments. The "loan to facilitate" was originated
in December 1993 and has been classified as substandard since that time.
It is the Association's policy to discontinue accruing interest on a
loan when it becomes 90 days or more delinquent, regardless of the collateral
supporting the loan or sooner if management believes it is prudent to do so.
Once the accrual of interest is discontinued, the Association generally records
interest as and when received until the loan is restored to accruing status. The
loan generally remains on nonaccrual until such time that the borrower has
repaid all delinquency and has maintained the loan in a current status for at
least three consecutive months, provided management concludes that full payment
of principal and interest is reasonably assured in the future.
72
<PAGE>
The following table sets forth the Association's loan delinquencies as
to principal and interest payments by type, by number, amount and by percentage
of type at September 30, 1997.
<TABLE>
<CAPTION>
Loans Delinquencies at September 30, 1997
-------------------------------------------------------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
-------------------------- --------------------------------- ------------------------------------
% of % of % of
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
Real Estate:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family............... 5 $215 0.58% 17 $993 2.69% 22 $1,208 3.27
Multi-family and commercial....... -- -- -- -- -- -- -- -- --
One- to four-family construction.. -- -- -- -- -- -- -- -- --
Other:
Commercial business............... -- -- -- -- -- -- -- -- --
Home equity -- -- -- 2 54 1.60 2 54 1.60
Other consumer.................... 2 18 1.63 -- -- -- 2 18 1.63
---- ----- ---- ----- ------ ---- -------
Total........................... 7 $233 0.45% 19 $1,047 2.04% 26 $1,280 2.49%
== ==== == ====== == ======
</TABLE>
73
<PAGE>
Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. The Association classifies all of its loans monthly based on
delinquency status. Multi-family and commercial real estate and commercial
business loans are reviewed annually regardless of delinquency status. There are
three classifications for problem assets: Substandard, Doubtful and Loss.
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the Association will sustain some loss if the
deficiencies are not corrected. Doubtful assets have the weaknesses of
Substandard assets, with the additional characteristics that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. An
asset classified Loss is considered uncollectible and of such little value that
continuance as an asset on the balance sheet of the institution is not
warranted. Assets classified as Substandard or Doubtful require the institution
to establish prudent general allowances for loan losses. If an asset or portion
thereof is classified as a loss, the institution charges off such amount against
the loan loss allowance. If an institution does not agree with an examiner's
classification of an asset, it may appeal this determination to the District
Director of the OTS. As of September 30, 1997, the Association had $2.6 million
of loans secured by one-to four-family residential property classified as
substandard. At that time, the Association also had $1.1 million of loans
secured by one- to four-family residential properties and $1.1 million of loans
secured by commercial real estate classified as "special mention." As of the
same date, the Association had no assets classified as doubtful or loss.
Non-Performing Assets. The table below sets forth the amounts and
categories of Association's non-performing assets. Foreclosed assets include
assets acquired in settlement of loans.
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Non-accruing loans:
<S> <C> <C> <C> <C> <C>
One- to four-family....................... $3,730(1) $2,212 $2,576 $3,438 $2,034
Home equity............................... 63 -- -- -- --
Other consumer............................ -- -- 5 80 69
---------- --------- --------- --------- --------
Total non-performing loans(2)........ 3,793 2,212 2,581 3,518 2,103
Foreclosed assets:
One- to four-family...................... 313 70 182 334 507
-------- --------- -------- -------- --------
Total non-performing assets................. $4,106 $2,282 $2,763 $3,852 $2,610
====== ====== ====== ====== ======
Total non-performing assets as a
percentage of total assets................ 6.73% 3.74% 4.38% 5.53% 4.22%
===== ==== ==== ==== ====
</TABLE>
(1) Includes $2.7 million of restructured or rewritten loans as to which real
estate taxes were previously delinquent but which were not otherwise
delinquent.
(2) There are no loans past due greater than 90 days and accruing interest or
restructured loans accruing interest.
74
<PAGE>
For the year ended September 30, 1997 gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to $343,000. The amount that was included in
interest income on such loans was $304,000.
At September 30, 1997, the Association's non-performing loans portfolio
consisted of 78 loans secured by one- to four-family residences located in the
Association's market area which totaled $3.8 million. Four of these loans were
secured solely by second mortgages while the remaining 74 loans were secured, at
a minimum, by a first mortgage on the collateral. At September 30, 1997, there
were seven one- to four-family properties held as OREO with a net carrying value
of $313,000. All of these OREO properties were either sold or under contract for
sale by December 31, 1997 without material loss.
As indicated under the caption "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 - Other Expense," as of the end
of fiscal 1996, the Association discovered that the real estate taxes were
delinquent on a number of its delinquent one- to four-family residential loans.
Since all such loans were already classified as non-performing, this information
did not result in a change in non-performing assets. However, in fiscal 1997,
the Association noted delinquent real estate taxes on a number of loans which
were not previously classified as non-performing. The Association contacted all
of the borrowers of such loans and, in cases where the taxes were not promptly
paid by the borrower, advanced funds for the payment of the taxes and rewrote
such loans to add the advanced funds to the loan principal and to include tax
escrow provisions. Such rewritten loans were classified as troubled debt
structurings where deemed appropriate based on the financial position of the
borrower. As of September 30, 1997, the Association's troubled debt
restructurings were $1.6 million and the other loans rewritten for delinquent
taxes were $1.1 million. While all such loans were classified as non-performing
at September 30, 1997, none were 90 days or more delinquent as of such date.
Since these loans were written at market interest rates, it is anticipated that,
provided that these loans continue to perform in accordance with their new
terms, they will become performing loans in fiscal 1998, generally after one
year of performance. All current originations by the Association provide for tax
escrows.
Other Loans of Concern. In addition to the non-performing assets set
forth in the table above, as of September 30, 1997, there were $1.1 million of
other loans, all of which were multi-family and commercial real estate or
commercial business loans, with respect to which known information about the
possible credit problems of the borrowers or the cash flows of the security
properties have caused management to have concerns as to the ability of the
borrowers to comply with present loan repayment terms and which may result in
the future inclusion of such items in the non-performing asset categories. While
none of these loans were 60 days or more delinquent as of the date hereof, weak
or negative cash flows, failure to attain budgeted income projections or
declines in collateral values have been the primary reasons which have caused
the Association to monitor such loans more carefully. Set forth below is a
description of each of the Association's loans of concern at September 30, 1997
which had a net book value in excess of $300,000.
Apartment Loan, Saratoga Springs. This Loan represents a $390,000
commercial real estate loan made to an S-Corp secured by a 3-story, 16 unit
apartment complex. Although this loan has experienced no delinquency since
originated in April 1996, the Association has classified it as "of
75
<PAGE>
concern" because of its declining cash flow. The loan is guaranteed by the
S-Corp's principal shareholder.
Takeout Restaurant, Saragota County. This $384,000 loan, originated in
September 1997, is classified as "of concern" due to concerns regarding sales
projections, collateral value and the start-up nature of the business. The
borrower paid 15% of the cost of renovations made to the takeout restaurant
directly from personal funds, and there is a $160,000 SBA second mortgage
commitment, the proceeds of which will reduce the Association's exposure, to be
funded the first quarter of calendar year 1998. The loan is current at September
30, 1997.
Other loans of concern at September 30, 1997 consisted of two
multi-family and commercial real estate loans totaling $318,000. All the other
loans of concern were current at September 30, 1997 but were classified because
of lower than expected debt service coverage. The Association's loans of concern
have been considered by management in conjunction with the analysis of the
adequacy of the allowance for loan losses.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for
loan losses charged to earnings based on the Association's evaluation of the
risk inherent in its entire loan portfolio. Such evaluation, which includes a
review of all loans for which full collectibility may not be reasonably assured,
considers the market value of the underlying collateral, growth and composition
of the loan portfolio, delinquency trends, adverse situations that may affect
the borrower's ability to repay, prevailing and projected economic conditions
and other factors that warrant recognition in providing for an adequate
allowance for loan losses.
While the Association believes that it uses the best information
available to determine the allowance for loan losses, unforeseen economic and
market conditions could result in adjustments to the allowance for loan losses,
and net earnings could be significantly affected, if circumstances differ
substantially from the assumptions used in making the final determination.
Management believes its allowance for loan losses is adequate at September 30,
1997; however, future adjustments could be necessary and net income could be
adversely affected if circumstances differ substantially from the assumptions
used in the determination of allowance for loan losses.
76
<PAGE>
The following table sets forth an analysis of the Association's
allowance for loan losses.
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period....................... $1,251 $ 779 $ 856 $ 875 $ 258
Charge-offs:
One- to four-family................................ (417) (218) (160) (115) (199)
Commercial business................................ (7) (4) -- -- --
Home equity........................................ (10) -- -- -- --
Other consumer..................................... (32) (32) (50) (142) (70)
------- ------- ------ ------ ------
Total charge-offs................................ (466) (254) (210) (257) (269)
------ ------ ----- ------ -----
Recoveries:
One- to four-family................................ 21 3 1 13 34
Other consumer..................................... 15 9 3 14 9
------ --------- ------ ------ ------
Total recoveries................................ 36 12 4 27 43
------- -------- ------ ------ -----
Net charge-offs...................................... (430) (242) (206) (230) (226)
Provisions charged to operations..................... 792 714 129 211 843
------- -------- ----- ----- -----
Balance at end of period............................. $1,613 $1,251 $779 $856 $875
====== ====== ==== ==== ====
Ratio of net charge-offs during the period to
average gross loans outstanding during the period.. 0.84% 0.49% 0.42% 0.53% 0.52%
==== ==== ==== ==== ====
Ratio of net charge-offs during the period to
average non-performing assets...................... 13.46% 9.64% 6.23% 7.11% 7.16%
===== ==== ==== ==== ====
Ratio of allowance to gross loans outstanding at
end of period...................................... 3.14% 2.45% 1.58% 1.83% 2.08%
==== ==== ==== ==== ====
Allowance as a percentage of non-performing loans
(end of period).................................... 42.53% 56.53% 30.20% 24.34% 41.63%
===== ===== ===== ===== =====
</TABLE>
77
<PAGE>
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for loan
losses by category as prepared by the Association. This allocation is based on
management's assessment as of a given point in time of the risk characteristics
of each of the component parts of the total loan portfolio and is subject to
changes as and when the risk factors of each such component part change. The
allocation is not indicative of either the specific amounts or the loan
categories in which future charge-offs maybe taken, nor should it be taken as an
indicator of future loss trends. The allocation of the allowance to each
category does not restrict the use of the allowance to absorb losses in any
category.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------------- --------------------------------- -----------------------------------
Percent Percent Percent
of loans of loans of loans
Amount Loan in Each Amount Loan in Each Amount Loan in Each
of loan Amounts Category of loan Amounts Category of loan Amounts Category
loss by of Total loss by of Total loss by of Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
------------ ---------- ---------- ----------- ----------- --------- ----------- ---------- ------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family......... $ 932 $36,891 71.92% $ 770 $40,262 78.80% $ 592 $42,578 86.41%
Multi-family and commercial. 238 7,950 15.50 93 4,635 9.07 52 2,579 5.23
One- to four-family
construction.............. 3 539 1.05 4 938 1.84 3 742 1.51
Commercial business......... 43 1,422 2.77 27 1,230 2.41 4 185 .38
Home equity................. 36 3,379 6.59 19 2,869 5.62 9 2,265 4.60
Other consumer.............. 87 1,111 2.17 84 1,154 2.26 72 920 1.87
Unallocated................. 274 -- --- 254 -- -- 47 -- --
-------- -------- -------- -------- -------- ------- ------- -------- ---------
Total.................. $1,613 $51,292 100.00% $1,251 $51,088 100.00% $ 779 $49,269 100.00%
====== ======= ====== ====== ======= ====== ===== ======= ======
</TABLE>
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------------------
1994 1993
-------------------------------------- --------------------------------------
Percent Percent
of loans of loans
Amount Loan in Each Amount Loan in Each
of loan Amounts Category of loan Amounts Category
loss by of Total loss by of Total
Allowance Category Loans Allowance Category Loans
------------ ---------- -------------- ----------- ----------- --------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family......... $706 $42,973 91.89% $685 $40,633 96.64%
Multi-family and commercial. 18 878 1.88 -- -- --
One- to four-family
construction.............. 3 701 1.50 1 139 .33
Commercial business......... -- -- 2.89 -- -- --
Home equity................. 5 1,352 --- -- -- --
Other consumer.............. 108 861 1.84 101 1,276 3.03
Unallocated................. 16 -- --- 88 -- --
------ -------- -------- ----- --------- -------
Total.................. $856 $46,765 100.00% $875 $42,048 100.00%
==== ======= ====== ==== ======= ======
</TABLE>
78
<PAGE>
Investment Activities
Generally, the investment policy of Gloversville Federal is to invest
funds among categories of investments and maturities based upon the
Association's asset/liability management policies, investment quality, loan and
deposit volume, liquidity needs and performance objectives. The Association's
securities must be classified into any of three categories: trading, held to
maturity and available for sale. Securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities and are reported at fair value with unrealized gains and losses
included in trading account activities in the statement of operations.
Securities that Gloversville Federal has the positive intent and ability to hold
to maturity are classified as held to maturity and reported at amortized cost.
All other securities not classified as trading or held to maturity are
classified as available for sale. At September 30, 1997, Gloversville Federal
had no securities which were classified as trading or held to maturity.
Available for sale securities are reported at fair value with unrealized gains
and losses included, on an after-tax basis, in a separate component of total
equity. At September 30, 1997, all of the Association's mortgage-backed and
other securities (totaling $7.0 million, including FHLB stock) were classified
as available for sale.
General. Gloversville Federal must maintain minimum levels of
investments and other assets that qualify as liquid assets under OTS
regulations. Liquidity may increase or decrease depending upon the availability
of funds and comparative yields on investments in relation to the return on
loans. At September 30, 1997, Gloversville Federal's liquidity ratio for
regulatory purposes was 10.3%. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Market Risk Analysis" and "-
Liquidity and Capital Resources."
79
<PAGE>
The following table sets forth the composition of the Association's
securities, and other earning assets at the dates indicated.
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ----------------------------- ----------------------------
Amortized % of Amortized % of Amortized % of
Cost Total Cost Total Cost Total
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
Securities held to maturity:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government agency obligations... $ -- --% $ -- --% $4,500 100.00%
---------- ---------- ---------- --------- ------ -------
Total securities held to maturity... -- -- -- -- 4,500 100.00
---------- ---------- ---------- --------- ------- -------
Securities available for sale:
US Government agency obligations...... 2,998 42.50 2,998 39.43 3,696 72.00
------ ------- ------- -------- ------- --------
Mortgage-backed securities
FNMA............................... 753 10.66 766 10.07 -- --
FHLMC.............................. 2,843 40.30 3,379 44.44 993 19.35
------ ------- ------- -------- -------- --------
Total mortgage-backed securities
available for sale............ 3,596 50.96 4,145 54.51 993 19.35
------ ------- ------- -------- -------- --------
FHLB Stock...................... 461 6.54 461 6.06 444 8.65
------- -------- -------- --------- -------- ---------
Total securities available for sale..... $7,054 100.00% $7,604 100.00% $5,133 100.00%
====== ====== ====== ====== ====== =======
Average remaining contractual life
of securities: 10.88 years 12.03 years 1.95 years
=========== =========== ==========
Other interest-earning assets:
Term deposit with FHLB................ $ -- -- $ -- -- $ 1,000 37.04
Federal funds sold.................... -- -- 100 100.00 1,700 62.96
-------------- ------------ ------------ ----------- ------------ ----------
Total............................... $ -- --% $ 100 100.00% $ 2,700 100.00%
============= ============ =========== =========== =========== =========
</TABLE>
80
<PAGE>
The following table sets forth the contractual maturities of the
Association's securities (excluding FHLB stock) at September 30, 1997.
<TABLE>
<CAPTION>
At September 30, 1997
------------------------------------------------------------------------
Less Than 1 to 5 5 to 10 Over
1 Year Years Years 10 Years Total Securities
----------- ----------- ----------- ------------ -----------------------
Amortized Amortized Amortized Amortized Amortized Market
Cost Cost Cost Cost Cost Value
---- ---- ---- ---- ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. government agency obligations................ $ -- $2,000 $ -- $ 998 $2,998 $2,994
Mortgage-backed securities........................ 694 998 -- 1,904 3,596 3,562
----- -------- ---- ------ ------ ------
Total securities available for sale............... $694 $2,998 $ -- $2,902 $6,594 $6,556
==== ====== ==== ====== ====== ======
Weighted average yield............................ 5.90% 5.93% --% 6.65% 6.14%
</TABLE>
Mortgage-Backed Securities. In order to supplement its lending
activities and achieve its asset/liability management goals, the Association
from time to time invests in mortgage-backed securities. As of September 30,
1997, all of the mortgage-backed securities owned by the Association were
issued, insured or guaranteed either directly or indirectly by a federal agency.
However, it should be noted that, while a (direct or indirect) federal guarantee
may indicate a high degree of protection against default, they do not indicate
that the securities will be protected from declines in value based on changes in
interest rates or prepayment speeds.
The Association primarily invests in fixed rate mortgage-backed
securities with lives of seven years or less and variable rate mortgage-backed
securities with rate reset intervals not to exceed three years and average lives
of seven years or less. The average lives of the Association's mortgage-backed
securities are determined by reference to industry standard tables which take
into account historical prepayments on mortgage loans with specified interest
rates and terms to maturity. At September 30, 1997, the Association's
mortgage-backed securities portfolio totaled $3.6 million. At September 30,
1997, all of the Association's mortgage-backed securities were issued or
guaranteed by FHLMC or FNMA and all were pass- through securities. On such date,
$1.7 million of the mortgage-backed securities had fixed interest rates with a
weighted average rate of 5.79% and a weighted average life of 2.3 years. The
remaining $1.9 million of mortgage-backed securities had adjustable rates with a
weighted average rate of 6.33% and weighted average period to repricing of one
year.
Mortgage-backed securities generally have higher yields than investment
securities because of the longer terms and the uncertainties associated with the
timing of mortgage repayments. In addition, mortgage-backed securities are more
liquid than individual mortgage loans and may be used to collateralize
borrowings of the Association. However, these securities generally yield less
than the loans that underlie them because of the cost of payment guarantees or
credit enhancements that reduce credit risk. For information regarding the
Association's mortgage-backed securities portfolio, see Note 2 of the Notes to
the Financial Statements.
81
<PAGE>
To assess price volatility, the Federal Financial Institutions
Examination Council ("FFIEC") adopted a policy in 1992 which requires an annual
"stress" test of mortgage derivative securities. This policy, which has been
adopted by the OTS, requires the Association to annually test its CMOs and other
mortgage-related securities to determine whether they are high-risk or
nonhigh-risk securities. Mortgage derivative products with an average life or
price volatility in excess of a benchmark 30-year, mortgage-backed, pass-through
security are considered high-risk mortgage securities. Under the policy, savings
institutions may generally only invest in low-risk mortgage securities in order
to reduce interest rate risk. In addition, all high-risk mortgage securities
acquired after February 9, 1992 which are classified as high risk at the time of
purchase must be carried in the institution's trading account or as securities
available for sale. At September 30, 1997, none of the Association's
mortgage-backed securities were classified as "high-risk."
As of September 30, 1997, the Association did not have any
mortgage-backed securities of a single issuer in excess of 10% of retained
earnings except for FNMA and FHLMC issues, amounting to $752,000 and $2.8
million, respectively.
82
<PAGE>
The following table shows mortgage-backed securities purchase, sale and
repayment activities of the Association for the periods indicated.
Years Ended September 30,
---------------------------------------
1997 1996 1995
---------- ------------- --------------
(In Thousands)
Purchases:
Adjustable-rate.................. $ -- $2,281 $ --
Fixed-rate....................... -- 1,301 993
--------- ------ ------
Total purchases............... -- 3,582 993
Sales:
Adjustable-rate.................. -- -- --
Fixed-rate....................... -- -- --
--------- -------- --------
Total sales.............. -- -- --
Principal repayments............. (551) (431) --
Discount/premium
Accretion/amortization......... 1 2 --
Fair value net change............ 67 (101) --
------- ----- --------
Net increase (decrease)... $ (483) $3,052 $993
===== ====== ====
The Association will evaluate mortgage-backed securities purchases in
the future based on its asset/liability objectives, market conditions and
alternative investment opportunities.
Investment Securities. Federally chartered savings institutions have
the authority to invest in various types of liquid assets, including United
States Treasury obligations, securities of various federal agencies, certain
certificates of deposit of insured banks and savings institutions, certain
bankers' acceptances, repurchase agreements and federal funds. Subject to
various restrictions, federally chartered savings institutions may also invest
their assets in commercial paper, investment grade corporate debt securities and
mutual funds whose assets conform to the investments that a federally chartered
savings institution is otherwise authorized to make directly.
In order to complement its lending and mortgage-backed securities
investment activities and to increase its holdings of short and medium term
assets, the Association invests in liquidity investments and in high-quality
investments, such as U.S. Treasury and agency obligations. At September 30,
1997, the Association's securities portfolio totaled $3.0 million. At September
30, 1997, the Association did not own any investment securities of a single
issuer which exceeded 10% of the Association's retained earnings, other than
federal agency obligations. See Note 2 of the Notes to the Financial Statements
for additional information regarding the Association's securities portfolio.
83
<PAGE>
Sources of Funds
General. The Association's primary source of funds are deposits. In
addition, the Association derives funds for loans and investments from loan and
security repayments and prepayments, from cash flows from operations and, to a
lesser extent, from borrowings. Scheduled payments on loans and mortgage-backed
and investment securities are a relatively stable source of funds, while savings
inflows and outflows and loan and mortgage-backed and investment securities
prepayments are significantly influenced by general interest rates and money
market conditions. Borrowings are occasionally used to compensate for reductions
in other sources of funds and to take advantage of lower funding costs that
better match the Association's short-term needs.
Deposits. The Association offers a variety of deposit programs to its
customers, including money market deposit accounts, passbook and statement
savings accounts, NOW accounts, checking accounts and time deposits. Deposit
account terms vary according to the minimum balance required, the time periods
the funds must remain on deposit and the interest rate, among other factors. The
Association's deposits are obtained predominantly from its Fulton and Saratoga
County market area. The Association relies primarily on customer service and
long-standing relationships with customers to attract and retain deposits;
however, market interest rates and rates offered by competing financial
institutions significantly affect the Association's ability to attract and
retain deposits. The Association does not generally pay premium rates for time
deposits in excess of $100,000, and for the last three years, the Association
generally has not used brokers to obtain deposits.
The Association prices its deposit offerings based upon market and
competitive conditions in its market area. Since fiscal 1995, the Association
has attempted to build core deposits by focusing its marketing efforts in money
market accounts. During the same period, the Association introduced improved
non-time deposit products, such as statement savings, tiered money market
accounts with checking and commercial checking accounts. Finally, in an effort
to reduce its cost of funds, over the same period of time, the Association has
priced its time deposit accounts less aggressively.
The following table indicates the amount of the Association's time
deposit and other deposits by time remaining until maturity as of September 30,
1997.
<TABLE>
<CAPTION>
Maturity
----------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
-------- ------------ ------------ ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Time deposits less than $100,00 $ 8,552 $3,761 $8,697 $4,512 $25,522
Time deposits $100,000 or more 1,753 432 100 208 2,493
------- ------- -------- ------- --------
Total time deposits $10,305 $4,193 $8,797 $4,720 $28,015
======= ====== ====== ====== =======
</TABLE>
84
<PAGE>
The following table sets forth the deposit flows at the Association
during the periods indicated.
Year Ended September 30,
-------------------------------------------
1997 1996 1995
---- ---- ----
(Dollars In Thousands)
Opening balance............... $ 55,716 $ 57,866 $ 64,703
Deposits...................... 143,875 116,344 87,068
Withdrawals................... (145,899) (120,910) (96,432)
Interest credited............. 2,425 2,416 2,527
----------- ----------- ----------
Ending balance.............. $ 56,117 $ 55,716 $ 57,866
========== ========= ========
Net increase (decrease)....... $ 401 $ (2,150) $ (6,837)
=========== =========== =========
Percent increase (decrease)... 0.72% (3.72)% (10.57)%
==== ===== ======
85
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Association as of the dates
indicated.
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ----------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
Transaction and savings accounts
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passbook and statement savings ....................... $12,004 21.40% $13,140 23.58% $13,833 23.90%
Demand and NOW accounts .............................. 5,148 9.17 5,174 9.29 4,374 7.56
Money market accounts ................................ 10,950 19.51 10,392 18.65 5,709 9.87
------- ------ ------- ------ ------- ------
Total transaction and savings accounts ............... 28,102 50.08 28,706 51.52 23,916 41.33
------- ------ ------- ------ ------- ------
Time Deposits
- -------------
Under 4.00% .......................................... 3 0.01 -- -- 48 0.08
4.00 - 4.99% ......................................... 3,994 7.12 11,357 20.38 4,685 8.10
5.00 - 5.99% ......................................... 21,942 39.10 11,101 19.92 18,923 32.70
6.00 - 6.99% ......................................... 2,046 3.64 4,525 8.12 10,219 17.66
7.00 - 7.99% ......................................... -- -- -- -- 50 0.09
8.00 - and over ...................................... 30 0.05 27 0.05 25 0.04
------- ------ ------- ------ ------- ------
Total time deposits .................................. 28,015 49.92 27,010 48.48 33,950 58.67
------- ------ ------- ------ ------- ------
Total deposits ....................................... $56,117 100.00% $55,716 100.00% $57,866 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
86
<PAGE>
The following table shows rate and maturity information for the
Association's time deposits as of September 30, 1997.
<TABLE>
<CAPTION>
Under 4.00 - 5.00 - 6.00 - 7.00 - 8.00 - Percent
4.00% 4.99% 5.99% 6.99% 7.99% 8.99% Total of Total
----- ----- ----- ----- ----- ----- ----- --------
(Dollars in Thousands)
Time deposit accounts maturing
in quarter ending:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997............ $ -- $2,504 $ 7,287 $ 514 $-- $ -- $10,305 36.78%
March 31, 1998............... 3 1,485 2,278 427 -- -- 4,193 14.97
June 30, 1998................ -- 5 3,236 100 -- -- 3,341 11.93
September 30, 1998........... -- -- 5,440 16 -- -- 5,456 19.48
December 31, 1998............ -- -- 1,180 92 -- -- 1,272 4.54
March 31, 1999............... -- -- 882 -- -- -- 882 3.15
June 30, 1999................ -- -- 689 -- -- -- 689 2.46
September 30, 1999........... -- -- 418 -- -- -- 418 1.49
December 31, 1999............ -- -- 44 247 -- -- 291 1.04
March 31, 2000............... -- -- 84 142 -- -- 226 0.81
June 30, 2000................ -- -- 40 173 -- -- 213 0.76
September 30, 2000........... -- -- -- 301 -- -- 301 1.07
December 31, 2000............ -- -- 85 34 -- -- 119 0.42
Thereafter................... -- -- 279 -- -- 30 309 1.10
------ ---------- --------- ---------- ---- ---- ---------- --------
Total.................... $ 3 $3,994 $21,942 $2,046 $-- $30 $28,015 100.00%
===== ====== ======= ====== === === ======= ======
Percent of total......... 0.01% 14.26% 78.32% 7.30% --% 0.11% 100.00%
</TABLE>
For additional information regarding the composition of the
Association's deposits, see Note 6 of the Notes to the Financial Statements.
87
<PAGE>
Borrowings. Although deposits are the primary source of funds for the
Association's lending and investment activities and for its general business
purposes, the Association has occasionally relied upon borrowed funds or
repurchase agreements to supplement them. The Association has borrowed funds,
either through direct borrowings or through the sale of securities under
agreements to repurchase, when the cost of borrowings was attractive when
compared to the rate required to be paid on deposits plus the deposit insurance
premium required to be paid. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital."
The Association may borrow under a line of credit agreement with the
FHLB of New York. FHLB advances typically are collateralized by all of the
assets of the Association. There were no FHLB advances outstanding at September
30, 1997.
Under an agreement with the Association's investment portfolio
safekeeping agent, the Association may from time to time enter into security
repurchase agreements brokered through such agent whereby the Association
obtains funds from the sale of securities held in the securities portfolio with
an agreement to repurchase the securities either the next day or a set number of
days following the sale. Total borrowings represented by repurchase agreements
at September 30, 1997 were $1.3 million. The Association undertook this
borrowing in order to provide needed funds at a time when the Association did
not want to increase the rates paid on time deposits to attract funds.
The following table sets forth the maximum month-end balance and
average balance of the Association's borrowings for the periods indicated.
Year Ended September 30,
------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
Maximum Balance:
FHLB borrowings........................ $ 850 $ 300 $ --
Securities sold under agreements
to purchase.......................... 1,300 -- --
Average Balance:
FHLB borrowings........................ $ 273 $ 6 $ --
Securities sold under agreements
to repurchase....................... 118 -- --
88
<PAGE>
The following table sets forth the amount and rate of the Association's
borrowings at the dates indicated.
September 30,
----------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
FHLB borrowings.......................... $ -- $ 300 $ --
Securities sold under agreements
to repurchase............................ 1,300 -- --
------ --------- ---
Total borrowings...................... $1,300 $ 300 $--
====== ====== ===
Weighted average interest rate of
FHLB borrowings........................ -- 5.88% --
Weighted average interest rate of
securities sold under agreements
to repurchase......................... 5.80% -- --
Subsidiary Activities
As a federally chartered savings and loan association, Gloversville
Federal is permitted by OTS regulations to invest up to 2% of its assets in the
stock of, or loans to, service corporation subsidiaries, and may invest an
additional 1% of its assets in service corporations where such additional funds
are used for inner-city or community development purposes. In addition to
investments in service corporations, federal institutions are permitted to
invest an unlimited amount in operating subsidiaries engaged solely in
activities which a federal savings association may engage in directly. At
September 30, 1996, Gloversville Federal did not have any subsidiaries.
Competition
Gloversville Federal faces strong competition both in originating real
estate loans and in attracting deposits. Competition in originating loans comes
primarily from commercial banks, credit unions, mortgage bankers and other
savings institutions, which also make loans secured by real estate located in
the Association's market area. Gloversville Federal competes for loans
principally on the basis of the interest rates and loan fees it charges, the
types of loans it originates and the quality of services it provides to
borrowers. The Association originated 5.93% of the residential mortgages
recorded in Fulton County during the calendar year ended December 31, 1996, the
latest date from which information was available, and .52% of the residential
mortgage loans recorded in Saratoga County during the same period.
Competition for those deposits is principally from commercial banks,
credit unions, mutual funds, securities firms and other savings institutions
located in the same communities. The ability of the Association to attract and
retain deposits depends on its ability to provide an investment opportunity that
satisfies the requirements of investors as to rate of return, liquidity, risk,
convenient locations and other factors. The Association competes for these
deposits by offering competitive rates, maintaining close ties with its local
community, advertising and marketing programs, convenient business hours and a
customer-oriented staff. The Association's deposit market share at December 31,
1996, the latest date for which information was available, was 6.21% in Fulton
County and 1.01% for Saratoga County.
The Association is subject to competition from other financial
institutions which may have much greater financial and marketing resources.
However, the Association believes that it benefits from its community
orientation.
89
<PAGE>
Employees
At September 30, 1997, the Association had a total of 28 employees
including 2 part-time employees. None of the Association's employees are
represented by any collective bargaining agreement. Management considers its
employee relations to be good.
Properties
The following table sets forth information concerning the main office
and the branch office of the Association at September 30, 1997. At September 30,
1997, the Association's premises had an aggregate net book value of
approximately $839,000.
Year Owned or Net Book Value at
Location Acquired Leased September 30, 1997
- --------------------------------------------------------------------------------
Main Office:
52 North Main Street 1962 own 593,000
Gloversville, New York 12078
Full Service Branch:
295 Broadway 1983 own 246,000
Saratoga Springs, New York 12866
The Association believes that its current facilities are adequate to
meet the present and foreseeable future needs of the Association and the Holding
Company.
The Association's depositor and borrower customer files are maintained
in-house. The net book value of the data processing and computer equipment
utilized by the Association at September 30, 1997 was approximately $359,000.
Legal Proceedings
From time to time, Gloversville Federal is involved as plaintiff or
defendant in various legal proceedings arising in the normal course of its
business. While the ultimate outcome of these various legal proceedings cannot
be predicted with certainty, it is the opinion of management that the resolution
of these legal actions should not have a material effect on the Holding
Company's and Gloversville Federal's financial position or results of
operations.
90
<PAGE>
REGULATION
General
Gloversville Federal is a federally chartered savings and loan
association, the deposits of which are federally insured and backed by the full
faith and credit of the United States Government. Accordingly, Gloversville
Federal is subject to broad federal regulation and oversight extending to all
its operations. Gloversville Federal is a member of the FHLB of New York and is
subject to certain limited regulation by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"). As the savings and loan holding
company of Gloversville Federal, the Holding Company also is subject to federal
regulation and oversight. The purpose of the regulation of the Holding Company
and other holding companies is to protect subsidiary savings associations.
Gloversville Federal is a member of the Savings Association Insurance Fund
("SAIF") and the deposits of Gloversville Federal are insured by the FDIC. As a
result, the FDIC has certain regulatory and examination authority over
Gloversville Federal.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
Federal Regulation of Savings Associations
The OTS has extensive authority over the operations of savings
associations. As part of this authority, Gloversville Federal is required to
file periodic reports with the OTS and is subject to periodic examinations by
the OTS. The last regular OTS examination of Gloversville Federal was as of
February 1997. Under agency scheduling guidelines, it is likely that another
examination will be initiated in the near future. When these examinations are
conducted by the OTS, the examiners may require Gloversville Federal to provide
for higher general or specific loan loss reserves. All savings associations are
subject to a semi-annual assessment, based upon the savings association's total
assets, to fund the operations of the OTS. Gloversville Federal's OTS assessment
for the fiscal year ended September 30, 1997 was $16,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Gloversville Federal and the
Holding Company. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of
Gloversville Federal is prescribed by federal laws and it is prohibited from
engaging in any activities not permitted by such laws. For instance, no savings
institution may invest in non-investment grade corporate debt securities. In
addition, the permissible level of investment by federal associations in loans
secured by non-residential real property may not exceed 400% of total capital,
except with approval of the
91
<PAGE>
OTS. Federal savings associations are also generally authorized to branch
nationwide. Gloversville Federal is in compliance with the noted restrictions.
Gloversville Federal's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At September 30, 1997, Gloversville Federal's
lending limit under this restriction was $737,000. Assuming the sale of the
minimum number of shares in the Conversion at September 30, 1997, that limit
would be increased to $885,000. Gloversville Federal is in compliance with the
loans-to-one-borrower limitation.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal
controls and audit systems, interest rate risk exposure and compensation and
other employee benefits. Any institution which fails to comply with these
standards must submit a compliance plan. A failure to submit a plan or to comply
with an approved plan will subject the institution to further enforcement
action. The OTS and the other federal banking agencies have also proposed
additional guidelines on asset quality and earnings standards. No assurance can
be given as to whether or in what form the proposed regulations will be adopted.
Insurance of Accounts and Regulation by the FDIC
Gloversville Federal is a member of the SAIF, which is administered by
the FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious risk
to the FDIC. The FDIC also has the authority to initiate enforcement actions
against savings associations, after giving the OTS an opportunity to take such
action, and may terminate the deposit insurance if it determines that the
institution has engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF-insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve
92
<PAGE>
ratio to that designated reserve level, or such higher reserve ratio as
established by the FDIC. The FDIC may also impose special assessments on SAIF
members to repay amounts borrowed from the United States Treasury or for any
other reason deemed necessary by the FDIC.
For the first six months of 1995, the assessment schedule for BIF
members and SAIF members ranged from .23% to .31% of deposits. As is the case
with the SAIF, the FDIC is authorized to adjust the insurance premium rates for
banks that are insured by the BIF of the FDIC in order to maintain the reserve
ratio of the BIF at 1.25% of BIF insured deposits. As a result of the BIF
reaching its statutory reserve ratio the FDIC revised the premium schedule for
BIF insured institutions to provide a range of .04% to .31% of deposits. The
revisions became effective in the third quarter of 1995. In addition, the BIF
rates were further revised, effective January 1996, to provide a range of 0% to
.27%. The SAIF rates, however, were not adjusted. At the time the FDIC revised
the BIF premium schedule, it noted that, absent legislative action (as discussed
below), the SAIF would not attain its designated reserve ratio until the year
2002. As a result, SAIF insured members would continue to be generally subject
to higher deposit insurance premiums than BIF insured institutions until, all
things being equal, the SAIF attains its required reserve ratio.
In order to eliminate this disparity and any competitive disadvantage
between BIF and SAIF member institutions with respect to deposit insurance
premiums, legislation to recapitalize the SAIF was enacted in September 1996.
The legislation provided for a one-time assessment to be imposed on all deposits
assessed at the SAIF rates, as of March 31, 1995, in order to recapitalize the
SAIF. It also provided for the merger of the BIF and the SAIF on January 1, 1999
if no savings associations then exist. The special assessment rate was
established at .657% of deposits by the FDIC and the resulting assessment of
$415,000 was paid in November 1996. This special assessment significantly
increased non-interest expense and adversely affected the Association's results
of operations for the year ended September 30, 1996. As a result of the special
assessment, Gloversville Federal's deposit insurance premiums was reduced to
.03% based upon its current risk classification and the new assessment schedule
for SAIF insured institutions. These premiums are subject to change in future
periods.
Prior to the enactment of the legislation, a portion of the SAIF
assessment imposed on savings associations was used to repay obligations issued
by a federally chartered corporation to provide financing ("FICO") for resolving
the thrift crisis in the 1980s. Although the FDIC has proposed that the SAIF
assessment be equalized with the BIF assessment schedule, effective October 1,
1996, SAIF-insured institutions remain subject to a FICO assessment as a result
of this continuing obligation. Although the legislation also now requires
assessments to be made on BIF-assessable deposits for this purpose, effective
January 1, 1997, that assessment was limited to 20% of the rate imposed on SAIF
assessable deposits until the earlier of December 31, 1999 or when no savings
association continues to exist, thereby imposing a greater burden on SAIF member
institutions such as Gloversville Federal. Thereafter, however, assessments on
BIF-member institutions will be made on the same basis as SAIF-member
institutions. The rates established by the FDIC to implement this requirement
for all FDIC-insured institutions are a 6.5 basis points assessment on SAIF
deposits and 1.5 basis points on BIF deposits until BIF insured institutions
participate fully in the assessment.
93
<PAGE>
Regulatory Capital Requirements
Federally insured savings associations, such as Gloversville Federal,
are required to maintain a minimum level of regulatory capital. The OTS has
established capital standards, including a tangible capital requirement, a
leverage ratio (or core capital) requirement and a risk-based capital
requirement applicable to such savings associations. These capital requirements
must be generally as stringent as the comparable capital requirements for
national banks. The OTS is also authorized to impose capital requirements in
excess of these standards on individual associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement. At September 30, 1997, Gloversville Federal did not have any
intangible assets recorded as assets on its financial statements.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries the debt and equity investments in such subsidiaries are deducted
from assets and capital.
At September 30, 1997, Gloversville Federal had tangible capital of
$3.3 million, or 5.4% of adjusted total assets, which is approximately $2.4
million above the minimum requirement of 1.5% of adjusted total assets in effect
on that date. On a pro forma basis, after giving effect to the sale of the
minimum, midpoint and maximum number of shares of Common Stock offered in the
Conversion and investment of 50% of the net proceeds in assets not excluded for
tangible capital purposes, Gloversville Federal would have had tangible capital
equal to 9.2%, 10.0% and 10.0%, respectively, of adjusted total assets at
September 30, 1997, which is $5.9 million, $6.5 million and $6.5 million,
respectively, above the requirement.
The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased credit card
relationships. As a result of the prompt corrective action provisions discussed
below, however, a savings association must maintain a core capital ratio of at
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At September 30, 1997,
Gloversville Federal had no intangibles which were subject to these tests.
At September 30, 1997, Gloversville Federal had core capital equal to
$3.3 million, or 5.4% of adjusted total assets, which is $1.5 million above the
minimum leverage ratio requirement of 3% as in effect on that date. On a pro
forma basis, after giving effect to the sale of the minimum, midpoint and
maximum number of shares of Common Stock offered in the Conversion and
94
<PAGE>
investment of 50% of the net proceeds in assets not excluded from core capital,
Gloversville Federal would have had core capital equal to 9.2%, 10.0% and 10.0%,
respectively, of adjusted total assets at September 30, 1997, which is $5.4
million, $6.5 million and $6.5 million, respectively, above the requirement.
The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At September 30, 1997, Gloversville
Federal had $486,000 of allowance for loan losses that qualify as supplementary
capital, which was less than 1.25% of risk-weighted assets.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. Gloversville Federal had
no such exclusions from capital and assets at September 30, 1997.
In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.
OTS regulations also require that every savings association with more
than normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise. Based upon its capital level and assets size at
September 30, 1997, Gloversville Federal is subject to these requirements;
however the OTS has not required implementation of this regulation.
95
<PAGE>
On September 30, 1997, Gloversville Federal had total capital of $3.8
million (including $3.3 million in core capital and $486,000 in qualifying
supplementary capital) and risk-weighted assets of $37.8 million; or total
capital of 10.0% of risk-weighted assets. This amount was $762,000 above the 8%
requirement in effect on that date. On a pro forma basis, after giving effect to
the sale of the minimum, midpoint and maximum number of shares of Common Stock
offered in the Conversion, the infusion to Gloversville Federal of ___% of the
net Conversion proceeds and the investment of those proceeds to Gloversville
Federal in 20% risk-weighted government securities, Gloversville Federal would
have had total capital of ___%, ___% and ____%, respectively, of risk-weighted
assets, which is above the current 8% requirement by $___ million, $____ million
and $____ million, respectively.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.
The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.
The imposition by the OTS or the FDIC of any of these measures on
Gloversville Federal may have a substantial adverse effect on Gloversville
Federal's operations and profitability and the value of the Common Stock
purchased in the Conversion. Holding Company stockholders do not have preemptive
rights, and therefore, if the Holding Company is directed by the OTS or the FDIC
to issue additional shares of Common Stock, such issuance may result in the
dilution in the
96
<PAGE>
percentage of ownership of the Holding Company of those persons purchasing
shares in the Conversion.
Limitations on Dividends and Other Capital Distributions
OTS regulations impose various restrictions on savings associations
with respect to their ability to make distributions of capital, which include
dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account. OTS regulations also prohibit a
savings association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result, the regulatory capital of the association
would be reduced below the amount required to be maintained for the liquidation
account established in connection with its mutual to stock conversion. See "The
Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of
the Association" and "- Restrictions on Repurchase of Stock."
Generally, savings associations, such as Gloversville Federal, that
before and after the proposed distribution meet their capital requirements, may
make capital distributions during any calendar year equal to the greater of 100%
of net income for the year-to-date plus 50% of the amount by which the lesser of
the association's tangible, core or risk-based capital exceeds its capital
requirement for such capital component, as measured at the beginning of the
calendar year, or 75% of its net income for the most recent four quarter period.
However, an association deemed to be in need of more than normal supervision by
the OTS may have its dividend authority restricted by the OTS. Gloversville
Federal may pay dividends in accordance with this general authority.
Savings associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution.
Savings associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns. See "- Regulatory Capital Requirements."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association that is a
subsidiary of a holding company may make a capital distribution with notice to
the OTS provided that it has a CAMEL 1 or 2 rating, is not of supervisory
concern, and would remain adequately capitalized (as defined in the OTS prompt
corrective action regulations) following the proposed distribution. Savings
associations that would remain adequately capitalized following the proposed
distribution but do not meet the other noted requirements must notify the OTS 30
days prior to declaring a capital distribution. The OTS stated it will generally
regard as permissible that amount of capital distributions that do not exceed
50% of the institution's excess regulatory capital plus net income to date
during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. As under the
current rule, the OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.
97
<PAGE>
Liquidity
All savings associations, including Gloversville Federal, are required
to maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. For a discussion of what
Gloversville Federal includes in liquid assets, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." This liquid asset ratio requirement may vary from time to
time (between 4% and 10%) depending upon economic conditions and savings flows
of all savings associations. At the present time, the minimum liquid asset ratio
is 5%.
Penalties may be imposed upon associations for violations of the liquid
asset ratio requirement. At September 30, 1997, Gloversville Federal was in
compliance with this requirement, with an overall liquid asset ratio of 10.3%.
Accounting
An OTS policy statement applicable to all savings associations
clarifies and re-emphasizes that the investment activities of a savings
association must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with GAAP.
Under the policy statement, management must support its classification of and
accounting for loans and securities (i.e., whether held-to-maturity,
available-for-sale or trading) with appropriate documentation. Gloversville
Federal is in compliance with these amended rules.
OTS regulations, which may be made more stringent than GAAP by the OTS,
require that transactions be reported in a manner that best reflects their
underlying economic substance and inherent risk and that financial reports must
incorporate any other accounting regulations or orders prescribed by the OTS.
Qualified Thrift Lender Test
All savings associations, including Gloversville Federal, are required
to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on
their operations. This test requires a savings association to have at least 65%
of its portfolio assets (as defined by regulation) in qualified thrift
investments on a monthly average for nine out of every 12 months on a rolling
basis. As an alternative, the savings association may maintain 60% of its assets
specified in Section 7701(a)(19) of the Internal Revenue Code. Under either
test, such assets primarily consist of residential housing related loans and
investments. At September 30, 1997, Gloversville Federal met the test with 93.7%
of its portfolio assets in qualified thrift investments and has always met the
test since its effectiveness.
Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings
98
<PAGE>
association and a national bank, and it is limited to national bank branching
rights in its home state. In addition, the association is immediately ineligible
to receive any new FHLB borrowings and is subject to national bank limits for
payment of dividends. If such association has not requalified or converted to a
national bank within three years after the failure, it must divest of all
investments and cease all activities not permissible for a national bank. In
addition, it must repay promptly any outstanding FHLB borrowings, which may
result in prepayment penalties. If any association that fails the QTL test is
controlled by a holding company, then within one year after the failure, the
holding company must register as a bank holding company and become subject to
all restrictions on bank holding companies. See "- Holding Company Regulation."
Community Reinvestment Act
Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking practices to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with the examination of
Gloversville Federal, to assess the institution's record of meeting the credit
needs of its community and to take such record into account in its evaluation of
certain applications, such as a merger or the establishment of a branch, by
Gloversville Federal. An unsatisfactory rating may be used as the basis for the
denial of an application by the OTS.
The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, Gloversville Federal may be required to devote additional
funds for investment and lending in its local community. Gloversville Federal
was examined for CRA compliance in March 1995 and received a rating of
satisfactory.
Transactions with Affiliates
Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of Gloversville Federal include the
Holding Company and any company which is under common control with Gloversville
Federal. In addition, a savings association may not lend to any affiliate
engaged in activities not permissible for a bank holding company or acquire the
securities of most affiliates.
Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.
99
<PAGE>
Holding Company Regulation
The Holding Company will be a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Holding Company is
required to register and file reports with the OTS and is subject to regulation
and examination by the OTS. In addition, the OTS has enforcement authority over
the Holding Company and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than Gloversville Federal
or any other SAIF-insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.
If Gloversville Federal fails the QTL test, the Holding Company must
obtain the approval of the OTS prior to continuing after such failure, directly
or through its other subsidiaries, any business activity other than those
approved for multiple savings and loan holding companies or their subsidiaries.
In addition, within one year of such failure the Holding Company must register
as, and will become subject to, the restrictions applicable to bank holding
companies. The activities authorized for a bank holding company are more limited
than are the activities authorized for a unitary or multiple savings and loan
holding company. See "- Qualified Thrift Lender Test."
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.
Federal Securities Law
The stock of the Holding Company is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Holding
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.
Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.
100
<PAGE>
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At September 30, 1997, Gloversville Federal was in compliance with these reserve
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity requirements that
may be imposed by the OTS. See "- Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Association "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Association.
Federal Home Loan Bank System
Gloversville Federal is a member of the FHLB of New York, which is one
of 12 regional FHLBs, that administers the home financing credit function of
savings associations. Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from proceeds derived
from the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing.
As a member, Gloversville Federal is required to purchase and maintain
stock in the FHLB of New York. At September 30, 1997, Gloversville Federal had
$461,000 in FHLB stock, which was in compliance with this requirement. In past
years, Gloversville Federal has received substantial dividends on its FHLB
stock. Over the past five calendar years such dividends have averaged 8.1% and
were 6.46% for calendar year 1996. As a result of their holdings, the
Association could borrow up to $9.2 million from the FHLB.
Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of Gloversville Federal's FHLB stock may result in a
corresponding reduction in Gloversville Federal's capital.
For the year ended December 31, 1996, dividends paid by the FHLB of New
York to Gloversville Federal totaled $22,000, which constitute a $4,000 increase
from the amount of dividends received in calendar year 1995. The $29,000
dividend received for the nine months ended September 30, 1997 reflects an
annualized rate of 8.4%, which is 30.0% greater than the rate for calendar 1996.
101
<PAGE>
Federal and State Taxation
In August 1996, legislation was enacted that repeals the reserve method
of accounting used by many thrifts to calculate their bad debt reserve for
federal income tax purposes. As a result, small thrifts such as the Association
must recapture that portion of the reserve that exceeds the amount that could
have been taken under the experience method for post-1987 tax years. The
legislation also requires thrifts to account for bad debts for federal income
tax purposes on the same basis as commercial banks for tax years beginning after
December 31, 1995. The recapture will occur over a six-year period, the
commencement of which will be delayed until the first taxable year beginning
after December 31, 1997, provided the institution meets certain residential
lending requirements. The management of the Company does not believe that the
legislation will have a material impact on the Company or the Association.
In addition to the regular income tax, corporations, including savings
associations such as Gloversville Federal, generally are subject to a minimum
tax. An alternative minimum tax is imposed at a minimum tax rate of 20% on
alternative minimum taxable income, which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference items, less any
available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset
no more than 90% of alternative minimum taxable income. For taxable years
beginning after 1986 and before 1996, corporations, including savings
associations such as Gloversville Federal, were also subject to an environmental
tax equal to 0.12% of the excess of alternative minimum taxable income for the
taxable year (determined without regard to net operating losses and the
deduction for the environmental tax) over $2 million.
To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the association's supplemental reserves
for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of December 31, 1995, Gloversville Federal's Excess for tax purposes
totaled approximately $3.1 million.
Gloversville Federal files its federal and New York income tax returns
on a calendar year basis using the accrual method of accounting. The Holding
Company may file a consolidated federal income tax return with Gloversville
Federal.
Gloversville Federal was audited by the IRS with respect to
consolidated federal income tax returns in 1994, 1995 and 1996. With respect to
years examined by the IRS, all deficiencies have been satisfied.
New York Taxation. For New York income tax purposes, the Association is
taxed at an effective rate equal to 9.0% of New York taxable income. For these
purposes, "New York Taxable
102
<PAGE>
Income" generally means federal taxable income, subject to certain adjustments
(including the addition of interest income on state and municipal obligations
and the partial exclusion of interest income on United States Treasury as well
as New York and certain of its political subdivisions obligations).
Delaware Taxation. As a Delaware holding company, the Holding Company
is exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.
MANAGEMENT
Directors and Executive Officers of the Holding Company and of the Association
Directors and Executive Officers of the Holding Company. The Board of
Directors of the Holding Company currently consists of six members. The
directors of the Holding Company are currently comprised of the directors of the
Association. See "- Board of Directors of the Association." Directors of the
Holding Company will serve three-year staggered terms so that one-third of the
directors will be elected at each annual meeting of stockholders. The terms of
the current directors of the Holding Company are the same as that of the
Association's board. The Holding Company does not intend to pay directors a fee
for board service. For information regarding stock options and restricted stock
proposed to be awarded to directors following stockholder ratification of such
plans, see "- Benefit Plans."
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The following
table sets forth information regarding executive officers of the Holding
Company. Each executive officer of the Holding Company has held his or her
position since the incorporation of the Holding Company.
Name Title
---- -----
Lewis E. Kolar President and Chief Executive Officer
Menzo D. Case Executive Vice-President, Chief Financial Officer and
Secretary
The Holding Company does not initially intend to pay executive officers
any fees in addition to fees payable to such persons as executive officers of
the Association. For information regarding compensation of directors and
executive officers of the Association, see "Management - Director Compensation"
and "- Executive Compensation." For information regarding stock options and
restricted stock proposed to be awarded to directors and executive officers
following stockholder ratification of the Holding Company's stock-based plans,
see "- Benefit Plans."
103
<PAGE>
Board of Directors of the Association. Prior to the Conversion, the
direction and control of the Association, as a mutual savings institution, was
vested in its Board of Directors. Upon conversion of the Association to stock
form, each of the directors of the Association will continue to serve as a
director of the converted Association. The Board of Directors of the Association
currently consists of six members. Each Director of the Association has served
as such at least since January, 1995, except for Priscilla J. Bell, who was
elected in January, 1996. The directors serve three-year staggered terms so that
approximately one-third of the directors are elected at each annual meeting of
members. Because the Holding Company will own all of the issued and outstanding
shares of capital stock of the Association after the Conversion, directors of
the Holding Company will elect the directors of the Association.
The following table sets forth certain information regarding the
directors of the Association.
<TABLE>
<CAPTION>
Director Term
Name Position(s) Held With the Association Age(1) Since Expires
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Priscilla J. Bell Director 48 1996 1999
Timothy E. Delaney Director 35 1993 2001
Lewis E. Kolar Director, President and Chief Executive 59 1995 2001
Officer
Donald I. Lee Director and Recording Secretary 70 1971 2000
Richard D. Ruby Chairman of the Board 48 1975 2000
Robert J. Sofarelli Director 52 1993 1999
</TABLE>
(1) At January 31, 1998.
The business experience of each director of the Holding Company and of
the Association for at least the past five years is set forth below.
Dr. Priscilla J. Bell. Dr. Bell has served as the President of Fulton
Montgomery Community College since 1995. From 1978 to 1995, Dr. Bell worked at
the Tacoma Community College, Tacoma, Washington, where she was Dean of Student
Services.
Timothy E. Delaney. Mr. Delaney is the President and Chief Financial
Officer of Delaney Construction Corporation, a company specializing in heavy
highway construction, which he founded in 1982.
Lewis E. Kolar. Mr. Kolar is the President and Chief Executive Officer
of the Association, a position he has held since October 1994. Mr. Kolar has
more than 20 years of commercial banking experience including service as a
Senior Vice-President and Regional Executive Officer at the National Bank &
Trust Company, Norwich, New York, from 1989 to 1994.
104
<PAGE>
Donald I. Lee. Mr. Lee is the President of Lee & Lee Associates,
Saratoga Springs, New York, and a partner in Lee's Deer Run Bed & Breakfast,
Stillwater, New York.
Richard D. Ruby. Mr. Ruby has been the owner and President of Ruby &
Quiri, Inc., a home furnishings center, located in Gloversville, New York, since
1969.
Dr. Robert J. Sofarelli. Dr. Sofarelli has been a veterinarian since
1971, and is the owner of Saratoga Veterinary Hospital, Planned Pets, a Saratoga
veterinary hospital and Paws & Claws, a distributor of pet foods located in
Wilton, New York.
Executive Officers Who Are Not Directors. Each of the executive
officers of the Association will retain his or her office in the converted
Association. Officers are elected annually by the Board of Directors of the
Association. The business experience of the executive officers who are not also
directors is set forth below.
Menzo D. Case, age 34. Mr. Case is a certified public accountant and
has served as the Association's Treasurer since December 1993. Mr. Case was
promoted to Executive Vice President and Chief Operating Officer in July 1994.
Previously, Mr. Case was an accountant with KPMG Peat Marwick from 1989 to 1993.
Michael J. Pepe, age 39. Mr. Pepe currently serves as the Association's
Vice-President of Lending, a position he has held since 1995. Mr. Pepe was an
Assistant Vice-President and Commercial Loan Officer for Amsterdam Savings Bank,
FSB from 1987 until he joined the Association.
Indemnification
The Certificate of Incorporation of the Holding Company provides that a
director or officer of the Holding Company shall be indemnified by the Holding
Company to the fullest extent authorized by the General Corporation Law of the
State of Delaware against all expenses, liability and loss reasonably incurred
or suffered by such person in connection with his activities as a director or
officer or as a director or officer of another company, if the director or
officer held such position at the request of the Holding Company. Delaware law
requires that such director, officer, employee or agent, in order to be
indemnified, must have acted in good faith and in a manner reasonably believed
to be not opposed to the best interests of the Holding Company, and, with
respect to any criminal action or proceeding, did not have reasonable cause to
believe his or her conduct was unlawful.
The Certificate of Incorporation and Delaware law also provide that the
indemnification provisions of such Certificate and the statute are not exclusive
of any other right which a person seeking indemnification may have or later
acquire under any statute, provision of the Certificate of Incorporation, Bylaws
of the Holding Company, agreement, vote of stockholders or disinterested
directors or otherwise.
105
<PAGE>
These provisions may have the effect of deterring shareholder
derivative actions, since the Holding Company may ultimately be responsible for
expenses for both parties to the action. A similar effect would not be expected
for third-party claims.
In addition, the Certificate of Incorporation and Delaware law also
provide that the Holding Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Holding
Company or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Holding
Company has the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law. The Holding Company may
obtain such insurance.
Meetings and Committees of Board of Directors
The Association. The Association's Board of Directors meets on a
monthly basis. The Board of Directors met 15 times during the year ended
September 30, 1997. During fiscal 1997, no director of the Association attended
fewer than 75% of the aggregate of the total number of Board meetings and the
total number of meetings held by the committees of the Board of Directors on
which he or she served.
The Association has standing Executive, Audit, Asset Liability, Loan,
Investment, Strategic Planning, Nomination and Community Reinvestment
Committees.
The Executive Committee provides oversight of Board-related matters
in-between regularly scheduled Board Meetings, provides informal counsel to the
President and is available to handle emergency or time critical situations. The
Executive Committee is comprised of Directors Richard D. Ruby, Donald I. Lee and
Timothy Delaney. This committee met approximately 15 times during fiscal year
1997.
The Audit Committee is comprised of four outside directors: Richard D.
Ruby, Donald I. Lee, Priscilla J. Bell and Timothy Delaney. This Committee
oversees and reviews the Association's financial and internal control matters.
The Audit Committee also reviews the Audited Financial Report with the
Association's outside auditors and the Report of the Examination with the OTS
examiners, either separately or with the full Board. This committee met four
times in fiscal 1997.
The Asset/Liability Management Committee is composed of Directors
Richard D. Ruby, and Priscilla J. Bell. This committee meets quarterly to handle
the investments for the Association and the implementation of the strategic and
business plans as they relate to interest rate risk and reinvestment options.
This committee also reviewed liquidity, interest rate risk and product pricing.
This committee met four times in fiscal 1997.
The Loan Committee reviews and approves loans which require the
committee's approval. This committee is composed of any two non-employee
directors and, met eight times in fiscal 1997.
The Investment Committee consists of Directors Richard D. Ruby and
Donald I. Lee. This committee reviews investments and assesses the current
investment portfolio. This committee did not meet in fiscal 1997.
106
<PAGE>
The Nominating Committee, composed of Directors Richard D. Ruby, Donald
I. Lee and Priscilla J. Bell, meets annually to select the nominees for the
Board of Directors and Board Committees.
The Community Reinvestment Committee consists of the entire Board and
reviews the Association's compliance with the Community Reinvestment Act. This
Committee met once during fiscal 1997.
The Holding Company. In January 1998, the Board of Directors of the
Holding Company established standing executive, audit, stock plan and nominating
Committees. These committees did not meet during fiscal 1997.
Director Compensation
Directors of the Association are paid a monthly fee of $950 for service
on the Board of Directors, and the Chairman of the Board is paid a monthly fee
of $1,050. These fees are paid only to Board members, not to employees.
Directors do not receive any additional compensation for committee meetings
attended.
Executive Compensation
The following table sets forth information concerning the compensation
accrued for services in all capacities to Gloversville Federal for the fiscal
year ended September 30, 1997 for the Association's President and Chief
Executive Officer. No other executive officer's aggregate annual compensation
(salary plus bonus) exceeded $100,000 in fiscal 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term Compensation
Annual Compensation(1) Awards
------------------------------------- -------------------------------
Other Annual Restricted Stock Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Award ($) SARs (#) Compensation($)
- --------------------------- ---- --------- -------- --------------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lewis E. Kolar 1997 $83,077 $8,400 -- N/A N/A $11,731(2)
</TABLE>
(1) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted by
the SEC, as informally interpreted by the SEC's Staff, Summary Compensation
information is excluded for the fiscal years ended December 31, 1996 and
1995.
(2) Consists of use of a vehicle valued at $1,441, life insurance payments of
$1,998 and contributions to Mr. Kolar's 401(k) of $8,292.
Change in Control Severance Agreements
The Association intends to enter into change in control severance
agreements with Messrs. Kolar and Case. The agreements become effective upon
completion of the Conversion and provide for an initial term of 24 months and 12
months, respectively. The agreements provide for extensions of one year, on each
anniversary of the effective date of the agreement, subject to a formal
107
<PAGE>
performance evaluation performed by disinterested members of the Board of
Directors of the Association. The agreement provides for termination for cause
or in certain events specified by OTS regulations.
The agreements provide for a lump sum payment to Mr. Kolar and Mr. Case
200% and 100% of their respective annual base compensation and the continued
payment for the remaining term of the contract of life and health insurance
coverage maintained by the Association in the event there is a "change in
control" of the Association where employment terminates involuntarily following
such change in control. This termination payment is subject to reduction to the
extent non-deductible for federal income tax purposes. For the purposes of the
agreements, a "change in control" is defined as any event which would require
the filing of an application for acquisition of control or notice of change in
control pursuant to 12 C.F.R. ss. 574.3 or 4 or any successor regulation. Such
events are generally triggered prior to the acquisition of control of 10% of the
Company's Common Stock. If the employment of Messrs. Kolar and Case had been
terminated as of September 30, 1997 under circumstances entitling them to
severance pay as described above, they would have been entitled to receive lump
sum cash payments in the amounts of $159,787 and $51,875, respectively. See
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions."
Benefit Plans
General. Gloversville Federal Savings and Loan Association currently
provides insurance benefits to its employees, including health and life
insurance, subject to certain deductibles and copayments.
Employee Severance Compensation Plan. The Association's Board of
Directors has established the Gloversville Federal Employee Severance
Compensation Plan ("Severance Compensation Plan") which will provide certain
employees with severance pay benefits in the event of a change in control of the
Association or the Holding Company following Conversion. Management personnel
with change in control severance agreements are not eligible to participate in
the Severance Compensation Plan. The purpose of the Severance Compensation Plan
is to recognize the valuable services and contributions of the Association's
employees and the uncertainties relating to continuing employment, reduced
employee benefits, management changes and relocations in the event of a change
in control. The Association believes that the Severance Compensation Plan will
assist it in attracting and retaining highly qualified individuals and reduce
the distractions and other adverse effects on the employees' performance in the
event of a change in control. The Severance Compensation Plan vests in each
participant a contractual right to the benefits such participant is entitled to
thereunder. Under the Severance Compensation Plan, in the event of a change in
control as defined in the Severance Compensation Plan, eligible employees who
are terminated or who voluntarily terminate employment (for reasons specified
under the Severance Compensation Plan), within one year of a change in control
will be entitled to receive a severance payment. Payments pursuant to the
Severance Compensation Plan are equal to the product of two weeks Annual
Compensation (as defined) times the number of years of service up to a maximum
of twelve years in the case of officers or seven years in the case of other
employees. Such payments may tend to discourage takeover attempts by increasing
costs to be incurred by the Association in the event of a takeover. As it is
management's belief that substantially all of the Association's employees would
be retained in the event of a change in control, and that any amount payable
under the Severance Compensation Plan, therefore, would be considerably less
than the total amount that could possibly be paid under the Severance
Compensation Plan, management cannot estimate the
108
<PAGE>
potential effect of the Severance Compensation Plan. The Severance Compensation
Plan may be amended or terminated by the Board of Directors by a majority vote
at any time prior to a change in control but may not be amended or terminated
thereafter.
Employee Stock Ownership Plan. The Boards of Directors of Gloversville
Federal Savings and Loan Association and the Holding Company have approved the
adoption of an ESOP for the benefit of employees of Gloversville Federal Savings
and Loan Association. The ESOP is also designed to meet the requirements of an
employee stock ownership plan as described at Section 4975(e)(7) of the Code and
Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and, as such, the ESOP is empowered to borrow in order to
finance purchases of the Common Stock.
It is anticipated that the ESOP will be funded with a loan from the
Holding Company (not to exceed an amount equal to 8% of the gross Conversion
proceeds). The interest rate of the ESOP loan will be equal to the applicable
federal interest rate as determined by the Internal Revenue Service for the
month in which the loan is made, as calculated pursuant to Section 1274(d) of
the Code.
GAAP generally requires that any borrowing by the ESOP from an
unaffiliated lender be reflected as a liability in the Holding Company's
Financial Statements, whether or not such borrowing is guaranteed by, or
constitutes a legally binding contribution commitment of, the Holding Company or
the Association. The funds used to acquire the ESOP shares will be borrowed from
the Holding Company. Since the Holding Company will finance the ESOP debt, the
ESOP debt will be eliminated through consolidation and no liability will be
reflected on the Holding Company's financial statements. In addition, shares
purchased with borrowed funds will, to the extent of the borrowings, be excluded
from stockholders' equity, representing unearned compensation to employees for
future services not yet performed. Consequently, if the ESOP purchases
already-issued shares in the open market, the Holding Company's consolidated
liabilities will increase to the extent of the ESOP's borrowings, and total and
per share stockholders' equity will be reduced to reflect such borrowings. If
the ESOP purchases newly issued shares from the Holding Company, total
stockholders' equity would neither increase nor decrease, but per share
stockholders' equity and per share net income would decrease because of the
increase in the number of outstanding shares. In either case, as the borrowings
used to fund ESOP purchases are repaid, total stockholders' equity will
correspondingly increase.
All employees of the Association are eligible to participate in the
ESOP after they attain age 21 and complete one year of service. The
Association's contribution to the ESOP is allocated among participants on the
basis of their relative compensation. Each participant's account will be
credited with cash and shares of Holding Company Common Stock based upon
compensation earned during the year with respect to which the contribution is
made. Contributions credited to a participant's account become fully vested upon
such participant's completing five years of service. Credit will be given for
prior years of service for vesting purposes. ESOP participants are entitled to
receive distributions from their ESOP accounts only upon termination of service.
Distributions will be made in cash and in whole shares of the Holding Company's
Common Stock. Fractional shares will be paid in cash. Participants will not
incur a tax liability until a distribution is made.
109
<PAGE>
Each participating employee is entitled to instruct the trustee of the
ESOP as to how to vote the shares allocated to his or her account. The trustee
will not be affiliated with the Holding Company or Gloversville Federal Savings
and Loan Association.
The ESOP may be amended by the Board of Directors, except that no
amendment may be made which would reduce the interest of any participant in the
ESOP trust fund or divert any of the assets of the ESOP trust fund for purposes
other than the benefit of participants or their beneficiaries.
401(k) Savings Plan. The Association has a qualified, tax-exempt
savings plan with a cash or deferred feature qualifying under Section 401(k)
(the "401(k) Plan") of the Internal Revenue Code of 1986, as amended (the
"Code"). All employees who have completed the service requirement, during which
they worked at least 1,000 hours, are eligible to participate.
Participants are permitted to make salary reduction contributions to
the 401(k) Plan of up to 5% of the participant's annual salary up to a maximum
of $10,000 for calendar year 1997 and the Association contributes 10% of the
employees salary, regardless of the employee's contribution. Employee
contributions are fully and immediately vested; contributions by the Association
vest 20% the third year, 50% the fourth year, and 100% the fifth year of
service. However, in the event of normal retirement, permanent disability or
death, a participant will automatically become 100% vested in the value of all
Association contributions and earnings thereon.
The Association intends to reduce its contribution under the 401(k)
Plan in order to offset in part the ESOP expense. In addition, the 401(k) Plan
is being amended to permit self-directed investments by participants into
Holding Company stock.
Stock Option and Incentive Plan. Among the benefits to the Association
anticipated from the Conversion is the ability to attract and retain personnel
through the prudent use of stock options and other stock-related incentive
programs. The Board of Directors of the Holding Company intends to adopt a Stock
Option and Incentive Plan (the "Stock Option Plan"), subject to ratification by
stockholders of the Holding Company at a meeting to be held not earlier than six
months after completion of the Conversion. Under the terms of the proposed Stock
Option Plan, stock options covering shares representing an aggregate of up to
10% of the shares of Common Stock issued in the Conversion may be granted to
directors, officers and employees of the Holding Company or its subsidiaries
under the Stock Option Plan.
Options granted under the Stock Option Plan may be either options that
qualify under the Code as "incentive stock options" (options that afford
preferable tax treatment to recipients upon compliance with certain restrictions
and that do not normally result in tax deductions to the employer) or options
that do not so qualify. The exercise price of stock options granted under the
Stock Option Plan is required to be at least equal to the fair market value per
share of the stock on the date of grant. All grants are made in consideration of
past and future services rendered to the Association, and in an amount deemed
necessary to encourage the continued retention of the officers and directors who
are considered necessary for the continued success of the Association. In this
regard, all options are intended to vest in five equal annual installments
commencing one year from the date of grant, subject to the continued service of
the holder of such option.
110
<PAGE>
The proposed Stock Option Plan provides for the grant of stock
appreciation rights ("SARs") at any time, whether or not the participant then
holds stock options, granting the right to receive the excess of the market
value of the shares represented by the SARs on the date exercised over the
exercise price. SARs generally will be subject to the same terms and conditions
and exercisable to the same extent as stock options.
Limited SARs may be granted at the time of, and must be related to, the
grant of a stock option or SAR. The exercise of one will reduce to that extent
the number of shares represented by the other. Limited SARs will be exercisable
only for the 45 days following the expiration of the tender or exchange offer,
during which period the related stock option or SAR will be exercisable.
However, no SAR or Limited SAR will be exercisable by a 10% beneficial owner,
director or senior officer within six months of the date of its grant. The
Holding Company has no present intention to grant any SARs or Limited SARs.
The proposed Stock Option Plan will be administered by Stock Plan
Committee of the Holding Company which will consist of at least two
disinterested directors. The Stock Plan Committee will select the recipients and
terms of awards made pursuant to the Stock Option Plan. OTS regulations limit
the amount of shares that may be awarded pursuant to stock-based plans to each
individual officer, each non-employee director and all non-employee directors as
a group to 25%, 5% and 30%, respectively, of the total shares reserved for
issuance under each such stock-based plan.
The Committee currently intends to grant options in amounts expressed
as a percentage of the shares issued in the Conversion, as follows: President
Kolar - 2.0%, Executive Vice President Case - 2.0%, and to all executive
officers as a group (3 persons) - ___%. In addition, under the terms of the
Stock Option Plan, each non-employee director of the Holding Company at the time
of stockholder ratification of the Stock Option Plan will be granted an option
to purchase shares of Common Stock equal to .5% of the shares sold in the
Conversion. The remaining balance of the available awards is unallocated and
reserved for future use. All options will expire 10 years after the date such
option was granted, which, for the option grants listed above, is expected to be
the date of stockholder ratification of the Stock Option Plan. All proposed
option grants to officers are subject to modification by the Stock Plan
Committee based upon its performance evaluation of the option recipients at the
time of stockholder ratification of the Stock Option Plan following completion
of the Conversion.
After stockholder ratification, the Stock Option Plan will be funded
either with shares purchased in the open market or with authorized but unissued
shares of Common Stock. The use of authorized but unissued shares to fund the
Stock Option Plan could dilute the holdings of stockholders who purchased Common
Stock in the Conversion. See "Pro Forma Data." In no event will the Stock Option
Plan acquire an amount of shares, which, in the aggregate, represent more than
10% of the shares issued in the Conversion.
Under SEC regulations, so long as certain criteria are met, an optionee
may be able to exercise the option at the Purchase Price and immediately sell
the underlying shares at the then-current market price without incurring
short-swing profit liability. This ability to exercise and
111
<PAGE>
immediately resell, which under the SEC regulations applies to stock option
plans in general, allows the optionee to realize the benefit of an increase in
the market price for the stock without the market risk which would be associated
with a required holding period for the stock after payment of the exercise
price. Under SEC regulations, the short-swing liability period now runs for six
months before and after the option grant. All grants are subject to ratification
of the Stock Option Plan by stockholders of the Holding Company following
completion of the Conversion.
Recognition and Retention Plan. The Holding Company intends to
establish the RRP in order to provide employees with a proprietary interest in
the Holding Company in a manner designed to encourage such persons to remain
with the Holding Company and the Association. The RRP will be subject to
ratification by stockholders at a meeting to be held not earlier than six months
after the completion of the Conversion. The Holding Company will contribute
funds to the RRP to enable it to acquire in the open market or from authorized
but unissued shares (with the decision between open market or authorized but
unissued shares based on the Holding Company's future stock price, alternate
investment opportunities and capital needs), following stockholder ratification
of such plan, an amount of stock equal to 4.0% of the shares of Common Stock
issued in the Conversion.
The Stock Plan Committee of the Board of Directors of the Holding
Company will administer the proposed RRP. Under the terms of the proposed RRP,
awards ("Awards") can be granted to key employees without payment by such
persons in the form of shares of Common Stock held by the RRP. Awards are
non-transferable and non-assignable. OTS regulations limit the amount of shares
that may be awarded pursuant to stock-based plans to each individual officer,
each non-employee director and all non-employee directors as a group to 25%, 5%
and 30%, respectively, of the total shares reserved for issuance under each such
stock-based plan.
Recipients will earn (i.e., become vested in), over a period of time,
the shares of Common Stock covered by the Award. Awards made pursuant to the RRP
will vest in five equal annual installments commencing one year from the date of
grant. Awards will be 100% vested upon termination of employment due to death or
disability. When shares become vested and are actually distributed in accordance
with the RRP, but in no event prior to such time, the participants will also
receive amounts equal to any accrued dividends with respect thereto. Earned
shares are distributed to recipients as soon as practicable following the date
on which they are earned.
The Stock Plan Committee presently intends to grant restricted stock
awards without cost to the recipients, in amounts expressed as a percentage of
the shares sold in the Conversion, as follows: to President Kolar - 1.0% and to
all executive officers as a group (3 persons) - ___%. Pursuant to the terms of
the proposed RRP, each non-employee director of the Holding Company at the time
of stockholder ratification of the RRP will be awarded an amount of shares equal
to __% of the shares sold in the Conversion. All proposed RRP awards to officers
of the Association are subject to modification by the Stock Plan Committee based
upon its performance evaluation of the award recipients at the time of
stockholder ratification of the RRP following completion of the Conversion.
After stockholder ratification, the RRP will be funded either with
shares purchased in the open market or with authorized but unissued shares of
Common Stock issued to the RRP by the Holding Company. The use of authorized but
unissued shares to fund the RRP could dilute the holdings of stockholders who
had purchased Common Stock in the Conversion. In the event the RRP purchases
stock in the open market at prices above the initial Purchase Price, the total
RRP expense may be above that disclosed under the caption "Pro Forma Data." In
no event will the RRP acquire an amount of shares which, in the aggregate,
represent more than 4.0% of the shares issued in the Conversion.
112
<PAGE>
Certain Transactions
The Association follows a policy of granting loans to the Association's
directors, officers and employees. The loans to executive officers and directors
are made in the ordinary course of business and on the same terms and conditions
as those of comparable transactions prevailing at the time, in accordance with
the Association's underwriting guidelines and do not involve more than the
normal risk of collectibility or present other unfavorable features. Loans to
all directors and executive officers and their associates, including outstanding
balances and commitments totaled $382,000 at September 30, 1997, which was 11.6%
of the Association's retained earnings at that date.
The table below sets forth information regarding the Association's
loans to directors and executive officers at September 30, 1997.
<TABLE>
<CAPTION>
Principal
Origination Original Interest Balance
Name Loan Type Relationship Date Balance Rate at 9/30/97 Commitments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lewis Kolar Cash Reserve President October 1994 $ -- 15.50$ $ -- $500.00
Menzo Case Automobile EVP December 1994 11,500.00 9.50% 4,044.82 --
Unsecured Personal loan May 1997 8,500.00 11.50% 7,909.75 --
Richard Ruby Residential mortgage Chairman March 1989 57,000.00 8.50% 46,849.90 --
Commercial real estate November 1994 135,000.00 6.50% 206,444.24 --
Donald Lee Residential mortgage Director January 1985 100,000.00 7.50% 92,467.90 --
Note July 1988 5,139.36 9.00% 2,039.65 --
William Jones(1) Residential mortgage Director July 1988 90,000.00 9.00% 10,088.47 --
Priscilla Bell Home equity Director April 1996 15,000.00 7.75% 11,542.79 --
Cash Reserve April 1996 -- 15.50% -- 500.00
----------- ---------- --------
Total loan balances and commitments to directors, executive officer and
related parties $382,387.50 $381,387.50 $1,000.00
=========== =========== =========
</TABLE>
(1) Resigned as director subsequent to September 30, 1997.
113
<PAGE>
THE CONVERSION
The Board of Directors of the Association and the OTS have approved the
Plan of Conversion. OTS approval does not constitute a recommendation or
endorsement of the Plan of Conversion. Certain terms used in the following
summary of the material terms of the Conversion are defined in the Plan of
Conversion, a copy of which may be obtained by contacting Gloversville Federal.
General
The Board of Directors of the Association unanimously adopted the Plan,
subject to approval by the OTS and the members of the Association. Pursuant to
the Plan, the Association will convert from a federally chartered mutual savings
loan and association to a federally chartered stock savings and loan
association, with the concurrent formation of a holding company.
The Conversion will be accomplished through amendment of the
Association's federal charter to authorize capital stock, at which time the
Association will become a wholly owned subsidiary of the Holding Company. The
Conversion will be accounted for as a pooling of interests.
Subscription Rights have been granted to the Eligible Account Holders
as of September 30, 1996, Tax-Qualified Employee Plans of the Association and
Holding Company, Supplemental Eligible Account Holders as of March 31, 1998,
Other Members, and directors, officers, and employees of the Association.
Additionally, subject to the availability of shares and market conditions at or
near the completion of the Subscription Offering, the Common Stock may be
offered for sale in a Public Offering and Direct Community Offering to selected
persons on a best-efforts basis through Capital Resources. See "- Offering of
Holding Company Common Stock." Subscriptions for shares will be subject to the
maximum and minimum purchase limitations set forth in the Plan of Conversion.
Business Purposes
Gloversville Federal has several business purposes for the Conversion.
The sale of Holding Company Common Stock will have the immediate result of
providing the Association with additional equity capital in order to support the
expansion of its existing operations, subject to market conditions. See
"Business." The sale of the Common Stock is the most effective means of
increasing the Association's permanent capital and does not involve the high
interest cost and repayment obligation of subordinated debt. In addition,
investment of that part of the net Conversion proceeds paid by the Holding
Company to the Association is expected to provide additional operating income to
further increase the Association's capital on a continuing basis.
The Board of Directors of the Association believes that a holding
company structure could facilitate the acquisition of both mutual and stock
savings institutions in the future as well as other companies. If a multiple
holding company structure is utilized in a future acquisition, the acquired
savings institution would be able to operate on a more autonomous basis as a
wholly owned subsidiary of the Holding Company rather than as a division of the
Association. For example, the acquired savings institution could retain its own
directors, officers and corporate name as well as
114
<PAGE>
having representation on the Board of Directors of the Holding Company. As of
the date hereof, there are no plans or understandings regarding the acquisition
of any other institutions.
The Board of Directors of the Association also believes that a holding
company structure can facilitate the diversification of the Association's
business activities. While diversification will be maximized if a unitary
holding company structure is utilized because the types of business activities
permitted to a unitary holding company are broader than those of a multiple
holding company, either type of holding company may engage in a broader range of
activities than may a thrift institution directly. Currently, there are no plans
that the Holding Company engage in any material activities apart from holding
the shares of the Association and investing the remaining net proceeds from the
sale of Common Stock in the Conversion.
The preferred stock and additional common stock of the Holding Company
being authorized in the Conversion will be available for future acquisitions and
for issuance and sale to raise additional equity capital, generally without
stockholder approval or ratification, but subject to market conditions. Although
the Holding Company currently has no plans with respect to future issuances of
equity securities, the more flexible operating structure provided by the Holding
Company and the stock form of ownership is expected to assist the Association in
competing more aggressively with other financial institutions in its principal
market area.
The Conversion will structure the Association in the stock form used in
the United States by all commercial banks, most major business corporations and
an increasing number of savings institutions. The Conversion will permit the
Association's members to become stockholders of the Holding Company, thereby
allowing members to own stock in the financial organization in which they
maintain deposit accounts or with which they have a borrowing relationship. Such
ownership should encourage stockholders to promote the Association to potential
customers, thereby further contributing to the Association's earnings potential.
The Association is also expected to benefit from its management and
employees owning stock, because stock ownership is viewed as an effective
performance incentive and a means of attracting, retaining and compensating
personnel.
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association
Voting Rights. Deposit account holders will have no voting rights in
the converted Association or the Holding Company and will therefore not be able
to elect directors of either entity or to control their affairs. These rights
are currently accorded to deposit account holders with regard to the
Association. Subsequent to Conversion, voting rights will be vested exclusively
in the Holding Company as the sole stockholder of the Association. Voting rights
as to the Holding Company will be held exclusively by its stockholders. Each
purchaser of Holding Company Common Stock shall be entitled to vote on any
matters to be considered by the Holding Company stockholders. A stockholder will
be entitled to one vote for each share of Common Stock owned, subject to certain
limitations applicable to holders of 10% or more of the shares of the Common
Stock. See "Description of Capital Stock."
115
<PAGE>
Deposit Accounts and Loans. The general terms of the Association's
deposit accounts, the balances of the individual accounts and the existing FDIC
insurance coverage will not be affected by the Conversion. Furthermore, the
Conversion will not affect the loan accounts, the balances of these accounts, or
the obligations of the borrowers under their individual contractual arrangements
with the Association.
Tax Effects. The Association has received an opinion from Silver,
Freedman & Taff, L.L.P. with regard to federal income taxation, and an opinion
from KPMG Peat Marwick LLP with regard to New York taxation, to the effect that
the adoption and implementation of the Plan of Conversion set forth herein will
not be taxable for federal or New York tax purposes to the Association or the
Holding Company. See "- Income Tax Consequences."
Liquidation Rights. The Association has no plans to liquidate, either
before or subsequent to the completion of the Conversion. However, if there
should ever be a complete liquidation, either before or after Conversion,
deposit account holders would receive the protection of insurance by the FDIC up
to applicable limits. Subject thereto, liquidation rights before and after
Conversion would be as follows:
Liquidation Rights in Present Mutual Institution. In addition to the
protection of FDIC insurance up to applicable limits, in the event of a
complete liquidation of the Association, each holder of a deposit account
in the Association in its present mutual form would receive his or her pro
rata share of any assets of the Association remaining after payment of
claims of all creditors (including the claims of all depositors in the
amount of the withdrawal value of their accounts). Such holder's pro rata
share of such remaining assets, if any, would be in the same proportion of
such assets as the balance in his or her deposit account was to the
aggregate balance in all deposit accounts in the Association at the time of
liquidation.
Liquidation Rights in Proposed Converted Institution. After Conversion,
each deposit account holder, in the event of a complete liquidation of the
Association, would have a claim of the same general priority as the claims
of all other general creditors of the Association in addition to the
protection of FDIC insurance up to applicable limits. Therefore, except as
described below, the deposit account holder's claim would be solely in the
amount of the balance in his or her deposit account plus accrued interest.
The holder would have no interest in the assets of the Association above
that amount.
The Plan of Conversion provides that there shall be established, upon the
completion of the Conversion, a special "liquidation account" for the
benefit of Eligible Account Holders (i.e., eligible depositors at September
30, 1996) and Supplemental Account Holders (eligible depositors at
___________, 1998) in an amount equal to the net worth of the Association
as of the date of its latest consolidated statement of financial condition
contained in the final prospectus relating to the sale of shares of Holding
Company Common Stock in the Conversion. Each Eligible Account Holder and
Supplemental Eligible Account Holder would have an initial interest in such
liquidation account for each deposit account held in the Association on the
qualifying
116
<PAGE>
date. An Eligible Account Holder and Supplemental Eligible Account Holder's
interest as to each deposit account would be in the same proportion of the
total liquidation account as the balance in his or her account on September
30, 1996 and March 31, 1998, respectively, was to the aggregate balance in
all deposit accounts of Eligible Account Holders and Supplemental Eligible
Account Holders on such dates. However, if the amount in the deposit
account of an Eligible Account Holder or Supplemental Eligible Account
Holder on any annual closing date of the Association is less than the
lowest amount in such account on September 30, 1996 or March 31, 1998 and
on any subsequent closing date, then the account holder's interest in this
special liquidation account would be reduced by an amount proportionate to
any such reduction, and the account holder's interest would cease to exist
if such deposit account were closed.
In addition, the interest in the special liquidation account would never be
increased despite any increase in the balance of the account holders'
related accounts after Conversion, and would only decrease.
Any assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders were satisfied would be
distributed to the Holding Company as the sole stockholder of the
Association.
No merger, consolidation, purchase of bulk assets with assumption of
deposit accounts and other liabilities, or similar transaction, whether the
Association, as converted, or another SAIF-insured institution is the
surviving institution, is deemed to be a complete liquidation for purposes
of distribution of the liquidation account and, in any such transaction,
the liquidation account would be assumed to the full extent authorized by
regulations of the OTS as then in effect. The OTS has stated that the
consummation of a transaction of the type described in the preceding
sentence in which the surviving entity is not a SAIF-insured institution
would be reviewed on a case-by-case basis to determine whether the
transaction should constitute a "complete liquidation" requiring
distribution of any then remaining balance in the liquidation account.
While the Association believes that such a transaction should not
constitute a complete liquidation, there can be no assurance that the OTS
will not adopt a contrary position.
Common Stock. For information as to the characteristics of the Common
Stock to be issued under the Plan of Conversion, see "Dividends" and
"Description of Capital Stock." Common Stock issued under the Plan of Conversion
cannot, and will not, be insured by the FDIC or any other governmental agency.
The Association will continue, immediately after completion of the
Conversion, to provide its services to depositors and borrowers pursuant to its
existing policies and will maintain the existing management and employees of the
Association. Other than for payment of certain expenses incident to the
Conversion, no assets of the Association will be distributed in the Conversion.
Gloversville Federal will continue to be a member of the FHLB System,
117
<PAGE>
and its deposit accounts will continue to be insured by the FDIC. The affairs of
Gloversville Federal will continue to be directed by the existing Board of
Directors and management.
Offering of Holding Company Common Stock
Under the Plan of Conversion, up to 575,000 shares of Holding Company
Common Stock will be offered for sale, subject to certain restrictions described
below, initially through the Offering. Federal conversion regulations require,
with certain exceptions, that all shares offered in a conversion be sold in
order for the conversion to become effective.
The Subscription Offering will expire at noon, Gloversville, New York
time, on ______ __, 1998 (the "Subscription Expiration Date") unless extended by
the Association and the Holding Company. Depending on the availability of shares
and market conditions at or near the completion of the Subscription Offering,
the Holding Company may effect a Public Offering of shares to selected persons
through Capital Resources. To order Common Stock in connection with the Public
Offering and Direct Community Offering, if any, an executed stock order and
account withdrawal authorization and certification must be received by Capital
Resources prior to the termination of the Public Offering and Direct Community
Offering. The date by which orders must be received in the Public Offering, if
any, will be set by the Holding Company at the time of such offering. OTS
regulations require that all shares to be offered in the Conversion be sold
within a period ending not more than 45 days after the Subscription Expiration
Date (or such longer period as may be approved by the OTS) or, despite approval
of the Plan of Conversion by members, the Conversion will not be effected and
Gloversville Federal will remain in mutual form. This period expires on _______
__, 1998, unless extended with the approval of the OTS. In addition, if the
Offering is extended beyond ________ __, 1998, all subscribers will have the
right to modify or rescind their subscriptions and to have their subscription
funds returned promptly with interest. In the event that the Conversion is not
effected, all funds submitted and not previously refunded pursuant to the
Offering will be promptly refunded to subscribers with interest at the
Association's current passbook rate and all withdrawal authorizations will be
terminated.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the
securities of a thrift institution sold in connection with its conversion must
be based on an appraised aggregate market value of the institution as converted
(i.e., taking into account the expected receipt of proceeds from the sale of the
securities in the conversion), as determined by an independent valuation. RP
Financial, which is experienced in the valuation and appraisal of business
entities, including thrift institutions involved in the conversion process, was
retained by the Association to prepare an appraisal of the estimated pro forma
market value of the Association and the Holding Company upon Conversion.
RP Financial will receive a fee of approximately $12,500 for its
appraisal in addition to its reasonable out-of-pocket expenses incurred in
connection with the appraisal. RP Financial has also agreed to assist in the
preparation of the Association's business plan for a separate fee of $2,500. The
Association has agreed to indemnify RP Financial under certain circumstances
against liabilities and expenses (including legal fees) arising out of, related
to, or based upon the Conversion.
118
<PAGE>
RP Financial has prepared an appraisal of the estimated pro forma
market value of the Association as converted. The RP Financial appraisal
concluded that, at December 12, 1997, an appropriate range for the estimated pro
forma market value of the Association and the Holding Company was from a minimum
of $4.3 million to a maximum of $5.8 million with a midpoint of $5.0 million.
Assuming that the shares are sold at $10.00 per share in the Conversion, the
estimated number of shares to be issued in the Conversion is expected to be
between 425,000 and 575,000. The Purchase Price of $10.00 was determined by
discussion among the Boards of Directors of the Association, the Holding Company
and RP Financial, taking into account, among other factors, (i) the requirement
under OTS regulations that the Common Stock be offered on a manner that would
achieve the widest distribution of shares and (ii) liquidity in the Common Stock
subsequent to the Conversion.
The appraisal involved a comparative evaluation of the operating and
financial statistics of the Association with those of other thrift institutions.
The appraisal also took into account such other factors as the market for thrift
institution stocks generally, prevailing economic conditions, both nationally
and in New York, which affect the operations of thrift institutions, the
competitive environment within which the Association operates and the effect of
the Association becoming a subsidiary of the Holding Company. No detailed
individual analysis of the separate components of the Holding Company's and the
Association's assets and liabilities was performed in connection with the
evaluation. The Plan of Conversion requires that all of the shares subscribed
for in the Offering be sold at the same price per share. The Board of Directors
reviewed the appraisal, including the methodology and the appropriateness of the
assumptions utilized by RP Financial and determined that in its opinion the
appraisal was not unreasonable. The Estimated Valuation Range may be amended
with the approval of the OTS in connection with changes in the financial
condition or operating results of the Association or market conditions
generally. As described below, an amendment to the Estimated Valuation Range
above $6,612,500 would not be made without a resolicitation of subscriptions
and/or proxies except in limited circumstances.
If, upon completion of the Offering, at least the minimum number of
shares are subscribed for, RP Financial, after taking into account factors
similar to those involved in its prior appraisal, will determine its estimate of
the pro forma market value of the Association and the Holding Company upon
Conversion, as of the close of the Offering.
If, based on the estimate of RP Financial, the aggregate pro forma
market value is not within the Estimated Valuation Range, RP Financial, upon the
consent of the OTS, will determine a new Estimated Valuation Range ("Amended
Valuation Range"). If the aggregate pro forma market value of the Association as
converted and the Holding Company has increased in the Amended Valuation Range
to an amount that does not exceed $6,612,500 (i.e., 15% above the maximum of the
Estimated Valuation Range), then the number of shares to be issued may be
increased to accommodate such increase in value without a resolicitation of
subscriptions and/or proxies. In such event the Association and the Holding
Company do not intend to resolicit subscriptions and/or proxies unless the
Association and the Holding Company then determine, after consultation with the
OTS, that circumstances otherwise require such a resolicitation. If, however,
the aggregate pro forma market value of the Holding Company and the Association,
as converted, at that time is less than $4,250,000 or more than $6,612,500, a
resolicitation of subscribers and/or proxies may be made, the Plan of Conversion
may be terminated or such other actions as the OTS may permit may be taken. In
the
119
<PAGE>
event that upon completion of the Offering, the pro forma market value of the
Holding Company and Association, as converted, is below $4,250,000 or above
$6,612,500 (15% above the maximum of the Estimated Valuation Range), the Holding
Company intends to file the revised appraisal with the SEC by post-effective
amendment to its Registration Statement on Form S-1. See "Additional
Information." If the Plan of Conversion is terminated, all funds would be
returned promptly with interest at the rate of the Association's current
passbook rate, and holds on funds authorized for withdrawal from deposit
accounts would be released. If there is a resolicitation of subscriptions,
subscribers will be given the opportunity to cancel or change their
subscriptions and to the extent subscriptions are so canceled or reduced, funds
will be returned with interest at the Association's current passbook rate and
holds on funds authorized for withdrawal from deposit accounts will be released
or reduced. Stock subscriptions received by the Holding Company and the
Association may not be withdrawn by the subscriber and, if accepted by the
Holding Company and the Association, are final. If the Conversion is not
completed prior to ________ __, 2000 (two years after the date of the Special
Meeting), the Plan of Conversion will automatically terminate.
Any increase in the total number of shares of Common Stock to be
offered in the Conversion will dilute a subscriber's percentage ownership
interest and will reduce the pro forma net income and net worth on a per share
basis. A decrease in the number of shares to be issued in the Conversion will
increase a subscriber's proportionate ownership interest and will increase both
pro forma net income and net worth on a per share basis while decreasing that
amount on an aggregate basis.
No sale of the shares will take place unless, prior thereto, RP
Financial confirms to the OTS that, to the best of RP Financial's knowledge and
judgment, nothing of a material nature has occurred which would cause RP
Financial to conclude that the actual Purchase Price on an aggregate basis is
incompatible with its estimate of the aggregate pro forma market value of the
Holding Company and the Association as converted at the time of the sale. If,
however, the facts do not justify such a statement, the Offering or other sale
may be canceled, a new Estimated Valuation Range set and new offering held.
In preparing its valuation of the pro forma market value of the
Association and the Holding Company upon Conversion, RP Financial relied upon
and assumed the accuracy and completeness of all financial and statistical
information provided by the Association and the Holding Company. RP Financial
also considered information based upon other publicly available sources which it
believes are reliable. However, RP Financial does not guarantee the accuracy and
completeness of such information and did not independently verify the financial
statements and other data provided by the Association and the Holding Company or
independently value the assets or liabilities of the Association and the Holding
Company. The appraisal is not intended to be, and must not be interpreted as, a
recommendation of any kind as to the advisability of voting to approve the
Conversion or of purchasing shares of Common Stock. The appraisal considers
Gloversville Federal and the Holding Company only as going concerns and should
not be considered as any indication of the liquidation value of Gloversville
Federal or the Holding Company. Moreover, the appraisal is necessarily based on
many factors which change from time to time. There can be no assurance that
persons who purchase shares in the Conversion will be able to sell such shares
at prices at or above the Purchase Price.
120
<PAGE>
Subscription Offering
In accordance with OTS regulations, non-transferable Subscription
Rights have been granted under the Plan of Conversion to the following persons
in the following order of priority: (1) Eligible Account Holders (deposit
account holders of the Association maintaining an aggregate balance of $50 or
more as of September 30, 1996), (2) the Holding Company and the Association's
Tax-Qualified Employee Plans; provided, however, that the Tax-Qualified Employee
Plans shall have first priority Subscription Rights to the extent that the total
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range; (3) Supplemental Eligible Accounts Holders
(deposit account holders of the Association maintaining a balance of $50 or more
as of March 31, 1998), (4) Other Members (depositors of the Association at the
close of business on _______ __, 1998 and Borrowers of the Association on
________ __, 198_ and _______ __, 1998, the voting record date for the Special
Meeting) and (5) officers, directors and employees of the Association. All
subscriptions received will be subject to the availability of Holding Company
Common Stock after satisfaction of all subscriptions of all persons having prior
rights in the Subscription Offering, and to the maximum and minimum purchase
limitations set forth in the Plan of Conversion.
Category No. 1 is reserved for the Association's Eligible Account
Holders. Subscription Rights to purchase shares under this category will be
allocated among Eligible Account Holders to permit each such depositor to
purchase shares in this Category in an amount equal to the greater of $150,000
of Common Stock, one-tenth of one percent (.10%) of the total shares offered in
the Conversion, 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
by a fraction of which the numerator is the amount of the qualifying deposits of
the Eligible Account Holder and the denominator is the total amount of the
qualifying deposit of the Eligible Account Holders in the Association, in each
case on the Eligibility Record Date. To the extent shares are oversubscribed in
this category, shares shall be allocated first to permit each subscribing
Eligible Account Holder to purchase, to the extent possible, 100 shares and
thereafter among each subscribing Eligible Account Holder pro rata in the same
proportion that his Qualifying Deposit bears to the total Qualifying Deposits of
all subscribing Eligible Account Holders whose subscriptions remain unsatisfied.
Category No. 2 provides for the issuance of Subscription Rights to
Tax-Qualified Employee Plans to purchase up to 10% of the total amount of shares
of Common Stock issued in the Subscription Offering on a second priority basis.
However, such plans shall not, in the aggregate, purchase more than 10% of the
Holding Company Common Stock issued. The ESOP intends to purchase a total of 8%
of the Common Stock issued in the Conversion under this category. Subscription
Rights received pursuant to this category shall be subordinated to all rights
received by Eligible Account Holders to purchase shares pursuant to Category No.
1; provided, however, that notwithstanding any provision of the Plan of
Conversion to the contrary, the Tax-Qualified Employee Plans shall have first
priority Subscription Rights to the extent that the total number of shares of
Common Stock sold in the Conversion exceeds the maximum of the Estimated
Valuation Range.
121
<PAGE>
Category No. 3 is reserved for the Association's Supplemental Eligible
Account Holders. Subscription Rights to purchase shares under this category will
be allocated among Supplemental Eligible Account Holders to permit each such
depositor to purchase shares in this Category in an amount equal to the greater
of $150,000 of Common Stock, one-tenth of one percent (.10%) of the total shares
of Common Stock offered in the Conversion, 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 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 deposit of the Supplemental
Eligible Account Holders in the converting Association in each case on March 31,
1998 (the "Supplemental Eligibility Record Date"), subject to the overall
purchase limitation after satisfying the subscriptions of Eligible Account
Holders and Tax Qualified Employee Plans. Any non-transferable Subscription
Rights received by an Eligible Account Holder shall reduce, to the extent
thereof, the subscription rights to be distributed to such person as a
Supplemental Eligible Account Holder. In the event of an oversubscription for
shares, the shares available shall be allocated first to permit each subscribing
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation (including the number
of shares, if any, allocated in accordance with Category No. 1) equal to 100
shares, and thereafter among each subscribing Supplemental Eligible Account
Holder pro rata in the same proportion that his Qualifying Deposit bears to the
total Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied.
Category No. 4 provides, to the extent that shares are then available
after satisfying the subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account Holders, for the issuance of
Subscription Rights to Other Members to purchase in this Category up to the
greater of $150,000 of Common Stock, or one-tenth of one percent (.10%) of the
Common Stock offered in the Conversion. In the event of an oversubscription, the
shares available shall be allocated among the subscribing Other Members pro rata
in the same proportion that his number of votes on the Voting Record Date bears
to the total number of votes on the Voting Record Date of all subscribing Other
Members on such date. Such number of votes shall be determined based on the
Association's mutual charter and bylaws in effect on the date of approval by
members of this Plan of Conversion.
Each depositor (including individual retirement accounts ("IRAs") and
Keogh account beneficiaries) as of __________ __, 1998 and Borrower as of
________ __, 199_ and _______ __, 1998 and the date of the Special Meeting is
entitled at the Special Meeting to cast one vote for each $100 or fraction
thereof, of the aggregate withdrawal value of all of such depositor's savings
accounts in the Association as of the applicable voting record date, up to a
maximum of 1,000 votes. However, no member may vote more than 1,000 votes. In
general, accounts held in different ownership capacities will be treated as
separate memberships for purposes of applying the 1,000 vote limitation. For
example, if two persons hold a $100,000 account in their joint names and each of
the persons also holds a separate account for $100,000 in his own name, each
person would be entitled to 1,000 votes for each separate account and they would
together be entitled to cast 1,000 votes on the basis of the joint account for a
total of 3,000 votes.
Category No. 5 provides for the issuance of Subscription Rights to
officers, directors and employees of the Association, to purchase in this
Category up to $150,000 of the Common Stock
122
<PAGE>
to the extent that shares are available after satisfying the subscriptions of
eligible subscribers in preference Categories 1, 2, 3 and 4. The total number of
shares which may be purchased in the conversion under this Category may not
exceed 24% of the number of shares of Holding Company Common Stock. In the event
of an oversubscription, the available shares will be allocated pro rata among
all subscribers in this category based on the number of shares ordered by each
subscriber.
Public Offering and Direct Community Offering
To the extent that shares remain available and subject to market
conditions at or near the completion of the Subscription Offering, the Holding
Company may offer shares pursuant to the Plan to selected persons in a Public
Offering and/or Direct Community Offering on a best-efforts basis through
Capital Resources in such a manner as to promote a wide distribution of the
Common Stock. Any orders received in connection with the Public Offering and
Direct Community Offerings if any, will receive a lower priority than orders
properly made in the Subscription Offering by persons properly exercising
Subscription Rights. In addition depending on market conditions, Capital
Resources may utilize selected broker-dealers ("Selected Dealers") in connection
with the sale of shares in the Public Offering, if any. Common Stock sold in the
Public Offering and Direct Community Offerings will be sold at $10.00 per share
and hence will be sold at the same price as all other shares in the Conversion.
The Holding Company and the Association have the right to reject orders, in
whole or in part, in their sole discretion in the Public Offering and Direct
Community Offering.
No person, together with any associate or group of persons acting in
concert, will be permitted to purchase more than $150,000 of Common Stock in the
Public Offering and Direct Community Offering. To order Common Stock in
connection with the Public Offering or Direct Community Offering, if any, an
executed stock order and account withdrawal authorization and certification must
be received by Capital Resources prior to the termination of such Offering. The
date by which orders must be received in the Public Offering and Direct
Community Offering will be set by the Holding Company at the time of
commencement of such offering; provided however, if the Offering is extended
beyond __________ __, 1998, each subscriber will have the opportunity to
maintain, modify or rescind his or her subscription. In such event, all
subscription funds will be promptly returned with interest to each subscriber
unless he or she affirmatively indicates otherwise.
Capital Resources may enter into agreements with Selected Dealers to
assist in the sale of shares in the Public Offering. Selected Dealers may only
solicit indications of interest from their customers to place orders with the
Holding Company as of a certain date ("Order Date") for the purchase of shares
of Conversion Stock with the authorization of Capital Resources. When and if
Capital Resources and the Holding Company believe that enough indications of
interest and orders have been received to consummate the Conversion, Capital
Resources 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 confirmation of the orders to such
customers on the next business day after the Order 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 closing date of the
Conversion. On the closing date, Selected Dealers will remit funds to the
account that the Holding Company established for each Selected Dealer. Each
customer's funds so forwarded to the Holding Company, along with all other
accounts held in the same title, will
123
<PAGE>
be insured up to the applicable legal limit. After payment has been received by
the Holding Company from Selected Dealers, funds will earn interest at the
Association's passbook rate until the completion of the Offering. In the event
the Conversion is not consummated as described above, funds with interest will
be returned promptly to the Selected Dealers, who, in turn, will promptly credit
their customers' brokerage account.
In the event the Holding Company determines to conduct a Public
Offering and/or Direct Community Offering, persons to whom a prospectus is
delivered may subscribe for shares of Common Stock by submitting a completed
Stock Order and Account Withdrawal Authorization Form (provided by Capital
Resources) and an executed Certification along with immediately available funds
(which may be obtained by debiting a Capital Resources account) to Capital
Resources by not later than the public offering expiration date (as established
by the Holding Company). Promptly upon receipt of available funds, together with
a properly executed Stock Order and Account Withdrawal Authorization Form and
Certification, Capital Resources will forward such funds to Gloversville Federal
to be deposited in a subscription escrow account.
If a subscription in the Public Offering and/or Direct Community
Offering is accepted, promptly after the completion of the Conversion, a
certificate for the appropriate amount of shares will be forwarded to Capital
Resources as nominee for the beneficial owner. In the event that a subscription
is not accepted or the Conversion is not consummated, the Association will
promptly refund with interest the subscription funds to Capital Resources which
will then return the funds to subscribers' accounts. If the aggregate pro forma
market value of the Company and the Association, as converted, is less than
$4,250,000 or more than $6,612,500, each subscriber will have the right to
modify or rescind his or her subscription.
The opportunity to subscribe for shares of Common Stock in the Public
Offering and/or Direct Community Offering is subject to the right of the
Association and the Holding Company, in their sole discretion, to accept or
reject any such orders in whole or in part.
Additional Purchase Restrictions
The Plan also provides for certain additional limitations to be placed
upon the purchase of shares in the Conversion. Specifically, no person (other
than a Tax-Qualified Employee Plan) by himself or herself or with an associate,
and no group of persons acting in concert, may subscribe for or purchase more
than $150,000 of Common Stock. For purposes of this limitation, an associate of
a person does not include a Tax-Qualified Employee Plan or Non-Tax Qualified
Employee Plan in which the person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity. Moreover, for purposes
of this paragraph, shares held by one or more Tax Qualified or Non-Tax Qualified
Employee Plans attributed to a person shall not be aggregated with shares
purchased directly by or otherwise attributable to that person except for that
portion of a plan which is self-directed by a person. See "- Stock Pricing and
Number of Shares to be Issued" regarding potential changes in Subscription
Rights in the event of a decrease in the number of shares to be issued in the
Conversion. Officers and directors and their associates may not purchase, in the
aggregate, more than 34% of the shares to be sold in the Conversion. For
purposes of the Plan, the members of the Board of Directors are not deemed to be
acting in concert solely by reason of their Board membership. For purposes of
this limitation, an associate of an officer or director does not
124
<PAGE>
include a Tax-Qualified Employee Plan. Moreover, any shares attributable to the
officers and directors and their associates, but held by a Tax-Qualified
Employee Plan (other than that portion of a plan which is self-directed) shall
not be included in calculating the number of shares which may be purchased under
the limitations in this paragraph. Shares purchased by employees who are not
officers or directors of the Association, or their associates, are not subject
to this limitation. The term "associate" is used above to indicate any of the
following relationships with a person: (i) any corporation or organization
(other than the Holding Company or the Association or a majority-owned
subsidiary of the Holding Company or the Association) of which a person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity security; (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; and (iii) any relative or
spouse of such person or any relative of such spouse who has the same home as
such person or who is a director or officer of the Holding Company or the
Association or any subsidiary of the Holding Company or the Association.
The Boards of Directors of the Holding Company and the Association, in
their sole discretion, may increase the maximum purchase limitations referred to
above up to 9.99% of the total shares to be offered in the Offering, provided
that orders for shares exceeding 5.0% of the shares being offered in the
Offering shall not exceed, in the aggregate, 10% of the shares being offered in
the Offering or decrease the maximum purchase limitation to one percent of the
Common Stock offered in the Conversion. Requests to purchase additional shares
of Common Stock under this provision will be allocated by the Boards of
Directors on a pro rata basis giving priority in accordance with the priority
rights set forth above. Depending on market and financial conditions, the Boards
of Directors of the Holding Company and the Association, with the approval of
the OTS and without further approval of the members, may increase or decrease
any of the above purchase limitations.
To the extent that shares are available, each subscriber must subscribe
for a minimum of 25 shares. In computing the number of shares to be allocated,
all numbers will be rounded down to the next whole number.
Common Stock purchased in the Conversion will be freely transferable
except for shares purchased by executive officers and directors of the
Association or the Holding Company. See "- Restrictions on Transfer of
Subscription Rights and Shares."
Marketing Arrangements
Gloversville Federal has retained Capital Resources, a broker-dealer
registered with the Securities and Exchange Commission (the "SEC") and a member
of the National Association of Securities Dealers, Inc. (the "NASD"), to consult
with and advise the Association and to assist in the distribution of shares in
the Offering on a best-efforts basis. Capital Resources is headquartered in
Washington, D.C. and its phone number is (202) 466-5685. Among the services
Capital Resources will perform are (i) training and educating Gloversville
Federal employees, who will be performing certain ministerial functions in the
Offering, regarding the mechanics and regulatory requirements of the stock sale
process, (ii) keeping records of orders for shares of Common Stock, (iii)
targeting Gloversville Federal's sales efforts including preparation of
marketing materials, (iv) assisting in the
125
<PAGE>
collection of proxies from Members for use at the Special Meeting, and (v)
providing its registered stock representatives to staff the Stock Information
Center and meeting with and assisting potential subscribers. For its services,
Capital Resources will receive a fee of $90,000.
To the extent registered broker-dealers are utilized, the Holding
Company will pay a fee, to be negotiated, to such Selected Dealers, including
any sponsoring dealer fees. Fees paid to Capital Resources and to any other
broker-dealer may be deemed to be underwriting fees, and Capital Resources and
such other broker-dealers may be deemed to be underwriters. The Holding Company
has agreed to reimburse Capital Resources for its reasonable out-of-pocket
expenses (not to exceed $15,000 without management approval), and its legal fees
and expenses (not to exceed $20,000 without management approval) and to
indemnify Capital Resources against certain claims or liabilities, including
certain liabilities under the Securities Act.
In the event there is a Public Offering or Direct Community Offering,
procedures may be implemented to permit a purchaser to pay for his or her shares
with funds held by or deposited with Capital Resources or a "Selected Dealer."
See "- Public Offering and Direct Community Offering."
Directors and executive officers of the Holding Company and the
Association may, to a limited extent, participate in the solicitation of offers
to purchase Common Stock. Sales will be made from a Stock Information Center
located away from the publicly accessible areas (including teller windows) of
the Association's office. Other employees of the Association may participate in
the Offering in administrative capacities, providing clerical work in effecting
a sales transaction or answering questions of a potential purchaser provided
that the content of the employee's responses is limited to information contained
in this Prospectus or other offering document. Other questions of prospective
purchasers will be directed to executive officers or registered representatives
of Capital Resources. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. To the extent permitted under applicable law, directors and
executive officers of the Holding Company and the Association may participate in
the solicitation of offers to purchase Common Stock, except in the State of
Texas where only a representative of Capital Resources will be able to offer and
sell securities to Texas residents. The Holding Company will rely on Rule 3a4-1
under the Exchange Act and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of the
Holding Company or the Association will be compensated in connection with his
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the Common Stock.
A conversion center will be established at the Association's office, in
an area separated from the Association's banking operations. No sales activities
will be conducted in the public areas of the Association's offices, but persons
will be able to obtain a Prospectus and sales information at such places, and
employees will inform prospective purchasers to direct their questions to the
conversion center and will provide such persons with the telephone number of the
conversion center. Completed stock orders will be accepted at such places, and
will be promptly forwarded to the conversion center for processing.
126
<PAGE>
The Association and the Holding Company will make reasonable efforts to
comply with the securities laws of all states in the United States in which
persons entitled to subscribe for shares, pursuant to the Plan of Conversion,
reside. However, no shares will be offered or sold under the Plan of Conversion
to any such person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of persons otherwise eligible
to subscribe for shares under the Plan of Conversion reside or as to which the
Association and the Holding Company determine that compliance with the
securities law of such state would be impracticable for reasons of cost or
otherwise, including, but not limited to, a requirement that the Association or
the Holding Company or any of their officers, directors or employees register,
under the securities laws of such state, as a broker, dealer, salesmen or agent.
No payments will be made in lieu of the granting of Subscription Rights to any
such person.
Method of Payment for Subscriptions
To purchase shares in the Subscription Offering, an executed order form
and certification form with the required payment for each share subscribed for,
or with appropriate authorization for withdrawal from the Association's deposit
account (which may be given by completing the appropriate blanks in the order
form), must be received by the Association by noon, Gloversville, New York time,
on ________ __, 1998. Order forms which are not received by such time or are
executed defectively or are received without full payment (or appropriate
withdrawal instructions) are not required to be accepted.
To order Common Stock in connection with the Public Offering and/or
Direct Community Offering, if any, an executed Stock Order and Account
Withdrawal Authorization Form and Certification must be received by Capital
Resources prior to the termination of such offering. The date by which orders
must be received in the Public Offering and Direct Community Offering will be
set by the Holding Company at the time of commencement of such offerings, if
any; provided however, if the Offering is extended beyond ________ __, 1998,
each subscriber will have the opportunity to maintain, modify or rescind his or
her subscription. In such event, all subscription funds will be promptly
returned with interest to each subscriber unless he or she affirmatively
indicates otherwise. In addition, the Holding Company and the Association are
not obligated to accept orders submitted on photocopies or facsimile order
forms.
The Holding Company and the Association have the right to waive or
permit the correction of incomplete or improperly executed forms, but do not
represent that they will do so. Once received, an executed order form or stock
order and account withdrawal authorization may not be modified, amended or
rescinded without the consent of the Holding Company and the Association unless
the Conversion has not been completed by _________ __, 1998.
Payment for subscriptions in the Subscription Offering, may be made (i)
in cash if delivered in person at the office of the Association, (ii) by check
or money order or (iii) by authorization of withdrawal from deposit accounts
maintained with the Association. Interest will be paid on payments made by cash,
check, bank draft or money order, whether or not the Conversion is complete or
terminated, at the Association's current passbook rate from the date payment is
received until the completion or termination of the Conversion. If payment is
made by authorization of withdrawal from deposit or time accounts, the funds
authorized to be withdrawn from such account
127
<PAGE>
will continue to accrue interest at the contractual rates until completion or
termination of the Conversion. Such funds will be unavailable to the depositor
until completion or termination of the Conversion.
If a subscriber authorizes the Association to withdraw the amount of
the Purchase Price from his certificate account, the Association will do so as
of the effective date of Conversion. The Association will waive any applicable
penalties for early withdrawal from time accounts at Gloversville Federal for
the purpose of purchasing Common Stock. If the remaining balance in a
certificate account is reduced below the applicable minimum balance requirement
at the time that the funds actually are transferred under the authorization, the
rate paid on the remaining balance of the certificate will earn interest at the
then-current passbook rate.
Owners of self-directed IRAs may under certain circumstances use the
assets of such IRAs to purchase shares of Common Stock in the Offering, provided
that such IRAs are self-directed and are not maintained at the Association.
Persons with IRAs maintained at the Association must have their accounts
transferred to an unaffiliated institution or broker to purchase shares of
Common Stock in the Offering. In addition, the provisions of the ERISA and
Internal Revenue Service regulations require that officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Common Stock
in the Offering make such purchases for the exclusive benefit of the IRAs.
If the ESOP subscribes for shares during the Subscription Offering,
such plan will not be required to pay for the shares subscribed for at the time
it subscribes, but rather, may pay for such shares of Common Stock subscribed
for the Purchase Price upon consummation of the Conversion, provided that there
is in force from the time of its subscription until such time, a loan commitment
to lend to the ESOP, at such time, the aggregate Purchase Price of the shares
for which it subscribed.
All refunds and any interest due will be paid after completion of the
Conversion. Certificates representing shares of Common Stock purchased will be
mailed to purchasers at the last address of such persons appearing on the
records of the Association, or to such other address as may be specified in
properly completed order forms, as soon as practicable following consummation of
the sale of all shares of Common Stock. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law.
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order forms will only be distributed with a prospectus. The Association will
accept for processing only orders submitted on original order forms with the
form of certification. Photocopies or facsimile copies of order forms or
certifications will not be accepted. Payment by cash, check, money order, bank
draft or debit authorization to an existing account at the Association must
accompany the order form. No wire transfers will be accepted.
128
<PAGE>
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (September 30,
1996), Supplemental Eligibility Record Date (March 31, 1998) and/or the Voting
Record Date (_______ __, 1997) must list all accounts on the stock order form
giving all names on each account and the account number as of the applicable
record date.
In addition to the foregoing, if shares are offered through Selected
Dealers, a purchaser may pay for his shares with funds held by or deposited with
a Selected Dealer. If an order form is executed and forwarded to the Selected
Dealer or if the Selected Dealer is authorized to execute the order form on
behalf of a purchaser, the Selected Dealer is required to forward the order form
and funds to the Association for deposit in a segregated account on or before
noon of the business day following receipt of the order form or execution of the
order form by the Selected Dealer. Alternatively, Selected Dealers may solicit
indications of interest from their customers who indicated an interest and seek
their confirmation as to their intent to purchase. Those indicating an intent to
purchase shall forward executed order forms and certifications to their Selected
Dealer or authorize the Selected Dealer to execute such forms. The Selected
Dealer will acknowledge receipt of the order to its customer in writing on the
following business day and will debit such customer's account on the third
business day after the customer has confirmed his intent to purchase (the "debit
date") and on or before noon of the next business day following the debit date
will send order forms and funds to the Association for deposit in a segregated
account. If such alternative procedure is employed, purchasers' funds are not
required to be in their accounts with Selected Dealers until the debit date.
Restrictions on Transfer of Subscription Rights and Shares
Prior to the completion of the Conversion, the OTS conversion
regulations prohibit any person with subscription rights, including the Eligible
Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members and employees, officers and directors, from transferring
or entering into any agreement or understanding to transfer the legal or
beneficial ownership of the subscription rights issued under the Plan or the
shares of Common Stock to be issued upon their exercise. Such rights may be
executed only by the person to whom they are granted and only for his account.
Each person exercising such subscription rights will be required to certify that
he is purchasing shares solely for his own account and that he has no agreement
or understanding regarding the sale or transfer of such shares. The OTS
regulations also prohibit any person from offering or making an announcement of
an offer or intent to make an offer to purchase such subscription rights or
shares of Common Stock prior to the completion of the Conversion.
The Association and the Holding Company 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 the
transfer of such rights.
Except as to directors and executive officers of the Association and
the Holding Company, the shares of Common Stock sold in the Conversion will be
freely transferable. Shares purchased by directors, executive officers or their
associates in the Conversion shall be subject to the restrictions that said
shares shall not be sold during the period of one year following the date of
129
<PAGE>
purchase, except in the event of the death of the stockholder. Accordingly,
stock certificates issued by the Holding Company to directors, executive
officers and their associates shall bear a legend giving appropriate notice of
such restriction and, in addition, the Association and the Holding Company will
give appropriate instructions to the transfer agent for the Common Stock with
respect to the applicable restriction upon transfer of any restricted shares.
Any shares issued at a later date as a stock dividend, stock split or otherwise,
to holders of restricted stock, shall be subject to the same restrictions that
may apply to such restricted stock. Holding Company stock (like the stock of
most companies) is subject to the requirements of the Securities Act.
Accordingly, Holding Company stock may be offered and sold only in compliance
with registration requirements or pursuant to an applicable exemption from
registration.
Holding Company stock received in the Conversion by persons who are not
"affiliates" of the Holding Company may be resold without registration. Shares
received by affiliates of the Holding Company (primarily the directors, officers
and principal stockholders of the Holding Company) will be subject to the resale
restrictions of Rule 144 under the Securities Act, which are discussed below.
Rule 144 generally requires that there be publicly available certain
information concerning the Holding Company, and that sales thereunder be made in
routine brokerage transactions or through a market maker. If the conditions of
Rule 144 are satisfied, each affiliate (or group of persons acting in concert
with one or more affiliates) is entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of Holding
Company stock, or (ii) if the stock is admitted to trading on a national
securities exchange or reported through the automated quotation system of a
registered securities bank, the average weekly reported volume of trading during
the four weeks preceding the sale.
Participation by the Board and Executive Officers
The directors and executive officers of Gloversville Federal have
indicated their intention to purchase in the Conversion an aggregate of $385,500
of Common Stock, equal to .90%, .77%, .67% or .58% of the number of shares to be
issued in the Offering, at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively. The following table sets
forth information regarding Subscription Rights to Common Stock intended to be
exercised by each of the directors of the Association, including members of
their immediate family and their IRAs, and by all directors and executive
officers as a group. The following table assumes that 5.0 million shares, the
midpoint of the Estimated Valuation Range, of Common Stock are issued at the
Purchase Price of $10.00 per share and that sufficient shares will be available
to satisfy the subscriptions indicated. The table does not include shares to be
purchased through the ESOP (8.0% of shares issued in the Conversion) or awarded
under the proposed RRP (an amount of shares which may be acquired after
stockholder ratification of such plan equal to 4.0% of the shares sold in the
Conversion) or proposed Stock Option Plan (an amount of shares which may be
issued after stockholder ratification of such plan equal to 10.0% of the shares
sold in the Conversion).
130
<PAGE>
<TABLE>
<CAPTION>
Number
Aggregate of Shares Percent of
Purchase at $10.00 Shares at
Name Title Price per Share(1) Midpoint
---- ----- ----- ------------ --------
<S> <C> <C> <C> <C>
Priscilla J. Bell Director $10,000 1,000 .02%
Timothy E. Delaney Director 100,000 10,000 .20
Lewis E. Kolar Director, President and Chief
Executive Officer 75,000 7,500 .15
Donald I. Lee Director and Secretary 50,000 5,000 .10
Richard D. Ruby Chairman of the Board 100,000 10,000 .20
Robert J. Sofarelli Director 20,000 2,000 .04
All other executive officers
as a group 30,500 3,050 .07
All directors and executive
officers as a group (8 persons) 385,500 38,550 .77
</TABLE>
- ----------
(1) Does not include subscriptions by the ESOP, or options which are intended
to be granted under the proposed Stock Option Plan or restricted stock
awards which are intended to be granted under the proposed RRP, subject to
stockholder ratification of such plans.
Risk of Delayed Offering
The completion of the sale of all unsubscribed shares in the Offering
will be dependent, in part, upon the Association's operating results and market
conditions at the time of the Offering. Under the Plan of Conversion, all shares
offered in the Conversion must be sold within a period ending 24 months from the
date of the Special Meeting. While the Association and the Holding Company
anticipate completing the sale of shares offered in the Conversion within this
period, if the Board of Directors of the Association and the Holding Company are
of the opinion that economic conditions generally or the market for publicly
traded thrift institution stocks make undesirable a sale of the Common Stock,
then the Offering may be delayed until such conditions improve.
A material delay in the completion of the sale of all unsubscribed
shares in the Public Offering or otherwise may result in a significant increase
in the costs of completing the Conversion. Significant changes in the
Association's operations and financial condition, the aggregate market value of
the shares to be issued in the Conversion and general market conditions may
occur during such material delay. In the event the Conversion is not consummated
within 24 months after the date of the Special Meeting of Members, the
Association would charge accrued Conversion costs to then current period
operations.
Approval, Interpretation, Amendment and Termination
All interpretations of the Plan of Conversion, as well as the
completeness and validity of order forms and stock order and account withdrawal
authorizations, will be made by the Association and the Holding Company and will
be final, subject to the authority of the OTS and the requirements of applicable
law. The Plan of Conversion provides that, if deemed necessary or desirable by
the
131
<PAGE>
Boards of Directors of the Association and the Holding Company, the Plan of
Conversion may be substantively amended by the Boards of Directors of the
Association and the Holding Company, as a result of comments from regulatory
authorities or otherwise, at any time with the concurrence of the OTS and the
SEC. In the event the Plan of Conversion is substantially amended, other than a
change in the maximum purchase limits set forth herein, the Holding Company
intends to notify subscribers of the change and to refund subscription funds
with interest unless subscribers affirmatively elect to increase, decrease or
maintain their subscriptions. The Plan of Conversion will terminate if the sale
of all shares is not completed within 24 months after the date of the Special
Meeting of Members. The Plan of Conversion may be terminated by the Boards of
Directors of the Holding Company and the Association with the concurrence of the
OTS, at any time. A specific resolution approved by a two-thirds vote of the
Boards of Directors of the Holding Company and the Association would be required
to terminate the Plan of Conversion prior to the end of such 24-month period.
Restrictions on Repurchase of Stock
For a period of three years following Conversion, the Holding Company
may not repurchase any shares of its capital stock, except in the case of an
offer to repurchase on a pro rata basis made to all holders of capital stock of
the Holding Company. Any such offer shall be subject to the prior approval of
the OTS. Furthermore, the Holding Company may not repurchase any of its stock
(i) if the result thereof would be to reduce the regulatory capital of the
Association below the amount required for the liquidation account to be
established pursuant to OTS regulations and (ii) except in compliance with the
requirements of the OTS' capital distribution rule.
The above limitations are subject to the OTS conversion rules which
generally provide that the Holding Company may repurchase its capital stock
provided (i) no repurchases occur within one year following the Conversion
(subject to certain exceptions), (ii) repurchases during the second and third
year after conversion are part of an open market stock repurchase program that
does not allow for a repurchase of more than 5% of the Holding Company's
outstanding capital stock during a 12- month period, (iii) the repurchases do
not cause the Association to become undercapitalized, and (iv) the Holding
Company provides notice to the OTS at lease 10 days prior to the commencement of
a repurchase program and the OTS does not object to such regulations. In
addition, the above limitations do not preclude repurchases of capital stock by
the Holding Company in the event applicable federal regulatory limitations are
subsequently liberalized.
Income Tax Consequences
Consummation of the Conversion is expressly conditioned upon prior
receipt by the Association of either a ruling from the IRS or an opinion of
Silver, Freedman & Taff, L.L.P. with respect to federal taxation, and an opinion
of KPMG Peat Marwick LLP with respect to New York taxation, to the effect that
consummation of the Conversion will not be taxable to the converted Association
or the Holding Company. The full text of the Silver, Freedman & Taff, L.L.P.
opinion, the RP Financial Letter (hereinafter defined) and the KPMG Peat Marwick
LLP opinion, which opinions are summarized herein, were filed with the SEC as
exhibits to the Holding Company's Registration Statement on Form S-1. See
"Additional Information."
132
<PAGE>
An opinion which is summarized below has been received from Silver,
Freedman & Taff, L.L.P. with respect to the proposed Conversion of the
Association to the stock form. The Silver, Freedman Taff, L.L.P. opinion states
that (i) the Conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended, and no gain or
loss will be recognized to the Association in either its mutual form or its
stock form by reason of the proposed Conversion, (ii) no gain or loss will be
recognized to the Association in its stock form upon the receipt of money and
other property, if any, from the Holding Company for the stock of the
Association; and no gain or loss will be recognized to the Holding Company upon
the receipt of money for Common Stock of the Holding Company; (iii) the assets
of the Association in either its mutual or its stock form will have the same
basis before and after the Conversion; (iv) the holding period of the assets of
the Association in its stock form will include the period during which the
assets were held by the Association in its mutual form prior to Conversion; (v)
gain, if any, will be realized by the depositors of the Association upon the
constructive issuance to them of withdrawable deposit accounts of the
Association in its stock form, nontransferable subscription rights to purchase
Holding Company Common Stock and/or interests in the Liquidation Account (any
such gain will be recognized by such depositors, but only in an amount not in
excess of the fair market value of the subscription rights and Liquidation
Account interests received); (vi) the basis of the account holder's savings
accounts in the Association after the Conversion will be the same as the basis
of his or her savings accounts in the Association prior to the Conversion; (vii)
the basis of each account holder's interest in the Liquidation Account is
assumed to be zero; (viii) based on the RP Financial Letter, as hereinafter
defined, the basis of the subscription rights will be zero; (ix) the basis of
the Holding Company Common Stock to its stockholders will be the purchase price
thereof; (x) a stockholder's holding period for Holding Company Common Stock
acquired through the exercise of subscription rights shall begin on the date on
which the subscription rights are exercised and the holding period for the
Conversion Stock purchased in the Offering will commence on the date following
the date on which such stock is purchased; (xi) the Association in its stock
form will succeed to and take into account the earnings and profits or deficit
in earnings and profits, of the Association, in its mutual form, as of the date
of Conversion; (xii) the Association, immediately after Conversion, will succeed
to and take into account the bad debt reserve accounts of the Association, in
mutual form, and the bad debt reserves will have the same character in the hands
of the Association after Conversion as if no Conversion had occurred; and (xiii)
the creation of the Liquidation Account will have no effect on the Association's
taxable income, deductions or addition to reserve for bad debts either in its
mutual or stock form.
The opinion from Silver, Freedman & Taff, L.L.P. is based, among other
things, on certain assumptions, including the assumptions that the exercise
price of the Subscription Rights to purchase Holding Company Common Stock will
be approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Association will receive a letter from RP Financial (the "RP Financial
Letter") which, based on certain assumptions, will conclude that the
Subscription Rights to be received by Eligible Account Holders, Supplemental
Eligible Account Holders and other eligible subscribers do not have any economic
value at the time of distribution or at the time the Subscription Rights are
exercised, whether or not a Public Offering takes place.
The Association has also received an opinion of Silver, Freedman &
Taff, L.L.P. to the effect that, based in part on the RP Financial Letter: (i)
no taxable income will be realized by depositors
133
<PAGE>
as a result of the exercise of non-transferable Subscription Rights to purchase
shares of Holding Company Common Stock at fair market value; (ii) no taxable
income will be recognized by borrowers, directors, officers and employees of the
Association on the receipt or exercise of Subscription Rights to purchase shares
of Holding Company Common Stock at fair market value; and (iii) no taxable
income will be realized by the Association or Holding Company on the issuance of
Subscription Rights to eligible subscribers to purchase shares of Holding
Company Common Stock at fair market value.
Notwithstanding the RP Financial Letter, if the Subscription Rights are
subsequently found to have a fair market value and are deemed a distribution of
property, it is Silver, Freedman & Taff, L.L.P.'s opinion that gain or income
will be recognized by various recipients of the Subscription Rights (in certain
cases, whether or not the rights are exercised) and the Association and/or the
Holding Company may be taxable on the distribution of the Subscription Rights.
With respect to New York taxation, the Association has received an
opinion from KPMG Peat Marwick LLP to the effect that the New York tax
consequences to the Association, in its mutual or stock form, the Holding
Company, eligible account holders, parties receiving Subscription Rights,
parties purchasing conversion stock, and other parties participating in the
Conversion will be the same as the federal income tax consequences described
above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and KPMG Peat Marwick LLP, as well as the RP Financial Letter, have
no binding effect or official status, and no assurance can be given that the
conclusions reached in any of those opinions would be sustained by a court if
contested by the IRS or the Delaware or New York tax authorities.
RESTRICTIONS ON ACQUISITIONS OF STOCK AND
RELATED TAKEOVER DEFENSIVE PROVISIONS
Although the Boards of Directors of the Association and the Holding
Company are not aware of any effort that might be made to obtain control of the
Holding Company after Conversion, the Board of Directors, as discussed below,
believe that it is appropriate to include certain provisions as part of the
Holding Company's certificate of incorporation to protect the interests of the
Holding Company and its stockholders from takeovers which the Board of Directors
of the Holding Company might conclude are not in the best interests of the
Association, the Holding Company or the Holding Company's stockholders.
The following discussion is a general summary of material provisions of
the Holding Company's certificate of incorporation and bylaws and certain other
regulatory provisions which may be deemed to have an "anti-takeover" effect. The
following description of certain of these provisions is necessarily general and,
with respect to provisions contained in the Holding Company's certificate of
incorporation and bylaws and the Association's proposed stock charter and
bylaws, reference should be made in each case to the document in question, each
of which is part of the Association's Conversion Application filed with the OTS
and the Holding Company's Registration Statement filed with the SEC. See
"Additional Information."
134
<PAGE>
Provisions of the Holding Company's Certificate of Incorporation and Bylaws
Directors. Certain provisions of the Holding Company's certificate of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. The Holding Company's certificate of incorporation provides that the
Board of Directors of the Holding Company will be divided into three classes,
with directors in each class elected for three-year staggered terms except for
the initial directors. Thus, assuming a Board of six directors, it would take
two annual elections to replace a majority of the Holding Company's Board. The
Holding Company's certificate of incorporation also provides that the size of
the Board of Directors may be increased or decreased only by a majority vote of
the whole Board or by a vote of 80% of the shares eligible to be voted at a duly
constituted meeting of stockholders called for such purpose. The bylaws also pro
vide that any vacancy occurring in the Board of Directors, including a vacancy
created by an increase in the number of directors, shall be filled for the
remainder of the unexpired term by a majority vote of the directors then in
office. Finally, the bylaws impose certain notice and information requirements
in connection with the nomination by stockholders of candidates for election to
the Board of Directors or the proposal by stockholders of business to be acted
upon at an annual meeting of stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
Restrictions on Call of Special Meetings. The certificate of
incorporation of the Holding Company provides that a special meeting of
stockholders may be called only pursuant to a resolution of the Board of
Directors and for only such business as directed by the Board. Stockholders are
not authorized to call a special meeting.
Absence of Cumulative Voting. The Holding Company's certificate of
incorporation does not provide for cumulative voting rights in the election of
directors.
Authorization of Preferred Stock. The certificate of incorporation of
the Holding Company authorizes 100,000 shares of serial preferred stock, $.01
par value. The Holding Company is authorized to issue preferred stock from time
to time in one or more series subject to applicable provisions of law, and the
Board of Directors is authorized to fix the designations, powers, preferences
and relative participating, optional and other special rights of such shares,
including voting rights (which could be multiple or as a separate class) and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of the Holding Company that the Board of Directors does
not approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of preferred stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any preferred stock and does not intend to issue any preferred stock except on
terms which the Board deems to be in the best interests of the Holding Company
and its stockholders.
Limitation on Voting Rights. The certificate of incorporation of the
Holding Company provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the
135
<PAGE>
then outstanding shares of Common Stock (the "Limit"), be entitled or permitted
to any vote in respect of the shares held in excess of the Limit. This
limitation would not inhibit any person from soliciting (or voting) proxies from
other beneficial owners for more than 10% of the Common Stock or from voting
such proxies. Beneficial ownership is to be determined pursuant to Rule 13d-3 of
the General Rules and Regulations of the Exchange Act, and in any event includes
shares beneficially owned by any affiliate of such person, shares which such
person or his affiliates (as defined in the certificate of incorporation) have
the right to acquire upon the exercise of conversion rights or options and
shares as to which such person and his affiliates have or share investment or
voting power but shall not include shares beneficially owned by directors,
officers and employees of the Association or the Holding Company. This provision
will be enforced by the Board of Directors to limit the voting rights of persons
beneficially owning more than 10% of the stock and thus could be utilized in a
proxy contest or other solicitation to defeat a proposal that is desired by a
majority of the stockholders.
Procedures for Certain Business Combinations. The Holding Company's
certificate of incorporation requires that certain business combinations
(including transactions initiated by management) between the Holding Company (or
any majority-owned subsidiary thereof) and a 10% or more stockholder either (i)
be approved by at least 80% of the total number of outstanding voting shares,
voting as a single class, of the Holding Company, (ii) be approved by two-thirds
of the continuing Board of Directors (i.e., persons serving prior to the 10%
stockholder becoming such) or (iii) involve consideration per share generally
equal to that paid by such 10% stockholder when it acquired its block of stock.
It should be noted that, since the Board and executive officers (8
persons) intend to purchase approximately $385,500 of the shares offered in the
Conversion and may control the voting of additional shares through the ESOP and
proposed RRP and Stock Option Plan, the Board and management may be able to
block the approval of combinations requiring an 80% vote even where a majority
of the stockholders vote to approve such combinations.
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Holding Company's certificate of incorporation must be approved by the Holding
Company's Board of Directors and also by a majority of the outstanding shares of
the Holding Company's voting stock, provided, however, that approval by at least
80% of the outstanding voting stock is generally required for certain provisions
(i.e., provisions relating to number, classification, election and removal of
directors; amendment of bylaws; call of special stockholder meetings; offers to
acquire and acquisitions of control; director liability; certain business
combinations; power of indemnification; and amendments to provisions relating to
the foregoing in the certificate of incorporation).
The bylaws may be amended by a majority vote of the Board of Directors
or the affirmative vote of at least 80% of the total votes eligible to be voted
at a duly constituted meeting of stockholders.
Purpose and Takeover Defensive Effects of the Holding Company's
Certificate of Incorporation and Bylaws. The Board of Directors of the
Association believes that the provisions described above are prudent and will
reduce the Holding Company's vulnerability to takeover
136
<PAGE>
attempts and certain other transactions which have not been negotiated with and
approved by its Board of Directors. These provisions will also assist the
Association in the orderly deployment of the conversion proceeds into productive
assets during the initial period after the Conversion. The Board of Directors
believes these provisions are in the best interest of the Association and of the
Holding Company and its stockholders. In the judgment of the Board of Directors,
the Holding Company's Board will be in the best position to determine the true
value of the Holding Company and to negotiate more effectively for what may be
in the best interests of its stockholders. Ac cordingly, the Board of Directors
believes that it is in the best interests of the Holding Company and its
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors of the Holding Company and that these provisions will
encourage such negotiations and discourage hostile takeover attempts. It is also
the view of the Board of Directors that these provisions should not discourage
persons from proposing a merger or other transaction at prices reflective of the
true value of the Holding Company and which is in the best interests of all
stockholders.
Attempts to take over financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the Holding
Company and its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above then
current market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of the benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners becomes less
than the 300 required for Exchange Act registration.
Despite the belief of the Association and the Holding Company as to the
benefits to stock holders of these provisions of the Holding Company's
certificate of incorporation and bylaws, these provisions may also have the
effect of discouraging a future takeover attempt which would not be approved by
the Holding Company's Board, but pursuant to 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 any opportunity to do so. Such provi sions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board will enforce the voting limitation provisions of the charter in proxy
solicitations and accordingly could utilize these provisions to defeat proposals
that are favored by a majority of the stockholders. The Boards of Directors of
the Association and the Holding Company, however, have concluded that the
potential benefits outweigh the possible disadvantages.
137
<PAGE>
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Conversion, the Holding Company may adopt additional
charter provisions regarding the acquisition of its equity securities that would
be permitted to a Delaware corporation. The Holding Company and the Association
do not presently intend to propose the adoption of further restrictions on the
acquisition of the Holding Company's equity securities.
Other Restrictions on Acquisitions of Stock
Delaware Anti-Takeover Statute. The Delaware General Corporation Law
(the "DGCL") provides that buyers who acquire more than 15% of the outstanding
stock of a Delaware corporation, such as the Holding Company, are prohibited
from completing a hostile takeover of such corporation for three years. However,
the takeover can be completed if (i) the buyer, while acquiring the 15%
interest, acquires at least 85% of the corporation's outstanding stock (the 85%
requirement excludes shares held by directors who are also officers and certain
shares held under employee stock plans), or (ii) the takeover is approved by the
target corporation's board of directors and two-thirds of the shares of
outstanding stock of the corporation (excluding shares held by the bidder).
However, these provisions of the DGCL do not apply to Delaware
corporations with less than 2,000 stockholders or which do not have voting stock
listed on a national exchange or listed for quotation with a registered national
securities association. Gloversville Federal may exempt itself from the
requirements of the statute by adopting an amendment to its Certificate of
Incorporation or Bylaws electing not to be governed by this provision. At the
present time, the Board of Directors does not intend to propose any such
amendment.
Federal Regulation. A federal regulation prohibits any person prior to
the completion of a conversion from transferring, or entering into any agreement
or understanding to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of conversion or the stock to be issued
upon their exercise. This regulation also prohibits any person prior to the
completion of a conversion from offering, or making an announcement of an offer
or intent to make an offer, to purchase such subscription rights or stock. For
three years following conversion, this regulation prohibits any person, without
the prior approval of the OTS, from acquiring or making an offer to acquire (if
the offer is opposed by the savings association) more than 10% of the stock of
any converted savings institution if such person is, or after consummation of
such acquisition would be, the beneficial owner of more than 10% of such stock.
In the event that any person, directly or indirectly, violates this regulation,
the securities beneficially owned by such person in excess of 10% may not be
counted as shares entitled to vote and may not be voted by any person or counted
as voting shares in connection with any matter submitted to a vote of
stockholders. Like the charter provisions outlined above, these federal
regulations can make a change in control more difficult, even if desired by the
holders of the majority of the shares of the stock. The Board of Directors
reserves the right to ask the OTS or other federal regulators to enforce these
restrictions against persons seeking to obtain control of the Holding Company,
whether in a proxy solicitation or otherwise. The policy of the Board is that
these legal restrictions must be observed in every case, including instances in
which an acquisition of control of the Holding Company is favored by a majority
of the stockholders.
138
<PAGE>
Federal law provides that no company, "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition,
federal regulations require that, prior to obtaining control of a savings
association, a person, other than a company, must give 60 days' prior notice to
the OTS and have received no OTS objection to such acquisition of control. Any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Under federal law (as well as the regulations referred to
below) the term "savings association" includes state and federally chartered
SAIF-insured institutions and federally chartered savings banks whose accounts
are insured by the FDIC's BIF and holding companies thereof.
Control, as defined under federal law, in general means ownership,
control of or holding irrevocable proxies representing more than 25% of any
class of voting stock, control in any manner of the election of a majority of a
savings association's directors, or a determination by the OTS that the acquiror
has the power to direct, or directly or indirectly to exercise a controlling
influence over, the management or policies of the institution. Acquisition of
more than 10% of any class of a savings association's voting stock, if the
acquiror also is subject to any one of eight "control factors," constitutes a
rebuttable determination of control under the OTS regulations. Such control
factors include the acquiror being one of the two largest stockholders. The
determination of control may be rebutted by submission to the OTS, prior to the
acquisition of stock or the occurrence of any other circumstances giving rise to
such determination, of a statement setting forth facts and circumstances which
would support a finding that no control relationship will exist and containing
certain undertakings. The OTS regulations provide that persons or companies
which acquire beneficial ownership exceeding 10% or more of any class of a
savings association's stock must file with the OTS a certification that the
holder is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.
DESCRIPTION OF CAPITAL STOCK
Holding Company Capital Stock
The 1,300,000 shares of capital stock authorized by the Holding Company
certificate of incorporation are divided into two classes, consisting of
1,200,000 shares of Common Stock (par value $.01 per share) and 100,000 shares
of serial preferred stock (par value $.01 per share). The Holding Company
currently expects to issue between 425,000 and 575,000 shares (subject to
increase to 661,250) of Common Stock in the Conversion and no shares of serial
preferred stock. The aggregate par value of the issued shares will constitute
the capital account of the Holding Company on a consolidated basis. Upon payment
of the Purchase Price, all shares issued in the Conversion will be duly
authorized, fully paid and nonassessable. The balance of the purchase price of
Common Stock, less expenses of Conversion, will be reflected as paid-in capital
on a consolidated basis. See "Capitalization."
Each share of the Common Stock will have the same relative rights and
will be identical in all respects with each other share of the Common Stock. The
Common Stock of the Holding
139
<PAGE>
Company will represent non-withdrawable capital, will not be of an insurable
type and will not be insured by the FDIC.
Under Delaware law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company. Each stockholder will be entitled
to one vote for each share held on all matters voted upon by stockholders,
subject to the limitation discussed under "Restrictions on Acquisitions of Stock
and Related Takeover Defensive Provisions - Provisions of the Holding Company's
Certificate of Incorporation and Bylaws - Limitation on Voting Rights." If the
Holding Company issues preferred stock subsequent to the Conversion, holders of
the preferred stock may also possess voting powers.
Liquidation or Dissolution. In the event of any liquidation,
dissolution or winding up of the Association, the Holding Company, as the sole
holder of the Association's capital stock would be entitled to receive, after
payment or provision for payment of all debts and liabilities of the Association
(including all deposit accounts and accrued interest thereon) and after
distribution of the balance in the special liquidation account to Eligible and
Supplemental Account Holders, all assets of the Association available for
distribution. In the event of liquidation, dissolution or winding up of the
Holding Company, the holders of its Common Stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Holding Company available for distribution. See "The
Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of
the Association." If preferred stock is issued subsequent to the Conversion, the
holders thereof may have a priority over the holders of Common Stock in the
event of liquidation or dissolution.
No Preemptive Rights. Holders of the Common Stock will not be entitled
to preemptive rights with respect to any shares which may be issued. The Common
Stock will not be subject to call for redemption, and, upon receipt by the
Holding Company of the full purchase price therefor, each share of the Common
Stock will be fully paid and nonassessable.
Preferred Stock. After Conversion, the Board of Directors of the
Holding Company will be authorized to issue preferred stock in series and to fix
and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. The holders of
preferred stock will be entitled to vote as a separate class or series under
certain circumstances, regardless of any other voting rights which such holders
may have.
Except as discussed above, the Holding Company has no present plans for
the issuance of the additional authorized shares of Common Stock or for the
issuance of any shares of preferred stock. In the future, the authorized but
unissued and unreserved shares of Common Stock will be available for general
corporate purposes, including but not limited to possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future underwritten or other
public offering, or under a stock based employee plan. The authorized but
unissued shares of preferred stock will similarly be available for issuance in
future mergers or acquisitions, in a future underwritten public offering or
private placement or for other general corporate purposes. Except as described
herein or as otherwise
140
<PAGE>
required to approve the transaction in which the additional authorized shares of
common stock or authorized shares of preferred stock would be issued, no
stockholder approval will be required for the issuance of these shares.
Accordingly, the Board of Directors of the Holding Company, without stockholder
approval, can issue preferred stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock.
Restrictions on Acquisitions. See "Restrictions on Acquisitions of
Stock and Related Takeover Defensive Provisions" for a description of certain
provisions of the Holding Company's certificate of incorporation and bylaws
which may affect the ability of the Holding Company's stockholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company.
Dividends. The Holding Company's Board of Directors may consider a
policy of paying cash dividends on the Common Stock in the future. No decision
has been made, however, as to the amount or timing of such dividends, if any.
The declaration and payment of dividends are subject to, among other things, the
Holding Company's then current and projected consolidated operating results,
financial condition, regulatory restrictions, future growth plans and other
factors the Board deems relevant. Therefore, no assurance can be given that any
dividends will be declared.
The ability of the Holding Company to pay cash dividends to its
stockholders will be dependent, in part, upon the ability of the Association to
pay dividends to the Holding Company. OTS regulations do not permit the
Association to declare or pay a cash dividend on its stock or repurchase shares
of its stock if the effect thereof would be to cause its regulatory capital to
be reduced below the amount required for the liquidation account or to meet
applicable regulatory capital requirements. See "Regulation - Limitations on
Dividends and Other Capital Distributions" for information regarding OTS
regulations governing the Association's ability to pay dividends to the Holding
Company.
Delaware law generally limits dividends of the Holding Company to an
amount equal to the excess of its net assets over its paid-in capital or, if
there is no such excess, to its net earnings for the current and immediately
preceding fiscal year. In addition, as the Holding Company does not anticipate,
for the immediate future, engaging in activities other than (i) investing in
cash, short-term securities and investment and mortgage-backed securities
similar to those invested in by the Association and (ii) holding the stock of
Gloversville Federal, the Holding Company's ability to pay dividends will be
limited, in part, by the Association's ability to pay dividends, as set forth
above.
Earnings appropriated to the Association's "Excess" bad debt reserves
and deducted for federal income tax purposes cannot be used by the Association
to pay cash dividends to the Holding Company without adverse tax consequences.
See "Regulation - Federal and State Taxation."
LEGAL AND TAX MATTERS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for Gloversville Federal by
the firm of Silver, Freedman & Taff, L.L.P. (a limited liability partnership
including professional corporations), 7th Floor, East Tower, 1100 New York
Avenue, NW, Washington, DC 20005. Silver, Freedman & Taff, L.L.P. has
141
<PAGE>
consented to the references herein to its opinions. The New York income tax
consequences of the Conversion will be passed upon by KPMG Peat Marwick LLP.
KPMG Peat Marwick LLP has consented to references herein to its opinion. Capital
Resources has been represented in the Conversion by Serchuk & Zelermyer, LLP, 81
Main Street, White Plains, New York.
EXPERTS
The financial statements of Gloversville Federal as of September 30,
1997 and 1996 and for each of the years in the three year period ended September
30, 1997 appearing in this Prospectus have been audited by KPMG Peat Marwick
LLP, independent certified public accountants, as set forth in their report
thereon appearing elsewhere herein, and is included in reliance upon such
report, given upon the authority of such firm as experts in accounting and
auditing.
RP Financial has consented to the inclusion herein of the summary of
its letter to the Association setting forth its opinion as to the estimated pro
forma market value of the Holding Company and the Association as converted and
to the reference to its opinion that subscription rights received by Eligible
Account Holders, Supplemental Eligible Account Holders and other eligible
subscribers do not have any economic value.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement
under the Securities Act with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, this Prospectus does not
contain all the information set forth in the Registration Statement. However,
the prospectus does contain a description of the material provisions of the
documents contained therein. Such information can be examined without charge at
the public reference facilities of the SEC located at 450 Fifth Street, NW,
Washington, DC 20549, and copies of such material can be obtained from the SEC
at prescribed rates. In addition, the SEC maintains a Web site. The address of
the SEC's Web site is "http://www.sec.gov." The statements contained herein as
to the contents of any contract or other document filed as an exhibit to the
Registration Statement are, of necessity, brief descriptions thereof which
describe only the material provisions of such documents; each such statement is
qualified by reference to such contract or document.
The Association has filed an Application for Conversion with the OTS
with respect to the Conversion. Pursuant to the rules and regulations of the
OTS, this Prospectus omits certain information contained in that Application.
The Application may be examined at the principal offices of the OTS, 1700 G
Street, NW, Washington, DC 20552 and at the Chicago District Office of the OTS,
Suite 1300, 200 West Madison Street, Chicago, Illinois 60606, without charge.
In connection with the Conversion, the Holding Company will register
the Common Stock with the SEC under Section 12(g) of the Exchange Act, and, upon
such registration, the Holding Company and the holders of its Common Stock will
become subject to the proxy solicitation rules, reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, the annual and periodic reporting and certain other
requirements of the
142
<PAGE>
Exchange Act. Under the Plan, the Holding Company has undertaken that it will
not terminate such registration for a period of at least three years following
the Conversion.
A copy of the Certificate of Incorporation and Bylaws of the Holding
Company are available without charge from the Association.
143
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS
AND LOAN ASSOCIATION
Financial Statements
As of September 30, 1997 and 1996 and
for the years in the three-year period
ended September 30, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.............................................. F-2
Statements of Financial Condition at September 30, 1997 and 1996.......... F-3
Statements of Operations for the Years Ended September 30, 1997, 1996
and 1995............................................................... F-4
Statements of Changes in Equity for the Years Ended September 30, 1997,
1996 and 1995........................................................... F-5
Statements of Cash Flows for the Years Ended September 30, 1997, 1996
and 1995................................................................ F-6
Notes to Financial Statements............................................. F-8
All schedules are omitted because the required information is not
applicable or is included in the Financial Statements and related Notes.
The Financial Statements of the Holding Company have been omitted
because the Holding Company has not yet issued any stock, has no assets, no
liabilities and has not conducted any business other than of an organizational
nature.
F-1
<PAGE>
[LETTERHEAD FOR KPMG PEAT MARWICK LLP]
Independent Auditors' Report
The Board of Directors
Gloversville Federal Savings and
Loan Association
Gloversville, New York
We have audited the accompanying statements of financial condition of
Gloversville Federal Savings and Loan Association (the Association) as of
September 30, 1997 and 1996, and the related statements of operations, changes
in equity and cash flows for each of the years in the three year period ended
September 30, 1997. These financial statements are the responsibility of the
Association's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gloversville Federal Savings
and Loan Association as of September 30, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three year period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
December 12, 1997
F-2
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Financial Condition
September 30,
------------------------------
Assets 1997 1996
---- ----
Cash and due from banks ...................... $ 1,922,386 1,098,081
Interest bearing time deposits ............... -- 100,000
------------ ------------
Total cash and cash equivalents .......... 1,922,386 1,198,081
Securities available for sale ................ 7,017,111 7,438,982
Net loans receivable ......................... 49,526,290 49,636,131
Accrued interest receivable .................. 332,122 329,991
Other real estate owned ...................... 312,892 69,548
Premises and equipment, net .................. 1,538,364 1,793,739
Prepaid expenses and other assets ............ 372,642 539,608
------------ ------------
Total assets ............................. $ 61,021,807 61,006,080
============ ============
Liabilities and Equity
Liabilities:
Deposits:
Demand and N.O.W. accounts ............... 5,147,684 5,174,015
Savings and money market accounts ........ 22,954,408 23,531,620
Time deposit accounts .................... 28,014,594 27,010,165
------------ ------------
Total deposits ........................... 56,116,686 55,715,800
Accrued expenses and other liabilities ...... 325,152 1,200,324
Borrowings .................................. 1,300,000 300,000
------------ ------------
Total liabilities ........................ 57,741,838 57,216,124
------------ ------------
Commitments and contingent liabilities
(note 10)
Equity:
Retained earnings .......................... 3,301,370 3,884,148
Net unrealized loss on securities
available for sale, net of taxes .......... (21,401) (94,192)
------------ ------------
Total equity ............................. 3,279,969 3,789,956
------------ ------------
Total liabilities and equity ............. $ 61,021,807 61,006,080
============ ============
See accompanying notes to financial statements.
F-3
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Operations
For the Years Ended
<TABLE>
<CAPTION>
September 30,
---------------------------------------
1997 1996 1995
---- ---- ----
Interest and dividend income:
<S> <C> <C> <C>
Interest and fees on loans ............. $ 4,409,006 4,131,580 3,928,591
Securities available for sale .......... 458,932 466,898 398,455
Securities held to maturity ............ -- -- 302,124
Interest bearing deposits .............. 36,714 134,345 186,839
----------- ----------- -----------
Total interest and dividend income .... 4,904,652 4,732,823 4,816,009
----------- ----------- -----------
Interest expense:
N.O.W. accounts ........................ 64,841 69,251 84,852
Savings and money market accounts ...... 837,803 679,589 645,219
Time deposit accounts .................. 1,522,058 1,667,030 1,796,706
Borrowings ............................. 21,777 178 --
----------- ----------- -----------
Total interest expense ................ 2,446,479 2,416,048 2,526,777
----------- ----------- -----------
Net interest income ................... 2,458,173 2,316,775 2,289,232
Provision for loan losses ............... 792,266 714,276 128,876
----------- ----------- -----------
Net interest income after provision
for loan losses ...................... 1,665,907 1,602,499 2,160,356
----------- ----------- -----------
Other income:
Fees and service charges ............... 140,309 118,499 96,130
Net (loss) gain on sale or writedown
of premises and equipment ............. -- (15,322) 86,379
Net gain on sale of securities available
for sale .............................. -- -- 204,285
Other .................................. 14,810 6,091 4,957
----------- ----------- -----------
Total other income ..................... 155,119 109,268 391,751
----------- ----------- -----------
Other expenses:
Compensation and employee benefits ..... 892,434 826,360 868,163
Occupancy expenses ..................... 224,598 212,054 156,802
Federal deposit insurance premiums ..... 56,665 130,387 143,696
Special one-time FDIC assessment ....... -- 414,835 --
Advertising expenses ................... 110,796 140,291 92,152
Directors' fees and expenses ........... 102,912 76,298 41,861
Equipment and data processing expenses . 319,110 310,218 282,206
Other real estate expenses ............. 73,030 27,039 126,719
Other operating expenses ............... 539,251 832,815 486,759
----------- ----------- -----------
Total other expenses .................. 2,318,796 2,970,297 2,198,358
----------- ----------- -----------
(Loss) income before income tax
(benefit) expense ...................... (497,770) (1,258,530) 353,749
Income tax expense (benefit) ............ 85,008 (222,324) 102,443
----------- ----------- -----------
Net (loss) income ..................... $ (582,778) (1,036,206) 251,306
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Changes in Equity
For the Years Ended September 30, 1997, 1996, and 1995
Net unrealized
gain(loss) on
securities
Retained available Total
earnings for sale equity
-------- -------- ------
Balance at October 1, 1994 ........ $ 4,669,048 35,609 4,704,657
Net income for 1995 ............... 251,306 -- 251,306
Change in valuation allowance
for securities available for
sale, net of income taxes ........ -- (101,943) (101,943)
----------- ----------- -----------
Balance at September 30, 1995 ..... 4,920,354 (66,334) 4,854,020
Net loss for 1996 ................. (1,036,206) -- (1,036,206)
Change in valuation allowance
for securities available for
sale, net of income taxes ........ -- (27,858) (27,858)
----------- ----------- -----------
Balance at September 30, 1996 ..... 3,884,148 (94,192) 3,789,956
Net loss for 1997 ................. (582,778) -- (582,778)
Change in valuation allowance
for securities available for
sale, net of income taxes ........ -- 72,791 72,791
----------- ----------- -----------
Balance at September 30, 1997 ..... $ 3,301,370 (21,401) 3,279,969
=========== =========== ===========
See accompanying notes to financial statements.
F-5
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows
For the Years Ended
<TABLE>
<CAPTION>
September 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) income ....................... $ (582,778) (1,036,206) 251,306
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation expense ................... 291,086 227,646 179,412
Provision for loan losses .............. 792,266 714,276 128,876
Deferred tax expense (benefit) ......... 125,000 (55,651) 85,676
Writedown of other real estate owned ... 33,032 24,300 88,100
Net gain on sale of other real estate
owned ................................. (38,881) (76,847) (18,093)
Net loss (gain) on sale or writedown
of premises and equipment ............. -- 15,322 (86,379)
Net gain on sale of securities
available for sale .................... -- -- (204,285)
(Increase) decrease in accrued interest
receivable ............................ (2,131) 49,528 10,984
(Increase) decrease in prepaid expenses
and other assets ...................... (12,947) (4,536) (362,379)
(Decrease) increase in accrued expenses
and other liabilities ................. (875,172) 846,553 163,908
----------- ----------- -----------
Total adjustments .................... 312,253 1,740,591 (14,180)
Net cash (used in) provided by
operating activities ............... (270,525) 704,385 237,126
----------- ----------- -----------
Cash flows from investing activities:
Purchase of securities available for sale -- (4,601,592) (10,490,471)
Proceeds from sale of securities
available for sale .................... -- -- 13,636,976
Proceeds from principal repayment of
securities available for sale ......... 549,575 430,569 56,339
Proceeds from maturity and redemption
of securities available for sale ...... -- 3,700,000 1,500,000
Purchase of securities held to maturity . -- -- (500,000)
Proceeds from maturity and redemption
of securities held to maturity ........ -- 2,500,000 1,590,000
Net increase in loans receivable ........ (1,193,317) (2,409,148) (2,903,669)
Proceeds from sale of other real estate
owned ................................. 273,397 462,684 262,348
Capital expenditures .................... (35,711) (920,326) (287,053)
Net proceeds from sale of premises and
equipment ............................. -- -- 407,552
----------- ----------- -----------
Net cash (used in) provided by
investing activities ................ (406,056) (837,813) 3,272,022
----------- ----------- -----------
Cash flows financing activities:
Net increase (decrease) in deposits ..... 400,886 (2,149,816) (6,837,041)
Net increase in borrowings .............. 1,000,000 300,000 --
----------- ----------- -----------
Net cash provided by (used in)
financing activities ................ 1,400,886 (1,849,816) (6,837,041)
Net increase (decrease) in cash and
cash equivalents ...................... 724,305 (1,983,244) (3,327,893)
Cash and cash equivalents at
beginning of year ..................... 1,198,081 3,181,325 6,509,218
----------- ----------- -----------
Cash and cash equivalents at end
of year ............................... $ 1,922,386 1,198,081 3,181,325
=========== =========== ===========
</TABLE>
(Continued)
F-6
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows, Continued
For the Years Ended
September 30,
-------------------------------------
1997 1996 1995
---- ---- ----
Additional disclosures relative
to cash flows:
Interest paid .......................... $ 2,446,479 2,416,048 2,526,955
=========== ========== ==========
(Refunds Received) Taxes paid .......... $ (165,891) (83,587) 330,699
=========== ========== ==========
Supplemental schedule of non-cash
investing and financing activities:
Transfers from loans to other real
estate owned ......................... $ 510,892 297,909 180,577
=========== ========== ==========
Securities held to maturity transferred
to securities available for sale under
the provisions of the FASBis Special
Report ............................... $ -- 2,000,000 --
=========== ========== ==========
Change in net unrealized loss on
securities available for sale,
net of $54,913, ($21,015) and
($76,904) tax effect at
September 30, 1997, 1996 and
1995, respectively ................... $ 72,791 (27,858) (101,943)
=========== ========== ==========
See accompanying notes to financial statements.
F-7
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
September 30, 1997 and 1996
(1) Significant Accounting Policies
The accounting and reporting policies of Gloversville Federal Savings and
Loan Association (the Association) conform, in all material respects, to
generally accepted accounting principles and to general practice within the
thrift industry. The following is a description of the more significant of
those policies which the Association follows in preparing and presenting
its financial statements.
(a) Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
A substantial portion of the Association's loans are secured by real
estate in the Upstate New York area, primarily in Fulton, Montgomery
and Saratoga counties. In addition, the other real estate owned is
located in the same market area. Accordingly, the ultimate
collectibility of a substantial portion of the Association's loan
portfolio and the recovery of the carrying amount of other real estate
owned are susceptible to changes in market conditions in these areas.
The determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures in
satisfaction of loans are based on material estimates that are
susceptible to change based on such factors as economic conditions in
the market area serviced by the Association, financial conditions of
individual borrowers, and changes in underlying collateral values. In
connection with the determination of the allowance for loan losses and
the valuation of other real estate owned, management obtains
independent appraisals for significant properties.
Management believes that the allowance for loan losses and the
valuation of other real estate owned are adequate. While management
uses available information to recognize losses on loans and other real
estate owned, future additions to valuation allowances may be
necessary based on changes in economic conditions, particularly in the
Association's market area. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review
the Association's allowance for loan losses and other real estate
owned. Such agencies may require the Association to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination which may not be
currently available to management.
(b) Cash and Cash Equivalents
For purposes of reporting cash flows, the Association considers all
cash and due from bank balances and interest bearing time deposits
with maturities of less than three months to be cash and cash
equivalents.
F-8
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(1), Continued
(c) Securities
The Association accounts for securities in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity
Securities". SFAS No. 115 requires classification of securities into
three categories: trading, available for sale, or held to maturity.
The Association classifies its debt securities, including mortgage
backed securities, as either available for sale or held to maturity,
as the Association does not hold any securities for trading purposes.
Held to maturity securities are those debt securities for which the
Association has the positive intent and the ability to hold until
maturity. All other securities are classified as available for sale.
As of September 30, 1997 and 1996 all securities were classified as
available for sale.
Available for sale securities are recorded at fair value. Held to
maturity securities are recorded at amortized cost, adjusted for the
amortization of premiums and accretion of discounts. Unrealized
holding gains and losses, net of the related tax effect, on available
for sale securities are excluded from earnings and are reported as a
separate component of equity until realized. Federal Home Loan Bank of
New York stock, a non-marketable equity security, is included in
securities available for sale at cost since there is no readily
available fair value. This investment is required for membership.
A decline in the fair value of any available for sale or held to
maturity security below cost that is deemed other than temporary is
charged to earnings, resulting in the establishment of a new cost
basis for the security.
Interest income includes interest earned on the securities and the
amortization of premiums and accretion of discounts. Amortization and
accretion is recorded using the level-yield method. Realized gains or
losses on securities sold are recognized on the trade date using the
specific identification method.
(d) Reclassification of Investment Securities
In November 1995, the staff of the Financial Accounting Standards
Board released a Special Report, iA Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities.i The Special Report contained a unique provision that
allowed entities to, as of one date between November 15, 1995 and
December 31, 1995, reassess the appropriateness of the classifications
on all securities held at that time. In conjunction with the
provisions of the Special Report, dated December 31, 1995, the
Association transferred securities with an amortized cost of
$2,000,000 and an estimated fair value of $1,985,000 from securities
held to maturity to securities available for sale.
F-9
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(1), Continued
(e) Loans Receivable
Loans are carried at the principal amount outstanding less net
deferred loan fees and the allowance for loan losses. Loan fees
received and certain direct loan origination costs are deferred, and
the net fee or cost is amortized into income so as to provide for a
level-yield of interest on the underlying loans. Amortization of
related net deferred fees is suspended when a loan is placed on
nonaccrual status.
Interest on loans is recognized on an accrual basis. Loans are
generally placed on nonaccrual status when principal or interest
becomes 90 days or more past due or sooner if management believes it
is prudent to do so. Unpaid interest previously recognized is reversed
when a loan is placed on nonaccrual status. Loans generally remain on
nonaccrual status until past due principal and interest payments are
brought current through cash collections or when, in the opinion of
management, the loans are estimated to be fully collectible as to
principal and interest.
An allowance for loan losses is established through a provision
charged to operations. Losses on loans are charged to the allowance
for loan losses when all or a portion of a loan is deemed to be
uncollectible. Recoveries of loans previously charged off are credited
to the allowance when realized. Management's periodic evaluation of
the adequacy of the allowance for loan losses considers known and
inherent risks in the portfolio, adverse situations which may affect
the borrowers' ability to repay, estimated value of underlying
collateral, results of reviews performed on specific problem loans,
and current and prospective economic conditions in the Association's
lending area.
Impaired loans are identified and measured in accordance with SFAS No.
114, iAccounting by Creditors for Impairment of a Loani, and SFAS No.
118, iAccounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures.i These Statements prescribe recognition
criteria for loan impairment, and measurement methods for impaired
loans and loans whose terms are modified in troubled-debt
restructurings subsequent to the adoption of these Statements. The
adoption of these Statements on October 1, 1995 did not have a
material effect on the Associationis financial statements.
(f) Other Real Estate Owned
Other real estate owned is recorded at the lower of cost (defined as
fair value at initial foreclosure) or fair value of the asset
acquired, less estimated costs to dispose of the property. Costs of
developing and improving such properties are capitalized, where
appropriate. Subsequent declines in the value of other real estate
owned and expenses relating to holding such real estate are charged to
operations as incurred. Other real estate owned consists primarily of
residential properties
(g) Premises and Equipment
Premises and equipment are carried at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the related assets. (Generally 3-5
years for furniture and fixtures and 15-20 years for buildings.)
F-10
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(1), Continued
(h) Income Taxes
The Association accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes". Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets are
recognized subject to management's judgment that those assets will
more likely than not be realized. A valuation allowance is recognized
if, based on an analysis of available evidence, management believes
that all or a portion of deferred tax assets will not be realized.
Adjustments to increase or decrease the valuation allowance are
charged or credited, respectively, to income tax expense. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(i) Financial Instruments
In the normal course of business, the Association is a party to
certain financial instruments with off-balance-sheet risk, such as
commitments to extend credit, unused lines of credit, and standby
letters of credit. The Association's policy is to record such
instruments when funded.
(j) Transfers of Financial Assets and Extinguishment of Liabilities
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which provides accounting and
reporting standards for transfers and servicing of financial assets
and extinguishments of liabilities based on consistent application of
a financial-components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. Certain aspects of SFAS
No. 125 were amended by SFAS No. 127 "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125." The adoption of SFAS
No. 125, as amended, did not have a material impact on the
Association's financial statements.
(k) Reclassification
Amounts in the prior periods' financial statements are reclassified
whenever necessary to conform with the current periodis presentation.
F-11
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(1), Continued
(l) Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. "SFAS No. 130",
"Reporting Comprehensive Income". SFAS No. 130 states that
comprehensive income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries
to equity, such as the mark to market adjustment on securities
available for sale, foreign currency items and minimum pension
liability adjustments. This statement is effective for fiscal years
beginning after December 15, 1997. Management does not believe that
the impact of adopting this Statement will be material to the
Association's financial statements.
(2) Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair
values of securities available for sale at September 30, 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
September 30, 1997
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Debt securities:
<S> <C> <C> <C> <C>
U.S. Government agency obligations ....... $2,998,160 1,867 (6,020) 2,994,007
Mortgage backed securities ............... 3,595,397 14,059 (47,452) 3,562,004
---------- ---------- ---------- ----------
Total debt securities ............. 6,593,557 15,926 (53,472) 6,556,011
Non-marketable equity securities:
Stock in FHLB ............................ 461,100 -- -- 461,100
---------- ---------- ---------- ----------
Total securities available for sale $7,054,657 15,926 (53,472) 7,017,111
========== ========== ========== ==========
September 30, 1996
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Debt securities:
U.S. Government agency obligations ....... $2,998,160 -- (64,726) 2,933,434
Mortgage backed securities ............... 4,144,972 -- (100,524) 4,044,448
---------- ---------- ---------- ----------
Total debt securities ............. 7,143,132 -- (165,250) 6,977,882
Non-marketable equity securities:
Stock in FHLB ............................ 461,100 -- -- 461,100
---------- ---------- --------- ----------
Total securities available for sale $7,604,232 -- (165,250) 7,438,982
========== ========== ========= ==========
</TABLE>
At September 30, 1997 and 1996, mortgage backed securities consisted of
Federal Home Loan Mortgage Corporation (FHLMC) and Federal National
Mortgage Association (FNMA) securities.
F-12
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2), Continued
The following sets forth information with regard to remaining contractual
maturities of debt securities available for sale as of September 30, 1997
(mortgage backed securities are included based on the final contractual
maturity date):
Estimated
Amortized Fair
Cost Value
---- -----
Within one year .......................... $ 693,867 671,834
From one to five years ................... 2,997,587 2,971,146
From five to ten years ................... -- --
After ten years .......................... 2,902,103 2,913,031
---------- ----------
$6,593,557 6,556,011
========== ==========
Actual maturities may differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
There were no security sales for the years ended September 30, 1997 and
1996. Proceeds from the sale of securities available for sale for the year
ended September 30, 1995 totaled $13,720,234. Gross gains and losses
realized on the sale of securities available for sale for the year ended
September 30, 1995 were $410,762 and $206,477, respectively.
(3) Net Loans Receivable
Net loans receivable at September 30, 1997 and 1996 are summarized as
follows:
1997 1996
---- ----
Loans secured by real estate:
Residential one-to-four family .............. $ 36,890,541 40,262,375
Multi-family and commercial ................. 7,949,702 4,635,401
Residential one-to-four family construction . 539,284 937,994
------------ ------------
Total loans secured by real estate ...... 45,379,527 45,835,770
------------ ------------
Other loans:
Commercial business ......................... 1,421,581 1,229,279
Home equity ................................. 3,379,775 2,868,795
Other consumer .............................. 1,111,559 1,154,440
------------ ------------
Total other loans ....................... 5,912,915 5,252,514
------------ ------------
Gross loans receivable .................. 51,292,442 51,088,284
Less:
Net deferred loan fees ...................... (153,171) (201,543)
Allowance for loan losses ................... (1,612,981) (1,250,610)
------------ ------------
Net loans receivable .................... $ 49,526,290 49,636,131
============ ============
F-13
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(3), Continued
Activity in the allowance for loan losses is summarized as follows for the
years ended September 30, 1997, 1996 and 1995:
1997 1996 1995
---- ---- ----
Balance at beginning of year ......... $ 1,250,610 779,417 856,480
Charge-offs .......................... (466,182) (254,364) (209,660)
Recoveries ........................... 36,287 11,281 3,721
Provision charged to operations ...... 792,266 714,276 128,876
----------- ----------- -----------
Balance at end of year ............... $ 1,612,981 1,250,610 779,417
=========== =========== ===========
Non-performing loans consist of loans on nonaccrual status at September 30,
1997 and 1996 amounting to $3,792,873 and $2,212,425, respectively. There
were no loans past due as to principal or interest greater than 90 days and
still accruing interest or accruing loans in a trouble debt restructuring
as of September 30, 1997 or 1996. Included in nonaccrual loans at September
30, 1997 are approximately $1.6 million of loans restructured in trouble
debt restructurings. At September 30, 1996, a number of substandard
classified residential loans were past due as to property taxes on property
collateralizing the loans. The total amount of the related past due taxes
on these substandard loans was approximately $318,000 at September 30,
1996.
During 1997, certain loans with past due property taxes were either
rewritten to provide the borrowers with amounts necessary to pay past due
property taxes or the loans were restructured in trouble debt restructuring
(but generally at market rates) to provide the borrowers with amounts
necessary to pay past due property taxes. Loans rewritten or restructured
due to past due property taxes at September 30, 1997 totaled $1.1 million
and $1.6 million, respectively.
Interest income which would have been recorded under the original terms of
nonaccrual loans for the years ended September 30, 1997, 1996 and 1995 was
approximately $343,000, $230,000 and $241,000, respectively. Interest
income recognized on nonaccrual loans for the years ended September 30,
1997, 1996 and 1995 was approximately, $304,000, $84,000 and $54,000. There
are no commitments to extend further credit on nonaccrual loans.
Under SFAS No. 114, a loan (generally commercial-type loans) is considered
impaired when it is probable that the borrower will be unable to repay the
loan according to the original contractual terms of the loan agreement or
when a loan (of any loan type) is restructured in a trouble debt
restructuring. The allowance for loan losses related to impaired loans is
based on discounted cash flows using the loanis initial effective interest
rate or the fair value of the collateral for loans where repayment of the
loan is expected to be provided solely by the underlying collateral
(collateral dependent loans).
As of September 30, 1997, there were no commercial-type loans on nonaccrual
status or classified as impaired. At September 30, 1997, there were
approximately $1.6 million in consumer loan related troubled debt
restructurings which are considered to be impaired. Approximately $334,700
of the allowance for loan losses has been allocated to these impaired loans
at September 30, 1997. As of September 30, 1997, there were no impaired
loans which did not have an allowance for loan losses determined in
accordance with SFAS No. 114. The average recorded investment in impaired
loans during the years ended September 30, 1997 and 1996 was approximately
$799,000 and $0, respectively. For the year ended September 30, 1997 and
1996, the Association has recognized interest income of approximately
$153,000 and $0, respectively on impaired loans. There were no impaired
loans at September 30, 1996.
F-14
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(3), Continued
The Association's lending activities are conducted principally in Fulton
and Saratoga Counties of New York State. The Association grants single
family and multi-family residential loans, commercial real estate,
commercial business loans, and a variety of consumer loans. In addition,
the Association grants loans for the construction of residential homes,
multi-family properties, and for commercial development. Most loans granted
by the Association are secured by related real estate. The ability and
willingness of borrowers to honor their repayment commitments generally
depends on the level of overall economic activity within the borrowers'
geographic areas and real estate values.
Certain directors and executive officers of the Association have had loan
transactions with the Association in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as
comparable loans made to others. Total loans to directors and executive
officers amounted to approximately $381,000 and $406,000 at September 30,
1997 and 1996, respectively. During the year ended September 30, 1997, new
loans of approximately $9,000 were made to directors or executive officers,
and repayments totaled approximately $34,000.
(4) Accrued Interest Receivable
A summary of accrued interest receivable at September 30, 1997 and 1996 is
as follows:
1997 1996
---- ----
Loans .......................................... $271,986 272,944
Securities available for sale .................. 60,136 57,047
-------- --------
Total ........................................ $332,122 329,991
======== ========
(5) Premises and Equipment
Premises and equipment at September 30, 1997 and 1996 are summarized by
major classifications as follows: 1997 1996
1997 1996
---- ----
Land ....................................... $ 140,215 140,215
Buildings .................................. 1,278,156 1,276,656
Furniture and fixtures ..................... 1,124,289 1,098,750
----------- -----------
Total .................................. 2,542,660 2,515,621
Less accumulated depreciation .............. (1,004,296) (721,882)
----------- -----------
Premises and equipment, net ............ $ 1,538,364 1,793,739
=========== ===========
Amounts charged to non-interest expense for depreciation of premises and
equipment amounted to $291,086, $227,646 and $179,412 in 1997, 1996 and
1995, respectively.
F-15
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(6) Deposits
Deposit account balances at September 30, 1997 and 1996 are summarized as
follows:
1997 1996
---- ----
Demand accounts (non-interest bearing) ......... $ 1,021,123 835,929
----------- -----------
N.O.W. accounts (1.75%) ........................ 4,126,561 4,338,086
----------- -----------
Passbook and statement savings
accounts (up to 4.00%) ....................... 12,004,406 13,139,454
Money market accounts (up to 4.88%) ............ 10,950,002 10,392,166
----------- -----------
22,954,408 23,531,620
----------- -----------
Time deposit accounts:
Under - 4.00% ......................... 2,624 10
4.00 - 4.99% ......................... 3,993,984 11,356,698
5.00 - 5.99% ......................... 21,942,237 11,101,230
6.00 - 6.99% ......................... 2,045,965 4,524,833
7.00 and over ........................ 29,784 27,394
----------- -----------
28,014,594 27,010,165
----------- -----------
$56,116,686 55,715,800
=========== ===========
At September 30, 1997 and 1996, the aggregate amount of time deposit
accounts with a balance equal to or in excess of $100,000 was $2,492,469
and $2,239,057, respectively. At September 30, 1997 and 1996, the aggregate
amount of escrow deposits was not significant, and are included in savings
and money market accounts.
Contractual maturities of time deposit accounts at September 30, 1997 are
as follows:
Years ending September 30,
1998 $23,295,264
1999 3,260,840
2000 1,030,752
Thereafter 427,738
-----------
$28,014,594
===========
Certain executive officers and directors of the Association, as well as
certain affiliates of these officers and directors, were customers of and
had deposit balances with the Association in the ordinary course of
business. The aggregate of such deposits was approximately $681,000 as of
September 30, 1997.
(7) Borrowings
The Association had approximately $9.2 million of available lines of credit
with the FHLB as of September 30, 1997 and 1996. Substantially all of the
assets of the Association have been pledged as collateral related to this
line of credit.
F-16
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(7), Continued
Information concerning FHLB borrowings in 1997 and 1996 follows:
1997 1996
---- ----
Amount outstanding at September 30 ................. $ -- 300,000
Maximum amount outstanding at any month end ........ 850,000 300,000
Average amount outstanding ......................... 272,726 6,027
Weighted average interest rate:
For the year .................................. 5.56% 5.56%
As of year end ................................ -- 5.88%
Information concerning securities sold under agreements to repurchase in
1997 and 1996 follows:
1997 1996
---- ----
Amount outstanding at September 30, ................ $1,300,000 --
Maximum outstanding at any month end ............... 1,300,000 --
Average amount outstanding ......................... 118,274 --
Weighted average interest rate:
For the year .................................. 5.78% --
As of year end ................................ 5.80% --
Securities underlying the repurchase agreements remain under the control of
the Association. Repurchase agreements are typically entered into for one
to three day periods.
(8) Income Taxes
The components of the income tax expense (benefit) for the years ended
September 30, 1997, 1996 and 1995 are as follows:
1997 1996 1995
---- ---- ----
Current tax (benefit) expense:
Federal .......................... $ (40,248) (166,929) 16,511
State ............................ 256 256 256
Deferred tax (benefit) expense ........ 125,000 (55,651) 85,676
--------- --------- ---------
$ 85,008 (222,324) 102,443
========= ========= =========
The actual tax expense (benefit) for the years ended September 30, 1997,
1996 and 1995 differs from expected tax expense (benefit), computed by
applying the Federal corporate tax rate of 34% to income (loss) before
taxes as follows:
1997 1996 1995
---- ---- ----
Expected tax expense (benefit) ....... $(169,242) (427,900) 120,275
Change in valuation allowance
for deferred tax asset .............. 273,510 248,426 --
New York State tax ................... (22,107) (45,443) 256
Other items .......................... 2,847 2,593 (18,088)
--------- --------- ---------
$ 85,008 (222,324) 102,443
========= ========= =========
(17%) 18% 29%
===== === ===
F-17
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(8), Continued
The tax effects of temporary differences that give rise to the
Association's deferred tax assets and liabilities at September 30, 1997 and
1996 are presented below:
1997 1996
---- ----
Deferred tax assets:
Differences in reporting the provision
for loan losses and the tax bad debt
deduction ................................... $ 628,792 461,788
Deferred net loan origination fees ............ 61,268 80,617
Differences in reporting accrued expenses ..... 73,393 81,200
Other ......................................... 14,010 2,120
--------- ---------
Total gross deferred tax assets ........... 777,463 625,725
Valuation allowance ....................... (625,052) (351,542)
--------- ---------
Deferred tax assets, net of valuation
allowance ............................... 152,411 274,183
--------- ---------
Deferred tax liabilities:
Depreciation .................................. (9,540) (4,902)
Net effect of other real estate
owned transactions .......................... (22,871) (24,281)
--------- ---------
Total gross deferred tax liabilities ...... (32,411) (29,183)
--------- ---------
Net deferred tax asset at
end of year ............................. 120,000 245,000
Net deferred tax asset at
beginning of year ....................... 245,000 189,349
--------- ---------
Deferred tax expense (benefit)
for the year ............................ $ 125,000 (55,651)
========= =========
In addition to the deferred tax assets described above, the Association had
a deferred tax asset of $16,145 and $71,058 at September 30, 1997 and 1996,
respectively, related to the net unrealized loss on securities available
for sale.
In assessing whether deferred tax assets will more likely than not be
realized, management considers the historical level of taxable income, the
time period over which the temporary differences are expected to reverse,
as well as estimates of future taxable income. As a result of the
Association experiencing a second year of significant losses before taxes,
continued economic weakness in the Association's market area, including
declining real estate values collateralizing much of the Association's loan
portfolio, reduced expectations of earnings in the future, as well as a
reduction in the amount of historical taxes available for carryback in
1997, the Association increased the deferred tax valuation allowance in
1997 by $273,510 to $625,052. As of September 30, 1997, the net deferred
tax asset is considered to be more likely then not realizable based upon
the historical level of taxable income available for carryback, amounting
to approximately $50 thousand, the reversal of temporary taxable items and
reliance on future taxable income amounting to approximately $175 thousand.
As a result of the 1996 loss before taxes of approximately $1.3 million,
and the significant reduction in the amount of historical taxes available
for carryback, the Association increased the valuation allowance in 1996 by
$248,426 to $351,542. As of September 30, 1996, the net deferred tax asset
is considered to be more likely than not realizable based upon the amount
of historical taxable income available for carryback, amounting to
approximately $90 thousand, the reversal of temporary taxable items and
reliance on future taxable income, amounting to approximately $380
thousand.
F-18
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(8), Continued
As a thrift institution, the Association is subject to special provisions
in the Federal and New York State tax laws regarding its allowable tax bad
debt deductions and related tax bad debt reserves. These deductions
historically have been determined using methods based on loss experience or
a percentage of taxable income. Tax bad debt reserves are maintained equal
to the excess of allowable deductions over actual bad debt losses and other
reserve reductions. These reserves consist of a defined base-year amount,
plus additional amounts ("excess reserves") accumulated after the base
year. SFAS No. 109 requires recognition of deferred tax liabilities with
respect to such excess reserves, as well as any portion of the base-year
amount which is expected to become taxable (or "recaptured") in the
foreseeable future.
Certain amendments to the Federal and New York State tax laws regarding bad
debt deductions were enacted in July and August 1996. The Federal
amendments include elimination of the percentage of taxable income method
for tax years beginning after December 31, 1995, and imposition of a
requirement to recapture into taxable income (over a period of
approximately six years) the bad debt reserves in excess of the base-year
amounts. The Association previously established, and will continue to
maintain, a deferred tax liability with respect to such excess Federal
reserves. The New York State amendments redesignate the Association's state
bad debt reserves at December 31, 1995 as the base-year amount and also
provide for future additions to the base-year reserve using the percentage
of taxable income method.
In accordance with SFAS No. 109, deferred tax liabilities have not been
recognized with respect to the Federal and state base-year reserves since
the Association does not expect that these reserves will become taxable in
the foreseeable future. At September 30, 1997, the Federal base year
reserve was approximately $1.3 million and the state base-year reserve was
not significant. Under New York State tax law, as amended, events that
would result in taxation of the state reserves include the failure of the
Association to maintain a specified qualifying assets ratio or meet other
thrift definition tests for tax purposes. The unrecognized tax liability at
September 30, 1997 with respect to the Federal base-year reserve was
approximately $440 thousand.
(9) Employee Benefits
Effective January 1, 1995, the Association established a defined
contribution plan (ithe Plani) that is intended to qualify under section
401(k) of the Internal Revenue Code. The Plan covers all employees with at
least six months of service. The Associationis contributions to the Plan
are discretionary and determined annually by the Board of Directors.
Employee contributions are voluntary. Employees vest immediately in their
own contributions, and vest in the Associationis contributions based on
years of service. For the years ended September 30, 1997, 1996 and 1995,
the Associationis contributions to the Plan were approximately $57,219,
$45,070 and $38,023, respectively.
Effective December 31, 1994, the Association terminated its defined benefit
pension plan. As of that date all participants in the plan were immediately
vested. Subsequent to termination date, no additional benefit obligations
accrued to the plan participants. In order to settle the benefit
obligations to plan participants, assets were liquidated and distributed.
The plan's termination resulted in a settlement loss of approximately
$64,000 which is included in compensation and employee benefits in the year
ended September 30, 1995.
F-19
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(10) Commitments and Contingent Liabilities
(a) Legal Proceedings
The Association is, from time to time, be a defendant in legal
proceedings relating to the conduct of its business. In the best
judgment of management, the financial position of the Association will
not be affected materially by the outcome of any pending legal
proceedings.
(b) Off-Balance Sheet Financing and Concentrations of Credit
The Association is a party to certain financial instruments with
off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
the Association's commitments to extend credit and commercial lines of
credit. Financial instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized on the statements of
financial condition. The contract amounts of these instruments reflect
the extent of involvement the Association has in particular classes of
financial instruments.
The Association's exposure to credit loss in the event of
nonperformance by the other party to the commitments to extend credit
is represented by the contractual notional amount of those
instruments. The Association uses the same credit policies in making
commitments as it does for on-balance sheet instruments.
Commitments to extend credit may be written on a fixed rate basis
exposing the Association to interest rate risk given the possibility
that market rates may change between commitment and actual extension
of credit.
Unless otherwise noted, the Association does not require collateral or
other security to support off-balance-sheet financial instruments with
credit risk.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being fully drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Association evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, if
any, required by the Association upon the extension of credit is based
on management's credit evaluation of the customer. Mortgage
commitments are secured by a first lien on real estate. Collateral on
extensions of credit for commercial loans varies but may include
property, plant and equipment, and income producing commercial
property.
F-20
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(10), Continued
Contract amounts of financial instruments that represent the future
extension of credit as of September 30, 1997 and 1996 at fixed and
variable interest rates are as follows:
1997
----
Fixed Variable Total
----- -------- -----
Financial instruments whose contract
amounts represent credit risk:
Residential (one-to-four-family) ....... $ 387,400 -- 387,400
Multi-family and commercial ............ -- 1,008,939 1,008,939
Construction ........................... 306,260 3,006 309,266
Commercial business .................... -- 375,604 375,604
Home equity ............................ -- 942,202 942,202
Other consumer ......................... 114,527 -- 114,527
---------- ---------- ----------
$ 808,187 2,329,751 3,137,938
========== ========== ==========
1996
----
Fixed Variable Total
----- -------- -----
Financial instruments whose contract
amounts represent credit risk:
Residential (one-to-four-family) ....... $ 194,928 43,000 237,928
Multi-family and commercial ............ -- 1,561,000 1,561,000
Construction ........................... 98,800 -- 98,800
Commercial business .................... -- 122,000 122,000
Home equity ............................ -- 1,591,000 1,591,000
Other consumer ......................... 131,500 -- 131,500
---------- ---------- ----------
$ 425,228 3,317,000 3,742,228
========== ========== ==========
The range of interest on fixed rate commitments was 7.625% to 10.250%
at September 30, 1997 and 7.90% to 9.25% at September 30, 1996. The
range of interest on adjustable rate commitments was 7.00% to 11.00%
at September 30, 1997 and 7.00% to 10.25% at September 30, 1996,
respectively.
At September 30, 1997, the Bank was required to maintain a $500,000
compensating balance with a correspondent bank. There were no
compensating balance requirements at September 30, 1996.
(c) Interest Rate Risk
The principal assets of the Association are long-term, fixed rate
first mortgage loans which have been primarily funded by deposits.
Accordingly, increases in interest rates paid on deposit accounts will
have an adverse effect on the Association's overall interest margins.
In response to this situation, the Association has begun programs
offering one year adjustable rate mortgages, three to five year
adjustable rate multi-family and commercial loans, commercial business
loans, home equity loans, and variable rate line of credit accounts to
loan customers in order to more closely match the pricing of earning
assets with their sources of funds on a prospective basis.
F-21
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(11) Savings Association Insurance Fund - Special Assessment
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
Act) was enacted into law. The Act included, among other things,
provisions to recapitalize the Savings Association Insurance Fund
(SAIF) through a special assessment, as well as provisions calling for
a future merger of the SAIF with the Bank Insurance Fund.
As a result of the Act, SAIF members were required to pay a special
assessment to recapitalize the SAIF based on insured deposits held on
March 31, 1995. The amount of the special SAIF assessment as
determined by the FDIC was 65.7 basis points. Based upon the
Associationis insured deposits on March 31, 1995, the special
assessment amounted to $414,835.
(12) Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires that the Association disclose estimated fair values for
certain financial instruments. SFAS No. 107 defines fair value of
financial instruments as the amount at which the instrument could be
exchanged in a current transaction between willing parties other than
in a forced or liquidation sale.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Association's
entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Association's financial
instruments, fair value estimates are based on judgments regarding
future expected net cash flows, current economic conditions, risk
characteristics of various financial instruments, and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Significant assets and
liabilities that are not considered financial assets or liabilities
include the deferred tax asset and bank premises and equipment. In
addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair
value estimates and have not been considered in the estimates of fair
value under SFAS No. 107.
In addition there are intangible assets that SFAS No. 107 does not
recognize, such as the value of "core deposits," the Association's
branch network and other items generally referred to as "goodwill."
Securities Available for Sale
-----------------------------
Securities available for sale are financial instruments which are
usually traded in broad markets. Fair values are based upon bid
quotations received from either quotation services or securities
dealers. The estimated fair value of stock in the Federal Home Loan
Bank of New York is assumed to be its cost given the lack of a public
market available for this investment.
F-22
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(12), Continued
Loans
-----
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as single
family loans, consumer loans and commercial loans. Each loan category
is further segmented into fixed and adjustable rate interest terms and
by performing and nonperforming categories.
The fair value of performing loans, is calculated by discounting
scheduled cash flows through the estimated maturity using estimated
market discount rates that reflect the credit and interest rate risk
inherent in the loan. The estimate of maturity is based on the
contractual term of the loans to maturity taking into consideration
certain prepayment assumptions.
Fair value for significant non-performing loans may be based on recent
external appraisals or discounting of cash flows. Estimated cash flows
are discounted using a rate commensurate with the risk associated with
the estimated cash flows. Assumptions regarding credit risk, cash
flows, and discount rates are judgmentally determined using available
market information and specific borrower information.
Deposit Liabilities
-------------------
Under SFAS No. 107, the fair value of deposits with no stated
maturity, such as non-interest bearing demand deposit, savings
accounts, NOW accounts, and money market accounts, must be stated at
the amount payable on demand as of September 30, 1997 and 1996. The
fair value of time deposits is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
Other Items
-----------
The following items are considered to have a fair value equal to
carrying value due to the nature of the financial instrument and the
period within which it will be settled: cash and cash equivalents,
accrued interest receivable, accrued interest payable, and borrowings.
F-23
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(12), Continued
Table of Financial Instruments
------------------------------
The carrying values and estimated fair values of financial instruments
as of September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
------------------------ -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents ... $ 1,922,386 1,922,386 1,198,081 1,198,081
Securities available for sale 7,017,111 7,017,111 7,438,982 7,438,982
Net Loans ................... 49,526,290 49,959,626 49,636,131 50,137,989
Accrued interest receivable . 332,122 332,122 329,991 329,991
Financial liabilities:
Deposits:
Demand, savings,
money market, and
NOW accounts ........... 28,102,092 28,102,092 28,705,635 28,705,635
Time deposits ........... 28,014,594 28,014,594 27,010,165 27,010,165
Borrowings .................. 1,300,000 1,300,000 300,000 300,000
</TABLE>
Commitments to Extend Credit
----------------------------
The fair value of commitments to extend credit is estimated using the
fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present credit
worthiness of the counterparties. For fixed rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates. Fees, such as these are not a
major part of the Association's business and in the Association's
business territory are not a "normal business practice." Therefore,
based upon the above facts the Association believes that book value
equals fair value and the amounts are not significant.
F-24
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13) Regulatory Capital Requirements
OTS capital regulations require savings institutions to maintain
minimum levels of regulatory capital. Under the regulations in effect
at September 30, 1997 and 1996, the Association was required to
maintain a minimum ratio of tangible capital to tangible assets of
1.5%; a minimum leverage ratio of core (Tier I) capital to total
adjusted tangible assets of 3.0%; and a minimum ratio of total capital
(core capital and supplementary capital) to risk weighted assets of
8.0%, of which 4.0% must be core (Tier I) capital.
Under its prompt corrective action regulations, the OTS is required to
take certain supervisory actions (and may take additional
discretionary actions) with respect to an undercapitalized
institution. Such actions could have a direct material effect on an
institution's financial statements. The regulations establish a
framework for the classification of savings institutions into five
categories: well capitalized, adequately capitalized, under
capitalized, significantly under capitalized, and critically under
capitalized. Generally an institution is considered well capitalized
if it has a core (Tier I) capital ratio of at least 5.0% (based on
average total assets); a core (Tier I) risk based capital ratio of at
least 6.0%; and a total risk based capital ratio of at least 10.0%.
The foregoing capital ratios are based in part on specific
quantitative measures of assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative
judgments by the OTS about capital components, risk weightings and
other factors.
Management believes that, as of September 30, 1997 and 1996, the
Association meets all capital adequacy requirements to which it is
subject. Further, the most recent OTS notification categorized the
Association as a well-capitalized institution under the prompt
corrective action regulations. There have been no conditions or events
since that notification that management believes have changed the
Association's capital classification.
The following is a summary of the Association's actual capital amounts
and ratios as of September 30, 1997 and 1996 compared to the OTS
minimum capital adequacy requirements and the OTS requirements for
classification as a well-capitalized institution.
<TABLE>
<CAPTION>
September 30, 1997
-------------------------------------------------------------------
Minimum
Capital For Classification
Actual Adequacy as Well Capitalized
------ -------- -------------------
Amount Ratio Ratio Ratio
------ ----- ----- -----
<S> <C> <C> <C> <C>
Tangible capital ........................ $3,301,370 5.41% 1.50%
Core (Tier I) capital ................... 3,301,370 5.41% 3.00% 5.00%
Core (Tier I) risk-based capital ........ 3,301,370 8.48% 6.00%
Total risk-based capital ................ 3,787,762 10.01% 8.00% 10.00%
</TABLE>
F-25
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13), Continued
<TABLE>
<CAPTION>
September 30, 1996
-------------------------------------------------------------------
Minimum
Capital For Classification
Actual Adequacy as Well Capitalized
------ -------- -------------------
Amount Ratio Ratio Ratio
------ ----- ----- -----
<S> <C> <C> <C> <C>
Tangible capital ........................ $3,827,023 6.26% 1.50%
Core (Tier I) capital ................... 3,827,023 6.26% 3.00% 5.00%
Core (Tier I) risk-based capital ........ 3,827,023 10.26% 6.00%
Total risk-based capital ................ 4,293,161 11.73% 8.00% 10.00%
</TABLE>
The following is a reconciliation of the Association's equity reported
in the financial statements under generally accepted accounting principals to
OTS regulatory capital requirements.
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
------- ------- -------
<S> <C> <C> <C>
September 30, 1997
Total equity as reported in the financial
statements.................................... $3,279,969 $3,279,969 $3,279,969
General allowance for loan losses............... -- -- 486,392
Net unrealized loss on available-for-sale
securities................................... 21,401 21,401 21,401
------------ ------------ ------------
Regulatory Capital.............................. $3,301,370 $3,301,370 $3,787,762
========== ========== ==========
September 30, 1996
Total equity as reported in the financial
statements.................................... $3,789,956 $3,789,956 $3,789,956
General allowance for loan losses............... -- -- 466,138
Excess deferred tax asset....................... (57,125) (57,125) (57,125)
Net unrealized gain on available-for-sale
securities..................................... 94,192 94,192 94,192
------------ ------------ ------------
Regulatory Capital $3,827,023 $3,827,023 $4,293,161
========== ========== ==========
</TABLE>
The OTS may reduce an institution's regulatory capital for interest
rate risk exposure (as determined by the OTS) if the institution's risk-based
capital ratio is less than 12% and the OTS notifies the institution of such
reduction. The Association has not been notified by the OTS of any reduction to
its regulatory capital for interest rate risk exposure.
F-26
<PAGE>
(14) Adoption of Plan of Conversion
On November 19, 1997, the Board of Directors of the Association,
subject to regulatory approval and approval by the members of the
Association, unanimously adopted a Plan of Conversion to convert from
a federally chartered mutual savings bank to a federally chartered
stock savings bank with the concurrent formation of a holding company.
The transaction is expected to be accomplished through amendment of
the Association's federal charter and the sale of the holding
company's common stock in an amount equal to the pro forma market
value of the Association after giving effect to the conversion. A
subscription offering of the sale of the Association's common stock
will be offered initially to the Association's depositors, then to
other members and directors, officers and employees of the
Association. Any shares of the Association's common stock not sold in
the subscription offering will be offered for sale to the general
public in the Association's market area.
At the time of the conversion, the Association will establish a
liquidation account in an amount equal to its total net worth as of
the date of the latest balance sheet appearing in the final
prospectus. The liquidation account will be maintained for the benefit
of eligible depositors who continue to maintain their accounts at the
Association after the conversion. The liquidation account will be
reduced annually to the extent that eligible depositors have reduced
their qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the
event of a complete liquidation, each eligible depositor will be
entitled to receive a distribution from the liquidation account in an
amount proportionate to the current adjusted qualifying balances for
accounts then held. The Association may not pay dividends that would
reduce stockholders' equity below the required liquidation account
balance.
F-27
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(14), Continued
Under Office of Thrift Supervision (OTS) regulations, limitations have
been imposed on all "capital distributions" by savings institutions,
including cash dividends. The regulation establishes a three-tiered
system of restrictions, with the greatest flexibility afforded to
thrifts which are both well-capitalized and given favorable
qualitative examination ratings by the OTS. For example, a thrift
which is given one of the two highest examination ratings and has
"capital" (as defined) equal to its fully phased-in regulatory capital
requirements could, after prior notice but without the prior approval
of the OTS, make capital distributions in any year that would reduce
by one-half the amount of its capital which exceeds its fully
phased-in capital requirement, as adjusted to reflect net income to
date during the year. Other thrifts would be subject to more stringent
procedural and substantive requirements, the most restrictive being
prior OTS approval of any capital distribution.
Conversion costs will be deferred and deducted from the proceeds of
the shares sold in the conversion. If the conversion is not completed,
all costs will be charged to expense. No conversion costs were
incurred as of September 30, 1997.
F-28
<PAGE>
No 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 other information or
representation must not be relied upon as having been authorized by the Holding
Company or the Association. 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 to make such offer or solicitation
in such jurisdiction. 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 Holding Company or the Association since
any of the dates as of which information is furnished herein or since the date
hereof.
--------------
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................
Selected Financial Information............................
Recent Financial Data.....................................
Risk Factors..............................................
Adirondack Financial Services Bancorp, Inc................
Gloversville Federal......................................
Use of Proceeds...........................................
Dividends.................................................
Market for Common Stock...................................
Pro Forma Data............................................
Pro Forma Regulatory Capital Analysis.....................
Capitalization............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................
Business .................................................
Regulation................................................
Management ...............................................
The Conversion............................................
Restrictions on Acquisitions of Stock and Related
Takeover Defensive Provisions..........................
Description of Capital Stock..............................
Legal and Tax Matters.....................................
Experts...................................................
Additional Information....................................
Index to Financial Statements.............................
Until the later of ________, 1998 or 25 days after commencement of the
offering of Common Stock, 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.
5,750,000
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
(Proposed Holding Company for Gloversville Federal Savings and Loan Association)
COMMON STOCK
----------
PROSPECTUS
----------
CAPITAL RESOURCES, INC.
_____________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
- -----------------------------------------------------
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance of the shares.
SEC registration fee.................................................. $ 1,951
NASD fee.............................................................. 1,100
OTS filing fees....................................................... 8,400
Counsel fees and expenses............................................. 75,000
Accounting fees and expenses.......................................... 165,000
Appraisal and business plan fees and expenses......................... 16,000
Conversion agent fees and expenses.................................... 12,000
Marketing agent's expenses............................................ 15,000
Marketing agent's fee................................................. 90,000
Marketing agent's counsel fees and expenses........................... 20,000
Printing, postage and mailing......................................... 60,000
Blue sky fees and expenses............................................ 14,000
Other expenses........................................................ 30,000
--------
TOTAL............................................................ $508,451
========
- ---------
(1) Based on maximum of Estimated Valuation Range and assumptions set forth
under "Pro Forma Data" in the Prospectus.
Item 14. Indemnification of Directors and Officers
- ---------------------------------------------------
Article Eleventh of the Holding Company's Certificate of Incorporation
provides for indemnification of directors and officers of the Holding Company
against any and all liabilities, judgments, fines and reasonable settlements,
costs, expenses and attorneys' fees incurred in any actual, threatened or
potential proceeding, except to the extent that such indemnification is limited
by Delaware law and such law cannot be varied by contract or bylaw. Article
Eleventh also provides for the authority to purchase insurance with respect
thereto.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation's Board of Directors to grant indemnity under certain
circumstances to directors and officers, when made, or threatened to be made,
parties to certain proceedings by reason of such status with the corporation,
against judgments, fines, settlements and expenses, including attorneys' fees.
In addition, under certain circumstances such persons may be indemnified against
expenses actually and reasonably incurred in defense of a proceeding by or on
behalf of the corporation. Similarly, the corporation, under certain
circumstances, is authorized to indemnify directors and officers of other
corporations or enterprises who are serving as such at the request of the
corporation, when such persons are made, or threatened to be made, parties to
certain proceedings by reason of such status, against judgments, fines,
settlements and expenses, including attorneys' fees; and under certain
circumstances, such persons may be indemnified against expenses actually and
reasonably incurred in connection with the defense or settlement of a proceeding
by or in the right of such other corporation or enterprise. Indemnification is
permitted where such person (i) was acting in good faith; (ii) was acting in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation or other corporation or enterprise, as appropriate; (iii) with
respect to a criminal proceeding, has no reasonable cause to believe his conduct
was unlawful; and (iv) was not adjudged to be liable to the corporation or other
corporation or enterprise (unless the court where the proceeding was brought
determines that such person is fairly and reasonably entitled to indemnity).
II-1
<PAGE>
Unless ordered by a court, indemnification may be made only following a
determination that such indemnification is permissible because the person being
indemnified has met the requisite standard of conduct. Such determination may be
made (i) by the Board of Directors of the Holding Company by a majority vote of
a quorum consisting of directors not at the time parties to such proceeding; or
(ii) if such a quorum cannot be obtained or the quorum so directs, then by
independent legal counsel in a written opinion; or (iii) by the stockholders.
Section 145 also permits expenses incurred by directors and officers in
defending a proceeding to be paid by the corporation in advance of the final
disposition of such proceedings upon the receipt of an undertaking by the
director or officer to repay such amount if it is ultimately determined that he
is not entitled to be indemnified by the corporation against such expenses.
Item 15. Recent Sales of Unregistered Securities
- -------------------------------------------------
The Registrant is newly incorporated, solely for the purpose of acting as
the holding company of First Security Federal Savings Bank pursuant to the Plan
of Conversion (filed as Exhibit 2 herein), and no sales of its securities have
occurred to date, other than the sale of one share of the Registrant's stock to
its incorporator for the purpose of qualifying the Registrant to do business in
Illinois.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
(a) Exhibits:
1.1 Letter Agreement regarding marketing and consulting services with
Capital Resources, Inc.
1.2 Form of Agency Agreement
2 Plan of Conversion*
3.1 Certificate of Incorporation of the Holding Company*
3.2 Bylaws of the Holding Company
3.3 Charter of First Security Federal Savings Bank in stock form
3.4 Bylaws of First Security Federal Savings Bank in stock form
4 Form of Stock Certificate of the Holding Company*
5 Opinion of Silver, Freedman & Taff, L.L.P. with respect to legality of
stock
8.1 Opinion of Silver, Freedman & Taff, L.L.P. with respect to Federal
income tax consequences of the Conversion
8.2 Opinion of KPMG Peat Marwick LLP with respect to New York income tax
consequences of the Conversion
8.3 RP Financial, LC. Letter with respect to estimated pro forma market
value and Subscription Rights*
10.1 Form of Proposed Stock Option and Incentive Plan*
10.2 Form of Proposed Recognition and Retention Plan*
10.3 Form of Change-In-Control Severance Agreement with Lewis E. Kolar*
10.4 Form of Change-In-Control Severance Agreement with Menzo D. Case*
10.5 Employee Stock Ownership Plan
21 Subsidiaries*
23.1 Consent of Silver, Freedman & Taff, L.L.P.
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of RP Financial, LC.*
24 Power of Attorney (set forth on signature page)
99.1 Appraisal
99.2 Proxy Statement and form of proxy to be furnished to Gloversville
Federal Savings and Loan Association account holders*
99.3 Stock Order Form and Order Form Instructions
99.4 Question and Answer Brochure
- ---------
* Previously filed.
II-3
<PAGE>
Item 17. Undertakings
- ----------------------
The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and it will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant
II-4
<PAGE>
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Gloversville, State of New York on
February 9, 1998.
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
By: /s/ Lewis E. Kolar
--------------------------------------
Lewis E. Kolar, President,
Chief Executive Officer and Director
(Duly Authorized Representative)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lewis E. Kolar, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all said attorney-in-fact and agent or his substitutes
or substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Lewis E. Kolar /s/ Priscilla J. Bell
- -------------------------------------- --------------------------------------
Lewis E. Kolar Priscilla J. Bell
President, Chief Executive Officer and Director
Director
(Principal Executive Officer)
Date: February 9, 1998 Date: February 9, 1998
-------------------------------- --------------------------------
/s/ Timothy E. Delaney /s/ Richard D. Ruby
- -------------------------------------- --------------------------------------
Timothy E. Delaney Richard D. Ruby
Director Chairman of the Board
Date: February 9, 1998 Date: February 9, 1998
-------------------------------- --------------------------------
II-6
<PAGE>
/s/ Donald I. Lee /s/ Robert J. Sofarelli
- -------------------------------------- --------------------------------------
Donald I. Lee Robert J. Sofarelli
Recording Secretary and Director Director
Date: February 9, 1998 Date: February 9, 1998
-------------------------------- --------------------------------
/s/Menzo D. Case
- --------------------------------------
Menzo D. Case
Executive Vice-President, Chief Operating
Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: February 9, 1998
--------------------------------
II-7
<PAGE>
As filed with the Securities and Exchange Commission on January 2, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
EXHIBITS TO
AMENDMENT NO. 1 TO THE
FORM S-1
UNDER
THE SECURITIES ACT OF 1933
-------------
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
52 North Main Street
Gloversville, New York 12078-3084
================================================================================
<PAGE>
Exhibits:
- ---------
1.1 Letter Agreement regarding marketing and consulting services with
Capital Resources, Inc.
1.2 Form of Agency Agreement
2 Plan of Conversion*
3.1 Certificate of Incorporation of the Holding Company*
3.2 Bylaws of the Holding Company
3.3 Charter of First Security Federal Savings Bank in stock form
3.4 Bylaws of First Security Federal Savings Bank in stock form
4 Form of Stock Certificate of the Holding Company*
5 Opinion of Silver, Freedman & Taff, L.L.P. with respect to legality of
stock
8.1 Opinion of Silver, Freedman & Taff, L.L.P. with respect to Federal
income tax consequences of the Conversion
8.2 Opinion of KPMG Peat Marwick LLP with respect to New York income tax
consequences of the Conversion
8.3 RP Financial, LC. Letter with respect to estimated pro forma market
value and Subscription Rights*
10.1 Form of Proposed Stock Option and Incentive Plan*
10.2 Form of Proposed Recognition and Retention Plan*
10.3 Form of Change-In-Control Severance Agreement with Lewis E. Kolar*
10.4 Form of Change-In-Control Severance Agreement with Menzo D. Case*
10.5 Employee Stock Ownership Plan
21 Subsidiaries*
23.1 Consent of Silver, Freedman & Taff, L.L.P.
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of RP Financial, LC.*
24 Power of Attorney (set forth on signature page)
99.1 Appraisal
99.2 Proxy Statement and form of proxy to be furnished to Gloversville
Federal Savings and Loan Association account holders*
99.3 Stock Order Form and Order Form Instructions
99.4 Question and Answer Brochure
- ---------
* Previously filed.
Exhibit 1.1
[CAPITAL RESOURCES, INC. LETTERHEAD]
October 29, 1997
Mr. Lewis E. Kolar
President and Chief Executive Officer
Gloversville Federal Savings and
Loan Association
52 N. Main Street
Gloversville, New York 12078
Dear Mr. Kolar:
We are pleased to submit this proposal to set forth the terms of the
proposed engagement between Capital Resources, Inc. and Gloversville Federal
Savings and Loan Association ("Gloversville Federal" or the "Association") for
your planned mutual-to-stock conversion (the "Conversion") and the offering of
your shares of common stock (the "Offering").
BACKGROUND ON CAPITAL RESOURCES
Capital Resources is a National Association of Securities Dealers
("NASD") member investment banking firm specializing in raising capital for
financial institutions. Members of our professional staff are licensed
securities representatives and have extensive experience in conducting local
sales efforts for thrift conversions. Our "hands-on" philosophy and direct sales
involvement have resulted in many successful conversions and a satisfied
clientele. We combine the critical and necessary operational and data processing
support within our package of marketing services to help ensure a smooth,
professionally conducted, successful Conversion.
As you are undoubtedly aware, there are substantial benefits to be
derived from a successful local offering of your stock. A successful local
offering not only results in stable, loyal stockholders, but also provides a
rare opportunity to capture many ancillary benefits to the Association, such as
the opportunity for enhancing local identity and increasing local exposure.
The conversion process involves an enormous amount of attention to detail
and requires extensive knowledge and expertise in conversion regulations and
securities regulations. Capital Resources' experience in managing thrift
conversions will help alleviate the burden on management and minimize disruption
to normal banking business while ensuring each detail is attended to in a timely
and accurate manner.
The following describes the scope of conversion marketing, operational
and staff training services Capital Resources proposes to provide Gloversville
Federal.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 2
PROPOSED SERVICES
Capital Resources proposes to act as placement agent and marketing
representative on behalf of Gloversville Federal with respect to the offering of
common stock pursuant to the Conversion. We will also serve as "Conversion
Manager" to assist you in numerous operational areas with respect to the
Conversion. In this regard, we combine four critical roles of the Conversion
process:
I. Sales and Marketing Assistance
II. Comprehensive Staff Training
III. Stock Center Management
IV. Proxy Solicitation
V. Additional Value-Added Services
Each area is discussed in the following sections.
I. SALES AND MARKETING ASSISTANCE
Capital Resources proposes to represent Gloversville Federal as placement
agent in the sale of the common stock in a Subscription and Community Offering.
Our marketing assistance program is designed to inform your true customer base
of this investment opportunity and to educate your customers on the conversion
process. Our main objective is to target sales to your local customers who will
have subscription rights (the "Subscription Offering"). Typically, the entire
issue will be bought by your customers. In the event shares remain available
after customer subscriptions, we will market remaining shares to achieve a wide
distribution to "friendly" local shareholders (the "Community Offering").
Our specific responsibilities as such will be as follows:
o Assign licensed professionals from our staff to work at Gloversville
Federal's offices as sales representatives on behalf of the Association.
Our professionals will be responsible for all customer contact and
inquiries regarding the Offering.
o Work with your conversion counsel regarding the prospectus and the
language in it from a marketing perspective.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 3
o If desirable, conduct a series of community meetings to provide
information on the Offering. Capital Resources' representatives will take
an active role in these meetings. These meetings serve as a customer
relations tool as well as enhance local exposure of Gloversville Federal
and set the stage for favorable stockholder relations after Conversion.
o Design and prepare for the Association a marketing campaign, including
appropriate marketing literature and media advertisements.
o After the Subscription and Community Offerings if shares remain
unsubscribed, we will assemble a selected dealer's syndicate to
distribute remaining shares (the "Syndicated Community Offering"). We
will meet with local brokers to educate them on the particulars of thrift
stocks, discuss the salient terms of Gloversville Federal's Offering,
create after-market interest and stimulate local interest in Gloversville
Federal's stock.
o We will make a market in the stock after Conversion and assist in
arranging other market-makers.
II. COMPREHENSIVE CONVERSION TRAINING
Capital Resources will conduct comprehensive training sessions before the
formal commencement date of the Offering. Our training sessions are designed to
ensure that members of the board, management and staff are knowledgeable of the
conversion process, aware of their roles and capable of dealing with problems,
inquiries and events. Each session is tailored to the audience involved and each
covers a different level of detail and area of the Conversion, as follows:
Management Meeting: A structured discussion pertaining to organization,
role assignments, facilities, marketing, accounting, reporting and timetables.
Board Meeting: A presentation regarding the conversion process and board
members' roles and responsibilities, with emphasis on insider behavior.
Staff Meeting: A comprehensive presentation to the entire staff to
discuss the nature of the Conversion, roles and responsibilities, and the
opportunity to elaborate community involvement. A slide presentation and
handouts are used.
Stock Center Training: We will train and supervise Bank personnel
specifically responsible for assisting us in the Stock Center with clerical
tasks (see section III below). Computer training, account balancing procedures
and stock recordkeeping are covered.
In addition to our personalized training meetings, Capital Resources
documents the many details and functions of the conversion process in
easy-to-read study manuals. Our conversion study
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 4
manuals are intended to be used in conjunction with our training sessions and as
a reference during the Conversion. The manuals provide instruction, sample forms
and general information vital to understanding the conversion process. This
information has been collected and updated by Capital Resources over many years.
III. STOCK CENTER MANAGEMENT
A conversion requires accurate and timely recordkeeping and reporting.
Furthermore, customer inquiries must be handled professionally and accurately.
The Stock Center centralizes all data and work effort relating to the
Conversion. Capital Resources will establish the Stock Center, preferably
on-site at the Association's offices, from which we will supervise all
activities relating to the Conversion. Our professionals will be on-site
throughout the Offering to handle customer inquiries and special situations as
they arise. In addition, we will require two of the Association's employees to
assist us on a full time basis in the Stock Center with clerical tasks. We will
train and supervise these employees. Stock Center activities for which Capital
Resources will be responsible for include the following:
o Collect, respond to and record all mail regarding conversion.
o Meet with customers who wish to discuss the Offering.
o Tabulate stock orders.
o Tabulate proxies.
o Mail "Stock-Grams", "Proxy-Grams", and other literature as applicable.
o Prepare and mail order confirmations.
o Sort and track prospects.
o Coordinate and record community meetings and attendance.
o Coordinate mailings to customers and prospects.
o Balance daily totals.
o Respond to mail and telephone inquiries.
o Generate daily management reports.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 5
o Coordinate with the printer for the initial sorting and mailing to
different categories of prospective subscribers.
Closing Assistance: The end of the Offering is a critical time that
requires coordination of many events. Capital Resources will be on-site to
coordinate tasks such as mailing interest checks, sending "welcome" letters to
shareholders, balancing accounts, tabulating final stock information, and
preparing stockholder records for the transfer agent, as well as answering
post-offering questions from subscribers.
In performing the various Stock Center tasks outlined above, Capital
Resources will utilize its proprietary conversion program, the "Back Office
Stock System" ("BOSS"). BOSS is a menu-driven, user-friendly program which will
help ensure efficient, accurate recordkeeping and timely reporting during the
Conversion. To use BOSS, we would require a computer to be provided by
Gloversville Federal for Stock Center use during the conversion.
IV. PROXY SOLICITATION
Regulations require that over 50% of the outstanding members' votes must
be in favor of the Plan of Conversion. As part of our engagement, we will
solicit proxies to ensure this vote requirement is met.
V. ADDITIONAL VALUE-ADDED SERVICES
Capital Resources will provide, at no charge, general financial
consulting to the Association with respect to issues facing stock companies for
a year following Conversion. A representative from Capital Resources will attend
Board meetings semi-annually, as requested, to discuss such issues. The Bank
will reimburse Capital Resources for out-of-pocket expenses related to such
meetings.
Capital Resources will also provide certain other post-conversion
services as part of this engagement at no charge, including stock research
coverage and stock benefit plan shares purchases at no commission.
PROPOSED FEE STRUCTURE
For our services as described herein, we propose a compensation structure
as follows:
A. A marketing fee of ninety thousand dollars ($90,000) payable as follows:
$25,000 upon execution of this proposal and the commencement of our
engagement, $25,000 upon filing of
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 6
the Application for Conversion, and the balance upon closing. This fee
covers all professional services for advisory services, due diligence,
training, proxy solicitation, and marketing services. Progress payments
are for consulting work performed prior to the Offering.
B. Reimbursement for out-of-pocket expenses incurred by us on behalf of the
Conversion. Such expenses shall include, but are not limited to, travel,
legal, communications and postage. We will provide you with a detailed
accounting of all reimbursable expenses and will bill you monthly.
Reimbursable out-of-pocket expenses shall not exceed $15,000, and our
legal expenses shall not exceed $20,000 without management's prior
approval.
ADDITIONAL PROVISIONS
Furthermore, it is understood that:
o Prior to the commencement of the Offering, Gloversville Federal and
Capital Resources will enter into a formal agency agreement generally
used by Capital Resources for securities offerings which provides for
mutual indemnities and warranties. Our sales and marketing services are
subject to the usual warranties, indemnities and conditions contained in
the agency agreement.
o Our role as your NASD agent is subject to our normal underwriting
criteria and examination of relevant books and records.
o The Association will pay all other expenses of the conversion, including
but not limited to attorney's fees, National Association of Securities
Dealers, Inc. filing fees, all fees and expenses relating to "blue sky"
research and filings, state licensing and securities registration fees,
all fees relating to auditing and accounting, all printing and
advertising fees and all costs associated with retaining temporary
staffing, if any, in connection with the Conversion.
o Capital Resources will conduct an examination of the relevant documents
and records of Gloversville Federal as appropriate. Gloversville Federal
agrees to make all documents and records deemed appropriate or necessary
by Capital Resources available upon request.
o Our obligations stated herein will be subject to there being no material
changes, in the opinion of our firm, in the Association's condition or in
market conditions so as to significantly delay the Offering or to render
the Offering inadvisable.
o Our marketing obligations pursuant to this agreement will terminate upon
the completion or termination of the initial Offering, but in no event
later than 12 months from the date of this letter. All fees or expenses
due to Capital Resources but unpaid will be payable to Capital Resources
at that time. In the event the offering is extended beyond this term, the
Association
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 7
and Capital Resources may mutually agree to renew this engagement under
mutually acceptable terms.
* * * * * * *
To engage our services, please sign in the space provided below and
return the signed letter to me. I have enclosed a signed copy for your files.
This proposal is open for your acceptance for thirty (30) days from the date of
this letter.
We look forward to working with Gloversville Federal on this most
exciting and challenging project.
Sincerely,
CAPITAL RESOURCES, INC.
David P. Rochester
Chairman and Chief
Executive Officer
DPR/am
Agreed To and Accepted By:
Gloversville Federal Savings and Loan Association
- ------------------------------------------------
signed date
- ------------------------------------------------
Lewis E. Kolar, President
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 1
[CAPITAL RESOURCES, INC. LETTERHEAD]
November 18, 1997
Mr. Lewis E. Kolar
President and Chief Executive Officer
Gloversville Federal Savings and
Loan Association
52 N. Main Street
Gloversville, New York 12078
Dear Mr. Kolar:
This letter describes the records management services that Capital
Resources Group, Inc. ("CRG") proposes to provide Gloversville Federal Savings
and Loan Association (the "Association") in connection with your planned
mutual-to-stock conversion (the "Conversion").
RECORDS MANAGEMENT
CRG proposes to act as your "Conversion Agent" to be responsible for
consolidating member accounts of and calculating subscription rights for your
depositors and borrowers. Specifically, the services to be provided Gloversville
Federal shall consist of the following:
Conversion and Consolidation of Member Files
o Convert depositor and loan customer files to establish a file for the
initial mailing of Conversion packages.
A. Members holding savings accounts as of the specified eligibility
record date;
B. Members holding savings accounts as of the supplemental
eligibility record date; and
C. Members holding savings accounts and/or loans as of the "Other
Member" date.
o Build an interim data base as of the latest practical date for the
purpose of providing a suspected same ownership report.
o Edit tapes to identify records with missing names and addresses and/or
other incomplete information.
o Perform audit to ensure that complete and correct data has been
converted. o Consolidate accounts with the same registration.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 2
o Segregate accounts coded "Bad Address" and "No Mail".
o Household sort accounts residing at the same address.
o Print consolidated addresses on mailing media.
File Analysis/Solicitation Aids
o Provide a household aggregate dollar balance range survey for determining
a target group for stock order solicitation.
o Provide zip code surveys for determining a plan for the mailing of
conversion packages.
o Provide geographic surveys for determining the "Blue Sky" states.
o Provide a telephone deck for stock order solicitation.
o Provide a list of eligible subscribers coded by eligibility categories
according to the "Plan of Conversion".
o Imprint name and address on request cards to non-target members, if
applicable.
o Code request cards or subscription forms with eligibility category
according to the Plan of Conversion.
Proxy Form Preparation and Analysis
o Provide list of all members entitled to receive a proxy for voting on the
conversion.
o Provide vote range survey for determining a target group for proxy
solicitation (if applicable).
o Imprint name and address on proxy cards.
o Print the number of eligible votes on the proxy cards.
o Code IRA and Keogh accounts as applicable.
o Segregate and produce proxies coded "Bad Address" or "No Mail".
o Print proxies and sort in household groups for mailing.
o Tabulate all validly executed proxies.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 3
o Furnish daily reports to management.
o Produce and mail second mailing proxies (i.e., "Proxygrams") to unvoted
target members, if necessary.
o Provide an inspector of elections to attend the special meeting of
members.
o Provide proxy vote final list showing all members entitled to vote, if
they voted, how they voted and the number of votes voted.
Subscription Preparation and Processing
o Imprint name and address on subscription forms, if applicable.
o Imprint code for subscription eligibility category on form.
o Segregate and process subscription forms by category as stated in the
Plan of Conversion.
o Create and maintain a file for all subscribers.
o Produce and mail acknowledgment letters to subscribers daily.
o Verify shares purchased daily.
o Generate reports which confirm shares purchased.
o Issue a final report and confirm the final shares sold.
o Generate a pricing matrix showing the additional shares for a range of
prices (if applicable).
o Provide to transfer agent data for the issuance of stock certificates.
o Calculate and generate refund/interest checks.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 4
FEE SCHEDULE
For records management services, our fee will be $10,000. The fees for
these services will be payable as follows: $5,000 payable upon execution of this
proposal and the commencement of our services; $2,500 upon regulatory approval
of the Conversion; and the balance either after the Special Meeting of Members
or the termination of the Conversion, whichever is sooner. In the rare event of
a recision or resolicitation, an additional fee of $2,500 for resolicitation of
stock subscriptions would be payable. In addition, we will bill you on a monthly
basis for direct out-of-pocket expenses incurred by us in performing our duties.
Such expenses shall include items such as travel (if necessary), communication,
shipping/postage, and supplies and shall not exceed $5,000 without prior
approval of the Association.
ADDITIONAL PROVISIONS
1. Gloversville Federal will provide CRG with all information we may
normally request in order to carry out the duties under this Agreement. The
information shall be provided on magnetic tape in the format required by us and
shall include, but not be limited to, names and addresses of all persons or
entities holding deposits in Gloversville Federal or who are borrowers thereof.
2. CRG may subcontract with any one or more of its affiliates to perform
part or all of its obligations herein with diligence and in a workmanlike
manner, and shall not be liable or responsible for delays or errors occurring by
reason of circumstances beyond its control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
communication or power supply.
3. Gloversville Federal shall indemnify and hold CRG harmless with
respect to any damages, liabilities, claims and expenses, unless caused in whole
or part by the negligence or willful misconduct by CRG under this Agreement.
Under no circumstances shall CRG be responsible for special or consequential
damages arising out of CRG's performance of its duties under this Agreement.
4. All data relating to Gloversville Federal's business submitted by the
Association to CRG pursuant to this Agreement will be safeguarded by us and CRG
will not disclose confidential information to third persons, except as provided
in Paragraph 5 below.
5. While all data submitted by Gloversville Federal required hereunder is
regarded to be disclosed in confidence, nothing herein shall prevent or prohibit
disclosure by CRG of any information if it has been made public or if required
to be disclosed by any provision of law, rule or regulation, or in those cases
where CRG is satisfied that it is liable to any governmental agency or third
person, or will be held in contempt for failure to disclose such information.
<PAGE>
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 5
6. This Agreement constitutes the entire Agreement between the parties
and cannot be changed orally.
7. Should Gloversville Federal decide, at any time during the Conversion
process, to discontinue such Conversion, Gloversville Federal shall be required
to pay CRG only for such work as has been completed up to the time that the
Conversion process was stopped, based on an equitable proration of the fee.
If the terms herein meet with your approval, please execute this contract
below and return it to me. I have enclosed a signed copy for your files.
We look forward to serving you in this capacity.
Sincerely,
CAPITAL RESOURCES GROUP, INC.
David P. Rochester
Chairman and Chief
Executive Officer
DPR/am
Agreed To and Accepted By:
Gloversville Federal Savings and Loan Association
- ------------------------------------------------
signed date
- ------------------------------------------------
Lewis E. Kolar, President
Exhibit 1.2
575,000 Shares
(subject to increase up to 661,250 shares
in the event of an oversubscription)
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
(a Delaware corporation)
COMMON STOCK
($0.01 Par Value Per Share)
Subscription Price: $10.00 Per Share
AGENCY AGREEMENT
____________, 1998
Capital Resources, Inc.
1211 Connecticut Avenue, N.W.
Suite 200
Washington, D.C. 20036
Ladies and Gentlemen:
Adirondock Financial Services Bancorp, Inc. (the "Company") and
Gloversville Federal Savings and Loan Association, a federally chartered mutual
savings and loan association ("Association"), with its deposit accounts insured
by the Savings Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC"), hereby confirm their agreement with
Capital Resources, Inc. ("Capital Resources") as follows:
SECTION 1. The Offering. The Association, in accordance with and
pursuant to its plan of conversion adopted by the Board of Directors of the
Association (the "Plan"), intends to be converted from a federally-chartered
mutual savings and loan association to a federally-chartered stock savings and
loan association and will sell all of its issued and outstanding stock to the
Company. The Company will offer and sell its common stock (the "Common Stock")
in a subscription offering ("Subscription Offering") to (1) depositors of the
Bank as of September 30, 1996 ("Eligible Account Holders"), (2) tax qualified
employee benefit plans of the Association, (3) depositors of the Association as
of ________, 1998 ("Supplemental Eligible Account Holders"), (4) certain other
members of the Association ("Other Members") and (5) its employees, officers and
directors, pursuant to rights to subscribe for shares of Common Stock (the
"Shares"). Subject to the prior subscription rights of the above-listed parties,
the Company may offer for sale in a public offering (the "Public Offering," and
when referred to together with the Subscription Offering, the "Subscription and
Public Offerings") conducted after the Subscription Offering, the Shares not so
subscribed for or ordered in the Subscription Offering to selected persons of
the general public (all such offerees being referred to in the aggregate as
"Eligible Offerees"). Shares may also be sold in the Public Offering by a
selling group of broker-dealers organized and managed by Capital Resources. It
is acknowledged that the purchase of Shares in the Subscription and Public
Offerings is subject to maximum and minimum purchase limitations as described in
the Plan and that the Company may reject in whole or in part any subscriptions
received from subscribers in the Public Offering.
-1-
<PAGE>
The Company and the Association desire to retain Capital Resources to
assist the Company with its sale of the Shares in the Subscription and Public
Offerings. By and through this Agreement, the Company and the Association
confirm the retention of Capital Resources to assist the Company and the
Association during the Subscription and Public Offerings.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-l (File No. 333- ___________)
containing an offering prospectus relating to the Subscription and Public
Offerings for the registration of the Shares under the Securities Act of 1933,
as amended (the "1933 Act"), and has filed such amendments thereto, if any, and
such amended prospectuses as may have been required to the date hereof (the
"Registration Statement"). The prospectus, as amended, included in the
Registration Statement at the time it initially becomes effective, is
hereinafter called the "Offering Prospectus", except that if any prospectus is
filed by the Company pursuant to Rule 424(b) or (c) of the rules and regulations
of the Commission under the 1933 Act (the "1933 Act Regulations") differing from
the offering prospectus included in the Registration Statement at the time it
initially becomes effective, the term "Offering Prospectus" shall refer to the
offering prospectus filed pursuant to Rule 424(b) or (c) from and after the time
said offering prospectus is filed with or mailed to the Commission for filing.
In accordance with Title 12, Part 563b of the Code of Federal
Regulations (the "Conversion Regulations"), the Association has filed with the
Office of Thrift Supervision (the "OTS") an Application for Approval of
Conversion on Form AC (the "Conversion Application") including the Offering
Prospectus and has filed such amendments thereto, if any, as may have been
required by the OTS. The Conversion Application has been approved by the OTS.
The Company has filed with the OTS its application on Form H-(e)lS (the "Holding
Company Application") to acquire the Association under the Home Owners' Loan
Act, as amended (12 U.S.C. ss. 1467a) ("HOLA").
SECTION 2. Retention of Capital Resources; Compensation; Sale and
Delivery of the Shares. Subject to the terms and conditions herein set forth,
the Company and the Association hereby appoint Capital Resources as their agent
to advise and assist the Company and the Association with the Company's sale of
the Shares in the Subscription and Public Offerings.
On the basis of the representations, warranties, and agreements herein
contained, but subject to the terms and conditions herein set forth, Capital
Resources accepts such appointment and agrees to consult with and advise the
Company and the Association as to matters relating to the Conversion and the
Subscription and Public Offerings. It is acknowledged by the Company and the
Association that Capital Resources shall not be required to purchase any Shares
and shall not be obligated to take any action which is inconsistent with any
applicable laws, regulations, decisions or orders. If requested by the Company
or the Association, Capital Resources also may assemble and manage a selling
group of broker dealers which are members of the National Association of
Securities Dealers, Inc. (the "NASD") to participate in the solicitation of
purchase orders for Shares under a selected dealers' agreement ("Selected
Dealers' Agreement"). The obligations of Capital Resources pursuant to this
Agreement shall terminate upon the completion or termination or abandonment of
the Plan by the Company or the Association or upon termination of the
Subscription and Public Offerings, or if the terms of the Conversion are
substantially amended so as to materially and adversely change the role of
Capital Resources, but in no event later than 45 days after the completion of
the Subscription and Public Offerings (the "End Date"). All fees due to Capital
Resources but unpaid will be payable to Capital Resources in next day funds at
the earlier of the Closing Date (as hereinafter defined) or the End Date. In the
event the Subscription and Public Offerings are extended beyond the End Date,
the Company, the Association and Capital Resources may mutually agree to renew
this Agreement under mutually acceptable terms.
-2-
<PAGE>
In the event the Company is unable to sell a minimum of 425,000 Shares
within the period herein provided, this Agreement shall terminate, and the
Company shall refund to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them plus accrued interest as
set forth in the Offering Prospectus; and none of the parties to this Agreement
shall have any obligation to the other parties hereunder, except as set forth in
this Section 2 and in Sections 7, 9 and 10 hereof.
In the event the closing does not occur, the Conversion is terminated
or otherwise abandoned, or the terms of the Conversion are substantially amended
so as to materially and adversely change the role of Capital Resources, Capital
Resources shall be reimbursed for all reasonable legal fees and out-of-pocket
expenses for rendering financial advice to the Association concerning the
structure of the Conversion, preparing a market and financial analysis,
performing due diligence and assisting in the preparation of the Application for
Conversion and the Registration Statement, which shall be paid upon such
termination, abandonment or amendment or within five days of such event.
If all conditions precedent to the consummation of the Conversion,
including, without limitation, the sale of all Shares required by the Plan to be
sold, are satisfied, the Company agrees to issue or have issued the Shares sold
in the Subscription and Public Offerings and to release for delivery
certificates for such Shares on the Closing Date (as hereinafter defined)
against payment to the Company by any means authorized by the Plan, provided,
however, that no certificates shall be released for such shares until the
conditions specified in Section 7 hereof shall have been complied with to the
reasonable satisfaction of Capital Resources and its counsel. The release of
Shares against payment therefor shall be made on a date and at a time and place
acceptable to the Company, the Association and Capital Resources. The date upon
which the Company shall release or deliver the Shares sold in the Subscription
and Public Offerings, in accordance with the terms hereof, is herein called the
"Closing Date."
Capital Resources shall receive the following compensation for its
services hereunder:
(a) a marketing fee in the amount of $90,000 (of which $25,000 was
payable in advance, $25,000 upon filing of the Conversion Application and the
balance upon closing of the Conversion).
(b) Capital Resources shall be reimbursed for all reasonable
out-of-pocket expenses, including, but not limited to, legal fees, travel,
communications and postage, incurred by it whether or not the Conversion is
successfully completed as set forth in Section 7 hereof. Reimbursement for
Capital Resources' legal and other expenses shall not exceed $20,000 and $15,000
respectively, unless otherwise approved by the Association. Capital Resources
shall be reimbursed promptly for all out-of-pocket expenses upon receipt by the
Company or the Association of a monthly itemized bill summarizing such expenses
since the date of the last bill, if any, to the date of the current bill.
(c) In the event other broker-dealers are assembled and managed by
Capital Resources under a selling syndicate to participate in the Public
Offering pursuant to the Selected Dealers' Agreement or participate in the
Public Offering as assisting brokers, the Company and the Association will be
directly responsible for the payment of selected dealers' commissions in the
amount of four percent (4%) of the aggregate dollar amount of Shares sold
through any such broker assisted purchases or through selected dealers, if any,
including Capital Resources.
-3-
<PAGE>
All subscription funds received by Capital Resources (and if by check
shall be made payable to the Company) or by other NASD registered broker-dealers
soliciting subscriptions (if any) shall be transmitted (either by U.S. Mail or
similar type of transmittal) to the Company by noon of the following business
day.
SECTION 3. Offering Prospectus; Subscription and Public Offerings. The
Shares are to be initially offered in the Subscription and Public Offerings at
the Purchase Price as set forth on the cover page of the Offering Prospectus.
SECTION 4. Representations and Warranties. The Company and the
Association jointly and severally represent and warrant to Capital Resources as
follows:
(a) The Registration Statement was declared effective by the Commission
on __________, 1998. At the time the Registration Statement, including the
Offering Prospectus contained therein (including any amendment or supplement
thereto), became effective, the Registration Statement complied in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations and
the Registration Statement, including the Offering Prospectus contained therein
(including any amendment or supplement thereto), any Blue Sky Application or any
Sales Information (as such terms are defined previously herein or in Section 8
hereof) authorized by the Company or the Association for use in connection with
the Subscription and Public Offerings did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and at the time any Rule 424(b) or (c)
Offering Prospectus was filed with or mailed to the Commission for filing and at
the Closing Date referred to in Section 2, the Registration Statement including
the Offering Prospectus contained therein (including any amendment or supplement
thereto), any Blue Sky Application or any Sales Information (as such terms are
defined previously herein or in Section 8 hereof) authorized by the Company or
the Association for use in connection with the Subscription and Public Offerings
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 4(a) shall not apply to
statements in or omissions from such Registration Statement or Offering
Prospectus made in reliance upon and in conformity with written information
furnished to the Company or the Association by Capital Resources expressly
regarding Capital Resources for use under the caption "The Conversion-Marketing
Arrangements."
(b) The Conversion Application, including the Offering Prospectus, was
approved by the OTS on __________, 1998. At the time of the approval of the
Conversion Application, including the Offering Prospectus, by the OTS (including
any amendment or supplement thereto) and at all times subsequent thereto until
the Closing Date, the Conversion Application, including the Offering Prospectus,
will comply in all material respects with the Conversion Regulations and any
other rules and regulations of the OTS. The Conversion Application, including
the Offering Prospectus (including any amendment or supplement thereto), does
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that representations or warranties in this
Section 4(b) shall not apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Association by
Capital Resources expressly regarding Capital Resources for use in the Offering
Prospectus contained in the Conversion Application under the caption "The
Conversion-Marketing Arrangements."
-4-
<PAGE>
(c) The Company has filed with the OTS the Holding Company Application
and will have received, as of the Closing Date, approval of its acquisition of
the Association from the OTS.
(d) No order has been issued by the OTS, the Commission, the FDIC (and
hereinafter reference to the FDIC shall include the BIF), or to the best
knowledge of the Company or the Association any State regulatory or Blue Sky
authority, preventing or suspending the use of the Offering Prospectus and no
action by or before any such government entity to revoke any approval,
authorization or order of effectiveness related to the Conversion is, to the
best knowledge of the Association or the Company, pending or threatened.
(e) At the Closing Date referred to in Section 2, the Plan will have
been adopted by the Board of Directors of both the Company and the Association,
the Company and the Association will have completed in all material respects the
conditions precedent to the Conversion and the offer and sale of the Shares will
have been conducted in all material respect in accordance with the Plan, the
Conversion Regulations and all other applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and provisions precedent
to the Conversion imposed upon the Company or the Association by the OTS, the
Commission or any other regulatory authority and in all materials respects in
the manner described in the Offering Prospectus. At the Closing Date, no person
will have sought to obtain review of the final action of the OTS, to the
knowledge of the Company or the Association, in approving the Plan or in
approving the Conversion or the Company's application to acquire all of the
capital stock and control of the Association pursuant to the HOLA or any other
statute or regulation.
(f) The Association is now a duly organized and validly existing
federally-chartered savings and loan association in mutual form of organization
and upon the Conversion will become a duly organized and validly existing
federally-chartered savings and loan association in capital stock form of
organization, in both instances duly authorized to conduct its business and own
its property as described in the Registration Statement and the Offering
Prospectus; the Company and the Association have obtained all material licenses,
permits and other governmental authorizations currently required for the conduct
of their respective businesses; all such licenses, permits and governmental
authorizations are in full force and effect, and the Company and the Association
are in all material respects complying with all laws, rules, regulations and
orders applicable to the operation of their businesses; and the Association is
in good standing under the laws of the United States and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which its ownership of property or leasing of properties or the
conduct of its business requires such qualification, unless the failure to be so
qualified in one or more of such jurisdictions would not have a material adverse
effect on the condition, financial or otherwise, or the business, operations or
income of the Association. The Association does not own equity securities or any
equity interest in any other business enterprise except as described in the
Offering Prospectus. Upon the completion of the Conversion of the Association to
a federally-chartered stock savings and loan association pursuant to the Plan,
(i) all of the authorized and outstanding capital stock of the Association will
be owned by the Company, and (ii) the Company will have no direct subsidiaries
other than the Association. The Conversion will have been effected in all
material respects in accordance with all applicable statutes, regulations,
decisions and orders; and except with respect to the filing of certain
post-sale, post-conversion reports and documents in compliance with the 1933 Act
Regulations or the OTS's resolutions or letters of approval. All terms,
conditions, requirements and provisions with respect to the Conversion imposed
by the Commission, the OTS and the FDIC, if any, will have been complied with by
the Company and the Association in all material respects or appropriate waivers
will have been obtained and all material notice and waiting periods will have
been satisfied, waived or elapsed.
-5-
<PAGE>
(g) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the Offering
Prospectus, and the Company is qualified to do business as a foreign corporation
in any jurisdiction in which the conduct of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the business of the Company.
(h) The Association is a member of the Federal Home Loan Association of
New York ("FHLBNY"); and the deposit accounts of the Association are insured by
the FDIC up to the applicable limits. Upon consummation of the Conversion, the
liquidation account for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders will be duly established in accordance with the
requirements of the Conversion Regulations.
(i) The Company and the Association have good and marketable title to
all assets owned by them which are material to the business of the Company and
the Association and to those assets described in the Registration Statement and
Offering Prospectus as owned by them, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the Registration
Statement and Offering Prospectus or are not materially significant or important
in relation to the business of the Company and the Association; and all of the
leases and subleases material to the business of the Company and the Association
under which the Company or the Association holds properties, including those
described in the Registration Statement and Offering Prospectus, are in full
force and effect.
(j) The Association has received an opinion of its counsel, Silver,
Freedman & Taff, L.L.P., with respect to the federal income tax consequences of
the Conversion of the Association from mutual to stock form, the acquisition of
the capital stock of the Association by the Company, the sale of the Shares, and
the reorganization of the Association as described in the Registration Statement
and the Offering Prospectus and an opinion from KPMG Peat Marwick, LLP ("KPMG")
with respect to the State income tax consequences of the proposed transaction;
all material aspects of the opinions of Silver, Freedman & Taff, L.L.P. and KPMG
are accurately summarized in the Offering Prospectus; and the facts and
representations upon which such opinions are based are truthful, accurate and
complete, and neither the Association nor the Company will take any action
inconsistent therewith.
(k) The Company and the Association have all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof and to issue and
sell the Capital Stock of the Association to the Company and Shares to be sold
by the Company as provided herein and as described in the Offering Prospectus.
The consummation of the Conversion, the execution, delivery and performance of
this Agreement and the consummation of the transactions herein contemplated have
been duly and validly authorized by all necessary corporate action on the part
of the Company and the Association and this Agreement has been validly executed
and delivered by the Company and the Association and is the valid, legal and
binding agreement of the Company and the Association enforceable in accordance
with its terms (except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws relating to
or affecting the enforcement of creditors' rights generally or the rights of
creditors of savings and loan holding companies, the accounts of whose
subsidiaries are insured by the FDIC or by general equity principles regardless
of whether such enforceability is considered in a proceeding in equity or at
law, and except to the extent, if any, that the provisions of Sections 9 and 10
hereof may be unenforceable as against public policy).
-6-
<PAGE>
(l) The Company and the Association are not in violation of any
directive which has been delivered to the Company or the Association or of which
management of the Company or the Association has actual knowledge from the OTS,
the Commission, the FDIC or any other agency to make any material change in the
method of conducting their businesses so as to comply in all material respects
with all applicable statutes and regulations (including, without limitation,
regulations, decisions, directives and orders of the OTS, the Commission and the
FDIC) and except as set forth in the Registration Statement and the Offering
Prospectus, there is no suit or proceeding or, to the knowledge of the Company
or the Association, charge, investigation or action before or by any court,
regulatory authority or governmental agency or body, pending or, to the
knowledge of the Company or the Association, threatened, which might materially
and adversely affect the Conversion, the performance of this Agreement or the
consummation of the transactions contemplated in the Plan and as described in
the Registration Statement or which might result in any material adverse change
in the condition (financial or otherwise), earnings, capital, properties,
business affairs or business prospects of the Company or the Association or
which would materially affect their properties and assets.
(m) The financial statements which are included in the Registration
Statement and which are part of the Offering Prospectus fairly present the
financial condition, results of operations, retained earnings and cash flows of
the Association at the respective dates thereof and for the respective periods
covered thereby, and comply as to form in all material respects with the
applicable accounting requirements of Title 12 of the Code of Federal
Regulations and generally accepted accounting principles ("GAAP") (including
those requiring the recording of certain assets at their current market value).
Such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied through the periods
involved, present fairly in all material respects the information required to be
stated therein and are consistent with the most recent financial statements and
other reports filed by the Association with the OTS and the FDIC, except that
accounting principles employed in such filings conform to requirements of such
authorities and not necessarily to generally accepted accounting principles. The
other financial, statistical and pro forma information and related notes
included in the Offering Prospectus present fairly the information shown therein
on a basis consistent with the audited and unaudited financial statements, if
any, of the Association included in the Offering Prospectus, and as to the pro
forma adjustments, the adjustments made therein have been properly applied on
the basis described therein.
(n) Since the respective dates as of which information is given in the
Registration Statement and the Offering Prospectus, except as may otherwise be
stated therein: (i) there has not been any material adverse change in the
financial condition of the Company or the Association, or of the Company and the
Association considered as one enterprise, or in the earnings, capital,
properties, business affairs or business prospects of the Company or the
Association, whether or not arising in the ordinary course of business, (ii)
there has not been (A) an increase of greater than $250,000 in the long term
debt of the Association or (B) an increase of $150,000 in non performing assets
(consisting of accruing loans past due 90 days or more, non-accruing loans and
foreclosed assets) or (C) a decrease of $50,000 or more in the allowance for
loan losses or (D) any decrease in total equity or (E) a decrease in net income
from January 1, 1997 to date when compared to the like period in 1996 or (F) any
change in total assets of the Association in an amount greater than $3,000,000
(excluding the proceeds of stock subscriptions) or (H) any other material change
which would require an amendment to the Offering Prospectus; (iii) the
Association has not issued any securities or incurred any liability or
obligation for borrowing other than in the ordinary course of business; (iv)
there have not been any material transactions entered into by the Company or the
Association, except with respect to those transactions entered into in the
ordinary course of business; and (v) the capitalization, liabilities, assets,
properties and business of the Company and the Association conform in all
material respects to the descriptions thereof contained in the Offering
Prospectus, and neither the Company nor the Association have any material
liabilities of any kind, contingent or otherwise, except as set forth in the
Offering Prospectus.
-7-
<PAGE>
(o) As of the date hereof and as of the Closing Date, neither the
Company nor the Association is in violation of its certificate of incorporation
or charter, respectively, or its bylaws (and the Association will not be in
violation of its charter or bylaws in capital stock form as of the Closing Date)
or in default in the performance or observance of any material obligation,
agreement, covenant, or condition contained in any contract, lease, loan
agreement, indenture or other instrument to which it is a party or by which it,
or any of its property may be bound which would result in a material adverse
change in the condition (financial or otherwise), earnings, capital, properties,
business affairs or business prospects of the Company or Association or which
would materially affect their properties or assets. The consummation of the
transactions herein contemplated will not (i) conflict with or constitute a
breach of, or default under, the certificate of incorporation and bylaws of the
Company, the charter and bylaws of the Association (in either mutual or capital
stock form), or any material contract, lease or other instrument to which the
Company or the Association has a beneficial interest, or any applicable law,
rule, regulation or order; (ii) violate any authorization, approval, judgment,
decree, order, statute, rule or regulation applicable to the Company or the
Association; or (iii) with the exception of the Liquidation Account established
in the Conversion, result in the creation of any material lien, charge or
encumbrance upon any property of the Company or the Association.
(p) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default on the part of the Company or
the Association, in the due performance and observance of any term, covenant or
condition of any indenture, mortgage, deed of trust, note, Association loan or
credit agreement or any other instrument or agreement to which the Company or
the Association is a party or by which any of them or any of their property is
bound or affected in any respect which, in any such cases, is material to the
Company or the Association; such agreements are in full force and effect; and no
other party to any such agreements has instituted or, to the best knowledge of
the Company or the Association, threatened any action or proceeding wherein the
Company or the Association would or might be alleged to be in default
thereunder.
(q) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company will be within the range set forth in
the Registration Statement under the caption "Capitalization," and no shares of
Common Stock have been or will be issued and outstanding prior to the Closing
Date referred to in Section 2; the Shares will have been duly and validly
authorized for issuance and, when issued and delivered by the Company pursuant
to the Plan against payment of the consideration calculated as set forth in the
Plan and in the Offering Prospectus, will be duly and validly issued and fully
paid and non-assessable; the issuance of the Shares will not violate any
preemptive rights; and the terms and provisions of the Shares will conform in
all material respects to the description thereof contained in the Registration
Statement and the Offering Prospectus. Upon the issuance of the Shares, good
title to the Shares will be transferred from the Company to the purchasers
thereof against payment therefor, subject to such claims as may be asserted
against the purchasers thereof by third party claimants.
(r) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares, except for the approval of the OTS, the
Commission and any necessary qualification or registration under the securities
or blue sky laws of the various states in which the Shares are to be offered and
as may be required under the regulations-of the National Association of
Securities Dealers, Inc. ("NASD").
(s) KPMG, which has certified the financial statements of the
Association included in the Registration Statement, are with respect to the
Company and the Association independent public accountants within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants and Title 12 of the Code of Federal Regulations, Section 571.2(c)(3)
and the 1933 Act and the 1933 Act Regulations.
-8-
<PAGE>
(t) The Company and the Association have (subject to all properly
obtained extensions) timely filed all required federal and state tax returns,
have paid all taxes that have become due and payable in respect of such returns,
have made adequate reserves for similar future tax liabilities and no deficiency
has been asserted with respect thereto by any taxing authority.
(u) Appropriate arrangements have been made for placing the funds
received from subscriptions for Shares in special interest-bearing accounts with
the Association until all Shares are sold and paid for, with provision for
refund to the purchasers in the event that the Conversion is not completed for
whatever reason or for delivery to the Company if all Shares are sold.
(v) The Company and the Association are in compliance in all material
respects with the applicable financial record keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and
the regulations and rules thereunder.
(w) To the knowledge of the Company and the Association, none of the
Company, the Association nor employees of the Company or the Association have
made any payment of funds of the Company or the Association as a loan to any
person for the purchase of the Shares other than the Employee Stock Ownership
Plan Trust.
(x) Prior to the Conversion, the Association was not authorized to
issue shares of capital stock and neither the Company nor the Association has:
(i) issued any securities within the last 18 months (except for notes to
evidence other Association loans and reverse repurchase agreements or other
liabilities); (ii) had any material dealings within the twelve months prior to
the date hereof with any member of the NASD, or any person related to or
associated with such member, other than discussions and meetings relating to the
proposed Subscription and Public Offerings and routine purchases and sales of
U.S. government and agency securities and other investment securities; (iii)
entered into a financial or management consulting agreement except as
contemplated hereunder; and (iv) engaged any intermediary between Capital
Resources and the Company and the Association in connection with the offering of
Common Stock, and no person is being compensated in any manner for such service.
(y) All pending legal proceedings to which the Company or the Bank is a
party or of which any of their property is the subject which are not described
in the Registration Statement and the Offering Prospectus, including ordinary
routine litigation incidental to the business are, considered in the aggregate,
not material.
(z) To the knowledge of the Company and the Association, the Company
and the Association comply in all material respects with all laws, rules and
regulations relating to environmental protection, and neither the Company nor
the Association has been notified or is otherwise aware that any of them is
potentially liable, or is considered potentially liable in any material respect,
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any similar state or local laws, except for the matter
described in the Offering Prospectus under the caption "Business of the
Association-Properties" for which estimated costs have been expensed as
described under the caption "Summary of Recent Developments." There are no
actions, suits, regulatory investigations or other proceedings pending or, to
the knowledge of the Company or the Association, threatened against the Company
or the Association relating to environmental protection, nor does the Company or
the Association have any reason to believe any such proceedings may be brought
against any of them.
-9-
<PAGE>
(aa) The Association has no subsidiaries.
Any certificates signed by an officer of the Company or the Association
and delivered to Capital Resources or its counsel that refer to this Agreement
shall be deemed to be a representation and warranty by the Company or the
Association to Capital Resources as to the matters covered thereby with the same
effect as if such representation and warranty were set forth herein.
SECTION 5. Capital Resources represents and warrants to the Company and
the Association that:
(a) Capital Resources is a corporation and is validly existing
in good standing under the laws of the District of Columbia with full power and
authority to provide the services to be furnished to the Company and the
Association hereunder.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of Capital Resources, and this
Agreement has been duly and validly executed and delivered by Capital Resources
and is the legal, valid and binding agreement of Capital Resources, enforceable
in accordance with its terms.
(c) Each of Capital Resources and its employees, agents and
representatives who shall perform any of the services hereunder shall be duly
authorized and empowered, and shall have all licenses, approvals and permits
necessary, to perform such services and Capital Resources is a registered
selling agent in the jurisdictions listed in Exhibit A hereto and will remain
registered in such jurisdictions in which the Company is relying on such
registration for the sale of the Shares, until the Conversion is consummated or
terminated.
(d) The execution and delivery of this Agreement by Capital
Resources, the consummation of the transactions contemplated hereby and
compliance with the terms and provisions hereof will not conflict with, or
result in a breach of, any of the terms, provisions or conditions of, or
constitute a default (or event which with notice or lapse of time or both would
constitute a default) under, the certificate of incorporation of Capital
Resources or any agreement, indenture or other instrument to which Capital
Resources is a party or by which its property is bound, or law or regulation by
which Capital Resources is bound.
(e) Funds received by Capital Resources to purchase Common
Stock will be handled in accordance with Rule 15c2-4 under the Securities
Exchange Act of 1934, as amended.
SECTION 6. Covenants of the Company and Association. The Company and
the Association hereby jointly and severally covenant with Capital Resources as
follows:
(a) The Company has filed the Registration Statement with the
Commission. The Company will not, at any time after the date the Registration
Statement is declared effective, file any amendment or supplement to the
Registration Statement without providing Capital Resources and its counsel
reasonable time to review such amendment or file any amendment or supplement to
which amendment Capital Resources or its counsel shall reasonably object.
-10-
<PAGE>
(b) The Association has filed the Conversion Application with
the OTS. The Association will not, at any time after the date the Conversion
Application is approved, file any amendment or supplement to the Conversion
Application without providing Capital Resources and its counsel an opportunity
to review such amendment or supplement or file any amendment or supplement to
which amendment or supplement Capital Resources or its counsel shall reasonably
object.
(c) The Company and the Association will use their best
efforts to cause any post-effective amendment to the Registration Statement to
be declared effective by the Commission and any post-effective amendment to the
Conversion Application to be approved by the OTS and will immediately upon
receipt of any information concerning the events listed below notify Capital
Resources and promptly confirm the notice in writing: (i) when the Registration
Statement, as amended, has become effective; (ii) when the Conversion
Application, as amended, has been approved by the OTS; (iii) of the receipt of
any comments from the Commission, the OTS or the FDIC or any other governmental
entity with respect to the Conversion or the transactions contemplated by this
Agreement; (iv) of the request by the Commission, the OTS or the FDIC or any
other governmental entity for any amendment or supplement to the Registration
Statement or for additional information; (v) of the issuance by the Commission,
the OTS, the FDIC or any other governmental entity of any order or other action
suspending the Subscription or Public Offerings or the use of the Registration
Statement or the Offering Prospectus or any other filing of the Company and the
Association under the Conversion Regulations or other applicable law, or the
threat of any such action; (vi) the issuance by the Commission, the OTS or the
FDIC, or any other state authority, of any stop order suspending the
effectiveness of the Registration Statement or of the initiation or threat of
initiation or threat of any proceedings for that purpose; or (vii) of the
occurrence of any event mentioned in paragraph (h) below. The Company and the
Association will make every reasonable effort to prevent the issuance by the
Commission, the OTS or the FDIC, or any other state authority of any such order
and, if any such order shall at any time be issued, to obtain the lifting
thereof at the earliest possible time.
(d) The Company and the Association will provide Capital
Resources and its counsel notice of its intention to file, and reasonable time
to review prior to filing any amendment or supplement to the Conversion
Application or the Holding Company Application and will not file any such
amendment or supplement to which Capital Resources shall reasonably object or
which shall be reasonably disapproved by its counsel.
(e) The Company and the Association will deliver to Capital
Resources and to its counsel two conformed copies of each of the following
documents, with all exhibits: the Conversion Application and the Holding Company
Application, as originally filed and of each amendment or supplement thereto,
and the Registration Statement, as originally filed and each amendment thereto.
Further, the Company and the Association will deliver such additional copies of
the foregoing documents to counsel for Capital Resources as may be required for
any NASD and blue sky filings. In addition, the Company and the Association will
also deliver to Capital Resources such number of copies of the Offering
Prospectus, as amended or supplemented, as Capital Resources may reasonably
request.
(f) The Company will furnish to Capital Resources, from time
to time during the period when the Offering Prospectus (or any later prospectus
related to this Offering) is required to be delivered under the 1933 Act or the
Securities Exchange Act of 1934 (the "1934 Act"), such number of copies of such
prospectus (as amended or supplemented) as Capital Resources may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act or the
respective applicable rules and regulations of the Commission thereunder. The
Company authorizes Capital Resources to use the Offering Prospectus (as amended
or supplemented, if amended or supplemented) for any lawful manner in connection
with the sale of the Shares by Capital Resources.
-11-
<PAGE>
(g) The Company and the Association will comply in all
material respects with any and all terms, conditions, requirements and
provisions with respect to the Conversion and the transactions contemplated
thereby imposed by the Commission, by applicable state law and regulations, and
by the 1933 Act, the 1934 Act and the rules and regulations of the Commission
promulgated under such statutes, to be complied with prior to or subsequent to
the Closing Date and when the Offering Prospectus is required to be delivered,
the Company and the Association will comply in all material respects, at their
own expense, with all requirements imposed upon them by the OTS, the Conversion
Regulations, the FDIC, the Commission, by applicable state law and regulations
and by the 1933 Act, the 1934 Act and the rules and regulations of the
Commission promulgated under such statutes, including, without limitation, Rule
10b-6 under the 1934 Act, in each case as from time to time in force, so far as
necessary to permit the continuance of sales or dealing in shares of Common
Stock during such period in accordance with the provisions hereof and the
Offering Prospectus.
(h) If, at any time during the period when the Offering
Prospectus relating to the Shares is required to be delivered, any event
relating to or affecting the Company or the Association shall occur, as a result
of which it is necessary or appropriate, in the reasonable opinion of counsel
for the Company and the Association or in the reasonable opinion of Capital
Resources' counsel, to amend or supplement the Registration Statement or
Offering Prospectus in order to make the Registration Statement or Offering
Prospectus not misleading in light of the circumstances existing at the time it
is delivered to a purchaser, the Company and the Association will, at their
expense, forthwith prepare, file with the Commission and the OTS and furnish to
Capital Resources a reasonable number of copies of any amendment or amendments
of, or a supplement or supplements to, the Registration Statement or Offering
Prospectus (in form and substance reasonably satisfactory to Capital Resources
and its counsel after a reasonable time for review) which will amend or
supplement the Registration Statement or Offering Prospectus so that as amended
or supplemented it will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances existing at the time the Offering Prospectus
reasonably is delivered to a purchaser, not misleading. For the purpose of this
Agreement, the Company and the Association each will timely furnish to Capital
Resources such information with respect to itself as Capital Resources may from
time to time request.
(i) The Company and the Association will take all necessary
actions, in cooperation with Capital Resources, and furnish to whomever Capital
Resources may direct, such information as may be required to qualify or register
the Shares for offering and sale by the Company under the applicable securities
or blue sky laws of such jurisdictions in which the shares are required under
the Conversion Regulations to be sold or as Capital Resources may reasonably
designate and as reasonably agreed to by the Association; provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify to do business in any jurisdiction in which it is not
so qualified. In each jurisdiction where any of the Shares shall have been
qualified or registered as above provided, the Company will make and file such
statements and reports in each fiscal period as are or may be required by the
laws of such jurisdiction.
(j) The liquidation account for the benefit of account holders
with account balances of $50 or more as of the applicable record dates will be
duly established and maintained in accordance with the requirements of the OTS.
-12-
<PAGE>
(k) The Company and the Association will not sell or issue,
contract to sell or otherwise dispose of, for a period of 180 days after the
date hereof, without Capital Resources' prior written consent, any shares of
Common Stock other than in connection with any plan or arrangement described in
the Offering Prospectus.
(l) The Company shall register its Common Stock under Section
12(g) of the 1934 Act concurrent with the stock offering pursuant to the Plan
and shall request that such registration be effective upon completion of the
Conversion. The Company shall maintain the effectiveness of such registration
for not less than three years or such shorter period as permitted by the OTS.
(m) During the period during which the Company's common stock
is registered under the 1934 Act or for three years from the date hereof,
whichever period is greater, the Company will furnish to its stockholders as
soon as practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders' equity and
changes in financial position or cash flow statement of the Company as at the
end of and for such year, certified by independent public accountants and
prepared in accordance with Regulation S-X under the 1934 Act).
(n) During the period of three years from the date hereof, the
Company will furnish to Capital Resources: (i) a copy of each public report of
the Company furnished to or filed with the Commission under the 1934 Act or any
national securities exchange or system on which any class of securities of the
Company is listed or quoted (including but not limited to, reports on Form 10-K,
10-Q and 8-K and all proxy statements and annual reports to stockholders), a
copy of each public report of the Company mailed to its stockholders or filed
with the Commission or the OTS or any other supervisory or regulatory authority
or any national securities exchange or system on which any class of securities
of the Company is listed or quoted, each press release and material news items
and additional public documents and information with respect to the Company or
the Association as Capital Resources may reasonably request, and (ii) from time
to time, such other publicly available information concerning the Company and
the Association as Capital Resources may reasonably request.
(o) The Company and the Association will use the net proceeds
from the sale of the Shares in the manner set forth in the Offering Prospectus
under the caption "Use of Proceeds."
(p) Other than as permitted by the Conversion Regulations, the
1933 Act, the 1933 Act Regulations and the laws of any state in which the Shares
are qualified for sale, neither the Company nor the Association will distribute
any prospectus, offering circular or other offering material in connection with
the offer and sale of the Shares.
(q) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the close of
the period an earnings statement (in form complying with the provisions of Rule
158 under the 1933 Act) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the effective date
(as defined in said Rule 158) of the Registration Statement.
(r) The Company will maintain quotation of the shares in the
over-the-counter market effective on the Closing Date.
(s) The Association will maintain appropriate arrangements for
depositing all funds received from persons mailing subscriptions for or orders
to purchase Shares in the Subscription and Public Offerings on an
interest-bearing basis at the rate described in the Offering Prospectus until
the Closing Date and satisfaction of all conditions precedent to the release of
the Association's obligation to refund payments received from persons
subscribing for or ordering Shares in the Subscription and Public Offerings in
accordance with the Plan as described in the Offering Prospectus or until
refunds of such funds have been made to the persons entitled thereto or
withdrawal authorizations canceled in accordance with the Plan and as described
in the Offering Prospectus. The Association will maintain such records of all
funds received to permit the funds of each subscriber to be separately insured
by the FDIC (to the maximum extent allowable) and to enable the Association to
make the appropriate refunds of such funds in the event that such refunds are
required to be made in accordance with the Plan and as described in the Offering
Prospectus.
-13-
<PAGE>
(t) The Company will register as a savings and loan holding
company under the HOLA within the period required by applicable law.
(u) The Company and the Association will take such actions and
furnish such information as are reasonably requested by Capital Resources in
order for Capital Resources to ensure compliance with the "Interpretation of the
Board of Governors of the NASD on Free Riding and Withholding."
(v) The Company and the Association have conducted their
businesses in compliance in all material respects with all applicable federal
and state laws, rules, regulations, decisions, directives and orders, including
all decisions, directives and orders of the Commission, the OTS and the FDIC.
(w) The Association will not amend the Plan of Conversion
without Capital Resources' prior written consent in any manner that, in the
reasonable opinion of Capital Resources, would materially and adversely affect
the sale of the Shares or the terms of this Agreement except as to comply with
any regulatory requirement.
(x) The Company shall advise Capital Resources, if necessary,
as to the allocation of the Shares in the event of an oversubscription and shall
provide Capital Resources with any information necessary to assist Capital
Resources in allocating the Shares in such event and such information shall be
accurate and reliable.
(y) The Company and the Association shall promptly advise
Capital Resources in writing of all relationships or facts which would render
persons subscribing or purchasing Shares in the Conversion "associates" or
"acting in concert" within the meaning of the Conversion Regulations, and shall
further advise Capital Resources of all appropriate limitations on the purchase
of shares by such persons imposed by the Conversion Regulations and such
information furnished shall be accurate and reliable in all material respects.
SECTION 7. Payment of Expenses. Whether or not this Agreement becomes
effective, the Conversion is completed or the sale of the Shares by the Company
is consummated, the Company and Association jointly and severally agree to pay
directly for or to reimburse Capital Resources for (to the extent that such
expenses have been reasonably incurred by Capital Resources) (a) all filing fees
and expenses incurred in connection with the qualification or registration of
the Shares for offer and sale by the Company under the securities or blue sky
laws of any jurisdictions Capital Resources and the Company may agree upon
pursuant to subsection (i) of Section 6 above, including counsel fees paid or
incurred by the Company, the Association or Capital Resources in connection with
such qualification or registration or exemption from qualification or
registration; (b) all filing fees in connection with all filings with the NASD;
(c) any stock issue or transfer taxes which may be payable with respect to the
sale of the Shares to purchasers in the Conversion; (d) reasonable and necessary
expenses of the Conversion, including but not limited to, attorneys' fees,
transfer agent, registrar and other agent charges, fees relating to auditing and
accounting or other advisors and costs of printing all documents necessary in
connection with the Conversion; and (e) out-of-pocket expenses incurred by
Capital Resources in connection with the Conversion or any of the transactions
contemplated hereby, including, without limitation, the fees of its attorneys,
and reasonable communication and travel expenses, as limited by Section 2
hereof.
-14-
<PAGE>
SECTION 8. Conditions to Capital Resources' Obligations. Capital
Resources' obligations hereunder, as to the Shares to be delivered at the
Closing Date, are subject to the condition that all representations and
warranties and other statements of the Company and the Association herein are,
at and as of the commencement of the Subscription and Public Offerings and at
and as of the Closing Date, true and correct in all material respects, the
condition that the Company and the Association shall have performed in all
material respects all of their obligations hereunder to be performed on or
before such dates, and to the following further conditions:
(a) At the Closing Date, the Company and the Association will
have completed the conditions precedent to, and shall have conducted the
Conversion in all material respects in accordance with, the Plan, the Conversion
Regulations and all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Conversion imposed upon them by the OTS.
(b) The Registration Statement shall have been declared
effective by the Commission and the Conversion Application approved by the OTS
not later than 5:30 p.m. (eastern time) on the date of this Agreement, or with
Capital Resources' consent at a later time and date; and at the Closing Date no
stop order suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act
or proceedings therefore initiated or threatened by the Commission or any state
authority, and no order or other action suspending the authorization of the
Offering Prospectus or the consummation of the Conversion shall have been issued
or proceedings therefore initiated or, to the Company's or Association's
knowledge, threatened by the Commission, the OTS, the FDIC or any state
authority.
(c) At the Closing Date, Capital Resources shall have
received:
(1) The favorable opinion, dated as of the Closing Date
addressed to Capital Resources and for its benefit, of Silver, Freedman & Taff,
L.L.P., counsel for the Company and the Association dated the Closing Date,
addressed to Capital Resources and in form and substance to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Offering Prospectus; and the Company is qualified
to do business as a foreign corporation in New York, to such counsel's knowledge
based on the conferences and document review specified in item (xiii) below, the
only state in which it is doing business.
-15-
<PAGE>
(iii) The Association was a duly organized and is a validly
existing federally-chartered savings association in mutual form of organization
and upon the Conversion will become a duly organized and validly existing
federally-chartered savings association in capital stock form of organization,
in both instances duly authorized to conduct its business and own its property
as described in the Registration Statement; and the Association is in good
standing under the laws of the United States and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which its ownership of property or leasing of properties or the conduct of its
business requires such qualification unless the failure to be so qualified in
one or more such jurisdictions would not have a material adverse effect on the
condition, financial or otherwise, or the business, operations or income or
business prospects of the Association. The activities of the Association as
described in the Offering Prospectus, insofar as they are material to the
operations and financial condition of the Association, are permitted by the
rules, regulations and resolutions and practices of the OTS or the FDIC and any
other federal or state authorities.
(iv) The Association is a member of the FHLBNY, and the
deposit accounts of the Association are insured by the FDIC up to the maximum
amount allowed under law and to the best of such counsel's knowledge no
proceedings for the termination or revocation of such insurance are pending or
threatened; and the description of the liquidation account as set forth in the
Registration Statement and the Offering Prospectus under the caption "The
Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of
the Association - Liquidation Rights in Proposed Converted Institution" has been
reviewed by such counsel and is accurate in all material respects.
(v) Upon consummation of the Conversion, the authorized,
issued and outstanding capital stock of the Company will be as set forth in the
Registration Statement and the Offering Prospectus under the caption
"Capitalization, " and no shares of Common Stock have been issued prior to the
Closing Date; at the time of the Conversion, the Shares subscribed for pursuant
to the Offerings will have been duly and validly authorized for issuance, and
when issued and delivered by the Company pursuant to the Plan against payment of
the consideration calculated as set forth in the Plan, will be duly and validly
issued and fully paid and non-assessable; and the issuance of the Shares is not
subject to preemptive rights.
(vi) The issuance and sale of the common stock of the
Association to the Company have been duly and validly authorized by all
necessary corporate action on the part of the Company and the Association and,
upon payment therefor in accordance with the terms of the Plan of Conversion,
will be duly and validly issued, fully paid and non-assessable and will be owned
of record by the Company, free and clear of any mortgage, pledge, lien,
encumbrance or claim (legal or equitable).
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Company and the
Association; and this Agreement is a valid and binding obligation of the Company
and the Association, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by Associationruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of savings
associations or savings and loan holding companies, the accounts of whose
subsidiaries are insured by the FDIC or by general equity principles, regardless
of whether such enforceability is considered in a proceeding in equity or at
law, and except to the extent, if any, that the provisions of Sections 9 and 10
hereof may be unenforceable as against public policy).
(viii) The Plan has been duly adopted by the required vote of
the Directors of the Company and the Association and members of the Association.
-16-
<PAGE>
(ix) Subject to the satisfaction of the conditions to the
OTS's approval of the Conversion and the Company's application to acquire the
Association, no further approval, registration, authorization, consent or other
order of any regulatory agency, public board or body is required in connection
with the execution and delivery of this Agreement, the issuance of the Shares
and the consummation of the Conversion, except as may be required under the
regulations of the NASD and the NASDAQ National Market. The Conversion has been
consummated in all material respects in accordance with all applicable
provisions of the HOLA, the Conversion Regulations, Federal and State law and
all applicable rules and regulations promulgated thereunder.
(x) The Conversion Application including the Offering
Prospectus as filed with the OTS was complete in all material respects and has
been approved by the OTS. The OTS has issued its order of approval under the
savings and loan holding company provisions of the HOLA, and the purchase by the
Company of all of the issued and outstanding capital stock of the Association
has been authorized by the OTS and no action has been taken, or to counsel's
knowledge is pending or threatened, to revoke any such authorization or
approval.
(xi) The Registration Statement is effective under the 1933
Act and no stop order suspending the effectiveness has been issued under the
1933 Act or proceedings therefor initiated or, to counsel's knowledge,
threatened by the Commission.
(xii) At the time the Conversion Application, including the
Offering Prospectus contained therein, was approved, the Conversion Application
including the Offering Prospectus contained therein (as amended or supplemented,
if so amended or supplemented) complied as to form in all material respects with
the requirements of all applicable federal laws and the rules, regulations,
decisions and orders of the OTS (except as to the financial statements, other
financial data and stock valuation information included therein as to which such
counsel need express no opinion); to the best of such counsel's knowledge, based
on conferences with management of and the independent accountants for the
Company and the Association, and on such investigation of the corporate records
of the Company and the Association as such counsel conducted in connection with
the preparation of the Registration Statement and the Conversion Application,
all material documents and exhibits required to be filed with the Conversion
Application (as amended or supplemented, if so amended or supplemented) have
been so filed. The description in the Conversion Application and the Offering
Prospectus contained therein of such documents and exhibits is accurate in all
material respects and fairly presents the information required to be shown. To
such counsel's knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS approving the Conversion Application or in
approving the Holding Company Application.
(xiii) At the time that the Registration Statement became
effective, (i) the Registration Statement (as amended or supplemented if so
amended or supplemented) (other than the financial statements and other
financial and statistical data and stock valuation information included therein,
as to which no opinion need be rendered), complied as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations and
(ii) the Offering Prospectus (other than the financial statements and other
financial and statistical data and the stock valuation information included
therein, as to which no opinion need be rendered) complied as to form in all
material respects with the requirements of the 1933 Act, the 1933 Act
Regulations, Conversion Regulations and Federal and State law (other than state
blue sky law as to which we express no opinion). To the best of such counsel's
knowledge based on the conferences and document review specified in item (xii)
above, all material documents and exhibits required to be filed with the
Registration Statement (as amended or supplemented, if so amended or
supplemented) have been so filed. The description in the Registration Statement
and the Offering Prospectus of such documents and exhibits is accurate in all
material respects and fairly presents the information required to be shown.
-17-
<PAGE>
(xiv) During the course of such counsel's representation of
the Company and the Association, nothing has come to such counsel's attention
that caused it to believe that (i) the Company and the Association have not
conducted the Conversion, in all material respects, in accordance with all
applicable requirements of the Plan and applicable law, and (ii) the Plan, the
Conversion Application, the Registration Statement and the Offering Prospectus
(other than the financial statements and other financial and statistical data
and the stock valuation information included therein as to which no opinion need
be rendered) do not comply in all material respects with all applicable laws,
rules, regulations, decisions and orders including, but not limited to, the
Conversion Regulations, the HOLA, the 1933 Act and 1933 Act Regulations and all
other applicable laws, regulations, decisions and orders, including all
applicable terms, conditions, requirements and provisions precedent to the
Conversion imposed upon it by the OTS, the Commission and the FDIC, if any.
(xv) The terms and provisions of the Common Stock of the
Company conform to the description thereof contained in the Registration
Statement and the Offering Prospectus, and the form of certificates used to
evidence the Shares are in due and proper form.
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened which are required to be
disclosed in the Registration Statement and the Offering Prospectus, other than
those disclosed therein, and all pending legal and governmental proceedings to
which the Company or the Association is a party or of which any of their
property is the subject which are not described in the Registration Statement
and the Offering Prospectus, including ordinary routine litigation incidental to
the business, are, considered in the aggregate, not material; provided that for
this purpose, any litigation or governmental proceeding is not considered to be
"threatened" unless the potential litigant or governmental authority has
manifested to the management of the Company or the Association, or to such
counsel, a present intention to initiate such litigation or proceeding.
(xvii) To such counsel's knowledge, the Company and the
Association have obtained all licenses, permits and other governmental
authorizations required for the conduct of their respective businesses, except
where the failure to have such licenses, permits or authorizations would not
have a material adverse effect on the business, financial condition operations
or income or business prospects of the Company and the Association, and all such
licenses, permits and other governmental authorizations are in full force and
effect, and the Company and the Association are in all material respects
complying therewith.
(xviii) To such counsel's knowledge, neither the Company nor
the Association is in contravention of its certificate of incorporation or its
charter, respectively, or its bylaws (and the Association will not be in
contravention of its charter or bylaws in stock form upon consummation of the
Conversion) or, to such counsel's knowledge, in default or violation of any
obligation, agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its property may be bound which default or
violation would be material to the business of the Company and the Association
considered as one enterprise; the execution and delivery of this Agreement by
the Company and the Association, the incurring of the obligations herein set
forth and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate action of the Company and the
Association, and, to such counsel default or violation, will not constitute a
material breach of, or default under, or result in the creation or imposition of
any material lien, charge or encumbrance upon any property or assets of the
Company or the Association which are material to their business considered as
one enterprise, pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or the Association is a
party or by which any of them may be bound, or to which any of the property or
assets of the Company or the Association is subject. In addition, such action
will not result in any default or violation of the provisions of the certificate
of incorporation or bylaws of the Company or the Association or to such
counsel's knowledge, any applicable law, act, regulation or order or court
order, writ, injunction or decree. The charter of the Association in stock form
has been approved by the OTS.
-18-
<PAGE>
(xix) To such counsel's knowledge, the Company and the
Association have good and marketable title to all properties and assets
described in the Registration Statement as owned by them, free and clear of all
liens, charges, encumbrances or restrictions, except such as are described in
the Registration Statement or are not material in relation to the business of
the Company and the Association considered as one enterprise; and to the best of
such counsel's knowledge, all of the leases and subleases material to the
business of the Company and the Association under which the Company and the
Association hold properties, as described in the Registration Statement, are in
full force and effect.
(xx) The Company and the Association are not in violation of
any directive from the OTS or the FDIC to make any material change in the method
of conducting their business and the Company and the Association have conducted
and are conducting their business so as to comply in all material respects with
all applicable statutes and regulations (including, without limitation,
regulations, decisions, directives and orders of the OTS and the FDIC).
(xxi) The information in the Registration Statement and
Offering Prospectus under the captions "Regulation," "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions," "The
Conversion," "Description of Capital Stock" and the information in response to
Items 7(d)(l), 7(f), 7(g) and 7(i) of the Form PS of the Conversion Regulations,
to the extent that it constitutes matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed by such
counsel and is correct in all material respects (except as to the financial
statements and other financial data included therein as to which such counsel
need express no opinion).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
United States, to the extent such counsel deems proper and specified in such
opinion satisfactory to Capital Resources, upon the opinion of other counsel of
good standing (providing that such counsel states that Capital Resources is
justified in relying upon such specified opinion or opinions), and (B) as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and the Association and public officials
(but not on conclusions of law which may be set forth in said certificates);
provided copies of any such opinion(s) or certificates are delivered pursuant
hereto or to Capital Resources together with the opinion to be rendered
hereunder by special counsel to the Company and the Association. Such counsel
may assume that any agreement is the valid and binding obligation of any parties
to such agreement other than the Company or the Association.
(2) The letter of Silver, Freedman & Taff, L.L.P., counsel for
the Company and the Association addressed to Capital Resources, dated the
Closing Date, in form and substance to the effect that:
During the preparation of the Conversion Application, the
Registration Statement and the Offering Prospectus, such counsel participated in
conferences with management of, and the independent public accountants for the
Company and the Association. Based upon such conferences and a review of
corporate records of the Company and the Association as such counsel conducted
in connection with the preparation of the Registration Statement and Conversion
Application, nothing has come to their attention that would lead them to believe
that the Conversion Application, the Registration Statement, the Offering
Prospectus, or any amendment or supplement thereto (other than the financial
statements and other financial and statistical data and stock valuation
information included therein, as to which such counsel need express no view),
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
-19-
<PAGE>
(3) The favorable opinion, dated as of the Closing Date, of
Serchuk & Zelermyer, LLP, counsel to Capital Resources, with respect to such
matters as Capital Resources may reasonably require. Such opinion may rely upon
the opinions of counsel to the Company and the Association, and as to matters of
fact, upon certificates of officers and directors of the Company and the
Association delivered pursuant hereto or as such counsel shall reasonably
request.
(d) At the Closing Date, counsel to Capital Resources shall
have been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to render the opinion as herein
contemplated and related proceedings or in order to evidence the occurrence or
completeness of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained.
(e) At the Closing Date, Capital Resources shall receive a
certificate of the Chief Executive Officer and the Chief Financial Officer of
the Company and of the Chief Executive Officer and Chief Financial Officer of
the Association, dated as of such Closing Date, to the effect that: (i) they
have carefully examined the Offering Prospectus and, in their opinion, at the
time the Offering Prospectus became authorized for final use, the Offering
Prospectus did not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
since the date the Offering Prospectus became authorized for final use, in their
opinion no event has occurred which should have been set forth in an amendment
or supplement to the Offering Prospectus which has not been so set forth,
including specifically, but without limitation, any material adverse change in
the condition, financial or otherwise, or in the earnings, capital, properties,
business prospects or business affairs of the Company or the Association, and
the conditions set forth in this Section 8 have been satisfied; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Offering Prospectus, there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, capital, properties,
business affairs or business prospects of the Company or the Association,
independently, or of the Company and the Association considered as one
enterprise, whether or not arising in the ordinary course of business; (iv) to
the best knowledge of such officers the representations and warranties in
Section 4 are true and correct with the same force and effect as though
expressly made at and as of the Closing Date; (v) the Company and the
Association have complied with all material agreements and satisfied, in all
material respects at or prior to the Closing Date, all obligations required to
be met by such date and will in all material respects comply with all
obligations to be satisfied by them after Conversion; (vi) no stop order
suspending the effectiveness of the Registration Statement has been initiated
or, to the best knowledge of the Company or Association, threatened by the
Commission or any state authority; (vii) no order suspending the Subscription or
Public Offerings, the Conversion, the acquisition of all of the shares of the
Association by the Company or the effectiveness of the Offering Prospectus has
been issued and to the best knowledge of the Company or Association, no
proceedings for that purpose have been initiated or threatened by the OTS, the
Commission, the FDIC, or any state authority; and (viii) to the best of their
knowledge, no person has sought to obtain review of the final action of the OTS
approving the Plan.
-20-
<PAGE>
(f) Prior to and at the Closing Date: (i) in the reasonable
opinion of Capital Resources, there shall have been no material adverse change
in the condition, financial or otherwise, or in the earnings, or the business
affairs or business prospects of the Company or the Association independently,
or of the Company or the Association, considered as one enterprise, since the
latest dates as of which such condition is set forth in the Offering Prospectus,
except as referred to therein; (ii) there shall have been no material
transaction entered into by the Company or the Association from the latest date
as of which the financial condition of the Company or the Association is set
forth in the Offering Prospectus other than transactions referred to or
contemplated therein; (iii) the Company or the Association shall not have
received from the OTS or the FDIC any direction (oral or written) to make any
material change in the method of conducting their business with which it has not
complied (which direction, if any, shall have been disclosed to Capital
Resources) and which would reasonably be expected to have a material and adverse
effect on the business, operations or financial condition or income of the
Company or the Association taken as a whole; (iv) neither the Company nor the
Association shall have been in default (nor shall an event have occurred which,
with notice or lapse of time or both, would constitute a default) under any
provision of and agreement or instrument relating to any material outstanding
indebtedness; (v) no action, suit or proceedings, at law or in equity or before
or by any federal or state commission, board or other administrative agency,
shall be pending, or, to the knowledge of the Company or the Association,
threatened against the Company or the Association or affecting any of their
properties wherein an unfavorable decision, ruling or finding would reasonably
be expected to have a material and adverse effect on the business, operations,
financial condition or income of the Company or the Association, taken as a
whole; and (vi) the Shares have been qualified or registered for offering and
sale under the securities or blue sky laws of the jurisdictions as Capital
Resources shall have requested and as agreed to by the Company.
(g) Concurrently with the execution of this Agreement, Capital
Resources shall receive a letter from KPMG, dated the date hereof and addressed
to Capital Resources: (i) confirming that KPMG is a firm of independent public
accountants within the meaning of the 1933 Act and the 1933 Act Regulations and
12 C.F.R. ss. 571.2(c)(3) and no information concerning its relationship with or
interests in the Company and the Association is required to be disclosed in the
Offering Prospectus by the Conversion Regulations or Item 10 of the Registration
Statement, and stating in effect that in KPMG's opinion the financial statements
of the Association as are included in the Offering Prospectus comply as to form
in all material respects with the applicable accounting requirements of the 1933
Act, the 1934 Act and the related published rules and regulations of the
Commission thereunder and the Conversion Regulations and generally accepted
accounting principles; (ii) stating in effect that, on the basis of certain
agreed upon procedures (but not an audit examination in accordance with
generally accepted auditing standards) consisting of a reading of the latest
available unaudited interim financial statements of the Association prepared by
the Association, a reading of the minutes of the meetings of the Board of
Directors and members of the Association and consultations with officers of the
Association responsible for financial and accounting matters, nothing came to
their attention which caused them to believe that: (A) such unaudited financial
statements, including Recent Developments, if any, are not in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Offering Prospectus; or (B) during the period from the date of the latest
unaudited financial statements included in the Offering Prospectus to a
specified date not more than five business days prior to the date hereof, there
has been (1) an increase of greater than $250,000 in the long term debt of the
Association or (2) an increase greater than $150,000 in non-performing assets
(consisting of accruing loans past due 90 days or more, non-accruing loans and
foreclosed assets) or (3) a decrease of $50,000 or more in the allowance for
loan losses or (4) any decrease in total equity or (5) a decrease in net income
when compared to the like period in 1996 or (6) any change in total assets of
the Association in an amount from January 1, 1997 to date greater than
$3,000,000 (excluding the proceeds of stock subscriptions); and (iii) stating
that, in addition to the audit examination referred to in its opinion included
in the Offering Prospectus and the performance of the procedures referred to in
clause (ii) of this subsection (g), they have compared with the general
accounting records of the Company and/or the Association, as applicable, which
are subject to the internal controls of the Company and/or the Association, as
applicable, accounting system and other data prepared by the Company and/or the
Association, as applicable, directly from such accounting records, to the extent
specified in such letter, such amounts and/or percentages set forth in the
Offering Prospectus as Capital Resources may reasonably request; and they have
found such amounts and percentages to be in agreement therewith (subject to
rounding).
-21-
<PAGE>
(h) At the Closing Date, Capital Resources shall receive a
letter from KPMG, dated the Closing Date, addressed to Capital Resources,
confirming the statements made by its letter delivered by it pursuant to
subsection (g) of this Section 8, except that the "specified date" referred to
in clause (ii)(B) thereof to be a date specified in such letter, which shall not
be more than three business days prior to the Closing Date.
(i) The Company and the Association shall not have sustained
since the date of the latest audited financial statements included in the
Registration Statement and Offering Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Registration
Statement and Offering Prospectus, and since the respective dates as of which
information is given in the Registration Statement and Offering Prospectus,
there shall not have been any material change in the long term debt of the
Company or the Association other than debt incurred in relation to the purchase
of Shares by the Company's Tax-Qualified Employee Plans, or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company or the Association, otherwise than as set forth or contemplated in
the Registration Statement and Offering Prospectus, the effect of which, in any
such case described above, is in Capital Resources' reasonable judgment
sufficiently material and adverse as to make it impracticable or inadvisable to
proceed with the Subscription or Public Offerings or the delivery of the Shares
on the terms and in the manner contemplated in the Offering Prospectus.
(j) At or prior to the Closing Date, Capital Resources shall
receive (i) a copy of the letter from the OTS authorizing the use of the
Offering Prospectus, (ii) a copy of the order from the Commission declaring the
Registration Statement effective, (iii) a copy of a certificate from the OTS
evidencing the good standing of the Association, (iv) certificates of good
standing from the States of Delaware and New York evidencing the good standing
of the Company and from the State of New York evidencing that the Company is
duly qualified to do business and in good standing in New York and (v) a copy of
the letter from the OTS approving the Company's Holding Company Application.
(k) As soon as available after the Closing Date, Capital
Resources shall receive a certified copy of the Association's stock charter.
(1) Subsequent to the date hereof, there shall not have
occurred any of the following: (i) a suspension or limitation in trading in
securities generally on the New York Stock Exchange or American Stock Exchange
or in the over-the-counter market, or quotations halted generally on the NASDAQ
National Market, or minimum or maximum prices for trading being fixed, or
maximum ranges for prices for securities being required by either of such
exchanges or the NASD or by order of the Commission or any other governmental
authority; (ii) a general moratorium on the operations of commercial
Associations or federal savings Associations or general moratorium on the
withdrawal of deposits from commercial Associations or federal savings
Associations declared by either federal or state authorities; (iii) the
engagement by the United States in hostilities which have resulted in the
declaration, on or after the date hereof, of a national emergency or war; or
(iv) a material decline in the price of equity or debt securities if, as to
clauses (iii) or (iv), the effect of such hostilities or decline, in Capital
Resources' reasonable judgment, makes it impracticable or inadvisable to proceed
with the Subscription or Public Offerings or the delivery of the Shares on the
terms and in the manner contemplated in the Registration Statement and the
Offering Prospectus.
-22-
<PAGE>
All such opinions, certifications, letters and documents shall
be in compliance with the provisions hereof only if they are, in the reasonable
opinion of Capital Resources and its counsel, satisfactory to Capital Resources
and its counsel. Any certificates signed by an officer or director of the
Company or the Association and delivered to Capital Resources or its counsel
shall be deemed a representation and warranty by the Company or the Association
to Capital Resources as to the statements made therein.
If any of the conditions specified in this Section shall not
have been fulfilled when and as required by this Agreement, this Agreement and
all of Capital Resources' obligations hereunder may be canceled by Capital
Resources by notifying the Association of such cancellation in writing or by
telegram at any time at or prior to the Closing Date, and any such cancellation
shall be without liability of any party to any other party except as otherwise
provided in Sections 2, 7, 9 and 10 hereof. Notwithstanding the above, if this
Agreement is canceled pursuant to this paragraph, the Company and the
Association jointly and severally agree to reimburse Capital Resources for all
out-of-pocket expenses, (including without limitation the fees and expenses of
Capital Resources' counsel) reasonably incurred by Capital Resources and Capital
Resources' counsel at its normal rates, in connection with the preparation of
the Registration Statement and the Offering Prospectus, and in contemplation of
the proposed Subscription or Public Offerings to the extent provided for in
Sections 2 and 7 hereof.
SECTION 9. Indemnification.
(a) The Company and the Association jointly and severally
agree to indemnify and hold harmless Capital Resources, its officers, directors,
agents and employees and each person, if any, who controls or is under common
control with Capital Resources within the meaning of Section 15 of the 1933 Act
or Section 20(a) of the 1934 Act, against any and all loss, liability, claim,
damage or expense whatsoever (including but not limited to settlement expenses),
joint or several, that Capital Resources or any of them may suffer or to which
Capital Resources and any such persons upon written demand for any expenses
(including fees and disbursements of counsel) incurred by Capital Resources or
any of them in connection with investigating, preparing or defending any
actions, proceedings or claims (whether commenced or threatened) to the extent
such losses, claims, damages, liabilities or actions (i) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment or supplement
thereto), preliminary or final Offering Prospectus (or any amendment or
supplement thereto), the Conversion Application or any Blue Sky application or
other instrument or document of the Company or the Association or based upon
written information supplied by the Company or the Association filed in any
state or jurisdiction to register or qualify any or all of the Shares or the
subscription rights applicable thereto under the securities laws thereof
(collectively, the "Blue Sky Application"), or any application or other
document, advertisement, oral statement, or communication ("Sales Information")
prepared, made or executed by or on behalf of the Company with its consent or
based upon written or oral information furnished by or on behalf of the Company
or the Association, whether or not filed in any jurisdiction in order to qualify
or register the Shares under the securities laws thereof; (ii) arise out of or
are based upon the omission or alleged omission to state in any of the foregoing
documents or information, a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or, (iii) arise from any theory of
liability whatsoever relating to or arising from or based upon the Registration
Statement (or any amendment or supplement thereto), preliminary or final
Offering Prospectus (or any amendment or supplement thereto), the Conversion
Application, any Blue Sky Application or Sales Information or other
documentation distributed in connection with the Conversion; provided, however,
-23-
<PAGE>
that no indemnification is required under this paragraph (a) to the extent such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue material statements or alleged untrue material statements in, or
material omission or alleged material omission from, the Registration Statement
(or any amendment or supplement thereto), the Conversion Application, any Blue
Sky Application, the preliminary or final Offering Prospectus (or any amendment
or supplement thereto), or Sales Information made in reliance upon and in
conformity with written information furnished to the Company or the Association
by Capital Resources regarding Capital Resources expressly for use under the
caption "The Conversion Marketing Arrangements or "-Public Offering and Direct
community Offering" in the Offering Prospectus nor is indemnification required
for material oral misstatements made by Capital Resources, which are not based
upon information provided by the Association or the Company orally or in writing
or based on information contained in the Registration Statement (or any
amendment or supplement thereto), preliminary or final Offering Prospectus (or
any amendment or supplement thereto), the Conversion Application, any Blue Sky
Application or Sales Information distributed in connection with the Conversion.
(b) Capital Resources agrees to indemnify and hold harmless
the Company and the Association, their directors and officers, agents, servants
and employees and each person, if any, who controls the Company or the
Association within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act against any and all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement expenses), joint or several
which they, or any of them, may suffer or to which they, or any of them, may
become subject under all applicable federal and state laws or otherwise, and to
promptly reimburse the Company, the Association and any such persons upon
written demand for any expenses (including fees and disbursements of counsel)
incurred by them, or any of them, in connection with investigating, preparing or
defending any actions, proceedings or claims (whether commenced or threatened)
to the extent such losses, claims, damages, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment of supplement
thereto), or the preliminary or final Offering Prospectus (or any amendment or
supplement thereto), or the Conversion Application or any Blue Sky Application
or Sales Information or are based upon the omission or alleged omission to state
in any of the foregoing documents a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that Capital
Resources obligations under this Section 9(b) shall exist only if and only to
the extent that such untrue statement or alleged untrue statement was made in,
or such material fact or alleged material fact was omitted from, the
Registration Statement (or any amendment or supplement thereto), the preliminary
or final Offering Prospectus (or any amendment or supplement thereto), or the
Conversion Application, any Blue Sky Application or Sales Information in
reliance upon and in conformity with written information furnished to the
Company or the Association by Capital Resources regarding Capital Resources
expressly for use under the caption "The Conversion - Marketing Arrangements" or
"-Public Offering and Direct Community Offering" in the Offering Prospectus or
in the event of oral misstatements made by Capital Resources, which are not
based upon information provided by the Association or the Company orally or in
writing or based on information contained in the Registration Statement (or any
amendment or supplement thereto), preliminary or final Offering Prospectus (or
any amendment or supplement thereto), the Conversion Application, any Blue Sky
Application or Sales Information distributed in connection with the Conversion.
In addition, Capital Resources will not be liable under the foregoing provisions
to the extent that the loss, claim, damage, liability or actions is expressly
found in a final judgment by a court of competent jurisdiction to have resulted
from the Association's or the Company's bad faith or gross negligence.
-24-
<PAGE>
(c) Each indemnified party shall give prompt written notice to
each indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have on account of this Section 9 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume defense of such action
with counsel chosen by it and approved by the indemnified parties that are
defendants in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
that are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action,
proceeding or claim, other than reasonable costs of investigation. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of attorneys (and any special counsel that said firm may
retain) for all indemnified parties in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction arising out of the same general allegations or
circumstances.
(d) The agreements contained in this Section 9 and in Section
10 hereof and the representations and warranties of the Company and the
Association set forth in this Agreement shall remain operative and in full force
and effect regardless of: (i) any investigation made by or on behalf of Capital
Resources or its officers, directors or controlling persons, agents or employees
or by or on behalf of the Company or the Association or any officers, directors
or controlling persons, agents or employees of the Company or the Association or
any controlling person, director or officer of the Company or the Association;
(ii) delivery of and payment hereunder for the Shares; or (iii) any termination
of this Agreement.
(e) No indemnification by the Association under Section 9(a)
hereof nor contribution under Section 10 hereof shall be effective if the same
shall be deemed to be in violation of any law, rule or regulation applicable to
the Association including, without limitation, Section 23A of the Federal
Reserve Act. If the indemnification or contribution by the Association is not
effective pursuant to the preceding sentence, then the indemnification by
Capital Resources pursuant to Section 9(b) shall be given only to the Company,
its directors and officers, agents, servants and employees and not to the
Association, its directors and officers, agents, servants and employees and the
Association shall not be entitled to any contribution from Capital Resources
pursuant to Section 10.
SECTION 10. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 9 is due in accordance with its terms but is for any reason unavailable
as a result of Section 9(e) or held by a court to be unavailable from the
Company, the Association or Capital Resources, the Company, the Association and
Capital Resources shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of any action, suit or
proceeding of any claims asserted, but after deducting any contribution received
by the Company or the Association or Capital Resources from persons other than
the other party thereto, who may also be liable for contribution) in such
proportion so that Capital Resources is responsible for that portion represented
-25-
<PAGE>
by the fees paid to Capital Resources pursuant to Section 2 of this Agreement
(not including expenses) bears to the gross proceeds received by the Company
from the sale of the Shares in the Subscription and Public Offerings and the
Company and the Association shall be responsible for the balance. If, however,
the allocation provided above is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 9 above, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative fault of the Company and the Association on the one hand and Capital
Resources on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions, proceedings
or claims in respect thereof), but also the relative benefits received by the
Company and Association on the one hand and Capital Resources on the other from
the offering as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Association on the one hand
and Capital Resources on the other shall be deemed to be in the same proportion
as the total gross proceeds from the Subscription and Public Offerings (before
deducting expenses) received by the Company bear to the total fees (not
including expenses) received by Capital Resources. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and/or the
Association on the one hand or Capital Resources on the other and the parties'
relative intent, good faith, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Association and
Capital Resources agree that it would not be just and equitable if contribution
pursuant to this Section 10 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 10. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or action, proceedings or claims in respect thereof) referred to
above in this Section 10 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action, proceeding or claim. It is expressly agreed that
Capital Resources shall not be liable for any loss, liability, claim, damage or
expense or be required to contribute any amount which in the aggregate exceeds
the amount paid (excluding reimbursable expenses) to Capital Resources under
this Agreement. It is understood that the above-stated limitation on Capital
Resources' liability is essential to Capital Resources and that Capital
Resources relied upon such limitation and would not have entered into this
Agreement if such limitation had not been agreed to by the parties to this
Agreement. No person found guilty of any fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not found guilty of such fraudulent misrepresentation.
The obligations of the Company and the Association under this Section 10 and
under Section 9 shall be in addition to any liability which the Company and the
Association may otherwise have. For purposes of this Section 10, each of Capital
Resources', the Company's or the Association's officers and directors and each
person, if any, who controls Capital Resources or the Company or the Association
within the meaning of the 1933 Act and the 1934 Act shall have the same rights
to contribution as the Company and the Association. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action,
suit, claim or proceeding against such party in respect of which a claim for
contribution may be made against another party under this Section 10, will
notify such party from whom contribution may be sought, but the omission to so
notify such party shall not relieve the party from whom contribution may be
sought from any other obligation it may have hereunder or otherwise than under
this Section 10. this Section 10 is subject to and limited by the provisions of
Section 23A of the Federal Reserve Act, as applicable.
SECTION 11. Survival of Agreements, Representations and Indemnities.
The respective indemnities of the Company, the Association and Capital Resources
and the representations and warranties and other statements of the Company and
the Association set forth in or made pursuant to this Agreement shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of Capital Resources, the
Company, the Association or any indemnified person referred to in Section 9
hereof, and shall survive the issuance of the Shares, and any legal
representative, successor or assign of Capital Resources, the Association, and
any such indemnified person shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
-26-
<PAGE>
SECTION 12. Termination. Capital Resources may terminate this Agreement
by giving the notice indicated below in this Section at any time after this
Agreement becomes effective as follows:
(a) In the event the Company fails to sell all of the Shares
within the period specified, and in accordance with the provisions of the Plan
or as required by the Conversion Regulations and applicable law, this Agreement
shall terminate upon refund by the Association to each person who has subscribed
for or ordered any of the Shares the full amount which it may have received from
such person, together with interest as provided in the Offering Prospectus, and
no party to this Agreement shall have any obligation to the other hereunder,
except for payment by the Association and/or the Company as set forth in
Sections 2, 7, 9 and 10 hereof.
(b) If any of the conditions specified in Section 8 shall not
have been fulfilled when and as required by this Agreement, or by the Closing
Date, or waived in writing by Capital Resources, this Agreement and all of
Capital Resources obligations hereunder may be canceled by Capital Resources by
notifying the Association of such cancellation in writing or by telegram at any
time at or prior to the Closing Date, and, any such cancellation shall be
without liability of any party to any other party except as otherwise provided
in Sections 2, 7, 9 and 10 hereof.
(c) If Capital Resources elects to terminate this Agreement as
provided in this section, the Company and the Association shall be notified as
provided in Section 13 hereof, promptly by Capital Resources by telephone or
telegram, confirmed by letter.
SECTION 13. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be mailed in writing and if sent to
Capital Resources shall be mailed, delivered or telegraphed and confirmed to
Capital Resources, Inc., 1211 Connecticut Avenue, N.W., Suite 200, Washington,
D.C. 20036 Attention: _________________(with a copy to Serchuk & Zelermyer, LLP,
81 Main Street, White Plains, NY 10601, Attention: Ivan Serchuk, Esq.) and, if
sent to the Company and the Association, shall be mailed, delivered or
telegraphed and confirmed to the Company and the Association at 52 North Main
Street, Gloversville, New York, 12078, Attention: Lewis E. Kolar (with a copy to
Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., Washington, D.C.
20005, Attention: Kip A. Weissman, Esq.)
SECTION 14. Parties. The Company and the Association shall be entitled
to act and rely on any request, notice, consent, waiver or agreement purportedly
given on behalf of Capital Resources when the same shall have been given by the
undersigned. Capital Resources shall be entitled to act and rely on any request,
notice, consent, waiver or agreement purportedly given on behalf or the Company
or the Association, when the same shall have been given by the undersigned or
any other officer of the Company or the Association. This Agreement shall inure
solely to the benefit of, and shall be binding upon, Capital Resources and the
Company, the Association and the controlling persons referred to in Section 9
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
-27-
<PAGE>
SECTION 15. Closing. The closing for the sale of the Shares shall take
place on the Closing Date at the offices of ________________or such other
location as mutually agreed upon by Capital Resources, the Company and the
Association. At the closing, the Association shall deliver to Capital Resources
in next day funds the commissions, fees and expenses due and owing to Capital
Resources as set forth in Sections 2 and 7 hereof and the opinions and
certificates required hereby and other documents deemed reasonably necessary by
Capital Resources shall be executed and delivered to effect the sale of the
Shares as contemplated hereby and pursuant to the terms of the Offering
Prospectus.
SECTION 16. Partial Invalidity. In the event that any term, provision
or covenant herein or the application thereof to any circumstances or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstance or
situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
SECTION 17. Construction. This Agreement shall be construed in
accordance with the laws of the District of Columbia.
SECTION 18. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
Time shall be of the essence of this Agreement.
If the foregoing correctly sets forth the arrangement among the
Company, the Association and Capital Resources, please indicate acceptance
thereof in the space provided below for that purpose, whereupon this letter and
Capital Resources' acceptance shall constitute a binding agreement.
Very truly yours,
ADIRONDACK FINANCIAL SERVICES
BANCORP, INC.
By: ________________________________
Lewis E. Kolar, President and
Chief Executive Officer
GLOVERSVILLE FEDERAL SAVINGS AND
LOAN ASSOCIATION
By: ________________________________
Lewis E. Kolar, President and
Chief Executive Officer
Accepted as of the date first above written.
CAPITAL RESOURCES, INC.
By:_____________________________________
-28-
<PAGE>
EXHIBIT A
Capital Resources
Broker/Dealer Jurisdictions
California
Colorado
Connecticut
District of Columbia
Florida
Georgia
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Massachusetts Maryland
Michigan
Minnesota
Missouri
North Carolina
New Jersey
New Mexico
New York
Ohio
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Wisconsin
West Virginia
[Capital Resources to confirm]
Exhibit 3.2
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than 60 days before the
date on which the meeting is to be held, to each stockholder entitled to vote at
such meeting, except as otherwise provided herein or required by law (meaning,
here and hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than 30
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of at least one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law. Where
a separate vote by a class or classes is required, a majority of the shares
<PAGE>
of such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or mailed to and received
at the principal executive offices of the Corporation not less than 60 days
prior to the anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not later than the
close of business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which notice of the date of the annual
meeting was mailed or public announcement of the date of such meeting is first
made. A stockholder's notice to the Secretary shall set forth as to each matter
such stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the Corporation's books, of the stockholder who
proposed such business, (iii) the class and number of shares of the
Corporation's capital stock that are
2
<PAGE>
beneficially owned by such stockholder and (iv) any material interest of such
stockholder in such business. Notwithstanding anything in these By-laws to the
contrary, no business shall be brought before or conducted at an annual meeting
except in accordance with the provisions of this Section 6(b). The officer of
the Corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 6(b) and, if he or she should so determine, he or she shall so declare
to the meeting and any such business so determined to be not properly brought
before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than ^ 70 days prior to the date of the meeting; provided,
however, that in the event that less than ^ 80 days' notice of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
public announcement of the date of the meeting is made. Such stockholder's
notice shall set forth (x) as to each person whom such stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (y) as to the stockholder giving
the notice: (A) the name and address, as they appear on the Corporation's books,
of such stockholder and (B) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request of
the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The officer of the Corporation or other person presiding
at the meeting shall, if the facts so warrant, determine that a nomination was
not made in accordance with such provisions and, if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
3
<PAGE>
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure established
for the meeting. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or in the absence of such direction, as determined
by a majority of the Board of Directors. No proxy shall be valid after eleven
months from the date of its execution except for a proxy coupled with an
interest.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballot, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. Stock List.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by applicable law. The stock transfer books shall be the only
evidence as to the identity of the stockholders entitled to examine the stock
transfer books or to vote in person or by proxy at any meeting of stockholders.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
4
<PAGE>
Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election, to act at
the meeting or any adjournment thereof and make a written report thereof, in
accordance with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
as provided for in the Certificate of Incorporation. 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.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of
preferred stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires,
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent director.
5
<PAGE>
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the President and shall be held at such place, on such date, and at such
time as they or he or she shall fix. Notice of the place, date, and time of each
such special meeting shall be given to each director by whom it is not waived by
mailing written notice not less than five days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
24 hours before the meeting. Unless otherwise indicated in the notice thereof,
any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
6
<PAGE>
(i) To declare dividends from time to time in accordance with
law;
(ii) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(iii) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, and to do all
things necessary in connection therewith;
(iv) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(v) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and
agents;
(vi) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(vii) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of
the Corporation and its subsidiaries as it may determine; and,
(viii) To adopt from time to time regulations, not inconsistent
with these By-laws, for the management of the Corporation's business
and affairs.
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance
7
<PAGE>
of stock or to adopt a certificate of ownership and merger pursuant to Section
253 of the Delaware General Corporation Law if the resolution which designated
the committee or a supplemental resolution of the Board of Directors shall so
provide. In the absence or disqualification of any member of any committee and
any alternate member in his or her place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he or
she or they constitute a quorum, may by unanimous vote appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one or two members, in
which event one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.
Section 3. Nominating Committee.
The Board of Directors may appoint a Nominating Committee of the Board,
consisting of not less than three members, one of which shall be the President
if, and only so long as, the President remains in office as a member of the
Board of Directors. The Nominating Committee shall have authority (i) to review
any nominations for election to the Board of Directors made by a stockholder of
the Corporation pursuant to Section 6(c)(ii) of Article I of these By-laws in
order to determine compliance with such By-law and (ii) to recommend to the
Whole Board nominees for election to the Board of Directors to replace those
directors whose terms expire at the annual meeting of stockholders next ensuing.
ARTICLE IV
OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President shall be chosen from among the directors. Any number of
offices may be held by the same person.
8
<PAGE>
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but any
officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board of
Directors.
(c) All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. President.
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the management
and oversight of the administration and operation of the Corporation's business
and general supervisory power and authority over its policies and affairs. The
President shall see that all orders and resolutions of the Board of Directors
and of any committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his or her absence, by such officer or other person as is chosen at the
meeting. The Secretary or, in his or her absence, the General Counsel of the
Corporation or such officer as has been designated by the Board of Directors or,
in his or her absence, such officer or other person as is chosen by the person
presiding, shall act as secretary of each such meeting.
Section 3. Vice President.
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in the President's absence or during his or her disability to
act. In addition, the Vice Presidents shall perform the duties and exercise the
powers usually incident to their respective offices and/or such other duties and
powers as may be properly assigned to them from time to time by the Board of
Directors, the Chairman of the Board or the President.
Section 4. Secretary.
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep their minutes, shall have charge of the seal and the
corporate books, shall perform such other duties and exercise such other powers
as are usually incident to such offices and/or such other duties and powers as
are properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
9
<PAGE>
Section 5. Treasurer.
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies or other entities as the Board of Directors from time to time
shall designate. The Treasurer shall sign or countersign such instruments as
require his or her signature, shall perform all such duties and have all such
powers as are usually incident to such office and/or such other duties and
powers as are properly assigned to him or her by the Board of Directors, the
Chairman of the Board or the President, and may be required to give bond,
payable by the Corporation, for the faithful performance of his duties in such
sum and with such surety as may be required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more assistant secretaries
and one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President, or
any officer of the Corporation authorized by the President, shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other Corporation.
ARTICLE V
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
10
<PAGE>
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
60 nor less than ten days before the date of any meeting of stockholders, nor
more than 60 days prior to the time for such other action as hereinbefore
described; provided, however, that if no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held, and, for determining stockholders entitled to receive payment of any
dividend or other distribution or allotment of rights or to exercise any rights
of change, conversion or exchange of stock or for any other purpose, the record
date shall be at the close of business on the day on which the Board of
Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
11
<PAGE>
ARTICLE VI
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, by sending such notice by prepaid telegram or mailgram or by
sending such notice by facsimile machine or other electronic transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered or
dispatched, if delivered through the mail, by telegram or mailgram or by
facsimile machine or other electronic transmission, shall be the time of the
giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
12
<PAGE>
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
13
Exhibit 3.3
Charter of
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
SECTION 1. Corporate title. The full corporate title of the bank is
Gloversville Federal Savings and Loan Association.
SECTION 2. Office. The home office of the bank shall be located in the
City of Gloversville, County of Fulton, in the state of New York.
SECTION 3. Duration. The duration of the bank is perpetual.
SECTION 4. Purpose and Powers. The purpose of the bank is to pursue any
or all of the lawful objectives of a federal bank chartered under section 5 of
the Home Owners' Loan Act and to exercise all of the express, implied, and
incidental powers conferred thereby and by all acts amendatory thereof and
supplemental thereto, subject to the Constitution and laws of the United States
as they are now in effect, or as they may hereafter be amended, and subject to
all lawful and applicable rules, regulations, and orders of the Office of Thrift
Supervision ("Office").
SECTION 5. Capital Stock. The total number of shares of all classes of
the capital stock which the bank has the authority to issue is one million three
hundred thousand (1,300,000) of which one million two hundred thousand
(1,200,000) shall be common stock of par value of $.01 per share, and of which
one hundred thousand (100,000) shall be serial preferred stock of par value $.01
per share. The shares may be issued from time to time as authorized by the board
of directors without further approval of stockholders, except as otherwise
provided in this Section 5 or to the extent that such approval is required by
governing law, rule or regulation. The consideration for the issuance of the
shares shall be paid in full before their issuance and shall not be less than
the par value. Neither promissory notes nor future services shall constitute
payment or part payment for the issuance of shares of the bank. The
consideration for the shares shall be cash, tangible or intangible property (to
the extent direct investment in such property would be permitted to the savings
bank), labor, or services actually performed for the bank, or any combination of
the foregoing. In the absence of actual fraud in the transaction, the value of
such property, labor, or services, as determined by the board of directors of
the bank, shall be conclusive. Upon payment of such consideration, such shares
shall be deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the surplus of the bank which is transferred to stated
capital upon the issuance of shares as a share dividend shall be deemed to be
the consideration for their issuance.
Except for shares issuable in connection with the conversion of the
bank from the mutual to the stock form of organization, no shares of capital
stock (including shares issuable upon conversion, exchange, or exercise of other
securities) shall be issued, directly or indirectly, to officers, directors, or
controlling persons of the bank other than as part of a general public offering
or as qualifying shares to a director, unless their issuance or the plan under
which they
<PAGE>
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: 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;
(ii) To any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or
consolidation of the bank with another corporation or the sale,
lease, or conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities of a
corporation other than the bank if the preferred stock is
exchanged for securities of such other corporation: Provided,
That no provision may require such approval for transactions
undertaken with the assistance or pursuant to the direction of
the Office; or the Federal Deposit Insurance Corporation.
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this
Section 5 (or in any supplementary sections hereto), including
any amendment which would create or enlarge any class or series
ranking prior thereto in rights and preferences. An amendment
which increases the number of authorized shares of any class or
series of capital stock, or substitutes the surviving bank in a
merger or consolidation for the bank, shall not be considered to
be such an adverse change.
A description of the different classes and series (if any) of the
bank's capital stock and a statement of the designations, and the relative
rights, preferences, and limitations of the shares of each class 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 the 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.
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
2
<PAGE>
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
bank, the holders of the common stock (and the holders of any class or series of
stock entitled to participate with the common stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets of the bank
available for distribution remaining after: (i) Payment or provision for payment
of the bank's debts and liabilities; (ii) distributions or provision for
distributions in settlement of its liquidation account; and (iii) distributions
or provisions for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation, dissolution, or
winding up of the bank. Each share of common stock shall have the same relative
rights as and be identical in all respects with all the other shares of common
stock.
B. Preferred Stock. The bank may provide in supplementary sections to
its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and issued in
series, with each series separately designated so as to distinguish the shares
thereof from the shares of all other series and classes. The terms of each
series shall be set forth in a supplementary section to the charter. All shares
of the same class shall be identical except as to the following relative rights
and preferences, as to which there may be variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and,
if so, from which date(s), the payment date(s) for dividends, and
the participating or other special rights, if any, with respect
to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which,
such shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding
up of the bank;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application, including
the price(s) at which such shares may be redeemed or purchased
through the application of such fund;
3
<PAGE>
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock
of the bank and, if so, the conversion price(s), or the rate(s)
of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares
of the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the bank
shall file with the Secretary to the Office a dated copy of that supplementary
section of this charter established and designating the series and fixing and
determining the relative rights and preferences thereof.
SECTION 6. Preemptive Rights. Holders of the capital stock of the bank
shall not be entitled to preemptive rights with respect to any shares of the
bank which may be issued.
SECTION 7. Liquidation Account. Pursuant to the requirements of the
Office's regulations (12 C.F.R. Part 563b) the bank shall establish and maintain
a liquidation account for the benefit of its savings account holders as of
December 31, 1993 ("eligible savers") and March 31, 1995 ("supplemental eligible
savers"). In the event of a complete liquidation of the bank, it shall comply
with such regulations with respect to the amount and the priorities on
liquidation of each eligible saver's and supplemental eligible saver's inchoate
interest in the liquidation account, to the extent it is still in existence:
Provided, That an eligible saver's and supplemental eligible saver's inchoate
interest in the liquidation account shall not entitle such eligible saver or
supplemental eligible saver to any voting rights at meetings of the bank's
stockholders.
SECTION 8. Certain Provisions Applicable for Five Years.
Notwithstanding anything contained in the bank's charter or bylaws to the
contrary, for a period of five years from the date
4
<PAGE>
of completion of the conversion of the bank from mutual to stock form, the
following provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10%
of any class of an equity security of the bank. This limitation shall not apply
to a transaction in which the bank forms a holding company without change in the
respective beneficial ownership interests of its stockholders other than
pursuant to the exercise of any dissenter and appraisal rights, 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 stockholders for a vote.
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, a bank, 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 equity
securities of the bank.
(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. Cumulative Voting Limitation. Stockholders shall not be permitted to
cumulate their votes for election of directors.
C. Call for Special Meetings. Special meetings of stockholders relating
to changes in control of the bank or amendments to its charter shall be called
only upon direction of the board of directors.
5
<PAGE>
SECTION 9. Directors. The bank shall be under the direction of a board
of directors. The authorized number of directors, as stated in the bank's
bylaws, shall not be fewer than five nor more than fifteen except when a greater
number is approved by the Director of the Office.
SECTION 10. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the board of directors of the bank, and
approved by the stockholders by a majority of the total votes eligible to be
cast at a legal meeting, unless a higher vote is otherwise required, and
approval is preapproved by the Office.
6
<PAGE>
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
ATTEST: _________________________________ By: _____________________________
Menzo D. Case Lewis Kolar
Secretary President and Chief Executive
Officer
DIRECTOR OF THE OFFICE OF
THRIFT SUPERVISION
ATTEST: _________________________________ By: _____________________________
Secretary of the Office of Thrift Director of the Office of
Supervision Thrift Supervision
Declared effective this ____ day of ____________.1998
7
Exhibit 3.4
BYLAWS OF
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
ARTICLE I
HOME OFFICE
The home office of the bank shall be in the City of Gloversville, in
the County of Fulton, in the State of New York.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the bank or at such other place
in the state in which the principal place of business of the bank is located as
the board of directors may determine.
Section 2. Annual Meeting. A meeting of shareholders of the bank for
the election of directors and for the transaction of any other business of the
bank shall be held annually within 120 days after the end of the bank's fiscal
year on the third Wednesday of each January, if not a legal holiday, and if a
legal holiday, then on the next day following which is not a legal holiday, at
2:00 p.m., or at such other date and time within such 120-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 bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the bank addressed to the chairman
of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws. 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
1
<PAGE>
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 bank as of the record date pre scribed 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
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,
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 bank shall make a complete list of the shareholders entitled to
vote at such meeting, or any adjournment, arranged in alphabetical order, with
the address and the number of shares held by each. This list of shareholders
shall be kept on file at the home office of the bank and shall be subject to
inspection by any shareholder 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 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 para graph, the board of
directors may elect to follow the procedures prescribed in Section 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 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.
2
<PAGE>
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 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 bank to the contrary, at any meeting of the shareholders of
the 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 shall be cast as directed by a majority of those holding such stock 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 by 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 no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or 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 bank nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the bank, shall
be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Unless otherwise provided in the charter
of the bank, 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
3
<PAGE>
multiplied by the number of shares shall equal or by distributing such votes on
the same principle among any number of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any person 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 repre sented 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 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 bank at least five days prior to the date of
the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the bank. Ballots bearing the names of all
the persons 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. At an annual meeting of shareholders only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been properly brought before the meeting. For any new
business proposed by management to be properly brought before the annual
meeting, such new business shall be approved by the board of directors, either
directly or through its approval of proxy solicitation materials related
thereto, and shall be stated in writing and filed with the secretary of the bank
at least 20 days before the date of the
4
<PAGE>
annual meeting, and all business so stated, proposed and filed shall be
considered at the annual meeting. Any shareholder may make any other proposal at
the annual meeting and the same may be discussed and considered, but unless
properly brought before the meeting such proposal shall not be acted upon at the
meeting. For a proposal to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the bank. To be timely, a shareholder's notice must be
delivered to or received at the principal executive offices of the bank, not
less than 20 days prior to the meeting; provided, however, that in the event
that less than 30 days notice of the date of the meeting is given to
shareholders (which notice shall be accompanied by a proxy or information
statement which describes each matter proposed by the board of directors to be
acted upon at the meeting), notice by the shareholder to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting: (a) a brief description
of the proposal desired to be brought before the annual meeting; (b) the name
and address of the shareholder proposing such business and (c) the class and
number of shares of the bank which are owned of record by the shareholder.
Notwithstanding anything in the bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 15.
Section 16. Informal Action by Shareholders. Any action required to be
taken at a meeting of 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 bank shall
be under the direction of its board of directors. The board of directors shall
annually elect a chairman of the board and a president from among its members
and shall designate, when present, either the chairman of the board or the
president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of six
members 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 immediately after,
and at the same place as, the annual meeting of shareholders. The board of
directors may provide, by resolution, the time and place,
5
<PAGE>
within the bank's normal lending territory, for the holding of additional
regular meetings without other notice than such resolution.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the bank unless
the 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 bank's normal lending
territory, as the place for holding any special meeting of the board of direc
tors 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 but shall not constitute attendance for the
purpose of compensation pursuant to Section 12 of this Article.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least two days 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 or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
6
<PAGE>
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the bank addressed to
the chairman of the board or the president. Unless otherwise specified, such
resignation shall take effect upon receipt by the chairman of the board or the
president. More than three consecutive absences from regular meetings of the
board of directors, unless excused by resolution of the board of directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the 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
actual attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the board of
directors may determine.
Section 13. Presumption of Assent. A director of the bank who is
present at a meeting of the board of directors at which action on any bank
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent or abstention shall be entered in the minutes of the meeting
or unless he or she shall file a written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the secretary of the bank within five
days after the date a copy of the minutes of the meeting is received. Such right
to dissent shall not apply to a director who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
7
<PAGE>
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 ex tent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the bank, or recommending to the shareholders a plan of
merger, consolidation, or conversion; the sale, lease, or other disposition of
all or substantially all of the property and assets of the bank otherwise than
in the usual and regular course of its business; a voluntary dissolution of the
bank; a revocation of any of the foregoing; or the approval of a transaction in
which any member of the executive committee, directly or indirectly, has any
material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
8
<PAGE>
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the bank. Unless otherwise specified,
such resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
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
bank and may prescribe the duties, constitution and procedures thereof.
ARTICLE V
OFFICERS
Section 1. Positions. The officers of the bank shall be a president,
one or more vice presidents, a secretary and a chief financial officer, each of
whom shall be elected by the board of directors. The Board of Directors may also
designate the Chairman of the Board as an officer. The president shall be the
chief executive officer, unless the board of directors designates the chairman
of the board as chief executive officer. The president shall be a director of
the bank. The offices of the secretary and chief financial officer may be held
by the same person and a vice president may also be either the secretary or the
chief financial officer. The board of directors may designate one or more vice
presidents as executive vice president or senior vice president. The board of
directors may also elect or authorize the appointment of such other officers as
the business of the bank may require. The officers shall have such authority and
perform such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
Section 2. Election and Term of Office. The officers of the bank shall
be elected annually at the first meeting of the board of directors held after
each annual meeting of the 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
9
<PAGE>
and qualified or until the officer's death, resignation, or removal in the
manner hereinafter provided. Election or appointment of an officer, employee or
agent shall not of itself create contractual rights. The board of directors may
authorize the bank to enter into an employment contract with any officer in
accordance with regulations of the Office; but no such contract shall impair the
right of the board of directors to remove any officer at any time in accordance
with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the bank will be served
thereby, but such removal, other than for cause, shall be without prejudice to
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 di rectors may authorize any officer,
employee, or agent of the bank to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the bank. Such authority may be
general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the bank
and no evidence of indebtedness shall be issued in its name unless authorized by
the board of directors. Such authority may be general or confined to specific
instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the bank shall be signed by one or more officers, employees or agents of
the bank in such manner as shall from time to time be determined by the board of
directors.
Section 4. Deposits. All funds of the bank not otherwise employed shall
be deposited from time to time to the credit of the bank in any duly authorized
depositories as the board of directors may select.
10
<PAGE>
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the bank shall be in such form as shall be determined by the
board of directors and approved by the Office. Such certificates shall be signed
by the chief executive officer or by any other officer of the bank authorized by
the board of directors, attested by the secretary or an assistant secretary, and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrar other than the bank itself
or one of its employees. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the bank. All
certificates surrendered to the bank for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares has been surrendered or cancelled, except that in case of a lost or
destroyed certificate, a new certificate may be issued upon such terms and
indemnity to the bank as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the bank. Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the bank shall be deemed by the bank to be the owner for
all purposes.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the bank shall end on the last day of September of
each year. The bank shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the board of directors. The appointment of such accountants shall be subject to
annual ratification by the shareholders.
11
<PAGE>
ARTICLE IX
DIVIDENDS
Subject to the terms of the bank's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE X
CORPORATE SEAL
The board of directors shall provide a bank seal which shall be two
concentric circles between which shall be the name of the bank. The year of
incorporation or an emblem may appear in the center.
ARTICLE XI
AMENDMENTS
These bylaws may be amended in a manner consistent with the regulations
of the Office at any time by a majority of the full board of directors or by a
majority of the votes cast by the shareholders of the bank at any legal meeting.
12
Exhibit 5
February 9, 1998
The Board of Directors
Adirondack Financial Services Bancorp, Inc.
52 North Main Street
Gloversville, New York 12078-3084
Re: Registration Statement Under the Securities Act of 1933
Gentlemen:
This opinion is rendered in connection with the Registration Statement
to be filed on Form S-1 with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the 661,250 shares of Common Stock of
Adirondack Financial Services Bancorp, Inc. (the "Company"), par value $.01 per
share, to be issued. As counsel, we have reviewed the Certificate of
Incorporation of the Company and such other documents as we have deemed
appropriate for the purpose of this opinion. We are rendering this opinion as of
the time the Registration Statement referred to above becomes effective.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
sold, be validly issued, fully paid and non-assessable shares of Common Stock of
the Company.
Very truly yours,
/S/ SILVER FREEDMAN & TAFF, L.L.P.
SILVER FREEDMAN & TAFF, L.L.P.
Exhibit 8.1
[SILVER, FREEDMAN & TAFF LETTERHEAD]
February 3, 1998
Board of Directors
Gloversville Federal Savings &
Loan Association
52 North Main Street
Gloversville, NY 12078-3084
RE: Federal Income Tax Opinion Relating To The Conversion Of
Gloversville Federal Savings & Loan Association From A Federally-
Chartered Mutual Savings and Loan Association To A Federally-
Chartered Stock Institution Under Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, As Amended
----------------------------------------------------------------------
Gentlemen:
In accordance with your request set forth hereinbelow is the opinion of
this firm relating to the federal income tax consequences of the conversion of
Gloversville Federal Savings & Loan Association ("Mutual") from a federal mutual
to a federal stock institution pursuant to the provisions of Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code").
Capitalized terms used herein which are not expressly defined herein
shall have the meaning ascribed to them in the Plan of Conversion dated November
19, 1997 (the "Plan").
The following assumptions have been made in connection with our
opinions hereinbelow:
<PAGE>
Board of Directors
December 30, 1997
Page 2
1. The Conversion is implemented in accordance with the terms of the
Plan and all conditions precedent contained in the Plan shall be performed or
waived prior to the consummation of the Conversion.
2. No amount of the savings accounts and deposits of Mutual, as of the
Eligibility Record Date or the Supplemental Eligibility Record Date, will be
excluded from participating in the liquidation account of Converted Bank. To the
best of the knowledge of the management of Mutual there is not now, nor will
there be at the time of the Conversion, any plan or intention, on the part of
the depositors in Mutual to withdraw their deposits following the Conversion.
Deposits withdrawn immediately prior to or immediately subsequent to the
Conversion (other than maturing deposits) are considered in making these
assumptions.
3. Holding Company and Converted Bank each have no plan or intention to
redeem or otherwise acquire any of the Holding Company Conversion Stock to be
issued in the proposed transaction.
4. Immediately following the consummation of the proposed transaction,
Converted Bank will possess the same assets and liabilities as Mutual held
immediately prior to the proposed transaction, plus substantially all of the net
proceeds from the sale of its stock to Holding Company except for assets used to
pay expenses of the Conversion. The liabilities transferred to Converted Bank
were incurred by Mutual in the ordinary course of business.
5. No cash or property will be given to deposit account holders in lieu
of Subscription Rights or an interest in the liquidation account of Converted
Bank.
6. Following the Conversion, Converted Bank will continue to engage in
its business in substantially the same manner as Mutual engaged in business
prior to the Conversion, and it has no plan or intention to sell or otherwise
dispose of any of its assets, except in the ordinary course of business.
7. There is no plan or intention for Converted Bank to be liquidated or
merged with another corporation following the consummation of the Conversion.
8. The fair market value of each savings account plus an interest in
the liquidation account of Converted Bank will, in each instance, be
approximately equal to the fair market value of each savings account of Mutual
plus the interest in the residual equity of Mutual surrendered in exchange
therefor.
9. Mutual, Converted Bank and Holding Company are each corporations
within the meaning of Section 7701(a)(3) of the Code.
<PAGE>
Board of Directors
December 30, 1997
Page 3
10. Holding Company has no plan or intention to sell or otherwise
dispose of the stock of Converted Bank received by it in the proposed
transaction.
11. Both Converted Bank and Holding Company have no plan or intention,
either currently or at the time of Conversion, to issue additional shares of
common stock following the proposed transaction, other than shares that may be
issued to employees and/or directors pursuant to certain stock option and stock
incentive plans or that may be issued to employee benefit plans.
12. If all of the net proceeds from the sale of Holding Company
Conversion Stock had been contributed by Holding Company to Converted Bank in
exchange for common stock of Converted Bank in the transaction, as opposed to
Holding Company retaining a portion of such net proceeds (the "retained
proceeds"), and Converted Bank immediately thereafter made a distribution of the
retained proceeds to Holding Company, Converted Bank would have sufficient
current and accumulated earnings and profits for tax purposes such that the
distribution would not result in the recapture of any portion of its bad debt
reserves of Converted Bank for federal income tax reporting.
13. Assets used to pay expenses of the Conversion and all distributions
(except for regular, normal interest payments and other payments in the normal
course of business made by Mutual immediately preceding the transaction) will in
the aggregate constitute less than 1% of the net assets of Mutual and any such
expenses and distributions will be paid by Converted Bank from the proceeds of
the sale of Holding Company Conversion Stock.
14. All distributions to deposit account holders in their capacity as
deposit account holders (except for regular, normal interest payments made by
Mutual), will, in the aggregate, constitute less than 1% of the fair market
value of the net assets of Mutual.
15. At the time of the proposed transaction, the fair market value of
the assets of Mutual on a going concern basis (including intangibles) will equal
or exceed the amount of its liabilities plus the amount of liabilities to which
such assets are subject. Mutual will have a positive regulatory net worth at the
time of the Conversion.
16. Mutual is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code. The
proposed transaction does not involve a receivership, foreclosure, or similar
proceeding before a federal or state agency involving a financial institution to
which Section 585 of the Code applies.
17. Mutual's Eligible Account Holders and Supplemental Eligible Account
Holders will pay expenses of the Conversion solely attributable to them, if any.
<PAGE>
Board of Directors
December 30, 1997
Page 4
18. The liabilities of Mutual assumed by Converted Bank plus the
liabilities, if any, to which the transferred assets are subject were incurred
by Mutual in the ordinary course of its business and are associated with the
assets being transferred.
19. There will be no purchase price advantage for Mutual's deposit
account holders who purchase Holding Company Conversion Stock.
20. Neither Mutual nor Converted Bank is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
21. None of the compensation to be received by any deposit account
holder-employees of Mutual or Holding Company will be separate consideration
for, or allocable to, any of their deposits in Mutual. No interest in the
liquidation account of Converted Bank will be received by any deposit account
holder-employees as separate consideration for, or will otherwise be allocable
to, any employment agreement, and the compensation paid to each deposit account
holder-employee, during the twelve-month period preceding or subsequent to the
Conversion, will be for services actually rendered and will be commensurate with
amounts paid to the third parties bargaining at arm's-length for similar
services. No shares of Holding Company Conversion Stock will be issued to or
purchased by any deposit account holder-employee of Mutual or Holding Company at
a discount or as compensation in the proposed transaction.
22. No creditors of Mutual or the depositors in their role as
creditors, have taken any steps to enforce their claims against Mutual by
instituting bankruptcy or other legal proceedings, in either a court or
appropriate regulatory agency, that would eliminate the proprietary interests of
the Members prior to the Conversion of Mutual including depositors as the equity
holders of Mutual.
23. The proposed transaction does not involve the payment to Converted
Bank or Mutual of financial assistance from federal agencies within the meaning
of Notice 89-102, 1989-40 C.B. 1.
24. On a per share basis, the purchase price of Holding Company
Conversion Stock will be equal to the fair market value of such stock at the
time of the completion of the proposed transaction.
25. Mutual has received or will receive an opinion from RP Financial,
Inc. ("Appraiser's Opinion"), which concludes that the Subscription Rights to be
received by Eligible Account Holders, Supplemental Eligible Account Holders and
other eligible subscribers do not have any ascertainable fair market value,
since they are acquired by the recipients without cost,
<PAGE>
Board of Directors
December 30, 1997
Page 5
are non-transferable and of short duration, and afford the recipients a right
only to purchase Holding Company Conversion Stock at a price equal to its
estimated fair market value, which will be the same price as the Public Offering
Price for unsubscribed shares of Holding Company Conversion Stock.
26. Mutual will not have any net operating losses, capital loss
carryovers or built-in losses at the time of the Conversion.
OPINION
Based solely on the assumptions set forth hereinabove and our analysis
and examination of applicable federal income tax laws, rulings, regulations,
judicial precedents and the Appraiser's Opinion, we are of the opinion that if
the transaction is undertaken in accordance with the above assumptions:
(1) The Conversion will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Code. Neither Mutual nor Converted Bank will
recognize any gain or loss as a result of the transaction (Rev. Rul. 80-105,
1980-1 C.B. 78). Mutual and Converted Bank will each be a party to a
reorganization within the meaning of Section 368(b) of the Code.
(2) Converted Bank will recognize no gain or loss upon the receipt of
money and other property, if any, in the Conversion, in exchange for its shares.
(Section 1032(a) of the Code.)
(3) No gain or loss will be recognized by Holding Company upon the
receipt of money for Holding Company Conversion Stock. (Section 1032(a) of the
Code.)
(4) The basis of Mutual's assets in the hands of Converted Bank will be
the same as the basis of those assets in the hands of Mutual immediately prior
to the transaction. (Section 362(b) of the Code.)
(5) Converted Bank's holding period of the assets of Mutual will
include the period during which such assets were held by Mutual prior to the
Conversion. (Section 1223(2) of the Code.)
(6) Converted Bank, for purposes of Section 381 of the Code, will be
treated as if there had been no reorganization. The tax attributes of Mutual
enumerated in Section 381(a) of the Code will be taken into account by Converted
Bank as if there had been no reorganization. Accordingly, the tax year of Mutual
will not end on the effective date of the Conversion. The part of the tax year
of Mutual before the Conversion will be includible in the tax year of Converted
<PAGE>
Board of Directors
December 30, 1997
Page 6
Bank after the Conversion. Therefore, Mutual will not have to file a federal
income tax return for the portion of the tax year prior to the Conversion. (Rev.
Rul. 57-276, 1957-1 C.B. 126.)
(7) Depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of Converted Bank,
Subscription Rights and/or interests in the liquidation account of Converted
Bank. Any gain resulting therefrom will be recognized, but only in an amount not
in excess of the fair market value of the liquidation accounts and/or
Subscription Rights received. The liquidation accounts will have nominal, if
any, fair market value. Based solely on the accuracy of the conclusion reached
in the Appraiser's Opinion, and our reliance on such opinion, that the
Subscription Rights have no value at the time of distribution or exercise, no
gain or loss will be required to be recognized by depositors upon receipt or
distribution of Subscription Rights. (Section 1001 of the Code.) See Paulsen v.
Commissioner, 469 U.S. 131,139 (1985). Likewise, based solely on the accuracy of
the aforesaid conclusion reached in the Appraiser's Opinion, and our reliance
thereon, we give the following opinions: (a) no taxable income will be
recognized by the borrowers, directors, officers and employees of Mutual upon
the distribution to them of Subscription Rights or upon the exercise or lapse of
the Subscription Rights to acquire Holding Company Conversion Stock at fair
market value; (b) no taxable income will be realized by the depositors of Mutual
as a result of the exercise or lapse of the Subscription Rights to purchase
Holding Company Conversion Stock at fair market value. Rev. Rul. 56-572, 1956-2
C.B. 182; and (c) no taxable income will be realized by Mutual, Converted Bank
or Holding Company on the issuance or distribution of Subscription Rights to
depositors of Mutual to purchase shares of Holding Company Conversion Stock at
fair market value. (Section 311 of the Code.)
Notwithstanding the Appraiser's Opinion, if the Subscription Rights are
subsequently found to have a fair market value, income may be recognized by
various recipients of the Subscription Rights (in certain cases, whether or not
the rights are exercised) and Holding Company and/or Converted Bank may be
taxable on the distribution of the Subscription Rights. (Section 311 of the
Code.) In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
(8) The creation of the liquidation account on the records of Converted
Bank will have no effect on Mutual's or Converted Bank's taxable income,
deductions, or tax bad debt reserve.
(9) A depositor's basis in the savings deposits of Converted Bank will
be the same as the basis of his savings deposits in Mutual. (Section 1012 of the
Code.) Based upon the Appraiser's Opinion, the basis of the Subscription Rights
will be zero. The basis of the interest in the liquidation account of Converted
Bank received by Eligible Account Holders and
<PAGE>
Board of Directors
December 30, 1997
Page 7
Supplemental Eligible Account Holders will be equal to the cost of such
property, i.e., the fair market value of the proprietary interest in Mutual,
which in this transaction we assume to be zero.
(10) The basis of Holding Company Conversion Stock to its shareholders
will be the purchase price thereof. (Section 1012 of the Code.)
(11) A shareholder's holding period for Holding Company Conversion
Stock acquired through the exercise of the Subscription Rights shall begin on
the date on which the Subscription Rights are exercised. (Section 1223(6) of the
Code.) The holding period for the Holding Company Conversion Stock purchase
pursuant to the Direct Community Offering, Public Offering or under other
purchase arrangements will commence on the date following the date on which such
stock is purchased. (Rev. Rul. 70-598, 1970-2 C.B. 168).
(12) Regardless of any book entries that are made for the establishment
of a liquidation account, the reorganization will not diminish the accumulated
earnings and profits of Mutual available for the subsequent distribution of
dividends, within the meaning of Section 316 of the Code. Section 1.312-11(b)
and (c) of the Regulations. Converted Bank will succeed to and take into account
the earnings and profits or deficit in earnings and profits of Mutual as of the
date of Conversion.
The above opinions are effective to the extent that Mutual is solvent.
No opinion is expressed about the tax treatment of the transaction if Mutual is
insolvent. Whether or not Mutual is solvent will be determined at the end of the
taxable year in which the transaction is consummated.
No opinion is expressed as to the tax treatment of the transaction
under the provisions of any of the other sections of the Code and Income Tax
Regulations which may also be applicable thereto, or to the tax treatment of any
conditions existing at the time of, or effects resulting from, the transaction
which are not specifically covered by the opinions set forth above.
Respectfully submitted,
SILVER, FREEDMAN & TAFF
----------------------------
Exhibit 8.2
February 5, 1998
Board of Trustees
Gloversville Federal Savings & Loan Association
52 North Main Street
Gloversville, New York 12078
Board Members:
You have requested the opinion of KPMG Peat Marwick LLP ("KPMG") as to the New
York State franchise and New York State personal income tax consequences
relating to the proposed conversion of Gloversville Federal Savings & Loan
Association from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank (Stock Bank) and the formation of
Adirondack Financial Services Bancorp, Inc. which will acquire all of the
outstanding stock of Stock Bank.
You have submitted to us a copy of the federal income tax opinion ("Federal
Opinion") relating to the federal income tax consequences of the proposed
transaction prepared by your counsel, Silver, Freedman & Taff, L.L.P. and dated
January 2, 1998.
Our opinion regarding the New York State franchise and New York State personal
income tax consequences of the proposed transaction is based on the same facts,
assumptions and conditions contained in the Federal Opinion. It is also based on
existing New York Tax Law which is subject to change. We have not reviewed the
legal documents necessary to effectuate the steps to be undertaken, and we
assume that all steps will be properly effectuated under state and federal law
and will be consistent with the legal documentation.
In our opinion, the New York State franchise and New York State personal income
tax consequences of the proposed transaction are consistent with the federal
income tax consequences of the proposed transaction opined upon in the Federal
Opinion.
For purposes of the franchise tax the State of New York has adopted federal
taxable income (Internal Revenue Code Sec. 63), as currently amended, as the
starting point for computing New York entire net income (NYS Tax Law Sec. 1453).
Franchise tax terms are defined in relation to the Internal Revenue Code of
1986, as amended. Taxpayers are required to use federal taxable income as the
starting point for the computation of entire net income.
Several specific modifications to federal taxable income are enumerated in the
New York Tax Law and the Banking Corporation Regulations in determining income
taxable for New York State franchise tax purposes, however there are no specific
modifications which apply to the proposed transaction (see New York State Tax
Law Article 32, Sections 1453 (b) through (m) and Regulation Sections 18-2.3,
18-2.4 and 18-2.5 of the Franchise Tax on Banking Corporations).
The State of New York has adopted federal adjusted gross income (IRC Sec. 62),
as currently amended, as the starting point for computing New York taxable
income (NYS Tax Law Sec. 612) for personal income tax purposes. Income tax terms
are defined in relation to the Internal Revenue Code of 1986, as amended.
<PAGE>
Board of Trustees
Gloversville Federal Savings & Loan Association
February 5, 1998
Page 1
Several specific modifications to federal taxable income are enumerated in the
New York Statutes in determining income taxable for New York State personal
income tax purposes, however there are no specific modifications which apply to
the proposed transaction (see New York State Tax Law Article 22, Sections 612
(b) through (t) and Regulation Sections 112.2 through 112.13 of the Personal
Income Tax).
Our opinion as expressed above is rendered only with respect to the New York
franchise and New York State personal income tax consequences of specific
matters discussed herein, and we express no opinion with respect to any other
New York franchise, income or transfer tax matter or any other federal, state,
local or foreign tax matter relating to the proposed transaction. Our opinion is
based on the facts and conditions as stated herein, whether directly or by
reference to the Federal Opinion. It is expressly understood and agreed to by
Gloversville Federal Savings & Loan Association, Stock Bank, and Adirondack
Financial Services Bancorp, Inc. that KPMG is relying solely on the Federal
Opinion in all respects relating to the federal tax consequences of the matters
described herein. KPMG has not independently verified the accuracy of any fact,
representation, opinion or other matter contained in the Federal Tax Opinion and
should any fact, representation, opinion or other matter addressed therein not
be correct, it could cause the New York State franchise and income tax opinion
contained herein to also be incorrect. If any of the facts and conditions are
not entirely complete or accurate, it is imperative that we be informed
immediately, as the inaccuracy or incompleteness could have a material effect on
our conclusions. In rendering our opinion, we are relying upon the relevant
provisions of the Internal Revenue Code of 1986, as amended, and New York
Statutes, as amended, the regulations and rules thereunder and judicial and
administrative interpretations thereof, which are subject to change or
modification by subsequent legislative, regulatory, administrative, or judicial
decisions. Any such changes could also have an effect on the validity of our
opinion. We undertake no responsibility to update or supplement our opinion
after its issuance. This opinion is not binding upon any tax authority or any
court and no assurance can be given that a position contrary to that expressed
herein will not be asserted by a tax authority and ultimately sustained by a
court.
Very truly yours,
KPMG Peat Marwick LLP
Brian C. Flynn
Partner
BCF/ms
Exhibit 10.5
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of October 1, 1997
<PAGE>
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
PREAMBLE 1
ARTICLE I DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions
(a) "Act" 2
(b) "Administrator" 2
(c) "Annual Additions" 2
(d) "Authorized Leave of Absence" 2
(e) "Beneficiary" 2
(f) "Board of Directors" 2
(g) "Break" 3
(h) "Code" 3
(i) "Compensation" 3
(j) "Date of Hire" 3
(k) "Disability" 3
(l) "Disability Retirement Date" 3
(m) "Early Retirement Date" 4
(n) "Effective Date" 4
(o) "Eligibility Period" 4
(p) "Employee" 4
(q) "Employer" 4
(r) "Employer Securities" 4
(s) "Entry Date" 4
(t) "Exempt Loan" 4
(u) "Former Participant" 4
(v) "Fund" 4
(w) "Hour of Service" 5
(x) "Investment Adjustments" 5
(y) "Limitation Year" 5
(z) "Normal Retirement Date" 5
(aa) "Participant" 5
(bb) "Plan" 6
(cc) "Plan Year" 6
(dd) "Qualified Domestic Relations Order" 6
<PAGE>
(ee) "Retirement" 6
(ff) "Service" 6
(gg) "Sponsor" 6
(hh) "Trust Agreement" 6
(ii) "Trustee" 7
(jj) "Valuation Date" 7
(kk) "Year of Service" 7
1.2 Plurals and Gender 7
1.3 Incorporation of Trust Agreement 7
1.4 Headings 8
1.5 Severability 8
1.6 References to Governmental Regulations 8
ARTICLE II PARTICIPATION
2.1 Commencement of Participation 9
2.2 Termination of Participation 9
2.3 Resumption of Participation 9
2.4 Determination of Eligibility 10
ARTICLE III CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes 11
3.2 Service Counted for Vesting Purposes 11
3.3 Credit for Pre-Break Service 11
3.4 Service Credit During Authorized Leaves 11
3.5 Service Credit During Maternity or
Paternity Leave 12
3.6 Ineligible Employees 12
ARTICLE IV CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions 13
4.2 Time and Manner of Employee Stock Ownership
Contributions 13
4.3 Records of Contributions 14
4.4 Erroneous Contributions 14
4.5 Re-employed Veterans 15
ARTICLE V ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant
Accounts 16
<PAGE>
5.2 Establishment of Suspense Account 16
5.3 Allocation of Earnings, Losses and Expenses 17
5.4 Allocation of Forfeitures 17
5.5 Allocation of Annual Employee Stock
Ownership Contributions 17
5.6 Limitation on Annual Additions 18
5.7 Erroneous Allocations 21
5.8 Value of Participant's Interest in Fund 21
5.9 Investment of Account Balances 21
ARTICLE VI RETIREMENT, DEATH AND DESIGNATION
OF BENEFICIARY
6.1 Normal Retirement 22
6.2 Early Retirement 22
6.3 Disability Retirement 22
6.4 Death Benefits 22
6.5 Designation of Death Beneficiary and
Manner of Payment 23
ARTICLE VII VESTING AND FORFEITURES
7.1 Vesting on Death, Disability, Normal Retirement 24
7.2 Vesting on Termination of Participation 24
7.3 Disposition of Forfeitures 24
ARTICLE VIII EMPLOYEE STOCK OWNERSHIP RULES
8.1 Right to Demand Employer Securities 26
8.2 Voting Rights 26
8.3 Nondiscrimination in Employee Stock Owner-
ship Contributions 26
8.4 Dividends 27
8.5 Exempt Loans 27
8.6 Exempt Loan Payments 29
8.7 Put Option 30
8.8 Diversification Requirements 30
8.9 Independent Appraiser 31
ARTICLE IX PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service
- In General 32
9.2 Commencement of Payments 32
<PAGE>
9.3 Mandatory Commencement of Benefits 33
9.4 Required Beginning Dates 35
9.5 Form of Payment 35
9.6 Payments Upon Termination of Plan 36
9.7 Distribution Pursuant to Qualified
Domestic Relations Orders 36
9.8 Cash-Out Distributions 36
9.9 ESOP Distribution Rules 37
9.10 Withholding 37
9.11 Waiver of 30-day Notice 38
9.12 Re-employed Veterans 38
ARTICLE X PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control 39
10.2 Top-Heavy Plan Definitions 39
10.3 Calculation of Accrued Benefits 41
10.4 Determination of Top-Heavy Status 42
10.5 Determination of Super Top-Heavy Status 42
10.6 Minimum Contribution 43
10.7 Vesting 44
10.8 Maximum Benefit Limitation 44
ARTICLE XI ADMINISTRATION
11.1 Appointment of Administrator 45
11.2 Resignation or Removal of Administrator 45
11.3 Appointment of Successors: Terms of
Office, Etc. 45
11.4 Powers and Duties of Administrator 45
11.5 Action by Administrator 47
11.6 Participation by Administrators 47
11.7 Agents 47
11.8 Allocation of Duties 47
11.9 Delegation of Duties 47
11.10 Administrator's Action Conclusive 48
11.11 Compensation and Expenses of
Administrator 48
11.12 Records and Reports 48
11.13 Reports of Fund Open to Participants 48
11.14 Named Fiduciary 48
11.15 Information from Employer 49
11.16 Reservation of Rights by Employer 49
<PAGE>
11.17 Liability and Indemnification 49
11.18 Service as Trustee and Administrator 49
ARTICLE XII CLAIMS PROCEDURE
12.1 Notice of Denial 50
12.2 Right to Reconsideration 50
12.3 Review of Documents 50
12.4 Decision by Administrator 50
12.5 Notice by Administrator 50
ARTICLE XIII AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments 51
13.2 Consolidation, Merger or Other
Transactions of Employer 51
13.3 Consolidation or Merger of Trust 52
13.4 Bankruptcy or Insolvency of Employer 52
13.5 Voluntary Termination 53
13.6 Partial Termination of Plan or Permanent
Discontinuance of Contributions 53
13.7 Change of Control 53
ARTICLE XIV MISCELLANEOUS
14.1 No Diversion of Funds 54
14.2 Liability Limited 54
14.3 Incapacity 54
14.4 Spendthrift Clause 54
14.5 Benefits Limited to Fund 55
14.6 Cooperation of Parties 55
14.7 Payments Due Missing Persons 55
14.8 Governing Law 55
14.9 Nonguarantee of Employment 56
14.10 Counsel 56
<PAGE>
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
PREAMBLE
Effective as of October 1, 1997, Adirondack Financial Services Bancorp,
Inc., a Delaware corporation (the "Sponsor"), has adopted the Adirondack
Financial Services Bancorp, Inc. Employee Stock Ownership Plan in order to
enable Participants to share in the growth and prosperity of the Sponsor and its
wholly owned subsidiary, Gloversville Federal Savings & Loan Association, and to
provide Participants with an opportunity to accumulate capital for their future
economic security by accumulating funds to provide retirement, death and
disability benefits. The Plan is a stock bonus plan designed to meet the
requirements of an employee stock ownership plan as described at Section
4975(e)(7) of the Code and Section 407(d)(6) of ERISA. The primary purpose of
the employee stock ownership plan is to invest in employer securities. The
Sponsor intends that the Plan will qualify under Sections 401(a) and 501(a) of
the Code and will comply with the provisions of ERISA. The Plan has been drafted
to comply with the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act
of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Revenue Reconciliation Act of 1989, the
Omnibus Budget Reconciliation Act of 1993, the Small Business Job Protection Act
of 1996, and the Taxpayer Relief Act of 1997.
The terms of this Plan shall apply only with respect to Employees of
the Employer on and after October 1, 1997.
<PAGE>
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Plan shall have the following meanings:
(a) "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
(b) "Administrator" shall mean the administrative committee provided
for in Article XI.
(c) "Annual Additions" shall mean, with respect to each Participant,
the sum of those amounts allocated to the Participant's accounts under this
Plan and under any other qualified defined contribution plan to which the
Employer contributes for any Limitation Year, consisting of the follow ing:
(1) Employer contributions;
(2) Forfeitures; and
(3) Voluntary contributions (if any).
(d) "Authorized Leave of Absence" shall mean an absence from Service
with respect to which the Employee may or may not be entitled to
Compensation and which meets any one of the following requirements:
(1) Service in any of the armed forces of the United States
for up to 36 months, provided that the Employee resumes Service within 90
days after discharge, or such longer period of time during which such
Employee's employment rights are protected by law; or
(2) Any other absence or leave expressly approved and granted
by the Employer which does not exceed 24 months, provided that the Employee
resumes Service at or before the end of such approved leave period. In
approving such leaves of absence, the Employer shall treat all Employees on
a uniform and nondiscriminatory basis.
(e) "Beneficiary" shall mean such persons as may be designated by the
Participant to receive benefits after the death of the Participant, or such
persons designated by the Administrator to receive benefits after the death
of the Participant, all as provided in Section 6.5.
-2-
<PAGE>
(f) "Board of Directors" shall mean the Board of Directors of the
Sponsor.
(g) "Break" shall mean a Plan Year during which an Employee fails to
complete more than 500 Hours of Service.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
(i) "Compensation" shall mean the amount of remuneration paid to an
Employee by the Employer, during a Plan Year in which the Employee is or
becomes a Participant, for services rendered to the Employer during a Plan
Year and reported on IRS Form W-2, including base salary, bonuses, overtime,
commissions, restricted stock and non-qualified stock options, and any
amount of compensation contributed pursuant to a salary reduction election
under Code Section 401(k) and any amount of compensation contributed to a
cafeteria plan described at Section 125 of the Code, but excluding amounts
paid by the Employer or accrued with respect to this Plan or any other
qualified or non-qualified unfunded plan of deferred compensation or other
employee welfare plan to which the Employer contributes, payments for group
insurance, medical benefits, reimbursement for expenses, and other forms of
extraordinary pay, and excluding amounts accrued for a prior year.
Notwithstanding anything herein to the contrary, the annual Compensation of
each Participant taken into account under the Plan for any Plan Year shall
not exceed $160,000, as adjusted from time to time in accordance with
Section 415(d) of the Code.
(j) "Date of Hire" shall mean the date on which a person shall perform
his first Hour of Service. Notwithstanding the foregoing, in the event a
person incurs one or more consecutive Breaks after his initial Date of Hire
which results in the forfeiture of his pre-Break Service pursuant to Section
3.3, his "Date of Hire" shall thereafter be the date on which he completes
his first Hour of Service after such Break or Breaks.
(k) "Disability" shall mean a physical or mental impairment which
prohibits a Participant from engaging in any occupation for wages or profit
and which has caused the Social Security Administration to classify the
individual as "disabled" for purposes of Social Security.
(l) "Disability Retirement Date" shall mean the first day of the month
after which a Participant incurs a Disability.
(m) "Early Retirement Date" shall mean the first day of the month
coincident with or next following the date on which a Participant attains
age 55 and completes 5 Years of Service.
(n) "Effective Date" shall mean October 1, 1997.
-3-
<PAGE>
(o) "Eligibility Period" shall mean the period of 12 consecutive months
commencing on an Employee's Date of Hire. Succeeding eligibility computation
periods after the initial eligibility computation period shall be based on
Plan Years which include the first anniversary of an Employee's Date of
Hire.
(p) "Employee" shall mean any person employed by the Employer,
including officers but excluding directors in their capacity as such;
provided, however, that the term "Employee" shall not include leased
employees, employees regularly employed outside the employer's own offices
in connection with the operation and maintenance of buildings or other
properties acquired through foreclosure or deed, and any employee included
in a unit of employees covered by a collective- bargaining agreement with
the Employer that does not expressly provide for participation of such
employees in this Plan, where there has been good-faith bargaining between
the Employer and employees' representatives on the subject of retirement
benefits.
(q) "Employer" shall mean Adirondack Financial Services Bancorp, Inc.,
a Delaware corporation, and its wholly owned subsidiary, Gloversville
Federal Savings & Loan Association, or any successors to the aforesaid
corporations by merger, consolidation or otherwise, which may agree to
continue this Plan, or any affiliated or subsidiary corporation or business
organization of any Employer which, with the consent of the Sponsor, shall
agree to become a party to this Plan.
(r) "Employer Securities" shall mean the common stock issued by
Adirondack Financial Services Bancorp, Inc., a Delaware corporation.
(s) "Entry Date" shall mean each October 1 and April 1, so long as
this Plan shall remain in effect.
(t) "Exempt Loan" shall mean a loan described at Section 4975(d)(1) of
the Code to the Trustee to purchase Employer Securities for the Plan, made
or guaranteed by a disqualified person, as defined at Section 4975(e)(2) of
the Code, including, but not limited to, a direct loan of cash, a purchase
money transaction, an assumption of an obligation of the Trustee, an
unsecured guarantee or the use of assets of such disqualified person as
collateral for such a loan.
(u) "Former Participant" shall mean any previous Participant whose
participation has terminated but who has a vested interest in the Plan which
has not been distributed in full.
(v) "Fund" shall mean the Fund maintained by the Trustee pursuant to
the Trust Agreement in order to provide for the payment of the benefits
specified in the Plan.
(w) "Hour of Service" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by an Employer for the
performance of duties or for reasons other than the performance of duties
(such as vacation time, holidays, sickness, disability, paid lay-offs, jury
duty
-4-
<PAGE>
and similar periods of paid nonworking time). To the extent not otherwise
included, Hours of Service shall also include each hour for which back pay,
irrespective of mitigation of damages, is either award ed or agreed to by
the Employer. Hours of working time shall be credited on the basis of actual
hours worked, even though compensated at a premium rate for overtime or
other reasons. In computing and crediting Hours of Service for an Employee
under this Plan, the rules set forth in Sections 2530.200b- 2(b) and (c) of
the Department of Labor Regulations shall apply, said Sections being herein
incor porated by reference. Hours of Service shall be credited to the Plan
Year or other relevant period during which the services were performed or
the nonworking time occurred, regardless of the time when Compensation
therefor may be paid. Any Employee for whom no hourly employment records are
kept by the Employer shall be credited with 45 Hours of Service for each
calendar week in which he would have been credited with a least one Hour or
Service under the foregoing provisions, if hourly records were available.
Effective October 1, 1985, for absences commencing on or after that date,
solely for purposes of determining whether a Break for participation and
vesting purposes has occurred in an Eligibility Period or Plan Year, an
individual who is absent from work for maternity or paternity reasons shall
receive credit for the Hours of Service which would otherwise have been
credited to such individual but for such absence, or in any case in which
such hours cannot be determined, 8 Hours of Service per day of such absence.
For purposes of this Section 1.1(w), an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with
the adoption of such child by such individual, or (4) for purposes of caring
for such child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this provision shall be
credited (1) in the computation period in which the absence begins if the
crediting is necessary to prevent a Break in that period, or (2) in all
other cases, in the following computation period.
(x) "Investment Adjustments" shall mean the increases and/or decreases
in the value of a Participant's accounts attributable to earnings, gains,
losses and expenses of the Fund, as set forth in Section 5.3.
(y) "Limitation Year" shall mean the calendar year.
(z) "Normal Retirement Date" shall mean the first day of the month
coincident with or during which a Participant attains age 65 and completes
the fifth anniversary of his participation in the Plan.
(aa) "Participant" shall mean an Employee who has met all of the
eligibility requirements of the Plan and who is currently included in the
Plan as provided in Article II hereof.
(bb) "Plan" shall mean the Adirondack Financial Services Bancorp, Inc.
Employee Stock Ownership Plan, as described herein or as hereafter amended
from time to time.
-5-
<PAGE>
(cc) "Plan Year" shall mean any 12 consecutive month period commencing
on October 1 and ending on September 30.
(dd) "Qualified Domestic Relations Order" shall mean any judgment,
decree or order (including approval of a property settlement agreement) that
relates to the provision of child support, alimony, marital property rights
to a spouse, former spouse, child or other dependent of the Participant (all
such persons hereinafter termed "alternate payee") and is made pursuant to a
State domestic relations law (including community property law) and,
further, that creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to receive all or a
portion of the benefits payable with respect to a Participant and that
clearly specifies the following:
(1) the name and last known mailing address (if available) of
the Participant and the name and mailing address of each alternate
payee to which the order relates;
(2) the amount or percentage of the Participant's benefits to
be paid to an alternate payee or the manner in which the amount is to
be determined; and
(3) the number of payments or period for which payments are
required.
A domestic relations order is not a Qualified Domestic Relations Order
if it:
(1) requires the Plan to provide any type or form of benefit
or any option not otherwise provided under the Plan; or,
(2) requires the Plan to provide increased benefits, or
(3) requires payment of benefits to an alternate payee that is
required to be paid to another alternate payee under a previously
existing Qualified Domestic Relations Order.
(ee) "Retirement" shall mean termination of employment which qualifies
as early, normal or Disability retirement as described in Article VI.
(ff) "Service" shall mean employment with the Employer.
(gg) "Sponsor" shall mean Adirondack Financial Services Bancorp, Inc.,
a Delaware corporation.
(hh) "Trust Agreement" shall mean the agreement, dated January 12, 1998
by and between Adirondack Financial Services Bancorp, Inc., a Delaware
corporation, and Community Bank, N.A., of Olean, New York.
-6-
<PAGE>
(ii) "Trustee" shall mean the Trustee or Trustees by whom the assets of
the Plan are held, as provided in the Trust Agreement, or his or their
successors.
(jj) "Valuation Date" shall mean the last day of each Plan Year. The
Trustee may make additional valuations, at the instruction of the
Administrator, but in no event may the Administrator request additional
valuations by the Trustee more frequently than quarterly. Whenever such date
falls on a Saturday, Sunday or holiday, the preceding business day shall be
the Valuation Date.
(kk) "Year of Service" shall mean any Plan Year during which an
Employee has completed at least 1,000 Hours of Service, except as otherwise
specified in Article III, in the determination of Years of Service for
eligibility and vesting purposes under this Plan, the term "Year of Service"
shall also mean any Plan Year during which an Employee has completed at
least 1,000 Hours of Service with an entity that is:
(1) a member of a controlled group including the Employer,
while it is a member of such controlled group (within the meaning of
Section 414(b) of the Code);
(2) in a group of trades or businesses under common control
with the Employer, while it is under common control (within the meaning
of Section 414(c) of the Code);
(3) a member of an affiliated service group including the
Employer, while it is a member of such affiliated service group (within
the meaning of Section 414(m) of the Code); or
(4) a leasing organization, under the circumstances described
in Section 414(n) of the Code.
1.2 Plurals and Gender.
Where appearing in the Plan and the Trust Agreement, the masculine
gender shall include the feminine and neuter genders, and the singular shall
include the plural, and vice versa, unless the context clearly indicates a
different meaning.
1.3 Incorporation of Trust Agreement.
The Trust Agreement, as the same may be amended from time to time, is
intended to be and hereby is incorporated by reference into this Plan and for
all purposes shall be deemed a part of the Plan.
-7-
<PAGE>
1.4 Headings.
The headings and sub-headings in this Plan are inserted for the
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
1.5 Severability.
In case any provision of this Plan shall be held illegal or void, such
illegality or invalidity shall not affect the remaining provisions of this Plan,
but shall be fully severable, and the Plan shall be construed and enforced as if
said illegal or invalid provisions had never been inserted herein.
1.6 References to Governmental Regulations.
References in this Plan to regulations issued by the Internal Revenue
Service, the Department of Labor, or other governmental agencies shall include
all regulations, rulings, procedures, releases and other position statements
issued by any such agency.
-8-
<PAGE>
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation.
(a) Any Employee who completes at least 1,000 Hours of Service during
his Eligibility Period or during any Plan Year beginning after his Date of Hire
shall initially become a Participant on the Entry Date coincident with or next
following the later of the following dates, provided he is employed by the
Employer on that Entry Date:
(1) The date which is 12 months after his Date of Hire; and
(2) The date on which he attains age 21.
(b) Any Employee who had satisfied the requirements set forth in
Section 2.1(a) during the 12-month period prior to the Effective Date shall
become a Participant on the Effective Date, provided he is still employed by the
Employer on the Effective Date.
2.2 Termination of Participation.
After commencement or resumption of his participation, an Employee
shall remain a Participant during each consecutive Plan Year thereafter until
the earliest of the following dates:
(a) His actual Retirement date;
(b) His date of death; or
(c) The last day of a Plan Year during which he incurs a Break.
2.3 Resumption of Participation.
(a) Any Participant whose employment terminates and who resumes Service
before he incurs a Break shall resume participation immediately on the date he
is reemployed.
(b) Except as otherwise provided in Section 2.3(c), any Participant who
incurs one or more Breaks and resumes Service shall resume participation
retroactively as of the first day of the first Plan Year in which he completes a
Year of Service after such Break(s).
(c) Any Participant who incurs one or more Breaks and resumes Service,
but whose pre- Break Service is not reinstated to his credit pursuant to Section
3.3, shall be treated as a new
-9-
<PAGE>
Employee and shall again be required to satisfy the eligibility requirements
contained in Section 2.1 before resuming participation on the appropriate Entry
Date, as specified in Section 2.1.
2.4 Determination of Eligibility.
The Administrator shall determine the eligibility of Employees in
accordance with the provisions of this Article. For each Plan Year, the Employer
shall furnish the Administrator a list of all Employees, indicating the original
date of their reemployment with the Employer and any Breaks they may have
incurred.
-10-
<PAGE>
ARTICLE III
CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes.
Except as provided in Section 3.3, all Years of Service completed by an
Employee shall be counted in determining his eligibility to become a Participant
on and after the Effective Date, whether such Service was completed before or
after the Effective Date.
3.2 Service Counted for Vesting Purposes.
All Years of Service completed by an Employee (including Years of
Service completed prior to the Effective Date) shall be counted in determining
his vested interest in this Plan, except the following:
(a) Service which is disregarded under the provisions of Section 3.3;
(b) Service prior to the Effective Date of this Plan if such Service
would have been disregarded under the "break in service" rules (within the
meaning of Section 1.411(a)-5(b)(6) of the Treasury Regulations).
3.3 Credit for Pre-Break Service.
Upon his resumption of participation following one or a series of
consecutive Breaks, an Employee's pre-Break Service shall be reinstated to his
credit for all purposes of this Plan only if either:
(a) He was vested in any portion of his accrued benefit at the time the
Break(s) began; or
(b) The number of his consecutive Breaks does not equal or exceed the
greater of 5 or the number of his Years of Service credited to him before the
Breaks began.
Except as provided in the foregoing, none of an Employee's Service
prior to one or a series of consecutive Breaks shall be counted for any purpose
in connection with his participation in this Plan thereafter.
3.4 Service Credit During Authorized Leaves.
An Employee shall receive no Service credit under Section 3.1 or 3.2
during any Authorized Leave of Absence. However, solely for the purpose of
determining whether he has incurred a Break
-11-
<PAGE>
during any Plan Year in which he is absent from Service for one or more
Authorized Leaves of Absence, he shall be credited with 45 Hours of Service for
each week during any such leave period. Notwithstanding the foregoing, if an
Employee fails to return to Service on or before the end of a leave period, he
shall be deemed to have terminated Service as of the first day of such leave
period and his credit for Hours of Service, determined under this Section 3.4,
shall be revoked. Notwithstanding anything contained herein to the contrary, an
Employee who is absent by reason of military service as set forth in Section
1.1(d)(1) shall be given Service credit under this Plan for such military leave
period to the extent, and for all purposes, required by law.
3.5 Service Credit During Maternity or Paternity Leave.
Effective for absences beginning on or after January 1, 1985, for
purposes of determining whether a Break has occurred for participation and
vesting purposes, an individual who is on maternity or paternity leave as
described in Section 1.1(w), shall be deemed to have completed Hours of Service
during such period of absence, all in accordance with Section 1.1(w).
Notwithstanding the foregoing, no credit shall be given for such Hours of
Service unless the individual furnishes to the Administrator such timely
information as the Administrator may reasonably require to determine:
(a) that the absence from Service was attributable to one of the
maternity or paternity reasons enumerated in Section 1.1(w); and
(b) the number of days for which such absence lasted.
In no event, however, shall any credit be given for such leave other
than for determining whether a Break has occurred.
3.6 Ineligible Employees.
Notwithstanding any provisions of this Plan to the contrary, any person
who is employed by the Employer, but who is ineligible to participate in this
Plan, either because of his failure
(a) To meet the eligibility requirements contained in Article II; or
(b) To be an Employee, as defined in Section 1.1(p), shall,
nevertheless, earn Years of Service for eligibility and vesting purposes
pursuant to the rules contained in this Article III. However, such a person
shall not be entitled to receive any contributions hereunder unless and until he
becomes a Participant in this Plan, and then, only during his period of
participation.
-12-
<PAGE>
ARTICLE IV
CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions.
(a) Subject to all of the provisions of this Article IV, for each Plan
Year commencing on or after the Effective Date, the Employer shall make an
Employee Stock Ownership contribution to the Fund, in such amount as may be
determined by the Board of Directors in its discretion. Such contribution shall
be in the form of cash or Employer Securities. In determining the value of
Employer Securities transferred to the Fund as an Employee Stock Ownership
contribution, the Administrator may determine the average of closing prices of
such securities for a period of up to 90 consecutive days immediately preceding
the date on which the securities are contributed to the Fund. In the event that
the Employer Securities are not readily tradable on an established securities
market, the value of the Employer Securities transferred to the Fund shall be
determined by an independent appraiser in accordance with Section 8.9.
(b) In no event shall such contribution by the Employer exceed for any
Plan Year the maximum amount that may be deducted by the Employer under Section
404 of the Code, nor shall such contribution cause the Employer to violate its
regulatory capital requirements. Each Employee Stock Ownership contribution by
the Employer shall be deemed to be made on the express condition that the Plan,
as then in effect, shall be qualified under Sections 401 and 501 of the Code and
that the amount of such contribution shall be deductible from the Employer's
income under Section 404 of the Code.
4.2 Time and Manner of Employee Stock Ownership Contributions.
(a) The Employee Stock Ownership contribution (if any) for each Plan
Year shall be paid to the Trustee in one lump sum or installments at any time on
or before the expiration of the time prescribed by law (including any
extensions) for filing of the Employer's federal income tax return for its
fiscal year ending concurrent with or during such Plan Year. Any portion of the
Employee Stock Ownership contribution for each Plan Year that may be made prior
to the last day of the Plan Year shall be maintained by the Trustee in the
Employee Stock Ownership suspense account described in Section 5.2 until the
last day of such Plan Year.
(b) If an Employee Stock Ownership contribution for a Plan Year is paid
after the close of the Employer's fiscal year which ends concurrent with or
during such Plan Year but on or prior to the due date (including any extensions)
for filing of the Employer's federal income tax return for such fiscal year, it
shall be considered, for allocation purposes, as an Employee Stock Ownership
contribution to the Fund for the Plan Year for which it was computed and
accrued, unless such
-13-
<PAGE>
contribution is accompanied by a statement to the Trustee, signed by a
representative of the Employer, which specifies that the Employee Stock
Ownership contribution is made with respect to the Plan Year in which it is
received by the Trustee. Any Employee Stock Ownership contribution paid by the
Employer during any Plan Year but after the due date (including any extensions)
for filing of its federal income tax return for the fiscal year of the Employer
ending on or before the last day of the preceding Plan Year shall be treated,
for allocation purposes, as an Employee Stock Ownership contribution to the Fund
for the Plan Year in which the contribution is paid to the Trustee.
(c) Notwithstanding anything contained herein to the contrary, no
Employee Stock Ownership contribution shall be made for any year during which a
"limitations account" created pursuant to Section 5.6(c)(2) is in existence
until the balance of such limitations account has been reallocated in accordance
with Section 5.6(c)(2).
4.3 Records of Contributions.
The Employer shall deliver at least annually to the Trustee, with
respect to the contributions contemplated in Section 4.1, a certificate of the
Administrator, in such form as the Trustee shall approve, setting forth:
(a) The aggregate amount of contributions, if any, to the Fund for such
Plan Year;
(b) The names, Internal Revenue Service identifying numbers and current
residential addresses of all Participants in the Plan;
(c) The amount and category of contributions to be allocated to each
such Participant; and
(d) Any other information reasonably required for the proper operation
of the Plan.
4.4 Erroneous Contributions.
(a) Notwithstanding anything herein to the contrary, upon the
Employer's request, a contribution which was made by a mistake of fact, or
conditioned upon the initial qualification of the Plan, under Code Section 401,
or upon the deductibility of the contribution under Section 404 of the Code,
shall be returned to the Employer by the Trustee within one year after the
payment of the contribution, the denial of the qualification or the disallowance
of the deduction (to the extent disallowed), whichever is applicable; provided,
however, that in the case of denial of the initial qualification of the Plan, a
contribution shall not be returned unless an Application for Determination has
been timely filed with the Internal Revenue Service. Any portion of a
contribution returned pursuant to this Section 4.4 shall be adjusted to reflect
its proportionate share of the losses of the fund, but shall not be adjusted to
reflect any earnings or gains. Notwithstanding any provisions of this Plan
-14-
<PAGE>
to the contrary, the right or claim of any Participant or Beneficiary to any
asset of the Fund or any benefit under this Plan shall be subject to and limited
by this Section 4.4.
(b) In no event shall voluntary Employee contributions be accepted. Any
such voluntary Employee contributions (and any earnings attributable thereto)
mistakenly received by the Trustee shall promptly be returned to the
Participant.
4.5 Re-employed Veterans.
Notwithstanding anything to the contrary set forth in the Plan, if an
Employee has been rehired by the Employer and is eligible for the benefits
provided by the Uniformed Services Employment and Reemployment Rights Act by
virtue of his prior military service and by virtue of his having met all the
requirements of that Act for being accorded the benefits provided thereunder, he
shall not be deemed to have incurred a Break because of his period of military
service. The Employee's military service shall be treated as Service hereunder
for eligibility, vesting and benefit accrual purposes. Such Employee shall be
entitled to all Employer contributions to which he otherwise would have been
entitled had he been employed by the Employer during the period of his military
service. In computing contribution amounts dependent upon or limited by the
amount of Compensation the Employee earned or would have earned, the Employee
shall be treated as receiving Compensation from the Employer during the period
of military service equal to the Compensation that Employee otherwise would have
received from the Employer during that period, or, if the Compensation the
Employee otherwise would have received is not reasonably certain, the Employee's
average Compensation from the Employer during the period immediately preceding
the period of military service. Such Employee shall not, however, be credited
with any earnings on any such additional Employer or Employee contributions
described in this Section before the contribution is actually made. Furthermore,
no forfeitures shall be allocated to such Employee's Accounts hereunder for the
period of military service. The rules governing the limitations on all such
contributions that may be required hereunder the Employer shall be governed by
Section 414(u) of the Code and any regulations promulgated thereunder.
-15-
<PAGE>
ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant Accounts.
The Administrator shall establish and maintain separate individual
accounts for Participants in the Plan and for each Former Participant in
accordance with the provisions of this Article V. Such separate accounts shall
be for accounting purposes only and shall not require a segregation of the Fund,
and no Participant, Former Participant or Beneficiary shall acquire any right to
or interest in any specific assets of the Fund as a result of the allocations
provided for under this Plan, except where segregation is expressly provided for
in this Plan.
(a) Employee Stock Ownership Accounts.
The Administrator shall establish a separate Employee Stock
Ownership Account in the Fund for each Participant. The account shall
be credited as of the last day of each Plan Year with the amounts
allocated to the Participant under Sections 5.4 and 5.5. The
Administrator may establish subaccounts hereunder, an Employer Stock
Account reflecting a Participant's interest in Employer Securities
held by the Trust and an Other Investments Account reflecting the
Participant's interest in his Employee Stock Ownership Account other
than Employer Securities.
(b) Distribution Accounts.
In any case where distribution of a terminated Participant's
vested interest in the Plan is to be deferred, the Administrator shall
establish a separate, nonforfeitable account in the Fund to which the
balance in his Employee Stock Ownership Account in the Plan shall be
transferred after such Participant incurs a Break. Unless the Former
Participant's distribution accounts are segregated for investment
purposes pursuant to section 9.4, they shall share in Investment
Adjustments.
(c) Other Accounts.
The Administrator shall establish such other separate accounts
for each Participant as may be necessary or desirable for the
convenient administration of the Fund.
5.2 Establishment of Suspense Accounts.
The Administrator shall establish separate accounts to be known as
"suspense accounts." There shall be credited to such appropriate suspense
accounts any Employee Stock Ownership contributions that may be made prior to
the last day of the Plan Year, as provided in Section 4.2. The suspense accounts
shall share proportionately as to time and amount in any Investment Adjustments.
-16-
<PAGE>
As of the last day of each Plan Year, the balance of the Employee Stock
Ownership suspense account shall be added to the Employee Stock Ownership
contribution and allocated to the Employee Stock Ownership Accounts of
Participants as provided in Section 5.5, except as provided herein. In the event
that the Plan takes an Exempt Loan, the Employer Securities purchased thereby
shall be allocat ed to a separate Exempt Loan Suspense Account, from which
allocations shall be made in accordance with Section 8.5.
5.3 Allocation of Earnings, Losses and Expenses.
As of each Valuation Date, any increase or decrease in the net worth of
the aggregate Employee Stock Ownership Accounts held in the Fund attributable to
earnings, losses, expenses and unrealized appreciation or depreciation in each
such aggregate Account, as determined by the Trustee pursuant to the Trust
Agreement, shall be credited to or deducted from the appropriate suspense
accounts and all Participants' Employee Stock Ownership Accounts (except
segregated distribution accounts described in Section 5.1(b) and the
"limitations account" described in Section 5.6(c)(4)) in the proportion that the
value of each such Account (determined immediately prior to such allocation and
before crediting any Employee Stock Ownership contributions and forfeitures for
the current Plan Year but after adjustment for any transfer to or from such
Accounts and for the time such funds were in such Accounts) bears to the value
of all Employee Stock Ownership Accounts.
5.4 Allocation of Forfeitures.
As of the last day of each Plan Year, all forfeitures attributable to
the Employee Stock Ownership Accounts which are then available for reallocation
shall be, as appropriate, added to the Employee Stock Ownership contribution (if
any) for such year and allocated among the Participants' Employee Stock
Ownership Accounts, as appropriate, in the manner provided in Sections 5.5 and
5.6.
5.5 Allocation of Annual Employee Stock Ownership Contributions.
As of the last day of each Plan Year for which the Employer shall make
an Employee Stock Ownership contribution, the Administrator shall allocate the
Employee Stock Ownership contribution (including reallocable forfeitures) for
such Plan Year to the Employee Stock Ownership account of each Participant who
completed at least 1,000 Hours of Service during that Plan Year, regardless of
whether he is still employed by the Employer on the last day of the Plan Year.
Such allocation shall be made in the same proportion that each such
Participant's Compensation for such Plan Year bears to the total Compensation of
all such Participants for such Plan Year, subject to Section 5.6.
-17-
<PAGE>
5.6 Limitation on Annual Additions.
(a) Notwithstanding any provisions of this Plan to the contrary, the
total Annual Additions credited to a Participant's accounts under this Plan (and
under any other defined contribution plan to which the Employer contributes) for
any Limitation Year shall not exceed the lesser of:
(1) 25% of the Participant's compensation for such Limitation
Year; or
(2) $30,000 (or, if greater, one-fourth of the defined benefit
dollar limitation set forth in Section 415(b)(1)(A) of the Code).
Whenever otherwise allowed by law, the maximum amount of $30,000 shall
be automatically adjusted annually for cost-of-living increases in
accordance with Section 415(d) of the Code and the highest such
increase effective at any time during the Limitation Year shall be
effective for the entire Limitation Year, without any amendment to
this Plan.
(b) Solely for the purpose of this Section 5.6, the term "compensation"
is defined as wages within the meaning of section 3401(a) of the Code and all
other payments of compensation to an Employee by an Employer (in the course of
the Employer's trade or business) for which the Employer is required to furnish
the Employee a written statement under sections 6041(d) and 6051(a)(3) of the
Code. "Compensation" as determined hereunder shall be determined without regard
to any rules under section 3401(a) of the Code that limit the remuneration
included in wages based on the nature or location of the employment or the
services performed, all as determined in accordance with Treas. Regs. Section
1.415(d)(11).
(c) In the event that the limitations on Annual Additions described in
this Section 5.6(a) above are exceeded with respect to any Participant in any
Limitation Year, then the contributions allocable to the Participant for such
year shall be reduced to the minimum extent required by such limitations in the
following order of priority:
(1) If any further reductions in Annual Additions are necessary,
then the Employee Stock Ownership contributions and forfeitures
allocated during such Limitation Year to the Participant's Employee
Stock Ownership Account shall be reduced. The amount of any such
reductions in the Employee Stock Ownership contributions and
forfeitures shall be reallocated to all other Participants in the same
manner as set forth under Sections 5.4 and 5.5.
(2) Any amounts which cannot be reallocated to other Participants
in a current Limitation Year in accordance with Section 5.6(c)(1)
above because of the limitations contained in Sections 5.6(a) and (d)
shall be credited to an account designated as the "limitations
account" and carried forward to the next and subsequent Limitation
Years until
-18-
<PAGE>
it can be reallocated to all Participants as set forth in Sections
5.4, and 5.5, as appropriate. No Investment Adjustments shall be
allocated to this limitations account. In the next and subsequent
Limitation Years, all amounts in the limitations account must be
allocated in the manner described in Sections 5.4 and 5.5, as
appropriate, before any Employee Stock Ownership contributions may be
made to this Plan for that Limitation Year.
(3) The Administrator shall determine to what extent the Annual
Additions to any Participant's Employee Stock Ownership Account must
be reduced in each Limitation Year.
The Administrator shall reduce the Annual Additions to all other
qualified, tax-exempt retirement plans maintained by the Employer in accordance
with the terms contained therein for required reductions or reallocations
mandated by Section 415 of the Code before reducing any Annual Additions in this
Plan.
(4) In the event this Plan is voluntarily terminated by the
Employer under Section 13.5, any amounts credited to the limitations
account described in Section 5.6(c)(2) above which have not be
reallocated as set forth herein shall be distributed to the
Participants who are still employed by the Employer on the date of
termination, in the proportion that each Participant's Compensation
bears to the Compensation of all Participants.
(d) The Annual Additions credited to a Participant's accounts for each
Limitation Year are further limited so that in the case of an Employee who is a
Participant in both this Plan and any qualified defined benefit plan
(hereinafter referred to as a "pension plan") of the Employer, the sum of (1)
and (2) below will not exceed 1.0:
(1) (A) The projected annual normal retirement benefit of a
Participant under the pension plan, divided by
(B) The lesser of:
(i) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(b)(1)(A) of the Code
for such Limitation Year, or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under Section
415(b)(1)(B) of the Code for the Participant for such
Limitation Year; plus
(2) (A) The sum of Annual Additions credited to the Participant
under this Plan for all Limitation Years, divided by:
-19-
<PAGE>
(B) The sum of the lesser of the following amounts determined for such
Limitation Year and for each prior year of service with the Employer:
(i) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(b)(1)(A) of the Code
for such Limitation Year, or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under Section
415(b)(1)(B) of the Code for the Participant for such
Limitation Year.
The Administrator may, in calculating the defined contribution plan
fraction described in Section 5.6(d)(2), elect to use the transitional rule
pursuant to Section 415(e)(6) of the Code, if applicable. If the sum of the
fractions produced above will exceed 1.0, even after the use of the "fresh
start" rule contained in Section 235 of the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA"), if applicable, then the same provisions as stated in
Section 5.6(c) above shall apply. If, even after the reductions provided for in
Section 5.6(c), the sum of the fractions still exceed 1.0, then the benefits of
the Participant provided under the pension plan shall be reduced to the extent
neces sary, in accordance with Treasury Regulations issued under the Code.
Solely for the purposes of this Section 5.6(d), the term "years of service"
shall mean all years of service defined by Treasury Regulations issued under
Section 415 of the Code.
(e) In the event that the Employer is a member of (1) a controlled
group of corporations or a group of trades or businesses under common control
(as described in Section 414(b) or (c) of the Code, as modified by Section
415(h) thereof), or (2) an affiliated service group (as described in Section
414(m) of the Code), the Annual Additions credited to any Participant's accounts
in any such Limitation Year shall be further limited by reason of the existence
of all other qualified retirement plans maintained by such affiliated
corporations, other entities under common control or other members of the
affiliated service group, to the extent such reduction is required by Section
415 of the Code and the regulations promulgated thereunder. The Administrator
shall determine if any such reduction in the Annual Additions to a Participant's
accounts is required for this reason, and if so, the same provisions as stated
in 5.6(c) and (d) above shall apply.
(f) Annual Additions shall not include any Employer contributions which
are used by the Trust to pay interest on an Exempt Loan nor any forfeitures of
Employer Securities purchased with the proceeds of an Exempt Loan, provided that
not more than one-third of the Employer contributions are allocated to
Participants who are among the group of employees deemed "highly compensated
employees" within the meaning of Code Section 414(q).
-20-
<PAGE>
5.7 Erroneous Allocations.
No Participant shall be entitled to any Annual Additions or other
allocations to his accounts in excess of those permitted under Sections 5.3,
5.4, 5.5, and 5.6. If it is determined at anytime that the Administrator and/or
Trustees have erred in accepting and allocating any contributions or forfeitures
under this Plan, or in allocating Investment Adjustments, or in excluding or
including any person as a Participant, then the Administrator, in a uniform and
nondiscriminatory manner, shall determine the manner in which such error shall
be corrected and shall promptly advise the Trustee in writing of such error and
of the method for correcting such error. The accounts of any or all Participants
may be revised, if necessary, in order to correct such error.
5.8 Value of Participant's Interest in Fund.
At any time, the value of a Participant's interest in the Fund shall
consist of the aggregate value of his Employee Stock Ownership Account and his
distribution account, if any, determined as of the next-preceding Valuation
Date. The Administrator shall maintain adequate records of the cost basis of
Employer Securities allocated to each Participant's Employer Stock Ownership
Account.
5.9 Investment of Account Balances.
The Employee Stock Ownership Accounts shall be invested primarily in
Employer Securities. Employer Securities shall constitute at least 51% of the
assets of all Employee Stock Ownership Accounts. All sales of Employer
Securities by the Trustee attributable to the Employee Stock Ownership Accounts
of all Participants shall be charged pro rata to the Employee Stock Ownership
Accounts of all Participants.
-21-
<PAGE>
ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
6.1 Normal Retirement.
A Participant who reaches his Normal Retirement Date and who shall
retire at that time shall thereupon be entitled to retirement benefits based on
the value of his interest in the Fund, payable pursuant to the provisions of
Section 9.1. A Participant who remains in Service after his Normal Retirement
Date shall not be entitled to any retirement benefits until his actual
termination of Service thereafter (except as provided in Section 9.3(g)) and he
shall meanwhile continue to participate in this Plan.
6.2 Early Retirement.
A Participant who reaches his Early Retirement Date may retire at such
time (or, at his election, as of the first day of any month thereafter prior to
his Normal Retirement Date) and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to the
provisions of Section 9.1.
6.3 Disability Retirement.
In the event a Participant incurs a Disability, he may retire on his
Disability Retirement Date and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to the
provisions of Section 9.1.
6.4 Death Benefits.
(a) Upon the death of a Participant before his Retirement or other
termination of Service, the value of his interest in the Fund shall be payable
pursuant to the provisions of Section 9.1. The Administrator shall direct the
Trustee to distribute his interest in the Fund to any surviving Beneficiary
designated by the Participant or, if none, to such persons designated by the
Administrator pursuant to Section 6.5.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee to distribute any undistributed balance of his interest in
the Fund to any surviving Beneficiary designated by him or, if none, to such
persons designated by the Administrator pursuant to Section 6.5.
-22-
<PAGE>
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive the interest in the Fund of a
deceased Participant or Former Partici pant as the Administrator may deem
desirable. The Administrator's determination of death and of the right of any
person to receive payment shall be conclusive.
6.5 Designation of Death Beneficiary and Manner of Payment.
(a) Each Participant shall have the right to designate a Beneficiary or
Beneficiaries to receive the sum or sums to which he may be entitled upon his
death. The Participant may also des ignate the manner in which any death
benefits under this Plan shall be payable to his Beneficiary, provided that such
designation is in accordance with Section 9.4. Such designation of Beneficiary
and manner of payment shall be in writing and delivered to the Administrator,
and shall be effective when received by the Administrator. The Participant shall
have the right to change such designation by notice in writing to the
Administrator. Such change of Beneficiary or the manner of payment shall become
effective upon its receipt by the Administrator. Any such change shall be deemed
to revoke all prior designations.
(b) If a Participant shall fail to designate validly a Beneficiary or
if no designated Beneficiary survives the Participant, his interest in the Fund
shall be paid to the person or persons in the first of the following classes of
successive preference Beneficiaries surviving at the death of the Participant:
the Participant's (1) widow or widower, (2) children, (3) parents, and (4)
estate. The Administrator shall decide what Beneficiaries, if any, shall have
been validly designated, and its decision shall be binding and conclusive on all
persons.
(c) Notwithstanding the foregoing, if a Participant has been married
throughout the 12 month period preceding the date of his death, the sum or sums
to which he may be entitled under this Plan upon his death shall be paid to his
spouse, unless the Participant's spouse shall have consented to the election of
another Beneficiary. Such a spousal consent shall be in writing and shall be
witnessed either by a representative of the Plan or a notary public. If it is
established to the satisfaction of the Administrator that such spousal consent
cannot be obtained because there is no spouse, because the spouse cannot be
located, or other reasons prescribed by governmental regulations, the consent of
the spouse may be waived, and the Participant may designate a Beneficiary or
Beneficiaries other than his spouse.
-23-
<PAGE>
ARTICLE VII
VESTING AND FORFEITURES
7.1 Vesting on Death, Disability and Normal Retirement.
Unless his participation in this Plan shall have terminated prior
thereto, upon a Participant's death, Disability or upon his attainment of Normal
Retirement Date (whether or not he actually retires at that time) while he is
still employed by the Employer, the Participant's entire interest in the Fund
shall be fully vested and nonforfeitable.
7.2 Vesting on Termination of Participation.
Upon termination of his participation in this Plan for any reason other
than death, Disability, or Normal Retirement, a Participant shall be vested in a
percentage of his Employee Stock Ownership Account, such vested percentages to
be determined under the following table, based on the Years of Service
(including Years of Service prior to the Effective Date) credited to him for
vesting purposes at the time of his termination of participation:
Years of Service Completed Percentage Vested
-------------------------- -----------------
Less than 3 0%
3 but less than 4 20%
4 but less than 5 50%
5 or more 100%
Any portion of the Participant's Employee Stock Ownership Account which
is not vested at the time he incurs a Break shall thereupon be forfeited and
disposed of pursuant to Section 7.3. Distribution of the vested portion of a
terminated Participant's interest in the Plan may be authorized by the
Administrator in any manner permitted under Section 9.1.
7.3 Disposition of Forfeitures.
(a) In the event a Participant incurs a Break and subsequently resumes
both his Service and his participation in the Plan prior to incurring at least 5
Breaks, the forfeitable portion of his Employee Stock Ownership Account shall be
reinstated to the credit of the Participant as of the date he resumes
participation.
-24-
<PAGE>
(b) In the event a Participant terminates Service and subsequently
incurs a Break and receives a distribution, or in the event a Participant does
not terminate Service, but incurs at least 5 Breaks, or in the event that a
Participant terminates Service and incurs at least 5 Breaks but has not received
a distribution, then the forfeitable portion of his Employer Account, including
Investment Adjustments, shall be reallocated to other Participants, pursuant to
Section 5.4 as of the date the Participant incurs such Break or Breaks, as the
case may be.
(c) In the event a former Participant who had received a distribution
from the Plan is rehired, he shall repay the amount of his distribution before
the earlier of 5 years after the date of his rehire by the Employer, or the
close of the first period of 5 consecutive Breaks commencing after the
withdrawal in order for any forfeited amounts to be restored to him.
-25-
<PAGE>
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS
8.1 Right to Demand Employer Securities.
A Participant entitled to a distribution from his Employee Stock
Ownership Account shall be entitled to demand that his interest in the Account
be distributed to him in the form of Employer Secu rities, all subject to
Section 9.9. In the event that the Employer Securities are not readily tradable
on an established market, the Participant shall be entitled to require that the
Employer repurchase the Em ployer Securities under a fair valuation formula, as
provided by governmental regulations. The Participant or Beneficiary shall be
entitled to exercise the put option described in the preceding sentence for a
period of not more than 60 days following the date of distribution of Employer
Securities to him. If the put option is not exercised within such 60-day period,
the Participant or Beneficiary may exercise the put option during an additional
period of not more than 60 days after the beginning of the first day of the
first Plan Year following the Plan Year in which the first put option period
occurred, all as provided in regulations promulgated by the Secretary of the
Treasury.
8.2 Voting Rights.
Each Participant with an Employee Stock Ownership Account shall be
entitled to direct the Trustee as to the manner in which the Employer Securities
in such Account are to be voted. Employer Securities held in the Employee Stock
Ownership Suspense Account or the Exempt Loan Suspense Account shall be voted by
the Trustee on each issue with respect to which shareholders are entitled to
vote in the manner directed by the majority of the Participants who directed the
Trustee as to the manner of voting their shares in the Employee Stock Ownership
Accounts with respect to such issue. Prior to the initial allocation of shares,
the Trustee shall be entitled to vote the shares in the Suspense Account without
prior direction from the Participants or the Administrator. In the event that a
Participant fails to give timely voting instructions to the Trustee with respect
to the voting of his allocated Employer Securities, the Trustee shall be
entitled to vote such shares in its discretion.
8.3 Nondiscrimination in Employee Stock Ownership Contributions.
In the event that the amount of the Employee Stock Ownership
contributions that would be required in any Plan Year to make the scheduled
payments on an Exempt Loan would exceed the amount that would otherwise be
deductible by the Employer for such Plan Year under Code Section 404, then no
more than one-third of the Employee Stock Ownership contributions for the Plan
Year, which is also the Employer's taxable year, shall be allocated to the group
of Employees who:
(a) Was a 5 percent owner (as defined at Code ss.416(i)(1)), at any
time during the Plan Year or during the preceding Plan Year, of the Employer; or
-26-
<PAGE>
(b) Received compensation from the Employer in excess of $80,000, as
adjusted under Code Section 414(q), in the preceding Plan Year, and was in the
"top-paid group" of employees (as defined below) for such year.
An Employee shall be deemed a member of the "top-paid group" of
employees for a given Plan Year if such Employee is in the group of the top 20%
of the employees of the Employer when ranked on the basis of compensation.
8.4 Dividends.
Dividends paid with respect to Employer Securities credited to a
Participant's Employee Stock Ownership account as of the record date for the
dividend payment may be paid in cash to the Participants, pursuant to the
directions of the Board of Directors of the Sponsor. If the Board of Directors
shall direct that the aforesaid dividends shall be paid directly to
Participants, the quarterly dividends paid with respect to such Employer
Securities shall be paid to the Plan, from which dividend distributions in cash
shall be made to the Participants with respect to the Employer Securities in
their Employee Stock Ownership Accounts within 90 days of the close of the Plan
Year in which the dividends were paid. Dividends on Employer Securities obtained
pursuant to an Exempt Loan and still held in the Suspense Account may be used to
make payments on an Exempt Loan, as described in Section 8.5.
8.5 Exempt Loans.
(a) The Sponsor may direct the Trustee to obtain Exempt Loans. The
Exempt Loan may take the form of (i) a loan from a bank or other commercial
lender to purchase Employer Securities (ii) a loan from the Employer to the
Plan; or (iii) an installment sale of Employer Securities to the Plan. The
proceeds of any such Exempt Loan shall be used, within a reasonable time after
the Exempt Loan is obtained, only to purchase Employer Securities, repay the
Exempt Loan, or repay any prior Exempt Loan. Any such Exempt Loan shall provide
for no more than a reasonable rate of interest and shall be without recourse
against the Plan. The number of years to maturity under the Exempt Loan must be
definitely ascertainable at all times. The only assets of the Plan that may be
given as collateral for an Exempt Loan are Employer Securities acquired with the
proceeds of the Exempt Loan and Em ployer Securities that were used as
collateral for a prior Exempt Loan repaid with the proceeds of the current
Exempt Loan. Such Employer Securities so pledged shall be placed in an Exempt
Loan Suspense Account. No person or institution entitled to payment under an
Exempt Loan shall have recourse against Trust assets other than the aforesaid
collateral, Employer Stock Ownership contributions (other than contributions of
Employer Securities) that are available under the Plan to meet obligations under
the Exempt Loan and earnings attributable to such collateral and the investment
of such contributions. All Employee Stock Ownership contributions paid during
the Plan Year in which an Exempt Loan is made (whether before or after the date
the proceeds of the Exempt Loan are received), all Employee Stock Ownership
contributions paid thereafter until the Exempt
-27-
<PAGE>
Loan has been repaid in full, and all earnings from investment of such Employee
Stock Ownership contributions, without regard to whether any such Employee Stock
Ownership contributions and earnings have been allocated to Participants'
Employee Stock Ownership Accounts, shall be available to meet obligations under
the Exempt Loan as such obligations accrue, or prior to the time such
obligations accrue, unless otherwise provided by the Employer at the time any
such contribution is made. Any pledge of Employer Securities shall provide for
the release of shares so pledged upon the payment of any portion of the Exempt
Loan.
(b) For each Plan Year during the duration of the Exempt Loan, the
number of shares of Employer Securities released from such pledge shall equal
the number of encumbered shares held im mediately before release for the current
Plan Year multiplied by a fraction. The numerator of the fraction is the sum of
principal and interest paid in such Plan Year. The denominator of the fraction
is the sum of the numerator plus the principal and interest to be paid for all
future years. Such years will be determined without taking into account any
possible extension or renewal periods. If interest on any Exempt Loan is
variable, the interest to be paid in future years under the Exempt Loan shall be
computed by using the interest rate applicable as of the end of the Plan Year.
(c) Notwithstanding the foregoing, the Trustee may obtain an Exempt
Loan pursuant to the terms of which the number of Employer Securities to be
released from encumbrance shall be determined solely with reference to principal
payments. In the event that such an Exempt Loan is obtained, annual payments of
principal and interest shall be at a cumulative rate that is not less rapid at
any time than level payments of such amounts for not more than 10 years. The
amount of interest in any such annual loan repayment shall be disregarded only
to the extent that it would be determined to be interest under standard loan
amortization tables. The requirement set forth in the preceding sentence shall
not be applicable from the time that, by reason of a renewal, extension, or
refinancing, the sum of the expired duration of the Exempt Loan, the renewal
period, the extension period, and the duration of a new Exempt Loan exceeds 10
years.
8.6 Exempt Loan Payments.
(a) Payments of principal and interest on any Exempt Loan during a Plan
Year shall be made by the Trustee (as directed by the Administrator) only from
(1) Employee Stock Ownership contributions to the Trust made to meet the Plan's
obligation under an Exempt Loan (other than contributions of Employer
Securities) and from any earnings attributable to Employer Securities held as
collateral for an Exempt Loan and investments of such contributions (both
received during or prior to the Plan Year); (2) the proceeds of a subsequent
Exempt Loan made to repay a prior Exempt Loan; and (3) the proceeds of the sale
of any Employer Securities held as collateral for an Exempt Loan. Such
contribution and earnings shall be accounted for separately by the Plan until
the Exempt Loan is repaid.
-28-
<PAGE>
(b) Employer Securities released by reason of the payment of principal
or interest on an Exempt Loan from amounts allocated to Participants' Employee
Stock Ownership Accounts shall immediately upon payment be allocated as set
forth in Section 5.5.
(c) The Employer shall contribute to the Trust sufficient amounts to
enable the Trust to pay principal and interest on any such Exempt Loans as they
are due, provided however that no such contribution shall exceed the limitations
in Section 5.6. In the event that such contributions by reason of the
limitations in Section 5.6 are insufficient to enable the Trust to pay principal
and interest on such Exempt Loan as it is due, then upon the Trustee's request
the Employer shall:
(1) Make an Exempt Loan to the Trust in sufficient amounts to
meet such principal and interest payments. Such new Exempt Loan shall
be subordinated to the prior Exempt Loan. Securities released from the
pledge of the prior Exempt Loan shall be pledged as collateral to
secure the new Exempt Loan. Such Employer Securities will be released
from this new pledge and allocated to the Employee Stock Ownership
Accounts of the Participants in accordance with applicable provisions
of the Plan;
(2) Purchase any Employer Securities pledged as collateral in
an amount necessary to provide the Trustee with sufficient funds to
meet the principal and interest repayments. Any such sale by the Plan
shall meet the requirements of Section 408(e) of ERISA; or
(3) Any combination of the foregoing. However, the Employer
shall not, pursuant to the provisions of this subsection, do, fail to
do or cause to be done any act or thing which would result in a
disqualification of the Plan as an Employee Stock Ownership Plan under
the Code.
(d) Except as provided in Section 8.1 above and notwithstanding any
amendment to or termination of the Plan which causes it to cease to qualify as
an Employee Stock Ownership plan within the meaning of Section 4975(e)(7) of the
Code, or any repayment of an Exempt Loan, no shares of Employer Securities
acquired with the proceeds of an Exempt Loan obtained by the Trust to purchase
Employer Securities may be subject to a put, call or other option, or buy-sell
or similar arrangement while such shares are held by the Plan or when such
Shares are distributed from the Plan.
8.7 Put Option.
If a Participant exercises a put option (as set forth in Section 8.1)
with respect to Employer Securities that were distributed as part of a total
distribution pursuant to which a Participant's Employee Stock Ownership Account
is distributed to him in a single taxable year, the Employer or the Plan may
elect to pay the purchase price of the Employer Securities over a period not to
exceed 5 years. Such payments shall be made in substantially equal installments
not less frequently than
-29-
<PAGE>
annually over a period beginning not later than 30 days after the exercise of
the put option. Reasonable interest shall be paid to the Participant with
respect to the unpaid balance of the purchase price and adequate security shall
be provided with respect thereto. In the event that a Participant exercises a
put option with respect to Employer Securities that are distributed as part of
an installment distribution, the amount to be paid for such securities shall be
paid not later than 30 days after the exercise of the put option.
8.8 Diversification Requirements
Each Participant who has completed at least 10 years of participation
in the Plan and has attained age 55 may elect within 90 days after the close of
each Plan Year during his "qualified election period" to direct the Plan as to
the investment of at least 25 percent of his Employee Stock Ownership Account
(to the extent such percentage exceeds the amount to which a prior election
under this Section 8.8 had been made). For purposes of this Section 8.8, the
term "qualified election period" shall mean the 5-Plan-Year period beginning
with the Plan Year after the Plan Year in which the Participant attains age 55
(or, if later, beginning with the Plan Year after the first Plan Year in which
the Employee first completes at least 10 years of participation in the Plan). In
the case of the Employee who has attained age 60 and completed 10 years of
participation in the prior Plan Year and in the case of the election year in
which any other Participant who has met the minimum age and service requirements
for diversification can make his last election hereunder, he shall be entitled
to direct the Plan as to the investment of at least 50 percent of his Employee
Stock Ownership Account (to the extent such percentage exceeds the amount to
which a prior election under this Section 8.8 had been made). The Plan shall
make available at least 3 investment options (not inconsistent with regulations
prescribed by the Department of Treasury) to each Participant making an election
hereunder. The Plan shall be deemed to have met the requirements of this Section
if the portion of the Participant's Employee Stock Ownership Account covered by
the election hereunder is distributed to the Participant or his designated
Beneficiary within 90 days after the period during which the election may be
made. In the absence of such a distribution, the Trustee shall implement the
Participant's election within 90 days following the expiration of the qualified
election period.
8.9 Independent Appraiser.
An independent appraiser meeting the requirements of Code Section
170(a)(1) shall value the Employer Securities in those Plan Years when such
securities are not readily tradable on an established securities market.
-30-
<PAGE>
ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service - In General.
All benefits provided under this Plan shall be funded by the value of a
Participant's vested interest in the Fund. As soon as practicable after a
Participant's Retirement, death or termination of Service, the Administrator
shall ascertain the value of his vested interest in the Fund, as provided in
Article V, and the Administrator shall hold or dispose of the same in accordance
with the following provisions of this Article IX.
9.2 Commencement of Payments.
(a) Distributions upon Retirement or Death. Upon a Participant's
Retirement or Death, payment of benefits under this Plan shall, unless the
Participant otherwise elects (in accordance with Section 9.3), commence no later
than 6 months after the close of the Plan Year in which occurs the date of the
Participant's Retirement or death.
(b) Distribution following Termination of Service. Unless a Participant
elects otherwise, if a Participant terminates Service prior to Retirement or
death, he shall be accorded an opportunity to commence receipt of distributions
from his Accounts within six (6) months after the Valuation Date next following
the date of his termination of service. A Participant who terminates Service
with a deferred vested benefit shall be entitled to receive from the
Administrator a statement of his benefits. In the event that a Participant
elects not to commence receipt of distributions from his Accounts in accordance
with this Section 9.2(b), after the Participant incurs a Break, the
Administrator shall transfer his deferred vested interest to a distribution
account. If a Participant's vested Employer Account does not exceed (or at the
time of any prior distribution did not exceed) $5,000, the Plan Administrator
may distribute the vested portion of his Employer Account as soon as
administratively feasible without the consent of the Participant or his spouse.
(c) Distribution of Accounts Greater Than $5,000. If the value of a
Participant's vested Account balance exceeds (or at the time of any prior
distribution exceeded) $5,000, and the Account balance is immediately
distributable, the Participant must consent to any distribution of such Account
balance. The Plan Administrator shall notify the Participant of the right to
defer any distribution until the Participant's Account balance is no longer
immediately distributable. The consent of the Participant shall not be required
to the extent that a distribution is required to satisfy Code ss.401(a)(9) or
Code ss.415.
-31-
<PAGE>
9.3 Mandatory Commencement of Benefits.
(a) Unless a Participant elects otherwise, in writing, distribution of
benefits will begin no later than the 60th day after the latest of the close of
the Plan Year in which (i) the Participant attains age 65, (ii) occurs the tenth
anniversary of the year in which the Participant commenced participation in the
Plan Year, or (iii) the Participant terminates Service with the Employer.
(b) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, as of the first distribution
calendar year, distributions, if not made in a lump sum, may be made only over
one of the following periods (or a combination thereof):
(i) the life of the Participant,
(ii) the life of the Participant and the designated beneficiary,
(iii) a period certain not extending beyond the life expectancy
of the Participant, or
(iv) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
beneficiary.
(c) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, if the participant's interest
is to be distributed in other than a lump sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(i) If a Participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the Participant or the
joint life and last survivor expectancy of the Participant and the
Participant's designated beneficiary or (2) a period not extending beyond
the life expectancy of the designated beneficiary, the amount required to be
distributed for each calendar year, beginning with distributions for the
first distribution calendar year, must at least equal the quotient obtained
by dividing the Participant's benefit by the applicable life expectancy.
(ii) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with distributions for the
first distribution calendar year shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (1) the
applicable life expectancy or (2) if the Participant's spouse is not the
designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the Proposed Regulations.
Distributions after the death of the participant shall be distributed using
the applicable life expectancy in sub-section (iii) above as the relevant
divisor without regard to Proposed Regulations 1.401(a)(9)-2.
(iii) The minimum distribution required for the Participant's
first distribution calendar year must be made on or before the Participant's
required beginning date. The minimum distribution
-32-
<PAGE>
for other calendar years, including the minimum distribution for the
distribution calendar year in which the employee's required beginning date
occurs, must be made on or before December 31 of the distribution calendar
year.
(d) If a Participant dies after a distribution has commenced in
accordance with Section 8.3(b) but before his entire interest has been
distributed to him, the remaining portion of such interest shall be distributed
to his Beneficiary at least as rapidly as under the method of distribution in
effect as of the date of his death.
(e) If a Participant shall die before the distribution of his interest
in the Plan has begun, the entire interest of the Participant shall be
distributed by December 31 of the calendar year containing the fifth anniversary
of the death of the Participant, except in the following events:
(i) If any portion of the Participant's interest is payable to
(or for the benefit of) a designated beneficiary over a period not extending
beyond the life expectancy of such beneficiary and such distributions begin
not later than December 31 of the calendar year immediately following the
calendar year in which the Participant died.
(ii) If any portion of the Participant's interest is payable
to (or for the benefit of) the Participant's spouse over a period not
extending beyond the life expectancy of such spouse and such distributions
begin no later than December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made a distribution election by the time of
his death, the Participant's designated beneficiary shall elect the method of
distribution no later than the earlier of (1) December 31 of the calendar year
in which distributions would be required to begin under this Article or (2)
December 31 of the calendar year which contains the fifth anniversary of the
date of death of the Participant. If the Participant has no designated
beneficiary, or if the designated beneficiary does not elect a method of
distribution, distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(f) For purposes of this Article, the life expectancy of a Participant
and his spouse may be redetermined but not more frequently than annually. The
life expectancy (or joint and last survivor expectancy) shall be calculated
using the attained age of the Participant (or designated beneficiary) as of the
Participant's (or designated beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has elapsed since the date life
expectancy was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so recalculated. The
applicable calendar year shall be the first distribution calendar year, and if
life expectancy is being recalculated, such succeeding calendar year. Unless
otherwise elected by the Participant (or his spouse, if applicable) by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Any such election not to recalculate shall be irrevocable
-33-
<PAGE>
and shall apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
(g) For purposes of Section 9.3(b) and 9.3(e), any amount paid to a
child shall be treated as if it had been paid to a surviving spouse if such
amount will become payable to the surviving spouse upon such child reaching
majority (or other designated event permitted under regulations).
(h) For distributions beginning before the Participant's death, the
first distribution calendar year is the calendar year immediately preceding the
calendar year which contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are required to begin
pursuant to this Article.
9.4 Required Beginning Dates.
(a) General Rule. The required beginning date of a Participant is the
first day of April of the calendar year following the calendar year in which the
participant attains age 70-1/2, provided that such Participant is a 5-percent
owner.
(b) 5-percent owner. A Participant is treated as a 5-percent owner for
purposes of this section if such Participant is a 5-percent owner as defined in
section 416(i) of the Code (determined in accordance with section 416 but
without regard to whether the plan is top-heavy) at any time during the Plan
Year ending with or within the calendar year in which such owner attains age
66-1/2 or any subsequent Plan Year. Once distributions have begun to a 5-percent
owner under this section, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
9.5 Form of Payment.
Each Participant's vested interest shall be distributed in a lump sum
payment. Notwithstanding the preceding sentence, but subject to Section 9.3, the
Administrator may not distribute a lump sum when the present value of a
Participant's total Account balances is in excess of $5,000 without the
Participant's consent. This form of payment shall be the normal form of
distribution. Furthermore, however, in the event that the Administrator must
commence distributions, pursuant to Section 9.4, with respect to an Employee who
has attained age 70-1/2 and is still employed by the Employer, if the Employee
does not elect a lump sum distribution, payments shall be made in installments
in such amounts as shall satisfy the minimum distribution rules of Section 9.3.
-34-
<PAGE>
9.6 Payments Upon Termination of Plan.
Upon termination of this Plan pursuant to Sections 13.2, 13.4, 13.5 or
13.6, the Administrator shall continue to perform its duties and the Trustee
shall make all payments upon the following terms, conditions and provisions: All
interests of Participants shall immediately become fully vested; the value of
the interests of all Participants shall be determined within 60 days after such
termination, and the Administrator shall have the same powers to direct the
Trustee in making payments as contained in Sections 9.1 and 13.5.
9.7 Distributions Pursuant to Qualified Domestic Relations Orders.
Upon receipt of a domestic relations order, the Administrator shall
notify promptly the Participant and any alternate payee of receipt of the order
and the Plan's procedure for determining whether the order is a Qualified
Domestic Relations Order. While the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined, if the benefits
would otherwise be paid, the Administrator shall segregate in a separate account
in the Plan the amounts that would be payable to the alternate payee during such
period if the order were a Qualified Domestic Relations Order. If within 18
months the order is determined to be a Qualified Domestic Relations Order, the
amounts so segregated, along with the interest or investment earnings
attributable thereto shall be paid to the alternate payee. Alternatively, if
within 18 months, it is determined that the order is not a Qualified Domestic
Relations Order or if the issue is still unresolved, the amounts segregated
under this Section 9.6, with the earnings attributable thereto, shall be paid to
the Participant or Beneficiary who would have been entitled to such amounts if
there had been no order. The determination as to whether the order is qualified
shall be applied prospectively. Thus, if the Ad ministrator determines that the
order is a Qualified Domestic Relations Order after the 18-month period, the
Plan shall not be liable for payments to the alternative payee for the period
before the order is determined to be a Qualified Domestic Relations Order.
9.8 Cash-Out Distributions
If a Participant receives a distribution of the entire present value of
his vested Account balances under this Plan because of the termination of his
participation in the Plan, the Plan shall disregard a Participant's Service with
respect to which such cash-out distribution shall have been made, in computing
his accrued benefit under the Plan in the event that a Former Participant shall
again become an Employee and become eligible to participate in the Plan. Such a
distribution shall be deemed to be made on termination of participation in the
Plan if it is made not later than the close of the second Plan Year following
the Plan Year in which such termination occurs. The forfeitable portion of a
Participant's accrued benefit shall be restored upon repayment to the Plan by
such former Participant of the full amount of the cash-out distribution,
provided that the former Participant again becomes an Employee. Such repayment
must be made by the Employee not later than the end of the 5-year period
beginning with the date of the distribution. Forfeitures required to be restored
by virtue
-35-
<PAGE>
of such repayment shall be restored from the following sources in the following
order of preference: (i) current forfeitures; (ii) additional employee stock
ownership contributions, as appropriate and as subject to Section 5.6; and (iii)
investment earnings of the Fund. In the event that a Participant's interest in
the Plan is totally forfeitable, a Participant shall be deemed to have received
a distribution of zero upon his termination of Service. In the event of a return
to Service within 5 years of the date of his deemed distribution, the
Participant shall be deemed to have repaid his distribution in accordance with
the rules of this Section 9.8.
9.9 ESOP Distribution Rules.
Notwithstanding any provision of this Article IX to the contrary, the
distribution of a Participant's Employee Stock Ownership Account (unless the
Participant elects otherwise in writing), shall commence as soon as
administratively feasible as of the first Valuation Date coincident with or next
following his death, disability or termination of Service, but not later than 1
year after the close of the Plan Year in which the Participant separates from
Service by reason of the attainment of his Normal Retirement Date, disability,
death or separation from Service. In addition, all distributions hereunder
shall, to the extent that the Participant's Account is invested in Employer
Securities, be made in the form of Employer Securities. Fractional shares,
however, may be distributed in the form of cash.
9.10 Withholding.
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article IX, a
distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an "eligible rollover distribution" paid
directly to an "eligible retirement plan" specified by the distributee in a
"direct rollover."
(b) For purposes of this Section 9.10, an "eligible rollover
distribution" is any distribution of all or any portion of the balance to the
credit of the distributee, except that an "eligible rollover distribution" does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to Employer
Securities).
(c) For purposes of this Section 9.10, an "eligible retirement plan" is
an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover
-36-
<PAGE>
distribution. However, in the case of an "eligible rollover distribution" to the
surviving spouse, an "eligible retirement plan" is an individual retirement
account or individual retirement annuity.
(d) For purposes of this Section 9.10, a distributee includes a
Participant or former Participant. In addition, the Participant's or former
Participant's surviving spouse and the Participant's or former Participant's
spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the Code, are "distributees"
with regard to the interest of the spouse or former spouse.
(e) For purposes of this Section 9.10, a "direct rollover" is a payment
by the Plan to the "eligible retirement plan" specified by the distributee.
9.11 Waiver of 30-day Notice.
If a distribution is one to which sections 401(a)(11) and 417 of the
Code do not apply, such distribution may commence less than 30 days after the
notice required under section 1.411(a)-11(c) of the Income Tax Regulations is
given, provided that: (1) the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and (2) the Participant,
after receiving the notice, affirmatively elects a distribution.
-37-
<PAGE>
ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control.
Anything contained in this Plan to the contrary notwithstanding, if for
any Plan Year the Plan is a top-heavy plan, as determined pursuant to Section
416 of the Code, then the Plan must meet the requirements of this Article X for
such Plan Year.
10.2 Top-Heavy Plan Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Article X shall have the following meanings:
(a) "Accrued Benefit" shall mean the account balances or accrued
benefits of an Employee, calculated pursuant to Section 10.3.
(b) "Determination Date" shall mean, with respect to any particular
Plan Year of this Plan, the last day of the preceding Plan Year (or, in the case
of the first Plan Year of the Plan, the last day of the first Plan Year). In
addition, the term "Determination Date" shall mean, with respect to any
particular plan year of any plan (other than this Plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the last day of the plan
year of such plan which falls within the same calendar year as the Determination
Date for this Plan.
(c) "Employer" shall mean the Employer (as defined in Section 1.1(q))
and any entity which is (1) a member of a controlled group including such
Employer, while it is a member of such controlled group (within the meaning of
Section 414(b) of the Code), (2) in a group of trades or businesses under common
control with such Employer, while it is under common control (within the meaning
of Section 414(c) of the Code), and (3) a member of an affiliated service group
including such Employer, while it is a member of such affiliated service group
(within the meaning of Section 414(m) of the Code).
(d) "Key Employee" shall mean any Employee or former Employee (or any
Beneficiary of such Employee or former Employee, as the case may be) who, at any
time during the Plan Year or during the 4 immediately preceding Plan Years is
one of the following:
(1) An officer of the Employer who has compensation greater
than 50% of the amount in effect under Code 415(b)(1)(A) for the Plan
Year; provided, however, that no more than 50 Employees (or, if lesser,
the greater of 3 or 10% of the Employees) shall be deemed officers;
-38-
<PAGE>
(2) One of the 10 Employees having annual compensation (as
defined in Section 415 of the Code) in excess of the limitation in
effect under Section 415(c)(1)(A) of the Code, and owning (or
considered as owning, within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(3) Any Employee owning (or considered as owning, within the
meaning of Section 318 of the Code) more than 5% of the outstanding
stock of the Employer or stock possessing more than 5% of the total
combined voting power of all stock of the Employer; or
(4) Any Employee having annual compensation (as defined in
Section 415 of the Code) of more than $150,000 and who would be
described in Section 10.2(d)(3) if "1%" were substituted for "5%"
wherever the latter percentage appears.
For purposes of applying Section 318 of the Code to the provisions of
this Section 10.2(d), Section 318(a)(2)(C) of the Code shall be applied by
substituting "5%" for "50%" wherever the latter percentage appears. In addition,
for purposes of this Section 10.2(d), the provisions of Section 414(b), (c) and
(m) shall not apply in determining ownership interests in the Employer. However,
for purposes of determining whether an individual has compensation in excess of
$150,000, or whether an individual is a Key Employee under Section 10.2(d)(1)
and (2), compensation from each entity required to be aggregated under Sections
414(b), (c) and (m) of the Code shall be taken into account. Notwithstanding
anything contained herein to the contrary, all determinations as to whether a
person is or is not a Key Employee shall be resolved by reference to Section 416
of the Code and any rules and regulations promulgated thereunder.
(e) "Non-Key Employee" shall mean any Employee or former Employee (or
any Beneficiary of such Employee or former Employee, as the case may be) who is
not considered to be a Key Employee with respect to this Plan.
(f) "Permissive Aggregation Group" shall mean all plans in the Required
Aggregation Group and any other plans maintained by the Employer which satisfy
Sections 401(a)(4) and 410 of the Code when considered together with the
Required Aggregation Group.
(g) "Required Aggregation Group" shall mean each plan (including any
terminated plan) of the Employer in which a Key Employee is (or in the case of a
terminated plan, had been) a Participant in the Plan Year containing the
Determination Date or any of the 4 preceding Plan Years, and each other plan of
the Employer which enables any plan of the Employer in which a Key Employee is a
Participant to meet the requirement of Sections 401(a)(4) and 410 of the Code.
-39-
<PAGE>
10.3 Calculation of Accrued Benefits.
(a) An Employee's Accrued Benefit shall be equal to:
(1) With respect to this Plan or any other defined
contribution plan (other than a defined contribution pension plan) in a
Required Aggregation Group or a Permissive Aggre gation Group, the
Employee's account balances under the respective plan, determined as of
the most recent plan valuation date within a 12-month period ending on
the Determination Date, including contributions actually made after the
valuation date but before the Determination Date (and, in the first
plan year of a plan, also including any contributions made after the
Determination Date which are allocated as of a date in the first plan
year).
(2) With respect to any defined contribution pension plan in a
Required Aggregation Group or a Permissive Aggregation Group, the
Employee's account balances under the plan, determined as of the most
recent plan valuation date within a 12-month period ending on the
Determination Date, including contributions which have not actually
been made, but which are due to be made as of the Determination Date.
(3) With respect to any defined benefit plan in a Required
Aggregation Group or a Permissive Aggregation Group, the present value
of the Employee's accrued benefits under the plan, determined as of the
most recent plan valuation date within a 12-month period ending on the
Determination Date, pursuant to the actuarial assumptions used by such
plan, and calculated as if the Employee terminated Service under such
plan as of the valuation date (except that, in the first plan year of a
plan, a current Participant's estimated Accrued Benefit Plan as of the
Determination Date shall be taken into account).
(4) If any individual has not performed services for the
Employer maintaining the Plan at any time during the 5-year period
ending on the Determination Date, any Accrued Benefit for such
individual shall not be taken into account.
(b) The Accrued Benefit of any Employee shall be further adjusted as
follows:
(1) The Accrued Benefit shall be calculated to include all
amounts attributable to both Employer and Employee contributions, but
shall exclude amounts attributable to voluntary deductible Employee
contributions, if any.
(2) The Accrued Benefit shall be increased by the aggregate
distributions made with respect to an Employee under the plan or plans,
as the case may be, during the 5-year period ending on the
Determination Date.
(3) Rollover and direct plan-to-plan transfers shall be taken
into account as follows:
-40-
<PAGE>
(A) If the transfer is initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by
another unrelated employer, the transferring plan shall
continue to count the amount transferred; the receiving plan
shall not count the amount transferred.
(B) If the transfer is not initiated by the Employee or
is made between plans maintained by related employers, the
transferring plan shall no longer count the amount
transferred; the receiving plan shall count the amount
transferred.
(c) If any individual has not performed services for the Employer at
any time during the 5-year period ending on the Determination Date, any accrued
benefit for such individual (and the account of such individual) shall not be
taken into account.
10.4 Determination of Top-Heavy Status.
This Plan shall be considered to be a top-heavy plan for any Plan Year
if, as of the Determination Date, the value of the Accrued Benefits of Key
Employees exceeds 60% of the value of the Accrued Benefits of all eligible
Employees under the Plan. Notwithstanding the foregoing, if the Employer
maintains any other qualified plan, the determination of whether this Plan is
top-heavy shall be made after aggregating all other plans of the Employer in the
Required Aggregation Group and, if desired by the Employer as a means of
avoiding top-heavy status, after aggregating any other plan of the Employer in
the Permissive Aggregation Group. If the required Aggregation Group is
top-heavy, then each plan contained in such group shall be deemed to be
top-heavy, notwithstanding that any particular plan in such group would not
otherwise be deemed to be top-heavy. Conversely, if the Permissive Aggregation
Group is not top-heavy, then no plan contained in such group shall be deemed to
be top-heavy, notwithstanding that any particular plan in such group would
otherwise be deemed to be top-heavy. In no event shall a plan included in a
top-heavy Permissive Aggregation Group be deemed a top-heavy plan unless such
plan is also included in a top-heavy Required Aggregation Group.
10.5 Determination of Super Top-Heavy Status.
The Plan shall be considered to be a super top-heavy plan if, as of the
Determination Date, the Plan would meet the test specified in Section 10.4 above
for classification as a top-heavy plan, except that "90%" shall be substituted
for "60%" whenever the latter percentage appears.
10.6 Minimum Contribution.
(a) For any year in which the Plan is top-heavy, each Non-Key Employee
who has met the age and service requirements, if any, contained in the Plan,
shall be entitled to a minimum con tribution (which may include forfeitures
otherwise allocable) equal to a percentage of such Non-Key
-41-
<PAGE>
Employee's compensation (as defined in Section 415 of the Code) as follows:
(1) If the Non-Key Employee is not covered by a defined
benefit plan maintained by the Employer, then the minimum contribution
under this Plan shall be 3% of such Non-Key Employee's compensation.
(2) If the Non-Key Employee is covered by a defined benefit
plan maintained by the Employer, then the minimum contribution under
this Plan shall be 5% of such Non-Key Employee's compensation.
(b) Notwithstanding the foregoing, the minimum contribution otherwise
allocable to a Non-Key Employee under this Plan shall be reduced in the
following circumstances:
(1) The percentage minimum contribution required under this
Plan shall in no event exceed the percentage contribution made for the
Key Employee for whom such percentage is the highest for the Plan Year
after taking into account contributions under other defined
contribution plans in this Plan's Required Aggregation Group; provided,
however, that this Section 10.7(b)(1) shall not apply if this Plan is
included in a Required Aggregation Group and this Plan enables a
defined benefit plan in such Required Aggregation Group to meet the
requirements of Section 401(a)(4) or 410 of the Code.
(2) No minimum contribution shall be required (or the minimum
contribution shall be reduced, as the case may be) for a Non-Key
Employee under this Plan for any Plan Year if the Employer maintains
another qualified plan under which a minimum benefit or contribution is
being accrued or made on account of such Plan Year, in whole or in
part, on behalf of the Non-Key Employee, in accordance with Section
416(c) of the Code.
(c) For purposes of this Section 10.6, there shall be disregarded (1)
any Employer contributions attributable to a salary reduction or similar
arrangement, or (2) any Employer contri butions to or any benefits under Chapter
21 of the Code (relating to the Federal Insurance Contributions Act), Title II
of the Social Security Act, or any other federal or state law.
(d) For purposes of this Section 10.6, minimum contributions shall be
required to be made on behalf of only those Non-Key Employees, as described in
Section 10.7(a), who have not terminated Service as of the last day of the Plan
Year. If a Non-Key Employee is otherwise entitled to receive a minimum
contribution pursuant to this Section 10.6(d), the fact that such Non-Key
Employee failed to complete 1,000 Hours of Service or failed to make any
mandatory or elective contributions under this Plan, if any are so required,
shall not preclude him from receiving such minimum contribution.
-42-
<PAGE>
10.7 Vesting.
(a) For any Plan Year in which the Plan is a top-heavy plan, a
Participant's Employer account shall continue to vest according to the following
schedule:
Years of Service Completed Percentage Vested
-------------------------- -----------------
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
(b) For purposes of Section 10.7(a), the term "year of service" shall
have the same meaning as set forth in Section 1.1(kk), as modified by Section
3.2
(c) If for any Plan Year the Plan becomes top-heavy and the vesting
schedule set forth in Section 10.7(a) becomes effective, then, even if the Plan
ceases to be top-heavy in any subsequent Plan Year, the vesting schedule set
forth in Section 10.7(a) shall remain applicable with respect to any Participant
who has completed 3 Years of Service.
10.8 Maximum Benefit Limitation.
For any Plan Year in which the Plan is a top-heavy plan, Section
5.6(d)(1)(B)(i) and Section 5.6(d)(2)(B)(i)shall be read by substituting "1.0"
for "1.25" wherever the latter figure appears; provided, however, that such
substitution shall not have the effect of reducing any benefit accrued under a
defined benefit plan prior to the first day of the plan year in which this
Section 10.8 becomes applicable.
-43-
<PAGE>
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Administrator.
This Plan shall be administered by a committee consisting of up to 5
persons, whether or not Employees or Participants, who shall be appointed from
time to time by the Board of Directors to serve at its pleasure. The Sponsor may
require that each person appointed as an Administrator shall signify his
acceptance by filing an acceptance with the Sponsor. The term "Administrator" as
used in this Plan shall refer to the members of the committee, either
individually or collectively, as appropriate. In the event that the Sponsor
shall elect not to appoint any individuals to constitute a committee to
administer the Plan, the Sponsor shall serve as the Administrator hereunder.
11.2 Resignation or Removal of Administrator.
An Administrator shall have the right to resign at any time by giving
notice in writing, mailed or delivered to the Employer and to the Trustee. Any
Administrator who was an employee of the Employer at the time of his appointment
shall be deemed to have resigned as an Administrator upon his termination of
Service. The Board of Directors may, in its discretion, remove any Administrator
with or without cause, by giving notice in writing, mailed or delivered to the
Administrator and to the Trustee.
11.3 Appointment of Successors: Terms of Office, Etc.
Upon the death, resignation or removal of an Administrator, the
Employer may appoint, by Board of Directors' resolution, a successor or
successors. Notice of termination of an Administrator and notice of appointment
of a successor shall be made by the Employer in writing, with copies mailed or
delivered to the Trustee, and the successor shall have all the rights and
privileges and all of the duties and obligations of the predecessor.
11.4 Powers and Duties of Administrator.
The Administrator shall have the following duties and responsibilities
in connection with the administration of this Plan:
(a) To promulgate and enforce such rules, regulations and procedures as
shall be proper for the efficient administration of the Plan, such rules,
regulations and procedures to apply uniformly to all Employees, Participants and
Beneficiaries;
-44-
<PAGE>
(b) To determine, in its sole and absolute discretion, all questions
arising in the administra tion, interpretation and application of the Plan,
including questions of eligibility and of the status and rights of Participants,
Beneficiaries and any other persons hereunder;
(c) To decide any dispute arising hereunder strictly in accordance with
the terms of the Plan; provided, however, that no Administrator shall
participate in any matter involving any questions relating solely to his own
participation or benefits under this Plan;
(d) To advise the Employer and the Trustee regarding the known future
needs for funds to be available for distribution in order that the Trustee may
establish investments accordingly;
(e) To correct defects, supply omissions and reconcile inconsistencies
to the extent necessary to effectuate the Plan;
(f) To advise the Employer of the maximum deductible contribution to
the Plan for each fiscal year;
(g) To direct the Trustee concerning all payments which shall be made
out of the Fund pursuant to the provisions of this Plan;
(h) To advise the Trustee on all terminations of Service by
Participants, unless the Employer has so notified the Trustee;
(i) To confer with the Trustee on the settling of any claims against
the Fund;
(j) To make recommendations to the Board of Directors with respect to
proposed amendments to the Plan and the Trust Agreement;
(k) To file all reports with government agencies, Employees and other
parties as may be required by law, whether such reports are initially the
obligation of the Employer, the Plan or the Trustee; and
(l) To have all such other powers as may be necessary to discharge its
duties hereunder.
Discretion is granted to the Administrator to affect the benefits,
rights and privileges of Participants, Beneficiaries or other persons affected
by this Plan. The Administrator shall exercise its discretion under the terms of
this Plan and shall administer the Plan in accordance with its terms, such
administration to be exercised uniformly so that all persons similarly situated
shall be similarly treated.
-45-
<PAGE>
11.5 Action by Administrator.
The Administrator may elect a Chairman and Secretary from among its
members and may adopt rules for the conduct of its business. A majority of the
members then serving shall constitute a quorum for the transaction of business.
All resolutions or other action taken by the Administrator shall be by vote of a
majority of those present at such meeting and entitled to vote. Resolutions may
be adopted or other action taken without a meeting upon written consent signed
by at least a majority of the members. All documents, instruments, orders,
requests, directions, instructions and other papers shall be executed on behalf
of the Administrator by either the Chairman or the Secretary of the
Administrator, if any, or by any member or agent of the Administrator duly
authorized to act on the Administrator's behalf.
11.6 Participation by Administrators.
No Administrator shall be precluded from becoming a Participant in the
Plan if he would be otherwise eligible, but he shall not be entitled to vote or
act upon matters or to sign any documents relating specifically to his own
participation under the Plan, except when such matters or documents relate to
benefits generally. If this disqualification results in the lack of a quorum,
then the Board of Directors shall appoint a sufficient number of temporary
Administrators who shall serve for the sole purpose of determining such a
question.
11.7 Agents.
The Administrator may employ agents and provide for such clerical,
legal, actuarial, accounting, medical, advisory or other services as it deems
necessary to perform its duties under this Plan. The cost of such services and
all other expenses incurred by the Administrator in connection with the
administration of the Plan shall be paid from the Fund, unless paid by the
Employer.
11.8 Allocation of Duties.
The duties, powers and responsibilities reserved to the Administrator
may be allocated among its members so long as such allocation is pursuant to
written procedures adopted by the Administrator, in which case, except as may be
required by the Act, no Administrator shall have any liability, with respect to
any duties, powers or responsibilities not allocated to him, for the acts of
omissions of any other Administrator.
11.9 Delegation of Duties.
The Administrator may delegate any of its duties to other employees of
the Employer, to the Trustee with its consent, or to any other person or firm,
provided that the Administrator shall prudently choose such agents and rely in
good faith on their actions.
-46-
<PAGE>
11.10 Administrator's Action Conclusive.
Any action on matters within the authority of the Administrator shall
be final and conclusive except as provided in Article XII.
11.11 Compensation and Expenses of Administrator.
No Administrator who is receiving compensation from the Employer as a
full-time employee, as a director or agent, shall be entitled to receive any
compensation or fee for his services hereunder. Any other Administrator shall be
entitled to receive such reasonable compensation for his services as an
Administrator hereunder as may be mutually agreed upon between the Employer and
such Administrator. Any such compensation shall be paid from the Fund, unless
paid by the Employer. Each Administrator shall be entitled to reimbursement by
the Employer for any reasonable and necessary expenditures incurred in the
discharge of his duties.
11.12 Records and Reports.
The Administrator shall maintain adequate records of its actions and
proceedings in administering this Plan and shall file all reports and take all
other actions as it deems appropriate in order to comply with the Act, the Code
and governmental regulations issued thereunder.
11.13 Reports of Fund Open to Participants.
The Administrator shall keep on file, in such form as it shall deem
convenient and proper, all annual reports of the Fund received by the
Administrator from the Trustee, and a statement of each Participant's interest
in the Fund as from time to time determined. The annual reports of the Fund and
the statement of his own interest in the Fund, as well as a complete copy of the
Plan and the Trust Agreement and copies of annual reports to the Internal
Revenue Service, shall be made available by the Administrator to the Employer
for examination by each Participant during reasonable hours at the office of the
Employer, provided, however, that the statement of a Participant's interest
shall not be made available for examination by any other Participant.
11.14 Named Fiduciary.
The Administrator is the named fiduciary for purposes of the Act and
shall be the designated agent for receipt of service of process on behalf of the
Plan. It shall use ordinary care and diligence in the performance of its duties
under this Plan. Nothing in this Plan shall preclude the Employer from
indemnifying the Administrator for all actions under this Plan, or from
purchasing liability insurance to protect it with respect to its duties under
this Plan.
-47-
<PAGE>
11.15 Information from Employer.
The Employer shall promptly furnish all necessary information to the
Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the Employer, unless it knows or should have
known that such information is erroneous.
11.16 Reservation of Rights by Employer.
Where rights are reserved in this Plan to the Employer, such rights
shall be exercised only by action of the Board of Directors, except where the
Board of Directors, by written resolution, delegates any such rights to one or
more officers of the Employer or to the Administrator. Subject to the rights
reserved to the Board of Directors acting on behalf of the Employer as set forth
in this Plan, no member of the Board of Directors shall have any duties or
responsibilities under this Plan, except to the extent he shall be acting in the
capacity of an Administrator or Trustee.
11.17 Liability and Indemnification.
(a) The Administrator shall perform all duties required of it under
this Plan in a prudent manner. To the extent not prohibited by the Act, the
Administrator shall not be responsible in any way for any action or omission of
the Employer, the Trustee or any other fiduciaries in the performance of their
duties and obligations set forth in this Plan and in the Trust Agreement. To the
extent not prohibited by the Act, the Administrator shall also not be
responsible for any act or omission of any of its agents, or with respect to
reliance upon advice of its counsel (whether or not such counsel is also counsel
to the Employer or the Trustee), provided that such agents or counsel were
prudently chosen by the Administrator and that the Administrator relied in good
faith upon the action of such agent or the advice of such counsel.
(b) The Administrator shall not be relieved from responsibility or
liability for any responsibility, obligation or duty imposed upon it under this
Plan or under the Act. Except for its own gross negligence, willful misconduct
or willful breach of the terms of this Plan, the Administrator shall be
indemnified and held harmless by the Employer against liability or losses
occurring by reason of any act or omission of the Administrator to the extent
that such indemnification does not violate the Act or any other federal or state
laws.
11.18 Service as Trustee and Administrator.
Nothing in this Plan shall prevent one or more Trustees from serving as
Administrator under this Plan.
-48-
<PAGE>
ARTICLE XII
CLAIMS PROCEDURE
12.1 Notice of Denial.
If a Participant or his Beneficiary is denied any benefits under this
Plan, either in whole or in part, the Administrator shall advise the claimant in
writing of the amount of his benefit, if any, and the specific reasons for the
denial. The Administrator shall also furnish the claimant at that time with a
written notice containing:
(a) A specific reference to pertinent Plan provisions;
(b) A description of any additional material or information necessary
for the claimant to perfect his claim, if possible, and an explanation of why
such material or information is needed; and
(c) An explanation of the Plan's claim review procedure.
12.2 Right to Reconsideration.
Within 60 days of receipt of the information described in 12.1 above,
the claimant shall, if he desires further review, file a written request for
reconsideration with the Administrator.
12.3 Review of Documents.
So long as the claimant's request for review is pending (including the
60-day period described in Section 12.2 above), the claimant or his duly
authorized representative may review pertinent Plan documents and the Trust
Agreement (and any pertinent related documents) and may submit issues and
comments in writing to the Administrator.
12.4 Decision by Administrator.
A final and binding decision shall be made by the Administrator within
60 days of the filing by the claimant of his request for reconsideration;
provided, however, that if the Administrator feels that a hearing with the
claimant or his representative present is necessary or desirable, this period
shall be extended an additional 60 days.
12.5 Notice by Administrator.
The Administrator's decision shall be conveyed to the claimant in
writing and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific references to the
pertinent Plan provisions on which the decision is based.
-49-
<PAGE>
ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments.
The Employer reserves the right at any time and from time to time, and
retroactively if deemed necessary or appropriate by it, to the extent
permissible under law, to conform with governmental regulations or other
policies, to amend in whole or in part any or all of the provisions of this
Plan, provided that:
(a) No amendment shall make it possible for any part of the Fund to be
used for, or diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Trust Agreement, except to the
extent provided in Section 4.4;
(b) No amendment may, directly or indirectly, reduce the vested portion
of any Participant's interest as of the effective date of the amendment or
change the vesting schedule with respect to the future accrual of Employer
contributions for any Participants unless each Participant with 3 or more Years
of Service with the Employer is permitted to elect to have the vesting schedule
in effect before the amendment used to determine his vested benefit; and
(c) No amendment may eliminate an optional form of benefit.
(d) No amendment may increase the duties of the Trustee without its
consent.
Amendments may be made in the form of Board of Directors' resolutions
or separate written document. Copies of all amendments shall be delivered to the
Trustee.
13.2 Consolidation, Merger or Other Transactions of Employer.
Nothing in this Plan shall prevent the consolidation, merger,
reorganization or liquidation of the Employer, or prevent the sale by Employer
of any or all of its property. Any successor corporation or other entity formed
and resulting from any such transaction shall have the right to become a party
to this Plan by adopting the same by resolution and by appointing a new Trustee
as though the Trustee had resigned in accordance with the Trust Agreement, and
by executing a proper supplemental agreement with the Trustee. If, within 180
days from the effective date of such transaction, such new entity does not
become a party to this Plan as above provided, this Plan shall automatically be
termi nated and the Trustee shall make payments to the persons entitled thereto
in accordance with Section 9.5.
-50-
<PAGE>
13.3 Consolidation or Merger of Trust.
In the event of any merger or consolidation of the Fund with, or
transfer in whole or in part of the assets and liabilities of the Fund to,
another trust fund held under any other plan of deferred compensation maintained
or to be established for the benefit of all or some of the Participants of this
Plan, the assets of the Fund applicable to such Participants shall be
transferred to the other trust fund only if:
(a) Each Participant would receive a benefit under such successor trust
fund immediately after the merger, consolidation or transfer which is equal to
or greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer (determined as if this Plan and
such transferee trust fund had then terminated);
(b) Resolutions of the Board of Directors under this Plan, or of any
new or successor employer of the affected Participants, shall authorize such
transfer of assets, and, in the case of the new or successor employer of the
affected Participants, its resolutions shall include an assumption of
liabilities with respect to such Participants' inclusion in the new employer's
plan; and
(c) Such other plan and trust are qualified under Sections 401(a) and
501(a) of the Code.
13.4 Bankruptcy or Insolvency of Employer.
In the event of (a) the Employer's legal dissolution or liquidation by
any procedure other than a consolidation or merger, (b) the Employer's
receivership, insolvency, or cessation of its business as a going concern, or
(c) the commencement of any proceeding by or against the Employer under the
federal bankruptcy laws, and similar federal or state statute, or any federal or
state statute or rule providing for the relief of debtors, compensation of
creditors, arrangement, receivership, liquidation or any similar event which is
not dismissed within 30 days, this Plan shall terminate automatically on such
date (provided, however, that if a proceeding is brought against the Employer
for reorganization under Chapter 11 of the United States Bankruptcy Code or any
similar federal or state statute, then this Plan shall terminate automatically
if and when said proceeding results in a liquidation of the Employer, or the
approval of any Plan providing therefor, or the proceeding is converted to a
case un der Chapter 7 of the Bankruptcy Code or any similar conversion to a
liquidation proceeding under federal or state law including, but not limited to,
a receivership proceeding). In the event of any such termination as provided in
the foregoing sentence, the Trustee shall make payments to the persons entitled
thereto in accordance with Section 9.5 hereof.
13.5 Voluntary Termination.
The Board of Directors reserves the right to terminate this Plan at any
time by giving to the Trustee and the Administrator notice in writing of such
desire to terminate. The Plan shall terminate upon the date of receipt of such
notice, the interests of all Participants shall become fully vested, and
-51-
<PAGE>
the Trustee shall make payments to each Participant or Beneficiary in accordance
with Section 9.5. Alternatively, the Employer, in its discretion, may determine
to continue the Trust Agreement and to continue the maintenance of the Fund, in
which event distributions shall be made upon the contin gencies and in all the
circumstances which would have been entitled such distributions on a fully
vested basis, had there been no termination of the Plan.
13.6 Partial Termination of Plan or Permanent Discontinuance of Contributions.
In the event that a partial termination of the Plan shall be deemed to
have occurred, or if the Employer shall discontinue completely its contributions
hereunder, the right of each affected Participant to his interest in the Fund
shall be fully vested. The Employer, in its discretion, shall decide whether to
direct the Trustee to make immediate distribution of such portion of the Fund
assets to the persons entitled thereto or to make distribution in the
circumstances and contingencies which would have controlled such distributions
if there had been no partial termination or discontinuance of contributions.
13.7 Change of Control.
In the event of a Change of Control, every Participant, to the extent
that he is not already fully vested in his interest in the Fund, shall become
fully and immediately vested therein, notwithstanding the vesting schedules set
forth at Sections 7.2 or 10.7. As used herein, the term "Change of Control"
shall mean (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Sponsor with respect to which 25% or more of the total
number of votes may be cast for the election of the Board of Directors of the
Sponsor; (ii) as a result of, or in connection with, any cash tender offer,
merger or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the Sponsor
shall cease to constitute a majority of the Board of Directors; or (iii) the
stockholders of the Sponsor shall approve an agreement providing either for a
transaction in which the Sponsor shall cease to be an independent publicly owned
entity or for a sale or other disposition of all or substantially all the assets
of the Sponsor.
-52-
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 No Diversion of Funds.
It is the intention of the Employer that it shall be impossible for any
part of the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of the Participants or their
Beneficiaries, except to extent that a return of the Employer's contribution is
permitted under Section 4.4.
14.2 Liability Limited.
Neither the Employer nor the Administrator, nor any agents, employees,
officers, directors or shareholders of any of them, nor the Trustee, nor any
other person shall have any liability or responsibility with respect to this
Plan, except as expressly provided herein.
14.3 Incapacity.
If the Administrator shall receive evidence satisfactory to it that a
Participant or Beneficiary entitled to receive any benefit under the Plan is, at
the time when such benefit becomes payable, a minor, or is physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of such Participant or Beneficiary, and that no guardian, committee or
other representative of the estate of such Participant or Beneficiary shall have
been duly appointed, the Administrator may direct the Trustee to make payment of
such benefit otherwise payable to such Participant or Beneficiary, to such other
person or institution, including a custodian under a Uniform Gifts to Minor Act,
or correspond ing legislation (who shall be an adult, a guardian of the minor or
a trust company), and the release of such other person or institution shall be a
valid and complete discharge for the payment of such benefit.
14.4 Spendthrift Clause.
Except as permitted by the Act or the Code, no benefits or other
amounts payable under the Plan shall be subject in any manner to anticipation,
sale, transfer, assignment, pledge, encumbrance, charge or alienation. If the
Administrator determines that any person entitled to any payments under the Plan
has become insolvent or bankrupt or has attempted to anticipate, sell, transfer,
assign, pledge, encumber, charge or otherwise in any manner alienate any benefit
or other amount payable to him under the Plan or that there is any danger of any
levy or attachment or other court process or encumbrance on the part of any
creditor of such person entitled to payments under the Plan against any benefit
or other accounts payable to such person, the Administrator may, at any time, in
its discretion, direct the Trustee to withhold any or all payments to such
person under the Plan and apply
-53-
<PAGE>
the same for the benefit of such person, in such manner and in such
proportion as the Administrator may deem proper.
14.5 Benefits Limited to Fund.
All contributions by the Employer to the Fund shall be voluntary, and
the Employer shall be under no legal liability to make any such contributions.
The benefits of this Plan shall be only as can be provided by the assets of the
Fund, and no liability for the payment of benefits under the Plan or for any
loss of assets due to any action or inaction of the Trustee shall be imposed
upon the Employer.
14.6 Cooperation of Parties.
All parties to this Plan and any party claiming interest hereunder
agree to perform any and all acts and execute any and all documents and papers
which are necessary and desirable for carrying out this Plan or any of its
provisions.
14.7 Payments Due Missing Persons.
The Administrator shall direct the Trustee to make a reasonable effort
to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provision in the Plan to the contrary, if, after a period of
5 years from the date such benefit shall be due, any such persons entitled to
benefits have not been located, their rights under the Plan shall stand
suspended. Before this provision becomes operative, the Trustee shall send a
certified letter to all such persons at their last known address advising them
that their interest in benefits under the Plan shall be suspended. Any such
suspended amounts shall be held by the Trustee for a period of 3 additional
years (or a total of 8 years from the time the benefits first became payable),
and thereafter such amounts shall be reallocated among current Participants in
the same manner that a current contribution would be allocated. However, if a
person subsequently makes a valid claim with respect to such reallocated amounts
and any earnings thereon, the Plan earnings or the Employer's contribution to be
allocated for the year in which the claim shall be paid shall be reduced by the
amount of such payment. Any such suspended amounts shall be handled in a manner
not inconsistent with regulations issued by the Internal Revenue Service and
Department of Labor.
14.8 Governing Law.
This Plan has been executed in the State of New York and all questions
pertaining to its validity, construction and administration shall be determined
in accordance with the laws of that State, except to the extent superseded by
the Act.
-54-
<PAGE>
14.9 Nonguarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any Employee
to be continued in the employment of the Employer, or as a limitation of the
right of the Employer to discharge any of its Employees, with or without cause.
14.10 Counsel.
The Trustee and the Administrator may consult with legal counsel, who
may be counsel for the Employer and for the Administrator or the Trustee (as the
case may be), with respect to the meaning or construction of this Plan and the
Trust Agreement, their respective obligations or duties hereunder or with
respect to any action or proceeding or any question of law, and they shall be
fully protected with respect to any action taken or omitted by them in good
faith pursuant to the advice of legal counsel.
IN WITNESS WHEREOF, the Sponsor has caused these presents to be
executed by its duly authorized officers and its corporate seal to be affixed on
this 4th day of February, 1998.
ADIRONDACK FINANCIAL
SERVICES BANCORP, INC.
ATTEST:
/s/ Menzo D. Case By /s/ Lewis E. Kolar,
- ----------------------------------- ----------------------------
Menzo D. Case, Lewis E. Kolar,
Executive Vice President and President
Secretary
[Corporate Seal]
-55-
Exhibit 23.1
CONSENT OF COUNSEL
We consent to the use of our opinions, to the incorporation by
reference of such opinions as an exhibits to the Form S-1 and to the reference
to our firm under the headings "The Conversion - Income Tax Consequences" and
"Legal and Tax Matters" in the Prospectus included in this Form S-1. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
/S/ SILVER, FREEDMAN & TAFF, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
Washington, D.C.
February 9, 1998
Exhibit 23.2
[KPMG PEAT MARWICK LETTERHEAD]
ACCOUNTANT'S CONSENT
The Board of Directors
Gloversville Federal Savings and
Loan Association
We consent to the use in this Registration Statement on Form S-1 and in the
Application for Conversion on Form AC of Adirondack Financial Services Bancorp,
Inc. of our report dated December 12, 1997, on the financial statements of
Gloversville Federal Savings and Loan Association as of September 30, 1997 and
1996 and for each of the years in the three-year period ended September 30,
1997.
We also consent to the references to our firm under the heading "Experts" in the
related prospectus.
/s/ KPMG Peat Marwick LLP
Albany, New York
February 6, 1998
-------------------------------------------------
CONVERSION APPRAISAL REPORT
ADIRONDACK FINANCIAL SERVICES BANCORP
PROPOSED HOLDING COMPANY FOR
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Gloversville, New York
Dated As Of:
December 12, 1997
-------------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
RP FINANCIAL, LC
- ---------------------------------------
Financial Services Industry Consultants
December 12, 1997
Board of Directors
Gloversville Federal Savings and Loan Association
52 North Main Street
Gloversville, New York 12078-3084
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
Gloversville Federal Savings and Loan Association, Gloversville, New York
("Gloversville Federal" or the "Association"). The common stock issued in
connection with the Association's conversion will simultaneously be acquired by
a holding company, Adirondack Financial Services Bancorp (the "Holding
Company"). Pursuant to the Plan of Conversion, the common stock is first being
offered in the Subscription Offering with nontransferable subscription rights
being granted to Eligible Account Holders, Tax Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members and employees officers and
directors. To the extent shares remain available for purchase after filling all
orders received in the Subscription Offering, the Common Stock will be offered
in a Public Offering.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Association has adopted a Plan of Conversion
pursuant to which the Association will convert from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association and issue all of its outstanding shares to the Holding Company. The
Holding Company will sell in the Subscription Offering and, if necessary, in the
Public Offering, Holding Company stock in the amount equal to the appraised
value of the Association. Immediately following the conversion, the only
significant assets of the Holding Company will be the capital stock of the
Association and the net conversion proceeds remaining after purchase of the
Association's common stock by the Holding Company. The Holding Company will use
50 percent of the net conversion proceeds to purchase the Association's common
stock. A portion of the remaining 50 percent of the net conversion proceeds will
be used to fund a loan to the ESOP with the remainder to be used as general
working capital.
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 2
background and experience of RP Financial is detailed in Exhibit V-1. We believe
that, except for the fee we will receive for our appraisal and assisting the
Association in the preparation of its business plan, we are independent of the
Association and the other parties engaged by the Association to assist in the
stock conversion process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed Gloversville Federal's
application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS, and the Holding Company's Form S-1 registration statement as filed
with the Securities Exchange Commission. We have conducted a financial analysis
of the Association that has included due diligence related discussions with the
Association's management; KPMG Peat Marwick, the Association's independent
auditor; Silver, Freedman & Taff, LLP, the Association's conversion counsel; and
Capital Resources, Inc., which has been retained by the Association as a
financial and marketing advisor in connection with the Holding Company's stock
offering. All conclusions set forth in the appraisal were reached independently
from such discussions. In addition, where appropriate, we have considered
information based on other available published sources that we believe are
reliable. While we believe the information and data gathered from all these
sources are reliable, we cannot guarantee the accuracy and completeness of such
information.
We have investigated the competitive environment within which the
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Gloversville Federal. We have reviewed the
economy in the Association's primary market area and have compared the
Association's financial performance and condition with selected publicly-traded
thrift institutions with similar characteristics as the Association's, as well
as all publicly-traded thrifts. We have reviewed conditions in the securities
markets in general and in the market for thrift stocks in particular, including
the market for existing thrift issues and the market for initial public
offerings by thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Gloversville Federal.
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of thrift stocks as a
whole or the Association's value alone. It is our understanding that
Gloversville Federal intends to remain an independent institution and there are
no current plans for selling control of the Association as a converted
institution. To the extent that such factors can be foreseen, they have been
factored into our analysis.
Pro forma market value is defined as the price at which Gloversville
Federal's stock, immediately upon completion of the conversion offering, would
change hands between a willing buyer and a willing seller, neither being under
any compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 3
Valuation Conclusion
- --------------------
It is our opinion that, as of December 12, 1997, the aggregate pro forma
market value of the shares to be issued was $5,000,000 at the midpoint, equal to
500,000 shares offered at a per share value of $10.00. Pursuant to the
conversion guidelines, the 15 percent offering range indicates a minimum value
of $4,250,000 and a maximum value of $5,750,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 425,000 shares at
the minimum to 575,000 shares at the maximum. In the event that the
Association's appraised value is subject to an increase, up to 661,250 shares
may be sold at an issue price of $10.00 per share, for an aggregate market value
of $6,612,500, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Association as of September 30, 1997, the date of the
financial data included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Association's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ James P. Hennessey
James P. Hennessey
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
ADIRONDACK FINANCIAL SERVICES BANCORP
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Strategic Discussion 1.1
Balance Sheet Trends 1.4
Income and Expense Trends 1.7
Interest Rate Risk Management 1.11
Lending Activities and Strategy 1.12
Asset Quality 1.13
Funding Composition and Strategy 1.14
Subsidiary 1.15
Legal Proceedings 1.15
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
Market Area Demographics 2.1
Economy 2.3
Deposit Trends and Competition 2.4
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Credit Risk 3.11
Interest Rate Risk 3.14
Summary 3.16
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
ADIRONDACK FINANCIAL SERVICES BANCORP
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
(continued)
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.4
5. Dividends 4.5
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.8
B. The New Issue Market 4.13
C. The Acquisition Market 4.16
8. Management 4.16
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Valuation Approaches 4.17
1. Price-to-Tangible Book ("P/TB") 4.19
2. Price-to-Earnings ("P/E") 4.19
3. Price-to-Assets ("P/A") 4.19
Valuation Conclusion 4.20
<PAGE>
RP Financial, LC.
LIST OF TABLES
ADIRONDACK FINANCIAL SERVICES BANCORP
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Historical Balance Sheets 1.5
1.2 Historical Income Statements 1.8
2.1 Summary Demographic Data 2.2
2.2 Major Employers in Fulton County 2.3
2.3 Market Area Unemployment Trends 2.4
2.4 Deposit Summary 2.5
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9
3.4 Loan Portfolio Composition Comparative Analysis 3.12
3.5 Credit Risk Measures and Related Information 3.13
3.6 Interest Rate Risk Measures and Net Interest Income Volatility 3.15
4.1 Peer Group Market Area Comparative Analysis 4.6
4.2 Conversion Pricing Characteristics 4.14
4.3 Market Pricing Comparatives 4.15
4.4 Public Market Pricing 4.21
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Gloversville Federal Savings and Loan Association ("Gloversville Federal"
or the "Association") is a federally-chartered mutual savings and loan
association headquartered in Gloversville, New York. Gloversville Federal
conducts operations out of a headquarters office in Gloversville, Fulton County,
New York and a branch office in Saratoga Springs, Saratoga County, New York. The
Association's markets in east-central New York are relatively rural in character
but at the same time, are within a relatively short distance of the
Albany/Schenectady markets (particularly the Saratoga Springs office). The
Association was established in 1923 as a federally-chartered institution and has
served Fulton County since that time; the Saratoga branch office was established
in the 1960s. The Association's deposits are insured up to the regulatory
maximums by the Federal Deposit Insurance Corporation ("FDIC") under the Savings
Association Insurance Fund ("SAIF"). At September 30, 1997, Gloversville Federal
maintained $61.0ymillion in total assets, $56.1 million in deposits and retained
earnings of $3.3 million, or 5.4 percent of total assets. For the fiscal year
ended September 30, 1997, the Association recorded a net loss of $583,000, equal
to 0.94 percent of average assets.
Adirondack Financial Services Bancorp ("AFSB" or the "Holding Company"),
was recently organized to facilitate the conversion of Gloversville Federal. In
the course of the conversion, the Holding Company will acquire all of the
capital stock that the Association will issue upon its conversion from the
mutual-to-stock form of ownership. Going forward, AFSB will own 100ypercent of
the Association's stock, and the Association will be AFSB's sole subsidiary. Up
to 50ypercent of the net proceeds received from the sale of common stock will be
used to purchase all of the then to-be-issued and outstanding capital stock of
the Association, with the balance of the proceeds being retained by the Holding
Company. At this time, no other activities are contemplated for AFSB other than
the ownership of the Association, a loan to the employee stock ownership plan
("ESOP"), the possible payment of dividends and investment of the cash retained
at the Holding Company in investment securities consistent with the
Association's current investment practices and procedures. In the future, AFSB
may repurchase shares, diversify its business possibly through existing or
newly-formed subsidiaries, and expand through branching or possibly acquisition
of other financial institutions. There are currently no arrangements,
understandings or agreements regarding any such activities.
Strategic Discussion
- ---------------------
Gloversville Federal is a community-oriented savings institution, with a
primary strategic objective of meeting the borrowing and savings needs of its
local customer base. Throughout its history, Gloversville Federal
<PAGE>
RP Financial, LC.
Page 1.2
has pursued a traditional thrift operating strategy and, thus, one-to-four
family permanent mortgage lending has been the focus of the Association's
lending activities. To a lesser extent, Gloversville Federal originates
commercial and multi-family mortgage loans as well as modest amounts of consumer
and commercial business loans. Investment securities have typically comprised
the balance of interest-earning assets, which served to address Gloversville
Federal's liquidity requirements and to earn a yield on excess investable funds.
Throughout the 1980s and through the mid-1990s, the Association offered a
limited array of products and services. In this regard, the Association has
primarily been a residential mortgage lender with its principal product
consisting of 15 and 30 year fixed rate loans. All loans have been originated
for portfolio. In terms of funding operations, the Association's principal
products were certificates of deposit ("CDs") and passbook accounts. The
Association experienced limited growth during the 1980s and into the early 1990s
as marketing efforts were modest and as loan demand and deposit growth were weak
(partially attributable to weak economic conditions locally).
As referenced above, a factor leading to the low growth of the Association
since the early 1990s are the economic conditions prevailing in Gloversville
Federal's market. Specifically, the Association's markets were hard hit by
recessionary economic conditions prevailing in the early 1990s, as unemployment
levels increased and market conditions, particularly in the real estate markets,
deteriorated. Weakness in the local economy has resulted in declining real
estate prices and an increased level of delinquencies for the Association. In
addition to weak conditions in the local real estate markets, new management
attributes the past increase in the level of non-performing assets ("NPAs") of
the Association to weak underwriting and collections by prior management.
Gloversville Federal's current Executive Vice President was employed by the
Association in late 1993 and the Association's current President was employed in
late 1994. New management has undertaken a number of strategies in order to
achieve the following broad objectives: (1) increase the Association's
competitiveness and ability to grow; (2) implement strategies to enhance the
Association's earnings; (3) reduce the level of NPAs through improved loan
underwriting and collections; and (4) draft and implement policies and
procedures with the objective of reducing the Association's risk exposure and
improving operating efficiency.
In particular, new management reconciled the general ledger and established
appropriate controls over the general ledger system. Additionally, management
revamped the Association's policies and procedures with the objective of
reducing Gloversville Federal's risk exposure. At the same time, management
commenced a thorough review of problem assets and employed an asset review
manager in early 1995 to facilitate its efforts in this regard.
<PAGE>
RP Financial, LC.
Page 1.3
Management's loan portfolio review coupled with the impact of the tightened
asset classification and non-accrual policy resulted in an increase in the
Association's non-performing loans. In this regard, management discovered that
loan due dates had been advanced in contravention of the Association's policies
and procedures. Additionally, the Association did not require escrows for taxes
and insurance to be withheld on residential loans made prior to 1995, and found
that a high number of its borrowers were delinquent with respect to taxes and
insurance. Last, the Association's residential loan documents provided for a 30
day grace period (i.e., late charges were not assessed until the loan is 30 days
or more past due) on loans made prior to 1995, which skewed the Association's 30
day delinquency ratio upward significantly.
In order to protect the Association's collateral interest in loans which
were delinquent with respect to taxes and insurance, the Association modified or
restructured the underlying loans in 1996. Currently, such loans total
approximately $2.7 million and are on non-accrual status consistent with the
Association's revised policies and procedures. Since these loans have been
consistent with market terms and conditions, they will be returned to accruing
status in 1998 if they perform in accordance with the revised terms.
Importantly, total non-performing assets ("NPAs") equaled $4.1 million, equal to
6.73 percent of assets as of September 30, 1997, and continue to represent a
significant risk factor in Gloversville Federal's operations. Management has
significantly bolstered the Association's loan loss allowance, consistent with
its policies and procedures, in recognition of the risk posed by the high level
of NPAs.
Residential loan origination activity has diminished in the last several
years relative to fiscal 1994 levels, as new management sought to draft and
implement new policies and procedures and work out of asset quality problems. At
the same time, new management has actively pursued commercial and multi-family
mortgage lending locally with the objective of increasing the Association's
yields and reducing interest rate risk exposure (most commercial and
multi-family mortgage loans are adjustable rate or shorter term balloon loans).
The Association employed a commercial loan officer in 1995 who was previously
employed by another local financial institution -- the commercial and
multi-family mortgage portfolio has increased from a near zero balance under
prior management to $8.0 million or 15.5 percent of total loans as of September
30, 1997.
On the liability side of the balance sheet, Gloversville Federal funds
operations primarily with deposits and, to a much lesser extent, borrowed funds.
Deposit levels actually reflect a decrease from the levels prevailing in fiscal
1994 as the Association has directed most of management's time and resources
toward resolving asset quality problems. At the same time, new management has
revamped the Association's deposit products to introduce statement savings,
money market account with limited check writing privileges, and commercial
demand deposit accounts, which it believes are required to meet the higher
growth objectives established for the future.
<PAGE>
RP Financial, LC.
Page 1.4
The Association's strategy for the future is to continue to focus on the
reduction of NPAs, and to resume asset growth, both in the area of residential
mortgage lending and commercial/multi-family mortgage lending. The Association
will continue to fund operations primarily through retail deposits but believes
that its higher future growth objectives may require it to utilize borrowing to
a greater degree than it has in the past. Additionally, management has indicated
that it intends to focus its future business development efforts on the Saratoga
Springs market where it maintains a branch office, based on this area's
comparatively favorable growth trends and income levels. In this regard,
management has indicated that it is currently evaluating the possibility of
moving its current branch office to a more favorable location and establishing
an additional branch office at another location in Saratoga County. A firm
decision regarding the Association's Saratoga branching strategy has not been
made and growth and cost estimates are currently being developed.
The Board of Directors of the Association has elected to convert to the
stock form of ownership to improve earnings and bolster capital. The additional
capital realized from conversion proceeds is expected to increase liquidity to
support loan growth, increase the capital cushion to absorb unanticipated loss,
enhance overall profitability and provide the capital for additional growth
through existing branches or possibly a new branch in Saratoga County. The
additional funds realized from the conversion stock offering will also serve as
an alternative funding source to facilitate the Association's ability to offer
competitive rates. The projected use of conversion proceeds are highlighted
below.
Adirondack Financial Services Bancorp. AFSB is expected to retain up to 50
percent of the net conversion proceeds. At present, the Holding Company
funds, net of the loan to the ESOP, are expected to be invested initially
into short- and intermediate-term investment securities with maturities
ranging up to two years. Over time, the Holding Company funds are
anticipated to be utilized for various corporate purposes, possibly
including acquisitions, infusing additional equity into the Association,
repurchases of common stock, and the payment of regular and/or special cash
dividends.
Gloversville Federal. At least 50 percent of the net conversion proceeds
will be infused into the Association in exchange for all of the
Association's newly issued stock. The increase in capital will be less, as
the amount to be borrowed by the ESOP to fund an 8 percent stock purchase
will be deducted from capital. Cash proceeds (i.e., net proceeds less
deposits withdrawn to fund stock purchases) infused into the Association
are anticipated to become part of general operating funds, and are expected
to initially be invested in short-term investments, used to repay
short-term borrowings and/or to fund loan growth.
Balance Sheet Trends
- --------------------
From the end of fiscal 1993 to 1997, the gross amount of Gloversville
Federal's total assets exhibited limited change, and equaled $61.0 million as of
September 30, 1997 (see Table 1.1 for details). The Association's limited growth
trends were evidenced in most key balance sheet aggregates as the level of
loans, cash and investments, and deposits have remained relatively static over
the last three fiscal years. As described in
<PAGE>
RP Financial, LC.
Page 1.5
Table 1.1
Gloversville Federal Savings and Loan Association
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
As of September 30, Compounded
----------------------------------------------------------------------------------- Annual
1993 1994 1995 1996 1997 Growth Rate
--------------- --------------- --------------- --------------- --------------- -----------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Pct
------ --- ------ --- ------ --- ------ --- ------ --- ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $61,894 100.00% $69,597 100.00% $63,073 100.00% $61,006 100.00% $61,022 100.00% -0.35%
Cash and Cash Equivalents 18,184 29.38% 6,509 9.35% 3,181 5.04% 1,198 1.96% 1,922 3.15% -42.98%
Net Loans Receivable 40,896 66.07% 45,645 65.58% 48,239 76.48% 49,636 81.36% 49,526 81.16% 4.90%
Mortgage-Backed Securities (MBS)-AFS 0 0.00% 3,968 5.70% 993 1.57% 4,044 6.63% 3,562 5.84% N.M.
Investment Securities-(AFS) 581 0.94% 5,781 8.31% 4,138 6.56% 3,395 5.57% 3,455 5.66% 56.16%
Deposits 57,346 92.65% 64,703 92.97% 57,866 91.74% 55,716 91.33% 56,117 91.96% -0.54%
Borrowed Funds 0 0.00% 0 0.00% 0 0.00% 300 0.49% 1,300 2.13% N.M.
Total Equity 4,397 7.10% 4,705 6.76% 4,854 7.70% 3,790 6.21% 3,280 5.38% -7.06%
Loans/Deposits 71.31% 70.55% 83.36% 89.09% 88.25%
Average Interest-Earning Assets/
Avergage Interest-Bearing Liabilities N.A. N.A. 105.01% 105.53% 103.76%
Non-Performing Assets/Assets 4.22% 5.53% 4.38% 3.74% 6.73%
Allowances for Loan Losses as a Percent of:
Loans Receivable, net 2.14% 1.88% 1.61% 2.52% 3.26%
Non-Performing Loans 41.63% 24.34% 30.20% 56.53% 42.53%
</TABLE>
Source: Gloversville Federal's audited and unaudited financial reports.
<PAGE>
RP Financial, LC.
Page 1.6
the Strategic Discussion, Gloversville Federal has basically been in a no growth
mode since 1994, primarily as a result of efforts by new management to focus on
the resolution of asset quality problems and due to relatively weak economic
conditions prevailing in the Association's Fulton County market where the
largest portion of the Association's loan and deposit customers reside.
The largest component of Gloversville Federal's assets consists of loans
receivable, which equaled $49.5 million, or 81.1 percent of assets as of
September 30, 1997. The Association's loan portfolio increased between 1993 and
the beginning of fiscal 1995 under prior management. Subsequently, the loan
portfolio balance has remained relatively stable as the residential mortgage
loan balance has declined, with the reduction offset by increases to the
commercial and multi-family mortgage loan portfolio. The impact of the
Association's current emphasis on higher risk weight lending is evidenced by
data which shows commercial and multi-family mortgage loans have increased from
a zero balance as of the end of fiscal 1993 to 15.5 percent of total loans
currently. As discussed earlier, the Association's residential mortgage loan
portfolio is primarily comprised of long term fixed rate mortgage loans (i.e.,
15 and 30 year fixed rate loans) as adjustable loans were not offered until
several years ago and consumer demand for such loans has been very limited to
date.
Cash and interest-earning deposits, investment securities, and federal
funds sold have typically comprised the balance of interest-earning assets.
Under prior management, Gloversville Federal's investment policies were very
conservative being primarily focused on providing the Association with liquidity
and earning a yield on excess investable funds. Accordingly, Gloversville
Federal's investment portfolio has typically been heavily weighted toward
federal funds and interest-earning deposits. With the employment of the new
management team, a new more aggressive posture with respect to the management of
the portfolio has been implemented. Over the long term, management has indicated
that it will be seeking to limit the level of cash and investments and that, in
the interim, the investment portfolio will be managed to enhance earnings
without incurring undue credit or interest rate risk. Accordingly, investment in
short term deposits has been substantially deemphasized and the majority of the
investment portfolio has been invested in U.S. Treasury and agency securities
with laddered maturities extending out for a maximum of approximately 13 years
and mortgage-backed securities ("MBS"). New investments, with the exception of
short term deposits, have been classified as available for sale ("AFS"). As of
September 30, 1997, the portfolios of investment securities and MBS equaled $3.5
million and $3.6 million, respectively, equal to 11.5 percent of total assets in
the aggregate.
The Association's assets were funded with a combination of deposits, borrowings
and retained earnings at September 30, 1997. Retail deposits have consistently
met the substantial portion of Gloversville Federal's funding needs, although
the Association's funding requirements have been modest recently as a result of
the limited growth of loans and assets. CDs comprised the largest component of
the Association's deposit base, equaling 49.9ypercent of total deposits as of
September 30, 1997. In this regard, the Association's deposit
<PAGE>
RP Financial, LC.
Page 1.7
mixture has changed somewhat over the last several fiscal years. Whereas CDs
equaled 58.7 percent of total deposits at the end of fiscal 1995, CDs equaled
49.9 percent of total deposits as of September 30, 1997. Management attributes
the increase in transaction and savings accounts to the introduction of several
new account types (i.e., statement savings and money market accounts) which have
proven to be popular with its customers.
The Association has not utilized borrowed funds to any significant extent
over the last five fiscal years. As of September 30, 1997, borrowed funds
outstanding totaled $1.3 million and consisted of funds from a reverse
repurchase agreement. It is management's preference to rely on deposits to fund
operations however, the Association has in the past, and expects to continue in
the future, to utilize borrowings under several circumstances as follows: (1)
when such funds are priced attractively relative to deposits; (2) to lengthen
the duration of liabilities; and (3) to generate additional liquid funds, if
required.
Positive albeit moderate earnings boosted retained earnings from $4.4
million, or 7.1 percent of assets, at September 30, 1993, to $4.9 million, or
7.7 percent of assets, at September 30, 1995. The Association's equity
diminished over the most recent two fiscal years, to equal $3.3 million, or 5.4
percent of assets as of September 30, 1997, as a result of operating losses
recorded as a result of loan loss provisions established, the special SAIF
assessment recorded in fiscal 1996, and to expenses incurred related to past due
property taxes on properties securing one-to-four family residential loans in
fiscal 1996. The Association maintains a moderate surplus relative to its
minimum capital requirements, which is expected to increase following the
infusion of the conversion proceeds.
Income and Expense Trends
- -------------------------
The ability of the Association to generate a profit has been primarily
dependent upon the level of loan loss provisions established. In this regard,
Gloversville Federal was modestly profitable during fiscal 1994 and 1995, when
loan loss provisions were comparatively low, but reported losses in fiscal 1993,
1996, and 1997 when loan loss provisions were comparatively higher. More
specifically, Gloversville Federal reported modest profitability in the range of
40 basis points on average assets in fiscal 1994 and fiscal 1995, while the
Association reported a net loss equal to $1.0 million or 1.69 percent of average
assets in fiscal 1996, and a net loss of $583,000 equal to 0.94 percent of
average assets in fiscal 1997.
Gloversville Federal's earnings have been largely derived through the net
interest margin and other non-interest operating income, although the
Association's earnings have been impacted to various degrees by non-operating
items over the past several years, which have primarily included gains on the
sale of fixed assets and investments in fiscal 1994, the special SAIF assessment
in fiscal 1996 and the expense incurred as a result of past due property taxes
on properties underlying the Association's mortgage loans. The Association's
high operating
<PAGE>
RP Financial, LC.
Page 1.8
Table 1.2
Gloversville Federal Savings and Loan Association
Historical Income Statements
(Amount and Percent of Assets)(1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------------- ---------------- ---------------- ---------------- ----------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $4,853 7.53% $4,805 7.42% $4,816 7.23% $4,733 7.72% $4,905 7.95%
Interest Expense (2,586) -4.01% (2,147) -3.32% (2,527) -3.79% (2,416) -3.94% (2,447) -3.96%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Net Interest Income $2,267 3.52% $2,657 4.11% $2,289 3.44% $2,317 3.78% $2,458 3.98%
Provision for Loan Losses (843) -1.31% (210) -0.32% (129) -0.19% (714) -1.16% (792) -1.28%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Net Interest Income after Provisions $1,424 2.21% $2,447 3.78% $2,160 3.24% $1,603 2.61% $1,666 2.70%
Other Income $30 0.05% $69 0.11% $102 0.15% $109 0.18% $155 0.25%
Operating Expense (1,754) -2.72% (2,119) -3.28% (2,198) -3.30% (2,556) -4.17% (2,319) -3.76%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Net Operating Income ($300) -0.47% $396 0.61% $64 0.10% ($845) -1.38% ($498) -0.81%
Expense of Special SAIF Assessment $0 0.00% $0 0.00% $0 0.00% ($414) -0.68% $0 0.00%
Gain on the Sale of Securities 0 0.00% 0 0.00% 204 0.31% 0 0.00% 0 0.00%
Gain on the Sale of Premises and Equipment 0 0.00% 0 0.00% 86 0.13% 0 0.00% 0 0.00%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total Non-Operating Income/(Expense) $0 0.00% $0 0.00% $290 0.44% ($414) -0.68% $0 0.00%
Net Income Before Tax ($300) -0.47% $396 0.61% $354 0.53% ($1,259) -2.05% ($498) -0.81%
Income Taxes 62 0.10% (124) -0.19% (102) -0.15% 222 0.36% (85) -0.14%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Net Income/(Loss) ($238) -0.37% $272 0.42% $252 0.38% ($1,036) -1.69% ($583) -0.94%
Estimated Core Earnings
- -----------------------
Net Income ($238) -0.37% $272 0.42% $252 0.38% ($1,036) -1.69% ($583) -0.94%
Addback(Deduct): Non-Recurring (Inc)/Exp 0 0.00% 0 0.00% (290) -0.44% 414 0.68% 0 0.00%
Tax Effect 0 0.00% 0 0.00% 84 0.13% (73) -0.12% 0 0.00%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Estimated Core Income ($238) -0.37% $272 0.42% $45 0.07% ($695) -1.13% ($583) -0.94%
Memo:
Expense Coverage Ratio (2) 129.22% 125.38% 104.13% 90.63% 106.01%
Efficiency Ratio (3) 76.36% 77.75% 91.94% 105.37% 88.73%
Effective Tax Rate 20.53% 31.28% 28.93% 17.66% -17.08%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Net interest income divided by operating expenses.
(3) Operating expenses as a percent of the sum of net interest income and other
income (excluding gains on sale).
Source: Gloversville Federal's audited and unaudited financial statements.
<PAGE>
RP Financial, LC.
Page 1.9
expenses reflect the small size of Gloversville Federal (overhead costs are
typically higher as a percent of assets in smaller institutions) coupled with
the high level non-performing assets, which are expensive to resolve in terms of
management time and institution resources. Loan loss provisions have also been
subject to increases recently, primarily as a result of the high level of NPAs.
These trends are explained more fully below.
The Association's ratio of net interest income before provisions for loan
losses has fluctuated at levels ranging from $2.3 million, equal to 3.44 percent
of average assets for the fiscal year ended September 30, 1995, to $2.7 million,
or 4.11 percent of average assets for the fiscal year ended September 30, 1994.
For the fiscal year ended September 30, 1997, net interest income equaled $2.5
million, or 3.98 percent of average assets. The net interest margin before loan
loss provisions decreased from fiscal 1994 to 1995 as interest rates increased
and the yield on the Association's largely fixed rate loan portfolio increased
at a slower pace than its predominately short term deposit base. Subsequently,
net interest income as a percent of average assets has increased as: (1)
interest rates have trended lower; (2) the percentage of loans in relation to
total assets increased; (3) the Association increased the level of higher
yielding commercial and multi-family mortgage loans; and (4) the proportion of
savings and transaction accounts as a percent of total deposits has increased.
Additionally, the Association's limited growth has reduced the competitive
pressures on funding costs modestly.
The data in Exhibit I-5 reflects changes in the Association's yields and
costs since fiscal 1995. The overall yield on the Association's interest-earning
assets has increased since fiscal 1995 (from 7.47 percent to 8.21 percent),
primarily as a result of the changing composition of the mortgage loan portfolio
to include a greater level of commercial and multi-family mortgage loans. At the
same time, the Association's cost of funds has remained comparatively stable
(ranging from 4.12 percent to 4.30 percent) over the corresponding time frame.
The Association's favorable cost of funds has been facilitated by limited
growth, which has reduced the need to price deposits at highly competitive
levels. Overall, Gloversville Federal's spread increased from 3.35 percent to
3.96 percent from fiscal 1995 to fiscal 1997. Importantly, while the higher
level of higher risk weight loans has provided the Association yield and
repricing benefits, such loans typically carry greater credit risk exposure as
well.
Loan loss provisions have had a significant impact on the Association's
operating results and have been a significant factor in Gloversville Federal's
ability to generate positive earnings. As described previously, loan loss
provisions had a limited impact on the Association's operating results for the
period from fiscal 1994 through fiscal 1995. During 1996 and into 1997, the
level of loan loss provisions was increased substantially due to several factors
including the following: (1) the Association became aware that a significant
number of its residential mortgage loans were past due on the payment of
property taxes; (2) as a result of normal increases in the level of commercial
and multi-family mortgage lending; and (3) ongoing weakness of the economy
locally, particularly in Fulton County. Management has indicated that it
believes loan loss provisions will be lower in the
<PAGE>
RP Financial, LC.
Page 1.10
future based on numerous factors including current and anticipated loan volumes,
market area trends, and the current level of allowances for loan losses and
NPAs.
The Association has consistently recorded moderate levels of non-interest
operating income, ranging between 0.05 percent and 0.25 percent of average
assets since fiscal 1993. For the fiscal year ended September 30, 1997,
non-interest operating income totaled $155,000, equal to 0.25 percent of average
assets. The level of non-operating income earned during the most recent fiscal
year reflects modest growth as a result of a revamping of the Association's
service fees and charges and to the changing composition of the deposit base to
include a modestly higher level of transaction accounts. The Association
generates non-interest operating income primarily from deposit fees, late
charges on loans, various fees charged in connection with loan originations and
other miscellaneous retail banking activities.
Notwithstanding the fact that the Association has been in a no growth mode
over the last three years, Gloversville Federal's operating expenses have been
subject to increase since fiscal 1993, both due to modest inflationary pressures
and due to the expenses related to increased staffing and the resolution of
problem assets. As a result, operating expenses have increased from $1.8
million, equal to 2.72 percent of average assets in fiscal 1993, to $2.3
million, equal to 3.76 percent of average assets in 1997. Gloversville Federal's
operating expenses were skewed upward in fiscal 1996 ($2.6 million or 4.17
percent of average assets) by a $318,000 expense related to the payment of
delinquent property taxes on properties securing the Association's residential
mortgage loan portfolio.
The Association's operating expenses are high in relation to industry
averages, particularly given Gloversville Federal's relatively undiversified
operations (i.e., limited activity in the area of high cost lending or fee
generating operations), due to a number of factors including the following: (1)
the Association maintains a relatively high proportion of savings and
transaction accounts which are typically more expensive to service than CDs; (2)
the Association's stable asset size since 1993 has tended to push up the
operating expense ratio as normal cost increases due to inflationary pressures
are spread across a static asset base; (3) costs of resolving NPAs has been
high, both in direct costs and in management time and resources; and (4) the
Association's static asset size has diminished the ability to achieve economies
of scale typically realized by growing financial institutions. At September 30,
1997, Gloversville Federal's assets/employee ratio was approximately $2.3
million as compared to the average for all publicly-traded savings institutions
of $4.2 million.
Over the long term, management has indicated that it will seek to
streamline operations and increase growth, all with the objective of lowering
the operating expense ratio. At the same time, the resumption of active
residential lending operations will tend to increase operating expenses.
Likewise, the expenses related to the stock
<PAGE>
RP Financial, LC.
Page 1.11
benefit plans which will be implemented pursuant to the proposed conversion will
also tend to increase the Association's operating expenses.
Gloversville Federal's operating results were only minimally impacted by
non-operating income and expenses for the period during 1993 and 1994. During
1995, the Association reported non-operating gains on the sale of investments
and premises and equipment equal to $204,000 and $86,000, respectively. The only
other non-operating item reported by Gloversville Federal was a $415,000 pre-tax
expense reported in 1996 as a result of the special SAIF assessment.
The Association reported a tax benefit of $222,000 in fiscal 1996 and a tax
equal to $85,000 in fiscal 1997, notwithstanding the operating loss reported for
the year. The Association reported a tax expense in the most recent fiscal year,
notwithstanding the reported operating loss, due to an increase in the valuation
allowance on the deferred tax asset. As of September 30, 1997, Gloversville
Federal had a deferred tax asset of $152,000, net of a valuation allowance of
$652,000.
Interest Rate Risk Management
- -----------------------------
Prior to 1994, Gloversville Federal was primarily a fixed rate residential
mortgage lender -- the Association did not offer adjustable rate mortgages or
commercial/multi-family mortgage loans. Coupled with a relatively short term
deposit base, the Association's maintained a relatively significant exposure to
interest rate risk. Commencing in 1994, the Association expanded the level of
loan and deposit products with the dual objectives of increasing earnings and
reducing the level of interest rate risk exposure. In this regard, Gloversville
Federal began to offer residential ARM loans and commenced originating higher
yielding variable rate (or shorter term) commercial and multi-family mortgage
loans. In terms of deposits, the Association introduced statement savings and
money market accounts with limited check writing privileges as well as
commercial checking accounts.
While these strategies have generally served to improve the Association's
interest rate risk posture, Gloversville Federal's long term fixed rate mortgage
loans continue to comprise the largest segment of the Association's
interest-earning assets and earnings continue to remain exposed to rising
interest rates. The rate shock analysis set forth in Exhibit I-6 reflects that
the Association's net portfolio value ("NPV") would be reduced by $1.4 million
or 22.9 percent pursuant to a 200 basis point permanent and instantaneous
increase in interest rates. Pursuant to a 400 basis upward rate shock, NPV would
be reduced by $3.2 million or 53.5 percent. Overall, the data suggests a
relatively significant exposure to interest rate risk.
<PAGE>
RP Financial, LC.
Page 1.12
Lending Activities and Strategy
- -------------------------------
The Association's lending activities have traditionally concentrated on the
origination and retention of 1-4 family permanent mortgage loans (see Exhibits
I-7 loan portfolio data). The Association is primarily a portfolio lender.
However, all single family residential mortgage loans originated for portfolio
and the Association has not purchased residential mortgage loans over the last
five years. Additionally, all of the loans which Gloversville Federal has
originated over the last five fiscal years have been secured by properties or
made to customers residing in the Association's local markets.
At September 30, 1997, the Association's loan portfolio was concentrated in
1-4 family residential loans totaling in aggregate, $36.9 million, or 71.9
percent of gross loans receivable. Residential mortgage lending activities
include permanent loans with fixed and adjustable rates of interest. The data
further reflects that the majority of the Association's residential mortgage
loan portfolio consists of fixed rate loans, which equaled approximately 86
percent of total residential mortgage loans as of September 30, 1997.
The Association has been seeking to expand the level of commercial real
estate and multi-family mortgage loans, in order to take advantage of local
lending opportunities, provide for additional interest income and to position
the Association as a more full-service financial institution. Commercial real
estate and multi-family loans totaled $8.0 million, equal to 15.5 percent of
total loans at September 30, 1997. Such loans are secured by apartments
(typically 30 units or less) or by non-residential buildings used by business
operations, such as warehouses and small office buildings. Essentially, all such
loans are secured by properties within Gloversville Federal's primary market
area and possess loan balances of less than $550,000.
The Association seeks to limit the risk of such lending by maintaining
loan-to-value ratios of 75 percent or less and debt service coverage ratios of
at least 120 percent. Additionally, Gloversville Federal has established loan
loss allowances in recognition of the risks involved in commercial and
multi-family mortgage lending. Nonetheless, the Association's track record with
respect to such lending is limited and the portfolio is relatively unseasoned.
The Association also makes construction loans from time to time, for the
purpose of constructing both residential and commercial properties. The balance
of the construction loan portfolio equaled $539,000, or 1.1 percent of total
loans as of September 30, 1997, and is expected to remain a limited portion of
the Association's lending activities in the future.
Non-mortgage loans comprise the remainder of the Association's loan
portfolio, equal to 11.5 percent of gross loans at September 30, 1997, and
consist of both commercial business and consumer loans. The majority of consumer
loans (balance of $4.5 million or 8.7 percent of loans) consist of home equity
loans with the remainder
<PAGE>
RP Financial, LC.
Page 1.13
of the consumer loan portfolio comprised of mobile home loans, auto loans, and
other miscellaneous loan types. Commercial loans equaled $1.4 million, equal to
2.8 percent of loans at September 30, 1997.
Exhibit I-10, which shows the Association's loan originations over the past
three fiscal years, highlights Gloversville Federal's limited loan volumes
overall and growth in multi-family and commercial mortgage lending. Total loans
originated equaled $10.2 million in fiscal 1995, and reduced to $8.8 million and
$8.9 million in fiscal 1996 and 1997, respectively. Approximately $4.1 million
or 46 percent of all loans originated in fiscal 1997 were comprised of
commercial and multi-family mortgage loans while residential mortgage loan
originations (substantially all fixed rate) equaled $1.6 million or 18 percent
of total originations. All loans are originated by in-house personnel and are
retained for portfolio. In the future, management will be seeking to increase
the level of residential and commercial/multi-family mortgage lending to meet
its targeted growth objectives.
Asset Quality
- -------------
As shown in Exhibit I-11, the level of non-performing assets has been high
over the last five fiscal years and has increased in fiscal 1997. Specifically,
the ratio of NPAs/assets has ranged from a low of 3.74 percent of assets to a
high of $4.1 million, equal to 6.73 percent of assets as of September 30, 1997.
A detailed review of Exhibit I-11, reflects that all of Gloversville
Federal's non-performing loans consisted of delinquent residential mortgage
loans. As discussed earlier, the high level of delinquencies are the result of
several factors including the following: (1) weak growth and slack economic
conditions locally; (2) weak underwriting and loan administration by prior
management (i.e., 30 day grace period on payments provided in pre-1995 loans);
and (3) the delinquency of many borrowers with respect to local property taxes.
With respect to this latter factor, such loans have been modified or
restructured and have an outstanding balance of $2.7 million. If they perform in
accordance with their terms, these loans may be returned to accrual status
throughout 1998. At the same time, approximately $1.0 million of the
Association's delinquent loans are delinquent due to serious financial problems
(i.e., unemployment or bankruptcy of the borrower, etc.) and many such loans
will be placed into foreclosure.
The perceived credit risk exposure of the Association is further increased
by recent trends in the loan portfolio where we observe the portfolio of
commercial and multi-family mortgage loans to be increasing. In this regard, the
Association's track record with regard to high risk-weight lending is limited
and the portfolio lacks seasoning, all of which contribute to the perceived
increase in the Association's credit risk exposure.
At September 30, 1997, Gloversville Federal maintained valuation allowances
totaling $1.6 million, which equaled 3.14 percent of loans, 42.53 percent of
non-performing loans, and 39.28 percent of NPAs.
<PAGE>
RP Financial, LC.
Page 1.14
Following the employment of a new President and Chief Executive Officer, new
management undertook a comprehensive review of all NPAs. As a result of the
ongoing results of this review, the current loan loss allowance figure reflects
the establishment of $714,000 of loan loss provisions in fiscal 1996 and
$792,000 of loan loss provisions in fiscal 1997. Management has indicated that
it believes loan loss provisions will be lower in the future based on numerous
factors including current and anticipated loan volumes, market area trends, and
the current level of allowances for loan losses and NPAs. At the same time, NPAs
remain high and the reserve coverage ratio is low by industry standards.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Association's primary source of funds
as the Association has employed borrowed funds from the Federal Home Loan Bank
of New York and reverse repurchase agreements only to a limited extent.
Gloversville Federal operates with a relatively favorable deposit base as
passbook savings and transaction accounts totaled $28.1 million, or 50.1 percent
of total deposits as of September 30, 1997. Growth in transaction and savings
accounts in recent years has been facilitated by the introduction of several new
account types including a statement savings account and a money market accounts
with limited check writing privileges.
As shown in Exhibit I-14, CDs accounted for approximately one-half of the
deposit base (49.9 percent of total deposits) and comprise the largest single
account type which the Association offers. Most of the Association's CDs are
concentrated in short-term maturities. As of September 30, 1997, approximately
83.2 percent of the CDs had maturities of one year or less. Retail deposits are
supplemented with a limited amount of jumbo certificates of deposits ("CDs"),
accounting for 4.44 percent of Gloversville Federal's deposits at September 30,
1997.
While borrowings are available as an alternative funding source, the
Association has not utilized borrowed funds extensively in the past and
borrowings totaled only $1.3 million as of September 30, 1997. Management
believes that anticipated deposit growth, the offering proceeds and internal
cash flows should adequately address most of the Association's funding needs in
the foreseeable future. If borrowings are required (other than the ESOP loan
from the Holding Company), such borrowings are expected to consist of FHLB
advances and reverse repurchase agreements utilizing securities held by the
Association as collateral.
<PAGE>
RP Financial, LC.
Page 1.15
Subsidiary
- ----------
As of September 30, 1997, the Association did not have any subsidiaries nor
are any subsidiary activities anticipated in the future.
Legal Proceedings
- -----------------
Gloversville Federal is currently not involved in any legal proceedings
other than routine legal proceedings that occur in the ordinary course of
business, which, in aggregate, involve amounts that are believed to be
immaterial to the financial condition of the Association.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Gloversville Federal conducts operations out of a headquarters office in
Gloversville, Fulton County, New York and a branch office in Saratoga Springs,
Saratoga County, New York. The Association's markets in east-central New York
are relatively rural in character but at the same time, are only approximately
70 miles from Albany. Fulton County has an estimated 1997 population of 54,000,
while Saratoga County has an estimated 1997 population of 196,000; the majority
of Saratoga County's population reside in close proximity to Schenectady and
Albany in the southern half of the County. The local areas surrounding the
Association's offices represent the primary market area for deposit generation
as most of the Association's depositors live in the areas surrounding the office
locations. Gloversville Federal's sources for loans primarily includes Fulton
and Saratoga Counties but the Association will occasionally originate loans in
other nearby areas.
Competition from other financial institutions operating in the
Association's market area includes a number of both large and small commercial
banks and savings institutions. The Association maintains a market share of
approximately 7 percent of overall financial institution deposits in Fulton
County where it is headquartered and a market share of only approximately 1
percent in Saratoga County. The other financial institutions are both
locally-owned community-oriented banks or subsidiaries of larger regional and
superregional institutions. The Association has been in a shrinking mode over
the last several years, and has lost market share as a result.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions. These factors have been briefly examined in the following pages to
help determine the growth potential that exists and the relative economic health
of the market area.
Market Area Demographics
- ------------------------
Demographic growth trends in the two county market served by the
Association have been measured by changes in population, number of households
and median household income and other data, with trends in those areas
summarized by the data presented in Table 2.1. Data for the U.S. and the State
of New York has been provided for comparative purposes.
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
Gloversville FS&LA
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> <C>
United States 248,710 267,805 281,209 1.1% 1.0%
New York 17,990 18,191 18,332 0.2% 0.2%
Fulton County 54 54 54 -0.1% -0.1%
Saratoga County 181 196 206 1.1% 1.0%
Households (000)
- ----------------
United States 91,947 99,020 104,001 1.1% 1.0%
New York 6,693 6,700 6,744 0.0% 0.1%
Fulton County 21 21 21 -0.1% -0.1%
Saratoga County 66 72 76 1.2% 1.1%
Median Household Income ($)
- ---------------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
New York 31,044 36,341 38,815 2.3% 1.3%
Fulton County 24,479 25,330 26,477 0.5% 0.9%
Saratoga County 37,490 37,062 38,734 -0.2% 0.9%
Per Capita Income - ($)
- -----------------------
United States $13,179 $18,100 -- 4.6% N/A
New York 14,413 18,504 -- 3.6% N/A
Fulton County 11,228 12,156 -- 1.1% N/A
Saratoga County 15,526 16,087 -- 0.5% N/A
1997 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
- ------------------------ ---------- ----------- ----------- ----------- --------- ----------
United States 21.7 13.6 31.4 20.5 12.7 34.8
New York 20.6 13.0 32.3 20.9 13.2 35.3
Fulton County 20.5 13.8 28.1 21.5 16.1 36.6
Saratoga County 21.7 13.0 33.1 21.5 10.8 34.7
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+
- ------------------------ ------- ------- ------- -------- -------- ---------
United States 17.7 14.4 33.5 26.5 5.4 2.6
New York 20.2 13.9 31.3 25.9 5.5 3.2
Fulton County 28.3 20.9 36.3 12.9 1.1 0.5
Saratoga County 15.3 14.8 37.6 27.9 3.3 1.1
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.3
As shown in Table 2.1, Gloversville Federal operates in a two county market
area with an estimated population of 250,000 as of 1997. There exists a
dichotomy in the markets served by Gloversville Federal as the Association's
traditional market in Gloversville is smaller with limited economic and
demographic growth while Saratoga County is one of the most rapidly growing
counties in the State of New York. Specifically, population and households in
Fulton County have been shrinking (0.1 percent annually) while the population
and households in Saratoga County have been increasing at levels in excess of 1
percent annually. These growth trends are projected to continue through the year
2002, and indicate that the economic performance of Fulton County will continue
to be sluggish while Saratoga County will be relatively favorable.
Paralleling trends observed in the demographic statistics, income levels in
Fulton County are well below the State of New York average while income levels
for Saratoga County are relatively more favorable, approximately equivalent to
the state average. Such trends are attributable to the blue collar nature of the
workforce in Gloversville and the surrounding markets and to the attractiveness
of southern portions Saratoga County to white collar commuters working in Albany
and Schenectady.
Economy
- -------
The Association's deposit gathering activities and the majority of the
lending operations are conducted in the Association's two county market area
described above. Employment in the Fulton County market is primarily derived
from the manufacturing and services sector as well as government. The
traditional employers in the Association's markets have consisted of small
manufacturers. Saratoga County generally has a larger and more diversified
economic base, which is more reliant upon white collar jobs and tourism (in
Saratoga Springs). Table 2.2 below presents the major employers within Fulton
County.
Table 2.2
Gloversville Federal Savings and Loan Association
Major Employers-Fulton County
Employer Industry Employees
-------- -------- ---------
Nathan Littauer Hospital Health Care 860
Fulton County Government 700
Gloversville School District Education 680
Tryon School for Boys Government/Education 455
Johnstown School District Education 380
Citizens Telecom Telecommunications 280
Johnstown Knitting Mill Manufacturing 275
UNI Distribution Manufacturing 275
Price Chopper Retail 227
Source: Technical Assistance Center, SUNY Plattsburgh
<PAGE>
RP Financial, LC.
Page 2.4
Table 2.3 displays unemployment data in the local market area as of
September 1996 and September 1997. The unemployment rates reflect the
comparatively lackluster performance of the Fulton County market as unemployment
rates remain well above the state and national average, although they do exhibit
a reduction from the prior year levels. Unemployment rates reflect the
comparatively more favorable growth trends and economic conditions prevailing in
Saratoga County, where unemployment equaled only 3.7 percent as of September
1997.
Table 2.3
Gloversville Federal Savings and Loan Association
Market Area Unemployment Trends
Region Sept. 1996 Sept. 1997
------ ---------- ----------
United States 5.0% 4.7%
New York 5.9 6.1
Fulton County 7.6 6.9
Saratoga County 3.9 3.7
Source: U.S. Bureau of Labor Statistics.
Deposit Trends and Competition
- ------------------------------
The market area (defined as the two county market area for deposits), is
characterized by the presence of both locally-based and locally-owned financial
institutions and larger, regional and superregional institutions. Major
competitors include local commercial banks such as The Adirondack Trust Company,
CNB Bancorp, CNB Financial Corporation and NBT Bancorporation as well as larger
regional and superregional banks such as Keycorp and Fleet.
Table 2.4 displays deposit market trends for the State of New York and the
primary market area from June 30, 1994 to June 30, 1996. Overall, financial
institution deposits showed an increase statewide, with commercial banks showing
growth while savings institutions lost deposits. This trend of moderate
increases in overall deposits, similar to the rest of the nation, reflects in
part disintermediation whereby banking customers have also placed available
funds into other types of financial intermediaries such as mutual funds,
investment firms, brokerage houses, and insurance companies. Deposit trends in
both market area counties exhibited similar trends as the state, with commercial
banks in Fulton and Saratoga Counties experiencing growth and savings
institutions realizing a declining market share.
<PAGE>
RP Financial, LC.
Page 2.5
Table 2.4
Gloversville FS&LA
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
----------------------------------------------------------------
1994 1996
------------------------------- ------------------------------- Deposit
Market Number of Market Number of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of New York $350,825,532 100.0% 4,816 $358,397,019 100.0% 4,707 1.1%
- -----------------
Commercial Banks 250,024,848 71.3% 3,615 268,779,750 75.0% 3,622 3.7%
Savings Institutions 100,800,684 28.7% 1,201 89,617,269 25.0% 1,085 -5.7%
Fulton County $ 543,503 100.0% 17 $ 580,682 100.0% 17 3.4%
- -------------
Commercial Banks 390,683 71.9% 14 424,104 73.0% 13 4.2%
Savings Institutions 152,820 28.1% 3 156,578 27.0% 4 1.2%
Gloversville FS&LA (1) 44,119 28.9% 1 38,379 24.5% 1 -6.7%
Gloversville FS&LA (2) 8.1% 6.6%
Saratoga County $ 1,417,683 100.0% 51 $ 1,553,467 100.0% 56 4.7%
- ---------------
Commercial Banks 1,055,508 74.5% 41 1,293,961 83.3% 44 10.7%
Savings Institutions 362,175 25.5% 10 259,506 16.7% 12 -15.4%
Gloversville FS&LA (1) 18,852 5.2% 1 18,158 7.0% 1 -1.9%
Gloversville FS&LA (2) 1.3% 1.2%
</TABLE>
(1) Percent of thrift deposits.
(2) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.6
Gloversville Federal reported deposit shrinkage over the time frame
indicated in Table 2.4 as management's focus was primarily on resolving internal
problems. In the future, the Association will be seeking to resume asset and
deposit growth and believes the stock conversion will facilitate its efforts in
this regard. Additionally, future marketing efforts are expected to be directed
toward the Saratoga County market where management will be seeking to take
advantage of more favorable growth and economic trends.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Gloversville Federal's operations
versus a group of comparable public companies (the "Peer Group") selected from
the universe of all publicly-traded savings institutions. The primary basis of
the pro forma market valuation of the Association is provided by these public
companies. Factors affecting Gloversville Federal'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 the Gloversville Federal and the Peer Group, will then be
used as a basis for the valuation of the Association's to-be-issued common
stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have excluded from the Peer Group all
publicly-traded subsidiary institutions of mutual holding companies, because
their pricing ratios are distorted by the minority issuance of their shares. We
have also excluded from the Peer Group those companies under acquisition and/or
companies whose market prices appear to be distorted by speculative factors or
unusual operating conditions. The universe of all publicly-traded institutions
is included as Exhibit III-1. Pricing characteristics of all thrift institutions
are included as Exhibit IV-1 (institutions excluded from the calculation of
averages are denoted with a footnote (8)).
Under ideal circumstances, the Peer Group would be comprised of a minimum
of ten publicly-traded New York thrifts with capital, earnings, asset sizes,
balance sheet composition, risk profiles, operating strategies and market areas
comparable to the Association. Since 10 such institutions do not exist, it was
necessary to expand the search beyond state boundaries and with search criteria
for similarly sized, well capitalized institutions located in other Mid-Atlantic
states. Accordingly, our Peer Group search focused on publicly traded savings
institutions in the Mid-Atlantic region with total assets of less than $250
million, and a total of twelve (12) institutions were included in the Peer
Group.
Given the relatively high level of NPAs at Gloversville Federal and the
importance of asset quality in investors' evaluation of thrift stocks, our
preference was to seek Peer Group companies which had a comparable
<PAGE>
RP Financial, LC.
Page 3.2
level of non-performing assets and reserve coverage as Gloversville Federal.
However, only a handful of publicly-traded companies maintain comparable asset
quality ratios, and they vary widely in terms of size, operating strategy and
markets. Accordingly, the focus of the Peer Group selection criteria was on
similarity of operations, markets, etc., and the dissimilar credit risk exposure
relative to the Peer Group will require an adjustment in the valuation section
to follow. Likewise, the Association has reported operating losses for the last
two fiscal years during a time period when many institutions are reporting
strong if not record earnings. As a result, the Peer Group companies are
reporting positive albeit moderate earnings on average; a characteristic which
will require the application of a valuation adjustment given the limited number
of companies with core and reported earnings levels approximating the
Association's levels.
Table 3.1 lists key characteristics of the Peer Group companies. In
general, the Peer Group is comprised of relatively seasoned publicly-traded
institutions operating in New York or other Mid-Atlantic U.S. states with small
asset sizes. While the Peer Group is not exactly comparable to the Association,
particularly in the areas of asset quality and profitability as referenced
above, we believe that it provides the "best fit" Peer Group of publicly-traded
thrifts with operations comparable to those of the Association and thus forms a
sound basis for valuation. A summary description of the key characteristics of
each of the Peer Group companies selected is detailed below.
o Skaneateles Bancorp of NY. Skaneateles Bancorp, the largest member of the
Peer Group with nearly $250 million of assets was selected due to its
meeting the selection criteria described above, including operations in
upstate New York. Skaneateles Bancorp maintains a relatively high
percentage of assets in loans receivable and maintains a comparatively
modest equity ratio. Moreover, the loan portfolio composition of
Skaneateles Bancorp is highly comparable to the Association's and NPAs are
well above industry averages.
o The Elmira Savings Bank of NY. Elmira SB is a $228 million asset
institution with operations in upstate New York. Elmira SB warrants
inclusion in the Peer Group based on its low earnings levels (lowest in the
Peer Group), similar asset structure and loan portfolio composition.
Furthermore, Elmira SB's operating expenses are most nearly similar to the
levels reported by the Association.
o Harbor Federal Bancorp of MD. Harbor Federal, a $217 million thrift,
operates through a 9 branch office network in the Baltimore area. Harbor
Federal, in addition to satisfying the selection criteria, lending
operations are broadly similar to the Association's and its capital ratio
is similar to Gloversville Federal's anticipated capital ratio following
the conversion.
o Peekskill Financial Corp. of NY. Peekskill Financial operates in the
mid-Hudson valley of New York through a total of three offices. Maintaining
an asset base of $181 million, Peekskill Financial maintained a large
investment in investment securities and MBS, which is somewhat different
from the Association's operating strategy. Additionally, Peekskill
Financial reports stronger operating returns than the Association,
primarily based on its better asset quality and lower expense ratio.
<PAGE>
RP Financial, LC.
Page 3.3
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
January 5, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ------ ------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 248 9 12-31 06/86 18.87 27
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 30.00 22
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 23.75 40
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.50 56
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 24.50 30
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 5 12-31 10/96 18.75 27
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 19.25 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 124 J 1 03-31 10/95 20.00 30
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.75 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 15.87 23
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 28.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 18.50 11
</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: 01/05/98
<PAGE>
RP Financial, LC.
Page 3.4
o SFS Bancorp of NY. SFS Bancorp operates with total assets of $174 million
and its primary market is relatively proximate to the Association's in the
Capital District. The asset base is primarily comprised of residential
mortgage loans and MBS and asset quality appears to be stronger in
comparison to Gloversville Federal. Operating returns are moderate owing to
operating costs which are above industry averages.
o AFSALA Bancorp, Inc. of NY AFSALA Bancorp is headquartered in Amsterdam,
New York, and is thus relatively proximate to the Association's market.
AFSALA maintains total assets of $159 million. AFSALA maintains a
relatively significant investment in cash and investments and a commercial
business lending orientation in its loan portfolio, which supports its
moderate to strong earnings levels.
o Prestige Bancorp of PA. Prestige Bancorp operates with total assets of $138
million. Prestige Bancorp is primarily a residential mortgage lender which
funds operations with deposits and, to a lesser extent, borrowed funds.
Asset quality is strong and loan chargeoffs have been low. Overall
profitability is moderate with an ROA of 63 basis points reported for the
most recent twelve month period.
o Tappan Zee Financial, Inc. of NY. Tappan Zee Financial operates with total
assets of $124 million in the lower Hudson valley area within the New York
City metropolitan area. Tappan Zee Financial maintains a comparatively
large investment in MBS and overall, focuses lending operations on
residential mortgages. Tappan Zee Financial generates moderate earnings
levels as a result of its operating expenses which are above industry
averages. The equity ratio is modestly above the Association's on a pro
forma basis.
o Advance Financial Bancorp of WV. Advance Financial operates through a total
of 2 offices and maintains $106 million in northern West Virginia and is
the most recently converted company in the Peer Group (January 1997).
Advance Financial's asset base is primarily comprised of loans, although it
has undertaken a greater level of diversification than the Association.
Income levels are strong and are supported by a wide net interest margin
and good asset quality.
o WHG Bancshares of MD. WHG Bancshares has $100 million of total assets and
operates through a total of 5 branch offices in the Baltimore metropolitan
area. The majority of assets are invested in loans and the portfolio
exhibits limited diversification outside of residential loans. Asset
quality is good and earnings are moderate which is partially attributable
to its relatively high operating expense ratio.
o Albion Banc. Corp of NY. Albion Banc Corp. is perhaps the most comparable
company to Gloversville Federal in the Peer Group. Albion Banc Corp.
operates two offices in a relatively rural area in western New York
(between Rochester and Buffalo). Lending operations are primarily centered
around residential mortgage loans with moderate diversification into other
loan types exhibited. Operations are primarily funded with retail deposits
and earnings are modest due in part, to a high operating expense ratio
(3.02 percent of average assets). An important difference between Albion
Banc Corp. and the Association however, is its more favorable asset quality
and reserve coverage ratios.
o Pennwood Savings Bank of PA. Pennwood SB is the smallest Peer Group
company, maintaining $48 million in assets and operating three offices in
the Pittsburgh metropolitan area. Pennwood SB is the only company included
in the Peer Group which is smaller than the Association in terms of total
assets. Pennwood SB is a residential lender but maintains a larger cash and
investment portfolio than the Association. Operating returns are strong
(0.99 percent of average assets) as a result of a strong net interest
margin and favorable asset quality.
In aggregate, the Peer Group companies have an average capital ratio that
is higher than the industry average (14.14 percent of assets versus 13.00
percent for the all SAIF average), and lower core profitability (0.72
<PAGE>
RP Financial, LC.
Page 3.5
percent versus 0.87 percent for all SAIF-insured publicly-traded institutions).
The Peer Group's higher capital ratio combined with lower earnings results in a
lower core ROE of 5.47 percent versus 7.81 percent for the all SAIF average. In
terms of pricing, the Peer Group on average trades at a lower price/book ("P/B")
multiple and a higher price/earnings ("P/E") multiple relative to the industry
(see the following table).
As of December 12, 1997
-----------------------
Peer All SAIF
Group Insured
----- --------
Equity-to-Assets 14.14% 13.00%
Return on Assets ("ROA")-Core 0.72% 0.87%
Return on Equity ("ROE")-Core 5.47% 7.81%
Market Capitalization ($Mil) $21.06 $181.59
Price-to-Tangible Book Ratio ("P/TB") 130.46% 162.79%
Price-to-Earnings Multiple ("P/E")-Core 23.35x 20.43x
Price-to-Assets Ratio ("P/A") 17.88% 19.33%
Source: Chapter IV tables.
The following sections present a comparison of the Association's financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the Peer Group. The conclusions drawn from the comparative
analysis are then factored into the valuation analysis discussed in the final
chapter.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for the Association and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. Information for Gloversville Federal is
as of September 30, 1997, and as of the latest available (September 30 or June
30) for the Peer Group. The Association's pre-conversion net worth of 5.4
percent was substantially below the Peer Group's average net worth ratio of 14.1
percent, although the Association's capital level can be expected to increase to
levels more closely approximating the Peer Group average on a pro forma basis.
Neither the Association or the Peer Group had a balance of goodwill. The
Association and all of the Peer Group companies were in compliance with all
fully phased-in regulatory capital requirements and were considered to be
well-capitalized by FDICIA standards.
The asset composition analysis reveals that Gloversville Federal maintains
a higher proportion of its assets in loans receivable than the Peer Group while
the Peer Group maintains a greater proportion of interest-earning asset deployed
into cash, investments and MBS. Specifically, loans equaled 81.2 percent of
assets for the
<PAGE>
RP Financial, LC.
Page 3.6
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>
Gloversville FS&LA
- ------------------
September 30, 1997 8.8 81.2 5.8 92.0 2.1 0.0 5.4 0.0 5.4 0.0
SAIF-Insured Thrifts 17.6 68.1 11.1 70.1 15.2 0.2 12.9 0.2 12.6 0.0
All Public Companies 18.5 67.2 11.1 70.6 14.8 0.2 12.9 0.3 12.6 0.0
State of NY 22.8 56.3 17.5 73.1 12.8 0.0 11.4 0.6 10.8 0.0
Comparable Group Average 20.5 65.5 11.0 79.0 5.6 0.0 14.1 0.0 14.1 0.0
Mid-Atlantic Companies 20.5 65.5 11.0 79.0 5.6 0.0 14.1 0.0 14.1 0.0
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1) 44.1 46.4 7.4 85.0 1.0 0.0 13.5 0.0 13.5 0.0
AFBC Advance Fin. Bancorp of WV 10.5 86.3 0.3 76.5 7.3 0.0 15.4 0.0 15.4 0.0
ALBC Albion Banc Corp. of Albion NY 11.3 71.4 13.1 77.5 13.1 0.0 8.6 0.0 8.6 0.0
HRBF Harbor Federal Bancorp of MD 22.8 68.8 5.8 79.1 6.8 0.0 13.1 0.0 13.1 0.0
PEEK Peekskill Fin. Corp. of NY 18.9 25.7 54.2 72.8 0.0 0.0 26.1 0.0 26.1 0.0
PWBK Pennwood SB of PA 32.2 60.2 3.9 76.7 3.1 0.0 18.3 0.0 18.3 0.0
PRBC Prestige Bancorp of PA 20.9 67.6 8.5 65.3 22.6 0.0 11.2 0.0 11.2 0.0
SFED SFS Bancorp of Schenectady NY 13.2 74.0 10.3 86.1 0.0 0.0 12.5 0.0 12.5 0.0
SKAN Skaneateles Bancorp Inc of NY(3) 9.5 85.1 1.3 84.1 7.4 0.0 7.0 0.2 6.8 0.0
TPNZ Tappan Zee Fin., Inc. of NY(1) 28.5 45.2 23.7 81.2 0.0 0.0 17.0 0.0 17.0 0.0
ESBK The Elmira SB FSB of Elmira NY 20.3 76.1 0.0 90.9 2.0 0.0 6.4 0.2 6.2 0.0
WHGB WHG Bancshares of MD(1) 13.5 79.3 2.9 73.3 4.0 0.0 20.7 0.0 20.7 0.0
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.6 (continued)
Table 3.2 (Continued)
<TABLE>
<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>
Gloversville FS&LA
- ------------------
September 30, 1997 0.02 17.07 -1.10 0.72 NM -13.46 -13.46 5.41 5.41 10.01
SAIF-Insured Thrifts 11.67 5.08 13.14 8.10 14.45 3.29 2.57 11.01 11.05 22.66
All Public Companies 11.83 4.94 13.11 8.07 15.82 3.98 3.31 11.12 11.09 22.61
State of NY 10.84 -5.49 13.28 7.28 13.27 2.16 2.04 10.04 9.71 23.47
Comparable Group Average 8.31 9.41 7.71 5.99 -16.64 -0.75 -0.66 13.63 13.41 31.95
Mid-Atlantic Companies 8.31 9.41 7.71 5.99 -16.64 -0.75 -0.66 13.63 13.41 31.95
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1) 15.92 99.01 1.85 7.91 -22.41 NM NM 13.48 13.48 32.75
AFBC Advance Fin. Bancorp of WV 13.46 29.04 12.67 2.32 5.04 NM NM 15.50 15.50 24.60
ALBC Albion Banc Corp. of Albion NY 18.29 27.93 17.71 16.47 47.36 5.15 5.15 NM NM NM
HRBF Harbor Federal Bancorp of MD 1.59 -7.28 7.03 6.10 -31.25 3.18 3.18 9.92 9.92 21.76
PEEK Peekskill Fin. Corp. of NY -2.82 -8.21 -1.58 2.37 NM -13.93 -13.93 25.20 25.20 97.40
PWBK Pennwood SB of PA 3.07 -25.87 29.54 2.63 NM -5.60 -5.60 NM 18.05 34.17
PRBC Prestige Bancorp of PA 32.05 NM 20.82 9.86 NM 1.71 1.71 11.24 11.24 23.95
SFED SFS Bancorp of Schenectady NY 4.86 -3.98 6.05 5.63 NM 2.56 2.56 12.45 12.45 24.20
SKAN Skaneateles Bancorp Inc of NY(3) 3.01 -2.15 3.53 3.19 1.44 9.09 8.13 NM 6.79 11.29
TPNZ Tappan Zee Fin., Inc. of NY(1) 4.18 NM -15.69 12.24 -100.00 -1.73 -1.73 13.60 13.60 38.80
ESBK The Elmira SB FSB of Elmira NY 3.43 -0.65 4.52 1.46 NM 3.05 4.93 6.19 6.19 10.23
WHGB WHG Bancshares of MD(1) 2.73 -13.72 6.01 1.71 NM -11.00 -11.00 15.11 15.11 32.25
</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
Association versus 65.5 percent for the Peer Group on average. Conversely,
investments and MBS equaled 8.8 percent and 5.8 percent, respectively, for the
Association versus an average of 20.5 percent and 11.0 percent, respectively for
the Peer Group. Following the conversion, the Association's level of cash and
investments is expected to initially increase, pending the Association's
deployment of the proceeds into loans or alternatively, the repayment of
borrowings. Overall, the Association's IEA totaled 95.8 percent of assets which
was below the Peer Group's ratio of 97.0 percent.
While the Association utilized deposits as the primary source to fund
operations, the Peer Group relied on both deposits and borrowings as funding
sources, as reflected in the current deposits to assets ratios of 92.0 percent
and 79.0 percent, respectively, and borrowings to assets ratios of 2.1 percent
and 5.6 percent, respectively. Total interest-bearing liabilities ("IBL")
maintained by the Association and the Peer Group equaled 94.1 percent and 84.6
percent, respectively, with the Peer Group's lower ratio attributable to its
higher capital ratio. On a pro forma basis, the Association's IBL ratio is
expected to decline as a result of the Association's enhanced capital base and
potential deposit withdrawals to fund stock purchases.
Taken together, the comparative IEA/IBL ratios demonstrate a key component
of earning power. In this regard, the Association's ratio of 101.8ypercent was
lower than the Peer Group's ratio of 114.7 percent. On a post-offering basis,
the Association's ratio should improve but will nonetheless remain below the
Peer Group average.
The growth rate section of Table 3.2 shows growth rates for key balance
sheet items. The growth rates for the Association are for the year ended
September 30, 1997 while growth rates for the Peer Group are for the latest
trailing twelve months available. The slow growth nature of Gloversville
Federal's primary market area in upstate New York coupled with the restructuring
of management and operations contributed to Gloversville Federal's stable asset
base (i.e., nominal growth of 0.02 percent). In contrast, the Peer Group on
average posted relatively strong asset growth of 8.31 percent. The growth rate
differential is attributable to the Peer Group's stronger deposit growth. One
factor impacting the asset growth rate differentials is shrinkage in the
Association's loan portfolio as the Association's product offerings over much of
the period were limited and new management effectively scaled back residential
lending operations in 1994 in order to develop and implement appropriate lending
policies and procedures and to focus on improving asset quality. The
Association's net worth reflects shrinkage over the most recent fiscal year
equal to 13.46 percent while net worth balances were relatively flat for the
Peer Group. The Association's net worth growth was inhibited by the loss
reported during the twelve months ended 1997, while capital growth of the Peer
Group companies was restrained by various capital management strategies employed
by Peer Group members (such as stock repurchases and dividends).
<PAGE>
RP Financial, LC.
Page 3.8
Income and Expense Components
- -----------------------------
For the twelve months ended September 30, 1997, Gloversville Federal
reported a net loss equal to 0.94 percent of average assets, which was lower
than the 0.73 percent positive ROA posted by the Peer Group companies (see Table
3.3). Gloversville Federal's earnings were supported by a comparatively strong
net interest margin, which was more than offset by lower levels of non-interest
operating income and operating expenses. The primary factor leading to the
Association's lower earnings however was weaker asset quality which led to
relatively higher loan loss provisions. The comparative income statement
analysis reveals some unique differences in the components of profitability, as
explained below.
Net interest income was the primary component of the Association's and the
Peer Group's earnings. Gloversville Federal's net interest income was more
favorable than that recorded by the Peer Group (3.98 percent and 3.57 percent of
average assets, respectively), notwithstanding the Association's lower capital
level. The primary factor leading to the differential is the Association's
favorable interest income ratio (7.95 percent of average assets versus 7.36
percent of average assets for the Peer Group) as the level of interest expense
to average assets did not result in a favorable comparison (3.96 percent for the
Association versus 3.79 percent for the Peer Group). As shown in the yield-cost
section of Table 3.3, Gloversville Federal's yield on assets equaled 8.21
percent versus an average of 7.58 percent for the Peer Group. We attribute
Gloversville Federal's favorable asset yields to its relatively high
concentration of loans, including higher yielding fixed rate residential and
commercial/multi-family mortgage loans. Additionally, the Association's cost of
funds has been minimized by slack growth which has minimized the need to price
deposits aggressively in relation to the prevailing market average (the
Association's cost of funds equaled 4.25 percent versus an average of 4.48
percent for the Peer Group). The reinvestment of the net conversion proceeds may
serve to initially dilute the Association's asset yields due to current market
rates on short- to intermediate-term investment securities but the net interest
margin should increase with an increase in the IEA/IBL ratio.
Non-interest income made a slightly smaller contribution to the
Association's earnings relative to the Peer Group's (0.25 percent of average
assets versus 0.30 percent for the Peer Group), reflecting the Association's
smaller, less diversified operations. Non-interest income for the Association
and the Peer Group is primarily comprised of deposit fee income, service
charges, late charges on loans, and other miscellaneous retail banking fee
revenues. No significant changes in non-interest income are anticipated on a
post-offering basis.
Gloversville Federal's operating expense ratio was higher than the Peer
Group ratio (3.74 percent of average assets versus 2.65 percent for the Peer
Group). The reasons for the higher operating expenses are related, in part, to
the relatively high number of employees in comparison to total assets ($2.2
million of assets per employee for the Association versus an average of $4.1
million for the Peer Group). Additionally, the
<PAGE>
RP Financial, LC.
Page 3.9
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income G&A/Other Exp.
------------------------------ ------------------- -----------------
Loss NII Total
Net Provis. After Loan R.E. Other Other G&A Goodwill
Income Income Expense NII on IEA Provis. Fees Oper. Income Income Expense Amort.
------ ------ ------- --- ------- ------- ---- ----- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA
- ------------------
September 30, 1997 -0.94 7.95 3.96 3.98 1.28 2.69 0.00 0.00 0.25 0.25 3.76 0.00
SAIF-Insured Thrifts 0.90 7.41 4.13 3.29 0.13 3.16 0.12 0.01 0.30 0.43 2.20 0.02
All Public Companies 0.94 7.42 4.07 3.35 0.13 3.22 0.11 0.01 0.30 0.42 2.21 0.03
State of NY 0.84 7.20 3.76 3.44 0.18 3.26 0.06 -0.03 0.26 0.29 2.17 0.06
Comparable Group Average 0.73 7.36 3.79 3.57 0.09 3.48 0.03 -0.01 0.28 0.30 2.65 0.00
Mid-Atlantic Companies 0.73 7.36 3.79 3.57 0.09 3.48 0.03 -0.01 0.28 0.30 2.65 0.00
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1)(3) 0.82 7.23 3.72 3.50 0.16 3.34 0.00 0.00 0.23 0.23 2.32 0.00
AFBC Advance Fin. Bancorp of WV 0.89 7.67 4.01 3.66 0.06 3.60 0.00 0.02 0.33 0.35 2.60 0.00
ALBC Albion Banc Corp. of Albion NY 0.50 7.56 4.16 3.40 0.11 3.29 0.01 0.05 0.45 0.52 3.02 0.00
HRBF Harbor Federal Bancorp of MD 0.71 7.37 4.44 2.93 0.02 2.91 0.05 0.00 0.06 0.11 1.86 0.00
PEEK Peekskill Fin. Corp. of NY 1.14 6.71 3.02 3.69 0.03 3.66 0.04 0.00 0.09 0.13 1.80 0.00
PWBK Pennwood SB of PA 0.99 7.90 3.64 4.26 0.08 4.18 0.00 -0.09 0.23 0.14 2.74 0.00
PRBC Prestige Bancorp of PA 0.63 7.06 3.86 3.20 0.07 3.12 0.00 0.00 0.27 0.27 2.39 0.00
SFED SFS Bancorp of Schenectady NY 0.69 7.18 3.80 3.37 0.07 3.30 0.07 0.01 0.16 0.24 2.54 0.00
SKAN Skaneateles Bancorp Inc of NY 0.70 7.65 3.86 3.79 0.19 3.60 0.04 -0.02 0.63 0.65 3.26 0.03
TPNZ Tappan Zee Fin., Inc. of NY(1) 0.72 7.29 3.52 3.77 0.06 3.71 0.00 -0.05 0.13 0.08 2.81 0.00
ESBK The Elmira SB FSB of Elmira NY 0.42 7.57 4.03 3.54 0.16 3.38 0.09 -0.03 0.68 0.74 3.44 0.02
WHGB WHG Bancshares of MD(1) 0.51 7.16 3.38 3.78 0.06 3.72 0.03 0.00 0.10 0.13 2.97 0.00
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.9 (continued)
Table 3.3 (Continued)
<TABLE>
<CAPTION>
Non-Op. Items Yields, Costs, and Spreads
-------------- -----------------------------
MEMO: MEMO:
Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
----- ------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA
- ------------------
September 30, 1997 0.00 0.00 8.21 4.25 3.96 2,260 17.08
SAIF-Insured Thrifts 0.03 0.00 7.68 4.84 2.85 4,267 37.00
All Public Companies 0.04 0.00 7.69 4.77 2.92 4,245 36.78
State of NY 0.02 0.00 7.44 4.36 3.08 4,802 39.72
Comparable Group Average 0.01 0.00 7.58 4.48 3.10 4,081 36.46
Mid-Atlantic Companies 0.01 0.00 7.58 4.48 3.10 4,081 36.46
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1)(3) 0.00 0.00 7.13 4.20 2.93 3,618 NM
AFBC Advance Fin. Bancorp of WV 0.04 0.00 7.91 4.69 3.22 2,937 36.48
ALBC Albion Banc Corp. of Albion NY 0.01 0.00 7.92 4.63 3.29 2,623 37.76
HRBF Harbor Federal Bancorp of MD 0.00 0.00 7.61 5.19 2.43 4,621 38.61
PEEK Peekskill Fin. Corp. of NY 0.00 0.00 6.78 4.23 2.55 7,250 42.65
PWBK Pennwood SB of PA -0.14 0.00 8.23 4.60 3.63 4,331 31.45
PRBC Prestige Bancorp of PA 0.00 0.00 7.27 4.45 2.81 3,938 37.41
SFED SFS Bancorp of Schenectady NY 0.00 0.00 7.36 4.44 2.92 2,902 31.65
SKAN Skaneateles Bancorp Inc of NY 0.03 0.00 7.96 4.21 3.75 2,251 29.74
TPNZ Tappan Zee Fin., Inc. of NY(1) 0.02 0.00 7.50 4.37 3.13 8,868 27.71
ESBK The Elmira SB FSB of Elmira NY 0.12 0.00 7.85 4.33 3.52 2,056 46.43
WHGB WHG Bancshares of MD(1) 0.00 0.00 7.49 4.47 3.01 3,580 41.15
</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
Association's deposit structure, which moderates the cost of funds, is somewhat
more costly to service (i.e., transaction and passbook savings accounts are more
costly to process and service than are higher costing CDs and borrowings). The
Association's asset quality problems have increased operating costs relative to
the Peer Group (i.e., cost related to implementing new policies and procedures
and working out of problem assets) in addition to resulting in higher loan loss
provisions which have burdened Gloversville Federal's earnings. Last,
Gloversville Federal's static asset base has diminished its ability to achieve
economies of scale realized by the Peer Group.
When viewed together, net interest income before provisions, non-interest
income (excluding non-operating items) and operating expenses provide an insight
into an institution's earnings strength. In this regard, as measured by their
efficiency ratios, Gloversville Federal's ratio of 88.8ypercent is far less
favorable than the Peer Group's ratio of 68.5ypercent. The Association's less
favorable efficiency ratio is attributable to its relatively high operating
expenses and low level of fee income. We anticipate that the Association's
efficiency ratio will initially improve following the holding company
reorganization and stock offering as the net proceeds are invested in
interest-earning assets. At the same time, resumption of active residential
lending operations and the impact of the stock benefit plans will tend to
diminish the beneficial impact of the conversion offering on the efficiency
ratio and core operating returns. Additionally, the Association may likely seek
to relocate its current office in Saratoga Springs and/or open a new office in
Saratoga County, either of which would tend to initially increase the
Association's expense ratio.
Loan loss provisions had a more significant impact on the Association's
earnings, as would be expected given the higher level of NPAs relative to the
Peer Group. The management of Gloversville Federal has indicated that it
anticipates that loan loss provisions will be lower in the future. However, the
projection of lower loan loss provisions will be contingent upon management
meeting its projection for improvement in the Association's asset quality
ratios.
Net non-operating income and expense was nominal for both the Association
and the Peer Group which is reflective of their traditional thrift operating
strategies.
The Association reported an effective tax rate of negative 17.08 percent as
compared to an effective tax rate of 36.46 percent on average for the Peer
Group. Most of the Peer Group companies appear to be in a fully taxable
position. The Association's negative effective tax rate for fiscal 1997 is
attributable to the increase in the valuation allowance on the Association's
deferred tax asset. As of September 30, 1997, Gloversville Federal had a
deferred tax asset of $152,000, net of a valuation allowance of $652,000. Given
the fully taxable status of the Peer Group and their record of profitable
operations, we do not believe the Peer Group has comparable deferred tax assets.
<PAGE>
RP Financial, LC.
Page 3.11
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Gloversville
Federal and the Peer Group. Residential mortgages and MBS accounted for the
largest portion of the Association's and the Peer Group's loan portfolios,
measured at 73.7 percent and 79.5 percent of total loan and MBS, respectively.
Both the Association and the Peer Group are primarily portfolio lenders,
although some Peer Group members engage in mortgage banking activity and
reported modest balances of loans serviced for others. The Association's higher
concentration of residential loans was more than offset by a lower ratio of MBS
relative to the Peer Group. On balance, Gloversville Federal's loan portfolio
was modestly more diversified than the Peer Group's loan portfolio.
The patterns of lending diversification for Gloversville Federal and the
Peer Group showed some key differences as well. Multi-family and commercial
mortgage lending was the primary area of loan portfolio diversification for the
Association (14.5 percent of loans and MBS) which is attributable to efforts by
new management to diversify the portfolio into higher yielding more interest
sensitive loans. In contrast, the Peer Group's multi-family/commercial mortgage
portfolio averaged 6.8 percent of loans and MBS while the Peer Group
participated in non-mortgage lending (11.9 percent loans and MBS) and
construction and land loans (3.1 percent of loans and MBS) to a greater extent.
The Association reported a higher risk-weighted assets ratio than the Peer
Group at 62.0 and 49.9 percent, respectively. The higher risk weighted asset
ratio is the result of the higher ratio of loans for the Association including
non-performing loans.
Credit Risk
- -----------
Overall, Gloversville Federal's credit risk exposure appears to be
significantly greater than the Peer Group's, as indicated by the Association's
higher level of NPAs and lower reserve coverage. As shown in Table 3.5,
Gloversville Federal's ratio of non-performing assets and accruing loans that
are more than 90 days past due equaled 6.73 percent of assets, versus a
comparative ratio of 0.81 percent for the Peer Group. Similarly, Gloversville
Federal's non-performing loans to loans ratio was higher than the Peer Group's
ratio (7.66 percent versus 0.95 percent for the Peer Group). Loss reserve ratios
as a percent of problem assets also indicated a potentially higher degree of
credit risk exposure for the Association, with the Association and the Peer
Group maintaining loss reserves as a percent of non-performing assets and
accruing loans that are more than 90 days past due of 42.53 percent and 120.23
percent, respectively, while loan chargeoffs were also higher for the
Association.
<PAGE>
RP Financial, LC.
Page 3.12
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- --- ------ ------- ------- -------- -------- ------ ---------- ---------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA 6.49 67.25 0.98 14.49 2.59 8.19 62.01 0 0
SAIF-Insured Thrifts 14.95 62.12 5.31 11.80 6.30 1.67 52.63 401,148 3,376
All Public Companies 14.81 61.19 4.90 12.96 5.97 2.01 53.11 397,170 3,375
State of NY 25.36 49.77 1.32 16.49 5.67 1.80 47.55 621,685 6,068
Comparable Group Average 14.79 64.75 3.09 6.79 9.28 2.57 49.92 6,753 0
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 14.67 51.43 1.31 3.63 27.48 1.87 42.78 0 0
AFBC Advance Fin. Bancorp of WV 0.72 68.35 3.88 12.64 12.86 4.05 60.58 0 0
ALBC Albion Banc Corp. of Albion NY 7.90 74.76 3.20 4.41 10.38 0.50 NA 10,947 0
HRBF Harbor Federal Bancorp of MD 10.75 73.83 10.77 5.81 0.82 2.14 46.07 332 0
PEEK Peekskill Fin. Corp. of NY 70.63 28.19 0.49 0.45 0.47 0.00 25.89 0 0
PWBK Pennwood SB of PA 8.26 71.53 6.33 11.34 4.37 0.00 54.56 148 0
PRBC Prestige Bancorp of PA 16.08 77.01 0.85 0.61 5.05 0.88 48.08 0 0
SFED SFS Bancorp of Schenectady NY 15.34 80.21 0.25 3.65 0.42 0.00 53.20 3,771 0
SKAN Skaneateles Bancorp Inc of NY 1.90 69.67 0.87 14.60 3.76 9.23 67.46 22,945 0
TPNZ Tappan Zee Fin., Inc. of NY(1) 27.51 56.38 3.11 8.69 1.98 3.92 36.28 0 0
ESBK The Elmira SB FSB of Elmira NY 0.00 40.61 0.98 11.58 38.84 8.24 66.72 33,853 0
WHGB WHG Bancshares of MD(1) 3.72 85.03 5.09 4.11 4.97 0.00 47.46 9,045 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
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------- ----- ------- ------- ------- --------- -----
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA 0.51 6.73 7.66 3.14 42.53 39.28 430 0.87
SAIF-Insured Thrifts 0.26 0.77 0.85 0.78 160.37 123.06 309 0.09
All Public Companies 0.25 0.78 0.88 0.88 163.53 125.84 323 0.10
State of NY 0.16 0.90 1.21 1.04 109.44 90.71 613 0.12
Comparable Group Average 0.07 0.81 0.95 0.77 120.23 103.98 23 0.05
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 0.00 0.45 0.95 1.43 150.77 150.77 0 0.00
AFBC Advance Fin. Bancorp of WV 0.00 0.74 0.36 0.33 90.58 38.01 86 0.39
ALBC Albion Banc Corp. of Albion NY 0.00 0.12 0.17 0.53 321.43 321.43 5 0.04
HRBF Harbor Federal Bancorp of MD 0.03 0.10 0.15 0.28 189.19 189.19 0 0.00
PEEK Peekskill Fin. Corp. of NY 0.12 1.24 2.09 1.35 64.74 28.37 0 0.00
PWBK Pennwood SB of PA 0.08 1.49 1.42 1.04 73.41 42.39 37 -0.06
PRBC Prestige Bancorp of PA 0.01 0.33 0.47 0.40 84.20 82.34 7 0.03
SFED SFS Bancorp of Schenectady NY 0.06 0.75 0.87 0.58 66.37 57.32 34 -0.01
SKAN Skaneateles Bancorp Inc of NY 0.39 2.04 1.62 0.98 60.52 41.25 86 0.16
TPNZ Tappan Zee Fin., Inc. of NY(1) 0.00 1.68 2.48 1.17 47.26 32.52 0 0.00
ESBK The Elmira SB FSB of Elmira NY 0.12 0.64 0.64 0.86 133.30 103.23 16 0.04
WHGB WHG Bancshares of MD(1) 0.00 0.15 0.18 0.29 160.96 160.96 0 0.00
</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 3.14
As described in Section One, new management of Gloversville Federal
attributes the high level of NPAs to several factors as follows: (1) weak growth
and slack economic conditions locally; (2) weak underwriting and loan
administration by prior management (i.e., 30 day grace period on payments
provided in pre-1994 loans); and (3) the delinquency of many borrowers with
respect to local property taxes. With respect to this latter factor, such loans
have been modified or restructured and have an outstanding balance of $2.7
million - if they perform in accordance with their terms, the may be returned to
accrual status throughout 1998. At the same time, approximately $1.0 million of
the Association's delinquent loans are delinquent due to serious financial
problems (i.e., unemployment or bankruptcy of the borrower, etc.) and many such
loans are expected to be placed into foreclosure.
Interest Rate Risk
- ------------------
Table 3.6 reflects the relative interest rate risk exposure of Gloversville
Federal and the Peer Group. The Association's lower capital level was the key
factor contributing to its lower IEA/IBL ratio relative to the Peer Group (101.8
percent versus 115.2 percent, respectively). The Association's lower capital and
IEA/IBL ratios increases its funding costs relative to the Peer Group. However,
the Association's capital ratio and IEA/IBL ratio will increase on a
post-conversion basis. The Association's relative interest rate risk exposure
was exacerbated by the higher level of non-interest earning assets, including
non-accruing loans related to the Association's asset quality problems.
In the absence of available or comparable gap and rate shock analyses for
the Peer Group, the change in the quarterly net interest income ratio to average
assets for the Association and the Peer Group has been examined in relation to
the change in market interest rates. As shown in Table 3.6, the Association's
net interest margin has recently shown greater sensitivity to changing market
interest rates in comparison to the Peer Group's average net interest margin. We
attribute this sensitivity to Gloversville Federal's fixed rate lending emphasis
in which substantially all loans are originated for portfolio. On a pro forma
basis, the Association's improved capital position and reinvestment of proceeds
in short- to intermediate-term securities can be expected to lower exposure to
changes in interest rates modestly. At the same time, Gloversville Federal will
continue to possess significant interest rate risk in relation to the Peer Group
based on its higher level of non-earning and non-performing assets, and
significant investment in long-term fixed rate loans.
<PAGE>
RP Financial, LC.
Page 3.15
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
------------------------
Non-Earn. Quarterly Change in Net Interest Income
Equity/ IEA/ Assets/ ----------------------------------------------------------
Institution Assets IBL Assets 09/30/97 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96
- ----------- ------ ----- --------- -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA 5.4 101.8 4.2 -16 -2 -14 9 12 0
SAIF-Insured Thrifts 12.6 113.9 3.2 -3 1 0 0 -1 11
All Public Companies 12.6 114.0 3.2 -4 1 1 1 -1 11
State of NY 10.8 113.4 3.4 -6 -4 2 4 1 13
Comparable Group Average 14.1 115.2 3.0 -2 0 2 -2 13 10
Market Interest Rates
- ---------------------
1 Year Treasury Bill -- -- -- 5 -84 -74 127 45 105
30 Year Treasury Bond -- -- -- -12 -80 -45 6 21 52
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 13.5 114.0 2.1 NA -6 NA 0 NA 20
AFBC Advance Fin. Bancorp of WV 15.4 115.9 2.9 -10 10 44 -7 NA NA
ALBC Albion Banc Corp. of Albion NY 8.6 105.8 4.2 -2 2 -8 -18 7 19
HRBF Harbor Federal Bancorp of MD 13.1 113.5 2.5 2 7 10 -2 -3 11
PEEK Peekskill Fin. Corp. of NY 26.1 135.8 1.2 -5 4 -17 14 -21 12
PWBK Pennwood SB of PA 18.3 120.7 3.8 -9 -0 -26 17 65 -9
PRBC Prestige Bancorp of PA 11.2 110.4 2.9 -5 -9 6 -9 36 23
SFED SFS Bancorp of Schenectady NY 12.5 113.3 2.5 -1 -3 3 -9 3 -1
SKAN Skaneateles Bancorp Inc of NY 6.8 105.0 4.0 10 18 9 NA NA NA
TPNZ Tappan Zee Fin., Inc. of NY(1) 17.0 119.9 2.6 NA -12 -2 2 10 16
ESBK The Elmira SB FSB of Elmira NY 6.2 103.9 3.6 -1 0 -4 0 7 -4
WHGB WHG Bancshares of MD(1) 20.7 123.9 4.3 NA -9 13 -4 14 NA
</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 3.16
Summary
- -------
Based on the above analysis and the criteria employed by in the Peer Group
selection process, the Peer Group appears to form a reasonable basis for
determining the pro forma market value of the Association, subject to the
adjustments noted in the following section.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of Gloversville Federal from the mutual-to-stock form of ownership.
The valuation has been prepared utilizing the pro forma valuation methodology
promulgated by the OTS, most recently set forth in their 1994 valuation
guidelines.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution. The
methodology included: (1) selection of a peer group of comparable seasoned
publicly-traded institutions whose pricing is not distorted due to a variety of
factors; (2) a fundamental analysis of the subject company to the peer group;
and (3) a pro forma valuation analysis of the subject company based on the
market pricing of the peer group as of the date of valuation. The amended
valuation guidelines also limit the amount of a new issue discount which may be
incorporated into the valuation and thereby curtail the potential price
appreciation in the after-market.
RP Financial's valuation analysis complies with the October 1983 OTS
appraisal guidelines as revised on October 21, 1994, incorporating a
"fundamental analysis" relative to the Peer Group and a "technical analysis" of
final conversion pricing and trading levels of recently completed conversions.
It should be noted that such analysis cannot possibly fully account for all the
market forces which impact after-market trading activity and pricing
characteristics of a stock on a given day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and financial
condition; (2) monitor the Association's operations and financial condition
relative to the Peer Group to identify any fundamental changes; (3) monitor the
external factors affecting value including, but not limited to, local and
national economic conditions, interest rates, and the stock market environment,
including the market for thrift stocks; and (4) monitor pending initial and
second step conversion offerings (including those in the offering phase) both
regionally and nationally. If material changes should occur during the
conversion process, RP Financial will prepare updated valuation reports
reflecting such changes and their related impact on
<PAGE>
RP Financial, LC.
Page 4.2
value, if any, over the course of the conversion process. RP Financial will also
prepare a final valuation update at the closing of the conversion offering to
determine if the preliminary range of value continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability), may materially impact the market value of
all savings institution stocks, including Gloversville Federal, or Gloversville
Federal's value alone. To the extent a change in factors impacting the
Association's value can be reasonably anticipated and/or quantified, RP
Financial has incorporated the estimated impact into its analysis.
Valuation Analysis
- -------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
such differences between the Association and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Association relative to the Peer Group in such
key areas as financial condition, profitability, growth and viability of
earnings, asset growth, primary market area, dividends, liquidity of the issue,
marketing of the issue, management, and the effect of government regulations
and/or regulatory reform. We have also considered the market for savings
institution stocks, and in particular new issues, to assess the impact on value
of Gloversville Federal coming to market at this time.
1. Financial Condition
-------------------
The financial strength of an institution is an important determinant in pro
forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's financial strength can be summarized as follows:
o Overall Asset/Liability. ("A/L") Composition. One-to-four family
permanent mortgage loans comprised the largest segment of the loan
portfolios of both Gloversville Federal and the Peer Group. The
primary difference with respect to the asset composition is the
Association's modestly higher level of loans, which is offset by the
Peer Group's modestly higher ratio of MBS. Additionally, in terms of
the loan portfolio composition, the Peer Group's portfolio reflects a
slightly greater level of diversification into commercial and
multi-family mortgage loans consistent with new management's targets
to build the portfolio up to 25 percent of total loans. Both have
funded their balance sheets primarily with retail deposits, although
the Peer Group has utilized borrowed funds to a greater extent. The
Association's pro forma IEA/IBL
<PAGE>
RP Financial, LC.
Page 4.3
ratio will be improved on a post-conversion basis although it is
expected remain below the Peer Group average.
o Credit Risk. The Association has a greater level of credit risk
exposure in comparison to the Peer Group based primarily on its higher
level of NPAs and lower reserve coverage ratio. Additionally, the
Association's markets were hard hit by recessionary economic
conditions prevailing in the early 1990s, particularly the real estate
markets, and have yet to fully recover. At the same time, new
management has been revamping the Association's policies and
procedures with the objective of reducing the level of NPAs, although
the long-term success of such efforts is uncertain. We also believe
the relatively unseasoned nature of the loan portfolio also increases
the Association's credit risk exposure in comparison to the Peer
Group. Accordingly, over the near term, the level of NPAs is expected
to remain in excess of the Peer Group average while the coverage ratio
will be less favorable.
o Balance Sheet Liquidity. The Association operates with a lower level
of balance sheet liquidity based on its lower level of cash,
investments and MBS. While the Association has a lower level of
borrowed funds, which would normally indicate greater borrowing
potential, credit quality problems diminish the ability to utilize
whole loans as borrowing collateral. The Association's liquidity will
be improved somewhat on a post-conversion basis based on the initial
use of proceeds.
o Capitalization. The Association operates with a lower pre-conversion
capital level than the Peer Group. Although Gloversville Federal's
capital level will be improved following the conversion, it will
nonetheless remain below the Peer Group average.
On balance, the most distinguishing characteristic between the financial
condition of the Association and the Peer Group was credit quality and risk
profile. Gloversville Federal's less favorable credit quality measures, coupled
with its lower level of balance sheet liquidity and lower pro forma capital
ratio warrant the application of a significant downward adjustment for 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 Association posted losses on operations for the
last two fiscal years versus moderate to strong profitability reported
by the Peer Group companies for the most recent twelve month period.
Reported earnings were well below the Peer Group average owing to its
comparatively higher operating expenses, loan loss provisions and
lower non-interest income levels. The foregoing items which led to the
Association's inferior earnings levels were offset to an extent, by
Gloversville Federal's comparatively higher level of net interest
income in comparison to the Peer Group average.
o Core Profitability. As noted previously, the Association's core
profitability is much lower than the Peer Group on a pro forma basis,
owing to its less favorable efficiency ratio. Additionally,
<PAGE>
RP Financial, LC.
Page 4.4
management has indicated that while future expenses may be reduced as
asset quality improves, the resumption of more aggressive marketing of
residential mortgage loans coupled with the relocation of an existing
office and/or opening of a new office in Saratoga County may tend to
increase the Association's operating costs initially. Management
expects loan loss provisions to be lower in the future which will
improve core profitability although the Association's ability to
sustain lower loan loss provisions may be contingent upon its ability
to improve credit quality.
o Interest Rate Risk. The Association appears to have greater interest
rate risk exposure, primarily as a result of its practice of placing
15 and 30 year fixed rate residential mortgage loans into portfolio.
The reinvestment of the proceeds pursuant to Gloversville Federal's
stock offering could be expected to moderate the Association's
interest rate risk exposure somewhat.
o Credit Quality. Gloversville Federal reported loan loss provisions
well above the Peer Group average in an effort by new management to
establish an adequate level of allowances for loan losses in
conjunction with the Association's revised policies and procedures.
Nonetheless, we believe the Association continues to maintain
comparatively greater credit risk exposure relative to the Peer Group
based primarily on its higher level of NPAs and lower reserve coverage
ratio and due to the unseasoned nature of the commercial and
multi-family mortgage loan portfolio.
o Earnings Growth Potential. Earnings growth at the Association will be
constrained by a number of factors, including slow growth in its
Fulton County market, intense competition, and the costs which may be
incurred in undertaking further expansion in the more favorable
Saratoga County market. The Peer Group companies, on average, operate
in better market areas than the Association, which leads to greater
opportunities. Additionally, the Peer Group on average is larger than
the Association, which provides more flexibility in diversifying
operations. Based on the foregoing, the Association's earnings growth
potential appears to be less favorable than that of the Peer Group.
Overall, RP Financial concluded that Gloversville Federal's disadvantage in
core profitability, greater credit risk exposure, and lower earnings growth
potential warrant a significant downward adjustment for profitability, growth
and viability of earnings.
3. Asset Growth
------------
Recent growth trends and expectations are less favorable than for the Peer
Group companies, on average. The Association has been in a no growth mode as a
result of limited growth trends for the Fulton County market and as new
management focused on resolving asset quality problems and revamping policies
and procedures. While the Association has been effective in increasing the
commercial/multi-family mortgage loan portfolio, the ability to increase
residential mortgage lending operations is uncertain. Overall, we applied a
moderate downward adjustment to the valuation for this factor.
4. Primary Market Area
-------------------
The general condition of a financial institution's primary market area has
a significant impact on value, as future success is in part dependent upon
opportunities for profitable activities in the local market. Gloversville
<PAGE>
RP Financial, LC.
Page 4.5
Federal's primary market area in Fulton County is a blue collar market that has
been relatively slow to recover from the economic recession of the 1980s. While
a large proportion of the manufacturing jobs that were lost have been replaced,
many of these are in services, which is typically a lower wage employment sector
than manufacturing. Conversely, the Association's market in Saratoga County is
more upscale and white collar market which has exhibited stronger growth trends.
As shown in Table 4.1, historical and projected population growth for the
Association's Fulton County market, where the majority of the depositors and
loan customers reside, exhibits comparable population growth trends in
comparison to the Peer Group and income levels which are well below the Peer
Group average. Demographic growth trends and income levels are more favorable
relative to the Peer Group in Saratoga County, although the Association
maintains a relatively small presence there. Overall, we believe no adjustment
is warranted for this factor as the negative characteristics of the Fulton
County market are offset by the greater potential of Saratoga County in
comparison to the markets served by the Peer Group.
5. Dividends
---------
The Holding Company has indicated that it will not initially pay a
dividend. The ability to pay a dividend will be based on numerous factors
including growth objectives, financial condition, the amount of net proceeds
retained by the Holding Company in the conversion, investment opportunities
available to the Holding Company and the Association, profitability, tax
considerations, minimum capital requirements, regulatory limitations, stock
market characteristics and general economic conditions.
Historically, savings institutions typically have not established dividend
policies at the time of their conversion to stock ownership. Newly converted
institutions, in general, have preferred to gain market seasoning, establish an
earnings track record and more fully invest the conversion proceeds before
establishing a dividend policy. However, during the late 1980s and early 1990s,
with negative publicity surrounding savings institutions, there was a tendency
for more institutions to initiate moderate dividend policies concurrent with
their conversion as a means of increasing the attractiveness of the stock
offering. Today, fewer institutions are compelled to initially establish
dividend policies at the time of their conversion offering to increase the
attractiveness of the stock issue as: (1) industry profitability has improved,
(2) the number of problem thrift institutions has declined, and (3) the stock
market cycle for thrift stocks is generally more favorable than in the early
1990s. At the same time, with ROE ratios under pressure, due to high equity
levels, well-capitalized institutions are subject to increased competitive
pressures to offer dividends and a number of institutions have instituted
special dividends.
<PAGE>
RP Financial, LC.
Page 4.6
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Per Capita Income
Population Proj. ----------------- Deposit
------------ Pop. 1990-97 1997-2002 % State Market
Institution County 1990 1997 2002 % Change % Change Median Age Amount Average Share(1)
- ----------- ------ ---- ---- ----- -------- --------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Skaneateles Bancorp of NY Onondaga 469 464 462 -1.0% -0.6% 34.3 15,641 84.5% 3.7%
The Elmira SB, FSB of NY Chemung 95 93 91 -2.6% -1.8% 35.5 13,104 70.8% 22.1%
Harbor Federal Bancorp of MD Baltimore City 736 663 642 -9.9% -3.1% 34.5 14,868 70.0% 1.0%
Peekskill Financial Corp of NY Westchester 875 896 910 2.4% 1.6% 37.3 27,713 149.8% 0.7%
SFS Bancorp of NY Schenectady 149 147 145 -1.7% -1.2% 37.0 16,937 91.5% 6.6%
AFSALA Bancorp of NY Montgomery 52 52 52 -0.4% -0.2% 37.3 12,121 65.5% 15.2%
Prestige Bancorp of PA Allegheny 1,336 1,286 1,252 -3.8% -2.6% 38.8 18,708 103.9% 0.3%
Tappan Zee Financial of NY Westchester 875 896 910 2.4% 1.6% 37.3 27,713 149.8% 0.5%
Advance Financial Bancorp of WV Brooke 27 26 26 -1.9% -1.3% 39.9 14,365 110.0% 43.1%
WHG Bancshares of MD Baltimore 692 721 741 4.2% 2.8% 37.0 21,680 102.1% 0.6%
Albion Bancorp of NY Orleans 42 45 47 8.0% 5.1% 34.8 11,705 63.3% 12.1%
Pennwood SB of PA Allegheny 1,336 1,286 1,252 -3.8% -2.6% 38.8 18,708 103.9% 0.1%
----- ----- ----- ---- ---- ---- ------ ----- ----
Averages: 557 548 544 -0.7% -0.2% 36.9 17,772 97.1% 8.8%
Medians: 580.6 563.7 551.9 -1.3% -0.9% 37.2 16,289 96.8% 2.4%
Gloversville FS&LA of NY Fulton 54 54 54 -0.7% -0.5% 36.6 12,156 65.7% 6.7%
Saratoga 181 196 206 8.2% 5.2% 34.7 16,087 86.9% 1.2%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits.
Sources: CACI, SNL Securities, Bureau of Labor Statistics
<PAGE>
RP Financial, LC.
Page 4.7
As publicly-traded savings institution's capital levels and profitability
have improved and as weakened institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. All twelve institutions
in the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 0.62 percent to 2.06 percent. The average dividend yield on
the stocks of the Peer Group institutions was 1.56 percent as of December 12,
1997, representing an average earnings payout ratio of 37.42 percent. As of
December 12, 1997, more than 80 percent of all publicly-traded savings
institutions had adopted cash dividend policies (see Exhibit IV-1), exhibiting
an average yield of 1.83 percent and an average payout ratio of 35.04 percent.
The dividend paying institutions 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
institutions.
The Holding Company's ability following the completion of the conversion to
pay a dividend will be lower based on the following considerations: (1)
management is committed to maintaining the Association's capital position at a
minimum of 10 percent of assets for the near term following the conversion which
may limit the amount of cash proceeds retained by the Holding Company; and (2)
the Holding Company's consolidated capital and core earnings will be below the
Peer Group average. Based on the foregoing, we have applied a moderate downward
adjustment for this factor.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $7.0 million to $55.9
million as of December 12, 1997, with an average market value of $25.9 million.
The shares outstanding of the Peer Group members ranged from 0.3 million to 3.1
million, with average shares outstanding of approximately 1.3 million.
The Association's stock is anticipated to be traded in the over-the-counter
market ("OTC"), which typically provides a lower level of liquidity than listing
on NASDAQ or trading on an exchange. Furthermore, the Association's pro forma
market capitalization and number of shares outstanding will be well below the
Peer Group averages. Based on the foregoing, we have applied a moderate downward
adjustment for this factor.
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for savings institution
stocks coming to market such as Gloversville Federal: (A) the after-market for
public companies, in which trading activity is regular and
<PAGE>
RP Financial, LC.
Page 4.8
investment decisions are made based upon financial condition, earnings, capital,
ROE and dividends; (B) the new issue market in which converting thrifts are
evaluated on the basis of the same factors but on a pro forma basis without the
benefit of a stock trading history and reporting quarterly operating results as
a publicly-held company; and (C) the acquisition market for savings institution
franchises in New York. All of these markets were considered in the valuation of
the Association's conversion.
A. Public Market
-------------
The value of publicly-traded thrift stocks is easily measurable, and is
tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock market has
generally trended higher over the past year. Following the rapid rise in the
stock market during November 1996, which was supported by the "status quo"
election results, stocks retreated during the first half of December. Profit
taking, concern about speculative excesses in the stock market and higher
interest rates all contributed to the decline in the stock market.
The stock market resumed an upward trend during the end of 1996 and the
first three weeks of 1997, with the DJIA establishing several new highs in the
process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent at the end of January. A high degree of
market volatility was evident throughout most of February 1997, reflecting
concern over speculative excesses in the stock market; particularly, as the DJIA
closed above the 7000 mark in mid-February. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than
<PAGE>
RP Financial, LC.
Page 4.9
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 percent, versus 4.9 percent in the first quarter, and comments by the
Federal Reserve Chairman which indicated that an increase in interest rates was
not imminent, spurred bond and stock prices strongly higher during the second
half of July.
A decline in the July 1997 unemployment rate reversed the positive bond and
stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond increasing from 6.32 percent at
the end of July to 6.66 percent as of August 8, 1997. The sell-off 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 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
<PAGE>
RP Financial, LC.
Page 4.10
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
sharpened the sell-off in the stock market, with the Dow Jones Industrial
Average ("DJIA") posting consecutive losses of more than 1.0 percent on October
16 and 17.
Stocks bounced back in early-week trading the following week, reflecting
positive third quarter earnings surprises posted by some of the blue chip
stocks. However, the recovery was abbreviated by global selling pressure led by
the decline in the Hong Kong stock market, as the DJIA posted a two-day loss
approximating 320 points on October 23 and 24, 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-
<PAGE>
RP Financial, LC.
Page 4.11
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 Dow Jones Industrial 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. On December 12, 1997, the DJIA closed at 7838.30, an increase of
24.3 percent from year a year ago.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. Similar to the overall
stock market, thrift prices traded lower in early-December 1996. Profit taking
and expectations of higher interest rates were factors contributing to the pull
back in thrift issues. However, 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
<PAGE>
RP Financial, LC.
Page 4.12
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 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 and
speculation of weaker economic growth leading to an increase in commercial loan
problems somewhat offset the declining interest rate environment, as thrift
issues traded in a narrow range in mid-December. The SNL Index for all
publicly-traded thrifts closed at 783.3 on December 12, 1997, an increase of
66.2 percent from one year ago.
<PAGE>
RP Financial, LC.
Page 4.13
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new issue
market for converting thrifts is also an important consideration in determining
the Association's pro forma market value. 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
mid-September 1997, conversion issues that have been completed and began trading
exhibited an average price increase of 40.7 percent on the first day of trading.
As shown in Table 4.2, the average one week change in price for publicly-traded
conversion offerings completed during the latest three month period ending
December 12, 1997 equaled positive 45.3 percent. The average pro forma
price/tangible book and price/earnings ratios of the recent conversions was 80.5
percent and 18.1 times, generally reflecting closings at the top of the super
range.
In examining the current pricing characteristics of institutions completing
their conversions during the last three months (see Tabley4.3), 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 135.02 percent
reflects a discount of 15.3 percent from the average P/B ratio of all
publicly-traded SAIF-insured thrifts (equal to 159.37 percent), and the core P/E
ratio of the recent conversions was at a notable premium to the all SAIF-insured
public average core P/E ratio of 20.43 times. Only three out of the five
recently converted companies were trading at a core P/E multiple of less than 30
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.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
most of the recently completed offerings have been oversubscribed and have
recorded healthy price increases in initial post-conversion trading activity.
<PAGE>
RP Financial, LC.
Page 4.14
RP Financial, LC.
December 15, 1997
----------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
----------------------------------------------------------
<TABLE>
<CAPTION>
Pre-Conversion Data Insider Purchases
------------------------------ Offering ---------------------
Institutional Information Financial Info. Asset Quality Information Benefit Plans
- --------------------------------------------------------- --------------- ------------- ------------------ -------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---------- ------ ------ ------- ------ ---- ----- ---- ----- ---- ------ -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 27 14.83% 0.69% 103% 4.5 132% 7.2% 0.0% 4.0% 17.6%
High County Bancorp CO 12/10/97 HCBC 76 7.81% 0.23% 286% 12.6 132% 4.4% 8.0% 4.0% 11.0%
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 239 5.82% 0.29% 41% 13.2 115% 3.9% 9.0% 5.0% 10.6%
Landmark Financial Corp. NY 12/01/97 P.Sheet 14 6.66% 1.38% 55% 1.5 132% 9.9% 8.0% 4.0% 8.2%
First Security Fed Fin., Inc IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7% 8.0% 4.0% 4.4%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 220 10.08% 0.12% 280% 46.9 132% 2.3% 8.0% 4.0% 3.9%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 230 11.24% 0.14% 245% 35.7 132% 2.8% 8.0% 4.0% 2.9%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52% 1.41% 36% 8.2 132% 5.7% 8.0% 4.0% 5.2%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 34 14.45% 0.47% 86% 6.3 94% 5.7% 8.0% 4.0% 8.3%
Citizens Bancorp IN 09/19/97 P. Sheet 46 12.28% 0.45% 84% 10.6 132% 4.6% 8.0% 4.0% 16.1%
Averages: $123 10.02% 0.61% 129% 20.4 128% 4.8% 7.3% 4.1% 8.8%
Medians: 80 10.66% 0.46% 85% 11.6 132% 4.5% 8.0% 4.0% 8.3%
Averages, Excluding 2nd Steps $105 9.76% 0.70% 150% $21.5 127% 4.9% 8.0% 4.0% 8.2%
Medians, Excluding 2nd Steps $76 10.08% 0.47% 84% $10.6 132% 4.6% 8.0% 4.0% 8.2%
</TABLE>
Table 4.2 (Continued)
<TABLE>
<CAPTION>
Pro Forma Data
Institutional Information ------------------------------------------
- --------------------------------------------------------- Pricing Ratios(4) Fin. Characteristics
Conversion --------------------- --------------------
Institution State Date Ticker P/TB P/E(5) P/A ROA TE/A ROE
- ----------- ----- ---------- ------ ---- ------ --- --- ---- ---
(%) (x) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 85.9% 17.1 22.9% 1.3% 26.7% 5.0%
High County Bancorp CO 12/10/97 HCBC 77.8% 26.1 15.1% 0.6% 19.5% 3.0%
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 100.5% 18.8 10.0% 0.5% 9.9% 5.4%
Landmark Financial Corp. NY 12/01/97 P.Sheet 70.9% NM 9.8% 0.7% 13.8% -6.8%
First Security Fed Fin., Inc IL 10/31/97 FSFF 78.1% 16.5 21.1% 1.3% 27.0% 4.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 75.3% 13.6 18.1% 1.0% 20.7% 5.1%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 109.0% 17.7 23.6% 1.3% 21.6% 6.2%
SHS Bancorp, Inc. PA 10/01/97 SHSB 72.3% 24.5 9.1% 0.4% 12.6% 3.0%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 62.3% 13.4 16.0% 1.2% 25.7% 4.6%
Citizens Bancorp IN 09/19/97 P. Sheet 72.9% 14.8 14.8% 1.1% 46.3% 2.4%
Averages: 80.5% 18.1 16.1% 0.9% 22.4% 3.3%
Medians: 76.5% 17.1 15.6% 1.1% 21.2% 4.7%
Averages, Excluding 2nd Steps 72.8% 18.1 14.9% 0.9% 23.7% 2.3%
Medians, Excluding 2nd Steps 72.9% 15.6 15.1% 1.0% 20.7% 3.0%
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.14 (continued)
Table 4.2 (Continued)
<TABLE>
<CAPTION>
Post-IPO Pricing Trends
-------------------------------------------------------
Closing Price:
Institutional Information -----------------------------------------------
- --------------------------------------------------------- First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(6) Chg. Month(7) Chg.
- ----------- ----- ---------- ------ ----- ------- ---- ------- ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 10.00 $11.56 15.6% $11.88 18.8% NA NA
High County Bancorp CO 12/10/97 HCBC 10.00 14.44 44.4% 14.81 48.1% NA NA
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 10.00 13.50 35.0% 15.38 53.8% 14.88 48.8%
Landmark Financial Corp. NY 12/01/97 P.Sheet 10.00 11.88 18.8% 12.00 20.0% 12.06 20.6%
First Security Fed Fin., Inc IL 10/31/97 FSFF 10.00 15.06 50.6% 15.13 51.3% 16.06 60.6%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 10.00 16.75 67.5% 16.75 67.5% 15.88 58.8%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 10.00 13.25 32.5% 13.63 36.3% 13.25 32.5%
SHS Bancorp, Inc. PA 10/01/97 SHSB 10.00 14.75 47.5% 16.25 62.5% 16.00 60.0%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 10.00 15.50 55.0% 15.50 55.0% 14.88 48.8%
Citizens Bancorp IN 09/19/97 P. Sheet 10.00 14.00 40.0% 14.00 40.0% 15.38 53.8%
Averages: $10.00 $14.07 40.7% $14.53 45.3% $14.80 48.0%
Medians: $10.00 $14.22 42.2% $14.97 49.7% $15.13 51.3%
Averages, Excluding 2nd Steps $10.00 $14.63 46.3% $14.92 49.2% $15.04 50.4%
Medians, Excluding 2nd Steps $10.00 $14.75 47.5% $15.13 51.3% $15.63 56.3%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
<PAGE>
RP Financial, LC.
Page 4.15
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of December 12, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43 0.37 1.58 30.13
All Public Companies 24.46 191.17 1.18 15.18 19.25 164.21 19.62 168.34 20.07 0.38 1.58 30.15
Special Selection Grouping(8) 15.80 63.96 0.52 11.89 27.14 135.02 25.11 136.24 27.14 0.00 0.00 0.00
State of NY 29.69 437.60 1.30 17.31 20.77 169.56 19.51 181.39 20.72 0.44 1.41 29.51
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
EBI Equality Bancorp of St Louis 14.87 36.97 0.53 9.95 28.06 149.45 14.82 149.45 28.06 0.00 0.00 0.00
FSFF First SecurityFed Fin of IL 15.94 102.14 0.61 12.80 26.13 124.53 33.66 124.53 26.13 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 16.06 75.40 0.59 13.29 27.22 120.84 29.02 120.84 27.22 0.00 0.00 0.00
RVSB Riverview Bancorp of WA 14.87 91.12 0.45 9.56 NM 155.54 32.28 161.63 NM 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 17.25 14.15 0.41 13.83 NM 124.73 15.76 124.73 NM 0.00 0.00 0.00
</TABLE>
Table 4.3 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
----------------------------------------------
Reported Core
Total Equity/ NPAs/ ---------- ----------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,195 13.00 0.77 0.89 8.05 0.87 7.81
All Public Companies 1,222 12.94 0.78 0.94 8.63 0.91 8.33
Special Selection Grouping(8) 237 18.87 0.48 0.90 5.33 0.89 5.25
State of NY 2,419 11.98 0.90 0.85 8.10 0.84 7.98
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
EBI Equality Bancorp of St Louis 249 9.92 0.29 0.53 5.33 0.53 5.33
FSFF First SecurityFed Fin of IL 303 27.03 NA 1.29 4.77 1.29 4.77
OTFC Oregon Trail Fin. Corp of OR 260 24.02 0.07 1.07 4.44 1.07 4.44
RVSB Riverview Bancorp of WA 282 20.76 0.14 1.22 9.14 1.17 8.75
SHSB SHS Bancorp, Inc. of PA 90 12.64 1.43 0.37 2.96 0.37 2.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC).
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.16
C. Acquisition Market
------------------
Also considered in the valuation was the potential impact on Gloversville
Federal's stock price of recently completed and pending acquisitions of other
thrifts operating in Gloversville Federal's market area. As shown in Exhibit
IV-4, there were 10 completed deals, and 2 pending transactions involving
publicly-traded savings institutions, although most of the acquisition activity
was in the New York metropolitan area, which is relatively distant from the
Association's market. The recent acquisition activity involving New York savings
institutions may imply a certain degree of acquisition speculation for the
Association's stock. To the extent that acquisition speculation may impact the
Association's offering, we have largely taken this into account in selecting
primarily New York or Mid-Atlantic U.S. savings institutions that also
experience a degree of acquisition speculation.
Taking these factors and trends into account, RP Financial concluded that a
slight upward adjustment was appropriate in the valuation analysis for purposes
of marketing of the issue.
8. Management
----------
By virtue of its asset size, Gloversville Federal's management team is
constrained by the resources available relative to other larger institutions.
However, Gloversville Federal under the leadership of new management (since
1994) appears to have the experience and expertise in all of the key areas of
the Association's operations. In this regard, the Association's CEO has decades
of banking industry experience and management has recently been bolstered by the
employment of a commercial lending officer and an asset review officer. The
financial results of the Peer Group companies indicate that they have been
effectively managed, as all of the Peer Group companies maintained adequate
levels of capital and recorded positive earnings, favorable interest rate risk
and favorable credit quality.
There are two principal areas where the Association's management fall short
of the Peer Group companies. First, management depth is necessarily limited in
view of the Association's smaller asset size. Additionally, management has a
more limited track record with the Association, particularly since much of
management's time since 1994 has been devoted to resolving asset quality
problems and developing and implementing new policies and procedures.
Accordingly, we have applied a moderate downward adjustment for this factor.
<PAGE>
RP Financial, LC.
Page 4.17
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The 1996 recapitalization of the SAIF insurance fund has removed the
difference in deposit insurance costs between BIF and SAIF-insured institutions.
As a fully-converted SAIF-insured institution, Gloversville Federal 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 Association's pro forma
regulatory capital ratios. On balance, RP Financial concluded that no adjustment
to the Association's value was warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Association's pro forma market value should take
into account the valuation adjustments relative to the Peer Group:
Key Valuation Parameters: Valuation Adjustment
------------------------- --------------------
Financial Condition Significant Downward
Profitability, Growth and Viability of Earnings Significant Downward
Asset Growth Moderate Downward
Primary Market Area No Adjustment
Dividends Moderate Downward
Liquidity of the Shares Moderate Downward
Marketing of the Issue Slight Upward
Management Moderate Downward
Effect of Government Regulations and Regulatory Reform No Adjustment
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 Gloversville Federal's to-be-issued
stock -- the price/earnings ("P/E"), price/book ("P/B"), and price/assets
("P/A") approaches -- all performed on a pro forma basis including the effects
of the conversion proceeds. In computing the pro forma impact of the conversion
and the related pricing ratios, we have incorporated the valuation parameters
disclosed in Gloversville Federal's prospectus for offering expenses, and the
effective tax rate and stock benefit plan assumptions (summarized in Exhibits
IV-7 and IV-8). We have utilized the reinvestment rate set forth in the
prospectus, the one year T-Bill rate as of September 30, 1997 of 5.44 percent,
which is consistent with the near term anticipated use of proceeds. With regard
to the employee stock ownership plan and stock reward plans, we have performed
the valuation assuming the ESOP purchases an amount equal to 8.0 percent of the
offering (10
<PAGE>
RP Financial, LC.
Page 4.18
year amortization) and the MRP acquires 4.0 percent of the offering. In our
estimate of value, we assessed the relationship of the pro forma pricing ratios
relative to the Peer Group and the recent conversions.
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. However, the usefulness of the P/E
approach in Gloversville Federal's valuation is diminished by a number
of factors including the following: (1) Gloversville Federal has
reported operating losses over the last two fiscal years; and (2) the
high level of NPAs and the low reserve coverage ratio introduce a
significant element of volatility into future earnings. At the same
time, management is projecting positive, albeit moderate, earnings in
the future based on the targeted improvement in asset quality.
However, such projections are based on numerous assumptions and
projections, all of which are subject to change. Accordingly, we have
deemphasized the earnings approach in the derivation of value relative
to its importance in the valuation of most entities with more
consistent earnings streams.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stock, with the greater determinant of long
term value being earnings. RP Financial considered the P/B approach to
be a reliable indicator of value given current market conditions,
particularly the market for new conversions (witness that a number
recent conversions reported not meaningful P/E ratios). For this
reason, coupled with the Association's current low earnings levels led
us to place relatively greater weight on pro forma book value (fully
converted basis), with the emphasis on tangible book value (fully
converted basis), in the determination of Gloversville Federal's
value.
o P/A Approach. P/A ratios are generally a less reliable indicator of
market value, as investors do not place exclusive weight simply on the
size of total assets as a determinant of market value. Furthermore,
this approach does not take into account the amount of stock purchases
funded by deposit withdrawals, thus understating the pro forma P/A
ratio. Investors place significantly greater weight on book value and
earnings.
The Association intends to adopt Statement of Position ("SOP" 93-6), which
will cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Association's shareholders. However, we have considered the
impact of adoption of SOP 93-6 on the Association in the determination of the
Association's pro forma value.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/TB and P/E approaches, followed by the P/A approach, RP
Financial concluded that the pro forma market value of the Association's
conversion stock is $5,000,000 at the midpoint at this time.
<PAGE>
RP Financial, LC.
Page 4.19
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB valuation
method requires calculating the Association's pro forma market value by applying
a valuation P/TB ratio to Gloversville Federal's pro forma tangible book value.
Based on the $5,000,000 midpoint valuation, Gloversville Federal's pro forma
P/TB ratio was 69.72 percent. In comparison to the average P/TB ratio for the
Peer Group of 130.46 percent, Gloversville Federal's valuation reflected a
discount of 46.55 percent. RP Financial considered a discount under the P/TB
approach to be reasonable in light of the valuation adjustments discussed
previously. Given the historically high P/TB pricing for thrifts in today's
market, a valuation discount under the P/TB approach could only be expected and
is consistent with the aftermarket trading of new conversion issues.
Given the emphasis on limiting near term aftermarket trading in the revised
appraisal guidelines, RP Financial also considered the pro forma P/TB ratios of
recent conversions in its valuation analysis. It is these companies that provide
a proxy for aftermarket trading for new thrift issues. At the midpoint value of
$5,000,000, Gloversville Federal's pro forma P/TB ratio of 69.72 percent
represented a discount of 46.1 percent from the 131.15 percent average P/TB
ratio of the recently converted thrifts (see Table 4.3). At the super maximum of
the valuation range, Gloversville Federal's pro forma P/B ratio of 76.97 percent
is discounted by approximately 43.5 percent from the new conversions.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple (fully converted basis) to the pro forma earnings base.
Ideally, the pro forma earnings base is composed principally of the
Association'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. In the case of Gloversville Federal
however, the earnings approach is rendered less meaningful by a number of
factors including: (1) the operating losses reported by the Association's for
the last two fiscal years; and (2) the high level of NPAs, and low reserve
coverage (management has indicated however that loan loss provisions are
expected to be lower in the future).
Based on Gloversville Federal's trailing twelve month earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Association's pro forma P/E multiple (fully converted basis) at the $5,000,000
midpoint value is not meaningful (i.e., the Association's earnings multiple is
negative). Incorporating pre-conversion earnings projected in the business plan
of $92,000 (six months annualized results), the pro forma P/E multiple is equal
to 54.3 times.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines market
value by applying a valuation P/A ratio to the Association's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results in
<PAGE>
RP Financial, LC.
Page 4.20
understating the pro forma P/A ratio which is computed herein. At the midpoint
of the valuation range, Gloversville Federal's value equaled 7.70 percent of pro
forma assets. Comparatively, the Peer Group companies exhibited an average P/A
ratio of 17.88 percent, which implies a 56.9 percent discount being applied to
the Association's pro forma P/A ratio.
Valuation Conclusion
- --------------------
Based on the foregoing, it is our opinion that, as of December 12, 1997,
the aggregate pro forma market value of the Association was $5,000,000 at the
midpoint, equal to 500,000 shares offered at $10.00 per share. Pursuant to the
conversion guidelines, the 15 percent offering range includes a minimum of
$4,250,000 and a maximum of $5,750,000. Based on the $10.00 per share offering
price, this valuation range equates to an offering of 425,000 shares at the
minimum to 575,000 shares at the maximum. The Holding Company's offering also
includes a provision for a super maximum, which would result in an offering size
of $6,612,500, equal to 661,250 shares at the $10.00 per share offering price.
The comparative pro forma valuation ratios relative to the Peer Group are shown
in Tabley4.4, and the key valuation assumptions are detailed in Exhibit IV-7.
The pro forma calculations for the range are detailed in Exhibit IV-8.
<PAGE>
RP Financial, LC.
Page 4.21
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Gloversville FS&LA and the Comparables
As of December 12, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
-------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA
- ------------------
Superrange 10.00 6.61 -0.72 12.99 -13.98 76.97 9.97 76.97 -13.98 0.00 0.00 0.00
Range Maximum 10.00 5.75 -0.85 13.62 -11.74 73.42 8.77 73.42 -11.74 0.00 0.00 0.00
Range Midpoint 10.00 5.00 -1.01 14.34 -9.92 69.72 7.70 69.72 -9.92 0.00 0.00 0.00
Range Minimum 10.00 4.25 -1.22 15.32 -8.20 65.27 6.61 65.27 -8.20 0.00 0.00 0.00
SAIF-Insured Thrifts(7)
- -----------------------
Averages 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43 0.37 1.58 30.13
Medians -- -- -- -- 19.18 150.78 17.84 154.00 20.03 -- -- --
All Non-MHC State of NY(7)
- --------------------------
Averages 29.67 466.26 1.34 17.68 20.44 163.77 19.02 174.50 20.72 0.45 1.43 30.09
Medians -- -- -- -- 19.94 155.95 17.14 157.65 20.40 -- -- --
Comparable Group Averages
- -------------------------
Averages 21.06 25.85 0.86 16.29 22.86 129.72 17.88 130.46 23.35 0.33 1.56 37.42
Medians -- -- -- -- 22.76 123.94 17.76 123.94 22.76 -- -- --
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 18.75 27.28 0.82 14.74 22.87 127.20 17.14 127.20 22.87 0.24 1.28 29.27
ALBK ALBANK Fin. Corp. of Albany NY 46.00 592.11 2.87 26.69 15.92 172.35 15.93 195.66 16.03 0.72 1.57 25.09
ALBC Albion Banc Corp. of Albion NY 28.00 7.00 1.29 24.26 21.37 115.42 9.89 115.42 21.71 0.32 1.14 24.81
AHCI Ambanc Holding Co., Inc. of NY 18.00 77.51 -0.68 14.57 NM 123.54 15.98 123.54 NM 0.20 1.11 NM
ASFC Astoria Financial Corp. of NY 57.37 1185.61 2.80 29.51 19.38 194.41 15.00 229.85 20.49 0.60 1.05 21.43
CNY Carver Bancorp, Inc. of NY 16.87 39.04 0.02 15.09 NM 111.80 9.39 116.34 NM 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY 17.37 80.89 0.85 15.41 20.68 112.72 27.93 112.72 20.44 0.32 1.84 37.65
DME Dime Bancorp, Inc. of NY 26.00 2638.79 1.28 10.38 20.00 250.48 13.59 263.16 20.31 0.16 0.62 12.50
DIME Dime Community Bancorp of NY 23.37 295.05 1.07 14.81 21.25 157.80 21.30 183.15 21.84 0.24 1.03 22.43
FIBC Financial Bancorp, Inc. of NY 24.50 41.90 1.56 15.71 16.78 155.95 14.11 156.75 15.71 0.40 1.63 25.64
FFIC Flushing Fin. Corp. of NY 23.00 183.61 1.04 17.08 23.23 134.66 19.12 140.24 22.12 0.24 1.04 23.08
GOSB GSB Financial Corp. of NY 17.12 38.49 0.44 13.78 NM 124.24 33.62 124.24 NM 0.00 0.00 0.00
GPT GreenPoint Fin. Corp. of NY 67.19 2877.48 3.30 29.63 19.88 226.76 21.98 NM 20.36 1.00 1.49 30.30
HAVN Haven Bancorp of Woodhaven NY 21.75 190.79 1.32 12.53 16.60 173.58 10.41 174.14 16.48 0.30 1.38 22.73
JSB JSB Financial, Inc. of NY 48.50 480.05 2.64 35.91 16.33 135.06 31.36 135.06 18.37 1.40 2.89 53.03
LISB Long Island Bancorp, Inc of NY 46.25 1111.06 1.74 22.74 22.45 203.39 18.73 205.28 26.58 0.6 1.30 34.48
MBB MSB Bancorp of Middletown NY 30.50 86.74 0.52 21.15 NM 144.21 10.66 293.83 NM 0.60 1.97 NM
NYB New York Bancorp, Inc. of NY 38.31 816.73 2.46 7.93 15.96 NM 25.18 NM 15.57 0.60 1.57 24.39
PEEK Peekskill Fin. Corp. of NY 17.50 55.88 0.66 14.81 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PKPS Poughkeepsie Fin. Corp. of NY(7)10.37 130.61 0.37 5.91 28.03 175.47 14.77 175.47 28.03 0.20 1.93 54.05
PSBK Progressive Bank, Inc. of NY 36.00 137.81 2.16 20.18 16.36 178.39 15.58 198.13 16.67 0.68 1.89 31.48
QCSB Queens County Bancorp of NY 36.50 551.44 1.45 11.44 25.35 319.06 35.78 319.06 25.17 0.80 2.19 55.17
RELY Reliance Bancorp, Inc. of NY 34.00 296.21 2.07 19.29 17.35 176.26 14.56 239.94 16.43 0.64 1.88 30.92
RSLN Roslyn Bancorp, Inc. of NY 21.88 954.89 0.93 14.04 29.97 155.84 27.48 156.62 23.53 0.28 1.28 30.11
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.21 (continued)
Table 4.4 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------
Reported Core
Total Equity/ NPAs/ ----------- -----------
Assets Assets Assets ROA ROE ROA ROE
------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Gloversville FS&LA
- ------------------
Superrange 66 12.95 6.19 -0.71 -5.51 -0.71 -5.51
Range Maximum 66 11.94 6.26 -0.75 -6.25 -0.75 -6.25
Range Midpoint 65 11.05 6.33 -0.78 -7.03 -0.78 -7.03
Range Minimum 64 10.13 6.39 -0.81 -7.96 -0.81 -7.96
SAIF-Insured Thrifts(7)
- -----------------------
Averages 1,195 13.00 0.77 0.89 8.05 0.87 7.81
Medians -- -- -- -- -- -- --
All Non-MHC State of NY(7)
- --------------------------
Averages 2,571 12.07 0.91 0.86 8.21 0.85 8.10
Medians -- -- -- -- -- -- --
Comparable Group Averages
- -------------------------
Averages 149 14.14 0.81 0.72 5.59 0.72 5.47
Medians -- -- -- -- -- -- --
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 159 13.47 0.45 0.79 6.46 0.79 6.46
ALBK ALBANK Fin. Corp. of Albany NY 3,717 9.24 0.94 1.04 11.41 1.04 11.33
ALBC Albion Banc Corp. of Albion NY 71 8.57 0.12 0.50 5.53 0.49 5.45
AHCI Ambanc Holding Co., Inc. of NY 485 12.94 0.73 -0.59 -4.24 -0.61 -4.43
ASFC Astoria Financial Corp. of NY 7,904 7.72 0.46 0.81 10.37 0.77 9.81
CNY Carver Bancorp, Inc. of NY 416 8.40 1.31 -0.15 -1.74 0.01 0.13
CATB Catskill Fin. Corp. of NY 290 24.78 0.40 1.39 5.20 1.41 5.26
DME Dime Bancorp, Inc. of NY 19,413 5.43 1.02 0.68 12.66 0.67 12.46
DIME Dime Community Bancorp of NY 1,385 13.50 0.60 1.09 6.91 1.06 6.72
FIBC Financial Bancorp, Inc. of NY 297 9.05 1.75 0.91 9.52 0.97 10.18
FFIC Flushing Fin. Corp. of NY 960 14.20 0.39 0.95 5.92 0.99 6.22
GOSB GSB Financial Corp. of NY 114 27.06 NA 1.02 3.77 0.86 3.19
GPT GreenPoint Fin. Corp. of NY 13,094 9.69 2.88 1.09 10.41 1.06 10.17
HAVN Haven Bancorp of Woodhaven NY 1,833 6.00 0.76 0.68 11.28 0.68 11.37
JSB JSB Financial, Inc. of NY 1,531 23.22 1.07 1.93 8.61 1.71 7.65
LISB Long Island Bancorp, Inc of NY 5,931 9.21 0.91 0.86 9.35 0.73 7.90
MBB MSB Bancorp of Middletown NY 814 7.39 NA 0.27 3.87 0.18 2.55
NYB New York Bancorp, Inc. of NY 3,244 5.21 0.88 1.62 31.66 1.66 32.45
PEEK Peekskill Fin. Corp. of NY 181 26.09 1.24 1.14 4.30 1.14 4.30
PKPS Poughkeepsie Fin. Corp. of NY(7) 884 8.42 4.19 0.54 6.43 0.54 6.43
PSBK Progressive Bank, Inc. of NY 885 8.73 0.94 0.96 11.35 0.94 11.15
QCSB Queens County Bancorp of NY 1,541 11.22 0.69 1.54 11.21 1.55 11.28
RELY Reliance Bancorp, Inc. of NY 2,035 8.26 0.67 0.89 10.80 0.93 11.40
RSLN Roslyn Bancorp, Inc. of NY 3,474 17.64 0.27 0.96 5.10 1.22 6.50
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.22
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4 (Continued)
Public Market Pricing
Gloversville FS&LA and the Comparables
As of December 12, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
-------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
State of NY (Continued)
- -----------------------
SFED SFS Bancorp of Schenectady NY 24.50 30.16 0.94 17.64 26.06 138.89 17.32 138.89 26.06 0.28 1.14 29.79
SKAN Skaneateles Bancorp Inc of NY 18.87 27.04 1.16 12.10 15.73 155.95 10.92 160.60 16.27 0.27 1.43 23.28
ROSE T R Financial Corp. of NY 33.50 589.33 1.69 13.09 17.82 255.92 15.96 255.92 19.82 0.64 1.91 37.87
TPNZ Tappan Zee Fin., Inc. of NY 20.00 29.76 0.57 14.20 NM 140.85 23.97 140.85 NM 0.28 1.40 49.12
ESBK The Elmira SB FSB of Elmira NY 30.00 22.26 1.03 19.55 23.62 153.45 9.75 157.65 29.13 0.61 2.03 59.22
YFCB Yonkers Fin. Corp. of NY 18.75 56.64 0.99 14.52 19.13 129.13 18.10 129.13 18.94 0.24 1.28 24.24
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY 18.75 27.28 0.82 14.74 22.87 127.20 17.14 127.20 22.87 0.24 1.28 29.27
AFBC Advance Fin. Bancorp of WV 17.75 19.24 0.81 15.02 21.39 118.18 18.20 118.18 21.91 0.32 1.80 39.51
ALBC Albion Banc Corp. of Albion NY 28.00 7.00 1.29 24.26 21.37 115.42 9.89 115.42 21.71 0.32 1.14 24.81
HRBF Harbor Federal Bancorp of MD 23.75 40.21 0.91 16.75 26.10 141.79 18.51 141.79 26.10 0.48 2.02 52.75
PEEK Peekskill Fin. Corp. of NY 17.50 55.88 0.66 14.81 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PWBK Pennwood SB of PA 18.50 10.55 0.91 15.33 22.29 120.68 22.13 120.68 20.33 0.32 1.73 35.16
PRBC Prestige Bancorp of PA 19.25 17.61 0.85 16.88 22.65 114.04 12.78 114.04 22.65 0.12 0.62 14.12
SFED SFS Bancorp of Schenectady NY 24.50 30.16 0.94 17.64 26.06 138.89 17.32 138.89 26.06 0.28 1.14 29.79
SKAN Skaneateles Bancorp Inc of NY 18.87 27.04 1.16 12.10 15.73 155.95 10.92 160.60 16.27 0.27 1.43 23.28
TPNZ Tappan Zee Fin., Inc. of NY 20.00 29.76 0.57 14.20 NM 140.85 23.97 140.85 NM 0.28 1.40 49.12
ESBK The Elmira SB FSB of Elmira NY 30.00 22.26 1.03 19.55 23.62 153.45 9.75 157.65 29.13 0.61 2.03 59.22
WHGB WHG Bancshares of MD 15.87 23.20 0.34 14.16 NM 112.08 23.15 112.08 NM 0.32 2.02 NM
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.22 (continued)
Table 4.4 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------
Reported Core
Total Equity/ NPAs/ ----------- -----------
Assets Assets Assets ROA ROE ROA ROE
------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of NY (Continued)
- -----------------------
SFED SFS Bancorp of Schenectady NY 174 12.47 0.75 0.68 5.36 0.68 5.36
SKAN Skaneateles Bancorp Inc of NY 248 7.00 2.04 0.70 10.25 0.68 9.91
ROSE T R Financial Corp. of NY 3,692 6.24 0.54 0.97 15.55 0.87 13.98
TPNZ Tappan Zee Fin., Inc. of NY 124 17.02 1.68 0.72 4.05 0.70 3.98
ESBK The Elmira SB FSB of Elmira NY 228 6.35 0.64 0.42 6.63 0.34 5.38
YFCB Yonkers Fin. Corp. of NY 313 14.02 0.48 1.05 6.64 1.06 6.71
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY 159 13.47 0.45 0.79 6.46 0.79 6.46
AFBC Advance Fin. Bancorp of WV 106 15.40 0.74 0.89 6.41 0.87 6.25
ALBC Albion Banc Corp. of Albion NY 71 8.57 0.12 0.50 5.53 0.49 5.45
HRBF Harbor Federal Bancorp of MD 217 13.06 0.10 0.71 5.50 0.71 5.50
PEEK Peekskill Fin. Corp. of NY 181 26.09 1.24 1.14 4.30 1.14 4.30
PWBK Pennwood SB of PA 48 18.34 1.49 0.99 5.21 1.09 5.71
PRBC Prestige Bancorp of PA 138 11.21 0.33 0.63 5.12 0.63 5.12
SFED SFS Bancorp of Schenectady NY 174 12.47 0.75 0.68 5.36 0.68 5.36
SKAN Skaneateles Bancorp Inc of NY 248 7.00 2.04 0.70 10.25 0.68 9.91
TPNZ Tappan Zee Fin., Inc. of NY 124 17.02 1.68 0.72 4.05 0.70 3.98
ESBK The Elmira SB FSB of Elmira NY 228 6.35 0.64 0.42 6.63 0.34 5.38
WHGB WHG Bancshares of MD 100 20.65 0.15 0.51 2.23 0.51 2.23
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operating items (including the SAIF assessment) on a
tax effected basis, and is shown on a pro forma basis where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Gloversville Federal's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 NPV Analysis
I-7 Loan Portfolio Composition
I-8 Fixed and Adjustable Rate Loans
I-9 Contractual Maturity by Loan Type
I-10 Loan Originations
I-11 Non-Performing Assets
I-12 Classified Assets
I-13 Loan Loss Allowances
I-14 Deposit Composition
I-15 Borrowings Composition
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Demographic/Economic Reports
II-4 Sources of Personal Income/Employment Sectors
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Mid-Atlantic Savings Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
Exhibit
Number Description
- ------- -----------
IV-1 Stock Prices: December 12, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Gloversville Federal Savings and Loan Association
Map of Office Locations
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT I-2
Gloversville Federal Savings and Loan Association
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Gloversville Federal Savings and Loan Association
Key Operating Ratios
Selected Financial Ratios and Other Data
<TABLE>
<CAPTION>
September 30,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Performance ratios:
- -------------------
Return (Loss) on average assets................. (0.94)% (1.69)% 0.38% 0.42% (0.37)%
Return (Loss) on average equity................. (16.30) (22.22) 5.30 5.97 (5.11)
Interest rate spread information:
- ---------------------------------
Average during period........................... 3.96 3.68 3.35 4.43 3.87
End of period................................... 4.19 4.21 3.61 4.05 4.18
Net interest margin........................... 4.11 3.91 3.55 4.42 3.82
Other Operating ratios:
- -----------------------
Ratio of operating expenses to average total
assets(1)...................................... 3.63 3.61 3.11 3.17 2.63
Efficiency ratio(2)............................. 85.94 91.10 86.67 75.85 74.46
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 103.76 105.53 105.01 99.70 98.73
Asset Quality ratios:
- ---------------------
Non-performing assets to total assets
at end of period................................ 6.73 3.74 4.38 5.53 4.22
Allowance for loan loss to non-performing loans
at end of period................................ 42.53 56.53 30.20 24.34 41.63
Allowance for loan losses to gross loans
receivable at end of period..................... 3.14 2.45 1.58 1.83 2.08
Capital ratios:
- ---------------
Equity to total assets at end of period......... 5.38 6.21 7.70 6.76 7.10
Average equity to average assets................ 5.78 7.62 7.11 6.99 7.17
Other data:
- -----------
Number of full service offices.................... 2 2 2 2 2
</TABLE>
(1) Operating expenses exclude OREO expenses of $73,000, $27,000, $127,000,
$52,000 and $44,000 for years ended September 30, 1997, 1996, 1995, 1994
and 1993, respectively. In addition, operating expenses for the year ended
September 30, 1996 exclude expenses incurred by the Association for
delinquent property taxes on collateral secured by certain nonperforming
one- to four-family residential loans paid on behalf of borrowers of
$318,000 and the special one-time SAIF assessment of $415,000.
(2) The efficiency ratio represents operating expenses (as defined in footnote
1 above) divided by the sum of net interest income and other operating
income (excluding a gain on sale of building of $86,000 and net gains from
security transactions of $204,000 for the year ended September 30, 1995).
<PAGE>
EXHIBIT I-4
Gloversville Federal Savings and Loan Association
Investment Portfolio Composition
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
Amortized % of Amortized % of Amortized % of
Cost Total Cost Total Cost Total
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
Securities held to maturity:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government agency obligations... $ -- --% $ -- --% $4,500 100.00%
------ ------ ------ ------ ------ ------
Total securities held to maturity... -- -- -- -- 4,500 100.00
------ ------ ------ ------ ------ ------
Securities available for sale:
US Government agency obligations...... 2,998 42.50 2,998 39.43 3,696 72.00
------ ------ ------ ------ ------ ------
Mortgage-backed securities
FNMA................................ 753 10.66 766 10.07 -- --
FHLMC............................... 2,843 40.30 3,379 44.44 993 19.35
------ ------ ------ ------ ------ ------
Total mortgage-backed securities
available for sale.............. 3,596 50.96 4,145 54.51 993 19.35
------ ------ ------ ------ ------ ------
FHLB Stock...................... 461 6.54 461 6.06 444 8.65
------ ------ ------ ------ ------ ------
Total securities available for sale..... $7,054 100.00% $7,604 100.00% $5,133 100.00%
====== ====== ====== ====== ====== ======
Average remaining contractual life
of securities: 10.88 years 12.03 years 1.95 years
=========== =========== ==========
Other interest-earning assets:
Term deposit with FHLB................ $ -- -- $ -- -- $1,000 37.04
Federal funds sold.................... -- -- 100 100.00 1,700 62.96
------ ------ ------ ------ ------ ------
Total............................... $ -- --% $ 100 100.00% $2,700 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT I-5
Gloversville Federal Savings and Loan Association
Yields and Costs
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------------------------------
1997 1996 1995
-------------------------- --------------------------- ----------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Outstanding Earned/ Outstanding Earned/
Balance Paid Yield/Rate Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---- ---------- ------- ---- ---------- ------- ---- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable, net of deferred loan fees.. $51,303 $4,409 8.59% $49,222 $4,132 8.39% $48,708 $3,928 8.06%
Securities at amortized cost ................ 7,337 459 6.26 7,764 467 6.01 12,616 701 5.56
Interest-earning deposits.................... 1,113 37 3.32 2,298 134 5.83 3,130 187 5.97
------- ------ ------- ------ ------- ------
Total earning assets....................... 59,753 4,905 8.21 59,284 4,733 7.98 64,454 4,816 7.47
------ ------ ------
Non-interest earning assets.................. 1,954 1,866 2,158
------- ------- --------
Total assets............................... $61,707 $61,150 $66,612
======= ======= =======
Interest-earning liabilities:
Savings deposits............................. $12,503 401 3.21 $13,724 433 3.16 $13,655 413 3.02
Demand and NOW............................... 5,316 65 1.22 4,805 69 1.44 4,520 85 1.88
MMDA......................................... 10,676 437 4.09 7,287 247 3.39 7,353 232 3.16
Time deposits................................ 28,704 1,522 5.30 30,358 1,667 5.49 35,848 1,797 5.01
Borrowings................................... 391 22 5.63 6 -- 5.56 -- -- --
------- ------ ------- ------ ------- ------
Total interest-bearing liabilities......... 57,590 2,447 4.25% 56,180 2,416 4.30% 61,376 2,527 4.12%
------ ------ ------
Non-interest-bearing liabilities............. 541 306 499
------- ------- -------
Total liabilities.......................... 58,131 56,486 61,875
Total equity............................... 3,576 4,664 4,737
------- ------- -------
Total liabilities and equity............... $61,707 $61,150 $66,612
======= ======= =======
Net interest/spread............................ $2,458 3.96% $2,317 3.68% $2,289 3.35%
====== ==== ====== ==== ====== ====
Margin......................................... 4.11% 3.91% 3.55%
==== ==== ====
Assets to liabilities.......................... 103.76% 105.53% 105.01%
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT I-6
Gloversville Federal Savings and Loan Association
NPV Analysis
NPV
Estimated to
Assumed Change NPV PV of Change % Change
in Interest Rates Amount Total Assets in NPV in NPV
--------------------------------------------------------------------------
(Basis Points)
(In Thousands)
+400 $2,762 4.62% $(3,176) (53.49)%
+300 3,676 6.04% (2,262) (38.09)%
+200 4,578 7.39% (1,360) (22.90)%
+100 5,378 8.55% (560) (9.43)%
-- 5,938 9.33% -- --
-100 6,179 9.65% 241 4.06%
-200 6,441 9.99% 503 8.47%
-300 6,802 10.46% 864 14.55%
-400 7,388 11.23% 1,450 24.42%
<PAGE>
EXHIBIT I-7
Gloversville Federal Savings and Loan Association
Loan Portfolio Composition
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- ---------------- ---------------- ---------------- ----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family................ $36,891 71.92% $40,262 78.80% $42,578 86.41% $42,973 91.89% $40,633 96.64%
Multi-family and commercial........ 7,950 15.50 4,635 9.07 1,712 3.47 878 1.88 -- --
One- to four-family construction... 539 1.05 938 1.84 742 1.51 701 1.50 139 0.33
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total real estate loans......... 45,380 88.47 45,835 89.71 45,032 91.39 44,552 95.27 40,772 96.97
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Other loans:
Commercial business................ 1,422 2.77 1,230 2.41 1,052 2.14 -- -- -- --
Home equity........................ 3,379 6.59 2,869 5.62 2,265 4.60 1,352 2.89 -- --
Other consumer..................... 1,111 2.17 1,154 2.26 920 1.87 861 1.84 1,276 3.03
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total loans..................... 5,912 11.53 5,253 10.29 4,237 8.61 2,213 4.73 1,276 3.03
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Gross loans 51,292 100.00% 51,088 100.00% 49,269 100.00% 46,765 100.00% 42,048 100.00%
====== ====== ====== ====== ======
Less:
Net deferred loan fees............. (153) (201) (251) (264) (277)
Allowance for loan losses.......... (1,613) (1,251) (779) (856) (875)
------- ------- ------- ------- -------
Total loans receivable, net...... $49,526 $49,636 $48,239 $45,645 $40,896
======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-8
Gloversville Federal Savings and Loan Association
Fixed and Adjustable Rate Loans
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- ---------------- ---------------- ---------------- ----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans:
Real estate:
One- to four-family................ $31,732 61.86% $34,929 68.37% $37,356 75.82% $39,632 84.75% $40,633 96.64%
Multi-family and commercial........ 1,206 2.35 924 1.81 1,527 3.10 878 1.88 -- --
One- to four-family construction... 392 0.76 423 0.83 293 0.59 485 1.04 139 0.33
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total real estate loans.......... 33,330 64.97 36,276 71.01 39,176 79.51 40,995 87.67 40,772 96.97
Commercial business.................. 283 0.55 23 0.05 -- -- -- -- -- --
Home equity.......................... 1,244 2.43 645 1.26 14 0.03 -- -- -- --
Other consumer....................... 1,056 2.06 1,058 2.07 916 1.86 861 1.84 1,276 3.03
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total fixed-rate loans........... 35,913 70.01 38,002 74.39 40,106 81.40 41,856 89.51 42,048 100.00%
Adjustable-Rate Loans
Real estate:
One-to four-family................. 5,159 10.06 5,333 10.44 5,222 10.60 3,341 7.14 -- --
Multi-family and commercial........ 6,744 13.15 3,711 7.26 1,052 2.14 -- -- -- --
One- to four-family construction... 147 0.29 515 1.01 449 0.91 216 0.46 -- --
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total real estate loans........ 12,050 23.50 9,559 18.71 6,723 13.65 3,557 7.60 -- --
Commercial business.................. 1,139 2.22 1,207 2.36 185 0.38 -- -- -- --
Home equity.......................... 2,135 4.16 2,224 4.35 2,251 4.56 1,352 2.89 -- --
Other consumer....................... 55 0.11 96 0.19 4 0.01 -- -- -- --
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total adjustable rate loans...... 15,379 29.99 13,086 25.61 9,163 18.60 4,909 10.49 -- --
Gross loans...................... 51,292 100.00% 51,088 100.00% 49,269 100.00% 46,765 100.00% 42,048 100.00%
====== ====== ====== ====== ======
Less:
Net deferred loan fees............. (153) (201) (251) (264) (277)
Allowance for loan losses.......... (1,613) (1,251) (779) (856) (875)
------- ------- ------- ------- -------
Total loans receivable, net..... $49,526 $49,636 $48,239 $45,645 $40,896
======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-9
Gloversville Federal Savings and Loan Association
Contractual Maturity by Loan Type
<TABLE>
<CAPTION>
Real Estate
---------------------------------------------------------------
Multi-family One- to four-family Home Equity and
One- to four-family and Commercial Construction Commercial Business Other Consumer
------------------- ------------------ ------------------- ------------------- ------------------
Due During Weighted Weighted Weighted Weighted Weighted
Years Ending Average Average Average Average Average
September 30, Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------------- ------ ---- ------ ---- ------ ---- ------ ---- ------ ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998................. $ 710 8.59% $ -- --% $539 8.34% $ 173 9.15% $ 184 7.88%
1999................. 732 7.18 -- -- -- -- 367 9.76 127 10.26
2000................. 237 9.45 -- -- -- -- 56 10.00 192 10.46
2001 to 2002......... 1,072 8.79 11 8.50 -- -- 81 10.50 427 8.94
2003 to 2007......... 3,959 8.81 2,278 9.87 -- -- 656 9.86 420 8.77
2008 to 2022......... 22,158 8.51 5,661 9.42 -- -- 14 10.50 3,119 9.11
2023 and following... 8,023 8.09 -- -- -- -- 75 10.16 21 7.23
------- ------ ---- ------ ------
Total............. $36,891 $7,950 $539 $1,422 $4,490
======= ====== ==== ====== ======
</TABLE>
<PAGE>
EXHIBIT I-10
Gloversville Federal Savings and Loan Association
Loan Originations
Year Ended September 30,
------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
Originations by type:
Fixed rate:
Real estate: One- to four-family............... $1,577 $2,140 $1,900
Multi-family and commercial....... 978 955 923
One- to four-family construction.. 683 428 447
Non-real estate: Commercial business............... 436 76 218
Home equity....................... 215 865 14
Other consumer.................... 348 449 257
------ ------ ------
Total fixed rate.................. 4,237 4,913 3,759
------ ------ ------
Adjustable rate:
Real estate: One- to four-family............... 24 243 2,409
Multi-family and commercial....... 3,115 1,795 112
One- to four-family construction.. 40 125 527
Non-real estate: Commercial business............... 456 1,078 1,493
Home equity....................... 773 530 1,906
Other consumer.................... 206 97 4
------ ------ ------
Total adjustable rate............. 4,614 3,868 6,451
------ ------ ------
Total loans originated............ 8,851 8,781 10,210
Principal repayments................................. (7,670) (6,173) (7,315)
Decrease in other terms, net......................... (977) (552) (391)
------ ------ ------
Net increase...................... $ 204 $2,056 $2,504
====== ====== ======
<PAGE>
EXHIBIT I-11
Gloversville Federal Savings and Loan Association
Non-Performing Assets
<TABLE>
<CAPTION>
September 30,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Non-accruing loans:
<S> <C> <C> <C> <C> <C>
One- to four-family.................. $3,730(1) $2,212 $2,576 $3,438 $2,034
Home equity.......................... 63 -- -- -- --
Other consumer....................... -- -- 5 80 69
------ ------ ------ ------ ------
Total non-performing loans(2)... 3,793 2,212 2,581 3,518 2,103
Foreclosed assets:
One- to four-family................. 313 70 182 334 507
------ ------ ------ ------ ------
Total non-performing assets............ $4,106 $2,282 $2,763 $3,852 $2,610
====== ====== ====== ====== ======
Total non-performing assets as a
percentage of total assets........... 6.73% 3.74% 4.38% 5.53% 4.22%
==== ==== ==== ==== ====
</TABLE>
(1) Includes $2.7 million of restructured or rewritten loans as to which real
estate taxes were previously delinquent but which were not otherwise
delinquent.
(2) There are no loans past due greater than 90 days and accruing interest or
restructured loans accruing interest.
<PAGE>
EXHIBIT I-12
Gloversville Federal Savings and Loan Association
Classified Assets
Classified Assets
September 30, 1997
(Dollars in Thousands)
Special Mention ......................... $1,148
Substandard ............................. 2,645
Doubtful ................................ --
Loss .................................... --
------
Total ................................. $3,793
======
General loss allowance .................. $1,613
======
<PAGE>
EXHIBIT I-13
Gloversville Federal Savings and Loan Association
Loan Loss Allowances
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period....................... $1,251 $ 779 $ 856 $ 875 $ 258
Charge-offs:
One- to four-family................................ (417) (218) (160) (115) (199)
Commercial business................................ (7) (4) -- -- --
Home equity........................................ (10) -- -- -- --
Other consumer..................................... (32) (32) (50) (142) (70)
------ ------ ----- ----- -----
Total charge-offs................................ (466) (254) (210) (257) (269)
------ ------ ----- ----- -----
Recoveries:
One- to four-family................................ 21 3 1 13 34
Other consumer..................................... 15 9 3 14 9
------ ------ ----- ----- -----
Total recoveries................................ 36 12 4 27 43
------ ------ ----- ----- -----
Net charge-offs...................................... (430) (242) (206) (230) (226)
Provisions charged to operations..................... 792 714 129 211 843
------ ------ ----- ----- -----
Balance at end of period............................. $1,613 $1,251 $ 779 $ 856 $ 875
====== ====== ===== ===== =====
Ratio of net charge-offs during the period to
average gross loans outstanding during the period.. 0.84% 0.49% 0.42% 0.53% 0.52%
===== ===== ===== ===== =====
Ratio of net charge-offs during the period to
average non-performing assets...................... 13.46% 9.64% 6.23% 7.11% 7.16%
===== ===== ===== ===== =====
Ratio of allowance to gross loans outstanding at
end of period...................................... 3.14% 2.45% 1.58% 1.83% 2.08%
===== ===== ===== ===== =====
Allowance as a percentage of non-performing loans
(end of period).................................... 42.53% 56.53% 30.20% 24.34% 41.63%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT I-14
Gloversville Federal Savings and Loan Association
Deposit Composition
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
Transaction and savings accounts
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passbook and statement savings ........... $12,004 21.40% $13,140 23.58% $13,833 23.90%
Demand and NOW accounts .................. 5,148 9.17 5,174 9.29 4,374 7.56
Money market accounts .................... 10,950 19.51 10,392 18.65 5,709 9.87
------- ------ ------- ------ ------- ------
Total transaction and savings accounts ... 28,102 50.08 28,706 51.52 23,916 41.33
------- ------ ------- ------ ------- ------
Time Deposits
- -------------
Under 4.00% .............................. 3 0.01 -- -- 48 0.08
4.00 - 4.99% ............................. 3,994 7.12 11,357 20.38 4,685 8.10
5.00 - 5.99% ............................. 21,942 39.10 11,101 19.92 18,923 32.70
6.00 - 6.99% ............................. 2,046 3.64 4,525 8.12 10,219 17.66
7.00 - 7.99% ............................. -- -- -- -- 50 0.09
8.00 - and over .......................... 30 0.05 27 0.05 25 0.04
------- ------ ------- ------ ------- ------
Total time deposits ...................... 28,015 49.92 27,010 48.48 33,950 58.67
------- ------ ------- ------ ------- ------
Total deposits ........................... $56,117 100.00% $55,716 100.00% $57,866 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
<PAGE>
EXHIBIT I-15
Gloversville Federal Savings and Loan Association
Borrowings Composition
Year Ended September 30,
---------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
Maximum Balance:
FHLB borrowings........................ $ 850 $300 $ --
Securities sold under agreements
to purchase.......................... 1,300 -- --
Average Balance:
FHLB borrowings........................ $ 273 $ 6 $ --
Securities sold under agreements
to repurchase....................... 118 -- --
September 30,
---------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
FHLB borrowings.......................... $ -- $300 $ --
Securities sold under agreements
to repurchase............................ 1,300 -- --
------ ---- ----
Total borrowings...................... $1,300 $300 $ --
====== ==== ====
Weighted average interest rate of
FHLB borrowings........................ -- 5.88% --
Weighted average interest rate of
securities sold under agreements
to repurchase......................... 5.80% -- --
<PAGE>
EXHIBIT II-1
Gloversville Federal Savings and Loan Association
List of Office Locations
Year Owned or Net Book Value at
Location Acquired Leased September 30, 1997
- --------------------------------------------------------------------------------
(In Thousands)
Main Office:
52 North Main Street 1962 own 593,000
Gloversville, New York 12078
Full Service Branch:
295 Broadway 1983 own 246,000
Saratoga Springs, New York 12866
<PAGE>
EXHIBIT II-2
Gloversville Federal Savings and Loan Association
Historical Interest Rates
<PAGE>
Exhibit II-2
Historical Interest Rates(1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ----- ------ -------- -------
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%
December 12, 1997 8.50% 5.17% 5.39% 5.92%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Gloversville Federal Savings and Loan Association
Demographic/Economic Reports
<PAGE>
-------------------------
COUNTY DEMOGRAPHIC REPORT
-------------------------
State/County 36035
County Name FULTON NY
Population 1997 Age Distribution
---------- ---------------------
1980 55,153 0-4 6.7
1990 54,191 5-9 6.7
1997 53,833 10-14 7.1
2002 53,588 15-19 7.4
20-24 6.4
Population Growth Rate -0.1 25-44 28.1
45-64 21.5
Households 65-84 14.2
---------- 85+ 1.9
1990 20,995 18+ 74.9
1997 20,856
2002 20,777 Median Age
----------
Household Growth Rate -0.1 1990 35.2
Average Household Size 2.53 1997 36.6
Families Male/Female Ratio 93.4
--------
1990 14,602 Per Capita Income $12,156
1997 14,448
1997 Household Income*
Family Growth Rate -0.1 ----------------------
Base 20,856
Race 1990 1997 % less than $15K 28.3
---- ---- ---- % $15K-25K 20.9
% White 98 97.6 % $25K-50K 36.3
% Black 1.2 1.4 % $50K-100K 12.9
% Asian % $100K-150K 1.1
/Pacific Isl. 0.4 0.6 % greater than $150K 0.5
% Hispanic* 0.8 1
Median Household Income
-----------------------
1997 $25,330
2002 $26,477
<PAGE>
FULTON NY (County Demographic Report Continued)
1997 Average Disposable Income
----------------------------------
Total $22,672
Householder less than 35 $19,573
Householder 35-44 $25,954
Householder 45-54 $31,749
Householder 55-64 $27,028
Householder 65+ $14,316
Spending Potential Index*
------------------------
Auto Loan 96
Home Loan 81
Investments 87
Retirement Plans 84
Home Repair 95
Lawn & Garden 91
Remodeling 102
Appliances 97
Electronics 91
Furniture 89
Restaurants 87
Sporting Goods 94
Theater/Concerts 89
Toys & Hobbies 97
Travel 90
Video Rental 96
Apparel 86
Auto Aftermarket 90
Health Insurance 100
Pets & Supplies 97
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 12/23/97
<PAGE>
-------------------------
COUNTY DEMOGRAPHIC REPORT
-------------------------
State/County 36091
County Name SARATOGA NY
Population 1997 Age Distribution
---------- ---------------------
1980 153,759 0-4 7.1
1990 181,276 5-9 7.4
1997 196,186 10-14 7.2
2002 206,468 15-19 6.9
20-24 6.1
Population Growth Rate 1.1 25-44 33.1
45-64 21.5
Households 65-84 9.7
---------- 85+ 1.1
1990 66,425 18+ 74.3
1997 72,027
2002 75,893 Median Age
----------
Household Growth Rate 1.1 1990 32.8
Average Household Size 2.67 1997 34.7
Families Male/Female Ratio 97.5
--------
1990 48,363 Per Capita Income $16,087
1997 52,655
1997 Household Income*
Family Growth Rate 1.2 ----------------------
Base 72,025
Race 1990 1997 % less than $15K 15.3
---- ---- ---- % $15K-25K 14.8
% White 97.6 96.9 % $25K-50K 37.6
% Black 1.3 1.5 % $50K-100K 27.9
% Asian % $100K-150K 3.3
/Pacific Isl. 0.8 1.2 % greater than $150K 1.1
% Hispanic* 1.1 1.5
Median Household Income
-----------------------
1997 $37,062
2002 $38,734
<PAGE>
SARATOGA NY (County Demographic Report Continued)
1997 Average Disposable Income
----------------------------------
Total $31,059
Householder less than 35 $28,613
Householder 35-44 $34,497
Householder 45-54 $41,024
Householder 55-64 $32,519
Householder 65+ $17,245
Spending Potential Index*
------------------------
Auto Loan 102
Home Loan 100
Investments 95
Retirement Plans 100
Home Repair 95
Lawn & Garden 96
Remodeling 99
Appliances 101
Electronics 102
Furniture 103
Restaurants 104
Sporting Goods 104
Theater/Concerts 100
Toys & Hobbies 104
Travel 97
Video Rental 100
Apparel 102
Auto Aftermarket 100
Health Insurance 100
Pets & Supplies 103
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 12/23/97
<PAGE>
EXHIBIT II-4
Gloversville Federal Savings and Loan Association
Sources of Personal Income/Employment Sectors
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
New York [36.000]
- ------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------
Place of residence profile
<S> <C> <C> <C> <C> <C>
Personal income (thousands of dollars) 426,449,104 449,864,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income 617,981 671,167 700,612 528,229 500,389
Derivation of personal income
Net earnings 1/ 271,251,641 288,944,503 293,390,203 301,263,987 315,214,465
Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Income maintenance 2/ 7,423,158 8,638,524 9,532,421 10,383,993 lO,999,344
Unemployment insurance 2,654,137 4,716,712 3,424,635 2,250,673 2,085,462
Retirement and other 62,019,263 67,880,934 70,524,482 78,224,701 85,033,852
Dividends, interest, and rent 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Population (number of persons) 3/ 18,036,973 18,099,081 18,170,321 18,196,829 18,190,562
Per capita incomes (dollars) 4/
Per capita personal income 23,643 24,856 25,162 26,185 27,572
Per capita net earnings 15,039 15,965 16,147 16,556 17,328
Per capita transfer payments 3,997 4,488 4,594 4,993 5,394
Per capita income maintenance 412 477 525 571 605
Per capita unemployment insurance 147 261 188 124 115
Per capita retirement & other 3,438 3,751 3,881 4,299 4,675
Per capita dividends, interest, & rent 4,607 4,403 4,421 4,636 4,850
Place of work profile
Total earnings (place of work, $000) 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Wages and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,813,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 38,438,534
Farm proprietors, income 286,741 348,667 346,393 179,067 109,167
Total full- and part- time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
Wage and salary jobs 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Number of proprietors 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Number of nonfarm proprietors /5 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
Number of farm proprietors 39,291 39,417 30,626 36,670 36,674
Average earnings per job (dollars) 31,753 34,052 34,508 35,090 36,613
Wage & salary earnings per job 29,730 32,024 32,527 33,038 34,504
Average earnings per nonfarm proprietor 25,178 26,327 25,179 25,826 21,057
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Fulton, New York [36.035]
- --------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------------
Place of residence profile
<S> <C> <C> <C> <C> <C>
Personal income (thousands of dollars) 866,970 910,630 936,935 986,016 1,014,810
Nonfarm personal income 865,663 908,686 934,886 984,544 1,013,295
Farm income 1,307 1,944 2,049 1,472 1,515
Derivation of personal income
Net earnings 1/ 512,041 543,677 565,129 594,893 598,380
Transfer payments 195,503 218,809 219,826 233,317 250,750
Income maintenance 2/ 16,029 18,592 20,408 21,078 22,194
Unemployment insurance 11,212 16,000 10,119 7,556 8,082
Retirement and other 168,262 184,217 189,299 204,683 220,474
Dividends, interest, and rent 159,426 148,144 151,980 157,806 165,680
Population (number of persons) 3/ 54,472 54,345 54,445 54,344 54,099
Per capita incomes (dollars) 4/
Per capita personal income 15,916 16,756 17,209 18,144 18,758
Per capita net earnings 9,400 10,004 10,380 10,947 11,061
Per capita transfer payments 3,589 4,026 4,038 4,293 4,635
Per capita income maintenance 294 342 375 388 410
Per capita unemployment insurance 206 294 186 139 149
Per capita retirement & other 3,089 3,390 3,477 3,766 4,075
Per capita dividends, interest, & rent 2,927 2,726 2,791 2,904 3,063
Place of work profile
Total earnings (place of work, $000) 422,498 455,443 478,086 515,803 514,094
Wages and salary disbursements 336,689 359,404 379,738 401,200 396,085
Other labor income 37,135 40,230 44,100 46,735 47,090
Proprietors' income 48,674 55,809 54,248 67,868 70,919
Nonfarm proprietors' income 48,165 54,635 53,044 67,231 70,338
Farm proprietors, income 509 1,174 1,204 637 581
Total full- and part- time employment 21,223 21,980 22,386 22,765 22,817
Wage and salary jobs 17,334 17,502 17,953 18,470 18,445
Number of proprietors 3,889 4,478 4,433 4,295 4,372
Number of nonfarm proprietors /5 3,668 4,254 4,213 4,087 4,164
Number of farm proprietors 221 224 220 208 208
Average earnings per job (dollars) 19,908 20,721 21,356 22,658 22,531
Wage & salary earnings per job 19,424 20,535 21,152 21,722 21,474
Average earnings per nonfarm proprietor 13,131 12,843 12,591 16,450 16,892
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Saratoga, New York [36.091]
- --------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------------
Place of residence profile
<S> <C> <C> <C> <C> <C>
Personal income (thousands of dollars) 3,684,58l 3,897,839 4,063,464 4,269,548 4,419,922
Nonfarm personal income 3,680,678 3,893,361 4,O59,111 4,266,489 4,417,150
Farm income 3,903 4,478 4,353 3,059 2,372
Derivation of personal income
Net earnings 1/ 2,651,566 2,816,179 2,920,899 3,043,857 3,114,240
Transfer payments 484,013 560,739 578,552 620,058 670,333
Income maintenance 2/ 20,208 25,482 27,717 29,338 30,637
Unemployment insurance 21,362 35,355 24,192 18,035 17,717
Retirement and other 442,443 499,902 526,643 572,685 621,979
Dividends, interest, and rent 549,002 520,921 564,013 605,633 635,349
Population (number of persons) 3/ 184,831 187,884 190,083 192,842 194,201
Per capita incomes (dollars) 4/
Per capita personal income 19,935 20,746 21,377 22,140 22,760
Per capita net earnings 14,346 14,989 15,366 15,784 16,036
Per capita transfer payments 2,619 2,984 3,044 3,215 3,452
Per capita income maintenance 109 136 146 152 158
Per capita unemployment insurance 116 188 127 94 91
Per capita retirement & other 2,394 2,661 2,771 2,970 3,203
Per capita dividends, interest, & rent 2,970 2,773 2,967 3,141 3,272
Place of work profile
Total earnings (place of work, $000) 1,564,144 1,689,603 1,744,603 1,815,162 1,875,036
Wages and salary disbursements 1,251,433 1,335,888 1,361,285 1,431,523 1,478,237
Other labor income 132,679 146,815 159,087 164,686 169,665
Proprietors' income 180,032 206,900 198,231 218,953 227,134
Nonfarm proprietors' income 179,017 205,118 196,838 218,814 228,032
Farm proprietors, income 1,015 1,782 1,393 139 -898
Total full- and part- time employment 72,519 74,623 75,538 77,583 78,180
Wage and salary jobs 56,294 56,676 57,900 59,295 59,634
Number of proprietors 16,225 17,947 17,638 18,288 l8,546
Number of nonfarm proprietors /5 15,607 17,408 17,110 17,787 18,045
Number of farm proprietors 538 539 528 501 501
Average earnings per job (dollars) 21,569 22,642 21,096 23,396 23,984
Wage & salary earnings per job 22,230 23,571 21,960 24,142 24,788
Average earnings per nonfarm proprietor 11,412 11,783 11,504 12,302 12,637
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA30, Regional Economic Profiles
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Consists largely of supplemental security income payments, payments to
families with dependent children (AFDC), general assistance payments, food
stamp payments, and other assistance payments, including emergency
assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as a
result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
9/ Shawano, WI and Menominee, WT are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY l/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
New York [36.000]
- --------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
By type
Wage and salary employment 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Proprietors' employment 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Farm proprietors' employment 39,291 39,417 38,626 36,670 36,674
Nonfarm proprietors' employment 2/ 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
By industry
Farm employment 65,040 64,787 63,878 62,579 60,966
Nonfarm employment 9,554,342 9,522,842 9,536,563 9,630,370 9,679,827
Private employment 8,054,500 8,047,730 8,063,842 8,172,340 8,260,522
Ag. serv., forestry, fishing, and other 3/ 56,253 57,490 62,005 64,437 67,572
Mining 10,964 10,698 10,790 10,897 10,748
Construction 381,720 364,084 358,140 368,762 373,361
Manufacturing 1,091,374 1,049,796 1,017,410 995,564 982,532
Transportation and public utilities 475,571 460,298 466,961 472,117 476,424
Wholesale trade 469,070 466,328 455,794 455,376 463,204
Retail trade 1,337,963 1,342,957 1,343,627 1,373,590 1,403,944
Finance, insurance, and real estate 1,083,164 1,058,557 1,052,103 1 068,536 1,049,318
Services 3,148,421 3,237,522 3,297,012 3,363,061 3,433,419
Government and government enterprises 1,499,842 1,475,112 1,472,721 1,458,030 1,419,305
Federal, civilian 156,791 154,683 149,185 146,900 145,670
Military 87,585 84,377 81,039 73,994 65,142
State and local 1,255,460 1,236,052 1,242,497 1,237,136 1,208,493
State 265,674 264,629 266,643 267,737 259,036
Local 989,786 971,423 975,854 969,399 949,457
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY l/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Fulton, New York [36.035]
- -----------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 21,223 21,980 22,386 22,765 22,817
By type
Wage and salary employment 17,334 l7,502 17,953 18,470 18,445
Proprietors' employment 3,889 4,478 4,433 4,295 4,372
Farm proprietors' employment 221 224 220 208 208
Nonfarm proprietors' employment 2/ 3,668 4,254 4,213 4,087 4,164
By industry
Farm employment 292 294 290 279 275
Nonfarm employment 20,931 21,686 22,096 22,486 22,542
Private employment 17,183 17,897 18,220 l8,396 18,420
Ag. serv., forestry, fishing, and other 3/ 108 (D) (D) (D) (D)
Mining 41 (D) (D) (D) (D)
Construction 962 1,080 1,084 1,085 1,114
Manufacturing 4,563 4,594 4,670 4,605 4,385
Transportation and public utilities 898 919 923 882 913
Wholesale trade 818 821 750 780 804
Retail trade 3,558 3,801 4,114 4,046 4,131
Finance, insurance, and real estate 938 953 870 911 898
Services 5,297 5,561 5,637 5,893 5,965
Government and government enterprises 3,748 3,789 3,876 4,090 4,122
Federal, civilian 115 118 113 117 117
Military 168 160 151 135 123
State and local 3,465 3,511 3,612 3,838 3,882
State 719 752 744 740 753
Local 2,746 2,759 2,868 3,098 3,129
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY l/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Saratoga, New York [36.091]
- -----------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 72,519 74,623 75,538 77,583 78,180
By type
Wage and salary employment 56,294 56,676 57,900 59,295 59,634
Proprietors' employment 16,225 17,947 17,638 l8,288 18,546
Farm proprietors' employment 538 539 528 501 501
Nonfarm proprietors' employment 2/ 15,687 17,408 17,110 17,787 18,045
By industry
Farm employment 778 775 763 742 727
Nonfarm employment 71,741 73,848 74,775 76,841 77,453
Private employment 58,927 61,029 61,867 63,746 64,489
Ag. serv., forestry, fishing, and other 3/ 813 893 (D) (D) (D)
Mining 73 72 (D) (D) (D)
Construction 4,640 4,677 4,547 4,576 4,488
Manufacturing 8,096 8,236 8,133 7,678 7,575
Transportation and public utilities 1,641 1,850 1,995 2,036 1,998
Wholesale trade 2,456 2,600 2,751 2,846 3,118
Retail trade 16,137 16,032 16,651 18,102 17,974
Finance, insurance, and real estate 4,933 5,691 5,658 5,735 5,581
Services 20,138 20,978 21,129 21,711 22,638
Government and government enterprises 12,814 12,819 12,908 13,095 12,964
Federal, civilian 338 380 380 389 397
Military 1,889 1,827 1,868 1,812 1,710
State and local 10,587 10,612 10,660 10,894 10,857
State 2,962 2,964 2,851 2,915 2,932
Local 7,625 7,648 7,809 7,979 7,925
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA25
Total Full- and Part-time Employment by Major Industry
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on 1987
SIC.
2/ Excludes limited partners.
3/ "Other" consists of the number of jobs held by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
4/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
5/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
6/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
7/ Shawano, W1 and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY l/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
New York [36.000]
- -----------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 426,449,104 449,864,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income 2/ 617,981 671,167 700,612 528,229 500,389
Population (number of persons) 3/ 18,036,973 18,099,041 18,170,321 18,196,829 18,190,562
Per capita personal income (dollars) 23,643 24,856 25,162 26,185 27,572
Derivation of personal income
Earnings by place of work 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Less: Personal cont. for social insurance 4/ 20,157,669 21,277,343 21,723,056 22,809,811 23,969,575
Plus: Adjustment for residence 5/ -14,032,029 -16,253,295 -16,176,404 -16,054,849 -17,458,226
Equals: Net earnings by place of residence 271,25l,641 288,944,503 293,390,203 301,263,987 315,214,465
Plus: Dividends, interest, and rent 6/ 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Plus: Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Earnings by place of work
Components of earnings
Wage and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,013,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income 7/ 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Farm proprietors' income 286,741 348,667 346,393 179,067 109,167
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 30,438,534
Earnings by industry
Farm earnings 617,981 671,167 700,612 528,229 500,389
Nonfarm earnings 304,023,358 325,803,974 330,589,051 339,600,418 356,141,877
Private earnings 256,703,602 276,348,868 279,258,676 286,634,354 302,158,622
Ag. serv., forestry, fishing, and other 8/ 1,066,872 1,102,025 1,139,347 1,174,292 1,239,111
Mining 276,048 273,802 281,155 298,633 293,435
Construction 12,677,634 11,765,608 11,856,560 12,667,535 12,766,179
Manufacturing 44,745,691 45,876,270 45,362,772 45,494,376 46,445,386
Durable goods 25,060,221 25,047,552 24,575,906 24,293,517 24,738,903
Nondurable goods 19,677,470 20,828,718 20,786,866 21,200,859 21,706,483
Transportation and public utilities 19,450,794 20,065,314 20,486,738 21,318,786 22,111,552
Wholesale trade 19,119,719 19,824,455 19,800,313 20,338,035 21,278,758
Retail trade 21,686,107 22,345,983 22,588,182 23,592,343 24,447,935
Finance, insurance, and real estate 44,488,557 54,163,800 53,874,820 52,813,729 58,166,600
Services 93,172,180 100,931,611 103,868,789 108,936,625 115,409,666
Government and government enterprises 48,119,756 49,455,106 51,330,375 52,966,064 53,983,255
Federal, civilian 6,006,187 6,332,570 6,418,896 6,543,912 6,584,486
Military 1,138,593 1,185,018 1,155,578 1,083,014 979,334
State and local 40,974,976 41,937,518 43,755,901 45,339,138 46,419,435
State 9,418,527 9,580,671 10,046,333 10,577,353 10,448,545
Local 31,556,449 32,356,847 33,709,568 34,761,785 35,970,890
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY l/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Fulton, New York [36.035]
- -------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 866,970 910,630 936,935 986,016 1,014,810
Nonfarm personal income 865,663 900,686 934,886 984,544 1,013,295
Farm income 2/ 1,307 1,944 2,049 l,472 1,515
Population (number of persons) 3/ 54,472 54,345 54,445 54,344 54,099
Per capita personal income (dollars) 15,916 16,756 17,209 18,144 18,758
Derivation of personal income
Earnings by place of work 422,498 455,443 478,O86 515,803 514,094
Less: Personal cont. for social insurance 4/ 28,297 30,075 31,698 34,729 34,999
Plus: Adjustment for residence 5/ 117,840 118,309 118,741 113,819 119,285
Equals: Net earnings by place of residence 512,041 543,677 565,129 594,893 598,380
Plus: Dividends, interest, and rent 6/ 159,426 148,144 151,980 157,806 165,680
Plus: Transfer payments 195,503 218,809 219,826 233,317 250,750
Earnings by place of work
Components of earnings
Wage and salary disbursements 336,689 359,404 379,738 401,200 396,085
Other labor income 37,135 40,230 44,100 46,735 47,090
Proprietors' income 7/ 48,674 55,809 54,248 67,868 70,919
Farm proprietors' income 509 1,174 1,204 637 581
Nonfarm proprietors' income 48,l65 54,635 53,044 67,231 70,338
Earnings by industry
Farm earnings 1,307 1,944 2,049 1,472 1,515
Nonfarm earnings 421,191 453,499 476,037 514,331 512,579
Private earnings 326,877 352,299 366,547 394,901 393,645
Ag. serv., forestry, fishing, and other 8/ 1,249 (D) (D) (D) (D)
Mining 619 (D) (D) (D) (D)
Construction 18,143 19,372 21,533 23,517 23,986
Manufacturing 108,036 112,147 119,585 120,027 114,330
Durable goods 31,731 32,899 34,134 33,746 35,526
Nondurable goods 76,305 79,248 85,451 86,281 78,804
Transportation and public utilities 33,553 37,025 35,540 34,980 35,941
Wholesale trade 16,876 17,235 15,727 16,579 17,275
Retail trade 43,748 47,425 52,214 53,001 54,569
Finance, insurance, and real estate 11,615 11,672 11,688 12,362 12,570
Services 93,038 105,305 108,329 132,208 132,524
Government and government enterprises 94,314 101,200 109,490 119,430 118,934
Federal, civilian 4,128 4,522 4,570 4,698 4,858
Military 1,059 1,107 1,067 1,073 998
State and local 89,127 95,571 103,853 113,659 113,078
State 23,776 24,919 25,976 27,126 28,064
Local 65,351 70,652 77,877 86,533 85,014
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY l/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Saratoga, New York [36.091]
- -------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 3,684,581 3,897,839 4,063,464 4,269,548 4,419,922
Nonfarm personal income 3,680,678 3,893,361 4,059,111 4,266,489 4,417,550
Farm income 2/ 3,903 4,478 4,353 3,059 2,372
Population (number of persons) 3/ 184,831 181,884 190,083 192,842 194,201
Per capita personal income (dollars) 19,935 20,746 21,377 22,140 22,760
Derivation of personal income
Earnings by place of work 1,564,144 1,689,603 1,744,603 1,815,162 1,875,036
Less: Personal cont. for social insurance 4/ 101,203 107,897 112,469 120,111 124,652
Plus: Adjustment for residence 5/ 1,188,625 1,234,473 1,288,765 1,348,806 1,363,856
Equals: Net earnings by place of residence 2,651,566 2,816,179 400,899 3,043,857 3,114,240
Plus: Dividends, interest, and rent 6/ 549,002 520,921 564,013 605,633 635,349
Plus: Transfer payments 484,013 560,739 578,552 620,058 670,333
Earnings by place of work
Components of earnings
Wage and salary disbursements 1,251,433 1,335,888 1,387,285 1,431,523 1,478,237
Other labor income 132,679 146,815 159,087 164,686 169,665
Proprietors' income 7/ 180,032 206,900 198,231 218,953 227,134
Farm proprietors' income 1,015 1,782 1,393 139 -898
Nonfarm proprietors' income 179,017 205,118 196,838 218,814 228,032
Earnings by industry
Farm earnings 3,903 4,478 4,353 3,059 2,372
Nonfarm earnings 1,560,241 1,685,125 1,740,250 1,812,103 1,872,664
Private earnings 1,215,865 1,319,878 1,357,877 1,417,616 1,465,648
Ag. serv., forestry, fishing, and other 8/ 11,301 12,109 (D) (D) (D)
Mining 1,359 1,481 (D) (D) (D)
Construction 125,768 122,688 123,433 126,449 120,329
Manufacturing 309,395 335,061 333,233 325,006 325,462
Durable goods 92,727 101,209 103,921 84,960 78,473
Nondurable goods 216,668 233,852 229,312 240,046 246,989
Transportation and public utilities 50,442 65,168 73,658 75,158 74,761
Wholesale trade 68,874 72,961 79,989 87,748 99,633
Retail trade 217,480 224,373 232,709 254,646 250,752
Finance, insurance, and real estate 64,300 88,367 95,264 97,513 96,422
Services 366,946 397,670 406,018 437,530 476,285
Government and government enterprises 344,376 365,247 382,373 394,487 407,016
Federal, civilian 12,113 14,730 15,175 16,157 16,664
Military 35,673 36,813 38,710 39,437 40,227
State and local 296,590 313,704 328,488 338,893 350,125
State 88,019 89,410 92,852 98,987 101,772
Local 208,571 224,294 235,636 239,906 248,353
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for table CA05
Personal Income by major source and Earnings by Major Industry
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on 1987
SIC.
2/ Farm income consists of proprietors' net income; the cash wages,
pay-in-kind, and other labor income of hired farm workers; and the salaries
of officers of corporate farms.
3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997, The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as a
result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
4/ Personal contributions for social insurance are included in earnings by
type and industry but excluded from personal income.
5/ The adjustment for residence is the net inflow of the earnings of interarea
commuters. For the United States, it consists of adjustments for border
workers: Earnings of U.S. residents commuting outside U.S. borders to work
less earnings of foreign residents commuting inside U.S. borders to work
and of certain Caribbean seasonal workers.
6/ Includes the capital consumption adjustment for rental income of persons.
7/ Includes the inventory valuation and capital consumption adjustments.
8/ "Other" consists of wage and salary disbursements of U.S. residents
employed by international organizations and foreign embassies and
consulates in the United States.
13/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
14/ Cibola, NM was separated from Valencia in June 1981, but in these
estimates, Valencia includes Cibola through the end of 1981.
15/ La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA contains La Paz, AZ through 1982.
16/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
Gloversville Federal Savings and Loan Association
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
California Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 368 12-31 10/72 61.69 5,824
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 91.31 5,184
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 34.25 1,728
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 62.50 1,165
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 85 12-31 01/71 28.13 753
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 38.37 406
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 37 12-31 / 12.50 242
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 17.19 451
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 41 12-31 05/86 34.87 433
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 19.12 342
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 41.62 248
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 49.50 298
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 17.12 108
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 967 14 12-31 04/94 19.87 143
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 902 9 12-31 / 17.75 139
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 6 12-31 / 19.87 61
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 21.37 100
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 21.50 104
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 516 8 12-31 / 32.87 76
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 410 7 12-31 02/95 19.00 61
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.25 40
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 125 3 12-31 01/96 13.25 11
Florida Companies
- -----------------
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 24.37 1,475
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 60 12-31 11/83 15.50 345
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 13.50 129
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 40 09-30 09/93 38.75 196
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 67.00 333
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Florida Companies (continued)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 1,046 20 12-31 01/94 29.00 197
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 20 12-31 10/94 34.87 178
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 22.25 85
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 91 12-31 08/86 26.00 2,639
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 21.62 1,930
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 67.19 2,877
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,904 45 12-31 11/93 57.37 1,186
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 46.25 1,111
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 72 12-30 04/92 46.00 592
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 33.50 589
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 21.88 955
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 38.31 817
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 30.75 365
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 56 06-30 06/96 21.50 349
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.25 650
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.75 690
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 34.00 296
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 21.75 191
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 36.50 551
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 48.50 480
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,496 16 12-31 11/86 20.75 258
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,489 10 12-31 07/96 37.25 305
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 23.37 295
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 33.50 162
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 J 25 02-28 06/87 27.00 175
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 24.87 219
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 41.62 333
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 28.75 147
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 23.00 184
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 36.00 138
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 10.37 131
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 18.62 99
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 30.50 87
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 18.62 148
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 17.37 190
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 22.50 103
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 18.62 121
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 39.25 355
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 625 14 06-30 07/94 29.75 122
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 4 03-31 08/97 12.25 110
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 32.75 78
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 26.75 82
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 10 12-31 04/87 28.75 78
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 506 J 8 07-31 12/93 24.87 112
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 J 12 12-31 12/95 18.00 78
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 437 9 12-31 07/83 15.50 62
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 7 03-31 10/94 16.87 39
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 407 6 12-31 03/87 27.50 65
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 34.00 70
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 381 8 09-30 06/88 27.50 43
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 37.37 46
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 24.87 71
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 26.62 63
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 29.37 49
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.25 53
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 7 06-30 03/87 26.25 57
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 18.75 57
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 J 4 09-30 09/93 48.50 29
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.50 42
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 17.37 81
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 23.50 122
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 19.50 56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 32.00 56
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 17.75 35
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 7.12 31
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 22.75 46
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 14.00 18
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 29.00 95
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 248 9 12-31 06/86 18.87 27
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 30.00 54
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 23.75 40
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 210 6 06-30 02/87 28.13 41
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.75 52
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 30.00 58
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.50 56
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 20.00 41
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 24.50 30
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 5 12-31 10/96 18.75 27
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.87 43
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 19.25 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 124 J 1 03-31 10/95 20.00 30
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 17.12 38
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 110 2 03-31 06/96 27.62 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.75 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 15.87 23
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12/31 10/97 17.25 14
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 28.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 18.50 11
Mid-West Companies
- ------------------
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 221 12-31 01/88 62.00 3,073
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 52.87 1,141
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 25.25 862
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 34.06 519
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 35 03-31 01/92 38.62 501
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 50.25 695
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12/31 / 19.12 261
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 35 03-31 07/92 35.00 317
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 27.75 229
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,661 23 09-30 06/93 41.50 217
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 30.25 277
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 31.00 327
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 26.50 213
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,292 J 32 12-31 04/93 43.00 215
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 66.50 215
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 28.37 152
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 34.87 177
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 54.00 120
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 26.00 133
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 20.50 156
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 32.25 133
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 604 13 12-31 / 18.50 94
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 597 5 12-31 04/95 16.37 57
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 575 19 06-30 04/92 26.25 74
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 14.75 132
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 26.25 111
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 23.75 116
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 14.75 82
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 J 6 03-31 09/93 28.25 110
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.62 41
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 11 12-31 / 25.00 80
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 498 5 09-30 12/93 23.00 64
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 488 5 06-30 02/92 32.00 101
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 32.37 92
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 26.06 55
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 J 12 12-31 03/92 36.00 45
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.25 44
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 405 9 09-30 06/94 44.75 88
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 21.37 58
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 402 12 12-31 07/95 20.25 71
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 5 12-31 03/94 27.75 52
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 397 6 12-31 07/94 26.62 63
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 J 8 09-30 12/95 23.75 99
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 20.25 65
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 19.12 58
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 36.50 60
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.75 54
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.00 91
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 25.50 68
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.12 94
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 49.31 74
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 18.25 125
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 34.38 49
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 J 9 09-30 03/95 27.12 68
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 27.19 46
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 5 09-30 08/88 19.75 39
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 26.50 66
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 15.94 102
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 18.50 42
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 291 6 09-30 07/87 24.00 81
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 7 12-31 05/96 18.00 47
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 28.25 56
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 26.00 27
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 256 4 09-30 03/94 23.50 39
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 30.25 68
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBI Equality Bancorp of St Louis NYSE St Louis Thrift 249 P 3 03-31 12/97 14.87 37
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 23.25 44
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 235 4 06-30 08/87 10.37 29
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 235 4 12-31 02/93 26.50 33
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 7 12-31 01/88 27.37 33
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 23.25 39
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 27.25 35
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 215 3 07-31 12/96 18.75 47
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 19.12 62
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 212 3 09-30 04/95 20.12 52
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 26.00 81
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.12 35
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 27.75 45
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 18.50 36
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 21.00 33
HCBB HCB Bancshares of AR OTC Southern AR Thrift 200 J 6 06-30 05/97 13.62 36
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 4 12-31 02/95 27.75 25
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 3 12-31 06/95 20.50 36
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 181 3 06-30 04/93 41.75 30
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.00 63
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 27.50 49
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 17.75 43
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 19.25 23
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 18.50 39
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 16.00 42
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 19.75 32
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 26.00 28
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.37 36
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 157 J 2 06-30 04/95 28.50 39
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 17.75 18
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 14.25 40
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.12 22
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 18.50 31
FKKYD Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 18.62 31
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 130 J 3 03-31 12/95 16.25 21
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 11.25 19
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 4 12-31 12/93 18.50 18
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 25.87 25
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 17.75 15
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 113 2 09-30 10/93 14.87 15
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.50 23
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 28.00 19
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 17.25 35
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 1 09-30 11/96 17.25 34
CBES CBES Bancorp of MO OTC Western MO Thrift 107 2 06-30 09/96 21.88 22
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 21.37 37
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 17.25 31
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 102 4 06-30 07/97 12.50 21
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 98 2 09-30 06/95 15.50 23
CNSB CNS Bancorp of MO OTC Central MO Thrift 97 5 12-31 06/96 21.50 36
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 19.25 16
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 96 3 06-30 12/94 20.50 19
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 95 J 4 06-30 08/95 20.25 17
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 21.25 45
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 15.75 14
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.62 27
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.69 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 11.75 10
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 88 2 06-30 01/94 13.37 21
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 J 2 09-30 09/96 13.75 21
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 1 12-31 06/95 15.25 19
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 1 12-31 11/96 18.50 40
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 19.37 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 21.00 9
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 14.75 13
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 J 1 09-30 02/95 23.25 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 77 2 06-30 02/95 19.50 24
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 17.25 16
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 17.50 13
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 2 06-30 03/95 13.75 7
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 63 2 12-31 01/95 18.75 20
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.50 17
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 J 2 09-30 06/95 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 17.12 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 15.44 21
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 J 2 09-30 10/95 13.25 12
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 1 06-30 07/96 15.75 15
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 06-30 04/96 8.87 22
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 21.25 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 17.62 8
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 15.25 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 15.00 11
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 35.00 2,139
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 63.50 861
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 43.44 1,194
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 28.37 680
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 52.25 330
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 37.37 209
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 37.25 192
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 20.75 156
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,129 12 12-31 10/95 32.62 212
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 37.75 171
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,036 12 03-31 01/97 20.37 177
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 37.12 100
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 961 10 12-31 10/95 19.87 112
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 933 14 12-31 05/86 46.62 166
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 30.50 157
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 27.37 145
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 30.31 165
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 38.00 92
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 49.00 113
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 8.75 122
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 5.03 84
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 38.00 70
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 9 02-31 09/86 32.00 72
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 24.75 126
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 21.62 82
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 15.75 67
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 26.81 53
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.25 44
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 13.50 52
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 27.62 36
ANE Alliance Bancorp of New Englan (3) AMEX Northern CT Thrift 242 7 12-31 12/86 16.87 27
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 27.87 36
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 12.75 30
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 22.87 42
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 183 5 12-31 11/86 6.25 41
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 7 12-31 / 15.00 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 21.00 26
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 129 4 04-30 12/87 23.75 21
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 94 J 2 09-30 03/96 20.00 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 61 2 03-31 11/89 28.75 7
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
North-West Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 95,608 290 12-31 03/83 68.62 17,647
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 31.87 1,514
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 39.25 316
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 21.25 161
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,074 J 16 03-31 11/95 26.25 269
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 980 7 09-30 10/95 21.50 215
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 17.12 127
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 6 12-31 12/85 17.00 69
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 426 11 06-30 08/92 12.75 43
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 14.87 91
OTFC Oregon Trail Fin. Corp of OR OTC Baker City Thrift 260 P 2 06-30 10/97 16.06 75
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 178 5 03-31 07/97 17.75 35
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 16.50 43
South-East Companies
- --------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 48.00 306
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 36.00 355
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 J 31 9-30 12/83 30.50 236
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 956 27 12-31 04/95 27.87 192
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 19.00 108
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 14.75 254
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 19 12-31 08/92 64.75 107
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 669 19 12-31 12/85 28.62 152
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 16.62 83
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 33.75 153
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 21.00 98
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 37.00 164
TSH Teche Holding Company of LA AMEX Southern LA Thrift 404 9 09-30 04/95 21.00 72
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 39.50 95
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 16 03-31 08/91 18.75 56
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 9 03-31 03/86 26.75 73
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 22.75 84
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 286 9 12-31 07/80 10.62 33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 274 4 12-31 07/96 23.62 64
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 60.62 91
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 18.87 85
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 4 12-31 12/86 19.37 39
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 4.50 5
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 4 03-31 03/88 26.50 34
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 179 5 09-30 07/95 25.75 46
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 8.25 25
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 28.25 32
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 135 3 06-30 07/93 22.25 35
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 3 12-31 04/97 18.00 62
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 127 2 06-30 12/95 10.37 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 17.62 33
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 22.50 20
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 5 12-31 07/95 19.75 16
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 14.12 18
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 17.75 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 83.00 34
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 20.62 17
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 J 1 09-30 12/96 19.00 22
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.25 20
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 22.50 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.25 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 37 12-31 / 29.00 145
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 20.25 34
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
December 22, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-West Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 J 6 09-30 04/96 18.87 47
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 21.28 24
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 116 2 09-30 01/95 20.62 21
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 110 1 06-30 06/95 20.25 16
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 10.75 13
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 24.00 396
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 25.25 141
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 22.25 152
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 25.25 31
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 88 2 12-31 09/93 14.75 17
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 60 1 09-30 03/96 15.37 15
</TABLE>
Other Areas
- -----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail
Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 12/22/97
<PAGE>
EXHIBIT III-2
Gloversville Federal Savings and Loan Association
Mid-Atlantic Savings Institutions
<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 December 12, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- ---------------------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43 0.37 1.58 30.13
Special Selection Grouping(8) 19.05 27.64 0.64 14.25 24.20 135.80 22.93 135.80 23.96 0.24 1.25 29.01
State of NY 29.69 437.60 1.30 17.31 20.77 169.56 19.51 181.39 20.72 0.44 1.41 29.51
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
AFED AFSALA Bancorp, Inc. of NY 18.75 27.28 0.82 14.74 22.87 127.20 17.14 127.20 22.87 0.24 1.28 29.27
AFBC Advance Fin. Bancorp of WV 17.75 19.24 0.81 15.02 21.39 118.18 18.20 118.18 21.91 0.32 1.80 39.51
SKBO First Carnegie,MHC of PA(45.0) 18.87 19.53 0.33 10.52 NM 179.37 29.50 179.37 NM 0.30 1.59 NM
GOSB GSB Financial Corp. of NY 17.12 38.49 0.44 13.78 NM 124.24 33.62 124.24 NM 0.00 0.00 0.00
HRBF Harbor Federal Bancorp of MD 23.75 40.21 0.91 16.75 26.10 141.79 18.51 141.79 26.10 0.48 2.02 52.75
PEEK Peekskill Fin. Corp. of NY 17.50 55.88 0.66 14.81 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PWBK Pennwood SB of PA 18.50 10.55 0.91 15.33 22.29 120.68 22.13 120.68 20.33 0.32 1.73 35.16
PHSB Ppls Home SB, MHC of PA (45.0) 18.75 23.29 0.54 10.22 NM 183.46 25.07 183.46 NM 0.00 0.00 0.00
SFED SFS Bancorp of Schenectady NY 24.50 30.16 0.94 17.64 26.06 138.89 17.32 138.89 26.06 0.28 1.14 29.79
SHSB SHS Bancorp, Inc. of PA 17.25 14.15 0.41 13.83 NM 124.73 15.76 124.73 NM 0.00 0.00 0.00
TPNZ Tappan Zee Fin., Inc. of NY 20.00 29.76 0.57 14.20 NM 140.85 23.97 140.85 NM 0.28 1.40 49.12
WHGB WHG Bancshares of MD 15.87 23.20 0.34 14.16 NM 112.08 23.15 112.08 NM 0.32 2.02 NM
</TABLE>
<PAGE>
Table III-2 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
----------------------------------------------
Reported Core
Total Equity/ NPAs/ ---------- ----------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- ------------------------------------ ------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,195 13.00 0.77 0.89 8.05 0.87 7.81
Special Selection Grouping(8) 139 17.19 0.85 0.76 4.88 0.75 4.84
State of NY 2,419 11.98 0.90 0.85 8.10 0.84 7.98
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
AFED AFSALA Bancorp, Inc. of NY 159 13.47 0.45 0.79 6.46 0.79 6.46
AFBC Advance Fin. Bancorp of WV 106 15.40 0.74 0.89 6.41 0.87 6.25
SKBO First Carnegie,MHC of PA(45.0) 147 16.45 NA 0.52 5.53 0.52 5.53
GOSB GSB Financial Corp. of NY 114 27.06 NA 1.02 3.77 0.86 3.19
HRBF Harbor Federal Bancorp of MD 217 13.06 0.10 0.71 5.50 0.71 5.50
PEEK Peekskill Fin. Corp. of NY 181 26.09 1.24 1.14 4.30 1.14 4.30
PWBK Pennwood SB of PA 48 18.34 1.49 0.99 5.21 1.09 5.71
PHSB Ppls Home SB, MHC of PA (45.0) 206 13.66 0.45 0.73 6.80 0.71 6.55
SFED SFS Bancorp of Schenectady NY 174 12.47 0.75 0.68 5.36 0.68 5.36
SHSB SHS Bancorp, Inc. of PA 90 12.64 1.43 0.37 2.96 0.37 2.96
TPNZ Tappan Zee Fin., Inc. of NY 124 17.02 1.68 0.72 4.05 0.70 3.98
WHGB WHG Bancshares of MD 100 20.65 0.15 0.51 2.23 0.51 2.23
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Equity/Assets greater than 12%; Mid-Atlantic Companies; Assets
less than $250 Million;
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Gloversville Federal Savings and Loan Association
Stock Prices:
As of December 12, 1997
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(297) 23.83 5,850 187.9 25.16 15.47 23.80 0.27 255.94 48.53
NYSE Traded Companies(11) 44.36 30,833 1,635.1 46.19 26.88 44.50 0.02 355.51 51.63
AMEX Traded Companies(16) 18.15 3,147 56.1 19.97 12.91 18.21 -0.24 294.44 33.49
NASDAQ Listed OTC Companies(270) 23.27 4,917 132.3 24.55 15.13 23.22 0.31 242.22 49.28
California Companies(21) 31.18 18,713 874.0 33.00 18.91 31.53 -0.97 169.04 53.64
Florida Companies(5) 22.87 20,239 445.9 24.67 13.65 22.91 1.10 210.61 53.95
Mid-Atlantic Companies(59) 25.72 6,729 191.2 26.73 15.75 25.46 1.15 237.22 60.25
Mid-West Companies(144) 22.13 3,601 104.2 23.23 14.67 22.02 0.37 288.85 44.70
New England Companies(9) 29.28 5,048 190.4 30.43 17.29 29.31 0.55 451.80 67.18
North-West Companies(8) 23.45 11,774 337.1 25.33 17.45 23.91 -1.60 181.57 35.25
South-East Companies(38) 23.30 3,451 80.3 25.55 16.12 23.58 -0.91 231.78 39.40
South-West Companies(7) 20.15 1,905 42.9 22.04 13.72 19.91 1.60 59.26 48.28
Western Companies (Excl CA)(6) 21.15 5,371 125.1 22.22 14.70 21.24 0.23 376.14 39.82
Thrift Strategy(240) 22.62 3,708 95.4 23.89 15.04 22.59 0.16 229.81 46.26
Mortgage Banker Strategy(35) 29.29 14,739 629.5 30.76 17.47 29.22 0.93 332.49 62.04
Real Estate Strategy(9) 27.78 7,823 255.0 28.94 16.22 27.62 0.35 246.38 57.05
Diversified Strategy(9) 34.07 30,268 1,045.3 36.95 20.59 34.47 -0.75 224.49 49.45
Retail Banking Strategy(4) 19.37 4,340 101.3 20.58 11.83 18.54 4.40 408.57 45.43
Companies Issuing Dividends(252) 24.17 5,562 187.3 25.55 15.73 24.14 0.28 269.99 47.35
Companies Without Dividends(45) 21.87 7,508 191.2 22.96 14.01 21.82 0.23 168.42 56.43
Equity/Assets less than 6%(23) 30.20 19,226 696.3 31.56 17.43 29.94 1.42 222.79 64.03
Equity/Assets 6-12%(141) 26.21 5,722 206.5 27.46 15.93 26.15 0.39 272.81 57.39
Equity/Assets greater than 12%(133) 20.51 3,725 84.8 21.92 14.72 20.54 -0.04 208.54 36.26
Converted Last 3 Mths (no MHC)(4) 16.03 3,602 57.2 16.50 14.35 16.03 -0.03 0.00 21.39
Actively Traded Companies(39) 35.13 18,235 802.8 36.63 20.99 35.33 -0.36 293.98 62.88
Market Value Below $20 Million(50) 17.54 892 14.8 18.63 12.21 17.38 1.07 289.36 42.55
Holding Company Structure(264) 23.96 5,614 185.9 25.32 15.68 23.93 0.23 243.70 47.00
Assets Over $1 Billion(60) 34.59 19,090 736.3 36.14 20.85 34.58 0.35 291.42 56.74
Assets $500 Million-$1 Billion(48) 24.41 5,454 119.3 25.85 15.07 24.36 0.29 303.38 55.60
Assets $250-$500 Million(64) 23.38 2,779 61.1 24.74 15.32 23.46 -0.45 227.78 52.59
Assets less than $250 Million(125) 18.91 1,481 27.0 20.08 13.25 18.81 0.59 160.26 39.51
Goodwill Companies(120) 27.85 10,091 335.3 29.25 17.15 27.82 0.21 284.72 55.05
Non-Goodwill Companies(177) 21.18 3,057 90.8 22.47 14.37 21.15 0.31 215.36 44.00
Acquirors of FSLIC Cases(10) 44.10 35,626 1,932.5 45.80 26.79 44.51 -0.23 373.19 55.78
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(61) 27.24 7,883 240.4 28.39 16.74 26.99 -0.33 265.65 59.51
NYSE Traded Companies(2) 46.60 72,159 2,758.1 47.88 30.12 47.00 -0.60 158.45 58.86
AMEX Traded Companies(6) 28.00 2,187 64.1 28.97 15.93 28.02 -0.41 166.34 65.84
NASDAQ Listed OTC Companies(53) 26.36 5,798 153.8 27.51 16.27 26.04 -0.31 281.23 58.87
California Companies(1) 17.75 7,847 139.3 21.25 14.00 18.00 -1.39 0.00 18.33
Mid-Atlantic Companies(16) 28.60 16,474 538.6 29.89 17.51 27.71 -1.31 192.45 59.80
Mid-West Companies(2) 11.06 1,707 17.2 11.31 8.25 11.06 -0.41 0.00 31.17
New England Companies(33) 27.87 4,521 133.3 28.91 16.20 27.78 0.64 297.07 68.32
North-West Companies(4) 20.12 7,249 155.1 21.56 13.30 20.58 -2.69 139.68 49.65
South-East Companies(5) 32.07 2,076 46.2 33.00 23.34 32.25 -0.94 0.00 34.83
Thrift Strategy(44) 27.20 4,834 165.0 28.30 16.76 26.82 -0.24 259.26 58.96
Mortgage Banker Strategy(7) 28.03 31,238 784.9 29.80 16.85 28.57 -2.55 277.11 69.19
Real Estate Strategy(5) 19.69 5,823 110.7 21.44 14.38 19.25 2.04 541.54 31.23
Diversified Strategy(5) 30.58 13,256 454.1 31.08 17.56 30.67 0.32 205.26 70.08
Companies Issuing Dividends(53) 28.74 8,311 261.6 29.93 17.71 28.53 -0.77 265.19 58.90
Companies Without Dividends(8) 16.96 4,948 94.9 17.82 10.13 16.43 2.72 272.03 63.62
Equity/Assets less than 6%(5) 20.63 29,899 750.7 20.97 10.20 19.91 3.22 210.62 102.24
Equity/Assets 6-12%(40) 29.70 6,232 233.2 30.95 17.47 29.21 -0.02 280.30 64.33
Equity/Assets greater than 12%(16) 23.54 5,990 128.4 24.64 16.80 23.90 -1.88 49.91 36.88
Actively Traded Companies(18) 30.24 11,760 343.8 31.21 18.26 30.00 1.51 306.04 61.30
Market Value Below $20 Million(3) 16.33 814 13.0 16.87 12.12 16.66 -1.60 0.00 28.84
Holding Company Structure(41) 26.29 6,428 177.3 27.36 16.42 25.80 -0.18 249.59 57.43
Assets Over $1 Billion(14) 34.05 24,469 838.4 35.22 20.72 34.32 -0.60 243.34 63.19
Assets $500 Million-$1 Billion(16) 30.59 5,008 124.2 31.74 18.07 30.35 0.92 250.39 61.96
Assets $250-$500 Million(13) 22.13 3,342 69.0 23.25 13.31 22.14 -0.02 305.22 63.11
Assets less than $250 Million(18) 22.83 1,544 29.3 23.97 15.09 21.97 -1.52 262.70 52.00
Goodwill Companies(31) 30.51 11,068 366.2 31.60 18.21 29.83 0.20 264.73 63.11
Non-Goodwill Companies(30) 23.85 4,580 109.9 25.05 15.22 24.04 -0.87 267.48 55.92
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 25.10 8,362 57.3 27.07 13.05 25.05 0.30 385.31 103.34
BIF-Insured Thrifts(3) 31.33 22,105 300.4 33.29 12.38 31.71 -0.92 344.73 160.43
NASDAQ Listed OTC Companies(23) 26.20 10,787 100.2 28.17 12.93 26.23 0.09 365.02 115.58
Florida Companies(3) 31.94 5,939 89.8 36.13 17.63 32.31 -1.28 0.00 66.74
Mid-Atlantic Companies(11) 22.68 11,091 59.8 24.14 10.12 22.50 0.67 0.00 162.50
Mid-West Companies(7) 28.47 2,111 26.0 30.40 15.09 28.47 0.36 385.31 85.56
New England Companies(1) 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
Thrift Strategy(22) 25.65 7,641 53.0 27.59 12.61 25.59 0.33 385.31 118.17
Diversified Strategy(1) 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
Companies Issuing Dividends(22) 26.66 11,289 105.0 28.69 12.89 26.68 0.18 365.02 115.58
Companies Without Dividends(1) 18.75 2,760 23.3 19.75 13.62 19.00 -1.32 0.00 0.00
Equity/Assets 6-12%(16) 27.75 14,078 131.5 30.10 13.14 27.84 -0.09 365.02 121.49
Equity/Assets greater than 12%(7) 22.47 2,887 25.2 23.52 12.42 22.35 0.52 0.00 93.90
Holding Company Structure(2) 30.00 1,917 26.5 30.00 9.38 28.75 4.35 0.00 219.83
Assets Over $1 Billion(6) 24.50 37,110 329.6 26.75 11.94 25.25 -2.81 344.73 120.57
Assets $500 Million-$1 Billion(2) 34.87 5,095 86.1 39.75 18.00 34.75 0.35 0.00 70.10
Assets $250-$500 Million(5) 28.71 3,423 39.6 30.50 15.36 29.21 -1.16 385.31 90.50
Assets less than $250 Million(10) 25.15 2,174 20.0 26.74 12.00 24.72 1.76 0.00 132.37
Goodwill Companies(9) 26.73 25,532 231.2 28.67 12.98 26.94 -0.89 365.02 128.02
Non-Goodwill Companies(14) 25.91 2,744 28.8 27.90 12.90 25.84 0.62 0.00 106.24
MHC Institutions(23) 26.20 10,787 100.2 28.17 12.93 26.23 0.09 365.02 115.58
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 61.69 94,411 5,824.2 64.25 31.50 62.94 -1.99 229.01 89.82
CSA Coast Savings Financial of CA 62.50 18,644 1,165.3 64.00 35.00 62.75 -0.40 440.66 70.67
CFB Commercial Federal Corp. of NE 52.87 21,582 1,141.0 53.69 29.75 50.37 4.96 ***.** 65.22
DME Dime Bancorp, Inc. of NY* 26.00 101,492 2,638.8 26.00 14.62 26.00 0.00 158.45 76.27
DSL Downey Financial Corp. of CA 28.13 26,754 752.6 29.00 17.98 28.75 -2.16 159.02 50.51
EBI Equality Bancorp of St Louis 14.87 2,486 37.0 15.37 12.00 15.37 -3.25 N.A. 21.39
FED FirstFed Fin. Corp. of CA 38.37 10,585 406.1 39.50 21.50 37.75 1.64 137.59 74.41
GSB Glendale Fed. Bk, FSB of CA 34.25 50,456 1,728.1 36.12 22.00 34.31 -0.17 110.77 47.31
GDW Golden West Fin. Corp. of CA 91.31 56,770 5,183.7 94.75 59.87 94.75 -3.63 248.64 44.66
GPT GreenPoint Fin. Corp. of NY* 67.19 42,826 2,877.5 69.75 45.62 68.00 -1.19 N.A. 41.45
JSB JSB Financial, Inc. of NY 48.50 9,898 480.1 49.56 36.00 48.69 -0.39 321.74 27.63
NYB New York Bancorp, Inc. of NY 38.31 21,319 816.7 38.31 16.87 36.94 3.71 440.34 97.78
WES Westcorp Inc. of Orange CA 17.19 26,256 451.3 23.50 13.25 16.87 1.90 134.52 -21.44
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.62 2,697 63.7 24.75 14.19 23.75 -0.55 N.A. 58.84
ANE Alliance Bancorp of New Englan* 16.87 1,627 27.4 18.00 8.72 17.12 -1.46 132.69 87.44
BKC American Bank of Waterbury CT* 49.00 2,313 113.3 49.50 27.37 48.62 0.78 161.33 75.00
BFD BostonFed Bancorp of MA 19.87 5,650 112.3 22.31 14.37 20.37 -2.45 N.A. 34.71
CFX CFX Corp of NH(8)* 28.37 23,977 680.2 28.75 15.12 28.75 -1.32 138.40 83.03
CNY Carver Bancorp, Inc. of NY 16.87 2,314 39.0 17.06 7.75 16.25 3.82 169.92 104.48
CBK Citizens First Fin.Corp. of IL 18.00 2,584 46.5 19.50 13.75 18.00 0.00 N.A. 25.26
ESX Essex Bancorp of VA(8) 4.50 1,058 4.8 7.94 1.00 5.00 -10.00 -73.13 105.48
FCB Falmouth Co-Op Bank of MA* 20.00 1,455 29.1 22.00 13.00 20.25 -1.23 N.A. 52.44
FAB FirstFed America Bancorp of MA 20.37 8,707 177.4 22.12 13.62 21.00 -3.00 N.A. N.A.
GAF GA Financial Corp. of PA 18.62 7,973 148.5 19.81 14.50 19.56 -4.81 N.A. 23.15
KNK Kankakee Bancorp of IL 34.38 1,426 49.0 35.00 23.37 34.38 0.00 243.80 38.91
KYF Kentucky First Bancorp of KY 14.69 1,303 19.1 14.69 10.56 14.37 2.23 N.A. 35.14
MBB MSB Bancorp of Middletown NY* 30.50 2,844 86.7 30.62 16.37 30.37 0.43 205.00 55.45
PDB Piedmont Bancorp of NC 10.37 2,751 28.5 11.62 9.25 10.75 -3.53 N.A. -1.24
SSB Scotland Bancorp of NC 10.25 1,914 19.6 19.25 10.12 10.37 -1.16 N.A. -27.41
SZB SouthFirst Bancshares of AL 20.62 848 17.5 20.87 12.50 20.00 3.10 N.A. 55.62
SRN Southern Banc Company of AL 17.75 1,230 21.8 17.75 13.12 17.69 0.34 N.A. 35.29
SSM Stone Street Bancorp of NC 22.12 1,898 42.0 27.25 19.25 22.50 -1.69 N.A. 7.90
TSH Teche Holding Company of LA 21.00 3,438 72.2 23.50 13.00 20.50 2.44 N.A. 46.14
FTF Texarkana Fst. Fin. Corp of AR 25.75 1,787 46.0 27.00 14.37 25.50 0.98 N.A. 64.75
THR Three Rivers Fin. Corp. of MI 20.25 824 16.7 20.50 13.62 20.37 -0.59 N.A. 44.64
WSB Washington SB, FSB of MD 7.12 4,348 31.0 8.25 4.81 7.00 1.71 469.60 46.20
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 26.00 1,038 27.0 27.50 18.09 27.50 -5.45 N.A. 36.84
AFED AFSALA Bancorp, Inc. of NY 18.75 1,455 27.3 19.50 11.37 19.12 -1.94 N.A. 56.25
ALBK ALBANK Fin. Corp. of Albany NY 46.00 12,872 592.1 47.75 30.50 44.69 2.93 97.85 46.64
AMFC AMB Financial Corp. of IN 16.50 964 15.9 17.75 12.75 16.00 3.13 N.A. 24.53
ASBP ASB Financial Corp. of OH 13.50 1,700 23.0 17.50 11.50 13.37 0.97 N.A. 3.85
ABBK Abington Savings Bank of MA* 38.00 1,840 69.9 38.00 19.00 36.37 4.48 474.02 94.87
AABC Access Anytime Bancorp of NM 10.75 1,217 13.1 10.75 5.15 10.12 6.23 59.26 99.44
AFBC Advance Fin. Bancorp of WV 17.75 1,084 19.2 17.87 12.75 17.25 2.90 N.A. N.A.
AADV Advantage Bancorp of WI(8) 66.50 3,236 215.2 68.50 31.75 66.50 0.00 622.83 106.20
AFCB Affiliated Comm BC, Inc of MA 32.62 6,493 211.8 33.00 17.10 31.50 3.56 N.A. 90.76
ALBC Albion Banc Corp. of Albion NY 28.00 250 7.0 30.50 16.50 28.00 0.00 115.38 67.16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABCL Allied Bancorp of IL 26.50 8,020 212.5 28.37 16.08 27.37 -3.18 297.30 58.97
ATSB AmTrust Capital Corp. of IN 13.75 526 7.2 14.50 10.00 14.00 -1.79 N.A. 37.50
AHCI Ambanc Holding Co., Inc. of NY* 18.00 4,306 77.5 19.50 11.00 19.37 -7.07 N.A. 60.00
ASBI Ameriana Bancorp of IN 20.25 3,231 65.4 22.00 15.25 20.37 -0.59 119.39 26.56
AFFFZ America First Fin. Fund of CA(8) 49.50 6,011 297.5 50.56 28.75 50.50 -1.98 164.00 63.64
ABCW Anchor Bancorp Wisconsin of WI 35.00 9,054 316.9 35.75 17.37 33.37 4.88 138.26 95.86
ANDB Andover Bancorp, Inc. of MA* 37.25 5,149 191.8 40.50 25.00 39.00 -4.49 246.51 45.39
ASFC Astoria Financial Corp. of NY 57.37 20,666 1,185.6 57.37 34.75 57.00 0.65 118.55 55.60
AVND Avondale Fin. Corp. of IL 16.37 3,495 57.2 18.87 12.75 16.00 2.31 N.A. -4.38
BKCT Bancorp Connecticut of CT* 24.75 5,086 125.9 25.00 10.75 24.25 2.06 328.20 120.00
BPLS Bank Plus Corp. of CA 12.50 19,341 241.8 13.75 9.62 13.12 -4.73 N.A. 8.70
BWFC Bank West Fin. Corp. of MI 16.00 2,630 42.1 17.50 7.00 17.25 -7.25 N.A. 125.99
BANC BankAtlantic Bancorp of FL 15.50 22,276 345.3 17.12 12.12 14.25 8.77 272.60 15.93
BKUNA BankUnited SA of FL 13.50 9,533 128.7 13.87 8.50 12.81 5.39 148.62 35.00
BVCC Bay View Capital Corp. of CA 34.87 12,421 433.1 36.12 19.94 36.12 -3.46 76.56 64.56
FSNJ Bayonne Banchsares of NJ 12.25 8,993 110.2 13.06 5.88 12.37 -0.97 N.A. 56.25
BFSB Bedford Bancshares of VA 28.25 1,142 32.3 29.00 17.50 29.00 -2.59 169.05 60.33
BFFC Big Foot Fin. Corp. of IL 18.75 2,513 47.1 19.62 12.31 18.87 -0.64 N.A. 44.23
BSBC Branford SB of CT(8)* 6.25 6,559 41.0 6.31 3.62 6.00 4.17 194.81 61.50
BYFC Broadway Fin. Corp. of CA 13.25 831 11.0 13.25 9.12 13.25 0.00 N.A. 43.24
CBES CBES Bancorp of MO 21.88 1,025 22.4 22.50 13.62 21.37 2.39 N.A. 53.54
CCFH CCF Holding Company of GA 19.75 820 16.2 21.00 14.75 20.00 -1.25 N.A. 33.90
CENF CENFED Financial Corp. of CA 41.62 5,959 248.0 42.25 25.45 39.75 4.70 165.43 56.53
CFSB CFSB Bancorp of Lansing MI 34.87 5,087 177.4 35.87 17.27 34.87 0.00 287.44 96.67
CKFB CKF Bancorp of Danville KY 18.50 903 16.7 20.50 17.50 18.50 0.00 N.A. -8.64
CNSB CNS Bancorp of MO 21.50 1,653 35.5 21.50 15.00 21.00 2.38 N.A. 42.20
CSBF CSB Financial Group Inc of IL* 13.25 942 12.5 13.50 10.00 13.00 1.92 N.A. 30.93
CBCI Calumet Bancorp of Chicago IL 32.00 3,166 101.3 34.00 21.67 32.50 -1.54 139.34 44.34
CAFI Camco Fin. Corp. of OH 25.00 3,214 80.3 25.50 14.05 24.00 4.17 N.A. 65.34
CMRN Cameron Fin. Corp. of MO 20.12 2,562 51.5 21.00 15.50 20.75 -3.04 N.A. 25.75
CAPS Capital Savings Bancorp of MO(8) 23.25 1,892 44.0 24.75 12.75 24.25 -4.12 75.47 78.85
CFNC Carolina Fincorp of NC* 17.62 1,851 32.6 18.25 13.00 17.62 0.00 N.A. 31.79
CASB Cascade SB of Everett WA(8) 12.75 3,387 43.2 16.80 10.40 12.75 0.00 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 17.37 4,657 80.9 19.12 13.75 18.25 -4.82 N.A. 24.07
CNIT Cenit Bancorp of Norfolk VA 64.75 1,654 107.1 71.00 39.25 68.00 -4.78 307.75 56.02
CEBK Central Co-Op. Bank of MA* 26.81 1,965 52.7 27.00 15.87 26.25 2.13 410.67 53.20
CENB Century Bancshares of NC* 83.00 407 33.8 84.00 62.00 83.00 0.00 N.A. 27.69
CBSB Charter Financial Inc. of IL(8) 23.75 4,150 98.6 24.25 12.50 23.12 2.72 N.A. 90.00
COFI Charter One Financial of OH 62.00 49,563 3,072.9 64.00 36.91 64.00 -3.13 254.29 55.00
CVAL Chester Valley Bancorp of PA 26.25 2,189 57.5 27.50 14.10 27.25 -3.67 131.69 86.17
CTZN CitFed Bancorp of Dayton OH 38.62 12,984 501.4 39.00 19.83 36.00 7.28 543.67 75.55
CLAS Classic Bancshares of KY 16.25 1,300 21.1 17.25 11.50 16.37 -0.73 N.A. 39.85
CMSB Cmnwealth Bancorp of PA 21.50 16,243 349.2 21.50 13.50 21.06 2.09 N.A. 43.33
CBSA Coastal Bancorp of Houston TX 29.00 4,992 144.8 33.25 22.37 29.00 0.00 N.A. 26.80
CFCP Coastal Fin. Corp. of SC 21.00 4,647 97.6 27.75 14.44 22.75 -7.69 110.00 33.33
CMSV Commty. Svgs, MHC of FL (48.5) 34.87 5,095 86.1 39.75 18.00 34.75 0.35 N.A. 70.10
CFTP Community Fed. Bancorp of MS 20.00 4,629 92.6 21.00 16.37 20.25 -1.23 N.A. 17.65
CFFC Community Fin. Corp. of VA 26.50 1,275 33.8 27.50 20.75 26.50 0.00 278.57 27.71
CFBC Community First Bnkg Co. of GA 39.50 2,414 95.4 40.00 31.87 39.50 0.00 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.75 916 14.4 17.00 10.33 16.25 -3.08 N.A. 39.01
COOP Cooperative Bk.for Svgs. of NC 18.75 2,983 55.9 18.75 10.00 18.25 2.74 275.00 85.28
CRZY Crazy Woman Creek Bncorp of WY 15.37 955 14.7 15.50 11.50 15.37 0.00 N.A. 28.08
DNFC D&N Financial Corp. of MI 27.75 8,244 228.8 27.75 15.37 26.37 5.23 217.14 65.67
DCBI Delphos Citizens Bancorp of OH 17.25 1,960 33.8 18.25 11.75 17.50 -1.43 N.A. 43.75
DIME Dime Community Bancorp of NY 23.37 12,625 295.0 25.50 14.31 25.50 -8.35 N.A. 58.44
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIBK Dime Financial Corp. of CT* 30.50 5,162 157.4 32.00 16.50 30.00 1.67 190.48 76.81
EGLB Eagle BancGroup of IL 19.25 1,198 23.1 20.00 13.25 20.00 -3.75 N.A. 29.46
EBSI Eagle Bancshares of Tucker GA 19.00 5,666 107.7 20.94 13.62 19.00 0.00 162.07 22.58
EGFC Eagle Financial Corp. of CT(8) 52.25 6,316 330.0 52.75 26.75 51.81 0.85 497.14 71.31
ETFS East Texas Fin. Serv. of TX 20.62 1,026 21.2 21.50 16.25 20.00 3.10 N.A. 25.96
EMLD Emerald Financial Corp of OH 18.50 5,072 93.8 19.62 10.62 19.25 -3.90 N.A. 64.44
EIRE Emerald Island Bancorp, MA(8)* 32.00 2,250 72.0 32.62 14.20 32.00 0.00 319.95 100.00
EFBC Empire Federal Bancorp of MT 16.50 2,592 42.8 18.25 12.50 16.31 1.16 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 28.25 1,986 56.1 29.00 14.12 27.50 2.73 N.A. 94.83
EQSB Equitable FSB of Wheaton MD 48.50 602 29.2 48.50 26.75 45.78 5.94 N.A. 71.68
FCBF FCB Fin. Corp. of Neenah WI 28.25 3,879 109.6 28.37 18.50 28.00 0.89 N.A. 52.70
FFBS FFBS Bancorp of Columbus MS 22.25 1,572 35.0 26.00 18.00 22.50 -1.11 N.A. -3.26
FFDF FFD Financial Corp. of OH 18.62 1,445 26.9 19.50 13.00 18.00 3.44 N.A. 40.53
FFLC FFLC Bancorp of Leesburg FL 22.25 3,835 85.3 23.50 12.00 23.12 -3.76 N.A. 72.48
FFFC FFVA Financial Corp. of VA 33.75 4,522 152.6 35.12 20.00 33.75 0.00 N.A. 64.63
FFWC FFW Corporation of Wabash IN 41.75 715 29.9 41.75 21.50 40.50 3.09 N.A. 90.81
FFYF FFY Financial Corp. of OH 32.25 4,122 132.9 32.25 25.00 30.12 7.07 N.A. 27.42
FMCO FMS Financial Corp. of NJ 32.75 2,388 78.2 32.75 17.37 32.75 0.00 263.89 79.45
FFHH FSF Financial Corp. of MN 19.12 3,010 57.6 21.00 14.50 19.75 -3.19 N.A. 26.46
FOBC Fed One Bancorp of Wheeling WV 26.62 2,373 63.2 27.00 15.75 25.87 2.90 166.20 69.02
FBCI Fidelity Bancorp of Chicago IL 23.00 2,795 64.3 25.75 16.87 23.25 -1.08 N.A. 35.29
FSBI Fidelity Bancorp, Inc. of PA 27.50 1,555 42.8 28.00 16.82 27.50 0.00 255.76 51.27
FFFL Fidelity FSB, MHC of FL (47.7) 29.00 6,783 93.5 32.50 17.25 29.87 -2.91 N.A. 63.38
FFED Fidelity Fed. Bancorp of IN 10.37 2,791 28.9 10.50 7.50 10.00 3.70 47.09 6.36
FFOH Fidelity Financial of OH 14.75 5,580 82.3 16.37 11.25 15.37 -4.03 N.A. 28.26
FIBC Financial Bancorp, Inc. of NY 24.50 1,710 41.9 25.75 14.25 24.75 -1.01 N.A. 63.33
FBSI First Bancshares of MO 26.00 1,093 28.4 28.00 16.50 25.37 2.48 103.92 56.44
FBBC First Bell Bancorp of PA 18.62 6,511 121.2 18.62 13.12 18.12 2.76 N.A. 40.53
FBER First Bergen Bancorp of NJ 19.50 2,865 55.9 19.50 11.37 18.87 3.34 N.A. 69.57
SKBO First Carnegie,MHC of PA(45.0) 18.87 2,300 19.5 19.87 11.62 18.75 0.64 N.A. N.A.
FSTC First Citizens Corp of GA 26.75 2,742 73.3 29.25 14.17 29.25 -8.55 224.24 58.94
FCME First Coastal Corp. of ME* 15.00 1,359 20.4 15.75 7.25 14.62 2.60 N.A. 93.55
FFBA First Colorado Bancorp of Co 24.00 16,485 395.6 26.12 16.00 25.50 -5.88 627.27 41.18
FDEF First Defiance Fin.Corp. of OH 14.75 8,957 132.1 16.25 11.75 16.25 -9.23 N.A. 19.24
FESX First Essex Bancorp of MA* 20.75 7,527 156.2 21.12 13.12 20.62 0.63 245.83 58.16
FFES First FS&LA of E. Hartford CT 37.12 2,682 99.6 37.50 22.75 37.50 -1.01 471.08 61.39
FFSX First FS&LA. MHC of IA (46.1) 32.37 2,833 42.2 35.00 20.75 31.87 1.57 385.31 66.00
BDJI First Fed. Bancorp. of MN 28.00 673 18.8 28.00 17.50 27.00 3.70 N.A. 51.35
FFBH First Fed. Bancshares of AR 23.75 4,896 116.3 24.25 15.75 22.00 7.95 N.A. 49.65
FTFC First Fed. Capital Corp. of WI 30.25 9,165 277.2 31.25 15.50 30.75 -1.63 303.33 93.04
FFKY First Fed. Fin. Corp. of KY 22.00 4,159 91.5 23.50 17.75 22.37 -1.65 39.68 8.64
FFBZ First Federal Bancorp of OH 21.00 1,575 33.1 21.00 15.00 19.62 7.03 110.00 31.25
FFCH First Fin. Holdings Inc. of SC 48.00 6,368 305.7 49.00 22.25 48.00 0.00 291.84 113.33
FFBI First Financial Bancorp of IL 21.00 415 8.7 21.00 15.50 20.25 3.70 N.A. 32.33
FFHS First Franklin Corp. of OH 27.37 1,192 32.6 28.50 16.00 26.50 3.28 108.61 65.88
FGHC First Georgia Hold. Corp of GA 8.25 3,052 25.2 9.50 5.33 8.25 0.00 115.40 45.50
FSPG First Home Bancorp of NJ 28.75 2,708 77.9 30.50 13.87 23.75 21.05 379.17 107.28
FFSL First Independence Corp. of KS 14.87 978 14.5 15.00 9.81 15.00 -0.87 N.A. 43.39
FISB First Indiana Corp. of IN 31.00 10,561 327.4 31.00 17.37 27.50 12.73 129.63 44.86
FKFS First Keystone Fin. Corp of PA 37.37 1,228 45.9 37.37 19.00 35.87 4.18 N.A. 94.13
FLKY First Lancaster Bncshrs of KY 15.75 951 15.0 16.37 14.50 15.75 0.00 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 30.50 7,725 235.6 33.75 18.25 30.75 -0.81 500.39 66.03
CASH First Midwest Fin. Corp. of IA 21.37 2,699 57.7 22.00 15.00 21.25 0.56 N.A. 39.40
FMBD First Mutual Bancorp of IL 20.25 3,507 71.0 21.50 13.75 20.25 0.00 N.A. 35.00
FMSB First Mutual SB of Bellevue WA* 17.00 4,067 69.1 20.17 10.61 18.25 -6.85 229.46 60.23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FNGB First Northern Cap. Corp of WI 14.00 8,840 123.8 14.00 8.00 14.00 0.00 92.84 72.20
FFPB First Palm Beach Bancorp of FL 38.75 5,048 195.6 40.56 23.00 38.75 0.00 N.A. 64.06
FSLA First SB SLA MHC of NJ (47.5)(8) 41.62 8,007 141.7 47.50 16.36 43.00 -3.21 316.20 147.44
SOPN First SB, SSB, Moore Co. of NC 22.75 3,687 83.9 25.00 17.87 23.25 -2.15 N.A. 21.33
FWWB First Savings Bancorp of WA* 26.25 10,247 269.0 26.50 18.00 26.00 0.96 N.A. 42.90
FSFF First SecurityFed Fin of IL 15.94 6,408 102.1 16.62 15.00 16.50 -3.39 N.A. N.A.
SHEN First Shenango Bancorp of PA 34.00 2,069 70.3 35.00 21.75 33.00 3.03 N.A. 51.11
FBNW FirstBank Corp of Clarkston WA 17.75 1,984 35.2 19.00 15.50 18.12 -2.04 N.A. N.A.
FFDB FirstFed Bancorp of AL 21.28 1,151 24.5 22.75 12.50 21.28 0.00 N.A. 70.24
FSPT FirstSpartan Fin. Corp. of SC 37.00 4,430 163.9 39.00 35.00 37.87 -2.30 N.A. N.A.
FLAG Flag Financial Corp of GA 19.37 2,037 39.5 19.87 10.25 18.50 4.70 97.65 80.19
FLGS Flagstar Bancorp, Inc of MI 19.12 13,670 261.4 21.75 13.00 19.12 0.00 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 23.00 7,983 183.6 24.00 17.37 23.25 -1.08 N.A. 26.93
FBHC Fort Bend Holding Corp. of TX 20.25 1,656 33.5 24.00 11.00 19.62 3.21 N.A. 58.82
FTSB Fort Thomas Fin. Corp. of KY 15.50 1,495 23.2 15.50 9.25 14.75 5.08 N.A. 6.02
FKKYD Frankfort First Bancorp of KY 18.62 1,640 30.5 24.50 16.00 18.50 0.65 N.A. -18.15
FTNB Fulton Bancorp of MO 21.37 1,719 36.7 26.50 14.75 20.62 3.64 N.A. 39.04
GFSB GFS Bancorp of Grinnell IA 17.06 988 16.9 17.62 10.12 16.87 1.13 N.A. 60.64
GUPB GFSB Bancorp of Gallup NM 20.25 801 16.2 22.25 15.50 20.25 0.00 N.A. 27.60
GSLA GS Financial Corp. of LA 18.00 3,438 61.9 18.75 13.37 17.75 1.41 N.A. N.A.
GOSB GSB Financial Corp. of NY 17.12 2,248 38.5 17.12 14.25 16.12 6.20 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 18.75 1,076 20.2 19.69 14.12 19.62 -4.43 N.A. 31.58
GBCI Glacier Bancorp of MT 22.25 6,816 151.7 22.97 15.33 22.06 0.86 360.66 36.25
GFCO Glenway Financial Corp. of OH 18.50 2,280 42.2 19.00 9.50 18.50 0.00 N.A. 80.49
GTPS Great American Bancorp of IL 18.50 1,697 31.4 19.50 14.50 19.00 -2.63 N.A. 24.92
GTFN Great Financial Corp. of KY(8) 50.25 13,823 694.6 50.81 29.12 50.56 -0.61 N.A. 72.56
GSBC Great Southern Bancorp of MO 24.75 8,080 200.0 25.50 16.00 23.75 4.21 747.60 38.97
GDVS Greater DV SB,MHC of PA (19.9)* 29.00 3,272 18.9 32.50 9.75 30.00 -3.33 N.A. 179.65
GSFC Green Street Fin. Corp. of NC 18.00 4,298 77.4 20.75 15.12 18.25 -1.37 N.A. 16.13
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 26.00 3,125 25.2 27.87 11.25 25.37 2.48 N.A. 115.59
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.25 12.62 13.62 0.00 N.A. N.A.
HEMT HF Bancorp of Hemet CA 17.12 6,282 107.5 17.50 10.75 17.00 0.71 N.A. 53.96
HFFC HF Financial Corp. of SD 26.25 2,803 73.6 27.00 16.50 26.50 -0.94 425.00 51.65
HFNC HFNC Financial Corp. of NC 14.75 17,192 253.6 22.06 13.94 14.75 0.00 N.A. -17.46
HMNF HMN Financial, Inc. of MN 26.25 4,212 110.6 26.50 17.87 26.50 -0.94 N.A. 44.87
HALL Hallmark Capital Corp. of WI 15.25 2,886 44.0 15.37 8.50 15.00 1.67 N.A. 71.93
HARB Harbor FSB, MHC of FL (46.6)(8) 67.00 4,973 155.2 69.75 32.00 65.50 2.29 N.A. 87.41
HRBF Harbor Federal Bancorp of MD 23.75 1,693 40.2 25.00 15.12 25.00 -5.00 137.50 50.79
HFSA Hardin Bancorp of Hardin MO 17.75 859 15.2 18.62 12.00 17.87 -0.67 N.A. 42.00
HARL Harleysville SA of PA 29.37 1,662 48.8 30.25 15.00 28.50 3.05 65.46 85.89
HFGI Harrington Fin. Group of IN 12.62 3,257 41.1 13.75 9.75 12.12 4.13 N.A. 17.40
HARS Harris SB, MHC of PA (24.3) 19.25 33,779 157.3 20.75 6.00 19.50 -1.28 N.A. 216.61
HFFB Harrodsburg 1st Fin Bcrp of KY 17.25 2,025 34.9 18.87 14.75 17.87 -3.47 N.A. -8.59
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.75 0.00 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 21.75 8,772 190.8 22.69 13.94 22.25 -2.25 N.A. 51.99
HTHR Hawthorne Fin. Corp. of CA 19.87 3,088 61.4 24.00 7.44 23.12 -14.06 -27.75 144.40
HMLK Hemlock Fed. Fin. Corp. of IL 17.37 2,076 36.1 17.50 12.50 17.12 1.46 N.A. N.A.
HBNK Highland Federal Bank of CA 32.87 2,300 75.6 33.12 17.00 32.00 2.72 N.A. 93.35
HIFS Hingham Inst. for Sav. of MA* 27.87 1,303 36.3 29.00 17.50 27.87 0.00 511.18 48.64
HBEI Home Bancorp of Elgin IL 18.25 6,856 125.1 19.31 12.81 18.50 -1.35 N.A. 35.19
HBFW Home Bancorp of Fort Wayne IN 27.12 2,525 68.5 27.75 18.50 27.12 0.00 N.A. 42.74
HBBI Home Building Bancorp of IN 21.25 312 6.6 23.75 18.00 21.25 0.00 N.A. 7.59
HCFC Home City Fin. Corp. of OH 17.25 905 15.6 18.00 12.00 17.37 -0.69 N.A. 30.19
HOMF Home Fed Bancorp of Seymour IN 26.00 5,102 132.7 28.25 15.33 26.50 -1.89 292.16 51.43
HWEN Home Financial Bancorp of IN 17.62 465 8.2 17.62 12.75 16.44 7.18 N.A. 38.20
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HPBC Home Port Bancorp, Inc. of MA* 22.87 1,842 42.1 25.00 16.12 23.62 -3.18 185.88 38.61
HMCI Homecorp, Inc. of Rockford IL(8) 27.19 1,708 46.4 27.37 11.83 27.37 -0.66 171.90 113.25
HZFS Horizon Fin'l. Services of IA 11.75 851 10.0 13.00 7.25 11.50 2.17 N.A. 55.42
HRZB Horizon Financial Corp. of WA* 17.12 7,434 127.3 18.00 11.30 17.50 -2.17 49.91 45.83
IBSF IBS Financial Corp. of NJ 17.37 10,949 190.2 18.75 12.94 16.87 2.96 N.A. 27.81
ISBF ISB Financial Corp. of LA 27.87 6,901 192.3 29.00 17.50 27.62 0.91 N.A. 54.83
ITLA Imperial Thrift & Loan of CA* 17.75 7,847 139.3 21.25 14.00 18.00 -1.39 N.A. 18.33
IFSB Independence FSB of DC 14.00 1,281 17.9 15.12 7.37 13.25 5.66 600.00 75.00
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 15.00 20.50 0.00 N.A. 26.15
INBI Industrial Bancorp of OH 18.12 5,173 93.7 18.25 12.00 18.25 -0.71 N.A. 42.12
IWBK Interwest SB of Oak Harbor WA 39.25 8,050 316.0 43.25 27.62 39.87 -1.56 292.50 21.71
IPSW Ipswich SB of Ipswich MA* 12.75 2,378 30.3 14.12 5.81 13.25 -3.77 N.A. 112.50
JXVL Jacksonville Bancorp of TX 18.87 2,490 47.0 19.75 13.25 19.12 -1.31 N.A. 29.07
JXSB Jcksnville SB,MHC of IL (45.6) 28.50 1,272 16.5 29.50 12.50 26.25 8.57 N.A. 115.09
JSBA Jefferson Svgs Bancorp of MO 43.00 5,006 215.3 44.00 22.87 41.75 2.99 N.A. 65.38
JOAC Joachim Bancorp of MO 15.00 722 10.8 15.63 14.00 15.00 0.00 N.A. 3.45
KSAV KS Bancorp of Kenly NC 22.50 885 19.9 25.50 14.81 22.50 0.00 N.A. 50.91
KSBK KSB Bancorp of Kingfield ME(8)* 21.00 1,238 26.0 21.00 7.67 16.50 27.27 N.A. 173.79
KFBI Klamath First Bancorp of OR 21.50 10,019 215.4 24.25 14.87 22.31 -3.63 N.A. 36.51
LSBI LSB Fin. Corp. of Lafayette IN 27.75 916 25.4 27.75 17.86 27.75 0.00 N.A. 49.43
LVSB Lakeview SB of Paterson NJ 24.87 4,509 112.1 26.00 11.75 25.00 -0.52 N.A. 99.92
LARK Landmark Bancshares of KS 23.25 1,689 39.3 27.25 17.00 23.25 0.00 N.A. 29.17
LARL Laurel Capital Group of PA 28.13 1,446 40.7 29.25 15.87 27.75 1.37 119.77 70.48
LSBX Lawrence Savings Bank of MA* 15.75 4,284 67.5 16.37 7.94 14.50 8.62 357.85 93.73
LFED Leeds FSB, MHC of MD (36.3) 23.50 5,182 44.3 23.50 10.00 22.75 3.30 N.A. 120.24
LXMO Lexington B&L Fin. Corp. of MO 17.12 1,138 19.5 17.25 12.75 17.25 -0.75 N.A. 26.81
LIFB Life Bancorp of Norfolk VA(8) 36.00 9,848 354.5 36.37 16.75 35.12 2.51 N.A. 100.00
LFBI Little Falls Bancorp of NJ 20.25 2,608 52.8 20.50 12.19 20.37 -0.59 N.A. 58.82
LOGN Logansport Fin. Corp. of IN 15.25 1,261 19.2 16.00 11.12 15.25 0.00 N.A. 35.56
LONF London Financial Corp. of OH 15.25 515 7.9 21.00 13.50 15.75 -3.17 N.A. 8.00
LISB Long Island Bancorp, Inc of NY 46.25 24,023 1,111.1 48.75 30.62 48.50 -4.64 N.A. 32.14
MAFB MAF Bancorp of IL 34.06 15,249 519.4 34.75 22.25 34.00 0.18 300.71 47.00
MBLF MBLA Financial Corp. of MO 27.25 1,268 34.6 27.25 19.00 27.00 0.93 N.A. 43.42
MFBC MFB Corp. of Mishawaka IN 23.50 1,651 38.8 23.75 16.50 23.25 1.08 N.A. 41.40
MLBC ML Bancorp of Villanova PA(8) 30.75 11,866 364.9 30.75 13.75 29.75 3.36 N.A. 117.78
MSBF MSB Financial Corp. of MI 19.50 1,234 24.1 19.50 9.50 19.00 2.63 N.A. 105.26
MARN Marion Capital Holdings of IN 27.50 1,776 48.8 28.13 19.25 27.00 1.85 N.A. 42.86
MRKF Market Fin. Corp. of OH 15.44 1,336 20.6 15.75 12.25 15.44 0.00 N.A. N.A.
MFSL Maryland Fed. Bancorp of MD 27.00 6,467 174.6 27.25 16.87 26.50 1.89 414.29 55.44
MASB MassBank Corp. of Reading MA* 46.62 3,561 166.0 47.75 27.75 45.50 2.46 372.82 63.06
MFLR Mayflower Co-Op. Bank of MA* 23.75 890 21.1 26.25 14.75 24.75 -4.04 375.00 39.71
MECH Mechanics SB of Hartford CT* 27.37 5,293 144.9 28.00 15.37 25.75 6.29 N.A. 73.78
MDBK Medford Bank of Medford, MA* 37.75 4,541 171.4 38.50 24.50 36.75 2.72 439.29 46.60
MERI Meritrust FSB of Thibodaux LA(8) 69.00 774 53.4 69.00 31.50 69.00 0.00 N.A. 118.22
MWBX MetroWest Bank of MA* 8.75 13,956 122.1 9.31 4.62 9.00 -2.78 112.38 62.94
MCBS Mid Continent Bancshares of KS(8) 44.75 1,962 87.8 46.37 23.37 42.25 5.92 N.A. 91.48
MIFC Mid Iowa Financial Corp. of IA 11.25 1,678 18.9 11.75 6.25 11.75 -4.26 125.00 76.61
MCBN Mid-Coast Bancorp of ME 28.75 233 6.7 29.00 18.50 28.75 0.00 403.50 51.32
MWBI Midwest Bancshares, Inc. of IA 17.75 1,018 18.1 19.50 8.83 17.75 0.00 433.03 101.02
MWFD Midwest Fed. Fin. Corp of WI(8) 27.75 1,628 45.2 27.75 16.75 27.25 1.83 455.00 50.00
MFFC Milton Fed. Fin. Corp. of OH 15.12 2,305 34.9 15.94 13.25 15.37 -1.63 N.A. 4.28
MIVI Miss. View Hold. Co. of MN 17.50 740 13.0 19.75 11.75 17.50 0.00 N.A. 45.83
MBSP Mitchell Bancorp of NC* 17.25 931 16.1 18.00 13.75 17.87 -3.47 N.A. 21.05
MBBC Monterey Bay Bancorp of CA 19.00 3,230 61.4 20.50 14.62 18.75 1.33 N.A. 28.81
MONT Montgomery Fin. Corp. of IN 12.50 1,653 20.7 14.00 11.00 12.37 1.05 N.A. -3.85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MSBK Mutual SB, FSB of Bay City MI 12.75 4,279 54.6 14.62 5.37 12.75 0.00 45.71 131.82
NHTB NH Thrift Bancshares of NH 21.25 2,075 44.1 22.75 11.62 21.50 -1.16 359.96 68.38
NSLB NS&L Bancorp of Neosho MO 18.50 707 13.1 19.50 13.62 18.50 0.00 N.A. 35.83
NMSB Newmil Bancorp. of CT* 13.50 3,835 51.8 14.50 8.75 13.37 0.97 111.93 38.46
NASB North American SB of MO 54.00 2,229 120.4 55.62 33.25 54.00 0.00 ***.** 57.66
NBSI North Bancshares of Chicago IL 25.87 962 24.9 27.12 15.75 26.25 -1.45 N.A. 56.79
FFFD North Central Bancshares of IA 19.12 3,258 62.3 19.25 13.37 18.50 3.35 N.A. 41.00
NBN Northeast Bancorp of ME* 27.62 1,294 35.7 27.94 13.25 27.94 -1.15 135.06 97.29
NEIB Northeast Indiana Bncrp of IN 20.50 1,763 36.1 21.12 13.25 20.00 2.50 N.A. 50.51
NWEQ Northwest Equity Corp. of WI 19.25 839 16.2 19.75 11.25 19.00 1.32 N.A. 58.83
NWSB Northwest SB, MHC of PA (30.7) 14.75 46,753 211.7 16.37 6.50 15.25 -3.28 N.A. 120.48
NSSY Norwalk Savings Society of CT* 38.00 2,427 92.2 40.12 22.94 39.25 -3.18 N.A. 62.60
NSSB Norwich Financial Corp. of CT* 30.31 5,432 164.6 31.62 18.00 31.25 -3.01 333.00 54.49
NTMG Nutmeg FS&LA of CT 10.75 986 10.6 10.75 5.25 9.84 9.25 N.A. 90.94
OHSL OHSL Financial Corp. of OH 26.50 1,235 32.7 28.25 20.75 27.75 -4.50 N.A. 24.01
OCFC Ocean Fin. Corp. of NJ 37.25 8,176 304.6 38.37 25.12 37.37 -0.32 N.A. 46.08
OCN Ocwen Financial Corp. of FL 24.37 60,505 1,474.5 28.28 12.62 25.62 -4.88 N.A. 82.27
OTFC Oregon Trail Fin. Corp of OR 16.06 4,695 75.4 16.75 15.63 16.00 0.37 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 30.00 1,917 26.5 30.00 9.38 28.75 4.35 N.A. 219.83
OFCP Ottawa Financial Corp. of MI 28.37 5,353 151.9 29.25 14.89 29.12 -2.58 N.A. 85.55
PFFB PFF Bancorp of Pomona CA 19.12 17,903 342.3 21.50 13.37 19.25 -0.68 N.A. 28.58
PSFI PS Financial of Chicago IL 18.50 2,167 40.1 18.50 11.75 17.87 3.53 N.A. 57.45
PVFC PVF Capital Corp. of OH 20.75 2,590 53.7 21.75 13.18 20.06 3.44 371.59 44.90
PALM Palfed, Inc. of Aiken SC(8) 28.62 5,299 151.7 28.81 13.75 28.62 0.00 86.21 104.43
PBCI Pamrapo Bancorp, Inc. of NJ 24.87 2,843 70.7 26.75 18.50 24.50 1.51 341.74 24.35
PFED Park Bancorp of Chicago IL 17.75 2,431 43.2 18.12 12.19 18.00 -1.39 N.A. 36.54
PVSA Parkvale Financial Corp of PA 28.75 5,106 146.8 29.75 19.60 29.00 -0.86 247.22 38.22
PEEK Peekskill Fin. Corp. of NY 17.50 3,193 55.9 18.25 13.37 17.75 -1.41 N.A. 22.81
PFSB PennFed Fin. Services of NJ 33.50 4,823 161.6 34.75 19.87 34.00 -1.47 N.A. 65.43
PWBC PennFirst Bancorp of PA 18.62 5,310 98.9 19.50 12.27 18.75 -0.69 133.33 50.28
PWBK Pennwood SB of PA* 18.50 570 10.5 19.12 12.62 19.12 -3.24 N.A. 34.55
PBKB People's SB of Brockton MA* 23.00 3,283 75.5 23.00 10.50 20.37 12.91 287.21 116.57
PFDC Peoples Bancorp of Auburn IN 24.00 3,392 81.4 25.00 13.00 25.00 -4.00 128.35 77.78
PBCT Peoples Bank, MHC of CT (40.1)* 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 39.25 9,046 127.4 39.25 15.75 37.50 4.67 N.A. 145.31
PFFC Peoples Fin. Corp. of OH 13.75 1,491 20.5 19.00 12.75 14.25 -3.51 N.A. 1.85
PHBK Peoples Heritage Fin Grp of ME* 43.44 27,475 1,193.5 43.94 24.87 43.94 -1.14 183.74 55.14
PSFC Peoples Sidney Fin. Corp of OH 17.25 1,785 30.8 18.50 12.56 17.25 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 26.06 2,103 54.8 27.37 20.25 26.12 -0.23 N.A. 28.69
PMFI Perpetual Midwest Fin. of IA 27.75 1,873 52.0 30.50 18.75 30.50 -9.02 N.A. 44.16
PERT Perpetual of SC, MHC (46.8)(8) 60.62 1,505 42.7 60.62 22.00 54.75 10.72 N.A. 149.98
PCBC Perry Co. Fin. Corp. of MO 23.25 828 19.3 25.00 17.00 23.25 0.00 N.A. 36.76
PHFC Pittsburgh Home Fin. of PA 17.75 1,969 34.9 20.81 12.87 19.00 -6.58 N.A. 32.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 36.50 1,632 28.1 37.12 16.25 34.87 4.67 N.A. 108.57
PTRS Potters Financial Corp of OH 18.50 965 17.9 18.50 9.38 17.62 4.99 N.A. 85.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 10.37 12,595 130.6 10.62 5.12 10.50 -1.24 33.81 97.52
PHSB Ppls Home SB, MHC of PA (45.0) 18.75 2,760 23.3 19.75 13.62 19.00 -1.32 N.A. N.A.
PRBC Prestige Bancorp of PA 19.25 915 17.6 20.00 13.00 19.25 0.00 N.A. 42.59
PFNC Progress Financial Corp. of PA 15.50 4,010 62.2 16.37 7.68 15.50 0.00 40.78 94.24
PSBK Progressive Bank, Inc. of NY* 36.00 3,828 137.8 38.00 22.75 35.00 2.86 169.26 58.24
PROV Provident Fin. Holdings of CA 21.50 4,836 104.0 21.75 13.62 20.87 3.02 N.A. 53.57
PULB Pulaski SB, MHC of MO (29.8) 30.00 2,094 18.7 32.50 14.12 30.00 0.00 N.A. 106.90
PLSK Pulaski SB, MHC of NJ (46.0) 20.00 2,070 19.0 24.50 11.50 19.00 5.26 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 26.75 3,081 82.4 29.75 15.75 26.12 2.41 116.25 69.84
QCFB QCF Bancorp of Virginia MN 28.50 1,382 39.4 28.50 17.25 28.50 0.00 N.A. 56.16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
QCBC Quaker City Bancorp of CA 21.37 4,673 99.9 24.56 13.00 21.25 0.56 184.93 40.59
QCSB Queens County Bancorp of NY* 36.50 15,108 551.4 37.75 20.22 36.19 0.86 N.A. 73.40
RARB Raritan Bancorp. of Raritan NJ* 27.50 2,372 65.2 29.00 15.33 27.25 0.92 327.02 77.42
REDF RedFed Bancorp of Redlands CA 19.87 7,179 142.6 21.12 12.37 20.00 -0.65 N.A. 47.19
RELY Reliance Bancorp, Inc. of NY 34.00 8,712 296.2 35.50 18.50 35.50 -4.23 N.A. 74.36
RELI Reliance Bancshares Inc of WI* 8.87 2,472 21.9 9.12 6.50 9.12 -2.74 N.A. 31.41
RIVR River Valley Bancorp of IN 18.12 1,190 21.6 18.87 13.25 18.62 -2.69 N.A. 31.78
RVSB Riverview Bancorp of WA 14.87 6,128 91.1 15.50 6.00 15.50 -4.06 N.A. 137.16
RSLN Roslyn Bancorp, Inc. of NY* 21.88 43,642 954.9 24.31 15.00 23.25 -5.89 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 22.50 699 15.7 25.25 15.00 22.87 -1.62 N.A. 50.00
SBFL SB Fngr Lakes MHC of NY (33.1) 30.00 1,785 17.7 30.00 12.75 29.50 1.69 N.A. 118.18
SFED SFS Bancorp of Schenectady NY 24.50 1,231 30.2 24.50 14.75 22.62 8.31 N.A. 66.10
SGVB SGV Bancorp of W. Covina CA 17.25 2,342 40.4 19.37 10.75 18.00 -4.17 N.A. 53.33
SHSB SHS Bancorp, Inc. of PA 17.25 820 14.1 17.25 14.75 16.25 6.15 N.A. N.A.
SISB SIS Bancorp Inc of MA* 37.37 5,581 208.6 38.50 22.37 38.12 -1.97 N.A. 63.40
SWCB Sandwich Co-Op. Bank of MA* 43.00 1,919 82.5 45.00 27.25 45.00 -4.44 398.84 44.54
SFSL Security First Corp. of OH 20.50 7,591 155.6 21.25 10.17 20.37 0.64 97.12 69.70
SMFC Sho-Me Fin. Corp. of MO(8) 49.31 1,499 73.9 50.75 21.62 47.75 3.27 N.A. 126.71
SKAN Skaneateles Bancorp Inc of NY* 18.87 1,433 27.0 21.33 10.67 0.00 -1.00 N.A. 74.24
SOBI Sobieski Bancorp of S. Bend IN 19.37 779 15.1 19.75 13.75 19.50 -0.67 N.A. 33.59
SOSA Somerset Savings Bank of MA(8)* 5.03 16,652 83.8 5.94 1.97 4.75 5.89 -1.76 155.33
SSFC South Street Fin. Corp. of NC* 18.87 4,496 84.8 20.00 13.75 19.00 -0.68 N.A. 34.79
SCBS Southern Commun. Bncshrs of AL 19.00 1,137 21.6 19.00 13.00 18.00 5.56 N.A. 43.40
SMBC Southern Missouri Bncrp of MO 19.75 1,612 31.8 20.12 14.00 19.12 3.29 N.A. 31.67
SWBI Southwest Bancshares of IL 25.50 2,657 67.8 26.00 18.00 25.62 -0.47 155.00 39.73
SVRN Sovereign Bancorp of PA 21.62 89,275 1,930.1 21.62 10.62 19.31 11.96 383.67 97.62
STFR St. Francis Cap. Corp. of WI 41.50 5,238 217.4 41.50 26.00 40.63 2.14 N.A. 59.62
SPBC St. Paul Bancorp, Inc. of IL 25.25 34,133 861.9 28.50 14.73 25.00 1.00 126.86 61.14
SFFC StateFed Financial Corp. of IA 13.37 1,557 20.8 14.12 8.25 13.50 -0.96 N.A. 62.06
SFIN Statewide Fin. Corp. of NJ 22.50 4,591 103.3 23.37 13.87 23.12 -2.68 N.A. 56.58
STSA Sterling Financial Corp. of WA 21.25 7,567 160.8 22.50 13.62 21.62 -1.71 133.77 50.50
SFSB SuburbFed Fin. Corp. of IL 36.00 1,263 45.5 36.00 19.00 34.69 3.78 439.73 89.47
ROSE T R Financial Corp. of NY* 33.50 17,592 589.3 35.00 15.50 34.00 -1.47 N.A. 88.73
THRD TF Financial Corp. of PA 29.75 4,088 121.6 29.75 15.87 28.00 6.25 N.A. 83.08
TPNZ Tappan Zee Fin., Inc. of NY 20.00 1,488 29.8 22.62 13.62 19.75 1.27 N.A. 46.84
ESBK The Elmira SB FSB of Elmira NY* 30.00 742 22.3 30.00 15.95 31.25 -4.00 108.77 72.61
TRIC Tri-County Bancorp of WY 14.75 1,167 17.2 14.75 9.00 13.75 7.27 N.A. 63.89
TWIN Twin City Bancorp of TN 14.12 1,272 18.0 14.50 11.50 14.00 0.86 N.A. 22.78
UFRM United FS&LA of Rocky Mount NC 10.62 3,074 32.6 12.75 7.75 11.50 -7.65 226.77 24.94
UBMT United Fin. Corp. of MT 25.25 1,223 30.9 27.00 18.75 26.00 -2.88 140.48 31.17
VABF Va. Beach Fed. Fin. Corp of VA 16.62 4,979 82.8 17.62 9.25 17.25 -3.65 254.37 76.06
WHGB WHG Bancshares of MD 15.87 1,462 23.2 16.50 12.62 15.87 0.00 N.A. 20.96
WSFS WSFS Financial Corp. of DE* 20.75 12,442 258.2 20.75 9.87 20.00 3.75 186.21 103.63
WVFC WVS Financial Corp. of PA* 32.00 1,748 55.9 34.00 23.50 32.00 0.00 N.A. 29.98
WRNB Warren Bancorp of Peabody MA* 21.62 3,798 82.1 21.62 14.75 20.50 5.46 541.54 44.13
WFSL Washington FS&LA of Seattle WA 31.87 47,509 1,514.1 33.31 22.39 33.12 -3.77 118.44 32.30
WAMU Washington Mutual Inc. of WA(8)* 68.62 257,176 17,647.4 72.37 41.25 71.37 -3.85 269.72 58.44
WYNE Wayne Bancorp of NJ 22.75 2,014 45.8 24.87 14.12 22.62 0.57 N.A. 49.18
WAYN Wayne S&L Co. MHC of OH (47.8) 30.25 2,255 32.5 33.00 15.33 33.00 -8.33 N.A. 85.24
WCFB Wbstr Cty FSB MHC of IA (45.2) 21.25 2,100 20.2 22.00 12.75 21.25 0.00 N.A. 54.55
WBST Webster Financial Corp. of CT 63.50 13,554 860.7 66.00 35.12 64.00 -0.78 572.67 72.79
WEFC Wells Fin. Corp. of Wells MN 18.50 1,959 36.2 19.00 12.62 17.50 5.71 N.A. 41.01
WCBI WestCo Bancorp of IL 26.50 2,474 65.6 29.25 20.00 26.50 0.00 165.00 23.26
WSTR WesterFed Fin. Corp. of MT 25.25 5,577 140.8 27.00 17.62 24.75 2.02 N.A. 38.36
WOFC Western Ohio Fin. Corp. of OH 26.62 2,356 62.7 29.25 20.62 26.87 -0.93 N.A. 22.39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- --------------------------------------------
52 Week (1) % Change From
Shares Market ------------ -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WWFC Westwood Fin. Corp. of NJ(8) 27.62 645 17.8 28.00 15.50 27.62 0.00 N.A. 67.39
WEHO Westwood Hmstd Fin Corp of OH 14.25 2,782 39.6 18.12 11.50 14.25 0.00 N.A. 17.57
WFI Winton Financial Corp. of OH 19.75 1,986 39.2 20.50 11.50 20.00 -1.25 N.A. 71.74
FFWD Wood Bancorp of OH 18.50 2,119 39.2 19.50 10.50 19.50 -5.13 N.A. 63.28
YFCB Yonkers Fin. Corp. of NY 18.75 3,021 56.6 22.00 12.75 19.00 -1.32 N.A. 45.69
YFED York Financial Corp. of PA 24.87 8,806 219.0 27.25 12.80 25.50 -2.47 163.17 91.31
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(297) 1.16 1.14 15.35 14.93 147.63
NYSE Traded Companies(11) 2.59 2.45 21.10 20.39 317.10
AMEX Traded Companies(16) 0.60 0.71 14.05 13.85 107.51
NASDAQ Listed OTC Companies(270) 1.13 1.11 15.18 14.75 142.60
California Companies(21) 1.73 1.61 17.45 16.86 265.86
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.31 1.31 16.00 15.39 164.56
Mid-West Companies(144) 1.05 1.04 15.12 14.82 126.75
New England Companies(9) 1.28 1.45 17.22 16.46 232.24
North-West Companies(8) 1.13 1.07 14.49 13.93 129.56
South-East Companies(38) 0.99 0.96 14.52 14.22 112.14
South-West Companies(7) 1.30 1.30 15.15 14.39 194.42
Western Companies (Excl CA)(6) 1.04 1.03 14.36 13.68 96.29
Thrift Strategy(240) 1.07 1.08 15.49 15.14 132.41
Mortgage Banker Strategy(35) 1.60 1.47 15.06 14.14 219.04
Real Estate Strategy(9) 1.66 1.60 14.81 14.52 225.37
Diversified Strategy(9) 1.93 1.73 14.11 13.56 195.62
Retail Banking Strategy(4) -0.35 -0.45 12.75 12.17 195.11
Companies Issuing Dividends(252) 1.20 1.18 15.49 15.03 144.34
Companies Without Dividends(45) 0.90 0.91 14.59 14.36 166.56
Equity/Assets less than 6%(23) 1.66 1.68 14.11 13.15 285.90
Equity/Assets 6-12%(141) 1.38 1.34 15.35 14.74 181.81
Equity/Assets greater than 12%(133) 0.86 0.86 15.57 15.41 92.05
Converted Last 3 Mths (no MHC)(4) 0.53 0.53 12.47 12.47 78.11
Actively Traded Companies(39) 1.95 1.95 17.26 16.62 228.67
Market Value Below $20 Million(50) 0.79 0.80 14.31 14.27 111.17
Holding Company Structure(264) 1.14 1.12 15.63 15.21 145.10
Assets Over $1 Billion(60) 1.83 1.78 17.18 15.98 243.29
Assets $500 Million-$1 Billion(48) 1.25 1.17 14.44 13.93 154.37
Assets $250-$500 Million(64) 1.16 1.16 15.75 15.37 151.21
Assets less than $250 Million(125) 0.81 0.83 14.68 14.61 99.43
Goodwill Companies(120) 1.44 1.41 15.78 14.70 193.04
Non-Goodwill Companies(177) 0.97 0.97 15.07 15.07 117.72
Acquirors of FSLIC Cases(10) 2.56 2.52 20.88 19.72 332.65
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(61) 1.58 1.51 15.76 14.91 153.16
NYSE Traded Companies(2) 2.34 2.29 20.01 12.88 248.52
AMEX Traded Companies(6) 1.34 1.15 17.59 15.21 172.94
NASDAQ Listed OTC Companies(53) 1.57 1.52 15.40 14.96 147.13
California Companies(1) 1.52 1.52 12.32 12.27 114.89
Mid-Atlantic Companies(16) 1.33 1.29 15.79 13.98 169.89
Mid-West Companies(2) 0.21 0.26 11.08 10.73 35.43
New England Companies(33) 1.91 1.80 14.67 14.10 168.95
North-West Companies(4) 1.05 1.02 11.21 10.83 95.73
South-East Companies(5) 1.42 1.41 27.07 27.07 100.38
Thrift Strategy(44) 1.55 1.48 16.33 15.41 148.82
Mortgage Banker Strategy(7) 1.58 1.55 14.32 13.84 180.63
Real Estate Strategy(5) 1.78 1.67 11.27 11.24 105.38
Diversified Strategy(5) 1.80 1.75 13.54 12.55 190.42
Companies Issuing Dividends(53) 1.57 1.49 16.48 15.52 161.86
Companies Without Dividends(8) 1.69 1.67 10.85 10.74 93.52
Equity/Assets less than 6%(5) 1.23 1.01 7.70 7.47 153.80
Equity/Assets 6-12%(40) 1.92 1.83 15.47 14.23 182.15
Equity/Assets greater than 12%(16) 0.93 0.95 18.43 18.26 89.58
Actively Traded Companies(18) 1.97 1.86 15.73 14.92 183.84
Market Value Below $20 Million(3) 0.53 0.59 14.56 14.32 57.53
Holding Company Structure(41) 1.51 1.45 15.91 15.20 137.18
Assets Over $1 Billion(14) 1.83 1.78 15.82 14.09 187.28
Assets $500 Million-$1 Billion(16) 1.93 1.81 16.83 15.48 191.21
Assets $250-$500 Million(13) 1.17 1.11 12.82 12.51 120.44
Assets less than $250 Million(18) 1.38 1.34 16.93 16.80 116.44
Goodwill Companies(31) 1.73 1.63 16.49 14.81 192.94
Non-Goodwill Companies(30) 1.43 1.39 15.01 15.01 111.90
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 0.68 0.67 10.72 10.65 95.80
BIF-Insured Thrifts(3) 1.06 0.85 10.76 10.12 101.07
NASDAQ Listed OTC Companies(23) 0.75 0.70 10.73 10.55 96.73
Florida Companies(3) 1.00 0.89 14.22 14.18 146.68
Mid-Atlantic Companies(11) 0.57 0.56 9.17 8.86 76.90
Mid-West Companies(7) 0.82 0.85 12.01 11.98 106.48
New England Companies(1) 1.44 0.93 11.41 11.40 126.48
Thrift Strategy(22) 0.71 0.69 10.69 10.50 94.87
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(22) 0.76 0.71 10.76 10.58 98.10
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.82 0.74 10.90 10.65 109.96
Equity/Assets greater than 12%(7) 0.57 0.61 10.33 10.33 64.98
Holding Company Structure(2) 1.05 0.94 12.02 10.10 100.68
Assets Over $1 Billion(6) 0.83 0.64 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(10) 0.64 0.65 11.03 10.82 87.76
Goodwill Companies(9) 0.92 0.78 9.94 9.44 108.33
Non-Goodwill Companies(14) 0.65 0.67 11.16 11.16 90.40
MHC Institutions(23) 0.75 0.70 10.73 10.55 96.73
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 3.94 3.37 20.17 17.13 495.70
CSA Coast Savings Financial of CA 2.94 3.14 25.21 24.92 484.90
CFB Commercial Federal Corp. of NE 3.02 3.02 20.59 18.42 333.94
DME Dime Bancorp, Inc. of NY* 1.30 1.28 10.38 9.88 191.28
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.81
EBI Equality Bancorp of St Louis 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 2.40 2.46 7.93 7.93 152.17
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 New Englan* 1.15 1.06 10.95 10.68 148.69
BKC American Bank of Waterbury CT* 3.27 2.76 23.23 22.38 263.69
BFD BostonFed Bancorp of MA 1.16 1.05 14.48 13.94 170.04
CFX CFX Corp of NH(8)* 0.58 0.78 10.25 9.88 117.66
CNY Carver Bancorp, Inc. of NY -0.26 0.02 15.09 14.50 179.59
CBK Citizens First Fin.Corp. of IL 0.63 0.56 14.79 14.79 107.57
ESX Essex Bancorp of VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.55
FAB FirstFed America Bancorp of MA 0.06 0.54 14.52 14.52 118.99
GAF GA Financial Corp. of PA 0.94 0.91 14.72 14.58 100.63
KNK Kankakee Bancorp of IL 2.15 2.11 27.25 25.69 238.38
KYF Kentucky First Bancorp of KY 0.78 0.77 11.29 11.29 67.60
MBB MSB Bancorp of Middletown NY* 0.79 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.11 0.25 7.56 7.56 46.00
SSB Scotland Bancorp of NC 0.66 0.65 7.61 7.61 33.65
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.86 0.86 16.32 16.32 55.20
TSH Teche Holding Company of LA 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 0.82 0.82 14.74 14.74 109.40
ALBK ALBANK Fin. Corp. of Albany NY 2.89 2.87 26.69 23.51 288.76
AMFC AMB Financial Corp. of IN 0.98 0.69 14.95 14.95 107.25
ASBP ASB Financial Corp. of OH 0.64 0.60 10.30 10.30 66.15
ABBK Abington Savings Bank of MA* 2.29 2.04 19.43 17.61 272.62
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.83 0.81 15.02 15.02 97.52
AADV Advantage Bancorp of WI(8) 3.30 2.96 30.59 28.46 320.60
AFCB Affiliated Comm BC, Inc of MA 1.78 1.76 16.97 16.87 173.81
ALBC Albion Banc Corp. of Albion NY 1.31 1.29 24.26 24.26 283.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
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* -0.65 -0.68 14.57 14.57 112.63
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
BSBC Branford SB of CT(8)* 0.31 0.31 2.69 2.69 27.88
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 0.16 -0.18 14.21 14.21 133.34
CENF CENFED Financial Corp. of CA 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.98 1.86 13.03 13.03 169.05
CKFB CKF Bancorp of Danville KY 1.22 0.91 15.69 15.69 66.30
CNSB CNS Bancorp of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL* 0.16 0.26 12.98 12.27 51.85
CBCI Calumet Bancorp of Chicago IL 2.27 2.23 25.01 25.01 154.25
CAFI Camco Fin. Corp. of OH 1.73 1.46 14.98 13.87 156.25
CMRN Cameron Fin. Corp. of MO 0.98 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(8) 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) 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 3.64 3.56 21.63 19.86 306.62
CVAL Chester Valley Bancorp of PA 1.36 1.30 12.75 12.75 147.25
CTZN CitFed Bancorp of Dayton OH 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 1.68 1.55 11.18 11.06 212.77
DCBI Delphos Citizens Bancorp of OH 0.82 0.82 14.65 14.65 55.00
DIME Dime Community Bancorp of NY 1.10 1.07 14.81 12.76 109.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
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 2.20 3.51 25.80 25.80 511.96
FCBF FCB Fin. Corp. of Neenah WI 0.61 0.47 19.74 19.74 134.88
FFBS FFBS Bancorp of Columbus MS 1.16 1.16 14.34 14.34 85.85
FFDF FFD Financial Corp. of OH 1.16 0.57 14.86 14.86 61.05
FFLC FFLC Bancorp of Leesburg FL 0.94 0.89 13.73 13.73 99.97
FFFC FFVA Financial Corp. of VA 1.70 1.63 16.70 16.36 125.45
FFWC FFW Corporation of Wabash IN 2.43 2.38 24.63 22.36 253.80
FFYF FFY Financial Corp. of OH 1.87 1.84 20.30 20.30 148.22
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.41 14.41 128.95
FOBC Fed One Bancorp of Wheeling WV 1.38 1.38 16.85 16.10 150.75
FBCI Fidelity Bancorp of Chicago IL 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 1.05 1.03 17.74 17.74 165.66
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.80 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 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.73 0.73 11.79 11.79 115.05
FISB First Indiana Corp. of IN 1.62 1.33 14.13 13.96 146.49
FKFS First Keystone Fin. Corp of PA 2.15 1.97 20.16 20.16 304.10
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
CASH First Midwest Fin. Corp. of IA 1.35 1.29 16.11 14.31 149.90
FMBD First Mutual Bancorp of IL 0.35 0.32 15.37 11.72 114.74
FMSB First Mutual SB of Bellevue WA* 1.07 1.05 7.53 7.53 110.92
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
FNGB First Northern Cap. Corp of WI 0.66 0.63 8.24 8.24 74.29
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 1.15 1.15 11.01 11.01 95.64
GUPB GFSB Bancorp of Gallup NM 0.97 0.97 17.60 17.60 137.28
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.12
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.59 0.59 16.14 16.14 58.19
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 0.99 0.96 12.17 12.03 128.62
GTPS Great American Bancorp of IL 0.42 0.47 16.80 16.80 82.24
GTFN Great Financial Corp. of KY(8) 2.20 1.62 21.08 20.23 209.33
GSBC Great Southern Bancorp of MO 1.57 1.48 7.79 7.79 90.04
GDVS Greater DV SB,MHC of PA (19.9)* 0.68 0.68 8.85 8.85 76.04
GSFC Green Street Fin. Corp. of NC 0.65 0.65 14.65 14.65 41.41
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.62 0.60 8.76 8.76 67.24
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA 0.05 0.28 13.26 11.05 167.20
HFFC HF Financial Corp. of SD 2.05 1.88 19.33 19.33 205.10
HFNC HFNC Financial Corp. of NC 0.62 0.53 9.48 9.48 50.42
HMNF HMN Financial, Inc. of MN 1.34 1.13 20.09 20.09 135.05
HALL Hallmark Capital Corp. of WI 0.91 0.89 10.59 10.59 145.00
HARB Harbor FSB, MHC of FL (46.6)(8) 2.68 2.66 19.47 18.85 227.43
HRBF Harbor Federal Bancorp of MD 0.91 0.91 16.75 16.75 128.29
HFSA Hardin Bancorp of Hardin MO 0.94 0.89 15.76 15.76 136.63
HARL Harleysville SA of PA 2.05 2.06 13.76 13.76 207.73
HFGI Harrington Fin. Group of IN 0.67 0.56 7.74 7.74 159.98
HARS Harris SB, MHC of PA (24.3) 0.52 0.43 5.12 4.53 62.47
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.50 11.35 11.35 90.82
HAVN Haven Bancorp of Woodhaven NY 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
HBNK Highland Federal Bank of CA 2.41 1.83 17.20 17.20 224.34
HIFS Hingham Inst. for Sav. of MA* 1.98 1.98 16.11 16.11 165.96
HBEI Home Bancorp of Elgin IL 0.43 0.43 13.77 13.77 49.96
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 1.05 1.03 18.89 18.89 133.80
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.74 1.58 11.78 11.43 136.05
HWEN Home Financial Bancorp of IN 0.74 0.64 15.59 15.59 88.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
HPBC Home Port Bancorp, Inc. of MA* 1.75 1.74 11.65 11.65 109.13
HMCI Homecorp, Inc. of Rockford IL(8) 0.99 0.80 13.07 13.07 191.38
HZFS Horizon Fin'l. Services of IA 0.77 0.62 10.27 10.27 103.15
HRZB Horizon Financial Corp. of WA* 1.09 1.07 11.17 11.17 71.43
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.69 11.69 67.11
ISBF ISB Financial Corp. of LA 0.97 0.96 16.70 14.29 138.54
ITLA Imperial Thrift & Loan of CA* 1.52 1.52 12.32 12.27 114.89
IFSB Independence FSB of DC 0.65 0.54 13.89 12.28 201.76
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.38 12.38 104.22
INBI Industrial Bancorp of OH 0.98 1.03 11.76 11.76 68.45
IWBK Interwest SB of Oak Harbor WA 2.52 2.32 16.13 15.84 254.25
IPSW Ipswich SB of Ipswich MA* 0.88 0.70 4.78 4.78 85.16
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.80 0.80 13.63 13.63 129.12
JSBA Jefferson Svgs Bancorp of MO 0.90 1.85 22.03 17.09 258.09
JOAC Joachim Bancorp of MO 0.39 0.39 13.67 13.67 48.58
KSAV KS Bancorp of Kenly NC 1.40 1.39 16.45 16.44 124.22
KSBK KSB Bancorp of Kingfield ME(8)* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.85 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 1.34 0.97 13.71 11.74 112.19
LARK Landmark Bancshares of KS 1.14 1.35 18.62 18.62 135.05
LARL Laurel Capital Group of PA 2.09 2.02 15.20 15.20 145.21
LSBX Lawrence Savings Bank of MA* 1.42 1.41 7.84 7.84 82.39
LFED Leeds FSB, MHC of MD (36.3) 0.64 0.64 9.16 9.16 55.08
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.91 0.95 12.86 12.86 68.04
LONF London Financial Corp. of OH 0.75 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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
MSBK Mutual SB, FSB of Bay City MI 0.15 0.08 9.73 9.73 152.87
NHTB NH Thrift Bancshares of NH 0.99 0.80 12.04 10.34 153.90
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.70 0.67 8.42 8.42 82.77
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.79 0.69 17.04 17.04 126.90
FFFD North Central Bancshares of IA 1.16 1.16 15.13 15.13 66.03
NBN Northeast Bancorp of ME* 1.37 1.13 14.27 12.61 205.13
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.17 1.13 13.51 13.51 115.56
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.41 4.33 4.09 44.93
NSSY Norwalk Savings Society of CT* 2.40 2.74 20.49 19.76 254.37
NSSB Norwich Financial Corp. of CT* 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.)* 1.05 0.94 12.02 10.10 100.68
OFCP Ottawa Financial Corp. of MI 1.29 1.26 14.15 11.43 161.96
PFFB PFF Bancorp of Pomona CA 0.65 0.66 14.69 14.53 146.09
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.82 10.63 10.63 147.98
PALM Palfed, Inc. of Aiken SC(8) 0.49 0.84 10.74 10.74 126.16
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.71 16.89 16.77 130.83
PFED Park Bancorp of Chicago IL 0.80 0.83 16.61 16.61 71.79
PVSA Parkvale Financial Corp of PA 2.05 2.05 15.20 15.10 196.91
PEEK Peekskill Fin. Corp. of NY 0.66 0.66 14.81 14.81 56.76
PFSB PennFed Fin. Services of NJ 2.14 2.14 20.72 17.54 282.80
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood SB of PA* 0.83 0.91 15.33 15.33 83.59
PBKB People's SB of Brockton MA* 1.44 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 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* 2.20 2.16 20.18 18.17 231.09
PROV Provident Fin. Holdings of CA 0.94 0.44 17.66 17.66 132.47
PULB Pulaski SB, MHC of MO (29.8) 0.68 0.90 11.23 11.23 86.07
PLSK Pulaski SB, MHC of NJ (46.0) 0.54 0.54 10.36 10.36 86.47
PULS Pulse Bancorp of S. River NJ 1.84 1.86 14.02 14.02 170.73
QCFB QCF Bancorp of Virginia MN 1.46 1.46 19.84 19.84 113.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
QCBC Quaker City Bancorp of CA 1.20 1.15 15.33 15.33 181.26
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp. of Raritan NJ* 1.63 1.61 12.65 12.45 171.70
REDF RedFed Bancorp of Redlands CA 1.28 1.28 11.21 11.17 134.74
RELY Reliance Bancorp, Inc. of NY 1.96 2.07 19.29 14.17 233.56
RELI Reliance Bancshares Inc of WI* 0.25 0.26 9.18 9.18 19.01
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSB Riverview Bancorp of WA 0.47 0.45 9.56 9.20 46.06
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.75 0.75 17.35 17.35 65.26
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.94 0.94 17.64 17.64 141.42
SGVB SGV Bancorp of W. Covina CA 0.65 0.71 12.99 12.79 174.63
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 2.05 2.03 19.16 19.16 260.35
SWCB Sandwich Co-Op. Bank of MA* 2.44 2.39 21.16 20.34 266.68
SFSL Security First Corp. of OH 1.14 1.15 8.31 8.18 89.69
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 0.33 0.54 13.20 13.20 61.89
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL 1.50 1.45 16.01 16.01 141.14
SVRN Sovereign Bancorp of PA 0.51 0.74 7.24 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 1.23 1.79 21.90 21.82 337.85
ROSE T R Financial Corp. of NY* 1.88 1.69 13.09 13.09 209.84
THRD TF Financial Corp. of PA 1.22 1.05 17.79 15.71 152.97
TPNZ Tappan Zee Fin., Inc. of NY 0.58 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
UFRM United FS&LA of Rocky Mount NC 0.63 0.50 6.82 6.82 92.96
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.66 6.62 120.21
WVFC WVS Financial Corp. of PA* 2.08 2.09 19.38 19.38 161.46
WRNB Warren Bancorp of Peabody MA* 2.04 1.81 10.21 10.21 95.87
WFSL Washington FS&LA of Seattle WA 2.21 2.20 15.11 13.87 120.39
WAMU Washington Mutual Inc. of WA(8)* 0.01 1.51 19.65 18.20 371.76
WYNE Wayne Bancorp of NJ 1.07 1.07 16.49 16.49 132.71
WAYN Wayne S&L Co. MHC of OH (47.8) 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 1.79 2.99 26.82 23.10 502.51
WEFC Wells Fin. Corp. of Wells MN 1.09 1.06 14.86 14.86 104.52
WCBI WestCo Bancorp of IL 1.88 1.78 19.41 19.41 124.93
WSTR WesterFed Fin. Corp. of MT 1.16 1.11 19.03 15.35 179.16
WOFC Western Ohio Fin. Corp. of OH 0.61 0.71 23.39 21.83 168.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<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>
WWFC Westwood Fin. Corp. of NJ(8) 1.20 1.28 15.95 14.27 171.20
WEHO Westwood Hmstd Fin Corp of OH 0.47 0.54 14.20 14.20 51.36
WFI Winton Financial Corp. of OH 1.14 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-1B
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(297) 13.04 12.81 0.90 8.09 4.66 0.88 7.85 0.78 122.10 0.78
NYSE Traded Companies(11) 7.94 7.75 0.92 13.60 5.73 0.83 12.78 1.06 72.81 1.11
AMEX Traded Companies(16) 14.70 14.59 0.64 3.84 3.09 0.78 4.91 0.66 141.41 0.71
NASDAQ Listed OTC Companies(270) 13.17 12.93 0.91 8.11 4.71 0.88 7.81 0.78 123.34 0.77
California Companies(21) 7.41 7.17 0.64 9.66 5.27 0.57 8.90 1.72 69.82 1.26
Florida Companies(5) 8.55 8.12 1.20 14.66 5.20 0.80 9.61 1.62 86.80 0.76
Mid-Atlantic Companies(59) 11.12 10.79 0.86 8.74 4.85 0.85 8.75 0.80 92.52 0.91
Mid-West Companies(144) 14.23 14.06 0.92 7.41 4.53 0.91 7.27 0.62 136.73 0.65
New England Companies(9) 8.05 7.77 0.62 8.22 4.56 0.66 8.90 0.48 156.42 1.04
North-West Companies(8) 16.32 15.90 0.98 8.53 4.27 0.97 8.03 0.51 205.79 0.59
South-East Companies(38) 15.99 15.80 0.97 7.28 4.08 0.96 6.98 0.86 138.63 0.81
South-West Companies(7) 10.52 10.27 0.87 10.21 6.68 0.88 10.00 0.77 66.48 0.72
Western Companies (Excl CA)(6) 16.12 15.71 1.21 8.16 4.92 1.21 8.18 0.34 130.33 0.71
Thrift Strategy(240) 14.29 14.08 0.91 7.33 4.60 0.91 7.30 0.72 122.56 0.72
Mortgage Banker Strategy(35) 7.47 7.03 0.77 11.19 5.15 0.69 10.10 0.99 126.54 1.01
Real Estate Strategy(9) 7.26 7.08 0.87 12.03 6.15 0.84 11.61 1.23 98.78 1.32
Diversified Strategy(9) 8.42 8.18 1.31 16.29 5.77 1.04 13.52 1.36 117.46 1.05
Retail Banking Strategy(4) 6.62 6.33 -0.24 -0.25 -3.30 -0.29 -1.06 0.73 132.47 0.95
Companies Issuing Dividends(252) 13.33 13.08 0.93 8.21 4.81 0.92 8.00 0.70 122.79 0.75
Companies Without Dividends(45) 11.42 11.30 0.69 7.42 3.81 0.64 6.94 1.29 118.07 0.96
Equity/Assets less than 6%(23) 5.05 4.72 0.68 13.54 5.77 0.64 12.81 1.40 77.64 1.07
Equity/Assets 6-12%(141) 8.77 8.47 0.81 9.63 5.09 0.78 9.25 0.79 131.02 0.86
Equity/Assets greater than 12%(133) 18.43 18.28 1.01 5.73 4.07 1.01 5.68 0.67 121.01 0.66
Converted Last 3 Mths (no MHC)(4) 18.40 18.40 0.81 4.37 3.36 0.81 4.37 0.60 127.39 0.63
Actively Traded Companies(39) 8.95 8.71 1.00 12.43 5.52 0.99 12.41 0.98 123.47 0.95
Market Value Below $20 Million(50) 14.68 14.66 0.84 6.04 4.61 0.85 6.08 0.70 109.38 0.63
Holding Company Structure(264) 13.51 13.29 0.89 7.76 4.56 0.88 7.56 0.78 119.97 0.77
Assets Over $1 Billion(60) 7.90 7.40 0.89 12.03 5.23 0.83 11.33 0.94 108.45 0.98
Assets $500 Million-$1 Billion(48) 10.42 10.08 0.90 9.22 4.78 0.84 8.62 0.86 146.87 0.91
Assets $250-$500 Million(64) 11.78 11.52 0.87 8.04 4.89 0.86 7.92 0.67 136.29 0.73
Assets less than $250 Million(125) 17.05 17.00 0.92 5.88 4.25 0.93 5.92 0.73 110.86 0.67
Goodwill Companies(120) 9.15 8.56 0.85 10.02 5.07 0.81 9.55 0.87 108.14 0.86
Non-Goodwill Companies(177) 15.61 15.61 0.93 6.82 4.40 0.92 6.72 0.73 131.52 0.73
Acquirors of FSLIC Cases(10) 7.27 6.84 0.84 12.30 5.65 0.83 12.07 1.08 60.52 0.82
</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 c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(61) 12.56 12.18 1.15 11.57 5.90 1.12 11.01 0.84 139.24 1.42
NYSE Traded Companies(2) 7.56 5.18 0.89 11.54 5.02 0.87 11.31 1.95 40.15 1.04
AMEX Traded Companies(6) 12.87 12.02 0.84 8.02 4.56 0.75 7.01 1.42 104.14 1.60
NASDAQ Listed OTC Companies(53) 12.74 12.49 1.19 11.94 6.07 1.16 11.41 0.75 146.14 1.43
California Companies(1) 10.72 10.68 1.45 13.02 8.56 1.45 13.02 1.54 79.64 1.45
Mid-Atlantic Companies(16) 10.93 10.27 0.86 8.98 4.44 0.87 8.78 0.93 130.18 1.33
Mid-West Companies(2) 36.66 35.98 0.82 1.90 2.01 0.95 2.33 0.56 57.14 0.56
New England Companies(33) 9.23 8.94 1.29 14.94 7.30 1.21 13.95 0.85 144.76 1.70
North-West Companies(4) 12.22 11.86 1.22 10.73 5.48 1.19 10.46 0.17 241.66 1.04
South-East Companies(5) 27.37 27.37 1.33 5.08 3.98 1.33 5.05 0.69 145.62 0.74
Thrift Strategy(44) 13.56 13.15 1.16 10.98 5.79 1.12 10.39 0.86 132.73 1.36
Mortgage Banker Strategy(7) 9.02 8.82 0.91 11.72 5.48 0.94 11.57 0.48 171.40 1.35
Real Estate Strategy(5) 10.69 10.66 1.80 17.32 9.00 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.94 6.42 1.04 15.06 6.00 1.00 14.56 0.76 196.07 2.08
Companies Issuing Dividends(53) 11.91 11.50 1.07 10.68 5.35 1.03 10.06 0.80 141.81 1.36
Companies Without Dividends(8) 17.04 16.83 1.71 17.66 9.67 1.72 17.46 1.10 120.84 1.80
Equity/Assets less than 6%(5) 5.17 5.05 0.96 17.25 6.12 0.80 14.29 0.92 98.61 1.42
Equity/Assets 6-12%(40) 8.75 8.25 1.22 14.00 6.95 1.17 13.39 0.92 134.29 1.59
Equity/Assets greater than 12%(16) 22.74 22.54 1.05 4.83 3.53 1.08 4.96 0.60 163.94 1.04
Actively Traded Companies(18) 9.01 8.59 1.22 13.94 6.67 1.15 13.00 0.73 138.50 1.49
Market Value Below $20 Million(3) 28.24 27.78 0.97 3.40 3.04 1.07 3.82 1.43 40.96 0.75
Holding Company Structure(41) 14.26 13.90 1.21 11.16 5.84 1.18 10.74 0.77 148.17 1.47
Assets Over $1 Billion(14) 9.11 8.40 1.05 12.26 5.33 1.04 11.92 0.82 154.48 1.49
Assets $500 Million-$1 Billion(16) 9.41 8.85 1.16 12.86 6.37 1.11 12.02 0.85 146.86 1.55
Assets $250-$500 Million(13) 11.57 11.40 1.07 10.63 5.22 1.02 10.09 0.67 162.47 1.65
Assets less than $250 Million(18) 18.84 18.71 1.28 10.56 6.39 1.25 10.06 0.98 97.91 1.06
Goodwill Companies(31) 9.42 8.67 0.96 11.26 5.59 0.92 10.59 0.90 135.75 1.44
Non-Goodwill Companies(30) 15.82 15.82 1.35 11.90 6.21 1.32 11.43 0.76 143.53 1.41
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 12.19 12.08 0.79 7.22 2.70 0.79 7.07 0.48 142.10 0.71
BIF-Insured Thrifts(3) 10.87 10.23 1.05 10.29 3.32 0.87 8.36 1.16 74.62 1.11
NASDAQ Listed OTC Companies(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
Florida Companies(3) 9.77 9.75 0.74 7.34 3.14 0.65 6.47 0.41 71.26 0.45
Mid-Atlantic Companies(11) 12.16 11.79 0.81 7.62 2.55 0.79 7.33 0.73 109.28 0.89
Mid-West Companies(7) 13.05 13.04 0.87 7.00 2.88 0.91 7.26 0.46 181.63 0.52
New England Companies(1) 9.02 9.01 1.16 13.69 4.11 0.75 8.84 0.76 146.25 1.66
Thrift Strategy(22) 12.14 11.92 0.82 7.39 2.73 0.81 7.20 0.60 128.33 0.72
Diversified Strategy(1) 9.02 9.01 1.16 13.69 4.11 0.75 8.84 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.85 11.63 0.85 7.82 2.80 0.81 7.35 0.62 128.20 0.74
Companies Without Dividends(1) 13.66 13.66 0.73 6.80 2.99 0.71 6.55 0.45 148.08 1.37
Equity/Assets 6-12%(16) 10.01 9.72 0.80 8.34 2.92 0.73 7.54 0.71 83.86 0.81
Equity/Assets greater than 12%(7) 16.63 16.63 0.93 6.38 2.55 0.98 6.73 0.31 266.20 0.71
Holding Company Structure(2) 11.94 10.03 1.06 9.22 3.50 0.95 8.25 0.91 43.96 0.67
Assets Over $1 Billion(6) 8.77 8.38 0.93 10.57 3.20 0.76 8.59 0.65 86.19 0.94
Assets $500 Million-$1 Billion(2) 11.34 11.34 0.80 7.04 3.07 0.73 6.45 0.41 90.57 0.62
Assets $250-$500 Million(5) 11.63 11.61 0.88 7.97 3.02 0.86 7.73 0.29 188.56 0.43
Assets less than $250 Million(10) 13.55 13.34 0.79 6.52 2.54 0.81 6.68 0.73 133.77 0.84
Goodwill Companies(9) 9.29 8.70 0.91 10.05 3.32 0.78 8.53 0.62 95.63 0.83
Non-Goodwill Companies(14) 13.41 13.41 0.80 6.51 2.53 0.81 6.63 0.60 149.74 0.75
MHC Institutions(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 4.07 3.46 0.76 19.09 6.39 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA 5.20 5.14 0.62 12.51 4.70 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.17 5.52 0.94 16.03 5.71 0.94 16.03 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 5.00 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.30 0.70 9.56 0.95 55.50 0.58
EBI Equality Bancorp of St Louis 9.92 9.92 0.53 5.33 3.56 0.53 5.33 0.29 41.13 0.26
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 5.71 0.56 11.68 1.20 168.73 2.57
GSB Glendale Fed. Bk, FSB of CA 5.65 5.05 0.57 10.24 5.14 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 6.49 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 5.03 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 6.12 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY 5.21 5.21 1.62 31.66 6.26 1.66 32.45 0.88 65.33 0.92
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.62 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 4.11 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of New Englan* 7.36 7.18 0.79 11.65 6.82 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.67 1.10 13.09 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.52 8.20 0.73 7.68 5.84 0.66 6.95 0.34 184.11 0.76
CFX CFX Corp of NH(8)* 8.71 8.40 0.73 8.91 2.04 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.54 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 3.50 0.54 3.67 0.61 38.86 0.28
ESX Essex Bancorp of VA(8) 0.02 -0.08 0.12 NM 4.44 0.10 NM 2.11 51.58 1.27
FCB Falmouth Co-Op Bank of MA* 23.86 23.86 0.84 3.43 2.60 0.79 3.23 NA NA NA
FAB FirstFed America Bancorp of MA 12.20 12.20 0.05 0.56 0.29 0.48 5.03 0.39 259.57 1.16
GAF GA Financial Corp. of PA 14.63 14.49 1.09 6.28 5.05 1.05 6.08 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 6.25 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.31 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.27 3.87 2.59 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.06 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.44 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.15 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.68 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 5.33 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 6.25 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 3.06 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 3.51 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 7.08 0.36 4.33 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.37 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.24 8.14 1.04 11.41 6.28 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 4.74 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.13 6.46 0.85 12.38 6.03 0.76 11.03 0.16 269.74 0.71
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 11.72 1.34 20.78 1.58 31.35 0.95
AFBC Advance Fin. Bancorp of WV 15.40 15.40 0.89 6.41 4.68 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI(8) 9.54 8.88 1.04 11.55 4.96 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc of MA 9.76 9.71 1.09 11.13 5.46 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 4.68 0.49 5.45 0.12 321.43 0.53
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 4.00 0.88 9.69 0.21 184.61 0.54
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.86 3.93 0.23 2.21 2.20 33.49 1.03
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.24 -3.61 -0.61 -4.43 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.58 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 14.77 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 5.97 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.74 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.16 0.77 9.81 0.46 39.39 0.43
AVND Avondale Fin. Corp. of IL 7.72 7.72 -1.93 -21.53 -20.59 -1.97 -21.92 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.75 10.75 1.36 13.01 4.53 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 5.20 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 3.69 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 7.87 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.63 0.28 6.90 0.62 27.63 0.21
BVCC Bay View Capital Corp. of CA 5.82 4.86 0.55 9.13 4.07 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 2.04 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.92 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.50 3.28 2.24 0.50 3.28 0.09 150.75 0.31
BSBC Branford SB of CT(8)* 9.65 9.65 1.12 12.06 4.96 1.12 12.06 1.56 131.46 3.09
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 5.39 1.12 6.26 0.59 81.11 0.53
CCFH CCF Holding Company of GA 10.66 10.66 0.14 1.03 0.81 -0.16 -1.16 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA 5.56 5.55 0.64 12.26 5.79 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.68 1.13 14.80 0.19 283.10 0.61
CKFB CKF Bancorp of Danville KY 23.67 23.67 1.83 7.53 6.59 1.37 5.61 1.20 16.62 0.22
CNSB CNS Bancorp of MO 24.33 24.33 0.79 3.21 2.19 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc of IL* 25.03 23.66 0.32 1.22 1.21 0.52 1.98 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 7.09 1.42 8.91 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.59 8.88 1.20 12.96 6.92 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 5.16 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 3.97 1.14 4.89 0.16 226.67 0.50
CASB Cascade SB of Everett WA(8) 6.64 6.64 0.60 9.62 5.10 0.60 9.62 0.28 332.14 1.12
CATB Catskill Fin. Corp. of NY* 24.78 24.78 1.39 5.20 4.84 1.41 5.26 0.40 162.15 1.50
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 5.24 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.93 8.88 0.87 8.67 5.41 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 5.05 1.70 5.62 0.25 219.37 0.85
CBSB Charter Financial Inc. of IL(8) 14.47 12.80 1.13 7.49 4.42 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 5.87 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.29 5.18 0.93 10.79 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.13 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.90 12.61 0.56 3.44 3.14 0.75 4.66 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 4.74 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 8.28 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.95 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 3.07 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 5.66 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 3.27 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.41 0.97 8.31 0.53 94.97 0.59
COOP Cooperative Bk.for Svgs. of NC 7.69 7.69 0.63 8.30 3.89 0.63 8.30 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 23.70 23.70 1.27 4.66 4.68 1.29 4.72 0.38 134.22 1.04
DNFC D&N Financial Corp. of MI 5.25 5.20 0.89 15.92 6.05 0.82 14.69 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 26.64 26.64 1.54 6.13 4.75 1.54 6.13 0.45 21.81 0.13
DIME Dime Community Bancorp of NY 13.50 11.63 1.09 6.91 4.71 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 10.00 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.39 0.25 2.04 1.48 35.66 0.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.63 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 1.72 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 3.64 0.63 3.43 0.27 88.06 0.48
EMLD Emerald Financial Corp of OH 7.80 7.69 1.05 13.70 6.49 0.97 12.67 0.24 115.15 0.36
EIRE Emerald Island Bancorp, MA(8)* 6.99 6.99 0.86 12.46 5.00 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.12 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.92 7.43 4.21 0.77 6.18 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.54 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 14.64 14.64 0.74 4.48 2.16 0.57 3.45 0.24 277.72 0.85
FFBS FFBS Bancorp of Columbus MS 16.70 16.70 1.41 7.48 5.21 1.41 7.48 0.58 72.88 0.59
FFDF FFD Financial Corp. of OH 24.34 24.34 1.94 7.84 6.23 0.95 3.85 NA NA 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.22 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.31 13.04 1.40 10.28 5.04 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.70 8.81 1.04 10.57 5.82 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 5.80 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 7.15 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 5.44 0.84 6.98 0.15 148.95 0.33
FOBC Fed One Bancorp of Wheeling WV 11.18 10.68 0.94 8.21 5.18 0.94 8.21 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.48 10.46 0.19 1.84 1.43 0.60 5.80 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.79 6.79 0.80 11.51 6.36 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 3.21 0.57 6.49 0.40 51.95 0.28
FFED Fidelity Fed. Bancorp of IN 6.11 6.11 0.75 14.32 6.46 0.73 13.89 0.13 626.40 0.96
FFOH Fidelity Financial of OH 13.02 11.56 0.91 6.59 5.15 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 5.96 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 6.69 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.34 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.64 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 1.75 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 8.11 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 30.13 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.63 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 4.27 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.41 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 5.17 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 3.65 0.71 8.56 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.71 10.71 0.65 5.81 3.75 0.63 5.70 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 4.76 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 5.95 0.89 13.87 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.64 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 5.95 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 4.63 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 3.84 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 3.88 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.86 6.76 0.93 13.99 6.05 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.25 10.25 0.65 5.99 4.91 0.65 5.99 1.25 47.61 0.89
FISB First Indiana Corp. of IN 9.65 9.53 1.14 12.04 5.23 0.93 9.89 1.39 103.20 1.70
FKFS First Keystone Fin. Corp of PA 6.63 6.63 0.82 11.30 5.75 0.75 10.35 1.11 39.39 0.84
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.37 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 4.33 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 10.75 9.55 0.96 8.44 6.32 0.91 8.06 0.75 78.49 0.93
FMBD First Mutual Bancorp of IL 13.40 10.21 0.32 2.12 1.73 0.30 1.94 0.26 138.78 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.02 15.29 6.29 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 4.77 0.49 7.25 0.57 58.39 0.53
FSLA First SB SLA MHC of NJ (47.5)(8) 9.50 8.63 0.90 9.64 2.74 0.94 10.06 0.54 105.63 1.04
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOPN First SB, SSB, Moore Co. of NC 23.01 23.01 1.75 7.26 5.80 1.75 7.26 0.29 70.15 0.31
FWWB First Savings Bancorp of WA* 14.23 13.15 1.06 6.79 3.77 1.01 6.44 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.83 1.29 4.77 NA NA 0.98
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.65 1.16 10.40 0.51 149.56 1.17
FBNW FirstBank Corp of Clarkston WA 16.43 16.43 0.39 3.23 1.86 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.47 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.38 0.96 6.28 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.21 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 22.77 8.68 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.30 0.99 6.22 0.39 172.94 1.12
FBHC Fort Bend Holding Corp. of TX 6.16 5.75 0.64 10.48 6.07 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 4.90 1.21 7.27 1.98 24.60 0.53
FKKYD Frankfort First Bancorp of KY 16.82 16.82 0.09 0.39 0.38 0.64 2.86 0.09 80.00 0.08
FTNB Fulton Bancorp of MO 24.66 24.66 1.25 5.02 3.42 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA 11.51 11.51 1.27 11.03 6.74 1.27 11.03 0.98 67.81 0.78
GUPB GFSB Bancorp of Gallup NM 12.82 12.82 0.86 5.43 4.79 0.86 5.43 0.29 115.79 0.63
GSLA GS Financial Corp. of LA 43.13 43.13 1.25 3.81 2.28 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.04 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.74 27.74 0.97 3.68 3.15 0.97 3.68 0.90 14.39 0.38
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 5.48 1.53 15.94 0.25 243.94 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.35 0.77 8.11 0.25 123.32 0.37
GTPS Great American Bancorp of IL 20.43 20.43 0.53 2.39 2.27 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 4.38 0.76 7.96 3.11 16.32 0.74
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 2.34 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 Guarnty FS&LA,MHC of MO (31.0)(8) 13.03 13.03 0.99 7.17 2.38 0.96 6.94 0.64 162.46 1.29
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.66 0.14 1.02 NA NA 1.44
HEMT HF Bancorp of Hemet CA 7.93 6.61 0.03 0.39 0.29 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.81 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.20 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 5.10 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 5.97 0.64 8.91 0.13 355.91 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.56 8.29 1.22 14.68 4.00 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 3.83 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.30 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 5.31 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 2.70 0.76 9.19 0.68 60.65 0.96
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.19 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.56 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 6.00 5.98 0.68 11.28 6.02 0.68 11.37 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 11.93 0.82 18.40 8.07 18.43 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 19.31 19.31 0.37 2.51 1.61 0.81 5.47 NA NA 1.22
HBNK Highland Federal Bank of CA 7.67 7.67 1.13 15.28 7.33 0.86 11.60 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.71 9.71 1.25 13.03 7.10 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.36 0.83 3.02 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 2.65 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 14.12 14.12 0.74 5.77 4.94 0.73 5.66 0.44 44.51 0.28
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 5.33 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 6.69 1.21 14.42 0.48 112.57 0.63
HWEN Home Financial Bancorp of IN 17.55 17.55 0.86 4.60 4.20 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 7.65 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.64 0.41 6.42 2.16 22.97 0.61
HZFS Horizon Fin'l. Services of IA 9.96 9.96 0.81 7.86 6.55 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 6.37 1.55 9.94 NA NA 0.85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. of NJ 17.42 17.42 0.78 4.41 3.05 0.78 4.41 0.13 110.72 0.50
ISBF ISB Financial Corp. of LA 12.05 10.31 0.75 5.87 3.48 0.74 5.81 0.27 196.73 0.80
ITLA Imperial Thrift & Loan of CA* 10.72 10.68 1.45 13.02 8.56 1.45 13.02 1.54 79.64 1.45
IFSB Independence FSB of DC 6.88 6.09 0.32 4.85 4.64 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 5.41 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 6.42 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 6.90 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.77 1.34 8.46 0.78 67.63 0.70
JXSB Jcksnville SB,MHC of IL (45.6) 10.56 10.56 0.65 6.02 2.81 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.54 6.62 0.38 4.79 2.09 0.77 9.84 0.67 101.16 0.89
JOAC Joachim Bancorp of MO 28.14 28.14 0.80 2.74 2.60 0.80 2.74 0.24 95.24 0.32
KSAV KS Bancorp of Kenly NC 13.24 13.23 1.21 8.81 6.22 1.20 8.74 0.53 55.44 0.35
KSBK KSB Bancorp of Kingfield ME(8)* 7.18 6.79 0.97 13.74 5.14 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 14.74 13.40 1.14 5.81 3.95 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 5.80 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.39 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.90 1.05 7.02 NA NA NA
LARL Laurel Capital Group of PA 10.47 10.47 1.46 14.04 7.43 1.41 13.57 0.43 201.97 1.25
LSBX Lawrence Savings Bank of MA* 9.52 9.52 1.76 20.06 9.02 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 2.72 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 3.21 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 3.75 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.26 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 18.90 18.90 1.41 7.25 5.97 1.48 7.57 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.91 19.91 1.02 5.01 4.92 0.96 4.68 NA NA 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.45 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 7.28 1.15 14.78 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.66 12.66 0.83 6.49 5.32 0.85 6.62 0.57 50.27 0.50
MFBC MFB Corp. of Mishawaka IN 13.10 13.10 0.84 5.76 5.15 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 3.90 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.41 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.07 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.46 0.98 3.41 0.34 27.23 0.20
MFSL Maryland Fed. Bancorp of MD 8.38 8.27 0.62 7.43 4.00 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 5.96 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 6.15 1.00 10.33 0.57 154.47 1.56
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 9.65 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.60 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 6.17 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 4.76 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 6.31 1.40 15.17 NA NA 0.45
MCBN Mid-Coast Bancorp of ME 8.59 8.59 0.76 8.81 6.68 0.72 8.35 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.92 6.92 0.87 12.62 6.82 0.77 11.16 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 5.01 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 3.97 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 3.77 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.42 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 3.05 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.36 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 4.66 0.56 7.48 0.61 151.10 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.22 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 5.19 0.82 8.00 1.36 128.18 3.26
NASB North American SB of MO 7.68 7.42 1.26 17.18 7.59 1.19 16.18 3.11 27.16 0.98
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NBSI North Bancshares of Chicago IL 13.43 13.43 0.64 4.40 3.05 0.56 3.85 NA NA 0.27
FFFD North Central Bancshares of IA 22.91 22.91 1.83 7.47 6.07 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 10.01 4.96 0.59 8.26 1.03 93.77 1.22
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.76 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.69 11.69 1.02 8.65 6.08 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 2.78 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.43 6.32 1.10 14.19 1.31 73.30 1.46
NSSB Norwich Financial Corp. of CT* 11.66 10.60 1.14 10.24 4.85 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 6.23 0.88 7.80 0.18 121.89 0.31
OCFC Ocean Fin. Corp. of NJ 15.17 15.17 1.01 5.69 4.51 1.00 5.62 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.50 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 3.67 1.07 4.44 0.07 307.09 0.54
PBHC OswegoCity SB, MHC of NY (46.)* 11.94 10.03 1.06 9.22 3.50 0.95 8.25 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 4.55 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.40 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 3.89 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.16 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 1.71 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 6.96 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.51 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 7.13 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.77 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.39 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 5.10 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.49 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 5.17 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 4.11 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 2.22 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.85 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.78 1.28 16.08 0.86 121.04 1.55
PSFC Peoples Sidney Fin. Corp of OH 25.29 25.29 1.04 6.27 3.25 1.04 6.27 1.00 40.10 0.45
PERM Permanent Bancorp of IN 9.46 9.34 0.62 6.63 4.83 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA 8.51 8.51 0.40 4.65 3.03 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 1.93 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 3.87 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.54 10.43 0.84 6.97 5.69 0.75 6.21 1.69 30.77 0.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.33 6.33 0.63 10.08 4.00 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.97 6.49 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 3.57 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 2.99 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.42 0.63 5.12 0.33 82.34 0.40
PFNC Progress Financial Corp. of PA 5.33 4.76 0.90 17.21 5.81 0.71 13.58 2.07 37.27 1.11
PSBK Progressive Bank, Inc. of NY* 8.73 7.86 0.96 11.35 6.11 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.37 0.35 2.48 1.58 55.80 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.05 13.05 0.80 6.20 2.27 1.06 8.20 0.64 41.41 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.98 11.98 0.64 6.99 2.70 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 6.88 1.11 14.09 0.75 59.52 1.82
QCFB QCF Bancorp of Virginia MN 17.49 17.49 1.34 7.36 5.12 1.34 7.36 0.24 345.09 2.00
QCBC Quaker City Bancorp of CA 8.46 8.46 0.71 8.11 5.62 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 3.95 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.37 7.25 1.02 13.34 5.93 1.01 13.18 0.39 208.57 1.26
REDF RedFed Bancorp of Redlands CA 8.32 8.29 1.01 12.28 6.44 1.01 12.28 1.80 44.74 0.92
RELY Reliance Bancorp, Inc. of NY 8.26 6.07 0.89 10.80 5.76 0.93 11.40 0.67 41.66 0.62
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.82 1.38 2.68 NA NA 0.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.54 0.62 5.72 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 3.16 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.34 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 1.47 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 3.84 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 3.77 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.38 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 5.49 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 5.56 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 5.50 1.23 12.86 0.29 190.55 0.63
SKAN Skaneateles Bancorp Inc of NY* 7.00 6.80 0.70 10.25 6.36 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 3.30 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 6.36 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 3.34 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 21.33 21.33 0.55 3.24 1.74 0.90 5.30 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.76 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL 11.34 11.34 1.06 9.81 5.88 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.43 3.61 0.42 10.16 2.36 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 5.40 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 5.50 1.06 12.12 0.36 210.72 1.10
SFFC StateFed Financial Corp. of IA 17.54 17.54 1.27 7.17 5.16 1.27 7.17 2.55 10.16 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.29 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.89 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.42 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.61 0.87 13.98 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.63 10.27 0.77 6.96 4.10 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 2.90 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 5.29 1.07 6.97 NA NA 1.05
TWIN Twin City Bancorp of TN 12.94 12.94 0.85 6.65 5.03 0.72 5.62 0.16 88.17 0.20
UFRM United FS&LA of Rocky Mount NC 7.34 7.34 0.71 9.49 5.93 0.57 7.53 0.77 101.45 0.92
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.83 1.40 6.04 0.48 15.21 0.22
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.51 0.50 7.31 1.24 59.40 0.95
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.14 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.31 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 6.50 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.44 1.91 19.17 1.15 97.04 1.73
WFSL Washington FS&LA of Seattle WA 12.55 11.52 1.86 15.80 6.93 1.85 15.73 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA(8)* 5.29 4.90 0.00 0.09 0.01 0.70 13.63 NA NA 0.98
WYNE Wayne Bancorp of NJ 12.43 12.43 0.86 6.10 4.70 0.86 6.10 0.89 88.41 1.18
WAYN Wayne S&L Co. MHC of OH (47.8) 9.53 9.53 0.73 7.89 2.68 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 3.01 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.82 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 5.89 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 7.09 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.59 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 2.29 0.43 3.09 0.44 115.19 0.66
WWFC Westwood Fin. Corp. of NJ(8) 9.32 8.34 0.73 7.79 4.34 0.78 8.31 0.13 158.78 0.58
WEHO Westwood Hmstd Fin Corp of OH 27.65 27.65 1.01 3.29 3.30 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 0.76 10.50 5.77 0.89 12.25 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 5.78 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 5.23 1.06 6.71 0.48 72.05 0.78
YFED York Financial Corp. of PA 8.85 8.85 0.96 11.41 5.07 0.81 9.60 2.50 23.98 0.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(297) 19.46 155.82 18.85 160.01 20.40 0.36 1.56 29.79
NYSE Traded Companies(11) 18.10 198.68 15.55 193.38 18.69 0.40 0.96 15.08
AMEX Traded Companies(16) 20.98 130.16 19.22 131.53 19.86 0.32 1.85 37.14
NASDAQ Listed OTC Companies(270) 19.47 155.64 18.98 160.52 20.50 0.36 1.57 30.14
California Companies(21) 18.62 169.71 11.79 168.66 19.58 0.16 0.48 9.96
Florida Companies(5) 20.61 186.91 20.22 212.54 24.74 0.20 0.74 14.79
Mid-Atlantic Companies(59) 19.41 159.98 17.04 164.46 19.97 0.37 1.45 29.11
Mid-West Companies(144) 19.22 148.88 19.58 152.32 20.25 0.35 1.65 31.10
New England Companies(9) 18.19 168.11 13.13 177.31 20.44 0.43 1.46 29.55
North-West Companies(8) 20.59 160.03 22.90 167.65 21.31 0.35 1.34 20.93
South-East Companies(38) 21.32 164.28 23.73 168.93 22.52 0.45 2.02 41.25
South-West Companies(7) 17.11 136.54 13.64 144.04 17.23 0.35 1.65 29.63
Western Companies (Excl CA)(6) 20.43 158.80 23.44 165.59 20.49 0.54 2.54 45.82
Thrift Strategy(240) 19.91 146.72 19.76 150.78 20.45 0.37 1.67 32.38
Mortgage Banker Strategy(35) 18.00 196.58 14.09 203.81 21.33 0.31 1.08 20.14
Real Estate Strategy(9) 16.83 183.89 13.21 187.14 17.54 0.14 0.68 11.55
Diversified Strategy(9) 17.68 230.80 21.41 239.24 18.13 0.47 1.38 23.67
Retail Banking Strategy(4) 19.03 157.74 9.86 163.04 21.91 0.14 0.76 22.88
Companies Issuing Dividends(252) 19.35 157.33 19.31 161.66 20.43 0.42 1.83 35.18
Companies Without Dividends(45) 20.21 146.91 16.25 150.44 20.16 0.00 0.00 0.00
Equity/Assets less than 6%(23) 17.64 206.22 11.09 211.72 19.53 0.21 0.65 12.39
Equity/Assets 6-12%(141) 18.36 172.30 14.77 179.65 19.26 0.37 1.44 26.80
Equity/Assets greater than 12%(133) 21.21 131.95 24.03 133.73 21.93 0.37 1.82 36.59
Converted Last 3 Mths (no MHC)(4) 27.14 129.89 23.32 129.89 27.14 0.00 0.00 0.00
Actively Traded Companies(39) 17.94 204.55 17.35 206.53 18.69 0.50 1.50 26.31
Market Value Below $20 Million(50) 19.53 125.06 17.89 125.38 20.94 0.32 1.86 34.52
Holding Company Structure(264) 19.67 153.78 19.30 157.35 20.64 0.37 1.61 30.93
Assets Over $1 Billion(60) 18.60 200.09 15.87 211.87 20.00 0.41 1.13 21.88
Assets $500 Million-$1 Billion(48) 18.59 171.40 17.25 177.64 19.67 0.36 1.45 28.27
Assets $250-$500 Million(64) 19.42 153.42 17.26 158.16 19.90 0.36 1.54 28.29
Assets less than $250 Million(125) 20.43 131.43 21.64 132.09 21.22 0.34 1.80 35.61
Goodwill Companies(120) 18.69 177.28 15.68 188.39 19.88 0.38 1.38 26.18
Non-Goodwill Companies(177) 20.03 141.73 20.95 141.73 20.77 0.34 1.67 32.39
Acquirors of FSLIC Cases(10) 18.00 204.29 14.20 202.76 18.59 0.42 1.26 21.70
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(61) 17.90 182.55 20.16 189.87 18.49 0.48 1.60 29.85
NYSE Traded Companies(2) 19.94 238.62 17.78 263.16 20.34 0.58 1.05 20.95
AMEX Traded Companies(6) 18.00 155.25 18.96 187.55 19.60 0.56 1.72 34.25
NASDAQ Listed OTC Companies(53) 17.80 183.06 20.38 188.59 18.33 0.46 1.61 29.85
California Companies(1) 11.68 144.07 15.45 144.66 11.68 0.00 0.00 0.00
Mid-Atlantic Companies(16) 20.22 189.11 18.75 200.11 20.18 0.49 1.63 32.81
Mid-West Companies(2) 0.00 99.35 36.11 102.31 0.00 0.00 0.00 0.00
New England Companies(33) 15.32 196.18 17.49 203.88 16.26 0.50 1.69 28.03
North-West Companies(4) 19.37 184.99 21.44 189.84 20.04 0.31 1.60 29.11
South-East Companies(5) 25.70 124.80 33.40 124.80 25.81 0.68 1.95 50.08
Thrift Strategy(44) 18.17 175.61 20.94 182.16 18.91 0.50 1.66 31.82
Mortgage Banker Strategy(7) 19.46 202.41 17.06 209.15 18.77 0.36 1.23 23.42
Real Estate Strategy(5) 11.14 177.91 19.00 178.21 11.81 0.26 1.20 12.75
Diversified Strategy(5) 16.74 236.38 16.06 254.47 17.47 0.49 1.53 25.72
Companies Issuing Dividends(53) 18.73 184.94 19.87 193.22 19.39 0.55 1.83 34.39
Companies Without Dividends(8) 10.46 166.22 22.17 167.42 10.53 0.00 0.00 0.00
Equity/Assets less than 6%(5) 16.58 271.37 14.09 277.77 18.16 0.18 0.87 14.12
Equity/Assets 6-12%(40) 16.07 196.02 17.16 206.49 16.96 0.53 1.70 28.55
Equity/Assets greater than 12%(16) 23.52 130.89 28.23 132.57 22.89 0.43 1.57 36.96
Actively Traded Companies(18) 15.64 197.08 17.19 208.38 16.24 0.58 1.84 29.07
Market Value Below $20 Million(3) 25.76 111.69 31.37 113.66 24.78 0.24 1.35 35.45
Holding Company Structure(41) 18.52 175.88 21.93 185.51 18.97 0.48 1.67 31.59
Assets Over $1 Billion(14) 19.71 223.82 19.55 233.72 19.87 0.55 1.55 30.02
Assets $500 Million-$1 Billion(16) 15.85 188.66 17.04 205.92 16.27 0.54 1.63 26.49
Assets $250-$500 Million(13) 17.72 181.54 19.56 185.47 18.58 0.40 1.69 31.12
Assets less than $250 Million(18) 18.59 146.64 24.00 147.98 19.36 0.42 1.54 31.78
Goodwill Companies(31) 17.91 187.90 16.62 202.74 18.68 0.51 1.54 27.06
Non-Goodwill Companies(30) 17.89 177.00 23.83 177.00 18.29 0.44 1.66 32.74
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 27.43 234.53 28.78 225.97 28.15 0.51 1.93 38.97
BIF-Insured Thrifts(3) 26.44 294.67 31.87 310.58 0.00 0.47 1.45 44.13
NASDAQ Listed OTC Companies(23) 26.77 245.81 29.32 242.89 28.15 0.50 1.85 40.69
Florida Companies(3) 0.00 225.04 21.93 225.77 0.00 0.90 2.84 0.00
Mid-Atlantic Companies(11) 28.57 247.75 30.60 241.26 0.00 0.28 1.22 36.08
Mid-West Companies(7) 27.43 238.81 30.30 239.21 28.15 0.69 2.51 48.46
New England Companies(1) 24.31 306.75 27.67 307.02 0.00 0.76 2.17 52.78
Thrift Strategy(22) 28.00 241.74 29.42 238.31 28.15 0.49 1.83 39.18
Diversified Strategy(1) 24.31 306.75 27.67 307.02 0.00 0.76 2.17 52.78
Companies Issuing Dividends(22) 26.77 249.96 29.59 247.14 28.15 0.53 1.96 45.78
Companies Without Dividends(1) 0.00 183.46 25.07 183.46 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(16) 26.77 258.58 26.59 255.49 28.15 0.49 1.68 45.78
Equity/Assets greater than 12%(7) 0.00 217.70 35.86 217.70 0.00 0.54 2.24 0.00
Holding Company Structure(2) 28.57 249.58 29.80 297.03 0.00 0.28 0.93 26.67
Assets Over $1 Billion(6) 24.31 292.21 27.53 268.86 0.00 0.51 1.88 44.70
Assets $500 Million-$1 Billion(2) 0.00 220.84 25.05 220.84 0.00 0.90 2.58 0.00
Assets $250-$500 Million(5) 27.43 257.46 30.00 258.11 28.15 0.54 1.90 40.68
Assets less than $250 Million(10) 28.57 229.23 30.36 234.50 0.00 0.44 1.73 38.28
Goodwill Companies(9) 26.77 271.23 26.67 266.66 28.15 0.47 1.65 40.29
Non-Goodwill Companies(14) 0.00 234.25 30.77 234.25 0.00 0.52 1.95 41.19
MHC Institutions(23) 26.77 245.81 29.32 242.89 28.15 0.50 1.85 40.69
</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 c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 15.66 305.85 12.45 NM 18.31 0.88 1.43 22.34
CSA Coast Savings Financial of CA 21.26 247.92 12.89 250.80 19.90 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 17.51 256.78 15.83 287.02 17.51 0.33 0.62 10.93
DME Dime Bancorp, Inc. of NY* 20.00 250.48 13.59 263.16 20.31 0.16 0.62 12.31
DSL Downey Financial Corp. of CA 18.88 180.20 12.86 182.54 19.67 0.32 1.14 21.48
EBI Equality Bancorp of St Louis 28.06 149.45 14.82 149.45 28.06 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 17.52 191.75 9.89 193.59 17.60 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 19.46 186.24 10.52 208.08 16.23 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.40 201.30 13.21 201.30 15.66 0.50 0.55 8.43
GPT GreenPoint Fin. Corp. of NY* 19.88 226.76 21.98 NM 20.36 1.00 1.49 29.59
JSB JSB Financial, Inc. of NY 16.33 135.06 31.36 135.06 18.37 1.40 2.89 47.14
NYB New York Bancorp, Inc. of NY 15.96 NM 25.18 NM 15.57 0.60 1.57 25.00
WES Westcorp Inc. of Orange CA 13.12 132.23 12.01 132.54 NM 0.40 2.33 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 24.35 137.17 23.25 137.17 25.13 0.36 1.52 37.11
ANE Alliance Bancorp of New Englan* 14.67 154.06 11.35 157.96 15.92 0.20 1.19 17.39
BKC American Bank of Waterbury CT* 14.98 210.93 18.58 218.95 17.75 1.44 2.94 44.04
BFD BostonFed Bancorp of MA 17.13 137.22 11.69 142.54 18.92 0.28 1.41 24.14
CFX CFX Corp of NH(8)* NM 276.78 24.11 287.15 NM 0.88 3.10 NM
CNY Carver Bancorp, Inc. of NY NM 111.80 9.39 116.34 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 28.57 121.70 16.73 121.70 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 22.50 NM 2.48 NM 25.00 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 129.87 30.98 129.87 NM 0.20 1.00 38.46
FAB FirstFed America Bancorp of MA NM 140.29 17.12 140.29 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 19.81 126.49 18.50 127.71 20.46 0.48 2.58 51.06
KNK Kankakee Bancorp of IL 15.99 126.17 14.42 133.83 16.29 0.48 1.40 22.33
KYF Kentucky First Bancorp of KY 18.83 130.12 21.73 130.12 19.08 0.50 3.40 64.10
MBB MSB Bancorp of Middletown NY* NM 144.21 10.66 293.83 NM 0.60 1.97 NM
PDB Piedmont Bancorp of NC NM 137.17 22.54 137.17 NM 0.40 3.86 NM
SSB Scotland Bancorp of NC 15.53 134.69 30.46 134.69 15.77 0.30 2.93 45.45
SZB SouthFirst Bancshares of AL NM 128.39 17.97 128.39 NM 0.50 2.42 NM
SRN Southern Banc Company of AL NM 121.74 20.71 123.01 NM 0.35 1.97 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 18.75 132.83 17.87 132.83 19.63 0.50 2.38 44.64
FTF Texarkana Fst. Fin. Corp of AR 15.99 168.08 25.75 168.08 15.99 0.56 2.17 34.78
THR Three Rivers Fin. Corp. of MI NM 130.31 17.54 130.81 22.50 0.40 1.98 64.52
WSB Washington SB, FSB of MD 28.48 137.98 11.56 137.98 20.34 0.10 1.40 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.13 119.54 10.34 121.89 28.57 0.28 1.08 15.22
AFED AFSALA Bancorp, Inc. of NY 22.87 127.20 17.14 127.20 22.87 0.24 1.28 29.27
ALBK ALBANK Fin. Corp. of Albany NY 15.92 172.35 15.93 195.66 16.03 0.72 1.57 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 21.09 131.07 20.41 131.07 22.50 0.40 2.96 62.50
ABBK Abington Savings Bank of MA* 16.59 195.57 13.94 215.79 18.63 0.40 1.05 17.47
AABC Access Anytime Bancorp of NM 8.53 143.14 12.38 143.14 9.19 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 21.39 118.18 18.20 118.18 21.91 0.32 1.80 38.55
AADV Advantage Bancorp of WI(8) 20.15 217.39 20.74 233.66 22.47 0.40 0.60 12.12
AFCB Affiliated Comm BC, Inc of MA 18.33 192.22 18.77 193.36 18.53 0.60 1.84 33.71
ALBC Albion Banc Corp. of Albion NY 21.37 115.42 9.89 115.42 21.71 0.32 1.14 24.43
ABCL Allied Bancorp of IL 25.00 164.60 15.50 166.67 22.46 0.44 1.66 41.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATSB AmTrust Capital Corp. of IN 25.46 94.96 10.38 95.95 NM 0.20 1.45 37.04
AHCI Ambanc Holding Co., Inc. of NY* NM 123.54 15.98 123.54 NM 0.20 1.11 NM
ASBI Ameriana Bancorp of IN 17.92 148.57 16.65 148.57 19.66 0.64 3.16 56.64
AFFFZ America First Fin. Fund of CA(8) 6.77 158.05 13.22 159.73 6.70 1.60 3.23 21.89
ABCW Anchor Bancorp Wisconsin of WI 16.75 253.26 16.21 257.73 17.95 0.32 0.91 15.31
ANDB Andover Bancorp, Inc. of MA* 14.84 184.41 14.98 184.41 15.20 0.76 2.04 30.28
ASFC Astoria Financial Corp. of NY 19.38 194.41 15.00 229.85 20.49 0.60 1.05 20.27
AVND Avondale Fin. Corp. of IL NM 124.20 9.58 124.20 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 22.10 276.23 29.70 276.23 24.26 0.50 2.02 44.64
BPLS Bank Plus Corp. of CA 19.23 136.46 6.17 136.61 23.15 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 27.12 180.38 25.53 180.38 NM 0.21 1.31 35.59
BANC BankAtlantic Bancorp of FL 12.70 220.48 12.14 266.78 24.22 0.13 0.84 10.66
BKUNA BankUnited SA of FL 27.55 192.03 6.00 244.12 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 24.56 235.45 13.70 281.89 21.93 0.40 1.15 28.17
FSNJ Bayonne Banchsares of NJ NM 115.78 18.09 115.78 NM 0.17 1.39 68.00
BFSB Bedford Bancshares of VA 20.32 164.44 23.18 164.44 20.47 0.56 1.98 40.29
BFFC Big Foot Fin. Corp. of IL NM 125.25 21.90 125.25 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 20.16 232.34 22.42 232.34 20.16 0.08 1.28 25.81
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 18.54 124.32 21.03 124.32 20.45 0.40 1.83 33.90
CCFH CCF Holding Company of GA NM 138.99 14.81 138.99 NM 0.55 2.78 NM
CENF CENFED Financial Corp. of CA 17.27 193.49 10.76 193.76 19.18 0.36 0.86 14.94
CFSB CFSB Bancorp of Lansing MI 17.61 267.61 20.63 267.61 18.75 0.68 1.95 34.34
CKFB CKF Bancorp of Danville KY 15.16 117.91 27.90 117.91 20.33 0.50 2.70 40.98
CNSB CNS Bancorp of MO NM 149.93 36.48 149.93 NM 0.24 1.12 51.06
CSBF CSB Financial Group Inc of IL* NM 102.08 25.55 107.99 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.10 127.95 20.75 127.95 14.35 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 14.45 166.89 16.00 180.25 17.12 0.54 2.16 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) 19.38 198.72 18.16 198.72 19.70 0.24 1.03 20.00
CFNC Carolina Fincorp of NC* 25.17 126.58 28.59 126.58 25.91 0.24 1.36 34.29
CASB Cascade SB of Everett WA(8) 19.62 152.51 10.13 152.51 19.62 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.68 112.72 27.93 112.72 20.44 0.32 1.84 38.10
CNIT Cenit Bancorp of Norfolk VA 19.10 219.71 15.26 239.90 20.56 1.00 1.54 29.50
CEBK Central Co-Op. Bank of MA* 18.49 154.08 15.30 172.19 18.24 0.32 1.19 22.07
CENB Century Bancshares of NC* 19.81 110.49 33.47 110.49 19.76 2.00 2.41 47.73
CBSB Charter Financial Inc. of IL(8) 22.62 173.23 25.06 195.80 16.16 0.32 1.35 30.48
COFI Charter One Financial of OH 17.03 286.64 20.22 312.19 17.42 1.00 1.61 27.47
CVAL Chester Valley Bancorp of PA 19.30 205.88 17.83 205.88 20.19 0.44 1.68 32.35
CTZN CitFed Bancorp of Dayton OH 19.51 242.59 15.22 266.90 19.51 0.24 0.62 12.12
CLAS Classic Bancshares of KY NM 108.84 16.22 128.66 23.55 0.28 1.72 54.90
CMSB Cmnwealth Bancorp of PA 21.08 165.13 15.33 211.82 25.00 0.28 1.30 27.45
CBSA Coastal Bancorp of Houston TX 12.08 142.44 4.94 169.39 11.74 0.48 1.66 20.00
CFCP Coastal Fin. Corp. of SC 16.80 301.29 19.75 301.29 19.44 0.36 1.71 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 220.84 25.05 220.84 NM 0.90 2.58 NM
CFTP Community Fed. Bancorp of MS NM 160.38 42.87 160.38 NM 0.30 1.50 45.45
CFFC Community Fin. Corp. of VA 17.67 139.55 18.43 139.55 17.55 0.56 2.11 37.33
CFBC Community First Bnkg Co. of GA NM 135.74 24.17 137.58 NM 0.60 1.52 46.51
CIBI Community Inv. Bancorp of OH 15.59 130.17 15.29 130.17 15.59 0.32 2.03 31.68
COOP Cooperative Bk.for Svgs. of NC 25.68 202.27 15.56 202.27 25.68 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 21.35 103.29 24.48 103.29 21.05 0.40 2.60 55.56
DNFC D&N Financial Corp. of MI 16.52 248.21 13.04 250.90 17.90 0.20 0.72 11.90
DCBI Delphos Citizens Bancorp of OH 21.04 117.75 31.36 117.75 21.04 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 21.25 157.80 21.30 183.15 21.84 0.24 1.03 21.82
DIBK Dime Financial Corp. of CT* 10.00 209.77 17.08 216.01 10.03 0.44 1.44 14.43
EGLB Eagle BancGroup of IL NM 113.04 13.40 113.04 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBSI Eagle Bancshares of Tucker GA 21.59 150.91 12.34 150.91 21.35 0.60 3.16 68.18
EGFC Eagle Financial Corp. of CT(8) NM 228.07 15.74 286.62 NM 1.00 1.91 NM
ETFS East Texas Fin. Serv. of TX 27.49 101.33 18.25 101.33 29.46 0.20 0.97 26.67
EMLD Emerald Financial Corp of OH 15.42 199.35 15.55 202.19 16.67 0.24 1.30 20.00
EIRE Emerald Island Bancorp, MA(8)* 20.00 232.39 16.23 232.39 18.82 0.28 0.88 17.50
EFBC Empire Federal Bancorp of MT NM 111.79 39.01 111.79 NM 0.30 1.82 NM
EFBI Enterprise Fed. Bancorp of OH 23.74 178.57 20.41 178.68 28.54 1.00 3.54 NM
EQSB Equitable FSB of Wheaton MD 22.05 187.98 9.47 187.98 13.82 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 143.11 20.94 143.11 NM 0.80 2.83 NM
FFBS FFBS Bancorp of Columbus MS 19.18 155.16 25.92 155.16 19.18 0.50 2.25 43.10
FFDF FFD Financial Corp. of OH 16.05 125.30 30.50 125.30 NM 0.30 1.61 25.86
FFLC FFLC Bancorp of Leesburg FL 23.67 162.05 22.26 162.05 25.00 0.29 1.30 30.85
FFFC FFVA Financial Corp. of VA 19.85 202.10 26.90 206.30 20.71 0.48 1.42 28.24
FFWC FFW Corporation of Wabash IN 17.18 169.51 16.45 186.72 17.54 0.72 1.72 29.63
FFYF FFY Financial Corp. of OH 17.25 158.87 21.76 158.87 17.53 0.80 2.48 42.78
FMCO FMS Financial Corp. of NJ 14.00 207.28 13.45 210.34 14.12 0.28 0.85 11.97
FFHH FSF Financial Corp. of MN 18.38 132.69 14.83 132.69 18.56 0.50 2.62 48.08
FOBC Fed One Bancorp of Wheeling WV 19.29 157.98 17.66 165.34 19.29 0.62 2.33 44.93
FBCI Fidelity Bancorp of Chicago IL NM 123.26 12.91 123.46 22.12 0.32 1.39 NM
FSBI Fidelity Bancorp, Inc. of PA 15.71 165.26 11.23 165.26 16.08 0.36 1.31 20.57
FFFL Fidelity FSB, MHC of FL (47.7) NM 229.25 18.81 230.71 NM 0.90 3.10 NM
FFED Fidelity Fed. Bancorp of IN 15.48 201.36 12.30 201.36 15.95 0.40 3.86 59.70
FFOH Fidelity Financial of OH 19.41 119.53 15.57 134.70 17.35 0.28 1.90 36.84
FIBC Financial Bancorp, Inc. of NY 16.78 155.95 14.11 156.75 15.71 0.40 1.63 27.40
FBSI First Bancshares of MO 14.94 125.42 17.46 125.42 16.56 0.20 0.77 11.49
FBBC First Bell Bancorp of PA 15.78 168.97 17.80 168.97 16.19 0.40 2.15 33.90
FBER First Bergen Bancorp of NJ 27.46 143.70 19.62 143.70 27.46 0.20 1.03 28.17
SKBO First Carnegie,MHC of PA(45.0) NM 179.37 29.50 179.37 NM 0.30 1.59 NM
FSTC First Citizens Corp of GA 12.33 215.03 21.75 272.68 13.79 0.29 1.08 13.36
FCME First Coastal Corp. of ME* 3.32 140.71 13.72 140.71 3.46 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 21.62 200.00 26.16 202.53 21.82 0.48 2.00 43.24
FDEF First Defiance Fin.Corp. of OH 23.41 116.97 23.00 116.97 24.18 0.32 2.17 50.79
FESX First Essex Bancorp of MA* 15.60 174.37 12.91 199.33 18.20 0.56 2.70 42.11
FFES First FS&LA of E. Hartford CT 19.33 152.13 10.08 152.13 17.03 0.60 1.62 31.25
FFSX First FS&LA. MHC of IA (46.1) 27.43 229.90 20.07 231.88 28.15 0.48 1.48 40.68
BDJI First Fed. Bancorp. of MN 26.67 157.84 16.90 157.84 27.18 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 21.02 142.73 21.25 142.73 21.99 0.24 1.01 21.24
FTFC First Fed. Capital Corp. of WI 16.81 263.96 17.78 280.09 20.30 0.48 1.59 26.67
FFKY First Fed. Fin. Corp. of KY 15.07 174.60 23.92 185.03 15.17 0.56 2.55 38.36
FFBZ First Federal Bancorp of OH 16.80 211.69 16.24 211.91 16.67 0.28 1.33 22.40
FFCH First Fin. Holdings Inc. of SC 21.62 291.79 17.84 291.79 22.22 0.84 1.75 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 26.07 156.49 14.11 157.39 22.07 0.40 1.46 38.10
FGHC First Georgia Hold. Corp of GA 25.78 195.96 16.10 213.73 NM 0.05 0.61 15.63
FSPG First Home Bancorp of NJ 16.52 216.00 14.83 219.30 16.91 0.40 1.39 22.99
FFSL First Independence Corp. of KS 20.37 126.12 12.92 126.12 20.37 0.25 1.68 34.25
FISB First Indiana Corp. of IN 19.14 219.39 21.16 222.06 23.31 0.48 1.55 29.63
FKFS First Keystone Fin. Corp of PA 17.38 185.37 12.29 185.37 18.97 0.20 0.54 9.30
FLKY First Lancaster Bncshrs of KY 29.72 107.73 31.74 107.73 29.72 0.50 3.17 NM
FLFC First Liberty Fin. Corp. of GA 23.11 247.97 18.28 275.02 28.24 0.44 1.44 33.33
CASH First Midwest Fin. Corp. of IA 15.83 132.65 14.26 149.34 16.57 0.48 2.25 35.56
FMBD First Mutual Bancorp of IL NM 131.75 17.65 172.78 NM 0.32 1.58 NM
FMSB First Mutual SB of Bellevue WA* 15.89 225.76 15.33 225.76 16.19 0.20 1.18 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 20.95 173.07 10.82 177.18 25.00 0.60 1.55 32.43
FSLA First SB SLA MHC of NJ (47.5)(8) NM 335.92 31.90 NM NM 0.48 1.15 42.11
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOPN First SB, SSB, Moore Co. of NC 17.23 123.44 28.40 123.44 17.23 0.88 3.87 66.67
FWWB First Savings Bancorp of WA* 26.52 175.94 25.04 190.49 27.93 0.28 1.07 28.28
FSFF First SecurityFed Fin of IL 26.13 124.53 33.66 124.53 26.13 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 15.04 150.78 17.52 150.78 15.11 0.60 1.76 26.55
FBNW FirstBank Corp of Clarkston WA NM 120.50 19.80 120.50 NM 0.28 1.58 NM
FFDB FirstFed Bancorp of AL 13.38 144.08 13.88 157.51 13.73 0.50 2.35 31.45
FSPT FirstSpartan Fin. Corp. of SC 29.60 126.84 33.99 126.84 29.60 0.60 1.62 48.00
FLAG Flag Financial Corp of GA 19.18 181.71 16.55 181.71 23.06 0.34 1.76 33.66
FLGS Flagstar Bancorp, Inc of MI 11.52 215.07 12.85 223.89 23.04 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 23.23 134.66 19.12 140.24 22.12 0.24 1.04 24.24
FBHC Fort Bend Holding Corp. of TX 16.46 170.45 10.50 182.60 19.66 0.40 1.98 32.52
FTSB Fort Thomas Fin. Corp. of KY 20.39 146.78 23.68 146.78 20.39 0.25 1.61 32.89
FKKYD Frankfort First Bancorp of KY NM 136.21 22.92 136.21 NM 0.80 4.30 NM
FTNB Fulton Bancorp of MO 29.27 143.62 35.42 143.62 NM 0.20 0.94 27.40
GFSB GFS Bancorp of Grinnell IA 14.83 154.95 17.84 154.95 14.83 0.26 1.52 22.61
GUPB GFSB Bancorp of Gallup NM 20.88 115.06 14.75 115.06 20.88 0.40 1.98 41.24
GSLA GS Financial Corp. of LA NM 109.49 47.22 109.49 NM 0.28 1.56 68.29
GOSB GSB Financial Corp. of NY NM 124.24 33.62 124.24 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 116.17 32.22 116.17 NM 0.40 2.13 67.80
GBCI Glacier Bancorp of MT 18.24 264.57 26.42 271.01 17.80 0.48 2.16 39.34
GFCO Glenway Financial Corp. of OH 18.69 152.01 14.38 153.78 19.27 0.40 2.16 40.40
GTPS Great American Bancorp of IL NM 110.12 22.50 110.12 NM 0.40 2.16 NM
GTFN Great Financial Corp. of KY(8) 22.84 238.38 24.01 248.39 NM 0.60 1.19 27.27
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 327.68 38.14 327.68 NM 0.36 1.24 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 Guarnty FS&LA,MHC of MO (31.0)(8) NM 296.80 38.67 296.80 NM 0.44 1.69 70.97
HCBB HCB Bancshares of AR NM 95.44 17.98 99.20 NM 0.00 0.00 0.00
HEMT HF Bancorp of Hemet CA NM 129.11 10.24 154.93 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 12.80 135.80 12.80 135.80 13.96 0.42 1.60 20.49
HFNC HFNC Financial Corp. of NC 23.79 155.59 29.25 155.59 27.83 0.28 1.90 45.16
HMNF HMN Financial, Inc. of MN 19.59 130.66 19.44 130.66 23.23 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.76 144.00 10.52 144.00 17.13 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 25.00 344.12 29.46 NM 25.19 1.40 2.09 52.24
HRBF Harbor Federal Bancorp of MD 26.10 141.79 18.51 141.79 26.10 0.48 2.02 52.75
HFSA Hardin Bancorp of Hardin MO 18.88 112.63 12.99 112.63 19.94 0.48 2.70 51.06
HARL Harleysville SA of PA 14.33 213.44 14.14 213.44 14.26 0.44 1.50 21.46
HFGI Harrington Fin. Group of IN 18.84 163.05 7.89 163.05 22.54 0.12 0.95 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 30.81 NM NM 0.22 1.14 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 119.05 32.06 119.05 23.63 0.40 2.32 72.73
HHFC Harvest Home Fin. Corp. of OH NM 129.96 16.24 129.96 29.50 0.44 2.98 NM
HAVN Haven Bancorp of Woodhaven NY 16.60 173.58 10.41 174.14 16.48 0.30 1.38 22.90
HTHR Hawthorne Fin. Corp. of CA 8.38 141.83 6.89 141.83 8.71 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 115.34 22.27 115.34 28.48 0.24 1.38 NM
HBNK Highland Federal Bank of CA 13.64 191.10 14.65 191.10 17.96 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 14.08 173.00 16.79 173.00 14.08 0.48 1.72 24.24
HBEI Home Bancorp of Elgin IL NM 132.53 36.53 132.53 NM 0.40 2.19 NM
HBFW Home Bancorp of Fort Wayne IN NM 153.92 20.45 153.92 23.58 0.20 0.74 27.78
HBBI Home Building Bancorp of IN 20.24 112.49 15.88 112.49 20.63 0.30 1.41 28.57
HCFC Home City Fin. Corp. of OH 18.75 113.56 22.27 113.56 18.55 0.36 2.09 39.13
HOMF Home Fed Bancorp of Seymour IN 14.94 220.71 19.11 227.47 16.46 0.35 1.35 20.11
HWEN Home Financial Bancorp of IN 23.81 113.02 19.83 113.02 27.53 0.20 1.14 27.03
HPBC Home Port Bancorp, Inc. of MA* 13.07 196.31 20.96 196.31 13.14 0.80 3.50 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 27.46 208.03 14.21 208.03 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 15.26 114.41 11.39 114.41 18.95 0.18 1.53 23.38
HRZB Horizon Financial Corp. of WA* 15.71 153.27 23.97 153.27 16.00 0.44 2.57 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-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. of NJ NM 148.59 25.88 148.59 NM 0.40 2.30 NM
ISBF ISB Financial Corp. of LA 28.73 166.89 20.12 195.03 29.03 0.50 1.79 51.55
ITLA Imperial Thrift & Loan of CA* 11.68 144.07 15.45 144.66 11.68 0.00 0.00 0.00
IFSB Independence FSB of DC 21.54 100.79 6.94 114.01 25.93 0.22 1.57 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 18.49 154.08 26.47 154.08 17.59 0.56 3.09 57.14
IWBK Interwest SB of Oak Harbor WA 15.58 243.34 15.44 247.79 16.92 0.64 1.63 25.40
IPSW Ipswich SB of Ipswich MA* 14.49 266.74 14.97 266.74 18.21 0.12 0.94 13.64
JXVL Jacksonville Bancorp of TX 20.97 139.26 20.77 139.26 15.99 0.50 2.65 55.56
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 195.19 16.66 251.61 23.24 0.56 1.30 62.22
JOAC Joachim Bancorp of MO NM 109.73 30.88 109.73 NM 0.50 3.33 NM
KSAV KS Bancorp of Kenly NC 16.07 136.78 18.11 136.86 16.19 0.60 2.67 42.86
KSBK KSB Bancorp of Kingfield ME(8)* 19.44 248.23 17.82 262.50 19.09 0.08 0.38 7.41
KFBI Klamath First Bancorp of OR 25.29 149.10 21.98 164.00 25.29 0.32 1.49 37.65
LSBI LSB Fin. Corp. of Lafayette IN 17.24 146.98 12.69 146.98 19.54 0.34 1.23 21.12
LVSB Lakeview SB of Paterson NJ 18.56 181.40 22.17 211.84 25.64 0.13 0.52 9.70
LARK Landmark Bancshares of KS 20.39 124.87 17.22 124.87 17.22 0.40 1.72 35.09
LARL Laurel Capital Group of PA 13.46 185.07 19.37 185.07 13.93 0.52 1.85 24.88
LSBX Lawrence Savings Bank of MA* 11.09 200.89 19.12 200.89 11.17 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 256.55 42.67 256.55 NM 0.51 2.17 NM
LXMO Lexington B&L Fin. Corp. of MO NM 116.15 32.89 116.15 24.11 0.30 1.75 54.55
LIFB Life Bancorp of Norfolk VA(8) 26.67 222.63 23.85 228.86 28.80 0.48 1.33 35.56
LFBI Little Falls Bancorp of NJ NM 139.37 16.28 151.12 NM 0.20 0.99 30.30
LOGN Logansport Fin. Corp. of IN 16.76 118.58 22.41 118.58 16.05 0.40 2.62 43.96
LONF London Financial Corp. of OH 20.33 103.25 20.56 103.25 21.79 0.24 1.57 32.00
LISB Long Island Bancorp, Inc of NY 22.45 203.39 18.73 205.28 26.58 0.60 1.30 29.13
MAFB MAF Bancorp of IL 13.73 197.79 15.41 225.12 13.85 0.28 0.82 11.29
MBLF MBLA Financial Corp. of MO 18.79 121.87 15.42 121.87 18.41 0.40 1.47 27.59
MFBC MFB Corp. of Mishawaka IN 19.42 115.76 15.16 115.76 19.42 0.32 1.36 26.45
MLBC ML Bancorp of Villanova PA(8) 25.63 227.61 15.76 243.85 NM 0.40 1.30 33.33
MSBF MSB Financial Corp. of MI 22.67 188.95 31.24 188.95 23.49 0.28 1.44 32.56
MARN Marion Capital Holdings of IN 16.47 123.76 27.16 123.76 16.67 0.88 3.20 52.69
MRKF Market Fin. Corp. of OH NM 103.69 36.75 103.69 NM 0.28 1.81 73.68
MFSL Maryland Fed. Bancorp of MD 25.00 180.00 15.09 182.31 17.31 0.42 1.56 38.89
MASB MassBank Corp. of Reading MA* 16.77 165.08 17.80 167.58 17.86 0.96 2.06 34.53
MFLR Mayflower Co-Op. Bank of MA* 16.27 169.89 16.38 172.73 17.21 0.68 2.86 46.58
MECH Mechanics SB of Hartford CT* 10.37 167.61 17.44 167.61 10.41 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 15.16 171.90 15.49 183.43 16.27 0.72 1.91 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* 16.20 279.55 20.85 279.55 16.20 0.12 1.37 22.22
MCBS Mid Continent Bancshares of KS(8) 21.01 219.58 21.66 219.58 20.25 0.40 0.89 18.78
MIFC Mid Iowa Financial Corp. of IA 15.85 160.71 15.04 160.94 11.25 0.08 0.71 11.27
MCBN Mid-Coast Bancorp of ME 14.97 126.93 10.90 126.93 15.80 0.52 1.81 27.08
MWBI Midwest Bancshares, Inc. of IA 14.67 174.36 12.06 174.36 16.59 0.24 1.35 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 19.96 247.55 21.82 256.71 20.26 0.34 1.23 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.20 132.05 16.60 132.05 28.53 0.60 3.97 NM
MIVI Miss. View Hold. Co. of MN 26.52 98.31 18.56 98.31 18.04 0.16 0.91 24.24
MBSP Mitchell Bancorp of NC* 29.24 112.30 46.43 112.30 29.24 0.40 2.32 67.80
MBBC Monterey Bay Bancorp of CA NM 130.23 14.98 140.43 NM 0.12 0.63 20.69
MONT Montgomery Fin. Corp. of IN 29.76 105.84 20.26 105.84 29.76 0.22 1.76 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 21.46 176.50 13.81 205.51 26.56 0.50 2.35 50.51
NSLB NS&L Bancorp of Neosho MO NM 111.99 21.90 111.99 28.91 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 19.29 160.33 16.31 160.33 20.15 0.32 2.37 45.71
NASB North American SB of MO 13.17 212.85 16.34 220.23 13.99 0.80 1.48 19.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NBSI North Bancshares of Chicago IL NM 151.82 20.39 151.82 NM 0.48 1.86 60.76
FFFD North Central Bancshares of IA 16.48 126.37 28.96 126.37 16.48 0.25 1.31 21.55
NBN Northeast Bancorp of ME* 20.16 193.55 13.46 219.03 24.44 0.32 1.16 23.36
NEIB Northeast Indiana Bncrp of IN 17.37 132.17 18.99 132.17 17.37 0.34 1.66 28.81
NWEQ Northwest Equity Corp. of WI 16.45 142.49 16.66 142.49 17.04 0.56 2.91 47.86
NWSB Northwest SB, MHC of PA (30.7) NM 340.65 32.83 NM NM 0.16 1.08 39.02
NSSY Norwalk Savings Society of CT* 15.83 185.46 14.94 192.31 13.87 0.40 1.05 16.67
NSSB Norwich Financial Corp. of CT* 20.62 201.40 23.49 221.73 22.29 0.56 1.85 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 16.06 127.77 13.95 127.77 16.56 0.88 3.32 53.33
OCFC Ocean Fin. Corp. of NJ 22.17 134.82 20.45 134.82 22.44 0.80 2.15 47.62
OCN Ocwen Financial Corp. of FL 18.19 NM 49.88 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 27.22 120.84 29.02 120.84 27.22 0.00 0.00 0.00
PBHC OswegoCity SB, MHC of NY (46.)* 28.57 249.58 29.80 297.03 NM 0.28 0.93 26.67
OFCP Ottawa Financial Corp. of MI 21.99 200.49 17.52 248.21 22.52 0.40 1.41 31.01
PFFB PFF Bancorp of Pomona CA 29.42 130.16 13.09 131.59 28.97 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 25.69 125.34 46.78 125.34 25.34 0.48 2.59 66.67
PVFC PVF Capital Corp. of OH 10.92 195.20 14.02 195.20 11.40 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 266.48 22.69 266.48 NM 0.12 0.42 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 14.38 147.25 19.01 148.30 14.54 1.00 4.02 57.80
PFED Park Bancorp of Chicago IL 22.19 106.86 24.72 106.86 21.39 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.02 189.14 14.60 190.40 14.02 0.52 1.81 25.37
PEEK Peekskill Fin. Corp. of NY 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PFSB PennFed Fin. Services of NJ 15.65 161.68 11.85 190.99 15.65 0.28 0.84 13.08
PWBC PennFirst Bancorp of PA 19.60 143.67 12.02 161.49 19.60 0.36 1.93 37.89
PWBK Pennwood SB of PA* 22.29 120.68 22.13 120.68 20.33 0.32 1.73 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 19.35 183.77 28.01 183.77 19.35 0.43 1.79 34.68
PBCT Peoples Bank, MHC of CT (40.1)* 24.31 306.75 27.67 307.02 NM 0.76 2.17 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 327.90 55.57 NM NM 0.35 0.89 40.23
PFFC Peoples Fin. Corp. of OH 25.94 87.14 23.70 87.14 25.94 0.50 3.64 NM
PHBK Peoples Heritage Fin Grp of ME* 17.31 264.56 19.71 310.06 17.31 0.84 1.93 33.47
PSFC Peoples Sidney Fin. Corp of OH NM 118.39 29.94 118.39 NM 0.28 1.62 50.00
PERM Permanent Bancorp of IN 20.68 133.57 12.64 135.38 20.85 0.40 1.53 31.75
PMFI Perpetual Midwest Fin. of IA NM 152.14 12.94 152.14 NM 0.30 1.08 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 301.14 35.61 301.14 NM 1.40 2.31 NM
PCBC Perry Co. Fin. Corp. of MO 25.83 123.67 23.74 123.67 22.36 0.40 1.72 44.44
PHFC Pittsburgh Home Fin. of PA 17.57 121.33 12.79 122.58 19.72 0.24 1.35 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 25.00 245.63 15.54 245.63 25.35 0.90 2.47 61.64
PTRS Potters Financial Corp of OH 15.42 165.18 14.55 165.18 15.68 0.20 1.08 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 28.03 175.47 14.77 175.47 28.03 0.20 1.93 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 183.46 25.07 183.46 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 22.65 114.04 12.78 114.04 22.65 0.12 0.62 14.12
PFNC Progress Financial Corp. of PA 17.22 266.78 14.23 299.23 21.83 0.12 0.77 13.33
PSBK Progressive Bank, Inc. of NY* 16.36 178.39 15.58 198.13 16.67 0.68 1.89 30.91
PROV Provident Fin. Holdings of CA 22.87 121.74 16.23 121.74 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 267.14 34.86 267.14 NM 1.10 3.67 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 193.05 23.13 193.05 NM 0.30 1.50 55.56
PULS Pulse Bancorp of S. River NJ 14.54 190.80 15.67 190.80 14.38 0.70 2.62 38.04
QCFB QCF Bancorp of Virginia MN 19.52 143.65 25.13 143.65 19.52 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.81 139.40 11.79 139.40 18.58 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 25.35 319.06 35.78 319.06 25.17 0.80 2.19 55.56
RARB Raritan Bancorp. of Raritan NJ* 16.87 217.39 16.02 220.88 17.08 0.48 1.75 29.45
REDF RedFed Bancorp of Redlands CA 15.52 177.25 14.75 177.89 15.52 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 17.35 176.26 14.56 239.94 16.43 0.64 1.88 32.65
RELI Reliance Bancshares Inc of WI* NM 96.62 46.66 96.62 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RIVR River Valley Bancorp of IN NM 123.86 15.35 125.75 29.23 0.16 0.88 34.78
RVSB Riverview Bancorp of WA NM 155.54 32.28 161.63 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* 29.97 155.84 27.48 156.62 23.53 0.28 1.28 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 251.68 23.49 251.68 NM 0.40 1.33 NM
SFED SFS Bancorp of Schenectady NY 26.06 138.89 17.32 138.89 26.06 0.28 1.14 29.79
SGVB SGV Bancorp of W. Covina CA 26.54 132.79 9.88 134.87 24.30 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 124.73 15.76 124.73 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 18.23 195.04 14.35 195.04 18.41 0.56 1.50 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 17.98 246.69 22.86 250.61 17.83 0.32 1.56 28.07
SMFC Sho-Me Fin. Corp. of MO(8) 18.20 237.41 21.43 237.41 19.19 0.00 0.00 0.00
SKAN Skaneateles Bancorp Inc of NY* 15.73 155.95 10.92 160.60 16.27 0.27 1.43 22.50
SOBI Sobieski Bancorp of S. Bend IN NM 121.14 17.90 121.14 NM 0.32 1.65 50.00
SOSA Somerset Savings Bank of MA(8)* 15.72 244.17 16.10 244.17 16.23 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 29.95 137.44 35.27 137.44 29.03 0.40 2.12 63.49
SCBS Southern Commun. Bncshrs of AL NM 143.94 30.70 143.94 NM 0.30 1.58 NM
SMBC Southern Missouri Bncrp of MO 21.01 120.72 19.50 120.72 21.94 0.50 2.53 53.19
SWBI Southwest Bancshares of IL 17.00 159.28 18.07 159.28 17.59 0.80 3.14 53.33
SVRN Sovereign Bancorp of PA NM 298.62 13.22 NM 29.22 0.08 0.37 15.69
STFR St. Francis Cap. Corp. of WI 18.53 169.11 13.09 191.16 18.78 0.56 1.35 25.00
SPBC St. Paul Bancorp, Inc. of IL 18.17 210.77 18.95 211.30 18.17 0.40 1.58 28.78
SFFC StateFed Financial Corp. of IA 19.38 135.60 23.78 135.60 19.38 0.20 1.50 28.99
SFIN Statewide Fin. Corp. of NJ 18.91 156.90 14.69 157.23 18.91 0.44 1.96 36.97
STSA Sterling Financial Corp. of WA 20.43 163.71 8.60 178.87 22.61 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 29.27 164.38 10.66 164.99 20.11 0.32 0.89 26.02
ROSE T R Financial Corp. of NY* 17.82 255.92 15.96 255.92 19.82 0.64 1.91 34.04
THRD TF Financial Corp. of PA 24.39 167.23 19.45 189.37 28.33 0.40 1.34 32.79
TPNZ Tappan Zee Fin., Inc. of NY NM 140.85 23.97 140.85 NM 0.28 1.40 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 18.91 127.48 19.52 127.48 18.67 0.40 2.71 51.28
TWIN Twin City Bancorp of TN 19.89 129.78 16.80 129.78 23.53 0.40 2.83 56.34
UFRM United FS&LA of Rocky Mount NC 16.86 155.72 11.42 155.72 21.24 0.24 2.26 38.10
UBMT United Fin. Corp. of MT 20.70 124.75 29.96 124.75 20.87 1.00 3.96 NM
VABF Va. Beach Fed. Fin. Corp of VA 22.16 191.03 13.67 191.03 27.25 0.20 1.20 26.67
WHGB WHG Bancshares of MD NM 112.08 23.15 112.08 NM 0.32 2.02 NM
WSFS WSFS Financial Corp. of DE* 15.84 311.56 17.26 313.44 15.96 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.38 165.12 19.82 165.12 15.31 1.20 3.75 57.69
WRNB Warren Bancorp of Peabody MA* 10.60 211.75 22.55 211.75 11.94 0.52 2.41 25.49
WFSL Washington FS&LA of Seattle WA 14.42 210.92 26.47 229.78 14.49 0.92 2.89 41.63
WAMU Washington Mutual Inc. of WA(8)* NM 349.21 18.46 NM NM 1.12 1.63 NM
WYNE Wayne Bancorp of NJ 21.26 137.96 17.14 137.96 21.26 0.20 0.88 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 285.92 27.26 285.92 NM 0.62 2.05 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 202.00 47.23 202.00 NM 0.80 3.76 NM
WBST Webster Financial Corp. of CT NM 236.76 12.64 274.89 21.24 0.80 1.26 44.69
WEFC Wells Fin. Corp. of Wells MN 16.97 124.50 17.70 124.50 17.45 0.48 2.59 44.04
WCBI WestCo Bancorp of IL 14.10 136.53 21.21 136.53 14.89 0.68 2.57 36.17
WSTR WesterFed Fin. Corp. of MT 21.77 132.69 14.09 164.50 22.75 0.46 1.82 39.66
WOFC Western Ohio Fin. Corp. of OH NM 113.81 15.78 121.94 NM 1.00 3.76 NM
WWFC Westwood Fin. Corp. of NJ(8) 23.02 173.17 16.13 193.55 21.58 0.20 0.72 16.67
WEHO Westwood Hmstd Fin Corp of OH NM 100.35 27.75 100.35 26.39 0.28 1.96 59.57
WFI Winton Financial Corp. of OH 17.32 173.86 12.36 177.61 14.85 0.46 2.33 40.35
FFWD Wood Bancorp of OH 17.29 189.36 23.54 189.36 18.88 0.40 2.16 37.38
YFCB Yonkers Fin. Corp. of NY 19.13 129.13 18.10 129.13 18.94 0.24 1.28 24.49
YFED York Financial Corp. of PA 19.74 214.03 18.95 214.03 23.46 0.48 1.93 38.10
</TABLE>
<PAGE>
EXHIBIT IV-2
Gloversville Federal Savings and Loan Association
Historical Stock Price Indices
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ------ -----
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 1,104.4 382.1 225.1
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
December 12, 1997 7838.3 953.4 1,536.6 787.3 417.7
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Gloversville Federal Savings and Loan Association
Historical Thrift Stock Indices
<PAGE>
Index Values
Index Values Percent Change Since
---------------------------------- --------------------
11/28/97 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------
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
All SNL indices are market-vaiue 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, 0R, WA, WY
Source: SNL Securities DECEMBER 1997
<PAGE>
EXHIBIT IV-4
Gloversville Federal Savings and Loan Association
Market Area Acquisition Activity
<PAGE>
RP Financial, LC.
New York Thrift Merger and Acquisition Activity 1996-Present
<TABLE>
<CAPTION>
Seller Financials at Completion(1)
--------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assts ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Finl NY 880,196 8.37 0.54 6.43 3.82 35.46
10/07/97 Pending North Fork Bancorp NY New York Bancorp NY 3,283,653 5.08 1.61 30.99 1.09 58.08
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 4,032,365 7.66 0.96 12.26 0.66 132.02
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 82,249 9.28 1.32 3.59 1.14 117.28
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 2,541,888 8.25 0.72 9.20 7.84 9.20
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 643,180 7.81 1.58 20.12 1.04 94.15
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 7,348,042 5.35 0.75 13.91 0.72 105.64
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 1,580,435 7.67 1.29 17.19 0.51 121.82
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 485,132 15.93 0.64 3.84 0.19 19.25
09/24/95 02/29/96 Republic New York NY Brooklyn Bancorp NY 4,139,215 8.79 1.00 11.83 13.63 18.75
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 611,933 10.90 1.11 10.07 0.50 65.45
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 587,904 17.42 1.60 9.42 3.87 64.35
Average 2,184,683 9.38 1.10 12.40 2.92 70.12
Median 1,230,316 8.31 NM 10.95 1.07 64.90
</TABLE>
New York Thrift Merger and Acquisition Activity 1996-Present (Continued)
<TABLE>
<CAPTION>
Deal Terms and Pricing at Completion(1)
--------------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp Value Pr/Shr Consid Pr/Bk Tg Bk 4-Qtr Assets CoreDp
Date Date Buyer ST Seller ST ($M) ($) Type ($) (%) EPS (x) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Finl NY 143.5 10.61 Stock 181.42 181.42 48.24 16.30 13.37
10/07/97 Pending North Fork Bancorp NY New York Bancorp NY 831.6 37.11 Stock 480.13 480.13 19.95 25.33 43.83
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 872.5 56.76 Stock 264.99 271.58 21.83 21.26 26.93
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 13.0 272.50 Cash 169.09 169.71 12.99 15.47 9.86
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 414.9 25.16 Mixture 214.28 214.28 29.95 16.09 12.63
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 91.8 52.00 Cash 165.13 165.13 10.24 14.11 9.91
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 652.0 Cash 163.00 166.03 8.15 9.09 6.02
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 282.4 55.43 Stock 211.01 212.79 14.40 17.23 13.33
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 105.4 21.31 Cash 121.22 121.22 30.01 21.32 6.83
09/24/95 02/29/96 Republic New York NY Brooklyn Bancorp NY 529.6 41.50 Cash 132.76 132.76 25.94 12.84 4.18
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 112.8 32.00 Cash 155.64 155.64 15.24 18.22 9.91
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 127.8 22.06 Cash 125.20 125.20 13.70 22.20 5.58
Average 348.1 56.95 198.66 199.66 20.89 17.46 13.53
Median 213.0 37.11 167.11 167.87 17.60 16.77 9.91
</TABLE>
(1) Pending deals reflect financials, terms and pricing as of announcement date.
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Gloversville Federal Savings and Loan Association
Directors and Management Summary Resumes
<PAGE>
Exhibit IV-5
Gloversville FS&LA
Directors and Management Summary Resumes
Dr. Priscilla J. Bell. Dr. Bell has served as the President of Fulton
Montgomery Community College since 1995. From 1978 to 1995, Dr. Bell worked at
the Tacoma Community College, Tacoma, Washington, where she was Dean of Student
Services.
Timothy E. Delaney. Mr. Delaney is the President and Chief Financial
Officer of Delaney Construction Corporation, a company specializing in heavy
highway construction, which he founded in 1982.
Lewis E. Kolar. Mr. Kolar is the President and Chief Executive Officer of
the Association, a position he has held since October 1994. He previously served
as a Senior Vice President of Residential Mortgages at the National Bank & Trust
Company, Norwich, New York, where he worked from 1989 to 1994.
Donald I. Lee. Mr. Lee is the President of Lee & Lee Associates and a
partner in Lee's Deer Run Bed & Breakfast. Mr. Lee was also appointed as
appraiser for the Association in 1971.
Richard D. Ruby. Mr. Ruby has been the owner and President of Ruby &
Quiri, Inc., a home furnishings center, since 1969.
Dr. Robert J. Sofarelli. Dr. Sofarelli has been a veterinarian since 1971,
and is the owner of Saratoga Veterinary Hospital, Planned Pets, a Saratoga
veterinary hospital and Paws & Claws, a distributor of pet foods.
Menzo D. Case. Mr. Case is a certified public accountant and has served
as the Association's Treasurer and Secretary since December 1993. Mr. Case was
promoted to Executive Vice President and Chief Operating Officer in July 1994.
Previously, Mr. Case was an accountant with KPMG Peat Marwick from 1989 to 1993.
Michael J. Pepe. Mr. Pepe currently serves as the Association's Vice
President of Lending, a position he has held since 1995. Mr. Pepe was an
Assistant Vice President and Commercial Loan Officer for Amsterdam Savings Bank,
FSB from 1987 until he joined the Association.
<PAGE>
EXHIBIT IV-6
Gloversville Federal Savings and Loan Association
Pro Forma Regulatory Capital Ratios
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at September 30, 1997
Actual, As of ----------------------------------------------------------------------------
September 30, 1997 Minimum Midpoint Maximum Maximum As Adjusted
------------------ ----------------- ----------------- ----------------- -------------------
Percent Percent Percent Percent Percent
Amount of Assets Amount of Assets Amount of Assets Amount of Assets Amount of Assets
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital and Retained
Earnings Under
Generally Accepted
Accounting Principles .... $3,301 5.41% $5,923 9.23% $6,480 10.00% $6,490 10.00% $6,502 10.00%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Tangible Capital ........... $3,301 5.41% $5,923 9.23% $6,480 10.00% $6,490 10.00% $6,502 10.00%
Requirement .............. 915 1.50% 962 1.50% 972 1.50% 974 1.50% 975 1.50%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess ................... $2,386 3.91% $4,961 7.73% $5,508 8.50% $5,517 8.50% $5,526 8.50%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Core Capital Capital ....... $3,301 5.41% $5,923 9.23% $6,480 10.00% $6,490 10.00% $6,502 10.00%
Requirement .............. 1,831 3.00% 1,925 3.00% 1,944 3.00% 1,947 3.00% 1,950 3.00%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess ................... $1,471 2.41% $3,999 6.23% $4,536 7.00% $4,543 7.00% $4,551 7.00%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Risk-Based Capital ......... $3,788 10.01% $6,410 16.66% $6,966 18.05% $6,976 18.07% $6,988 18.09%
Requirement .............. 3,027 8.00% 3,077 8.00% 3,088 8.00% 3,089 8.00% 3,091 8.00%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess ................... $761 2.01% $3,332 8.66% $3,879 10.05% $3,887 10.07% $3,897 10.09%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
<PAGE>
EXHIBIT IV-7
Gloversville Federal Savings and Loan Association
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
Gloversville FS&LA
Prices as of December 12, 1997
<TABLE>
<CAPTION>
Comparable All NY All SAIF
Companies Companies Companies
---------------- ---------------- ----------------
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 -9.92x 22.86x 22.76x 20.44x 19.94x 19.50x 19.18x
Price-core earnings = P/CORE -9.92x 23.35x 22.76x 20.72x 20.40x 20.43x 20.03x
Price-book ratio = P/B 69.72% 129.72% 123.94% 163.77% 155.95% 159.37% 150.78%
Price-tng book ratio = P/TB 69.72% 130.46% 123.94% 174.50% 157.65% 162.79% 154.00%
Price-assets ratio = P/A 7.70% 17.88% 17.76% 19.02% 17.14% 19.33% 17.84%
</TABLE>
Valuation Parameters
- --------------------
Pre-Conv Earnings (Y) $ -583,000 Est ESOP Borrowings (E) $400,000
Pre-Conv Book Value (B) $ 3,280,000 Cost of ESOP Borrowings (S) 0.00%(4)
Pre-Conv Assets (A) $61,022,000 Amort of ESOP Borrowings (T) 10 Years
Reinvestment Rate(2) (R) 3.26% Recognition Plans Amount (M) $200,000
Est Conversion Exp(3) (X) 508,200 Recognition Plans Expense (N) $ 40,000
Proceeds Not Reinvested (Z) $ 600,000
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) V = $4,999,546
-----------------------------------------
1-(P/E)R
2. V = P/B (B-X-E-M) V = $5,000,591
-----------------------
1-P/B
3. V = P/A (A-X-M-E) V = $4,998,226
-----------------------
1-P/A
Total Price Total
Conclusion Shares Per Share Value
- ---------- ------ --------- -----
Appraised Value 500,000 $10.00 $5,000,000
RANGE:
- ------
- - Minimum 425,000 $10.00 $4,250,000
- - Maximum 575,000 $10.00 $5,750,000
- - Superrange 661,250 $10.00 $6,612,500
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 5.44 percent, and a tax rate of
40.00 percent.
(3) Conversion expenses reflect estimated expenses as presented in offering
document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 40.00 percent.
<PAGE>
RP Financial, Inc.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
Gloversville FS&LA
Prices as of December 12, 1997
Mean Pricing Median Pricing
------------------ ------------------
Valuation Approach Subject Peers (Disc) Peers (Disc)
- ------------------ ------- ----- ------ ----- ------
P/E Price-earnings -9.92x 22.86x NM% 22.76x NM%
P/CORE Price-core earnings -9.92x 23.35x NM% 22.76x NM%
P/B Price-book 69.72% 129.72% -46.26% 123.94% -43.75%
P/TB Price-tang. book 69.72% 130.46% -46.56% 123.94% -43.75%
P/A Price-assets 7.70% 17.88% NM% 17.76% NM%
Average Premium (Discount) -46.41% -43.75%
<PAGE>
EXHIBIT IV-8
Gloversville Federal Savings and Loan Association
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Gloversville FS&LA
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $4,250,000
Less: Estimated offering expenses ............... 508,200
----------
Net Conversion Proceeds ............................. $3,741,800
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $3,741,800
Less: Held in Non-Earning Assets(5)(1) .......... 510,000
----------
Net Proceeds Reinvested ............................. $3,231,800
Estimated net incremental rate of return ............ 3.26%
----------
Earnings Increase ................................... $ 105,486
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 20,400
Less: Recognition Plans Expense(4) .............. 20,400
----------
Net Earnings Increase ............................... $ 64,686
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended September 30, 1997 $ -583,000 $ -518,314
12 Months ended September 30, 1997 (Core) $ -583,000 $ -518,314
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $ 3,280,000 $3,231,800 (3)(4) $ 6,511,800
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $61,022,000 $3,231,800 $64,253,800
NOTE: Shares for calculating per share amounts: 425,000
(1) Estimated ESOP borrowings of $340,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $340,000 are omitted from net worth.
(4) $170,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $34,000 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Gloversville FS&LA
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $5,000,000
Less: Estimated offering expenses ............... 508,200
----------
Net Conversion Proceeds ............................. $4,491,800
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $4,491,800
Less: Held in Non-Earning Assets(5)(1) .......... 600,000
----------
Net Proceeds Reinvested ............................. $3,891,800
Estimated net incremental rate of return ............ 3.26%
----------
Earnings Increase ................................... $ 127,028
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 24,000
Less: Recognition Plans Expense(4) .............. 24,000
----------
Net Earnings Increase ............................... $ 79,028
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended September 30, 1997 $ -583,000 $ -503,972
12 Months ended September 30, 1997 (Core) $ -583,000 $ -503,972
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $ 3,280,000 $3,891,800 (3)(4) $ 7,171,800
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $61,022,000 $3,891,800 $64,913,800
NOTE: Shares for calculating per share amounts: 500,000
(1) Estimated ESOP borrowings of $400,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $400,000 are omitted from net worth.
(4) $200,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $40,000 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Gloversville FS&LA
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $5,750,000
Less: Estimated offering expenses ............... 508,200
----------
Net Conversion Proceeds ............................. $5,241,800
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $5,241,800
Less: Held in Non-Earning Assets(5)(1) .......... 690,000
----------
Net Proceeds Reinvested ............................. $4,551,800
Estimated net incremental rate of return ............ 3.26%
----------
Earnings Increase ................................... $ 148,571
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 27,600
Less: Recognition Plans Expense(4) .............. 27,600
----------
Net Earnings Increase ............................... $ 93,371
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended September 30, 1997 $ -583,000 $ -489,629
12 Months ended September 30, 1997 (Core) $ -583,000 $ -489,629
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $ 3,280,000 $4,551,800 (3)(4) $ 7,831,800
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $61,022,000 $4,551,800 $65,573,800
NOTE: Shares for calculating per share amounts: 575,000
(1) Estimated ESOP borrowings of $460,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $460,000 are omitted from net worth.
(4) $230,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $46,000 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Gloversville FS&LA
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value .............................. $6,612,500
Less: Estimated offering expenses ............... 508,200
----------
Net Conversion Proceeds ............................. $6,104,300
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $6,104,300
Less: Held in Non-Earning Assets(5)(1) .......... 793,500
----------
Net Proceeds Reinvested ............................. $5,310,800
Estimated net incremental rate of return ............ 3.26%
----------
Earnings Increase ................................... $ 173,345
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 31,740
Less: Recognition Plans Expense(4) .............. 31,740
----------
Net Earnings Increase ............................... $ 109,865
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended September 30, 1997 $ -583,000 $ -473,135
12 Months ended September 30, 1997 (Core) $ -583,000 $ -473,135
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $ 3,280,000 $5,310,800 (3)(4) $ 8,590,800
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
September 30, 1997 $61,022,000 $5,310,800 $66,332,800
NOTE: Shares for calculating per share amounts: 661,250
(1) Estimated ESOP borrowings of $529,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $529,000 are omitted from net worth.
(4) $264,500 purchased by the Recognition Plans with an estimated pre-tax
expense of $52,900 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
EXHIBIT IV-9
Gloversville Federal Savings and Loan Association
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ----------- ------ ---------
($000) ($000) ($000) ($000) ($000) ($000) ($)
Comparable Group
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
AFED AFSALA Bancorp, Inc. of NY(1)(4) 593 0 0 0 593 1,455 0.82
AFBC Advance Fin. Bancorp of WV 902 -44 15 0 873 1,084 0.81
ALBC Albion Banc Corp. of Albion NY 328 -7 2 0 323 250 1.29
HRBF Harbor Federal Bancorp of MD 1,541 0 0 0 1,541 1,693 0.91
PEEK Peekskill Fin. Corp. of NY 2,098 0 0 0 2,098 3,193 0.66
PWBK Pennwood SB of PA 473 65 -22 0 516 570 0.91
PRBC Prestige Bancorp of PA 778 3 -1 0 780 915 0.85
SFED SFS Bancorp of Schenectady NY 1,162 0 0 0 1,162 1,231 0.94
SKAN Skaneateles Bancorp Inc of NY 1,715 -84 29 0 1,660 1,433 1.16
TPNZ Tappan Zee Fin., Inc. of NY(1) 866 -23 8 0 851 1,488 0.57
ESBK The Elmira SB FSB of Elmira NY 946 -278 95 0 763 742 1.03
WHGB WHG Bancshares of MD(1) 502 0 0 0 502 1,462 0.34
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(4) Figures are for two 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 V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (12)
James J. Oren, Vice President (10)
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Monroe Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
Exhibit 99.3
AFS
ADIRONDACK FINANCIAL
SERVICES BANCORP, INC.
Stock Offering Expires
12:00 Noon
Stock Center
52 North Main Street
Gloversville, N.Y. 12078
(518) 725-3660
STOCK ORDER FORM
- --------------------------------------------------------------------------------
Number of Shares
- --------------------------------------------------------------------------------
- ----------------------- -----------------------
Number of Shares Purchase Price Total Payment Due
- ----------------------- X $10.00 = -----------------------
The minimum number of shares that may be subscribed for is 25 and the maximum
number is 15,000 shares per individual or per account. The limit for any person
together with their associates or persons acting in concert in the
reorganization is 15,000 shares. Management has the discretion to increase or
decrease the purchase limit within regulations. Orders of $25,000 or more must
be paid by Gloversville Federal Savings and Loan Association account
withdrawals, certified funds, cashier's check or money order.
- --------------------------------------------------------------------------------
Method of Payment
- --------------------------------------------------------------------------------
/ / Enclosed is a check or money order made payable to Gloversville Federal
Savings and Loan Association for $__________.
Do not mail cash. Please take cash payment in
person to any Gloversville Federal Savings and
Loan Association office.
/ / I authorize Gloversville Federal Savings and Loan Association to withdraw
the indicated amounts from the following Gloversville Federal Savings and
Loan Association accounts, and understand that the amounts will not
otherwise be available for withdrawal.
Account Number Amount
---------------------------------------- --------------------
$
---------------------------------------- --------------------
$
---------------------------------------- --------------------
$
---------------------------------------- --------------------
$
---------------------
To withdraw from an account with check writing privileges, please write a
check. (Call the Stock Center for IRA transactions.)
There will be no penalty for early withdrawals of funds used to order stock.
- --------------------------------------------------------------------------------
Purchaser Information
- --------------------------------------------------------------------------------
/ / Check here if you are a director, officer or employee of Gloversville
Federal Savings and Loan Association or a member of their immediate
families.
/ / Check here if you were a depositor on the Eligibility Record Date,
September 30, 1996 or the Supplemental Eligibility Date, December 31, 1997
or a current depositor on - , 1998. If you check this box, please enter
all your account information for each of these dates on the back of this
form; (If you need additional space, please attach a separate sheet.)
/ / I am not acting in concert with any other persons purchasing stock in the
Reorganization nor are any of my associates purchasing stock.
/ / I am acting in concert with the following purchasers and/or the following
purchasers are my associates: __________, __________, __________.
- --------------------------------------------------------------------------------
Stock Registration
- --------------------------------------------------------------------------------
Please review the guidelines on the back of this form. Print the name(s) in
which you want the stock registered and the mailing address for the
registration. Names must appear exactly as on your account at Gloversville
Federal Savings and Loan Association if you are subscribing as an Eligible
Account Holder, Supplemental Account Holder or Current Depositor.
SUBSCRIPTION RIGHTS ARE NOT TRANSFERABLE.
- -----------------------------------------
Form of ownership: Please check one.
<TABLE>
<CAPTION>
<S> <C> <C>
/ / Individual / / Tenants in common / / Uniform Transfers to Minors Act
/ / Joint Tenants / / Corporation or partnership / / Uniform Gifts to Minors Act
/ / Other___________________ / / Fiduciary_____________________
please specify adoption date
</TABLE>
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D. No.
- --------------------------------------------------------------------------------
Name Evening Telephone
- --------------------------------------------------------------------------------
Street Address Daytime Telephone
- --------------------------------------------------------------------------------
City State Zip County of Residence
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NASD Affiliation
- --------------------------------------------------------------------------------
Please read the NASD Affiliation section on the reverse side of this form.
Check if applicable and initial where indicated with *.
/ / Check here if you are a member of the NASD or a person associated with an
NASD member or a partner with a securities brokerage firm or a member of the
immediate family of any such person to whose support such person contributes
directly or indirectly or if you have an account in which an NASD member or
person associated with an NASD member has a beneficial interest. In accordance
with the conditions for an exception from the Interpretation, I agree (i) not
to sell, transfer or hypothecate this stock for a period of three months
following issuance and (ii) to report this subscription in writing to the
applicable NASD member I am associated with within one day of payment of the
stock.
* ------------------ (Initial )
- --------------------------------------------------------------------------------
Acknowledgments
- --------------------------------------------------------------------------------
To purchase stock in the Subscription Offering, this fully completed Stock
Order Form must be actually received by Gloversville Federal Savings and Loan
Association no later than 12:00 noon, New York 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 and signed Certification, may be delivered to
Gloversville Federal Savings and Loan Association or may be mailed to the
address 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. The undersigned certifies that this stock order is for my account only
and there is no agreement or understanding regarding the transfer of my
subscription rights or any further sales or transfer of these shares.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of conversion and
Stock Issuance of Gloversville Federal Savings and Loan Association described
in the accompanying prospectus, receipt of which is hereby acknowledged at
least 48 hours prior to delivery of this Stock Order Form to Gloversville
Federal Savings and Loan Association. If the minimum shares cannot be sold, all
orders will be canceled and funds received as payment will be returned
promptly.
The undersigned agrees that after receipt by Gloversville Federal Savings and
Loan Association this Stock Order Form may not be modified, withdrawn or
canceled (unless the Offering is not completed by ____, 1998 and if
Gloversville Federal Savings and Loan Association has been given authorization
to withdraw a specified amount from deposit accounts at Gloversville Federal
Savings and Loan Association as payment for shares, the amount authorized for
withdrawal shall not otherwise be available for withdrawal by the undersigned.
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT NOR AN ACCOUNT AND IS NOT
INSURED OR GUARANTEED BY THE SAIF, THE FDIC OR THE FEDERAL GOVERNMENT.
Under penalty of perjury, I certify that the Social Security or Tax ID Number
on this Stock Order Form is true, correct and complete and that I am not
subject to back-up withholding.
- --------------------------------------------------------------------------------
Sign Below (You must also read and sign the Certification on the reverse side
to purchase stock). ---
- --------------------------------------------------------------------------------
--------------------------------------
- --------------------------------------
Sign and date the form. When purchasing as a custodian, corporate officer,
etc., include your full title. An additional signature is required only when
payment is by withdrawal from an account that requires more than one signature
to withdraw funds. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE PROVISIONS
OF THE PROSPECTUS. THIS ORDER IS NOT VALID IF NOT SIGNED.
If you need help completing this form, you may call the Stock Center at (518)
725-3660.
- ------------------------------------------------------------------------------
x
- ------------------------------------------------------------------------------
Authorized Signature Title (If Applicable) Date
x
- ------------------------------------------------------------------------------
Authorized Signature Title (If Applicable) Date
x
- ------------------------------------------------------------------------------
<PAGE>
Name(s) on Accounts Account Number Name(s) on Accounts Account Number
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
GUIDELINES FOR REGISTERING STOCK
- --------------------------------------------------------------------------------
For reasons of clarity and standardization, the stock transfer industry
has developed uniform stock ownership registrations which we will use in
issuing your stock certificate. Common ownership registrations are explained
below. If you have any questions about how your Gloversville Federal Savings
and Loan Association stock should be registered, see your legal advisor.
To ensure correct registration, please follow the instructions for the
ownership you select:
- --------------------------------------------------------------------------------
GENERAL INSTRUCTIONS:
o Include the first name, middle initial, and last name of each person listed.
Avoid the use of an initial in place of the first name.
o Do not use titles such as "Mr.", "Mrs.", "Dr.", etc.
o Omit words that do not affect ownership rights such as "special account",
"personal property", etc.
- --------------------------------------------------------------------------------
INDIVIDUAL:
Instructions: Print the first name, middle initial, and last name of the person
in whose name the stock is to be registered. You may not list beneficiaries for
this ownership.
- --------------------------------------------------------------------------------
JOINT TENANTS:
Joint Tenancy with Right of Survivorship identifies two or more persons as
owners of the stock. Upon the death of one of the owners, ownership
automatically passes to the surviving tenant(s).
Instructions: Print the first name, middle initial, and last name of each joint
tenant. You may not list beneficiaries for this ownership.
- --------------------------------------------------------------------------------
TENANTS IN COMMON:
Tenants in Common identifies two or more persons as owners of the stock. Upon
the death of one co-tenant, ownership of the stock passes to the heirs of the
deceased co-tenant and the surviving co-tenant(s).
Instructions: Print the first name, middle initial, and last name of each
co-tenant. You may not list beneficiaries for this ownership.
- --------------------------------------------------------------------------------
FIDUCIARIES:
Generally, fiduciary relationships (such as Conservatorship, Legal Trust,
Guardianship, etc.) are established under a form of trust agreement or are
pursuant to a court order. Without a legal document establishing a fiduciary
relationship, your stock may not be registered in a fiduciary capacity.
Instructions: On the first "NAME" line, print the first name, middle initial,
and last name of the fiduciary if the fiduciary is an individual. If the
fiduciary is a corporation, list the corporate title on the first "NAME" line.
Following the name, print the fiduciary "title" such as conservator, personal
representative, etc.
On the second "NAME" line, print either the name of the maker, donor or
testator or the name of the beneficiary. Following the name, indicate the type
of legal document establishing the fiduciary relationship (agreement, court
order, etc.)
In the blank above "Adoption Date", fill in the date of the document governing
the relationship. The date of the document need not be provided for a trust
created by a will.
EXAMPLE OF A FIDUCIARY REGISTRATION:
John D. Smith Trustee for Tom A. Smith Under Agreement Dated 6/6/74.
PLEASE NOTE THAT "TOTTEN TRUST" AND "PAYABLE ON DEATH" OWNERSHIPS MAY NOT BE
USED IN REGISTERING STOCK.
For example, stock cannot be registered as "John Doe Trustee for Jane Doe" or
"John Doe Payable on Death to Jane Doe."
- --------------------------------------------------------------------------------
UNIFORM GIFTS TO MINORS ACT/UNIFORM TRANSFERS TO MINORS:
For New York residents and residents of many states, stock may be held in the
name of a custodian for the benefit of a minor under the Uniform Transfers to
Minors Act. For residents of some other states, stock may be held in a similar
type of ownership under the Uniform Gifts to Minors Act of the individual
states. For either ownership, the minor is the actual owner of the stock with
the adult custodian being responsible for the investment until the minor
reaches legal age.
Instructions: If you are a New York resident and wish to register stock in this
ownership, check "Uniform Transfers to Minors Act". For other states, see your
legal advisor if you are unsure about the correct registration of your stock.
On the first "NAME" line, print the first name, middle initial, and last name
of the custodian with the abbreviation "CUST" after the name.
Print the first name, middle initial, and last name of the minor on the second
"NAME" line.
Only one custodian and one minor may be designated.
- --------------------------------------------------------------------------------
NASD AFFILIATION:
Please refer to the NASD AFFILIATION statement on the face of this form. If
applicable, initial where indicated and check the box. The National Association
of Securities Dealers, Inc. Interpretation With Respect to Free-Riding and
Withholding (the "Interpretation") restricts the sale of a "hot issue"
(securities that trade at a premium in the aftermarket) to NASD members,
persons associated with NASD members (i.e., an owner, director, officer,
partner, employee or agent of a NASD member) and certain members of their
families. Such persons are requested to indicate that they will comply with
certain conditions required for an exemption from the restrictions.
- --------------------------------------------------------------------------------
CERTIFICATION
I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY GLOVERSVILLE FEDERAL SAVINGS AND
LOAN ASSOCIATION 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/we should call the Office of Thrift
Supervision Regional Director, Northeast Regional Office, at (201) 413-1000.
I/We further certify that before purchasing the common stock, par value $0.01
per share, of Adirondack Financial Services Bancorp, Inc. I/we received an
prospectus that contains disclosure concerning the nature of the security being
offered and describes the risks involved in the investment, including, among
other (1) ---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------- See "Risk Factors" on pages - through - of the Prospectus.
SIGNATURE:-------------------------- SIGNATURE:-------------------------------
PRINT NAME:------------------------- PRINT NAME:------------------------------
Exhibit 99.4
MARKETING MATERIALS
FOR
Gloversville Federal Savings
STOCK CONVERSION CAMPAIGN
Revised
January 27, 1998
<PAGE>
QUESTIONS AND ANSWERS BROCHURE
Cover Page
[GRAPHIC OMITTED]
Answers to Frequently Asked Questions
About Our Stock Conversion and
Your Opportunity to Invest in
Adirondack Financial Services Bancorp, Inc.
the Proposed Holding Company of
Gloversville Federal Savings
<PAGE>
Questions and Answers Brochure
Page 2
Inside Cover
You can be one of the initial stockholders of Adirondack Financial
Services Bancorp, Inc., the proposed holding company of Gloversville Federal
Savings. Adirondack Financial Services Bancorp, Inc. is "going public" as part
of Gloversville Federal Savings' conversion from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association to be known as Gloversville Federal Savings. Now you have the
opportunity to invest in Gloversville Federal Savings by purchasing stock in the
initial offering of the holding company. This brochure answers some of the most
frequently asked questions about the conversion to stock ownership and about
your opportunity to invest in Adirondack Financial Services Bancorp, Inc.
<PAGE>
Questions and Answers Brochure
Page 3
ABOUT THE TRANSACTION
1. WHAT IS A CONVERSION?
Gloversville Federal Savings is now a federally chartered mutual
savings and loan association with directors being elected by our
members. After the Conversion, we will be a stock savings and loan
association owned by a holding company. The holding company, Adirondack
Financial Services Bancorp, Inc., will be owned by stockholders who
will have voting rights with respect to certain key business matters.
The holding company is offering shares of common stock to certain
depositors, borrowers , tax-qualified employee plans, directors,
officers and employees of Gloversville Federal Savings and depending
upon market conditions and the availability of shares, may offer shares
to selected persons in a public offering.
2. WHAT IS ADIRONDACK FINANCIAL SERVICES BANCORP, INC. AND WHY
WAS IT FORMED?
Adirondack Financial Services Bancorp, Inc. is a newly organized
holding company created by Gloversville Federal Savings specifically to
purchase 100% ownership in Gloversville Federal Savings. The holding
company currently has no stockholders, but is offering shares of its
common stock to certain depositors, borrowers, tax-qualified employee
plans, directors, officers and employees of Gloversville Federal
Savings and depending upon market conditions and the availability of
shares, may offer shares to selected persons in a public offering. The
additional capital provided through the offering of Adirondack
Financial Services Bancorp, Inc. stock will support future banking
activities and local expansion of the financial services currently
offered through Gloversville Federal Savings.
3. WHAT ARE THE BENEFITS AND RISKS OF CONVERSION?
The Conversion and sale of stock will increase Gloversville Federal
Savings' capital, enabling it to do many things, including possibly the
following:
- support expansion of financial services
- enhance ability to expand through acquisitions
- better compete with other financial institutions
- facilitate future access to the capital markets
Please review "Use of Proceeds" in the Prospectus for Gloversville
Federal Savings' and the holding company's initial plans with respect
to the capital to be raised in the Conversion.
There are certain risks in investing in Adirondack Financial Services
Bancorp, Inc. common stock. An offer is made only by a prospectus
accompanied by a stock order form and certification. Please review the
prospectus prior to making an investment decision, particularly the
section entitled "Risk Factors".
<PAGE>
Questions and Answers Brochure
Page 4
4. WILL THE CONVERSION HAVE ANY EFFECT ON MY SAVINGS OR LOAN
ACCOUNT?
No. The Conversion will not affect the general terms of your savings
account which will continue to be insured by the Federal Deposit
Insurance Corporation (FDIC) to the maximum legal limit. Your savings
account is not being converted to stock. The obligations of borrowers
under their loan agreements will not be affected.
5. HOW DO I BENEFIT FROM THE CONVERSION?
Eligible depositors and certain borrowers will be given the opportunity
to subscribe or place an order to purchase stock in Adirondack
Financial Services Bancorp, Inc. and thereby participate in any gain in
the value of the shares and future dividend payments, if any.
Furthermore, the additional capital will enable Gloversville Federal
Savings to provide expanded services to its customers and the
community.
ABOUT PURCHASING STOCK
6. WHO MAY PURCHASE STOCK?
Adirondack Financial Services Bancorp, Inc. is currently conducting a
Subscription Offering. Persons listed below may have the opportunity to
subscribe to purchase Adirondack Financial Services Bancorp, Inc.'s
common stock during the Subscription Offering.
- Eligible Account Holders. Persons who had a savings deposit of
at least $50 at Gloversville Federal Savings on the
Eligibility Record Date, September 30, 1996.
- Tax Qualified Employee Plans of Gloversville Federal Savings.
- Supplemental Eligible Account Holders. Persons who had a
savings deposit of at least $50 on the Supplemental
Eligibility Record Date, December 31, 1997.
- Other Members. Depositors and certain borrowers as of the
Voting Record Date, , 1998.
- Officers, Directors and Employees of Gloversville Federal
Savings.
Adirondack Financial Services Bancorp, Inc. may, depending upon market
conditions and the availability of shares, offer stock to certain
persons in a public offering.
<PAGE>
Questions and Answers Brochure
Page 5
7. WHAT IS THE PRICE PER SHARE AND HOW MANY SHARES ARE BEING
OFFERED?
The aggregate value of Adirondack Financial Services Bancorp, Inc.
stock has been determined by an independent, nationally recognized
appraisal firm. The purchase price per share is $10.00. Up to shares
are being offered for sale (or up to shares under certain conditions
such as a change in market and financial conditions following
commencement of the Offering).
8. WILL EVERYONE PAY THE SAME PRICE FOR THE STOCK?
Yes. All subscribers, including Gloversville Federal Savings' Board of
Directors and management, will pay the same price during the Offering.
9. ARE DEPOSITORS OBLIGATED TO BUY STOCK?
No. But our depositors have a priority subscription right.
10. HOW MUCH STOCK MAY I BUY IN THE SUBSCRIPTION OFFERING?
The individual purchase limit is 15,000 shares. Individuals acting in
concert or groups of persons may purchase up to 15,000 shares. The
actual number of shares to be issued is expected to be between and (or
up to shares under certain conditions such as a change in market and
financial conditions following commencement of the Offering).
11. WHAT IS THE MINIMUM AMOUNT OF STOCK I MAY BUY?
The minimum purchase limit is 25 shares.
12. IS THE STOCK INSURED BY THE FDIC?
No. Like any other common stock, Adirondack Financial Services Bancorp,
Inc. stock will not be insured by the FDIC or any governmental agency.
13. IN THE FUTURE, HOW MAY I PURCHASE MORE SHARES OR SELL MY
SHARES?
Adirondack Financial Services Bancorp, Inc. has applied to have the
common stock quoted on the Nasdaq. No assurance can be given, however,
that the Adirondack Financial Services Bancorp, Inc.'s stock will be
quoted on the Nasdaq or that an active and liquid market for the common
stock will develop or that an investor will be able to resell the
common stock at or above the purchase price after Conversion.
<PAGE>
Questions and Answers Brochure
Page 6
14. WILL THERE BE ANY DIVIDENDS?
Adirondack Financial Services Bancorp, Inc. does not currently intend
to pay dividends on its common stock. The declaration and payment of
dividends are subject to, among other things, the financial conditions
and results of operations of Adirondack Financial Services Bancorp,
Inc., Gloversville Federal Savings' compliance with its capital
requirements, tax considerations, industry standards and other factors.
15. HOW DO I ORDER STOCK AND WHAT METHODS CAN BE USED FOR PAYMENT OF MY
STOCK PURCHASES?
Complete the stock order form and certification as instructed. Be sure
to indicate the number of shares you wish to purchase and the total
amount remitted (multiply the number of shares subscribed for by $10.00
per share.) Total payment for purchases in the Subscription Offering
must accompany the order form and be received by Adirondack Financial
Services Bancorp, Inc. prior to 12:00 noon, Eastern time, on , 1998.
The payment options for stock purchases are as follows:
- Check or money order sent or delivered to any Gloversville
Federal Savings branch or the Stock Center. If payment is made
by check or money order, interest will be earned at the
passbook rate until the Conversion is completed.
- Withdrawal of funds from any existing account of Gloversville
Federal Savings in an amount equal to the Purchase Price
(which is $10.00 per share) times the number of shares
ordered. Penalties for early withdrawal from an Gloversville
Federal Savings account will be waived when purchasing stock
in the Subscription Offering. Once authorization for
withdrawal of funds has been made, the subscriber may not
withdraw the designated amount unless the Plan of Conversion
is terminated or as otherwise required by regulatory
authorities. All funds maintained in savings accounts are
insured by the FDIC up to legally applicable limits and will
earn interest until completion of the Conversion.
- Orders of $25,000 or more must be paid by Gloversville Federal
Savings account withdrawals, certified funds, cashier's check,
or money orders.
- IRA purchases. If you wish to purchase shares of Adirondack
Financial Services Bancorp, Inc. stock for an IRA account,
either at Gloversville Federal Savings or elsewhere, we may be
able to accommodate you. Please contact the Stock Center as
soon as possible at ( ) - so that we may assist you with the
appropriate procedures for such a purchase. It is important
that you contact us soon because making the IRA arrangements
takes time.
<PAGE>
Questions and Answers Brochure
Page 7
16. MAY I CHANGE MY MIND?
The stock order form you executed cannot be canceled or withdrawn.
However, you may order additional shares by completing another stock
order form, subject to the maximum purchase limitations.
17. ARE MY SUBSCRIPTION RIGHTS TRANSFERABLE?
No. No person may transfer or enter into any agreement to transfer his
or her subscription rights issued under the Plan of Conversion, or the
shares to be issued upon the exercise of such rights. Persons violating
such prohibition will lose their right to purchase stock in the
Conversion and may be subject to further government sanctions.
ABOUT MEMBERS' VOTING RIGHTS
18. WHO IS ELIGIBLE TO VOTE ON THE PLAN OF CONVERSION?
Depositors at the Voting Record Date of _______, 1998 who continue to
be depositors at the date of the Special Meeting are eligible to vote.
Borrowers with loans outstanding on and through the Voting Record Date
are also eligible to vote.
19. HOW IS THE NUMBER OF VOTES DETERMINED?
Each deposit account holder is entitled to cast one vote for each $100,
or fraction thereof, of the aggregate withdrawal value of all such
account holder's deposit accounts on the Voting Record Date. The
maximum number of votes per person is 1,000. Each borrower who has
voting rights is entitled to cast one vote, in addition to any votes a
borrower has as a depositor.
20. IF I VOTE FOR THE PLAN OF CONVERSION ON THE PROXY CARD, WILL I BE
OBLIGATED TO PURCHASE ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
STOCK?
No. Signing the proxy card and voting for the Conversion in no way
obligates you to purchase Adirondack Financial Services Bancorp, Inc.
stock. All members are urged to vote for the Conversion. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE PLAN OF CONVERSION AND
RECOMMENDS MEMBERS VOTE "FOR" APPROVAL OF THE PLAN OF CONVERSION.
21. WHAT HAPPENS IF I DON'T VOTE?
<PAGE>
Questions and Answers Brochure
Page 8
Failing to vote could be equivalent to voting against the Plan of
Conversion. YOUR VOTE IS EXTREMELY IMPORTANT! Please sign and mail your
proxy card(s) now.
22. MAY I COME TO THE SPECIAL MEETING AND VOTE?
Yes. However, every member is encouraged to send a proxy card(s) to
Gloversville Federal Savings prior to the meeting even if the member
plans to attend the special meeting. The proxy is revocable and can be
changed by submitting a later dated proxy or by casting a ballot at the
meeting.
23. I RECEIVED MORE THAN ONE PROXY CARD. CAN I VOTE THEM ALL?
Yes. Please vote ALL the proxy cards you receive. You may have more
than one account in different registrations. While some accounts have
been consolidated, it is not permissible to consolidate all accounts.
24. IF A SAVINGS ACCOUNT IS IN JOINT NAME, MUST BOTH NAMES BE SIGNED ON THE
PROXY CARD?
No. Two or more signatures are required only when two or more
signatures are needed to withdraw funds from the account.
25. IF I DON'T BUY STOCK WILL I HAVE A VOTE AT FUTURE ANNUAL MEETINGS?
No. After the Conversion, only stockholders will have voting rights.
However, the operations of Gloversville Federal Savings and the general
terms and balances of your deposit accounts and loans will remain
unchanged.
26. HOW MAY I GET MORE INFORMATION?
We hope that these questions and answers, combined with the Prospectus
and the Proxy Statement, will help you better understand the Conversion
and the stock offering. You are urged to carefully review the
Prospectus and Proxy Statement before making an investment or voting
decision. If you desire further information, please contact the Stock
Center at:
Telephone: ( ) -
