As filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 333-47605
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------
Amendment No. 1
to the
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
HUDSON RIVER 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.)
One Hudson City Centre, Hudson, New York 12534 (518) 828-4600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------
Carl A. Florio
President and Chief Executive Officer
Hudson River Bancorp, Inc.
One Hudson City Centre
Hudson, New York 12534 (518) 828-4600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
Please send copies of all communications to:
Robert L. Freedman, P.C.
James S. Fleischer, P.C.
Beth A. Freedman, Esq.
Craig M. Scheer, 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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum
Class of Securities to be Offering Price Aggregate Offering Amount of
to be Registered Registered Per Share(2) Price Registration Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01
par value (1) 17,853,750 shares $10.00 $178,537,500 $ (3)
- -------------------------------------------------------------------------------------------------
Participation
Interests (4) -- $ 3,687,764 (5)
=================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes shares to be issued to the Hudson River Bank & Trust Company
Foundation.
(3) Registration fee previously paid with Form S-1 filed on March 9, 1998.
(4) In addition, this registration statement also covers an indeterminate
amount of interests to be offered or sold pursuant to the Hudson City
Savings Institution 401(k) Savings Plan.
(5) The securities of Hudson City Savings Institution are included in the
amount shown for Common Stock. Accordingly, no separate fee is required for
the participation interests. In accordance with Rule 457(h) of the
Securities Act, as amended, the registration fee has been calculated on the
basis of the number of shares of Common stock that may be purchased with
the current assets of such Plan.
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
HUDSON RIVER BANCORP, INC.
THE HUDSON CITY SAVINGS INSTITUTION
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
This Prospectus Supplement relates to the offer and sale to
participants (the "Participants") in The Hudson City Savings Institution's
401(k) Savings Plan in RSI Retirement Trust (the "Plan") of up to ______ shares
of Hudson River Bancorp, Inc. (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 The Hudson City Savings
Institution ("Hudson City") from mutual to stock form (the "Conversion") and the
formation of the Holding Company as the holding company of Hudson City, the Plan
has been amended to provide for an investment fund consisting of Holding Company
Stock as an investment option for the Participants in the Plan (the "Employer
Stock Fund"). The amended Plan permits Participants in the Plan to direct the
trustee of the Employer Stock Fund (the "Trustee") 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 ____________, 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 Hudson City. 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, THE
NEW YORK STATE BANKING DEPARTMENT, 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 ____________, 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, Hudson City 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, Hudson City 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.................. 2
Description of the Plan..................................................... 3
Introduction....................................................... 3
Eligibility and Participation...................................... 4
Investment of Contributions........................................ 4
Financial Data..................................................... 6
Administration of the Plan.......................................... 7
Reports to Plan Participants........................................ 7
Amendment and Termination........................................... 8
Merger, Consolidation or Transfer................................... 8
Federal Tax Aspects of the Plan..................................... 8
Restrictions on Resale............................................. 10
Legal Opinions...............................................................10
Financial Statements.........................................................11
Summary Plan Description (including Summaries
of Material Modifications thereto)........................................ A-1
Financial Statements....................................................... B-1
Election Form
i
<PAGE>
THE OFFERING
Securities Offered
Up to ______ 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 Hudson City 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 Hudson City is contained in the
Prospectus delivered herewith. The address of the principal executive office of
the Holding Company is One Hudson City Centre, Hudson, New York 12534 and its
telephone number is (518) 828-4600. The address and telephone number of Hudson
City's principal office are the same as the Holding Company's.
Election to Purchase Holding Company Stock in the Conversion
In connection with Hudson City'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 Subscription
Rights to purchase Holding Company Stock in the Conversion to the extent
provided in Hudson City's Plan of Conversion. See "The Conversion Subscription
Offering and Subscription Rights" 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, rather than being counted in determining the maximum amount that
the Holding Company's or Hudson City's Tax-Qualified Employee Plans (as defined
in the Prospectus) may purchase in the aggregate. See "The Conversion
Subscription Offering and Subscription Rights" 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 Account 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 in Part 2 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 in Part 2
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 Center at Hudson City by
1:00 p.m. Eastern 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 Hudson City 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, Hudson City intends to provide for such future
investment. 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 by the Trustee to
purchase Holding Company Stock through the exercise of Subscription Rights
granted to the Plan under Hudson City's Plan of Conversion. 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 Participants individual interest in the
Employer Stock Fund.
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") as directed by
Participants with interests in the Employer Stock Fund. Shares with respect to
which no instructions have been received by the Trustee will not be voted.
2
<PAGE>
DESCRIPTION OF THE PLAN
Introduction
The Plan was adopted by Hudson City as a profit sharing plan with a
cash or deferred arrangement described at Section 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), to encourage employee thrift and savings
and to allow eligible employees to share in profits.
Hudson City intends that the Plan will comply in operation with each of
the requirements of the Code which are applicable to a plan qualified under
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.
The Plan is an "individual account plan" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"defined contribution plan" under the Code. As such, the Plan is not subject to
the Plan Termination Insurance provisions of Title IV of ERISA. However, the
Plan is subject to those provisions of Title I (Protection of Employee Benefit
Rights) and Title II (Amendments to the Internal Revenue Code Relating to
Retirement Plans) of ERISA that apply to "individual account plans" and "defined
contribution plans" other than "money purchase pension plans." Accordingly, the
Plan is not subject to the funding requirements contained in Part 3 of Title I
of ERISA or Section 412 of the Code which by their terms do not apply to an
individual account plan (other than a money purchase pension plan). [In
addition, the Plan does not provide for distribution of Participants' Accounts
in the form of a qualified joint and survivor annuity or a qualified
preretirement survivor annuity.] Neither the plan termination insurance
provisions, the funding requirements [nor the annuity requirements] contained in
ERISA and/or the Code will be extended to Participants or beneficiaries under
the Plan.
Reference to Full Text of Plan. The following statements are summaries
of certain provisions of the Plan. They are not a complete description of such
provisions and are qualified in their entirety by the full text of 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 (including Summaries of
Material Modifications thereto (the "Summary Plan Description")), a copy of
which is attached to, and made a part of, this Prospectus Supplement.
3
<PAGE>
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 Hudson City who have met the eligibility requirements
may participate in the Plan by completing and filing with Hudson City an
application for participation. See "JOINING THE PLAN - Eligibility" and
"Participation" in the Summary Plan Description attached hereto.
As of December 31, 1997, there were approximately 232 employees
eligible to participate in the Plan, and 224 employees had elected to
participate in the Plan.
Investment of Contributions
Investment Options. All amounts credited to Participants' Accounts
under the Plan are held in the Trust, which is administered by the Trustee
appointed by Hudson City'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"): (i) a Core
Equity Fund, (ii) an Emerging Growth Equity Fund, (iii) a Value Equity Fund,
(iv) an Intermediate-Term Bond Fund, (v) an Actively Managed Bond Fund, (vi) an
International Equity Fund, or (vii) a Short-Term Investment Fund. Investments in
the Employer Stock Fund may be made only through reallocation of existing funds
in the seven investment options listed above. A brief description of the
Employer Stock Fund is set forth below. For descriptions of the other Investment
Options available to Plan Participants, see "INVESTING YOUR PLAN ACCOUNT - The
Investment Funds" in the Summary Plan Description attached hereto.
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
4
<PAGE>
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.
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 not less than 10% 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 Core Equity
Fund, (ii) 30% from the Value Equity Fund, and (iii) 60% from the
Intermediate-Term Bond Fund. In such case, the Trustee would liquidate $100 of
the Participant's funds from the Core Equity Fund, $300 from funds in the Value
Equity Fund and $600 from funds in the Intermediate-Term Bond 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 Hudson City 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 the Plan Administrator. However, modifications and
fund transfers relating to the Employer Stock Fund are permitted only during an
"Investment Change Period." An "Investment Change Period" opens at the beginning
of the third business 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.
Hudson City anticipates these opportunities will occur four times per year.
Hudson City will attempt to notify Participants of the commencement of each
Investment Change Period but will not assume responsibility for doing so.
5
<PAGE>
Valuation of Accounts. The Investment Options and the Employer Stock
Fund are valued daily. The net value of each Participant's Account is valued
from time to time by the Trustee, but not less often than monthly. In
determining such net value, the Trustee shall value the assets comprising the
Trust at their fair market value.
When Holding Company Stock is purchased or sold, the cost or net
proceeds are charged or credited to the Accounts of Participants affected by the
purchase or sale. Hudson City expects to pay any brokerage commissions, transfer
fees and other expenses incurred in the sale and purchase of Holding Company
Stock for the Employer Stock Fund. A Participant's account will be adjusted to
reflect changes in the value of shares of Holding Company Stock resulting from
stock dividends, stock splits and similar changes.
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 not less often
than monthly, and are allocated among the Accounts of Participants according to
the balance of each such Accounts as of the end of each quarter. 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.
Financial Data
Employer Contributions. For the Plan Year ended December 31, 1997,
Hudson City made matching contributions totaling approximately $126,000. Hudson
City has made no discretionary contributions to the Plan for the fiscal year
ended December 31, 1997. See generally "CONTRIBUTIONS TO THE PLAN" in the
Summary Plan Description attached hereto.
Due to the additional expenses related to the establishment and
operation of the ESOP and RRP, Hudson City 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 RSI Retirement Trust, the
trustee for funds invested in such Investment Options ("RSI").
The information set forth below with respect to the Investment Options
has been reproduced from materials supplied by RSI. Hudson City and the Holding
Company take no responsibility for the accuracy of such information.
6
<PAGE>
Additional information regarding the Investment Options may be
available from RSI or Hudson City. 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 December 31, 1998
Ended December 31, Annualized
----------------------------------- ----------------------
1997 1996 1995 3 Years 5 Years
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Core Equity Fund...................... 25.32% 21.53% 40.17% 28.76% 19.00%
Emerging Growth Equity Fund........... 8.25 27.09 42.83 25.25 19.74
Value Equity Fund..................... 31.70 25.90 33.96 30.47 18.87
Intermediate-Term Bond Fund........... 7.07 4.02 13.99 8.28 5.90
Actively Managed Bond Fund............ 9.70 3.15 17.70 10.02 7.24
International Equity Fund............. 0.92 10.86 12.46 7.95 10.57
Short-Term Investment Fund............ 4.93 4.70 5.39 5.01 4.16
</TABLE>
Each Participant should note that past performance is not necessarily
an indicator of future results.
Administration of the Plan
Trustee. The trustee is appointed by the Board of Directors of Hudson
City to serve at its pleasure. The current trustee for the Investment Options
(other than the Employer Stock Fund) is RSI. Hudson City's trust department will
serve as trustee of the Employer Stock Fund.
The Trustees receive and hold the contributions to the Plan in trust
and distribute them to Participants and beneficiaries in accordance with the
provisions of the Plan. The Trustees are responsible, following Participant
direction, for effectuating the investment of the assets of the Trust in the
Holding Company Stock and the other Investment Options.
Plan Administrator. RSI and Hudson City share the duties of Plan
Administrator. Hudson City is responsible for administration of the Plan and is
appointed by and serves at the pleasure of the Board of Directors of Hudson
City. Hudson City may appoint individuals to assist in the administration of the
Plan and in carrying out its responsibilities for interpretation of the
provisions of the Plan, prescribing procedures for filing applications for
benefits, preparation and distribution of information explaining the Plan,
furnishing Hudson City with reports with respect to the administration of the
Plan, receiving, reviewing and keeping on file reports of the financial
condition of the Trust, and appointing or employing individuals to assist in the
administration of the Plan. RSI is responsible for maintenance of Plan records,
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants and beneficiaries under Sections
104 and 105 of ERISA.
Reports to Plan Participants
As of the end of each fiscal 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 and forfeitures allocated to his or her Accounts for that period,
and (iii) the
7
<PAGE>
adjustments to his or her Accounts to reflect a respective share of dividends on
Holding Company Stock, and other income, gains or losses, if any.
Amendment and Termination
It is the intention of Hudson City to continue the Plan indefinitely.
Nevertheless, Hudson City, by action of its Board of Directors, may terminate
the Plan in its sole discretion at any time and for any reason. 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. Hudson City reserves the right to make from time to time
any amendment or amendments to the Plan which do not cause any part of the Trust
to be used for, or diverted to, any purpose other than the exclusive benefit of
Participants or their beneficiaries; provided, however, that Hudson City may
make any amendment it determines necessary or desirable, with or without
retroactive effect, to comply with ERISA.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust assets to another plan, the Plan requires
that each Participant would (if either the Plan or the other plan were then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he or she would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then been terminated).
Federal Tax Aspects of the Plan
The Plan will be administered to comply in operation with the
requirements (i) for qualification under Section 401(a) of the Code, (ii) for
treatment as a qualified cash or deferred arrangement under Section 401(k) of
the Code, and (iii) for exclusion of elective deferrals under Section 402(g) 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, including
Participant elective deferrals, and the investment earnings on these Accounts,
are not includable in Participants' gross income for federal income tax purposes
until such contributions or earnings are actually distributed or withdrawn from
the Plan. However, Participant elective deferrals to the Plan are subject to
both FICA and Medicare taxes. Special tax treatment may apply to the taxable
portion of any distribution that includes Holding Company Stock, that is paid to
another employer's plan or to an IRA in a "rollover," or that is eligible for
special tax treatment for lump sum distributions (as described below).
(b) Income earned by the Trust will not be taxable to the Trust.
8
<PAGE>
Permitted Rollover Amounts. Most payments from the Plan will be
"eligible rollover distributions." This means that they can be rolled over to an
IRA or to another employer plan that accepts rollovers. Required minimum
payments, beginning generally in the year in which the Participant reaches age
70 1/2 or retires, whichever is later, cannot be rolled over.
Direct Rollover. A Participant may choose a direct rollover of all or
any portion of a payment that is an "eligible rollover distribution." In a
direct rollover, the eligible rollover distribution is paid directly from the
Plan to an IRA or another employer plan that accepts rollovers. If the
Participant chooses a direct rollover, the rollover amount will not be taxed
until it is taken out of the IRA or the employer plan.
Payments that are not Rolled Over. A payment made to a Participant is
subject to 20% mandatory income tax withholding. This amount is sent to the IRS
as income tax withholding, and it will be credited against any income tax owed
for the year. The payment is taxed in the year it is received unless, within 60
days, it is rolled over to an IRA or to another plan that accepts rollovers. If
the payment is not rolled over, special tax rules may apply (as described
below).
Sixty-Day Rollover Option. Even if a Participant has an eligible
rollover distribution paid to him or her, all or part of it can still be rolled
over to an IRA or to another employer plan that accepts rollovers. However, the
rollover must be made within 60 days after the payment is received. The portion
of the payment that is rolled over will not be taxed until it is taken out of
the IRA or the employer plan. The Participant can roll over up to 100% of the
payment from the Plan, including an amount equal to the 20% that was withheld,
by including other money to replace the 20% that was withheld. On the other
hand, if only the 80% that was received is rolled over, the Participant will be
taxed on the 20% that was withheld.
Additional 10% Tax. If a Participant receives a payment before reaching
age 59 1/2 and does not roll it over, then, in addition to the regular income
tax, an extra tax equal to 10% of the taxable portion of the payment may be
imposed. The additional 10% tax does not apply to the payment if it is (1) paid
because the Participant separates from service with the employer during or after
the year in which the Participant reaches age 55, (2) paid because of retirement
due to disability, (3) paid as equal (or almost equal) payments over the
Participant's life or life expectancy (or the Participant's and his or her
beneficiary's lives or life expectancies), (4) used to pay certain medical
expenses, (5) paid to a beneficiary upon a Participant's death, or (6) paid to
an alternate payee pursuant to a qualified domestic relations order.
Special Tax Treatment. If an eligible rollover distribution is not
rolled over, it will be taxed in the year it is received. However, if it
qualifies as a "lump sum distribution," it may be eligible for special tax
treatment. A lump sum distribution is a payment, within one year, of the
Participant's entire balance under the Plan (and certain other similar plans of
the employer) that is payable because the Participant has reached age 59 1/2,
has separated from service with his employer, or has died. For a payment to
qualify as a lump sum distribution, the recipient must have been a participant
in the Plan for at least 5 years. The special tax treatment for lump sum
distributions is described below.
9
<PAGE>
Five-Year Averaging. If the Participant receives a lump sum
distribution after reaching age 59 1/2, he or she may be able to make a
one-time election to figure the tax on the payment by using "5-year
averaging." Five-year averaging often reduces the tax owed because it
treats the payment much as if it were paid over 5 years. The entire tax
(using current tax rates) is paid in the year in which the lump sum
distribution is received.
Ten-Year Averaging For Those Born Before January 1, 1936. If a
Participant receives a lump sum distribution and was born before
January 1, 1936, he or she can make a one-time election to figure the
tax on the payment by using "10-year averaging" (using 1986 tax rates)
instead of 5- year averaging (using current tax rates). Like the 5-year
averaging rules, 10-year averaging often reduces the amount of tax
owed.
Capital Gain Treatment For Those Born Before January 1, 1936.
In addition, if a Participant who was born before January 1, 1936,
receives a lump sum distribution, he or she may elect to have the
portion of the payment that is attributable to pre-1974 participation
in the Plan (if any) taxed as long-term capital gain.
There are other limits on the special tax treatment for lump sum
distributions. For example, a Participant can generally elect this special tax
treatment only once during his or her lifetime, and the election applies to all
lump sum distributions received in that same year. If the Participant has
previously rolled over a payment from the Plan (or certain other similar plans
of the employer), he or she cannot use this special tax treatment for later
payments from the Plan. If the payment is rolled over to an IRA, the Participant
will not be able to use this special tax treatment for later payments from the
IRA. Also, if any portion of the payment is rolled over to an IRA, this special
tax treatment is not available for the rest of the payment.
The special tax treatment for lump sum distributions described above,
other than the special rules for those born before January 1, 1936, has been
repealed for all such distributions received in tax years beginning after
December 31, 1999.
Employer Securities. There is a special rule for a payment from the
Plan that includes employer securities. To use this special rule, the payment
must qualify as a lump sum distribution, as described above (or would qualify
except that the Participant has not participated in the Plan for at least 5
years). Under this rule, the Participant has the option of not paying tax on the
"net unrealized appreciation" of the securities until they are sold. Net
unrealized appreciation generally is the increase in the value of the securities
that took place while they were held by the Plan.
The Participant may elect not to have the special rule apply to the net
unrealized appreciation. In such case, the net unrealized appreciation will be
taxed in the year the securities are received from the Plan (and may be eligible
for the special tax treatment described above), unless they are rolled over. The
securities (including any net unrealized appreciation) can be rolled over to an
IRA or to another employer plan that accepts rollovers.
10
<PAGE>
Other Payment Recipients. In general, the rules summarized above that
apply to payments to Participants also apply to payments to Participants'
surviving spouses and to spouses or former spouses who are alternate payees
pursuant to a qualified domestic relations order. Some of the rules summarized
above also apply to a deceased Participant's beneficiary who is not a spouse.
However, there are some significant exceptions for payments to surviving
spouses, alternate payees, and other beneficiaries.
A surviving spouse of a deceased Participant may choose to have an
eligible rollover distribution paid in a direct rollover to an IRA or paid to
the spouse. If the spouse has the payment made to him or her, such spouse can
keep it or roll it over to an IRA (but not to an employer plan). An alternate
payee has the same choices as the Participant. Thus, an alternate payee can have
the payment paid as a direct rollover or paid to the alternate payee. If the
alternate payee has it paid to him or her, the alternate payee can either keep
it or roll it over to an IRA or to another employer plan that accepts rollovers.
A beneficiary other than the surviving spouse cannot roll over the payment under
any circumstances.
A surviving spouse, alternate payee or another beneficiary may be able
to use the special tax treatment for lump sum distributions and the special rule
for payments that include employer securities, as described above. A payment
that is received because of the Participant's death may be eligible for the
special tax treatment available for lump sum distributions if the Participant
met the appropriate age requirements, whether or not the Participant had 5 years
of participation in the Plan.
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.
11
<PAGE>
Restrictions on Resale
Any person receiving shares of Holding Company Stock under the Plan who
is an "affiliate" of Hudson City 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 Hudson City) 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 Hudson City 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 Hudson City in connection with Hudson City's Conversion.
12
<PAGE>
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.
13
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION
401(k) SAVINGS PLAN
IN RSI RETIREMENT 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 Date of Birth Date of Hire
Accounts at December 31, 1998
2. INVESTMENT DIRECTION
The Plan is giving participants a special opportunity to invest their
account balances in common stock ("Holding Company Stock") issued by Hudson
River Bancorp, Inc. (the "Holding Company") in connection with the conversion of
The Hudson City Savings Institution ("Hudson City") 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 December 31, 1997. 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. Hudson City, 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
business 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. Hudson
City anticipates these opportunities will occur four times per year. Hudson City
will attempt to notify Participants of the commencement of each Investment
Change Period but will not assume responsibility for doing so.
[ ] 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 10% increments):
[ ] Core Equity Fund ________%
[ ] Emerging Growth Equity Fund ________%
14
<PAGE>
[ ] Value Equity Fund ________%
[ ] Intermediate-Term Bond Fund ________%
[ ] Actively Managed Bond Fund ________%
[ ] Intermediate Equity Fund ________%
[ ] Short-Term Investment Fund ________%
Total (Aggregate Purchase Price) 100 %
========
[ ] 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 _________________, 1998
IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE STOCK CENTER AT (518) _____-________.
15
<PAGE>
Summary Plan Description
================================================================================
The Hudson City Savings Institution 401(k) Savings Plan
In
RSI Retirement Trust
(As Amended Through April 2, 1998, And
the Conversion Date)
================================================================================
<PAGE>
Table Of Contents
Section Page
TABLE OF CONTENTS...........................................................i
INTRODUCTION...............................................................ii
INDEX TO DEFINED TERMS.....................................................iv
HOW THE PLAN WORKS..........................................................1
JOINING THE PLAN............................................................2
CONTRIBUTIONS TO THE PLAN...................................................5
INVESTING YOUR PLAN ACCOUNT................................................11
VESTING....................................................................15
PAYMENT OF BENEFITS........................................................17
DISTRIBUTIONS UPON RETIREMENT OR DISABILITY................................18
DISTRIBUTIONS UPON TERMINATION (OTHER THAN RETIREMENT OR DISABILITY).......23
DISTRIBUTION UPON DEATH....................................................26
WITHDRAWALS................................................................28
LOANS......................................................................32
APPLICATION FOR BENEFITS AND CLAIMS PROCEDURE..............................34
AMENDMENT AND TERMINATION OF PLAN..........................................36
SPECIAL RULES IF PLAN BECOMES TOP-HEAVY....................................37
OTHER IMPORTANT INFORMATION................................................38
i
<PAGE>
Introduction
The Hudson City Savings Institution maintains The Hudson City Savings
Institution 401(k) Savings Plan in RSI Retirement Trust ("Plan") to offer its
eligible employees a convenient and tax-advantaged way to supplement their
retirement income. As an eligible employee under the Plan, you may shelter part
of your income from current taxes while accumulating a substantial nest egg for
the future.
For purposes of explaining the provisions in this document, the Hudson City
Savings Institution will be referred to as the Employer ("Employer"). This is a
summary of the key Plan features as amended and restated effective January 1,
1997 and as further amended through April 2, 1998 and _______________, 1998
("the Conversion Date"). The Plan as it existed prior to January 1, 1997 is
referred to as the "Prior Plan".
The full terms and conditions of the Plan are described in the Plan document
which legally governs the operation of the Plan. This booklet, called a Summary
Plan Description ("SPD"), has been prepared to provide you with a description of
the key features of the Plan including your rights, obligations and benefits
under the Plan. The SPD provides you with answers to questions most frequently
asked about the Plan.
If there is a discrepancy between the document and this summary, the wording of
the Plan document will govern. The terms of the Plan may be changed from time to
time by amendments adopted by the Employer. If any changes are made, you will be
notified of the changes.
While your employment with the Employer determines your eligibility to
participate in the Plan, your participation is not a contract of employment.
Both you and the Employer have the right to terminate your employment.
When referring to this booklet, please keep in mind that this is a summary of
the Plan only, that it does not alter any employment policies of the Employer
and it does not alter the Plan provisions in any way.
If you have any questions or need additional information about the Plan, contact
the Plan Administrator; he or she will be happy to assist you.
Notice To Employees Who Direct Investment in Common Stock of Hudson River
Bancorp, Inc.
As a Participant in the Plan, you may direct that all or a portion of your Plan
accounts be invested in common stock of Hudson River Bancorp, Inc., the holding
company of the Employer. The stock will be kept in an account referred to in
this summary as the Employer Stock Fund and special rules may apply to
investments in this stock.
These special rules affect withdrawals, loans, and transfers of investment
account balances for certain highly paid officers only. They will apply only if
you are subject to the rules of the Securities Exchange Act of 1934. If you wish
to make a withdrawal or borrow from your Plan accounts, or if you wish to
ii
<PAGE>
transfer account balances among the investment accounts, contact the Plan
Administrator for additional information about these special rules.
iii
<PAGE>
Index To Defined Terms
Defined Terms, with page number
Before-Tax Contributions ..................................................5
Deferred Payment......................................................... 21
Disabled..................................................................19
Early Retirement Date.....................................................18
Eligibility Service....................................................... 3
Employee Benefits Committee (Committee)...................................40
Employee Retirement Income Security Act (ERISA).......................... 38
Employer................................................................. ii
Employer Stock Fund.......................................................12
Excluded Employees.........................................................2
Installment Payments..................................................... 21
Investment Funds......................................................... 11
Matching Contributions.................................................... 8
Normal Retirement Date................................................... 18
Plan..................................................................... ii
Plan Administrator....................................................... 41
Plan Year................................................................ 40
Postponed Retirement Date................................................ 18
Prior Plan............................................................... ii
Qualified Domestic Relations Order (QDRO)................................ 38
Rollover Contributions.................................................... 8
Rollovers to An Individual Retirement Account (IRA)
Or Another Qualified Plan........................ ..................22, 25
Salary.................................................................... 5
Single Cash Payment.................................................. 21, 25
Standard Form of Payment Upon Termination................................ 24
Standard Forms of Payment at Retirement or Disability.................... 20
Summary Plan Description (SPD)........................................... ii
Trustee.................................................................. 41
Vesting.................................................................. 15
iv
<PAGE>
Section 1
How The Plan Works
================================================================================
Overview
Participation in the Plan is entirely voluntary; you are not obligated to
participate. However, if you do participate, you can shelter part of your income
from current taxes while you accumulate a substantial nest egg for the future.
When you participate in the Plan, you are authorizing the Employer to defer a
portion of your pay. Whatever you defer is taken out of your paycheck on a
before-tax basis and held in a before-tax Plan account set up on your behalf.
When reading this summary, you should keep in mind that whenever you see the
words "Before-Tax," it means that for federal income tax purposes, you will not
be taxed on the money when it is contributed to the before-tax Plan account. It
will, however, be taxed when withdrawn from the Plan. The same may or may not be
true for state and local income tax purposes. You should check with your tax
advisor to determine how state and local laws affect your "Before-Tax
Contributions".
The Employer will make a contribution which matches a portion of your Before-Tax
Contributions. Such contribution will be held in the Matching Contribution Plan
account set up on your behalf. (See, CONTRIBUTIONS TO THE PLAN section, Matching
Contributions, below.)
Your contributions and the Matching Contributions made by the Employer are
invested in one or more of the Plan's 7 professionally managed investment funds
in RSI Retirement Trust. In addition to the 7 investment funds, you have the
option of investing in the Employer Stock Fund. Your Before-Tax Contributions
and the vested portion of your Matching Contributions, as well as any investment
income they may earn, are not taxed until they are distributed to you from the
Plan. Payments are usually made when you terminate employment or upon your
retirement, when you may be in a lower tax bracket.
While the Plan offers you the flexibility you need to develop a personal savings
strategy, it is designed to encourage you to save for your retirement. In
exchange for the significant tax advantages it provides, the Internal Revenue
Service imposes certain restrictions that limit your access to your Plan
contributions while you are actively employed by the Employer. However, in order
to enable you to meet some of your more immediate financial needs, the Plan has
special provisions, described later in this SPD, which allow you to withdraw
from or borrow against your Plan accounts.
1
<PAGE>
Section 2
Joining The Plan
================================================================================
In General
You must satisfy certain requirements in order to be eligible to join the Plan.
This section describes what those requirements are.
Eligibility Requirements
If you were a participant under the Prior Plan, you will continue to be a
participant under the current Plan.
If you were not a participant under the Prior Plan, you will become eligible to
join the Plan once you have satisfied all of the following requirements:
* you have attained age 21; and
* you have completed at least 1 year of Eligibility Service (see,
Eligibility Service below);
* you are classified as a salaried Employee, a sales commission
Employee or, commencing September 1, 1997, an hourly paid
Employee; and
* you do not or no longer belong to one of the groups of excluded
employees listed under Excluded Employees below.
If you participate in the Plan and then switch to one of the ineligible groups
of employees noted below, you will no longer be able to make contributions under
the Plan, nor will any Matching Contributions be made under the Plan on your
behalf. Even if you are no longer making contributions under the Plan and no
Matching Contributions are being made on your behalf, your Plan accounts will
continue to reflect the investment performance of the investment fund or funds
in which you are invested. (See, INVESTING YOUR PLAN ACCOUNT section, How Your
Account Is Valued, below.) In addition, you will still be able to transfer your
investment account balances from one fund to another. (See, INVESTING YOUR PLAN
ACCOUNT section, Adjusting Your Investment Strategy, Transferring existing
account balances, below.)
Excluded Employees
If any of the following apply to you, you will not be able to participate in the
Plan:
2
<PAGE>
* you are paid on a daily, fee or retainer basis (or an hourly paid
employee prior to September 1, 1997);
* you are a leased employee;
* you are an employee covered by a collective bargaining agreement
(unless the agreement provides for Plan participation).
Eligibility Service
For Plan purposes, a year of Eligibility Service is a 365-day period of
employment with the Employer, measured from your date of hire.
Participation in the Plan is totally voluntary. You can join as of the first day
of the payroll period of any calendar month following the date you meet the
eligibility requirements mentioned above. All you have to do to join the Plan is
submit an enrollment form at least 10 days in advance of the date you want your
participation to begin. Payroll deductions will begin in the first payroll
period following the date of your Plan participation.
Sometime before you first become eligible to join the Plan, a member of the
Human Resources Department will explain the Plan's enrollment procedures to you.
At that time, you will receive the forms you need to complete in order to
participate in the Plan.
About Your Enrollment Form
You must complete an enrollment form in order to participate in the Plan. On the
form you will indicate the percentage of your Salary (see, Contributions to the
Plan, Salary, below) you want the Employer to defer for you, if any, each payday
on a before-tax basis. You will also indicate how you want your contributions
invested and designate your beneficiary. (See, About Your Beneficiary, below.)
The form also authorizes the Employer to deduct your contributions from your
Salary, if you have chosen to make such contributions.
Enrollment forms are available from the Plan Administrator.
About Your Beneficiary
You will be asked to name a beneficiary when you enroll in the Plan. Your
beneficiary is the person who will receive the value of your Plan accounts, less
any outstanding loans, if you should die. You may also name a contingent
beneficiary who will serve as beneficiary if your beneficiary dies before you.
If you are married, your spouse is automatically your beneficiary unless your
spouse has completed a form waiving his or her right to your Plan accounts. Your
spouse's consent must be witnessed by a Plan representative or notarized in
order for it to be valid.
You may change your beneficiary and/or contingent beneficiary at any time by
completing a new beneficiary form. However, if you are married and want to
change your beneficiary from your spouse to someone else, your spouse must
consent to the change in writing. Your spouse's consent must be witnessed by a
Plan representative or notarized in order for it to be valid.
3
<PAGE>
Termination of Employment
If you leave the Employer for any reason, contributions to your Plan accounts
will automatically cease.
Eligibility Upon Reemployment
If you leave the Employer and are later rehired by the Employer, there are some
instances where your past employment with the Employer will be counted toward
the 1-year service requirement. (See, JOINING THE PLAN section, Eligibility
Requirements, above.) A Plan representative will advise you if your past
employment will be counted or if you will have to meet the 1-year service
requirement as a new employee. Special rules apply if you are absent from work
for maternity or paternity reasons, or if you are called for service in the
Armed Forces of the United States. See a Plan representative for more
information.
Eligibility Upon Reemployment Of Employees Subject To The Securities Exchange
Act of 1934
If you are a highly paid officer who is subject to the rules of the Securities
Exchange Act of 1934, and you leave the Employer and are later rehired, a Plan
representative will advise you when you will be eligible to participate in the
Plan.
4
<PAGE>
Section 3
Contributions To The Plan
================================================================================
General
There are several different types of contributions which may be made on your
behalf under the Plan. You are permitted to make Before-Tax Contributions. If
you were previously a participant in another employer's plan, and you receive a
distribution from such plan, you may be permitted to contribute the amount from
such previous plan into this Plan through a Rollover Contribution. In addition,
the Employer will also contribute to the Plan by making Matching Contributions.
The different types of contributions are described in greater detail below. Your
own Before-Tax Contributions will be based upon a percentage of your Salary
(see, Salary, below).
Salary
For Plan purposes, Salary is your regular base pay, including the amount of any
Before-Tax Contributions you make to the Plan during the year but, excluding
overtime, bonuses, commissions, expense allowances, severance pay, fees, and any
other special or supplemental compensation. For sales commissioned employees,
only draw against commissions paid shall be considered Salary. The maximum
amount of your Salary that may be used for any purpose under the Plan is
$160,000 for the 1998 Plan Year. For following Plan Years, this amount may be
adjusted annually by law to account for changes in the cost-of-living.
Before-Tax Contributions
Prior to April 2, 1998, you were able to contribute an amount from 1% to 10% of
your Salary to the Plan on a before-tax basis. Beginning on and after April 2,
1998, you can direct that an amount from 1% to 15% (in whole percentages) of
your Salary be contributed to the Plan on a before-tax basis. The most you may
contribute on a before-tax basis is $10,000 for 1998. (The amount will be
further adjusted by law, based on changes in the consumer price index.)
Since your Before-Tax Contributions are taken out of your pay before income
taxes are deducted, the overall effect of making such contributions is to reduce
your current taxable income for federal and possibly state and local income tax
purposes.
Examples
The following examples show how contributions on a before-tax basis rather than
an after-tax basis can increase your take-home pay. These examples are based on
1998 federal income tax and FICA withholding rates. If you are permitted to
defer state and local income taxes, your actual savings will be greater. The
amount of tax you actually pay will depend on current tax rates and your own
financial situation.
5
<PAGE>
Example 1
In this example a married employee earning $40,000 a year, files a joint federal
income tax return and claims 4 federal personal income tax exemptions (e.g., a
family of 4). The participant chooses to save 6% of annual Salary, $2,400,
through the Plan instead of in a regular after-tax savings account. As you can
see, the employee saves the same amount in each case, but pays $360 less in
taxes in the before-tax plan.
Regular
Savings Account Plan Savings
(After-Tax) (Before-Tax)
----------- ------------
Annual Salary $40,000 $40,000
Before-Tax Contributions -0- - 2,400
Reportable Gross Income 40,000 37,600
Taxable Income * 29,200 26,800
Estimated Federal Income Tax - 3,412 - 3,052
FICA Tax - 3,060 - 3,060
After-Tax Savings 2,400 -0-
-----------------------------------
Take-Home Pay $31,128 $31,488
Increased Take-Home Pay Through Use
of Before-Tax Savings in the Plan $ 360**
=======
* Assumes 1998 tax rates and use of Standard Deduction.
** Contributions and earnings on Before-Tax Contributions are tax deferred
until distributed from the Plan.
6
<PAGE>
Example 2
In this example a single employee earns $30,000 a year, files a single taxpayer
federal income tax return and claims a single personal income tax exemption. The
participant chooses to save 6% of annual Salary, $1,800, through the Plan
instead of in a regular after-tax savings account. As you can see, the employee
saves the same amount in each case, but pays $270 less in taxes in the
before-tax plan.
Regular
Savings Account Plan Savings
(After-Tax) (Before-Tax)
----------- ------------
Annual Salary $30,000 $30,000
Before-Tax Contributions -0- 1,800
Reportable Gross Income 30,000 28,200
Taxable Income * 27,300 25,500
Estimated Federal Income Tax - 3,697 - 3,427
FICA Tax - 2,295 - 2,295
After Tax Savings 1,800 -0-
-----------------------------------
Take-Home Pay $22,208 $22,478
Increased Take-Home Pay Through Use
of Before-Tax Savings in the Plan $ 270 **
=======
* Assumes 1998 tax rates and use of Standard Deduction.
** Contributions and earnings on Before-Tax Contributions are tax deferred
until distributed from the Plan.
7
<PAGE>
Matching Contributions
The Employer will match a portion of your Before-Tax Contributions. However, if
you are classified as an hourly paid Employee, the Employer will not match a
portion of your Before-Tax Contributions. For each dollar up to 4% of your
Salary that you save on a before-tax basis, the Employer will make a Matching
Contribution equal to 50% of your contribution. The Employer may, from time to
time, change the Plan to provide for a different Matching Contribution. If a
change is made, you will be notified of the change.
If you stop making Before-Tax Contributions, the Employer Matching Contributions
will also stop for the same period. Matching Contributions which have been
suspended in this way, are not permitted to be made up at a later date.
You will not be taxed on Matching Contributions or earnings thereon as long as
they remain in the Plan. You will vest in Matching Contributions and earnings
thereon over a period of years; (see, VESTING section, below).
Some Important Restrictions
The Internal Revenue Service requires plans that provide for Before-Tax
Contributions and Matching Contributions to pass special nondiscrimination
tests. The amount of contributions contributed to the Plan on behalf of each
Participant may not discriminate in favor of highly-paid employees.
The Plan must pass special nondiscrimination tests each calendar year to keep
its tax advantages. If the Plan does not pass the tests, some or all of the
highly-paid employees may have their Plan contributions or the contributions
made by the Employer reduced, even if the Before-Tax Contribution is less than
the maximum permissible contribution during that calendar year. If you are
affected by the tests, a Plan representative will notify you and make the
appropriate adjustment.
Another restriction you should know about relates to limits on how much
employees and the Employer can contribute to this and all other retirement-type
plans the Employer provides. Prior to the Plan Year beginning January 1, 2000,
if what you save through the Plan, either alone or together with the
contributions the Employer makes to this and any other such Plan, exceeds the
limits set by the Internal Revenue Service, your contributions to this Plan may
be reduced. Usually, very few employees, if any, are affected by this
limitation. If you are affected, a Plan representative will notify you and make
the proper adjustment.
Rollover Contributions
You may be joining the Employer from an employer that had a tax-qualified plan
similar to the Employer's Plan. If that is the case, and if you recently
received a distribution from your prior employer's tax-qualified plan, you may
be eligible to deposit that distribution into the Rollover Contribution account
set up on your behalf. In addition, if you elected to have your prior employer
directly transfer money from your prior employer's tax-qualified plan into this
Plan, that distribution was deposited into the Rollover Contribution account set
up on your behalf. In both cases, you will continue to defer income taxes on
your distribution. Each of these types of transactions is known as a "Rollover
Contribution".
8
<PAGE>
You may make a Rollover Contribution even if you are not yet eligible to join
the Plan. To maintain the tax deferral, the rollover must occur within 60 days
of your receipt of the distribution from your prior employer's plan, which may
be before you have satisfied the eligibility requirements of this Plan. Rollover
Contributions, however, cannot include any after-tax Contributions you may have
made to your prior employer's plan. For more information about Rollover
Contributions, contact a Plan representative.
What Happens To Contributions
A series of accounts are set up and maintained for each employee in the Plan.
You will have a Before-Tax Contribution account and you may have a Matching
Contribution account. You may also have a Rollover Contribution account. Each
pay period, the contributions made by you or on your behalf will be allocated to
the investment fund or funds you choose. (See, INVESTING YOUR PLAN ACCOUNT
section, below.)
Adjusting Your Contribution Strategy
Once you elect how much of your Salary you want to defer you are not locked into
your choice. You may submit a request form to a Plan representative, twice in
any Plan Year, to increase, decrease, suspend or resume your Before-Tax
Contributions. Your request will be processed as soon as possible after the
Employer receives the properly completed form.
* Changing your contribution percentage. If you increase or
decrease your contribution percentage, the change will go into
effect as of the first payroll period following 10 days after you
submit your written request to a Plan representative or as soon
as possible thereafter. Keep in mind that prior to April 2, 1998,
the most you may save through the Plan on a before-tax basis is
10% of your Salary and commencing on and after April 2, 1998, 15%
of your Salary (subject to deferral and maximum contribution
limitations).
* Suspending your contributions. When you suspend contributions,
any money you already have in your account will still reflect the
investment results of the investment fund or funds you chose. If
you suspend your contributions, you cannot make them up at a
later date. A Plan representative must receive your written
request to suspend contributions at least 10 days before you want
your payroll deductions to stop.
* Resuming your contributions after a suspension. If you want to
start contributing again after you suspended contributions, a
Plan representative must receive your written request to resume
contributions at least 10 days before you want your payroll
deductions to start.
9
<PAGE>
Impact On Social Security and Medicare Benefits
Since Social Security and Medicare payroll deductions (FICA) remain the same
regardless of whether or not you participate in the Plan, whatever you save in
the Plan will not reduce your future Social Security or Medicare benefits.
10
<PAGE>
Section 4
Investing Your Plan Account
================================================================================
In General
The Plan has 7 active investment funds which are held by RSI Retirement Trust.
Each fund represents a different type of investment with its own degree of
growth potential and risk. Having this choice of funds allows you to develop a
savings strategy that best fits your own long-range needs.
You are not limited to one investment choice. You can split your investment
among these 7 funds, and/or the Employer Stock Fund, in multiples of 10%.
Whatever allocation you elect applies to all of your Plan accounts and remains
in effect until you change it. (See, Adjusting Your Investment Strategy, below.)
If you fail to make an investment election, all of your accounts will
automatically be invested in the Short-Term Investment Fund, as described in The
Investment Funds, below.
The Investment Funds
The Plan's 7 investment funds in RSI Retirement Trust are described below.
* Core Equity Fund. This fund seeks capital appreciation and income
and invests in a broadly diversified group of high quality, large
capitalization companies exhibiting sustainable growth in
earnings and dividends. It is expected that the variability of
returns (risk) for the Core Equity Fund will approximate that of
the Standard and Poor's 500 stock index, over time.
* Emerging Growth Equity Fund. This fund seeks capital appreciation
and income by investing primarily in stocks of smaller companies
with higher-than-average earnings and dividend growth potential.
The fund will generally have a higher degree of risk and price
volatility than the portfolios of the Core Equity Fund and the
Value Equity Fund.
* Value Equity Fund. This fund seeks capital appreciation and
income and invests heavily in out-of-favor stocks of financially
sound companies that are selling at unjustifiably low market
valuations based on price/earnings ratios, price-to-book ratios,
etc. The results achieved by this fund may be more volatile than
the results produced by the Standard and Poor's 500 Index.
* Intermediate-Term Bond Fund. This fund seeks principal
appreciation and income and invests in high quality fixed-income
vehicles that mature within 10 years or have expected average
lives of 10 years or less. At least 65% of its assets must be
invested in securities issued or backed by the United States
government, or its agencies or instrumentalities. The returns of
this fund are expected to be less volatile than the returns
produced by the broad market index (Lehman Brothers
Government/Intermediate Bond Index).
11
<PAGE>
* Actively Managed Bond Fund. This fund invests in high quality
fixed-income securities and seeks both principal appreciation and
income. The maturity structure of this fund is expected to vary
substantially based on the perceived relative attractiveness of
different areas of the fixed-income market. At least 65% of its
assets must be invested in securities issued or backed by the
United States government, or its agencies or instrumentalities.
The returns of this fund are expected to reflect the variability
of returns produced by the broad market index (Lehman Brothers
Aggregate Bond Index).
* International Equity Fund. This fund seeks capital appreciation
and income by investing in stocks of companies headquartered in
foreign countries. Each selection is based on companies whose
current prices do not reflect the true earnings potential and
therefore, are selling at "undervalued" prices. Investments in
foreign markets with unacceptable political or economic risks are
avoided. Holdings are concentrated in the larger markets of
Europe, Australia and the Far East. In addition, the portfolio
manager will invest in emerging markets, as opportunities arise.
The fund generally carries a higher degree of risk and price
volatility than the Core Equity Fund and the Value Equity Fund,
but less than the Emerging Growth Equity Fund. Total net return,
including adjustments for currency price changes, should exceed
the Lipper International Mutual Funds Average measured over a
period of 3 to 5 years.
* Short-Term Investment Fund. This fund focuses on preservation of
principal while producing a competitive money market return.
The Employer Stock Fund
Commencing on the Conversion Date, the Plan also allows you to invest in the
Employer Stock Fund by transferring a percentage of one or more of your account
balances in the Plan's 7 investment funds in RSI Retirement Trust, described
above, from such funds to the Employer Stock Fund. It is described below.
* Employer Stock Fund. This fund is invested in common stock of
Hudson River Bancorp, Inc., the "holding company" of the
Employer.
Dividends And Interest
Dividends and interest earned on each fund are reinvested in that fund. Like
your Before-Tax Contributions, investment earnings are not taxed until you
receive a distribution from the Plan.
12
<PAGE>
Investment Expenses
The expenses of managing each fund, including investment management fees,
commissions, and other transaction costs, are charged against the total assets
of the applicable fund.
Adjusting Your Investment Strategy
The Plan gives you the flexibility you need to adjust your investment strategy.
However, if you are a highly paid officer who is subject to the rules of the
Securities Exchange Act of 1934, see, INTRODUCTION section, Notice To Employees
Who Direct Investment In Common Stock of Hudson River Bancorp, Inc. above.
* Changing future allocations. Prior to April 2, 1998, you were
able to change your investment direction of future contributions
not more than once in any calendar quarter by submitting a
request to a Plan representative at least 10 days prior to the
date the change is to take effect.
Commencing on and after April 2, 1998, you may change your
investment direction of future contributions at any time, by
telephone through the Retirement System Group Information Center.
If your change in investment direction is made by telephone, it
will become effective on the day of your telephone call, if you
call by 3:00 p.m. on a day that the New York Stock Exchange is
open; otherwise, as of the close of business on the next day the
Exchange is open. For detailed information regarding this
service, please contact your Plan Administrator.
In addition, if permitted by the Committee, instead of by
telephone, you may submit a written request to a Plan
representative at least 10 days prior to the date the change is
to take effect. If your change in investment direction is made in
this manner, it will become effective as of the first payroll
period following your written notice to the Plan representative,
or as soon as possible thereafter.
* Transferring existing account balances. Prior to April 2, 1998,
you were able to transfer existing investment account balances
from one fund to another not more than once in any calendar
quarter by submitting a request to a Plan representative at least
10 days prior to the date the transfer is to be made.
Commencing on and after April 2, 1998, you can transfer existing
investment account balances from one fund to another at any time,
by telephone through the Retirement System Group Information
Center as described above under "Changing future allocations".
In addition, if permitted by the Committee, instead of by
telephone, you may submit a written request to a Plan
representative at least 10 days prior to the date the transfer is
to be made. A transfer, if made in this manner, becomes effective
as soon as administratively possible following the 10 day
required notice. Such transfer is required to be made in
multiples of 10%.
13
<PAGE>
Transferring existing investment account balances does not change
how future contributions are invested. (If you want to change how
your future contributions are invested, see, Changing future
allocations, above.)
How Your Account Is Valued
The value of your Plan accounts will reflect the investment performance of the
investment fund or funds in which you are invested. Each of the Plan's 7
investment funds in RSI Retirement Trust and the Employer Stock Fund is valued
daily. Investment performance takes into account 2 factors:
* Investment income, which can only increase the value of your
accounts; and
* Change in market value, which can either increase or decrease the
value of your accounts.
Changes in market value reflect current security prices and interest rates.
Actively traded stocks and securities tend to change in price from day to day.
Changing interest rates, or the price of money, affect the price of government
and other fixed-income obligations. When interest rates rise, the price of
fixed-income obligations decline, and vice versa..
Account Statements
You will receive a statement of your Plan accounts once each calendar quarter.
The statement will show you the following as of the statement date: your balance
as of the prior statement date, contributions made to each account, the net
investment return, distributions made, loans disbursed, loan repayments and/or
transfers between investment funds, and the value of your Plan accounts.
A Word About Your Investment Decisions
Your investment decisions are your own. No employee or officer of the Employer
is authorized to give investment advice to you regarding how to invest your Plan
accounts. You should consider all of the funds carefully before making your
investment choice. Also, keep in mind that any investment carries a degree of
risk. The Plan's Trustees, investment managers, or the Employer cannot guarantee
against any Plan investment losses.
14
<PAGE>
Section 5
Vesting
================================================================================
Vesting
Vesting refers to your right to receive a percentage of the money in your Plan
accounts when you are eligible for a distribution.
Requirements For Vesting
You are always 100% vested in the value of your Before-Tax Contributions,
Rollover Contributions (if any) and any investment income they may earn. This
means you have a nonforfeitable right to your Before-Tax Contributions and
Rollover Contributions (if any) and earnings thereon.
Matching Contributions generally become vested only after you have been employed
by the Employer for a period of time (see, below). The same is true of any
earnings on the Matching Contributions. However, if you retire from the
Employer, become permanently Disabled or terminate employment as a result of
your death, you will become 100% vested in the value of all Matching
Contributions and earnings thereon, regardless of how long you had been employed
by the Employer.
If you leave the Employer after 1 full year of employment (365 days), your right
to Matching Contributions and earnings thereon is determined by the vesting
schedule set forth below. For purposes of determining your vested percentage
under the Plan, your entire period of employment with the Employer shall be
considered, except your employment with the Employer before May 1, 1986 (the
date the Employer originally adopted the Plan).
Subject to the above limitations on your years of employment for vesting
purposes, the vesting schedule under the Plan is as follows:
Vesting Schedule
Years of employment Percent
recognized for vesting purposes: vested:
-------------------------------- -------
Less than 1 year 0%
1 year but less than 2 20%
2 years but less than 3 40%
3 years but less than 4 60%
4 years but less than 5 80%
5 years or more 100%
15
<PAGE>
If you are not 100% vested and leave the Employer for any reason (other than
retirement, disability or death), the portion of the Matching Contributions and
earnings thereon which are not vested will be forfeited. The value of any
forfeitures is used to offset part of the Employer's future Matching
Contributions.
Vesting Upon Reemployment
If you leave the Employer or are on an extended leave of absence for any reason
and return to work for the Employer within 5 years, your past vesting service
with the Employer will be included in the vesting schedule. If you return to
work for the Employer after 5 years, your past vesting service with the Employer
may be included in the vesting schedule. A Plan representative will advise you
whether or not any of your past vesting service will be included in the vesting
schedule.
If you leave the Employer when you are not 100% vested in your Plan accounts,
and receive a distribution of your Plan accounts and return to work for the
Employer within 5 years, the Matching Contributions and earnings thereon that
you forfeited will be recredited to your Plan accounts only if you repay the
full amount of the distribution you received. The repayment must be made within
5 years from the date of your distribution.
16
<PAGE>
Section 6
Payment Of Benefits
================================================================================
Distributions After Termination of Employment
The Plan is designed to provide you with a source of retirement income.
Therefore, benefits are normally paid at retirement. However, the Plan also has
provisions for distributions in case you become disabled, die, or leave the
Employer before you actually retire. Plan distributions are normally made as
soon as administratively possible after you (or your beneficiary) become
eligible for such a distribution. (SEE, DISTRIBUTIONS UPON RETIREMENT OR
DISABILITY section, DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT section, and
DISTRIBUTIONS UPON DEATH section, below).
There are, however, certain instances where benefits may be lost or delayed. For
this reason, it is important for you to be aware of the following:
* A distribution from the Plan will not be made until you (or your
beneficiary) file an application for benefits.
* If you do not furnish information requested to complete or verify
your application for benefits, a distribution may be delayed
until such time as the information is received.
* A distribution may be delayed (or temporarily stopped) if your
current address is not on file.
In-Service Distributions
Although the Plan's main purpose is to encourage you to save money for your
retirement, your Employer does realize that there are instances when you may
need access to your money while you are still employed. For this reason, the
Plan contains provisions for withdrawals and loans during your employment years.
While these provisions give the Plan a degree of flexibility, they are governed
by certain rules and restrictions which are outlined in this SPD. (See,
WITHDRAWALS and LOANS section, below).
17
<PAGE>
Section 7
Distributions Upon Retirement Or Disability
================================================================================
In General
Plan benefits are normally paid to you upon your retirement. You may retire at
any time after you reach your Normal Retirement Date or your Early Retirement
Date. If you continue to work for the Employer past your Normal Retirement Date,
your benefits generally will be deferred until you actually retire.
In the event that you become Disabled (See, Disability, below), you may be
eligible to receive benefits, under the Plan, even before you are otherwise
eligible to retire.
The Plan also provides benefits, in some cases, if you terminate employment
before you are eligible to retire and for reasons other than Disability or
death. (See, DISTRIBUTIONS UPON TERMINATION (FOR REASONS OTHER THAN RETIREMENT
OR DISABILITY) section, below.)
Retirement Dates
You may retire, under the Plan, on or after any of the following dates:
* Normal Retirement Date. Normal retirement under this Plan occurs
on the later of the date you attain age 65 or the date you
complete 6 years of employment with the Employer.
* Early Retirement Date. You can choose to retire earlier if:
you have completed at least 5 consecutive years of employment
(which is recognized for benefit calculation under the Employer's
defined benefit retirement plan) and you meet one of the
following conditions:
(i) attainment of age 60; or
(ii) the sum of your attained age and years of employment (which
is recognized for vesting purposes under the Employer's
defined benefit retirement plan) equals of exceeds 75 years.
you become Disabled.
* Postponed Retirement Date. If you continue working after your
Normal Retirement Date, your Plan distribution will generally be
deferred at least until your actual retirement date (your
Postponed Retirement Date. Prior to January 1, 1997, the Internal
Revenue Service ("IRS") had required that you receive at least a
portion of your Plan accounts by the first day of April following
the year in which you reached age 70-1/2, even if you were still
employed by the Employer. Since these rules have been revised,
you are now required to begin receiving your benefits no later
than the first day of April following the calendar year in which
you retire (or terminate employment due to a Disability) or, if
later, in which you attain age 70-1/2.
18
<PAGE>
Disability
You are eligible for a Plan distribution if you become Disabled while you are an
active employee of the Employer. For purposes of the Plan, you are considered to
be Disabled if you have a physical or mental condition which the Committee
determines makes you totally and permanently incapable of engaging in any
substantial gainful employment (based on your education, training and
experience).
When And How Distributions Are Made
Plan distributions at retirement or disability will be made automatically in the
applicable Standard Form of Payment (See, Standard Form of Payment at Retirement
or Disability, below), unless an Optional Form of Payment (See, Optional Forms
of Payment at Retirement or Disability, below) is elected. Plan distributions
are generally taxable as ordinary income in the year in which the payment is
made.
If a portion of the vested interest in your Plan accounts is invested in the
Employer Stock Fund, you may elect to receive a distribution (other than an
in-service withdrawal or loan) from the Employer Stock Fund in the form of stock
rather than cash. A request to receive such common stock in kind must be
submitted to a Plan representative prior to the date a distribution of your Plan
accounts is to be made. If you elect to receive all or any part of your
distribution in the form of shares of the Employer Stock Fund, such distribution
will be made in whole shares (with any fractional shares distributed in cash).
If you leave the Employer and receive a distribution before you are age 55 and
do not roll over your distribution to a rollover Individual Retirement Account
(IRA) or a subsequent employer's qualified plan, you may have to pay a 10%
federal excise tax on the taxable portion of your distribution in addition to
other federal, state and local income taxes applicable to all distributions.
Prior to January 1, 1997, the Internal Revenue Service had required that the
value of your Plan accounts either be distributed or commence to be distributed
no later than the first day of April following the calendar year in which you
reached age 70-1/2, even if you were still employed by the Employer. Effective
January 1, 1997, the new rules require, instead, that the value of your Plan
accounts either be distributed or commence to be distributed no later than the
first day of April following the calendar year in which you retire (or terminate
employment due to a Disability) or, if later, in which you attain age 70-1/2. In
the event that you were required to begin receiving distributions due to your
attainment of age 70-1/2, but prior to your termination of employment, you may,
if you are still employed, elect to defer further distribution of your Plan
accounts until such time as you actually terminate employment.
19
<PAGE>
Standard Forms of Payment at Retirement or Disability
Your benefits will be paid to you in the following Standard Forms of Payment,
unless you choose an optional payment form:
* Plan Accounts of $5,000 or less. If you terminate employment on
your Early Retirement Date, Normal Retirement Date or Postponed
Retirement Date, or because you become Disabled and the value of
your Plan accounts is $5,000 or less, your benefits will
automatically be paid to you in the form of a single cash payment
as soon as administratively possible after you retire or become
disabled, to the extent that such benefits are derived from
amounts invested in any of the Plan's 7 investment funds in RSI
Retirement Trust. To the extent your benefit is derived from
amounts invested in the Employer Stock Fund, such benefit may be
paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible
following your termination of employment. Provided, however, that
a request to receive such common stock in kind must be submitted
to a Plan representative prior to the date a distribution of your
Plan accounts is to be made. If you elect to receive all or any
part of the distribution in the form of shares of the Employer
Stock Fund, such distribution will be made in whole shares (with
any fractional shares distributed in cash).
* Normal or Postponed Retirement. If you terminate employment at
your Normal or Postponed Retirement Date and the value of your
Plan accounts exceed $5,000, your benefits will automatically be
paid to you in the form of a single cash payment as soon as
administratively possible following your termination of
employment, to the extent that such benefits are derived from
amounts invested in any of the Plan's 7 investment funds in RSI
Retirement Trust. To the extent your benefit is derived from
amounts invested in the Employer Stock Fund, such benefit may be
paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible
following your termination of employment. Provided, however, that
a request to receive such common stock in kind must be submitted
to a Plan representative prior to the date a distribution of your
Plan accounts is to be made. If you elect to receive all or any
part of the distribution in the form of shares of the Employer
Stock Fund, such distribution will be made in whole shares (with
any fractional shares distributed in cash).
* Early Retirement or Disability. If your termination of employment
occurs on or after you have reached your Early Retirement Date or
upon your becoming Disabled and the value of your Plan accounts
exceeds $5,000, your benefits will automatically be paid to you
at the time you would have reached your Normal Retirement Date.
At that time, your benefit will be paid in the form of a single
cash payment, to the extent that such benefit is derived from
amounts invested in any of the Plan's 7 investment funds in RSI
Retirement Trust. To the extent your benefit is derived from
amounts invested in the Employer Stock Fund, such benefit may be
paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible
following your termination of employment. Provided, however, that
a request to receive such common stock in kind must be submitted
to a Plan representative prior to the date a distribution of your
Plan accounts is to be made. If you elect to receive all or any
part of the distribution in the form of shares of the Employer
Stock Fund, such distribution will be made in whole shares (with
any fractional shares distributed in cash).
20
<PAGE>
In lieu of the above, you have the right to elect to receive your benefit under
another available optional form of payment. A list of the optional forms of
payment under the Plan and a description of when each form is available,
follows.
Optional Forms of Payment at Retirement or Disability
* Single Cash Payment. This option is available if the value of
your Plan accounts exceed $5,000. If you leave the Employer at
any time on or after your Early Retirement Date or on your Normal
Retirement Date or on your Postponed Retirement Date or because
you become Disabled, you may elect to receive the value of your
Plan accounts as a single cash payment up to 13 months after you
leave the Employer, to the extent that such benefits are derived
from amounts invested in any of the Plan's 7 investment funds in
RSI Retirement Trust.
* Deferred Payment. This option is available if the value of your
Plan accounts exceeds $5,000. You may elect to defer receipt of
the value of your Plan accounts until after your Normal
Retirement Date or after your actual retirement date (if you
retire after your Normal Retirement Date), to the extent that
such benefits are derived from amounts invested in any of the
Plan's 7 investment funds in RSI Retirement Trust. Your election
will be valid if, at least 10 days prior to your retirement date,
you file the appropriate election form with a Plan
representative. Keep in mind that the Internal Revenue Service
requires that you receive at least a portion of your Plan
accounts by April first of the calendar year following the later
of (i) the calendar year in which you retire (or terminate
service due to a Disability) or (ii) the calendar in which you
attain age 70-1/2.
21
<PAGE>
* Installment Payments. This option is available if the value of
your Plan accounts exceed $5,000. You may elect to receive the
value of your Plan accounts in installments, to the extent that
such benefits are derived from amounts invested in any of the
Plan's 7 investment funds in RSI Retirement Trust.. You decide
the duration of your payment period, up to a maximum payment
period of 20 years. However, the maximum payment period you
select cannot exceed your life expectancy and the life expectancy
of your beneficiary. You also decide when installments will
begin. (For example, you may wish to defer your first installment
until the first of the year following the date your Plan accounts
become payable.) You must begin to receive payments no later than
April first of the calendar year following the later of (i) the
calendar year in which you retire (or terminate service due to a
Disability) or (ii) the calendar year in which you attain age
70-1/2. Each installment amount will be based on the number of
payments then remaining and the current value of your Plan
accounts.
* Rollovers to An Individual Retirement Account (IRA) Or Another
Qualified Plan. This option is available regardless of the value
of your Plan accounts. You may, at least 10 days prior to the
date on which your benefit is scheduled to be paid, request that
the value of your Plan accounts be transferred to a rollover
Individual Retirement Account (IRA), or to another employer's
qualified plan, if the other plan permits it. If you choose not
to roll over your Plan distributions, you may be subject to 20%
Federal income tax withholding on the distribution. Details
concerning these rollover rules will be provided at the time you
request a Plan distribution. You should consult your own tax
advisor for further information.
For purposes of the foregoing optional forms of payments, to the extent your
benefit is derived from amounts invested in the Employer Stock Fund, such
benefit may be paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible following your
termination of employment. Provided, however, that a request to receive such
common stock in kind must be submitted to a Plan representative prior to the
date a distribution of your Plan accounts is to be made. If you elect to receive
all or any part of the distribution in the form of shares of the Employer Stock
Fund, such distribution will be made in whole shares (with any fractional shares
distributed in cash).
How To Apply For A Distribution
When you become eligible for and wish to receive a Plan distribution, you can
obtain an application form for benefits by contacting a Plan representative.
(See, APPLICATION FOR BENEFITS AND CLAIMS PROCEDURE section, below.)
22
<PAGE>
Section 8
Distributions Upon Termination (Other Than Retirement Or Disability)
================================================================================
In General
If you leave the Employer before you are eligible to retire, for any reason,
other than [if you are Disabled, or upon your ]death, contributions to your Plan
accounts will end. At such termination of employment, you will be entitled to
receive the vested value of your Plan accounts at the time and in the manner
described in this Section.
When And How Distributions Are Made
Plan distributions upon termination of employment for reasons other than
retirement or disability will be made automatically in the applicable Standard
Form of Payment (See, Standard Forms of Payment Upon Termination, below), unless
you elect one of the available Optional Forms of Payment (see Optional Forms of
Payment at Termination, below).
Plan distributions are generally taxable as ordinary income in the year in which
the payment is made. If a portion of the vested interest in your Plan accounts
is invested in the Employer Stock Fund, you may elect to receive a distribution
(other than an in-service withdrawal or loan) from the Employer Stock Fund in
the form of stock rather than cash. A request to receive such common stock in
kind must be submitted to a Plan representative prior to the date a distribution
of your Plan accounts is to be made. If you elect to receive all or any part of
your distribution in the form of shares of the Employer Stock Fund, such
distribution will be made in whole shares (with any fractional shares
distributed in cash).
If you leave the Employer and receive a distribution before you are age 55 and
do not roll over your distribution to a rollover Individual Retirement Account
(IRA) or a subsequent employer's qualified plan, you may have to pay a 10%
federal excise tax on the taxable portion of your distribution in addition to
other federal, state and local income taxes applicable to all distributions.
Prior to January 1, 1997, the Internal Revenue Service had required that the
value of your Plan accounts either be distributed or commence to be distributed
no later than the first day of April following the calendar year in which you
reached age 70-1/2, even if you were still employed by the Employer. Effective
January 1, 1997, the new rules require, instead, that the value of your Plan
accounts either be distributed or commence to be distributed no later than the
first day of April following the calendar year in which you retire (or terminate
employment due to a Disability or, if later, in which you attain age 70-1/2. In
the event that you were required to begin receiving distributions due to your
attainment of age 70-1/2, but prior to your termination of employment, you may,
if you are still employed, elect to defer further distribution of your Plan
accounts until such time as you actually terminate employment.
23
<PAGE>
Standard Forms of Payment Upon Termination
Your benefits will be paid to you in the following Standard Forms of Payment,
unless you choose an optional payment form, below:
* Plan Accounts of $3,500 or less. If you leave the Employer for
reasons other than retirement or disability and the value of your
vested Plan accounts is $3,500 or less, your benefits will be
paid to you in the form of a single cash payment as soon as
administratively possible after your termination of employment,
to the extent that such benefits are derived from amounts
invested in any of the Plan's 7 investment funds in RSI
Retirement Trust. To the extent your benefit is derived from
amounts invested in the Employer Stock Fund, such benefit may be
paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible
following your termination of employment. Provided, however, that
a request to receive such common stock in kind must be submitted
to a Plan representative prior to the date a distribution of your
Plan accounts is to be made. If you elect to receive all or any
part of the distribution in the form of shares of the Employer
Stock Fund, such distribution will be made in whole shares (with
any fractional shares distributed in cash).
* Plan Accounts exceeding $3,500. If you leave the Employer for
reasons other than retirement or disability and the value of your
vested Plan accounts is greater than $5,000, your benefits will
be paid to you at the time you would have reached your Normal
Retirement Date. At that time, your benefit will be paid in the
form of a single cash payment, to the extent that such benefits
are derived from amounts invested in any of the Plan's 7
investment funds in RSI Retirement Trust. To the extent your
benefit is derived from amounts invested in the Employer Stock
Fund, such benefit may be paid to you in cash, or in the form of
common stock of the Employer Stock Fund as soon as
administratively possible following your termination of
employment. Provided, however, that a request to receive such
common stock in kind must be submitted to a Plan representative
prior to the date a distribution of your Plan accounts is to be
made. If you elect to receive all or any part of the distribution
in the form of shares of the Employer Stock Fund, such
distribution will be made in whole shares (with any fractional
shares distributed in cash).
In lieu of the above, you may have the right to elect to receive your benefit
under another available optional form of payment. A list of the optional forms
of payment under the Plan and a description of each form is available follows.
24
<PAGE>
Optional Forms of Payment Upon Termination
* Single Cash Payment. This option is available if the value of
your vested Plan accounts exceed $5,000. You may elect to receive
the value of your vested Plan accounts as a single cash payment
as soon as administratively possible after your termination of
employment, to the extent that such benefits are derived from
amounts invested in any of the Plan's 7 investment funds in RSI
Retirement Trust.
* Rollovers to An Individual Retirement Account (IRA) Or Another
Qualified Plan. You may, at least 10 days prior to the date on
which your benefit is scheduled to be paid, request that the
value of your Plan accounts be transferred to a rollover
Individual Retirement Account (IRA), or to another employer's
qualified plan, if the other plan permits it. If you choose not
to roll over your Plan distributions, you may be subject to 20%
Federal income tax withholding on the distribution. Details
concerning these rollover rules will be provided at the time you
request a Plan distribution. You should consult your own tax
advisor for further information.
For purposes of the foregoing optional forms of payments, to the extent your
benefit is derived from amounts invested in the Employer Stock Fund, such
benefit may be paid to you in cash, or in the form of common stock of the
Employer Stock Fund as soon as administratively possible following your
termination of employment. Provided, however, that a request to receive such
common stock in kind must be submitted to a Plan representative prior to the
date a distribution of your Plan accounts is to be made. If you elect to receive
all or any part of the distribution in the form of shares of the Employer Stock
Fund, such distribution will be made in whole shares (with any fractional shares
distributed in cash).
How To Apply For A Distribution
When you become eligible for and wish to receive a Plan distribution, you can
obtain an application form for benefits by contacting a Plan representative.
(See, APPLICATION FOR BENEFITS AND CLAIMS PROCEDURE section, below.)
25
<PAGE>
Section 9
Distribution Upon Death
================================================================================
In General
The full value of your Plan accounts, less any outstanding loans, will be paid
to your designated beneficiary if you die. (See, JOINING THE PLAN section, About
Your Beneficiary, above.) In order to receive this payment, your designated
beneficiary must first provide a Plan representative with proper documentation
(for example, a death certificate). However, if you are married, your spouse
will automatically be your designated beneficiary, unless you elect otherwise in
accordance with the requirements of the Plan. If you are not married and if
there is no designated beneficiary on record, payment will be made to your
estate.
If a portion of the vested interest in your Plan accounts is invested in the
Employer Stock Fund, your beneficiary may elect to receive a distribution (other
than an in-service withdrawal or loan) from the Employer Stock Fund in the form
of stock rather than cash. A request to receive such common stock in kind must
be submitted to a Plan representative prior to the date a distribution of the
Plan accounts is to be made. If you elect to receive all or any part of your
distribution in the form of shares of the Employer Stock Fund, such distribution
will be made in whole shares (with any fractional shares distributed in cash).
Manner of Payment
If you die before you receive the entire value of your vested Plan accounts,
payments will be made to your designated beneficiary as follows:
* If you had not made a valid election as to how payments are to be
made, a single cash payment, and/or, payment in the form of stock
of the Employer Stock Fund, if applicable, will be made as soon
as administratively possible following your death.
* If you had made a valid election or are otherwise scheduled to
receive a deferred single cash payment, a single cash payment,
and/or, payment in the form of stock of the Employer Stock Fund,
if applicable, will generally be made as of the date you had
elected to receive the payment. However, there are some
situations when a single cash payment, and/or, payment in the
form of stock of the Employer Stock fund, if applicable, may be
made as of another date. They are:
26
<PAGE>
if your designated beneficiary is your spouse and you die before
your attainment of age 70-1/2, the payment to your spouse will be
made no later than the date you would have attained age 70-1/2
if your designated beneficiary is your spouse and you die on or
after your attainment of age 70-1/2, the payment to your spouse
will be made as soon as administratively possible following your
death; and
if your designated beneficiary is not your spouse, the payment to
your designated beneficiary will be made within one year of the
date of your death.
* if you are receiving installment payments and die before you
received all your installments, your designated beneficiary will
continue to receive the installments in the same manner that you
were receiving them. Payments will continue until the
installments you and your designated beneficiary receive equal
the number of installment payments you had elected to receive.
27
<PAGE>
Section 10
Withdrawals
================================================================================
In General
Although the Plan is designed to encourage you to save money for your
retirement, you may have access to your Plan accounts while you are employed by
the Employer through the Plan's withdrawal provisions. The Plan also allows you
access to your Plan accounts through its loan provisions (see, LOANS section,
below). If you are a highly paid officer who is subject to the rules of the
Securities Exchange Act of 1934, see, INTRODUCTION section, Notice To Employees
Who Direct Investment In The Employer Stock Fund, above.
If you are eligible and request a withdrawal, the Committee will review the
withdrawal documents you submit and determine whether or not you qualify for the
withdrawal in accordance with the following provisions.
Non-Hardship Withdrawals After Age 59-1/2
You may request a withdrawal from your Plan accounts for any reason once you
reach age 59-1/2. Withdrawals will be made in the following order:
* First, from your Before-Tax Contribution account (if any),
* Second, from your Rollover Contribution account (if any),
* Third, from the vested portion of your Matching Contribution
account (see, VESTING section, above).
The non-hardship distribution will be made, pro rata, from that portion of your
Plan accounts invested in the 7 Investment Funds, as well as from the Employer
Stock Fund (see, INVESTING YOUR PLAN ACCOUNT section, The Investment Funds,
above), in the account priority as stated above. The distribution will be made
from the cash value of that portion of your Plan accounts invested in the
Employer Stock Fund.
You may not make more than 2 withdrawals in any calendar year.
Hardship Withdrawals
You may be eligible for a hardship withdrawal if you have an immediate and
substantial financial need to meet certain expenses and you have no other
reasonably available resources to meet your need. Among other requirements, you
must first withdraw all amounts available to you under the non-hardship
provisions of the Plan (see, Non-hardship withdrawals after age 59-1/2, above)
before you may apply for a hardship withdrawal.
28
<PAGE>
When you request a hardship withdrawal, you will need to complete a Hardship
Withdrawal Form. You must also provide a statement of need and evidence of the
hardship to the Committee. The Committee will not approve an amount that is more
than you need to meet your immediate financial obligation, nor will an
unsubstantiated hardship withdrawal request be approved.
The following Internal Revenue Service requirements must be met before a
distribution may be made in the form of a hardship withdrawal:
* Immediate and substantial financial need:
Expenses that automatically qualify for an immediate and
substantial financial need are: (1) purchase of your primary home
(excluding mortgage payments); (2) payment of post-secondary
school education (for the next 12 months for you, your spouse or
dependents); (3) unreimbursed medical expenses which were
previously incurred, or expenses which are necessary to obtain
medical care for you, your spouse or dependents; or (4) an amount
to prevent your eviction from your primary home or to prevent a
foreclosure of the mortgage on your primary home.
* Lack of available resources:
In addition to an immediate and substantial financial need, you
must have no other reasonably available resources to meet your
need in order to receive a hardship withdrawal. The Plan provides
the following 2 ways to meet this requirement:
1. You may submit a representation, to the Committee, on a form
provided by a Plan representative, that you have no other
available resources to meet your financial hardship
obligation. This means that you cannot meet your financial
need by any of the following resources:
reimbursement or compensation from insurance or otherwise;
reasonable liquidation of assets;
stopping Before-Tax Contributions to your Plan accounts; or
borrowing from commercial sources on reasonable terms.
Note that for purposes of determining lack of reasonably
available resources, your resources will include assets of
your spouse and minor children that are reasonably available
to you, or
29
<PAGE>
2. You may comply with all of the following requirements:
you must have received a distribution of all amounts
available to you under all other plans of the Employer; and
you must have received all nontaxable loans currently
available from all plans maintained by the Employer; and
the amount of distribution that you request must not be more
than what you need, including amounts necessary to pay any
income taxes or penalties as a result of this distribution;
and
you may not have any Before-Tax Contributions or Matching
Contributions made on your behalf for 12 months after your
hardship withdrawal; and
the amount of any Before-Tax Contributions that may be made
on your behalf for the calendar year after you received a
hardship withdrawal will be reduced. The Plan Administrator
will let you know the amount of Before-Tax Contributions
that may be made on your behalf after the 12 month
suspension described above.
If you qualify for a hardship withdrawal, withdrawals will be made from your
Plan accounts in the following order:
* First, from your Before-Tax Contribution account (if any),
* Second, from your Rollover Contribution account (if any),
* Third, from the vested portion of your Matching Contribution
account (see, VESTING, above).
The hardship distribution will be made, pro rata, from that portion of your Plan
accounts invested in the 7 Investment Funds including the Employer Stock Fund
(see, INVESTING YOUR PLAN ACCOUNT section, The Investment Funds, above), in the
account priority as stated above. The distribution will be made from the cash
value of that portion of your Plan accounts invested in the Employer Stock Fund.
Hardship withdrawals will not include any investment income earned on your
Before-Tax Contributions after January 1, 1989.
You may not make more than 2 hardship withdrawals in any calendar year.
How To Make A Withdrawal
To make a withdrawal from the Plan, you must submit a withdrawal application to
the Committee at least 10 days before the withdrawal is to be processed. Payment
will be made in a cash payment as soon as administratively possible after
receipt of your request by the Plan's Trustees.
30
<PAGE>
How Withdrawals Are Taxed
Withdrawals made while you are an employee may be taxable as ordinary income. If
you qualify for and make a Plan withdrawal prior to your attainment of age
59-1/2, the taxable portion of the amount withdrawn may also be subject to a 10%
federal excise tax.
31
<PAGE>
Section 11
Loans
================================================================================
In General
You may borrow against your Plan accounts at any time for any reason. If you are
a highly paid officer who is subject to the rules of the Securities Exchange Act
of 1934, (see, INTRODUCTION section, Notice to Employees Who Direct Investments
In the Employer Stock Fund, above). You will have to pay interest on your loan
but the interest is paid into your own Plan accounts. There is no excise tax or
income tax payable on the amount you borrow.
Loan Amount and Frequency
The minimum amount you may borrow is $1,000.
The most you may borrow is :
the lesser of:
* 50% of:
your Before-Tax Contribution account,
the vested portion of your Matching Contribution account (see,
VESTING section, above),
your Rollover Contribution account (if any), or
* $50,000 reduced by your largest outstanding loan balance during
the past 12 months.
You may have 2 outstanding loan at any given time. Loans will be made in the
following order:
* First, from your Before-Tax Contribution account,
* Second, from the vested portion of your Matching Contribution
account (see, VESTING section, above).
* Third, from your Rollover Contribution account (if any).
The distribution of your loan will be made, pro rata, from that portion of your
Plan accounts invested in the 7 Investment Funds, including the Employer Stock
Fund (see, INVESTING YOUR PLAN ACCOUNT section, The Investment Funds, above), in
the account priority as stated above. The distribution of your loan will be made
from the cash value of that portion of your Plan accounts invested in the
Employer Stock Fund.
32
<PAGE>
Interest On Your Loan
The annual rate of loan interest is based on the "prime rate" of interest as
published in The Wall Street Journal on the first day of the month in which the
loan was made, increased by one (1) percentage point. All principal and interest
repayments are credited to the Plan accounts from which you borrowed and are
invested the same way your current contributions are invested. Such rate shall
remain in effect until the Loan Account is closed.
Repayments
Generally, you will repay your loan through payroll deductions. Payments are
made according to a schedule established under your Promissory Note to the Plan
and you may take up to 5 years to repay your loan. However, you can take up to
15 years to repay if your loan is for the purchase of your primary residence.
You may choose to repay all of the outstanding balance of your loan at any time.
Partial prepayment of loans is not permitted.
Default In Repayments
If you have an outstanding loan and you are no longer on the payroll of the
Employer, the outstanding balance of your loan must be paid to the Employer in
monthly installments. If you fail to make such payment within 30 days of the due
date, on the next day you will be in default and you will be required to pay the
entire outstanding amount, plus interest, within 90 days after your default.
Security On Your Loan
If you become eligible for a Plan distribution before you have repaid your loan
in full, the total value of your vested Plan accounts available for distribution
will be reduced by any outstanding loan amounts.
33
<PAGE>
Section 12
Application For Benefits And Claims Procedure
================================================================================
General
This section describes how to apply for benefits under the Plan. It also
describes how you should proceed if you believe you are entitled to benefits and
benefits have been denied, or if you believe the amount of your benefit is not
correct.
How To File For Benefits
When you become eligible for a Plan distribution, you can get an application
form for benefits by contacting a Plan representative.
Claim For Benefits
If you believe you are entitled to a benefit that has not been paid, you should
notify the Plan Administrator of all relevant facts about your claim on a Plan
claim form. The Plan Administrator will notify you of the status of your claim
within 90 days of receiving your properly completed claim form. If more than the
90 days is needed to process the claim, the Plan Administrator will notify you
in writing of the special circumstances requiring the extension and of the date
a decision is expected to be made. An extension will not be more than 180 days
from the receipt of the claim.
Denial of Claim
If your claim for benefits is denied, you will receive a written notice from the
Plan Administrator with the following information:
* the specific reasons for the denial,
* the specific parts of the Plan which formed the basis for the
denial,
* the additional information you must submit to have the claim
reconsidered and why such additional information is required; and
* the steps you must take if you wish to appeal the decision.
Your claim will be deemed to be denied if you have not received an approval or
denial notice within 90 days after you submitted your claim form for benefits,
or the end of the extended period established.
34
<PAGE>
Review of Denied Claims and Decision
You have the right to appeal the decision denying your claim. The appeal must be
submitted in writing and filed with the Committee within 60 days after your
claim was actually denied, or within 60 days after it was deemed denied (see,
Denial of Claim above).
The Committee will conduct a full and fair review of the denial of your claim.
When the review has been completed you will be notified in writing of the final
decision, which will state the specific reasons for the decision and will
include specific references to the pertinent Plan provisions upon which the
decision was based. The decision will be furnished to you no later than 60 days
after the receipt of your request for a review, unless special circumstances
require an extension of time for processing. In this case, a decision will be
rendered no later than 120 days after receipt of your appeal.
35
<PAGE>
Section 13
Amendment And Termination Of Plan
================================================================================
General
While the Employer intends to continue the Plan indefinitely, the Employer
reserves the right to amend the Plan at any time and to terminate the Plan. This
section describes what will happen if the Employer amends or terminates the
Plan.
Amendment to the Plan
The Plan is governed by current tax laws and the rulings and regulations of the
Internal Revenue Service. If any changes occur in the current tax laws or in the
Internal Revenue Service rulings and regulations which affect the Plan, the Plan
will be amended to comply with such changes. The Employer also reserves the
right to make changes in the Plan from time to time. For example, the Employer
may amend the Plan to change the level of Matching Contributions or the method
of determining the interest rate on loans from the Plan. If any changes are
made, you will be notified of the changes.
Termination of the Plan
The Employer has every intention of continuing to offer the Plan to all eligible
employees. However, the Employer reserves the right to terminate the Plan. While
termination of the Plan is unlikely, should it happen, you will receive the full
value of your Plan accounts.
36
<PAGE>
Section 14
Special Rules If Plan Becomes Top-Heavy
================================================================================
General
In order for the Employer to maintain the Plan, the Employer must meet many
legal requirements. One of these requirements is that the Plan must not favor a
certain group of highly paid employees. This section describes what happens if
the Plan does not meet this requirement.
Determination
If the Plan primarily benefits Key Employees (a certain group of highly-paid
employees of the Employer), the Plan will be Top-Heavy.
A study will be done for each Plan Year (see, OTHER IMPORTANT INFORMATION
section, Administrative Information, Plan Year, below) to determine if the Plan
is Top-Heavy. The Plan will be Top-Heavy if, for a Plan Year, the present value
of the cumulative accrued benefits to be provided for Key Employees exceeds 60%
of the present value of the cumulative accrued benefits for all participants,
certain former officers and employees, and beneficiaries.
Special Rules
If the Plan becomes Top-Heavy in any Plan Year, non-key employees will be
entitled to certain minimum contributions.
If you are a participant in more than one plan, you may not be entitled to
minimum Top-Heavy contributions or benefits under both plans.
You will be notified if the Plan becomes Top-Heavy and whether any of these
special rules will affect your benefits.
37
<PAGE>
Section 15
Other Important Information
================================================================================
General Information
In addition to the information about your Plan presented so far, there is
additional information that is important for you to know. The benefits described
here are exclusively for Plan participants and their beneficiaries. Your Plan
benefits cannot be assigned, transferred, or sold for any reason except as
provided by law, including in the event of a Qualified Domestic Relations Order
as described below.
Domestic Relations Order
If you are or were married or have dependents, your spouse, former spouse, or
dependents may, through court order, have a right to receive a portion of your
benefit, for example, as part of a property settlement in connection with a
divorce, or to provide financial support.
In order to enforce this right, your spouse or dependent must deliver to the
Plan Administrator a court order establishing such right and containing certain
information required by federal law. This court order is called a Qualified
Domestic Relations Order (QDRO).
You will be notified when the Plan Administrator receives a court order that is
intended to be a QDRO which may affect your benefits. The Plan Administrator
will review the court order to determine whether it satisfies the requirement
for such an order. No payment will be made under a court order until you have
been notified that the court order satisfies the requirements for a QDRO. The
portion of your benefit affected by a court order may be held in reserve under
the Plan until such a determination is made.
Your Rights Under the Employee Retirement Income Security Act (ERISA)
It is the Employer's policy to provide benefits to each eligible employee. One
of these benefits, the Plan, is described in this booklet. While the Employer is
not required to provide the Plan, because it does, you, as a participant, are
entitled to certain rights and protections under the Employee Retirement Income
Security Act of 1974, as amended (ERISA).
Statement of Rights
ERISA provides that all Plan participants shall be entitled to:
Examine, without charge, at the Plan Administrator's office and at other
specified work site locations, all Plan documents, including insurance
contracts, copies of all documents filed on behalf of the Plan with the
U.S. Department of Labor, such as detailed annual reports and plan
descriptions.
38
<PAGE>
Obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator. The administrator may make a reasonable
charge for the copies.
Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each participant with a copy of
this summary annual report.
In addition to creating rights for Plan participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan.
The people who operate the Plan, called "fiduciaries" of the Plan, have a duty
to do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your Employer, or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining a benefit or exercising your rights under ERISA.
If your claim for a benefit is denied in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have
your claim reviewed and reconsidered.
We doubt that you will ever find it necessary to go to court or file suit, but
the right is yours and the Employer will not (and cannot) dismiss you or
discriminate against you to prevent you from obtaining Plan benefits or
exercising any of your rights under ERISA.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan Administrator and do not
receive them within 30 days, you may file suit in a federal court. In such a
case, the court may require the Plan Administrator to provide the materials and
pay you up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the administrator. If you
have a claim for benefits which is denied or ignored, in whole or in part, you
may file suit in a state or federal court. If it should happen that Plan
fiduciaries misuse the Plan's money, or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. The court will decide who should
pay court costs and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees (for example, if it finds that your claim
is frivolous).
If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
39
<PAGE>
Benefits Not Insured by the Pension Benefit Guaranty Corporation (PBGC)
Under the Employee Retirement Income Security Act of 1974, a corporation was
established within the United States Department of Labor to insure the adequacy
of certain types of pension plan trust funds to provide the benefits promised
under pension plans. The corporation is known as the Pension Benefit Guaranty
Corporation. Under present law, the Pension Benefit Guaranty Corporation does
not insure the adequacy of profit-sharing and 401(k) plan trust funds in any
way. Accordingly, benefits under this Plan are not insured by the Pension
Benefit Guaranty Corporation.
Administrative Information
If it ever becomes necessary for you to contact the U.S. Department of Labor or
the Internal Revenue Service, you will need the following information:
Name of Plan: The Hudson City Savings Institution 401(k) Savings Plan in RSI
Retirement Trust As Amended and Restated Effective January 1, 1997 Including
provisions Effective through April 2, 1998 and the Conversion Date.
Name of Employer and Plan Sponsor:
The Hudson City Savings Institution
1 City Center
Hudson, NY 12534
Employer Identification Number (EIN): The Employer Identification Number which
is assigned by the Internal Revenue Service ("IRS") is 14-0763300.
Plan Number: The Plan Number which is assigned by the Employer is 002.
Plan Cost: This Plan is funded entirely by Before-Tax Contributions, and
Employer Matching Contributions.
Plan Year: This Plan is administered on a calendar year basis, January 1 through
December 31.
Plan Type: Defined contribution
Effective Date: May 1, 1986
Plan Administration: The Employer has appointed a Plan Administrator, an
Employee Benefits Committee ("Committee") and the RSI Retirement Trust to
perform specific functions and duties with respect to the administration and
operation of the Plan.
40
<PAGE>
The Plan Administrator is
The Hudson City Savings Institution
1 City Center
Hudson, NY 12534
(518) 828-4600
Agent for Service of Legal Process: For disputes arising under the Plan, the
Plan Administrator is the person designated as the agent for service of legal
process. Service of legal process may also be made upon RSI Retirement Trust or
___________________ ______________________________________________________, if
applicable.
Type of Plan Administration: The Plan is jointly administered by the Employer
and the Trustees.
Trustees: The assets of the Plan invested in the 7 Investment Funds are held for
investment by RSI Retirement Trust, 317 Madison Avenue, New York, New York
10017. The assets of the Plan invested in the Employer Stock Fund are held by
______________________________, ___________________________________________.
The Plan Administrator is responsible for maintaining the Plan's records,
determining eligibility to participate, forwarding all appropriate forms to the
Trustee, notifying the participant regarding claims for benefits and generally
acting in good faith and in the Plan's interest. The Trustee is responsible for
investing the Plan assets.
*************
This booklet is a summary of the key features of the Plan; it does not cover all
of the details. The full terms and conditions of the Plan are described in the
formal Plan document, which together with the RSI Retirement Trust Agreement and
Declaration of Trust and _____________________________, legally govern the
operation of the Plan. If there is any discrepancy between the Plan or Trust
documents and this SPD, the wording of the formal Plan document and Trusts will
govern.
41
<PAGE>
Form 5500-C/R 1996
Return/Report of Employee Benefit Plan
(With 100 or more 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(e), 6057(b), and
6058(a) of the Internal Revenue Code.
For the calendar plan year 1996 or fiscal plan year beginning January 1, 1996
and ending December 31, 1996.
If A(1) through A(4), B, C, and/or D do not apply to this year's return/report,
leave the boxes unmarked.
This return/report is:
(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).
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. [ X ]
1a Name and address of plan sponsor (employer, if for a single-employer plan)
(Address should include room and suite no.)
The Hudson City Savings Institution
One Hudson City Centre
P.O. Box 76
Hudson, NY 12534-0076
1b Employer Identification Number (EIN) 14-0763300
1c Sponsor's telephone number (518) 828-4331
1d Business code (see instructions, Page 20) 6030
1e CUSIP Issuer Number N/A
<PAGE>
2a Name and address of plan administrator (if same as plan sponsor, enter
"Same")
RSI Retirement Trust
317 Madison Avenue
New York, NY 10017
2b Administrator's EIN 11-1805969
2c Administrator's telephone number (212) 503-0100
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 in line 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). Enter "Yes" or "No."
4 ENTITY CODE.(If not shown, enter applicable code from page 8 of the
instructions.)
A
5a Name of Plan
The Hudson City Savings Institution 401(k) Savings Plan in
RSI Retirement Trust
5b Effective Date of Plan (Mo., Day, Yr.)
05/01/86
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.)
2
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.)
G C
<PAGE>
6d Fringe benefit plan. Attach Schedule F (Form 5500).
See instructions. [ ]
CAUTION: A penalty for the late or incomplete filing of this
return/report will be assessed unless reasonable cause is
established.
Under penalties 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/ Tim E. Blow Date 10/10/97
Type or print name of individual signing above
Tim E. Blow
Signature of plan administrator
/s/ Durando J. Saccente Date 09/23/97
Type or print name of individual signing above
Durando J. Saccente
<PAGE>
6e Check all applicable investment arrangements below: (1) Master trust [ ] (2)
103-12 investment entity [ ] (3) Common/collective trust [ ] (4) Pooled
separate account [ ]
6f Single-employer plans enter the tax year end of the employer in which this
plan year ends
Month 12 Day 31 Year 96
6g Is any part of this plan funded by an insurance contract described in Code
section 412(i)?
Yes [ ] No [ X ]
6h If line 6g is "Yes," was the part subject to the minimum funding standards
for either of the prior 2 plan years?
Yes [ ] No [ ]
7 Number of participants as of the end of the plan year (welfare plans complete
only lines 7a(4), 7b, 7c, and 7d):
7a Active participants
(1) Number fully vested 103
(2) Number partially vested 75
(3) Number nonvested 11
(4) Total 189
7b Retired or separated participants receiving benefits 0
7c Retired or separated participants entitled to future
benefits 40
7d Subtotal. Add lines 7a(4), 7b, and 7c 229
7e Deceased participants whose beneficiaries are receiving
or are entitled to receive benefits 0
7f Total. Add lines 7d and 7e. 229
7g Number of participants with account balances. (Defined
benefit plans do not complete this line item.) 218
7h Number of participants that terminated employment during the plan year with
accrued benefits that were less than 100% vested 11
7i (1) Was any participant(s) 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 persons
required to be reported 16
<PAGE>
8a Was this plan terminated during this plan year or any prior plan year?
Yes [ X ] No [ ]
If "Yes", complete line 8b.
8b If line 8a is "Yes," enter the date the most recent amendment was adopted.
Month 08 Day 15 Year 96
8c Did any amendment during the current plan year result in the retroactive
reduction of accrued benefits for any participants?
Yes [ ] No [ X ]
8d During this plan year did any amendment change the information contained in
the latest summary plan descriptions or summary description of modifications
available at the time of amendment?
Yes [ X ] No [ ]
8e If line 8d is "Yes," has a summary plan description or summary description
of modifications that reflects the plan amendments referred to on line 8d
been both furnished to participants and filed with the Department of Labor?
Yes [ X ] No [ ]
9a Was this plan terminated during this plan year or any prior plan year? If
"Yes," enter the year.
Yes [ ] No [ X ]
9b 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 ]
9c Was a resolution to terminate this plan adopted during this plan year or any
prior plan year?
Yes [ ] No [ X ]
9d If line 9a or line 9c is "Yes," have you received a favorable determination
letter from the IRS for termination?
Yes [ ] No [ ]
9e If line 9d is "No," has a determination letter been requested from the IRS?
Yes [ ] No [ ]
9f If line 9a or 9c is "Yes," have participants or beneficiaries been notified
of the termination or the proposed termination?
Yes [ ] No [ ]
9g If line 9a is "yes" and the plan is covered by PBGC, is the
<PAGE>
plan continuing to file a 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 [ ]
9h During this plan year, did any trust assets revert to the employer for which
the Code section 4980 excise tax is due?
Yes [ ] No [ X ]
9i If line 9h is "Yes," enter the amount of tax paid with
Form 5530 $
10a In this plan year, was this plan merged or consolidated into another
plan(s), or were assets or liabilities transferred to another plan(s)? If
"Yes," complete lines 10b through 10e.
Yes [ ] No [ X ]
10b Name of plan(s)
10c Employer identification number(s)
10d Plan number(s)
10e If required, has a Form 5310-A been filed?
Yes [ ] No [ ]
11 Enter the plan funding arrangement code from page 10 of
the instructions 1
12 Enter the plan benefit arrangement code from page 10 of
the instructions 1
13a Is this a plan established or maintained pursuant to one or more collective
bargaining agreements?
Yes [ ] No [ X ]
13b If line 13a is "Yes," enter the appropriate six-digit LM number(s) of the
sponsoring labor organization(s) (see instructions):
14 If any benefits are provided by an insurance company,
insurance service, or similar organization, enter the
number of Schedules A (Form 5500), Insurance Information,
attached. if none, enter "-0-". 0
<PAGE>
WELFARE PLANS DO NOT COMPLETE LINES 15 THROUGH 24. GO TO LINE 25
ON PAGE 4.
15a If this is a defined benefit plan subject to the minimum funding standards
for this plan year, is Schedule B (Form 5500) required to be attached? (If
this is a defined contribution plan, please leave blank.)
Yes [ ] No [ ]
15b If this is a defined contribution plan (i.e., money purchase or target
benefit), is it subject to the minimum funding standards? (If a waiver was
granted, see instructions.) (If this is a defined benefit plan, leave
blank.)
Yes [ ] No [ X ]
(1) Amount of employer contribution required for the plan year under Code
section 412
(2) Amount of contribution paid by the employer for the plan year
Enter the date of last payment by employer
Month Day Year
(3) If (1) is greater than (2), subtract (2) from (1) and enter the
funding deficiency here; otherwise, enter -0-. (If you have a funding
deficiency, file Form 5330.)
16 Has the annual compensation of each participant taken into account under the
current plan year ben limited as required by section 401(a)(17)? (See
instructions.)
Yes [ X ] No [ ]
17a (1) Did the plan distribute any annuity contracts this year?
Yes [ ] No [ X ]
(2) If (1) is "Yes," did these contracts contain a requirement that the
spouse consent before any distributions under the contract are made in
a form other than a qualified joint and survivor annuity?
Yes [ ] No [ ]
17b Did the plan make distributions or loans to married participants and
beneficiaries without the required consent of the participant's spouse?
Yes [ ] No [ X ]
17c Upon plan amendment or termination, do the accrued benefits of every
participant include the subsidized benefits that the participant may become
entitled to
<PAGE>
receive subsequent to the plan amendment or termination?
Yes [ X ] No [ ]
18 Is the plan administrator making an election under section 412(c)(8) for an
amendment adopted after the end of the plan year? (See instructions.)
Yes [ ] No [ X ]
19 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 agrees to the change.
Yes [ ] No [ ]
20 Is the employer electing to compute minimum funding for the plan year using
the Transition rule of Code section 412(l)(11)?
Yes [ ] No [ ]
21 Check if you are applying the substantiation guidelines from Revenue
Procedure 93-42, in completing lines 21a through 21o (see instructions) [ ]
If you checked the box, enter the first day of the plan year for
which data is being submitted
Month Day Year
21a Does the employer apply the separate line of business rules of Code section
414(r) when testing this plan for the coverage and discrimination tests of
Code sections 410(b) and 410(a)(4)?
Yes [ ] No [ X ]
21b If line 21a is "Yes," enter the total number of separate lines of business
claimed by the employer.
21c Does the employer apply the mandatory disaggregation rules under Income Tax
Regulations section 1.410(b)-7(c)?
Yes [ X ] No [ ]
If "Yes," see instructions for additional information to attach.
21d In testing whether this plan satisfies the coverage and discrimination tests
of Code sections 410(b) and 401(a), does the employer aggregate plans?
Yes [ ] No [ X ]
21e Does the employer restructure the plan into component plans to satisfy the
coverage and discrimination tests of Code sections 410(b) and 401(a)(4)?
Yes [ ] No [ X ]
<PAGE>
21f If you meet either of the following exceptions, check the applicable box to
tell us which exception you meet and do NOT complete the rest of question
21:
(1) [ ] No highly compensated employee benefitted under the plan at
any time during the plan year;
(2) [ ] This is a collectively bargained plan that benefits only
collectively bargained employees, no more than 2% of whom are
professional employees.
21g Did any leased employee perform services for the employer at any time during
the plan year?
Yes [ ] No [ X ]
21h Enter the total number of employees of the employer. Employer includes
entities aggregated with the employer under Code section 414(b), (c), or
(m). Include leased employees and self-employed individuals.
293
21i Enter the total number of employees excludable because of:
(1) failure to meet requirements for minimum age and
years of service;
(2) collectively bargained employees;
(3) nonresident aliens who receive no earned income from U.S. sources; and
(4) 500 hours of service/last day rule
86
21j Enter the number of nonexcludable employees. Subtract
line 21i from line 21h. 207
21k Do 100% of the nonexcludable employees entered on line 21j benefit under the
plan?
Yes [ ] No [ X ]
If line 21k is "Yes," do NOT complete lines 21l through 21o.
21l Enter the number of nonexcludable employees (line 21j)
who are highly compensated employees 8
21m Enter the number of nonexcludable employees (line 21j)
who benefit under the plan 188
21n Enter the number of employees entered on line 21m who are
highly compensated employees 8
21o This plan satisfies the coverage requirements on the basis of (check one):
(1) [ ] The average benefits test
(2) [ X ] The ratio percentage test - Enter percentage
90.5%
<PAGE>
Welfare Plans Go To Line 25 On This Page.
22a Is it or was it ever intended that this plan qualify under Code section
401(a)? If "Yes," complete lines 22b and 22c
Yes [ X ] No [ ]
22b Enter the date of the most recent IRS determination letter
Month 12 Year 92
22c Is a determination letter request pending with the IRS?
Yes [ ] No [ X ]
23a Does the plan hold any assets that have a fair market value that is not
readily determinable on an established market? (If "Yes," complete line 23b)
(See instructions)
Yes [ ] No [ X ]
23b Were all the assets referred to in line 23a valued for the 1996 plan year by
an independent third-party appraiser?
Yes [ ] No [ ]
23c If line 23b is "No," enter the value of the assets that were not valued by
an independent third-party appraiser for the 1996 plan year.
23d Enter the most recent date the assets on line 23c were valued by an
independent third-party appraiser. (If more than one asset, see
instructions.)
Month Day Year
(If this plan does not have ESOP features leave line 23e blank and go to
line 24.)
23e If dividends paid on employer securities held by the ESOP were used to make
payments on ESOP loans, enter the amount of the dividends used to make the
payments
24 Does the employer/sponsor listed on line 1a of this form maintain other
qualified pension benefit plans?
Yes [ X ] No [ ]
If "Yes," enter the total number of plans, including this
plan 2
25a Did any person who rendered services to the plan receive directly or
indirectly $5,000 or more in compensation from the plan during the plan year
(except for employees of the plan who were paid less than $1,000 in each
month)?
Yes [ ] No [ X ]
If "Yes," complete Part I of Schedule C (Form 5500).
<PAGE>
25b Did the plan have any trustees who must be listed in Part II of Schedule C
(Form 5500)?
Yes [ X ] No [ ]
25c has there been a termination in the appointment of any person listed on line
25d below?
Yes [ ] No [ X ]
25d If line 25c is "Yes," check the appropriate box(es), answer lines 25e and
25f, and complete Part III of Schedule C (Form 5500):
(1) [ ] Accountant
(2) [ ] Enrolled actuary
(3) [ ] Insurance carrier
(4) [ ] Custodian
(5) [ ] Administrator
(6) [ ] Investment manager
(7) [ ] Trustee
25e have there been any outstanding material disputes or matters of disagreement
concerning the above termination?
Yes [ ] No [ ]
25f If an accountant or enrolled actuary has been terminated during the plan
year, has the terminated accountant/ actuary been provided a copy of the
explanation required by Part III of Schedule C (Form 5500) with a notice
advising them of their opportunity to submit comments on the explanation
directly to the DOL?
Yes [ ] No [ ]
25g Enter the number of Schedules C (Form 5500) that are
attached. if none, enter -0-. 1
26a Is this plan exempt from the requirement to engage an independent qualified
public accountant? (see instructions)
Yes [ ] No [ X ]
26b If line 26a is "No," attach the accountant's opinion to
this return/report and check the appropriate box. This
opinion is:
(1) [ X ] Unqualified
(2) [ ] Qualified/disclaimer per Department of labor Regulations 29
CFR 2520.103-8 and/or 2520.103-12(d)
(3) [ ] Qualified/disclaimer other
(4) [ ] Adverse
(5) [ ] Other (explain)
26c If line 26a is "No," does the accountant's report, including the financial
statements and/or notes required to be
<PAGE>
attached to this return/report disclose (1) errors or irregularities; (2)
illegal acts; (3) material internal control weaknesses; (4) a loss
contingency indicating that assets are impaired or a liability incurred; (5)
significant real estate or other transactions in which the plan and (A) the
sponsor, (B) the plan administrator, (c) the employer(s), or (D) the
employee organization(s) are jointly involved; (6) that the plan has
participated in any related party transactions; or (7) any unusual or
infrequent events or transactions occurring subsequent to the plan year end
that might significantly affect the usefulness of the financial statements
in assessing the plan's present or future ability to pay benefits?
Yes [ ] No [ X ]
26d If line 26c is "Yes," provide the total amount involved in such disclosure
27 If line 26a is "No," complete the following questions.
(You may NOT use "N/A" in response to lines 27a through
27i): If line 27a, 27b, 27c, 27d, 27e, or 27f is checked
"Yes," schedules of these items in the format set forth
in the instructions are required to be attached to this
return/report. Schedule G (Form 5500) may be used as
specified in the instructions.
During the plan year:
(a) Did the plan have assets held for investment?
Yes [ X ] No [ ]
(b) Were any loans by the plan or fixed income obligations due the plan in
default as of the close of the plan year or classified during the year
as uncollectible?
Yes [ ] No [ X ]
(c) Were any leases to which the plan was a party in default or classified
during the year as uncollectible?
Yes [ ] No [ X ]
(d) Were any plan transactions or series of transactions in excess of 5%
of the current value of plan assets?
Yes [ X ] No [ ]
(e) Do the notes to the financial statements accompanying the accountant's
opinion disclose any nonexempt transactions with parties-in-interest?
Yes [ ] No [ X ]
(f) Did the plan engage in any nonexempt transactions with
parties-in-interest not reported on line 27e?
Yes [ ] No [ X ]
(g) Did the plan hold qualifying employer securities
<PAGE>
that are not publicly traded?
Yes [ ] No [ X ]
(h) Did the plan purchase or receive any nonpublicly traded securities
that were not appraised in writing by an unrelated third party within
3 months prior to their receipt?
Yes [ ] No [ X ]
(i) Did any person manage plan assets who had a financial interest worth
more than 10% in any party providing services to the plan or receive
anything of value from any party providing services to the plan?
Yes [ ] No [ X ]
<PAGE>
28 Did the plan acquire individual whole life insurance contracts during the
plan year?
Yes [ ] No [ X ]
29 During the plan year:
29a (1) Was this plan covered by a fidelity bond?
Yes [ X ] No [ ]
If "Yes," complete lines 29a(2) and 29a(3)
(2) Enter amount of bond
$4,000,000
(3) Enter the name of the surety company
THE HARTFORD INSURANCE CO.
29b (1) Was there any loss to the plan, whether or not reimbursed, caused
by fraud or dishonesty?
Yes [ ] No [ X ]
(2) If line 29b(1) is "Yes," enter amount of loss
$
30a Is the plan covered under the Pension Benefit Guaranty Corporation
termination insurance program?
Yes [ ] No [ X ] Not determined [ ]
30b If line 30a is "Yes" or "Not determined," enter the employer identification
number and the plan number used to identify it
Employer identification number
Plan number
31 Current value of plan assets and liabilities at the
beginning and end of the plan year. Combine the value of
plan assets held in more than one trust. Allocate the
value of the plan's interest in a commingled trust
containing the assets of more than one plan on a line-by-
line basis unless the trust meets one of the specific
exceptions described in the instructions. Do not enter the
value of that portion of an insurance contract that
guarantees, during this plan year, to pay a specific dollar
benefit at a future date. Round off amounts to the nearest
dollar; any other amounts are subject to rejection. Plans
with no assets at the beginning and the end of the plan
year, enter -0- on line 31f.
ASSETS
31a Total noninterest-bearing cash
Beginning of Year $ 178
End of Year $ 4,405
31b Receivables:
<PAGE>
(1) Employer contributions
Beginning of Year $
End of Year $
(2) Participant contributions
Beginning of Year $
End of Year $
(3) Income
Beginning of Year $
End of Year $
(4) Other
Beginning of Year $
End of Year $
(5) Less allowance for doubtful accounts
Beginning of Year $
End of Year $
(6) Total. Add lines 31b(1) through 31b(4) and subtract line 31b(5)
Beginning of Year $ 0
End of Year $ 0
31c General investments:
(1) Interest-bearing cash (including money market funds)
Beginning of Year $
End of Year $
(2) Certificates of deposit
Beginning of Year $
End of Year $
(3) U.S. Government securities
Beginning of Year $
End of Year $
(4) Corporate debt instruments:
(A) Preferred
Beginning of Year $
End of Year $
(B) All other
Beginning of Year $
End of Year $
(5) Corporate stocks:
(A) Preferred
Beginning of Year $
End of Year $
(B) Common
Beginning of Year $
End of Year $
(6) Partnership/joint venture interests
Beginning of Year $
End of Year $
(7) Real estate:
<PAGE>
(A) Income-producing
Beginning of Year $
End of Year $
(B) Nonincome-producing
Beginning of Year $
End of Year $
(8) Loans (other than to participants) secured by mortgages:
(A) Residential
Beginning of Year $
End of Year $
(B) Commercial
Beginning of Year $
End of Year $
(9) Loans to participants:
(A) Mortgages
Beginning of Year $ 18,726
End of Year $ 17,749
(B) Other
Beginning of Year $ 146,131
End of Year $ 208,514
(10) Other loans
Beginning of Year $
End of Year $
(11) Value of interest in common/collective trusts
Beginning of Year $
End of Year $
(12) Value of interest in pooled separate accounts
Beginning of Year $
End of Year $
(13) Value of interest in master trusts
Beginning of Year $
End of Year $
(14) Value of interest in 103-12 investment entities
Beginning of Year $
End of Year $
(15) Value of interest in registered investment companies
Beginning of Year $ 2,361,870
End of Year $ 3,023,492
(16) Value of funds held in insurance company general account (unallocated
contracts)
Beginning of Year $
End of Year $
(17) Other
<PAGE>
Beginning of Year $
End of Year $
(18) Total. Add lines 31c(1) through 31c(17)
Beginning of Year $ 2,526,727
End of Year $ 3,249,755
31d Employer related investments:
(1) Employer securities
Beginning of Year $
End of Year $
(2) Employer real property
Beginning of Year $
End of Year $
31e Buildings and other property used in plan operation
Beginning of Year $
End of Year $
31f Total assets. Add lines 31a, 31b(6), 31c(18), 31d(1), 31d(2), and 31e.
Beginning of Year $ 2,526,905
End of Year $ 3,254,160
LIABILITIES
31g Benefit claims payable
Beginning of Year $
End of Year $
31h Operating payables
Beginning of Year $
End of Year $
31i Acquisition indebtedness
Beginning of Year $
End of Year $
31j Other liabilities.
Beginning of Year $
End of Year $
31k Total liabilities. Add lines 31g through 31j
Beginning of Year $ 0
End of Year $ 0
NET ASSETS
31l Subtract line 31k from line 31f
Beginning of Year $ 2,526,905
End of Year $ 3,254,160
<PAGE>
32 Plan income, expenses, and changes in net assets for the plan year. Include
all income and expenses of the plan, including any trust(s) or separately
maintained fund(s), and any payments/receipts to/from insurance carriers.
Round off amounts to the nearest dollar; any other amounts are subject to
rejection.
INCOME
32a Contributions:
(1) Received or receivable from:
(A) Employers
(a) Amount: $ 119,112
(B) Participants
(a) Amount: $ 259,059
(C) Others
(a) Amount: $
(2) Noncash contributions
(a) Amount: $
(3) Total contributions. Add lines 32a(1)(A), (B), (C) and line 32a(2)
(b) Total: $ 375,171
32b Earnings on investments:
(1) Interest
(A) Interest-bearing cash (including money
market funds)
(a) Amount: $
(B) Certificates of deposit
(a) Amount: $
(C) U.S. Government securities
(a) Amount: $
(D) Corporate debt instruments
(a) Amount: $
(E) Mortgage loans
(a) Amount: $ 1,212
(F) Other loans
(a) Amount: $ 14,754
(G) Other interest
(a) Amount: $
(H) Total interest. Add lines 32b(1)(A) through (G)
(b) Total: $ 15,966
(2) Dividends
(A) Preferred stock
(a) Amount: $
(B) Common stock
(a) Amount: $
(C) Total dividends. Add lines 32b(2)(A) and (B)
(b) Total: $ 0
(3) Rents
(b) Total: $
<PAGE>
(4) Net gain (loss) on sale of assets:
(A) Aggregate proceeds
(a) Amount: $
(B) Aggregate carrying amount (see instructions)
(a) Amount: $
(C) Subtract (B) from (A) and enter result
(b) Total: $ 0
(5) Unrealized appreciation (depreciation) of assets
(b) Total: $
(6) Net investment gain (loss) from common/ collective trusts
(b) Total: $
(7) Net investment gain (loss) from pooled separate account
(b) Total: $
(8) Net investment gain (loss) from master trusts
(b) Total: $
(9) Net investment gain (loss) from 103-12 investment entities
(b) Total: $
(10) Net investment gain (loss) from registered investment companies
(b) Total: $ 444,690
32c Other income
(b) Total: $
32d Total income. Add all amounts in column (b) and enter total
(b) Total: $ 838,827
EXPENSES
32e benefit payment and payments to provide benefits:
(1) Directly to participants or beneficiaries
(a) Amount: $ 167,225
(2) To insurance carriers for the provision of benefits
(a) Amount: $
(3) Other
(a) Amount: $
(4) Total payments. Add lines 32e(1) through 32e(3)
(b) Total: $ 167,225
32f Interest expense
(b) Total: $
32g Administrative expenses:
(1) Salaries and allowances
(a) Amount: $
(2) Accounting fees
(a) Amount: $
(3) Actuarial fees
(a) Amount: $
(4) Contract administrator fees
<PAGE>
(a) Amount: $ 600
(5) Investment advisory and management fees
(a) Amount: $
(6) Legal fees
(a) Amount: $
(7) Valuation/appraisal fees
(a) Amount: $
(8) Trustees fees/expenses (including travel, seminars, meetings, etc.)
(a) Amount: $
(9) Other
(a) Amount: $
(10) Total administrative expenses. Add lines 32g(1) through 32g(9)
(b) Total: $ 600
32h Total expenses. Add lines 32e(4), 32f, and 32g(10)
(b) Total: $ 167,825
32i Net income (loss). Subtract line 32h from line 32d
(b) Total: $ 671,002
32j Transfers to (from) the plan (see instructions)
(b) Total: $ 56,253
32k Net assets at beginning of year (line 31l, column (a))
(b) Total: $ 2,526,905
32l Net assets at end of year (line 31l, column (b))
(b) Total: $ 3,254,160
33 Did any employer sponsoring the plan pay any of the administrative expenses
of the plan that were not reported on line 32g?
Yes [ ] No [ X ]
<PAGE>
Attachment to 1996 Form 550
For Item 21
Plan Name The Hudson City Savings Institution 401(k)
Savings Plan in RSI Retirement Trust
EIN 14-076330
PN 002
Attachment number [ 1 ] of [ 1 ] for:
[ X ] Mandatory Disaggregation
[ ] Separate Line of Business (SLOB)
Plan Part/ SLOB
IRC Section 401(m) Employer Matching Contributions
21b Enter the total number of separate lines of business claimed
by the employer
21c Does the employer apply the mandatory disaggregation rules under Income Tax
Regulations section 1.410(b)-7(c)?
Yes [ X ] No [ ]
21d In testing whether this plan satisfies the coverage and discrimination tests
of Code sections 410(b) and 401(a), does the employer aggregate plans?
Yes [ ] No [ X ]
21e Does the employer restructure the plan into component plans to satisfy the
coverage and discrimination tests of Code sections 410(b) and 401(a)(4)?
Yes [ ] No [ X ]
21f If you meet either of the following exceptions, check the applicable box to
tell us which exception you meet and do NOT complete the rest of question
21:
(1) [ ] No highly compensated employee benefitted under the plan
at any time during the plan year
(2) [ ] This is a collectively bargained plan that benefits only
collectively bargained employees no more than 2% of whom are
professional employees.
21g Did any leased employee perform services for the employer at any time during
the plan year?
Yes [ ] No [ X ]
21h Enter the total number of employees of the employer. Employer includes
entities aggregated with the employer under Code section 414(b), (c), or
(m). Include leased employees and self-employed individuals.
Number 293
<PAGE>
21i Enter the total number of employees excludable because of:
(1) failure to meet requirements for minimum age and years
of service;
(2) collectively bargained employees;
(3) nonresident aliens who receive no earned income from U.S. sources; and
(4) 500 hours of service/last day rule
Number 86
21j Enter the number of nonexcludable employees. Subtract line 21i from line
21h.
Number 207
21k Do 100% of the nonexcludable employees entered on line 21j benefit under the
plan?
Yes [ ] No [ X ]
If line 21k is "Yes," do NOT complete lines 21l through 21o.
21l Enter the number of nonexcludable employees (line 21j) who are highly
compensated employees.
Number 8
21m Enter the number of nonexcludable employees (line 21j) who benefit under the
plan.
Number 188
21n Enter the number of employees entered on line 21m who are highly compensated
employees
Number 8
21o This plan satisfies the coverage requirements on the basis of (check one):
(1) [ ] The average benefits test (2) [ X ] The ratio percentage test
Enter percentage 90.5%
<PAGE>
SCHEDULE C Service Provider and Trustee Information 1996
(Form 5500) This schedule is required to be filed under
section 104 of the Employee Retirement Income
Security Act of 1974.
File as an attachment to Form 5500
Additional Schedules C (Form 5500) may be used, if needed, to
provide additional information for Parts I, II, and/or III.
For the calendar year 1996 or fiscal plan year beginning
January 1, 1996
and ending
December 31, 1996
Name of plan sponsor as shown on line 1a of Form 5500 The Hudson City Savings
Institution
Employer identification number
14-0763300
Name of Plan
The Hudson City Savings Institution 401(k)
Savings Plan in RSI Retirement Trust
Three-digit plan number
002
PART I Service Provider Information (see instructions)
1 Enter the total dollar amount of compensation paid by the plan to all
persons receiving less than $5,000 during the plan year
$600
2a (1) Name
2b (1) Employer identification number (see instructions)
2c (1) Official plan position
Contract administrator
2d (1) Relationship to employer, employee organization, or
person known to be a party-in-interest
2e (1) Gross salary or allowances paid by plan
2f (1) Fees and commissions paid by plan
2g (1) Nature of service code (see instructions)
12
<PAGE>
PART II Trustee Information
Enter the name and address of all trustees who served during the plan year.
If more space is required to supply this information, attach additional
Schedules C (Form 5500).
Name:
Retirement System Trust
Address:
317 Madison Avenue, New York, NY 10017
PART III Termination Information (see instructions)
(a) Name
(b) EIN
(c) Position
(d) Address
(e) Telephone No.
(1) Explanation:
<PAGE>
SCHEDULE G Financial Schedules 1996
(Form 5500) This schedule may be filed as an attachment
to the Annual Return/Report Form 5500 under Section
104 of the Employee Retirement Income Security Act
of 1974, referred to as ERISA.
See the instructions for item 27 of the Form 5500.
Attach to Form 5500
For the calendar year 1996 or fiscal plan year beginning
January 1, 1996
and ending
December 31, 1996
Name of plan sponsor as shown on line 1a of Form 5500 The Hudson City Savings
Institution
Employer identification number
14-0763300
Name of Plan
The Hudson City Savings Institution 401(k)
Savings Plan in RSI Retirement Trust
Three-digit plan number
002
PART I Schedule of Assets Held for Investment Purposes See Form 5500, Item
27a.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(a) (b) Identity of (c) Description of (d) Cost (e) Current
issue, borrower, investment including Value
lessor, or maturity date, rate
similar party of interest,
collateral, par or
maturity value
* RSI Retirement Trust Core Equity 856,104 1,569,742
* RSI Retirement Trust Emerging Growth Equity 270,363 467,778
* RSI Retirement Trust Value Equity 171,727 278,958
* RSI Retirement Trust International Equity 81,639 96,028
* RSI Retirement Trust Short-Term Investment 267,890 319,017
* RSI Retirement Trust Actively Managed 150,094 192,841
* RSI Retirement Trust Intermediate Term Bond 80,062 99,128
</TABLE>
<PAGE>
PART II Schedule of Assets Held for Investment Purposes That
Were Both Acquired And Disposed of Within The Plan
Year See Form 5500, Item 27a.
(a) Identity of issue, borrower, lessor, or similar party
(b) Description of investment including maturity date, rate
of interest, collateral, par or maturity value
(c) Costs of acquisitions
(d) Proceeds of dispositions
PART III Schedule of Loans or Fixed Income Obligations
See Form 5500, Item 27b
(a)
(b) Identity and address of obligor (c) Original amount of loan
Amount received during reporting year
(d) Principal
(e) Interest
(f) Unpaid balance at end of year
(g) Detailed description of loan including dates of making and maturity,
interest rate, the type and value of collateral, any renegotiation of
the loan and the terms of the renegotiation and other material items
Amount overdue
(h) Principal
(i) Interest
<PAGE>
PART IV Schedule of Leases in Default or Classified as Uncollectible
See Form 5500, Item 27c.
(a)
(b) Identity of lessor/lessee
(c) Relationship to plan, employer, employee organization, or other
party-in-interest
(d) Terms and description (type of property, location and date it was
purchased, terms regarding rent, taxes, insurance, repairs, expenses,
renewal options, date property was leased)
(e) Original cost
(f) Current value at time of lease
(g) Gross rental receipts during the plan year
(h) Expenses paid during the plan year
(i) Net receipts
(j) Amount in arrears
PART V Schedule of Reportable Transactions See Form 5500, Line 27d.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Identity Description Purchase Selling Lease Expense Cost Current Net gain
of party of asset price price rental incurred of value of or (loss)
involved (include with asset asset on
interest trans- trans-
rate and action action
maturity in date
case of a
loan)
RSI Core 171,876 112,833 284,709 171,876 39,685
Retire- Equity
ment
Trust
RSI Emerging 114,686 43,830 158,516 114,686 13,721
Retire- Growth
ment
Trust
</TABLE>
<PAGE>
PART VI Schedule of Nonexempt Transactions See Form 550, Item 27e.
If a nonexempt transaction occurred with respect to a disqualified person, file
Form 5330 with the IRS to pay the excise tax on the transaction.
(a) Identity of party involved
(b) Relationship to plan, employer, or other party-in-interest
(c) Description of transactions including maturity date, rate of interest,
collateral, par or maturity value
(d) Purchase price
(e) Selling price
(f) Lease rental
(g) Expenses incurred in connection with transaction
(h) Cost of asset
(i) Current value of asset
(j) Net gain or (loss) on each transaction
PART VII Schedule of Nonexempt Transactions
See Form 5500, Item 27f
If a nonexempt transaction occurred with respect to a disqualified person, file
Form 5330 with the IRS to pay the excise tax on the transaction.
(a) Identity of party involved
(b) Relationship to plan, employer, or other party-in-interest
(c) Description of transactions including maturity date, rate of interest,
collateral, par or maturity value
(d) Purchase price
(e) Selling price
(f) Lease rental
(g) Expenses incurred in connection with transaction
(h) Cost of asset
(i) Current value of asset
(j) Net gain or (loss) on each transaction
<PAGE>
FORM 5558 Application for Extension of Time File with
To File Certain Employee Plan Returns IRS Only
File before the due date for filing the return (see instructions).
Name of taxpayer or plan sponsor (see instructions)
The Hudson City Savings Institution 806
Number, street, and room or suite no.
(If a P.O. Box, see instructions)
P.O. Box 76
City or town, state, and ZIP code
Hudson, NY 12534-0076
Identifying No. Check applicable box and enter number (see
instructions)
[ X ] Employer identification number (EIN). Filers checking any box in
1a through 1c must enter an EIN. All other filers see specific
instructions.
14-0763300 OR
[ ] Social security number. Form 5330 filers see
instructions.
1 I request an extension of time until (see instructions) OCTOBER 15, 1997
(check appropriate box below]
(a) [ X ] To file Form 5500, Annual Return/Report of Employee Benefit
Plan (with related schedules).
(b) [ ] To file Form 5500-C/R, Return/Report of Employee Benefit Plan
(with related schedules).
(c) [ ] To file Form 5500-EZ, Annual Return of One-Participant Pension
Benefit Plan (with related schedules).
(d) [ ] To file Form 5330, Return of Excise Taxes Related to Employee
Benefit Plans, for tax year beginning
and ending
2 If you checked 1d above, do you elect to be taxed under ERISA section
2003(c)(1)(B)?
Yes [ ] No [ ]
3a If you have never filed a Form 5500, 5500-C/R, or 5500-EZ for your plan,
check this box.
[ ]
3b If you checked 3a, enter the name, address, and EIN of the plan
administrator. (If same as taxpayer or plan sponsor,
<PAGE>
enter "Same.")
4 Complete the following for the plan(s) covered by this application (see How
To File):
Plan name
The Hudson City Savings Institution 401(k)
Savings Plan in RSI Retirement Trust
Plan number
002
Plan year ending
Month 12 Day 31 Year 96
5a Has an extension of time to file Form 5330 been previously granted for this
tax year?
Yes [ ] No [ ]
5b If "Yes," enter the date(s) for which the extension was
granted
6 Attach a detailed statement explaining why you need the extension (see
instructions).
7 If the extension is for Form 5330, enter the amount of tax estimated to be
due on Form 5330.
Pay this amount with this application.
CAUTION: See Late Payment of Tax and Signature in the
instructions.
Under penalties of perjury, I declare that to the best of my knowledge and
belief the statements made on this form are true, correct, and complete, and
that I am authorized to prepare this application.
Signature: /s/ Hoche Date: 6/30/97
Complete if you want Form 5558 returned to an address other than the address
shown above.
Name
Retirement System Group, Inc.
Number, street, and room or suite no. (If a P.O. Box,
see instructions.)
317 Madison Avenue
City or town, state, and ZIP code
New York, NY 10017 Att: Michael Morgenroth
<PAGE>
Notice to Applicant. The IRS will indicate below whether the extension is
granted or denied and will return this application to you.
[ X ] This application IS approved to
OCTOBER 15, 1997
(You MUST attach a copy of this form to each return
that was granted an extension)
[ ] This application IS NOT approved. However, in view
of the reasons stated in the application, a 10-day
grace period is granted from the date shown below or
the due date of the return, whichever is later. This
10-day grace period constitutes a valid extension of
time for purposes of elections otherwise required to
be made on a timely filed return. (You MUST attach a
copy of this form to each return that you file that
is granted a grace period.)
[ ] This application IS NOT approved. After consideration
of the reasons stated in your application, we have
determined that an extension is not warranted. (The
10-day grace period was not granted)
[ ] This application cannot be considered, because it was filed after
the due date of the return.
[ ] This application cannot be considered because the maximum extension
of time allowed is 2 1/2 months (6 months for Form 5330).
[ ] Other:
Date: July 22, 1997
Director: /s/ George M. Handy
By:
<PAGE>
Attachment to Form 5558
Detailed Statement of Need for Extension of Time
Plan(s) covered by this application:
<TABLE>
<CAPTION>
<S> <C> <C>
Plan Name Plan Number Plan year ending
The Hudson City Savings 002 12/31/96
Institution 401(k)
Savings Plan in RSI
Retirement Trust
</TABLE>
Detailed statement of need for extension of time:
The extension of time is required in order to finalize the necessary Financial
data and to permit sufficient time for the Plan's Independent Auditor to review
and issue an opinion relative to the content of the report as required for the
submission with Form 5500 for the Plan Year ended 12/31/96.
<PAGE>
SCHEDULE SSA Annual Registration Statement Identifying 1996
(FORM 5500) Separated Participants With Deferred
Vested Benefits
Under Section 6057(a) of the Internal Revenue Code
File as an attachment to Form 5500 or 5500-C/R
For the calendar year 1996 or fiscal plan year beginning
January 1, 1996
and ending
December 31, 1996
1a Name of plan sponsor (employer if for a single employer plan) The Hudson
City Savings Institution
1b Sponsor's employer identification number (EIN)
14-0763300
2a Name of Plan
The Hudson City Savings Institution 401(k)
Savings Plan in RSI Retirement Trust
2b Three-digit plan number
002
3 Enter one of the following Entry Codes in column (a) for each separated
participant with deferred vested benefits that:
Code A has not previously been reported
Code B has previously been reported under the above plan
number but requires revisions to the information
previously reported
Code C has previously been reported under another plan number but will
be receiving their benefits from the plan listed above instead
Code D has previously been reported under the above plan but is no
longer entitled to those deferred vested benefits
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Entry Social Name of Type Payment Defined Units Total Previous Previous
code Security partici- of frequency benefit or value sponsor's plan
number pant annuity plan - shares of employer number
periodic account identi-
payment fication
number
A ###-##-#### BAER, SUSAN G. A A 698
A ###-##-#### BRENNAN, B. A A 6,059
A ###-##-#### DIXON, J. A A 413
A ###-##-#### HERMANCE, S. A A 55
A ###-##-#### HOLLING, E. A A 34,673
A ###-##-#### HURD, P. A A 3,555
A ###-##-#### IHLENBURG, A. A A 81,035
A ###-##-#### MESICK, C. A A 3,040
A ###-##-#### ONDERDONK, S. A A 79
A ###-##-#### RAPPLEYEA, H. A A 2,023
</TABLE>
<PAGE>
[ X ] Check here if additional participants are shown on attachments.
All attachments must include the sponsor's name, EIN, name of plan,
plan number, and column identification letter for each column
computed for line 3.
[ ] Check here if plan is a government, church, or other plan that
elects to voluntarily file Schedule SSA. If so, complete lines 4
through 5c, and the signature area. Otherwise, complete the signature
area only.
4 Plan sponsor's address (number, street, and room or suite no.) (If a P.O.
box, see the instructions for line 4.)
City or town, state, and ZIP code
5a Name of plan administrator (if other than sponsor)
5b Administrator's EIN
5c Number, street, and room or suite no. (If a P.O. box, see
instructions for line 4)
City or town, state, and ZIP code
Under penalty of perjury, I declare that I have examined this report, and to the
best of my knowledge and belief, it is correct, and complete.
Signature of plan administrator:
/s/ Durando J. Saccente
Phone number of plan administrator:
(212) 503-0100
Date:
9/23/97
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
EIN: 14-0763300
PN: 002
Attachment to 1996 Schedule SSA (Form 5500)
Additional Participants:
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
A ###-##-#### Schomaker, L. A A 504
A ###-##-#### Stumpfel, J. A A 9,601
A ###-##-#### Swintoka, M. A A 24,187
A ###-##-#### Tuczinski, K. A A 805
A ###-##-#### Wharton, R. A A 25,034
A ###-##-#### Wheeler, J. A A 959
<PAGE>
SCHEDULE P Annual Return of Fiduciary 1996
(Form 5500) of Employee Benefit Trust
File as an attachment to Form 5500, 5500-C/R, or 5500-EZ
For trust calendar year 1996 or fiscal year beginning
January 1, 1996
and ending
December 31, 1996
1a Name of trustee or custodian
RSI RETIREMENT TRUST
1b Number, street, and room or suite no. (If a P.O. box, see the instructions
for Form 5500, 5500-C/R, or 5500-EZ.)
317 Madison Avenue
1c City or town, state, and ZIP code New York, NY 10017
2a Name of trust
RSI RETIREMENT TRUST AGREEMENT AND DECLARATION OF TRUST
2b Trust's employer identification number
11-1805969
3 Name of plan if different from name of trust THE HUDSON CITY SAVINGS
INSTITUTION 401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
4 Have you furnished the participating employee benefit plan(s) with the trust
financial information required to be reported by the plan(s)?
Yes [ X ] No [ ]
5 Enter the plan sponsor's employer identification number as shown on Form
5500, 5500-C/R, or 5500-EZ
14-0763300
Under penalties of perjury, I declare that I have examined this schedule, and to
the best of my knowledge and belief, it is true, correct, and complete.
Signature of fiduciary: /s/ Durando J. Saccente
Date: 9/23/97
<PAGE>
Prospectus
[LOGO]
HUDSON RIVER BANCORP, INC.
(Proposed Holding Company for The Hudson City Savings Institution)
(to be known as Hudson River Bank & Trust Company)
$10.00 Per Share
__________ Shares of Common Stock
(Anticipated Maximum)
Hudson River Bancorp, Inc. (the "Holding Company") is offering up to
__________ shares of common stock, par value $0.01 per share (the "Common
Stock"), in connection with the conversion of The Hudson City Savings
Institution ("HCSI" or the "Bank") from a New York state chartered mutual
savings bank to a New York state chartered stock savings bank to be renamed
Hudson River Bank & Trust Company and the issuance of all of HCSI's outstanding
capital stock to the Holding Company (the "Conversion"). Pursuant to the Bank'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) HCSI's depositors with account balances of $100 or more as of September
30, 1996 ("Eligible Account Holders"), (ii) tax-qualified employee plans of HCSI
and the Holding Company ("Tax-Qualified Employee Plans"), and (iii) HCSI's
depositors with account balances of $100 or more as of __________, 1998
("Supplemental Eligible Account Holders").
(continued on next page)
----------
FOR ADDITIONAL INFORMATION ON HOW TO SUBSCRIBE, PLEASE CALL THE
CONVERSION CENTER AT (___) ___-____.
----------
THESE SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL INVESTED.
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED, SEE
"RISK FACTORS" BEGINNING ON PAGE __.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT,
OR THE FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS SUCH COMMISSION,
SUPERINTENDENT, BOARD, DEPARTMENT 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, Estimated Net
Purchase Price(1) Commissions and Other Expenses(2) Conversion Proceeds(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share............................... $10.00 0.21 9.79
Midpoint Per Share.............................. $10.00 0.19 9.81
Maximum Per Share............................... $10.00 0.18 9.82
Minimum Total................................... $111,407,770 2,326,475 109,081,295
Midpoint Total.................................. $131,067,960 2,542,737 128,525,223
Maximum Total................................... $150,728,150 2,759,000 147,969,150
Maximum Total, As Adjusted(4)................... $173,337,380 3,007,701 170,329,679
====================================================================================================================================
</TABLE>
(1) Determined on the basis of an appraisal prepared by RP Financial, LC. ("RP
Financial") dated February 27, 1998, which states that the estimated
aggregate pro forma market value of the Common Stock to be sold in the
Conversion ranged from $111,407,770 to $150,728,150 or between 11,140,777
shares and 15,072,815 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 Bank and the Holding Company arising
from the Conversion, including the payment to Sandler O'Neill & Partners,
L.P. ("Sandler O'Neill") of estimated sales commissions ranging from
$1,195,917 (at the minimum) to $1,628,442 (at the maximum) in connection
with the sale of shares in the Offering. Such fees may be deemed to be
underwriting fees. See "Use of Proceeds" and "Pro Forma Data" for the
assumptions used to arrive at these estimates. The Holding Company has
agreed to indemnify Sandler O'Neill 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, commissions and expenses.
(3) Net Conversion proceeds may vary from the estimated amounts, depending on
the Purchase Price, the number of shares issued and the number of shares
sold subject to commissions. 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) As adjusted to give effect to the sale of up to an additional 2,260,922
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."
Sandler O'Neill & Partners, L.P.
The date of this Prospectus is ________ __, 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. Subject to the prior rights of holders of
Subscription Rights and to market conditions, the Holding Company may also offer
the Common Stock for sale through Sandler O'Neill in a community offering (the
"Community Offering") to selected persons to whom this prospectus is delivered.
It is anticipated that shares not subscribed for in the Subscription Offering
and the Community Offering, if any, will be offered to certain members of the
general public in a syndicated community offering (the "Syndicated Community
Offering") (The Subscription Offering, Community Offering and Syndicated
Community Offering are referred to collectively as the "Offerings").
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 Bank as converted. The purchase price per share
("Purchase Price") has been fixed at $10.00. Based on the current valuation
range of the shares to be sold of $111,407,770 to $150,728,150 (the "Estimated
Valuation Range"), the Holding Company is offering up to 15,072,815 shares.
Depending upon the market and financial conditions at the time of the completion
of the Syndicated Community Offering, if any, the total number of shares to be
issued in the Conversion may be increased or decreased from the 15,072,815
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 $111,407,770 or above
$173,337,380, 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."
Pursuant to the Plan, the Holding Company has established the Hudson River
Bank and Trust Company Foundation, a charitable foundation (the "Foundation").
The Plan provides that the Bank and the Holding Company will fund the Foundation
with shares of Common stock contributed by the Holding Company from authorized
but unissued shares in an amount equal to 3% of the number of shares of Common
Stock sold in the Conversion. The purpose of the Foundation is to provide
charitable benefits to persons and organizations residing within the communities
in which the Bank operates. For a discussion of the Foundation and its effects
on the Conversion, see "Risk Factors -- Risks Associated With the Establishment
of the Charitable Foundation," "Pro Forma Data," and "The Conversion -
Establishment of the Hudson River Bank & Trust Company Charitable Foundation."
With the exception of the Tax-Qualified Employee Plans, no Eligible Account
Holder or Supplemental Eligible Account Holder may purchase in their capacity as
such in the Subscription Offering more than $250,000 of Common Stock; no person,
together with associates of and persons acting in concert with such person, may
purchase more than $250,000 of Common Stock in the Community Offering and no
person, together with associates of and persons acting in concert with such
person, may purchase more than 1% of Common Stock in the Offerings. Under
certain circumstances, the maximum purchase limitations may be increased at the
sole discretion of the Bank and the Holding Company up to 9.99% of the total
number of shares of Common Stock sold in the Conversion. The minimum purchase is
25 shares. See "The Conversion - Limitations on Common Stock Purchases." The
Bank and the Holding Company have engaged Sandler O'Neill 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 Syndicated Community
Offering. For such services, Sandler O'Neill will receive a marketing fee of
1.10% of the total dollar amount of Common Stock sold in the Conversion,
excluding purchases by directors, officers, employees and their immediate family
members, and the employee stock ownership and benefit plans of the Bank and the
Holding Company. 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 Syndicated Community Offering through such selected
dealers. Such fees may be deemed to be underwriting commissions. Sandler O'Neill
and the selected dealers may be deemed to be underwriters. See "The Conversion -
Marketing Arrangements" and "The Conversion - Offering of Holding Company Common
Stock."
The Subscription Offering will expire at 12:00 noon, Eastern time, on ,
1998 ("Expiration Date"), unless extended by the Bank and the Holding Company
with the approval of the Superintendent of Banks of the State of New York (the
"Superintendent") and the Federal Deposit Insurance Corporation ("FDIC"), if
necessary. The Community Offering and/or any Syndicated Community Offering must
be completed within 45 days after close of the Subscription Offering, unless
extended by the Bank and the Holding Company with the approval of the
Superintendent and the FDIC, if necessary. Orders submitted are irrevocable
until the completion of the Conversion; provided, that if the Conversion is not
completed within the 45 day period referred to above unless such period has been
extended with the consent of the Superintendent and the FDIC, if necessary, all
subscribers will have their funds returned promptly with interest, and all
withdrawal authorizations will be cancelled. Such extensions may not go beyond
______ __, 2000.
The Holding Company has applied to have the Common Stock listed on the
Nasdaq Stock Market under the symbol "HRBT." Prior to this offering there has
not been a public market for the Common Stock, and there can be no assurance
that an active and liquid trading market for the Common Stock will develop or
that resales of the Common Stock can be made at or above the Purchase Price. See
"Market for Common Stock" and "The Conversion Stock Pricing and Number of Shares
to be Issued."
Explanatory Note: This Prospectus contains certain forward looking
statements, which statements consist of estimates with respect to the financial
condition, results of operations and business of the Company and the Bank.
Prospective investors are cautioned that such forward looking statements are not
guarantees of future performance and are subject to various factors that could
cause actual results to differ materially from these estimates. These factors
include changes in general economic and market conditions, and the development
of an interest rate environment that adversely affects the interest rate spread
or other income anticipated from the Company's and the Bank's operations and
investments. See "Risk Factors" for a discussion of other factors that might
cause actual results to differ from such estimates.
2
<PAGE>
[MAP TO COME]
3
<PAGE>
SUMMARY
The following summary of the Conversion and the Offerings is qualified
in its entirety by the more detailed information appearing elsewhere in this
Prospectus.
Risk Factors....... A purchase of the Common Stock involves a substantial
degree of risk. Eligible Account Holders, Supplemental
Eligible Account Holders and other prospective investors
should carefully consider the matters set forth under "Risk
Factors." The shares of Common Stock offered hereby are not
insured or guaranteed by the FDIC or any other government
agency and are not guaranteed by the Holding Company or the
Bank.
Hudson River
Bancorp, Inc..... The Holding Company is a Delaware corporation organized
organized at the direction of the Bank to become a savings
and loan holding company and own all of the Bank's capital
stock to be issued upon its conversion from mutual form to
stock form. To date, the Holding Company has not engaged in
any business. Its executive office is located at 1 Hudson
City Centre, Hudson, New York 12534 and its telephone number
is (518) 828-4600.
The Hudson
City Savings
Institution...... The Bank is a New York State chartered mutual savings bank.
At December 31, 1997, the Bank had total assets of $665.1
million, total deposits of $586.2 million and total equity
of $67.4 million and operated twelve full service offices.
The Bank's main office is located at 1 Hudson City Centre,
Hudson, New York 12534 and its telephone number at that
location is (518) 828-4600. The Bank's current operating
strategy consists primarily of:
o investing primarily in residential mortgage loans;
including home equity loans, and to a lesser extent,
manufactured home loans, (loans secured by
prefabricated or mobile homes which serve as the
borrower's dwelling), financed insurance premiums and
other consumer loans, commercial real estate,
construction and commercial business loans and in
investment-grade securities;
o managing its interest rate risk by originating and
retaining for portfolio adjustable-rate loans and
fixed-rate loans with maturities of 20 years or less;
o emphasizing the purchase of short- to intermediate-term
government agency and corporate debt securities;
o maintaining a low cost of funds by providing enhanced
service to attract and retain core deposits; and
o attempting to attract new deposit customers by
competitively pricing time deposit products and
offering a variety of maturities of such deposits.
The Conversion
and Reasons for
Conversion....... The Board of Trustees of the Bank has adopted a Plan of
Conversion pursuant to which the Bank intends to convert to
a New York
4
<PAGE>
State-chartered stock savings bank to be known as Hudson
River Bank & Trust Company and issue all of its stock to
the Holding Company. The Holding Company is offering shares
of its Common Stock in the Offerings in connection with the
Bank's Conversion. Management believes the Conversion offers
a number of advantages, including: (i) providing enhanced
future access to capital markets; (ii) providing enhanced
ability to diversify into other financial services related
activities; and (iii) providing enhanced ability to increase
its presence in the communities it serves and to
geographically expand its operations and market area through
marketing and business development, the acquisition or
establishment of branch offices or the acquisition of other
financial institutions. The Conversion and the Offerings are
subject to approval by the Superintendent and non-objection
by the FDIC, and approval of voting depositors of the Bank
as of March 31, 1998, with aggregate deposit accounts of
$100 or more ("Voting Depositors") at a special meeting to
be held on __________, 1998 (the "Special Meeting"). The
Superintendent issued an approval letter on _______, 1998
and the FDIC issued a notice of intent not to object to the
Conversion on _______, 1998. See "The Conversion-- General."
Hudson River Bank
& Trust Company
Foundation...... The Bank's Plan of Conversion provides for the establishment
of a charitable foundation in connection with the
Conversion. The Foundation, which will be incorporated under
Delaware law as a non-stock corporation, will be funded with
a contribution by the Holding Company equal to 3% of the
Common Stock sold in the Conversion. The authority for the
affairs of the Foundation will be vested in the Board of
Directors of the Foundation, which will initially be
comprised of six members of which four will be members
of the Bank's Board of Trustees. See "The Conversion -
Establishment of The Hudson River Bank & Trust Company
Foundation."
Terms of the
Offering........ The shares of Common Stock to be sold in connection with the
Conversion are being offered at a fixed price of $10.00 per
share in the Subscription Offering pursuant to subscription
rights in the following orders of priority: (i) Eligible
Account Holders; (ii) the Holding Company's and the Bank's
tax-qualified employee plans ("Employee Plans"), including
the ESOP; and (iii) Supplemental Eligible Account Holders.
Under the New York Banking regulations, Escrow Account
holders are not considered eligible account holders or
subscribers for purposes of the Offerings. Upon completion
of the Subscription Offering, any shares of Common Stock not
subscribed for in the Subscription Offering will be offered
in the Community Offering at $10.00 per share to certain
members of the general public. Subscription rights will
expire if not exercised by 12:00 noon, Eastern time, on
__________, 1998, unless extended by the Bank and the
Holding Company, with the approval of the Superintendent and
the FDIC, if necessary. See "The Conversion--Subscription
Offering and Subscription Rights" and "--Community
Offering."
Procedure for
Ordering Shares
and Prospectus
Delivery....... Forms to order Common Stock offered in the Subscription
Offering and the Community Offering will only be distributed
with or be preceded by a Prospectus. Any person receiving a
stock order and
5
<PAGE>
certification form who desires to subscribe for shares must
do so prior to the Expiration Date by delivering to the Bank
a properly executed stock order and certification form
together with full payment. Once tendered, subscription
orders cannot be revoked or modified without the consent of
the Holding Company and Bank. To ensure that each purchaser
receives a prospectus at least 48 hours prior to the
Expiration Date in accordance with Rule 15c2-8 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), no prospectus will be mailed any later than five days
prior to the Expiration Date or hand delivered any later
than two days prior to such date. The Holding Company and
Bank are not obligated to accept subscriptions not submitted
on an original stock order form. The only place to obtain an
original stock order form and prospectus other than through
the mail is at the Conversion Center located at the Bank's
main office. See "The Conversion - Procedure for Purchasing
Shares in Subscription and Community Offerings."
Form of Payment
for Shares...... Payment for subscriptions may be made: (i) in cash (if
delivered in person); (ii) by check, bank draft or money
order; or (iii) by authorization of withdrawal from deposit
accounts maintained at the Bank. No wire transfers will be
accepted. See "The Conversion-- Procedure for Purchasing
Shares in Subscription Offering."
Nontransferability
of Subscription
Rights.......... The subscription rights of Eligible Account Holders,
Supplemental Eligible Account Holders, and Employee Benefit
Plans are nontransferable. Certificates representing shares
of Common Stock purchased in the Subscription Offering must
be registered in the name of the Eligible Account Holder or
Supplemental Eligible Account Holder, as the case may be.
Joint stock registration will be allowed only if the
qualifying deposit account is so registered. See "The
Conversion--Restrictions on Transfer of Subscription Rights
and Shares of Common Stock."
Purchase
Limitations..... No Eligible Account Holder or Supplemental Eligible Account
Holder may purchase in the Subscription Offering more than
$250,000 of Common Stock. No person, together with
associates and persons acting in concert with such person,
may purchase in the Community Offering and the Syndicated
Community Offering more than $250,000 of Common Stock. No
person, together with associates or persons acting in
concert with such person, may purchase in the aggregate more
than 1% of the Common Stock offered (the "overall maximum
purchase limitation"). However, the Employee Plans,
including the ESOP, may purchase up to 10% of the Common
Stock issued, including shares issued to the Foundation. It
is anticipated that the ESOP will subscribe to purchase 8%
of the Common Stock issued, including shares issued to the
Foundation. The minimum purchase is 25 shares of Common
Stock. At any time during the Conversion and without
approval of the Bank's depositors or a resolicitation of
subscribers, the Bank and the Company may, in their sole
discretion, decrease the maximum purchase limitation below
$250,000 of
6
<PAGE>
Common Stock; however, such amount may not be reduced to
less than 0.10% of the Common Stock offered. Additionally,
at any time during the Conversion, the Bank and the Company
may, in their sole discretion, increase the maximum purchase
limitation in the Subscription and Community Offerings to an
amount in excess of $250,000 up to a maximum of 5% of the
shares to be issued in the Conversion. Similarly, the 1.0%
overall maximum purchase limitation may be increased up to
5% of the total shares of Common Stock offered in the
Conversion.
Securities Offered
and Purchase
Price............ The Holding Company is offering between 11,140,777 and
15,072,815 shares of Common Stock at a Purchase Price of
$10.00 per share. The maximum of the Estimate Price Range
may be increased by up to 15% and the maximum number of
shares of Common Stock to be offered may be increased up to
17,333,738 shares due to regulatory considerations or
changes in market or general financial or economic
considerations. See "The Conversion--Stock Pricing" and
"--Number of Shares to be Issued."
Appraisal......... The Purchase Price per share has been fixed at $10.00. The
total number of shares to be issued in the Conversion is
based upon an independent appraisal prepared by RP
Financial, LC. ("RP Financial"), dated as of February 27,
1998, which states that the estimated pro forma market value
of the Common Stock offered ranged from $111,407,770 to
$150,728,150. The final aggregate value will be determined
at the time of closing of the Offerings and is subject to
change due to changing market conditions and other factors.
See "The Conversion--Stock Pricing."
Use of Proceeds... The Holding Company will use 50% of the net proceeds of the
Offerings to purchase all of the outstanding common stock of
the Bank to be issued in the Conversion. A portion of net
proceeds retained by the Holding Company will be used for
general business activity, including a loan by the Holding
Company directly to the ESOP to enable the ESOP to purchase
up to 8% of the Common Stock issued in the Conversion,
including shares issued to the Foundation. The Holding
Company intends to initially invest the remaining net
proceeds primarily in government agency and corporate debt
securities and in deposit accounts with the Bank. The Bank
intends to utilize net proceeds for general business
purposes, including investments in loans and securities as
well as for the possible expansion of its facilities and
operations through marketing, business development, or
acquisitions of other financial institutions, branch offices
or other financial services companies, although the Holding
Company and the Bank have no current arrangements,
understandings or agreements regarding any such
transactions.
Dividend Policy... Upon Conversion, the Board of Directors of the Holding
Company will have the authority to declare dividends on the
Common Stock, subject to statutory and regulatory
requirements. In the future, the Board of Directors of the
Holding Company may consider a policy of paying cash
dividends on the Common Stock. However, no decision has been
made with respect to such dividends, if any. See "Dividends
Policy."
7
<PAGE>
Benefits of
the Conversion
to Management... Among the benefits to the Bank and the Holding Company
anticipated from the Conversion is the ability to attract
and retain personnel through the use of stock options and
other stock related benefit programs. Subsequent to the
Conversion, the Holding Company intends to adopt a
Recognition and Retention Plan and a Stock Option and
Incentive Plan for the benefit of directors, officers and
employees. If such benefit plans are adopted within one year
after the Conversion, such plans will be subject to
stockholders' approval at a meeting of stockholders which
may not be held earlier than six months after the
Conversion.
The Holding Company intends to adopt a Recognition and
Retention Plan (the "RRP") which would provide for the
granting of Common Stock to officers, directors and
employees of the Bank and Company in an amount equal to 4%
of the Common Stock issued in the Conversion, including
shares issued to the Foundation (representing 621,000 shares
in the aggregate, having a value of $6,210,000 based on the
offering price per share of $10.00. The Holding Company also
intends to adopt a stock option and incentive plan (the
"Stock Option Plan") which would provide the Holding Company
with the ability to grant options to officers, directors and
employees of the Bank and Holding Company to purchase Common
Stock equal to 10% of the number of shares of Common Stock
issued in the Conversion, including shares issued to the
Foundation. It is intended that under the Stock Option Plan,
an optionee would not be required to make any payment for an
option granted thereunder; accordingly, until the optionee
exercised the option, he or she would not be placing any
personal funds at risk.
Certain officers of the Holding Company and the Bank will be
provided with employment agreements or change in control
agreements which provide such officers with employment
rights and/or payments upon their termination of service
following a change in control. For a further description of
the RRP and Stock Option Plan as well as the employment
contracts and change in control agreements, see "Risk
Factors" and "Management of the Bank - Benefit Plans." See
also "Management of the Bank - Proposed Purchases by
Executive Officers and Trustees," "The Conversion -
Establishment of The Hudson River Bank & Trust Company
Foundation" and "Restrictions on Acquisition of the Holding
Company and the Bank -Restrictions in the Holding Company's
Certificate of Incorporation and Bylaws."
Voting Control
of Officers
and Directors... Trustees and executive officers of the Bank and the Company
are expected to purchase approximately 2.36% and 1.52% of
shares of Common Stock outstanding, based upon the minimum
and the maximum of the Estimated Valuation Range including
shares issued to the Foundation, respectively. Additionally,
assuming the implementation of the ESOP, RRP and Stock
Option Plan, trustees, executive officers and employees have
the potential to control the voting of approximately 24.36%
or 23.52% of the Common Stock at the minimum and the maximum
of the Estimated Valuation Range, including shares issued to
the Foundation, respectively.
Additionally, the Foundation will hold Common Stock in an
amount equal to 3% of the Common Stock sold in the
Conversion, which such shares of Common Stock may be voted
as directed by the Board of Directors of the Foundation, who
will initially consist of six Directors of which four will
be Directors of the Holding Company and the Bank. However,
the FDIC and the New York State Banking Board (the "NYBB" or
the "Board") may impose conditions regarding voting of the
Common Stock by the Foundation. See "The Conversion -
Establishment of The Hudson River Bank & Trust Company
Foundation," "Management of the Bank - Proposed Purchases by
Executive Officers, and Trustees," and "Restrictions on
Acquisition of the Holding Company and the Bank
-Restrictions in the Holding Company's Certificate of
Incorporation and Bylaws."
Expiration Date
for the
Subscription
Offering....... The Expiration Date for the Subscription Offering is 12:00
noon
8
<PAGE>
Eastern time on _______________, 1998 unless extended by the
Bank for an initial period of up to 45 days after the
Expiration Date or for one or more additional 60 day periods
thereafter, upon approval of the Superintendent, and if
necessary, the FDIC. The Subscription Offering may not be
extended beyond ________, 2000. See "The Conversion
-Subscription Offering and Subscription Rights."
Market for
Common Stock.... As a mutual institution, the Bank has never issued capital
stock and, consequently, there is no existing market for the
Common Stock. The Holding Company has applied to have its
Common Stock quoted on the Nasdaq National Market under the
symbol "____" subject to the completion of the Conversion
and compliance with certain conditions, including the
presence of at least three registered and active market
makers. See "Market for Common Stock."
No Board
Recommendations.. The Bank's Board of Trustees and the Holding Company's Board
of Directors are not making any recommendations to
depositors or other potential investors regarding whether
such persons should purchase the Common Stock. An investment
in the Common Stock must be made pursuant to each investor's
evaluation of his or her best interests.
Conversion Center.. If you have any questions regarding Conversion, call the
Conversion Center at (518) _________.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK
Set forth below are selected consolidated financial and other data of
the Bank. The financial data is derived in part from, and should be read in
conjunction with the Consolidated Financial Statements and Notes of the Bank
presented elsewhere in this Prospectus.
In the opinion of management, the unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial condition and results of
operations of HCSI as of December 31, 1997 and for the nine month periods ended
December 31, 1997 and 1996. Interim results for the nine months ended December
31, 1997 are not necessarily indicative of the results that may be expected for
the year ended March 31, 1998.
<TABLE>
<CAPTION>
At At March 31,
December 31, -----------------------------------------------------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Selected Financial Data:
<S> <C> <C> <C> <C> <C> <C>
Total assets ......................................... $665,051 $651,034 $623,220 $576,111 $553,818 $515,184
Loans receivable, net ................................ 505,142 487,147 447,125 435,688 406,072 387,806
Securities available for sale, at fair value:
U.S. Government and Agency securities .............. 36,943 37,329 33,452 2,937 -- --
Corporate debt securities .......................... 6,339 8,294 17,977 6,926 14,337 --
Investment securities, at amortized cost:
U.S. Government and Agency securities .............. 19,974 17,960 13,957 14,937 13,964 5,961
Corporate debt securities .......................... 46,743 57,648 63,557 69,238 59,611 76,632
Mortgage-backed securities ......................... 4,517 3,050 4,221 2,591 3,147 4,476
State, county and municipal ........................ 10 410 1,268 2,820 1,955 2,456
Federal Home Loan Bank of New York stock ............. 2,812 2,812 2,596 2,569 -- --
Deposits ............................................. 586,231 564,599 555,188 514,451 498,677 465,353
Short-term borrowings ................................ 2,000 12,585 -- -- -- --
Total equity ......................................... 67,395 65,129 59,606 52,138 46,350 40,177
Full service offices(1) .............................. 12 11 11 9 7 7
</TABLE>
- -------------
(1) No branch offices of the Bank were closed during the periods shown.
10
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended December 31, Years Ended March 31,
------------------ ----------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In Thousands)
Summary of Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income ........................ $ 41,453 $ 39,373 $ 52,881 $ 49,082 $ 43,059 $ 40,649 $ 41,152
Interest expense .................................... 19,540 19,091 25,426 24,086 19,309 18,157 20,814
-------- -------- -------- -------- -------- -------- --------
Net interest income ............................... 21,913 20,282 27,455 24,996 23,750 22,492 20,338
Provision for loan losses ........................... 6,408 1,858 3,826 1,090 1,169 1,201 2,543
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for
loan losses ..................................... 15,505 18,424 23,629 23,906 22,581 21,291 17,795
-------- -------- -------- -------- -------- -------- --------
Other operating income:
Service charges on deposit accounts ............... 840 815 1,063 1,026 1,033 921 928
Loan servicing income ............................. 353 402 480 272 265 281 193
Net securities transactions ....................... 12 28 28 28 (16) 597 449
Net gain (loss) on sale of loans .................. 39 (5) 17 92 14 326 964
Other income ...................................... 646 121 237 217 236 1,396 546
-------- -------- -------- -------- -------- -------- --------
Total other operating income .................... 1,890 1,361 1,825 1,635 1,532 3,521 3,080
-------- -------- -------- -------- -------- -------- --------
Other operating expenses:
Compensation and benefits ......................... 6,985 6,436 8,592 7,471 6,840 6,381 5,843
Occupancy ......................................... 993 916 1,285 1,184 1,162 1,086 1,047
Equipment ......................................... 1,232 860 1,230 1,057 1,194 1,219 1,092
OREO and repossessed property
expenses ........................................ 274 190 292 348 851 441 365
Other expenses .................................... 4,704 3,356 4,788 4,139 5,176 5,325 4,364
-------- -------- -------- -------- -------- -------- --------
Total other operating expenses ................. 14,188 11,758 16,187 14,199 15,223 14,452 12,711
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense .............. 3,207 8,027 9,267 11,342 8,890 10,360 8,164
Income tax expense ................................. 1,321 3,142 3,607 4,298 2,917 4,169 3,571
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
accounting changes ............................... 1,886 4,885 5,660 7,044 5,973 6,191 4,593
Cumulative effect of change in accounting
for taxes ......................................... -- -- -- -- -- -- 815
-------- -------- -------- -------- -------- -------- --------
Net income .......................................... $ 1,886 $ 4,885 $ 5,660 $ 7,044 $ 5,973 $ 6,191 $ 5,408
======== ======== ======== ======== ======== ======== ========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
At or For the
Nine Months Ended At or For the Year Ended
December 31, March 31,
----------------- -----------------------------------------------
1997(1) 1996(1) 1997 1996 1995 1994 1993
------- ------- ---- ---- ---- ---- ----
Performance Ratios:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets .................................. 0.38% 1.01% 0.88% 1.18% 1.05% 1.15% 1.07%
Return on average equity .................................. 3.71 10.36 8.94 12.52 12.06 14.17 14.45
Net interest rate spread(2) ............................... 4.05 3.90 3.97 3.89 4.05 4.04 3.95
Net interest margin(3) .................................... 4.62 4.41 4.48 4.38 4.40 4.38 4.24
Yield on average earning assets ........................... 8.75 8.56 8.64 8.59 7.98 7.92 8.59
Rate on average interest-bearing
liabilities ............................................. 4.70 4.66 4.67 4.70 3.93 3.88 4.64
Average earning assets to average
interest-bearing liabilities ............................ 113.97 112.33 112.56 111.48 109.72 109.55 106.91
Efficiency ratio(4) ....................................... 58.48 53.52 54.34 52.07 56.81 55.13 53.75
Expense ratio(5) .......................................... 2.80 2.40 2.48 2.32 2.54 2.60 2.44
Asset Quality Ratios:
Non-performing loans to total loans ....................... 3.20 3.10 4.06 2.42 1.67 2.25 2.41
Allowance for loan losses to non-performing loans ......... 41.24 28.19 29.37 32.57 43.36 31.67 21.28
Allowance for loan losses to total loans .................. 1.32 0.87 1.19 0.79 0.73 0.71 0.51
Non-performing assets to total assets ..................... 2.62 2.85 3.60 2.02 1.50 2.12 2.07
Capital Ratios:
Equity to total assets .................................... 10.13 10.00 10.00 9.56 9.05 8.37 7.80
Average equity to average total assets .................... 10.21 9.78 9.88 9.42 8.74 8.11 7.41
</TABLE>
- ---------
(1) Ratios for the nine month periods are stated on an annualized basis. Such
ratios and results are not necessarily indicative of results that may be
expected for the full year.
(2) Net interest rate spread represents the difference between the yield on
average earning assets and the rate on average interest-bearing
liabilities.
(3) Net interest margin represents net interest income as a percentage of
average earning assets.
(4) Total other operating expense, excluding other real estate owned and
repossessed property expense, as a percentage of net interest income and
total other operating income, excluding net securities transactions.
(5) Total other operating expense, excluding other real estate owned and
repossessed property expense, as a percentage of average total assets.
12
<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.
Interest Rate Risk Exposure
The Bank's profitability is dependent to a large extent upon its net
interest income, which is the difference between its interest and dividend
income on earning assets, such as loans and investments, and its interest
expense on interest-bearing liabilities, such as deposits and borrowings.
Changes in the level of interest rates affect the amount of loans originated by
the Bank as well as the market value of the Bank's 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.
In managing its asset/liability mix, the Bank may, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, place 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 Bank will continue to
be significantly vulnerable to changes in interest rates and to decreases in the
difference between long and short term interest rates.
Risks Associated with the Establishment of the Charitable Foundation
Pursuant to the Plan of Conversion, the Holding Company and the Bank
intend to voluntarily establish a charitable foundation in connection with the
Conversion. The Foundation has been incorporated under Delaware law as a
non-stock corporation and will be funded with shares of common stock contributed
by the Holding Company (the "Stock Contribution"). The contribution of common
stock to the foundation will be dilutive to the ownership and voting interests
of stockholders and will have an adverse impact on the earnings of the Holding
Company on a consolidated basis in the period the Foundation is established.
As a condition to receiving the non-objection of the FDIC to the
Conversion and the approval of the Conversion by the Superintendent, the
Foundation will commit in writing to the FDIC and the Superintendent that all
shares of Common Stock held by the Foundation will be voted in the same ratio as
all other shares of the Holding Company's Common Stock on all proposals
considered by shareholders of the Holding Company; provided, however, that,
consistent with the condition, the FDIC and the Superintendent shall waive this
voting restriction under certain circumstances if compliance with the voting
restriction would: (i) cause a violation of the law of the State of Delaware;
(ii) cause the Foundation to lose its tax-exempt status, or cause the IRS to
deny the Foundation's request for a determination that it is an exempt
organization or otherwise have a material and adverse tax consequence on the
Foundation; or (iii) cause the Foundation to be subject to an excise tax under
Section 4941 of the Code. As of the date hereof, no event has occurred which
would require the Company to seek a waiver from the FDIC and the Superintendent
of the voting restriction.
Adverse Impact on Earnings. The Stock Contribution will have an adverse
impact on the Holding Company's earnings. The Holding Company will recognize an
expense in the amount of $4.5 million ($2.7 million net of taxes) in the quarter
in which the Conversion is completed based on the issuance of shares at the
maximum of the Estimated Valuation Range, which is expected to be the first
quarter of fiscal 1999. Such expense will reduce earnings and have a material
adverse impact on the Holding Company's earnings in the fiscal quarter and year
recorded. The Holding Company has been advised by its legal counsel that the
Stock Contribution should be tax deductible, subject to a limitation based on
10% of the Holding Company's annual taxable income. If the Stock Contribution
had been made at December 31, 1997,
13
<PAGE>
the Bank would have reported a net loss of $827 thousand for the nine month
period rather than net income of $1.9 million.
In the future, the Company may make additional contributions to the
Foundation, although the Holding Company has no current plans regarding the
amount or timing of any such future contributions. The amount of future
contributions, if any, will be determined based upon, among other factors, an
assessment of the Holding Company's then current financial position, operations,
and prospects and on the need for charitable activities in the Bank's market
area. Any such contributions, regardless of form, will result in an increase in
other operating expense and thus a reduction in net earnings. In addition, any
contributions of authorized but unissued shares would dilute the interests of
outstanding stockholders. However, the Holding Company currently anticipates
that any future contributions of shares by it to the Foundation will be funded
through shares repurchased in the open market.
Dilution of Stockholder's Interests. The Stock Contribution will
involve the donation of 452,184 shares of the Common Stock, or the sale of such
shares for their aggregate par value $4,522, to the Foundation. Upon completion
of the Conversion and the Stock Contribution, the Holding Company will have
15,525,000 shares issued and outstanding at the maximum of the Estimated
Valuation Range, of which the Foundation will own 452,184 shares, or 2.9%. As a
result, persons purchasing shares in the Conversion will have their share
ownership and voting interest in the Holding Company diluted by 2.9%. See "Pro
Forma Data."
Possible Nondeductibility of the Stock Contribution. It is expected
that the Internal Revenue Service ("IRS") will rule that the Foundation is
exempt from federal income tax under Section 501(a) of the Code as an
organization described in Section 501(c)(3) of the Code. As such, the Holding
Company will be entitled to a deduction in the amount of the Stock Contribution,
subject to an annual limitation based on 10% of the Holding Company's annual
taxable income. The Holding Company, however, would be able to carry forward any
unused portion of the deduction for five years following the Stock Contribution
for Federal and New York tax purposes. Based on present information, the Holding
Company currently estimates that the Stock Contribution should be fully
deductible for federal tax and New York purposes. However, no assurances can be
made that the Holding Company will have sufficient pre-tax income over the
five-year period following the year in which the Stock Contribution is made to
utilize fully the carryover related to the excess contribution.
Potential Change in Valuation and Capital if the Stock Contribution is
Not Made. The Stock Contribution was taken into account by RP Financial in
determining the estimated pro forma market value of the Holding Company. The
aggregate price of the shares of Common Stock being offered in the Offering is
based upon the Appraisal. The pro forma aggregate price of the shares being
offered for sale in the Conversion is currently estimated to be between $111.4
million and $150.7 million, with a midpoint of $131.1 million.
If the Stock Contribution is not part of the Conversion, the Estimated
Valuation Range of the shares being offered is estimated to be between $119.0
million and $161.0 million. This represents an increase of $8.9 million at the
midpoint of the Estimated Valuation Range. In such event the
14
<PAGE>
estimated pro forma stockholders' equity of the Holding Company would be
approximately $188.0 million at the midpoint based on a pro forma price to book
ratio of 74.5% and a pro forma price to earnings ratio of 25.26x. See
"Comparison of Valuation and Pro Forma Information with No Stock Contribution."
The decrease in the amount of Common Stock being offered for sale as a
result of the Stock Contribution will not have a significant effect on the
Holding Company's or the Bank's capital position. The Bank's regulatory capital
is significantly in excess of its regulatory capital requirements and will
further exceed such requirements following the Conversion. See "Comparison of
Valuation and Pro Forma Information with No Stock Contribution."
Potential Anti-Takeover Effect. Upon completion of the Conversion, the
Foundation would own 2.9% of the Holding Company's outstanding shares. Such
shares will be owned solely by the Foundation; however pursuant to the terms of
the Stock Contribution as mandated by the FDIC and the Superintendent, the
shares of Holding Company Common Stock must be voted in the same proportion as
all other shares of Holding Company Common Stock on all proposals considered by
the Holding Company's stockholders. See "The Conversion -- Establishment of The
Hudson River Bank & Trust Company Foundation." In the event that the FDIC and
the Superintendent were to waive this voting restriction, the Foundation's Board
of Directors would exercise sole voting power over such shares and would no
longer be subject to the voting restriction. However, the FDIC and the
Superintendent could impose additional conditions at that time on the
composition of the Board of the Foundation or which otherwise relate to control
of the Common Stock of the Holding Company held by the Foundation. See "The
Conversion -- Establishment of The Hudson River Bank & Trust Company
Foundation." If a waiver of the voting restriction were granted by the FDIC and
the Superintendent and no further conditions were imposed on the Foundation at
that time, management of the Holding Company and the Bank could benefit to the
extent that the Board of Directors of the Foundation determines to vote the
shares of Common Stock held by the Foundation in favor of proposals supported by
the Holding Company and the Bank. Furthermore, when the Foundation's shares are
combined with shares purchased directly by executive officers and directors of
the Holding Company, shares issued pursuant to proposed stock benefit plans, and
shares held in the Bank's ESOP, the aggregate of such shares could exceed 20% of
the Holding Company's outstanding Common Stock, which could enable management to
defeat stockholder proposals requiring 80% approval. Consequently, this
potential voting control might preclude takeover attempts that other
stockholders deem to be in their best interest, and might tend to perpetuate
management. Since the ESOP shares are allocated to eligible employees of the
Bank, and any unallocated shares will be voted by an independent trustee, and
because awards under the proposed stock benefit plans may be granted to
employees other than executive officers and directors, management of the Holding
Company does not expect to have voting control of all shares held or to be
allocated by the ESOP or other stock benefit plans. See, "-- Takeover Defensive
Provisions."
There are no agreements or understandings, written or tacit, with
respect to the exercise of either direct or indirect control over the management
or policies of the Holding Company by the Foundation, including agreements
related to voting, acquisition or disposition of the Holding
15
<PAGE>
Company's Common Stock. Finally, as the Foundation sells its shares of Common
Stock over time, its ownership interest and voting power in the Holding Company
is expected to decrease.
Potential Challenges. The funding of a charitable foundation as part of
a conversion is innovative and has occurred on only a few other occasions. As
such, the Stock Contribution may be subject to potential challenges
notwithstanding that the Board of Directors of the Holding Company and the Board
of Trustees of the Bank have carefully considered the various factors involved
in the establishment of the Foundation in reaching their determination to make
the Stock Contribution as part of the Conversion. See "The
Conversion-Establishment of the Hudson River Bank and Trust Company Foundation."
Source of Manufactured Home Loan Applications
The largest component of the Bank's consumer loan portfolio is
manufactured home loans (loans secured by prefabricated or mobile homes which
serve as the borrower's dwelling). At December 31, 1997 the Bank had $98.3
million in manufactured home loans, representing 19.2% of the Bank's total loan
portfolio. Substantially all of the manufactured home loans originated by the
Bank are referred to it by Tammac Corporation ("Tammac"), an unaffiliated
corporation which is a party to an agreement with the Bank to solicit
manufactured home loans on behalf of the Bank in return for a fixed percentage
of the loan amount. If Tammac were unable to perform its obligations under the
agreement and the Bank were unable to secure a comparable source of manufactured
home loan applications, originations of manufactured home loans could decline
substantially. In addition, because Tammac provides certain collection,
repossession and liquidation services for delinquent manufactured home loans,
termination of the agreement with Tammac could adversely affect the Bank. The
Bank currently has no reason to believe that Tammac will fail to perform its
obligations under the agreement.
Risks Associated with Non-Residential Lending Activity
The Bank has emphasized the origination of non-residential loans. At
December 31, 1997, the Bank's loan portfolio included $98.3 million (19.2%) of
manufactured home loans, $23.4 million (4.6%) of financed insurance premiums,
$12.1 million (2.4%) of other consumer loans, $73.9 million (14.4%) of
commercial real estate loans and $13.9 million (2.7%) of commercial business
loans.
These loans generally are considered to involve a higher degree of risk
than single-family residential loans due to a variety of factors. See "Business
of the Bank - Commercial Real Estate Lending" and "-- Consumer Lending." At
December 31, 1997, of the $16.4 million of the Bank's non-performing loans, $4.9
million related to residential non-performing real estate loans and $11.5
million related to other non-performing loans. See "Business of the Bank - Asset
Quality - Non-Performing Assets."
Competition
HCSI 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 credit unions,
mortgage banks, commercial banks, mutual funds and national and local securities
firms. Due to their size, many competitors can achieve certain economies of
scale and as
16
<PAGE>
a result offer a broader range of products and services than the Bank. The Bank
attempts to mitigate the effect of such factors by emphasizing customer service
and community outreach. Such competition may limit HCSI's growth in the future.
See "Business of the Bank - Competition."
Takeover Defensive Provisions
Holding Company and Bank Governing Instruments. Certain provisions of
the Holding Company's Certificate of Incorporation and Bylaws and the Bank's
Restated Organization Certificate and Bylaws assist the Holding Company and the
Bank in 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. 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
Acquisition of the Holding Company and the Bank."
Provisions in Management Contracts and Benefit Plans. Certain
provisions contained in the proposed management contracts and benefit plans that
provide for cash payments or the vesting of benefits upon a change of control of
the Holding Company or the Bank may have an anti-takeover effect and could
discourage an acquisition of the Holding Company. See "Management of the Bank -
Employment Agreements."
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 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, respectively, and
assuming the use of authorized but unissued shares, the interest of stockholders
will be diluted by up to 9.1% and 3.8%, respectively. See "Pro Forma Data,"
"Management of the Bank - Benefit Plans - Stock Option and Incentive Plan," and
"- Recognition and Retention Plan" and "Restrictions on Acquisition of the
Holding Company and the Bank." For financial accounting purposes, grants under
the proposed RRP will result in the recording of compensation expense over the
vesting period. See "Pro Forma Data."
17
<PAGE>
Voting Control of Directors and Executive Officers. The trustees and
executive officers (12 persons) of the Bank propose to purchase an aggregate of
approximately 270,800 shares, representing approximately 2.36% of the shares
offered in the Conversion at the minimum of the Estimated Valuation Range, and
1.52% of the shares offered in the Conversion at the maximum of the Estimated
Valuation Range, exclusive of shares that may be attributable to directors and
officers through the RRP, the Stock Option Plan and the ESOP, which may give
directors, executive officers and employees the potential to control the voting
of additional Common Stock and including shares issued to the Foundation. A
number of shares equal to 4% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation, will be available for
issuance under the Recognition and Retention Plan (621,000 shares at the maximum
of the Estimated Valuation Range), and a number of shares equal to 10% of the
shares issued in the Conversion, including shares issued to the Foundation, will
be available for issuance under the Stock Option Plan (1,552,500 shares at the
maximum of the Estimated Valuation Range). It is intended that the ESOP will
purchase 8% of the shares issued in the Conversion, including shares issued to
the Foundation (1,242,000 shares at the maximum of the Estimated Valuation
Range). In connection with the Conversion, the Foundation will receive 452,184
shares of Common Stock at the maximum of the Estimated Valuation Range which, if
a waiver of the voting restriction imposed on such Common Stock is obtained from
the FDIC and the Superintendent, may be voted as determined by the Board of
Directors of the Foundation who will initially consist of four Directors of the
Holding Company and the Bank and two outside directors. Thus, after the
Conversion, the aggregate number of shares which may be controlled by directors
and executive officers of the Company, including those to be issued to the
Foundation and those that may be issued under the Stock Option Plan and the
Recognition and Retention Plan totaled 2,896,484 at the maximum of the Estimated
Valuation Range, or 18.66% of the total number of shares at the maximum of the
Estimated Valuation Range, including shares issued to the Foundation, on a fully
diluted basis (including shares available for issuance under the Stock Option
Plan and Recognition and Retention Plan). Management's voting control could,
together with additional stockholder support, defeat stockholder proposals
requiring 80% approval of stockholders. As a result, this voting control may
preclude takeover attempts that certain stockholders deem to be in their best
interest and tend to perpetuate existing management. See "Restrictions on
Acquisition of the Holding Company and the Bank--Restrictions in the Holding
Company's Certificate of Incorporation and Bylaws."
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" and "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 of the Bank -
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 of the Bank - Benefit Plans - Employee Stock Ownership Plan." In
addition, the Bank and the Holding Company intend to initially invest the
additional capital being raised through the offering into shorter-term,
lower-yielding assets (i.e., federal funds sold) and gradually reinvest the
additional capital into longer-term, higher-yielding loans and mortgage backed
securities as opportunities arise. Until the additional capital can be
effectively reinvested, the Holding Company's return on equity is expected to
decrease from the Bank's historic levels.
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, SOP 93-6 would increase compensation
expense relating to the ESOP to be established in connection with the
Conversion. It is not possible to determine at this time the extent of such
impact on future net income. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Impact of New Accounting
Standards" and "Pro Forma Data."
In addition, the Company will experience additional expense in the
quarter in which the Conversion is completed as a result of the Stock
Contribution. See "The Conversion--Establishment of The Hudson River Bank &
Trust Company Foundation."
18
<PAGE>
Absence of Active Market for the Common Stock
The Holding Company, as a newly organized company, has never issued
capital stock and, consequently, there is no established market for the Common
Stock at this time. The Holding Company has received approval to have its Common
Stock quoted on the Nasdaq National Market under the symbol "HRBT" conditioned
on the consummation of the Conversion. A public trading market having the
desirable characteristics of depth, liquidity and orderliness depends upon the
existence of willing buyers and sellers at any given time, the presence of which
is dependent upon the individual decisions of buyers and sellers over which
neither the Holding Company nor any market maker has control. Accordingly, there
can be no assurance that an active and liquid trading market for the Common
Stock will develop or that, if developed, will continue, nor is there any
assurance that purchasers of the Common Stock will be able to sell their shares
at or above the Purchase Price. In the event a liquid market for the Common
Stock does not develop or market makers for the Common Stock discontinue their
activities, such occurrences may have an adverse impact on the liquidity of the
Common Stock and the market value of the Common Stock. See "Market for Common
Stock."
HUDSON RIVER BANCORP, INC.
The Holding Company was formed at the direction of HCSI in March 1998
for the purpose of becoming a savings and loan holding company and owning all of
the outstanding stock of the Bank 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 HCSI. The holding company structure will, however, provide the
Holding Company with greater flexibility than the Bank 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 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 HCSI, 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 HCSI, if any. See "Dividends" and "Regulation - The Holding
Company." 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 of
the Bank - Benefit Plans - Employee Stock Ownership Plan."
19
<PAGE>
The executive office of the Holding Company is located at One Hudson
City Centre, Hudson, New York 12534. Its telephone number at that address is
(518) 828-4600.
THE HUDSON CITY SAVINGS INSTITUTION
HCSI serves the financial needs of communities in its market area
through its main office and 11 other full service branch offices and one loan
production office located throughout HCSI's primary market area. Its deposits
are insured up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC"). At December 31, 1997, HCSI had total assets of $665.1 million,
deposits of $586.2 million and total equity of $67.4 million (or 10.1% of total
assets).
HCSI has been, and intends to continue to be, an independent, community
oriented financial institution. HCSI's business involves attracting deposits
from the general public and using such deposits, together with other funds, to
originate primarily residential mortgage loans including home equity loans, and
to a lesser extent, manufactured home loans, financed insurance premiums and
other consumer loans, commercial real estate, construction and commercial
business loans. HCSI originates its loans in the Bank's primary market area,
with the exception of manufactured home loans, which are primarily originated
outside of the Bank's primary market area including states contiguous with New
York, and financed insurance premiums, which are originated primarily in New
York, New Jersey and Pennsylvania. At December 31, 1997, $250.6 million, or
49.0%, of the Bank's total loan portfolio consisted of residential mortgage
loans. See "Business of the Bank - Lending Activities." The Bank also invests in
government agency and corporate debt securities and other permissible
investments. See "Business of the Bank - Investment Activities."
The executive office of the Bank is located at One Hudson City Centre,
Hudson, New York 12534. Its telephone number at that address is (518) 828-4600.
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 $109.1 million and $148.0
million (or up to $170.3 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 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 HCSI issued in the
Conversion, the Holding Company will contribute approximately 50% of the net
proceeds from the sale of the Holding Company's Common Stock to HCSI. On an
interim basis, the proceeds will be invested by the Holding Company and HCSI in
short-term investments similar to those currently in the Bank's portfolio. 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 $9.2 million (based upon the sale
20
<PAGE>
of shares at the minimum of the Estimated Valuation Range) to $12.4 million
(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 prime rate of interest as reported in the Wall Street Journal at
the time of origination. It is anticipated that the ESOP will repay the loan
through periodic tax-deductible contributions from the Bank over a fifteen-year
period.
The net proceeds received by HCSI will become part of HCSI's general
funds for use in its business and will be used to support the Bank's existing
operations, subject to applicable regulatory restrictions. Immediately upon the
completion of the Conversion, it is anticipated that the Bank will invest such
proceeds into short-term assets. Subsequently, the Bank intends to redirect the
net proceeds to the origination of loans, subject to 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
securities similar to those already held by the Bank, as well as in deposit
accounts with the Bank. 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 $4.6 million (based upon the sale of shares at
the minimum of the Estimated Valuation Range and including shares issued to the
Foundation) to approximately $6.2 million (based upon the sale of shares at the
maximum of the Estimated Valuation Range and including shares issued to the
Foundation). 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 of the Bank - Lending
Activities" and " - Investment Activities" and "Management of the Bank - Benefit
Plans - Employee Stock Ownership Plan" and "- Recognition and Retention Plan."
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 applicable
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 Bank's investment opportunities and capital needs.
The Bank may use a portion of the proceeds to fund the creation of one
or more new branch offices within its primary market area, although the Bank has
no specific plans regarding any new branch offices at this time. In addition,
the Holding Company or HCSI might consider expansion through the acquisition of
other financial services providers (or branches, deposits or assets thereof),
although there are no specific plans, negotiations or written or oral agreements
regarding any acquisitions at this time.
21
<PAGE>
DIVIDENDS
The Holding Company currently has no plans to pay dividends. However,
the Holding Company's Board of Directors may consider a policy of paying
dividends in the future. Dividends, when and if paid, will be subject to
determination and declaration by the Board of Directors at its discretion. They
will take into account the Holding Company's consolidated financial condition,
the Bank's regulatory capital requirements, tax considerations, industry
standards, economic conditions, regulatory restrictions, general business
practices and other factors.
It is not presently anticipated that the Holding Company will conduct
significant operations independent of those of HCSI 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 $109.1 million to $148.0 million based on the minimum and the maximum of
the Estimated Valuation Range, respectively) and dividends from HCSI, 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 HCSI to pay dividends to the Holding Company. See
"Description of Capital Stock - Holding Company Capital Stock Dividends." HCSI,
like all savings associations regulated by the FDIC, 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. In addition, under New York state banking law, a New York
chartered stock savings bank may declare and pay dividends out of its net
profits, unless there is an impairment of capital, but approval of the New York
State Banking Department (the "NYSBD" or the "Department") is required if the
total of all dividends declared in a calendar year would exceed the total of its
net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments. See "The Conversion -
Effects of Conversion -- Deposit Accounts and Loans" and "Regulation - The Bank
- -- Capital Requirements" and "- Limitations on Dividends." Earnings allocated to
HCSI's "excess" bad debt reserves and deducted for federal income tax purposes
cannot be used by HCSI to pay cash dividends to the Holding Company without
adverse tax consequences. See "Regulation" and "Taxation."
MARKET FOR COMMON STOCK
HCSI, as a mutual savings bank, and the Holding Company, as a newly
organized company, have never issued capital stock. Consequently, there is not
at this time an existing market for the Common Stock. The Holding Company has
applied for listing of the Common Stock on the Nasdaq Stock Market under the
symbol "HRBT" upon completion of the Conversion. In order to be quoted on the
Nasdaq Stock Market, among other criteria, there must be at least three market
makers for the Common Stock. Sandler O'Neill has agreed to act as a market maker
for the Holding Company's Common Stock following the Conversion, and assist in
securing additional market makers to do the same. A public trading 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. Accordingly, there can be no assurance that an active
and liquid market for the Common Stock will develop or be maintained or that
resales of the Common Stock can be made at or above the Purchase Price. See "The
Conversion - Stock Pricing" and "-- Number of Shares to be Issued."
22
<PAGE>
PRO FORMA REGULATORY CAPITAL ANALYSIS
At December 31, 1997, the Bank exceeded all regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with
regulatory capital standards as of December 31, 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 December 31, 1997
-------------------------------------------------------------------------------------------
17,333,738 Shares
11,140,777 Shares 13,106,796 Shares 15,072,815 Shares Sold at 15%
Historical Sold at Minimum Sold at Midpoint Sold at Maximum Above 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(1)........ $67,395 10.13% $108,166 15.32% $115,458 16.19% $122,750 17.04% $131,135 17.99%
======= ====== ======== ====== ======== ====== ======== ====== ======== ======
Leverage Capital(2):
Capital level(3)..... $66,753 10.08% $107,524 15.29% $114,816 16.16% $122,108 17.01% $130,493 17.97%
Requirement(4)....... 26,495 4.00% 28,126 4.00% 28,417 4.00% 28,709 4.00% 29,044 4.00%
-------- ------ ------- ------ -------- ------ -------- ------ -------- ------
Excess............... $40,258 6.08% $79,398 11.29% $86,399 12.16% $93,399 13.01% $101,449 13.97%
======= ====== ======= ====== ======= ====== ======== ====== ======== ======
Risk-Based Capital(2):
Capital level(3)(5).. $72,672 15.38% $113,443 23.01% $120,735 24.31% $128,027 25.59% $136,412 27.04%
Requirement.......... 37,812 8.00% 39,443 8.00% 39,735 8.00% 40,027 8.00% 40,362 8.00%
-------- ------ ------- ------ -------- ----- -------- ------ -------- ------
Excess............... $34,860 7.38% $74,000 15.01% $81,000 16.31% $ 88,000 17.59% $96,050 19.04%
======= ====== ======= ====== ======= ===== ======== ====== ======== ======
</TABLE>
- ----------
(1) Total equity as calculated under generally accepted accounting principles
("GAAP") expressed as a percent of total assets under GAAP.
(2) Leverage capital levels are shown as a percentage of "total assets," and
risk-based capital levels are calculated on the basis of a percentage of
"risk-weighted assets," each as defined in the FDIC regulations.
(3) Pro forma capital levels assume receipt by the Bank of 50% of the net
proceeds from the shares of Common Stock sold at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. These
levels assume funding by the Bank of the RRP equal to 4% of the Common
Stock issued, including shares issued to the Foundation, and repayment of
the Holding Company's loan to the ESOP to enable the ESOP to purchase 8% of
the Common Stock issued, including shares issued to the Foundation, valued
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range.
(4) The current leverage capital requirement is 3% of total adjusted assets for
savings banks that receive the highest supervisory ratings for safety and
soundness and that are not experiencing or anticipating significant growth.
The current leverage capital ratio applicable to all other savings banks is
4% to 5%. See "Regulation - The Bank - Capital Requirements."
(5) Assumes the net proceeds are invested in assets that carry a risk-weighting
of 50%.
23
<PAGE>
CAPITALIZATION
Set forth below is the capitalization, including deposits and
short-term borrowings, of HCSI as of December 31, 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
--------------------------------------------------
15% Above
HCSI Minimum Midpoint Maximum Maximum
Existing 11,140,777 13,106,796 15,072,815 17,333,738
Capitalization Shares Shares Shares Shares
-------------- ------ ------ ------ ------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits............................................. $ 586,231 $ 586,231 $ 586,231 $ 586,231 $ 586,231
========= ========= ========= ========= =========
Total deposits and short-term borrowings(1).......... $ 588,231 $ 588,231 $ 588,231 $ 588,231 $ 588,231
========= ========= ========= ========= =========
Stockholders' Equity:
Preferred Stock ($0.01)............................ $ -- $ -- $ -- $ -- $ --
Common Stock ($0.01)(2)............................ -- 115 135 155 179
Additional Paid-in Capital
(includes expenses and commissions)............... -- 112,309 132,322 152,336 175,351
Surplus and undivided profits, substantially
restricted(3)..................................... 67,363 67,363 67,363 67,363 67,363
Net unrealized gain on securities available
for sale, net of tax.............................. 32 32 32 32 32
Less:
Expense of contribution to Foundation(6)........... -- (3,342) (3,932) (4,522) (5,200)
Plus:
Tax effect of contribution to Foundation(4)........ -- 1,337 1,573 1,809 2,080
Less:
Common Stock acquired by ESOP(5) .................. -- (9,180) (10,800) (12,420) (14,283)
Common Stock acquired by RRP(5) ................... -- (4,590) (5,400) (6,210) (7,142)
--------- --------- --------- --------- ---------
Total Stockholders' Equity(6) ....................... $ 67,395 $ 164,043 $ 181,293 $ 198,543 $ 218,380
========= ========= ========= ========= =========
</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 and includes shares issued to
the Foundation.
(3) See "Dividends" and "Regulation - The Bank - Limitations on Dividends"
regarding restrictions on future dividend payments and "The Conversion -
Effects of Conversion - Deposit Accounts and Loans" regarding the
liquidation account to be established upon Conversion.
(4) Represents the tax effect of the contribution of Common Stock to the
Foundation based on a 40% tax rate. The realization of the tax benefit is
limited annually to 10% of the Holding Company's annual taxable income,
subject to the ability of the Holding Company to carry forward any unused
portion of the deduction for five years following the year in which the
contribution is made.
(5) Assumes that 8% of the shares sold in the Conversion, including shares
issued to the Foundation, will be purchased by the ESOP. The funds used to
acquire the ESOP shares will be borrowed from the Holding Company. The Bank
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, including shares issued to the Foundation, will be acquired by
the RRP, following stockholder 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 of the Bank - Benefit Plans - Employee Stock
Ownership Plan" and "- Recognition and Retention Plan."
(6) If the Stock Contribution is approved by the Bank's members, the amount of
initial contribution will be accrued as an expense in the fiscal quarter in
which the conversion is completed. See "The Conversion--Establishment of
The Hudson River Bank & Trust Company Foundation."
24
<PAGE>
PRO FORMA DATA
The following table sets forth the historical net income and equity
data of HCSI at and for the nine months ended December 31, 1997 and the fiscal
year ended March 31, 1997, and after giving effect to the Conversion, the pro
forma net income, capital stock and stockholders' equity and per share data of
the Holding Company at and for the nine months ended December 31, 1997 and the
fiscal year ended March 31, 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 periods and yielded net proceeds to the Holding
Company as indicated, (ii) 3% of the shares were donated to the Foundation upon
the completion of the Conversion, (iii) 50% of such net proceeds were retained
by the Holding Company and the remainder was used to purchase all of the stock
of HCSI, and (iv) such net proceeds, less the amount of the ESOP and RRP
funding, were invested by the Bank and Holding Company at the beginning of the
periods to yield a pre-tax return of 5.476% and 5.997% for the nine months ended
December 31, 1997 and for the fiscal year ended March 31, 1997, respectively.
The after-tax rate of return is 3.286% and 3.598%, respectively, assuming a
combined federal and state 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
the end of the periods indicated. The use of this rate is viewed to be more
relevant than the use of an arithmetic average of the weighted average yield
earned by the Bank on its earning assets and the weighted average rate paid on
its interest-bearing liabilities during such periods. In calculating the
underwriting fees to be paid as part of the Offering, the table assumes that (i)
no commission was paid on $2.7 million of shares sold to directors, officers and
employees, and (ii) the remaining shares were sold at a 1.10% commission. (These
assumptions represent management's estimate as to the distribution of stock
orders in the Conversion. However, there can be no assurance that such estimate
will be accurate and that a greater proportion of shares will not be sold at a
higher commission, thus increasing offering expenses.) Fixed expenses are
estimated to be $1,130,558. Actual Conversion expenses may be more or less than
those estimated because the fees paid to Sandler O'Neill and other brokers will
depend upon the categories of purchasers, the Purchase Price and market
conditions and other factors. The pro forma net income amounts derived from the
assumptions set forth herein should not be considered indicative of the actual
results of operations of the Holding 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 $111,407,770 (the minimum of the Estimated Valuation
Range) or more than $173,337,380 (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."
25
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months Ended December 31, 1997
-----------------------------------------------------
15% Above
Minimum Midpoint Maximum Maximum
11,140,777 13,106,796 15,072,815 17,333,738
Shares Sold at Shares Sold at Shares Sold at Shares Sold at
$10.00 per $10.00 per $10.00 per $10.00 per
Share Share Share Share
---------- ---------- ---------- ----------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds......................................... $111,408 $131,068 $150,728 $173,337
Plus: Shares issued to Foundation(1)................... 3,342 3,932 4,522 5,200
--------- --------- --------- ---------
Pro forma market capitalization........................ $114,750 $135,000 $155,250 $178,537
======== ======== ======== ========
Gross proceeds......................................... $111,408 $131,068 $150,728 $173,337
Less offering expenses and commissions................. (2,326) (2,543) (2,759) (3,007)
----------- ----------- ----------- -----------
Estimated net conversion proceeds..................... $109,082 $128,525 $147,969 $170,330
Less ESOP shares....................................... (9,180) (10,800) (12,420) (14,283)
Less RRP shares........................................ (4,590) (5,400) (6,210) (7,142)
----------- ----------- ----------- -----------
Estimated proceeds available for investment(2)........ $95,312 $112,325 $129,339 $148,905
======= ======== ======== ========
Net Income:
Historical........................................... $1,886 $1,886 $1,886 $1,886
Pro Forma Adjustments:
Net earnings from proceeds(3)....................... $2,349 $2,768 $3,187 $3,669
ESOP(4)............................................. ($275) ($324) ($373) ($428)
RRP(5).............................................. ($413) ($486) ($559) ($643)
---------- ---------- ---------- ----------
Pro forma net income(5)........................... $3,547 $3,844 $4,141 $4,484
====== ====== ====== ======
Net Income Per Share:
Historical(7)...................................... $0.18 $0.15 $0.13 $0.11
Pro forma Adjustments:
Net earnings from proceeds........................ $0.22 $0.22 $0.22 $0.22
ESOP(4)........................................... ($0.03) ($0.03) ($0.03) ($0.03)
RRP(5)............................................ ($0.04) ($0.04) ($0.04) ($0.04)
-------- ----------- ----------- -----------
Pro forma net income per share(5)(6).......... $0.33 $0.30 $0.28 $0.26
===== ===== ===== =====
Offering price to pro forma net income per
share (annualized).............................. 22.47x 24.39x 26.03x 27.65x
Stockholders' Equity (Book Value)(8):
Historical........................................... $67,395 $67,395 $67,395 $67,395
Pro Forma Adjustments:
Estimated net Conversion proceeds.................... $109,082 $128,525 $147,969 $170,330
Plus: Tax benefit of Stock Contribution.............. $1,337 $1,573 $1,809 $2,080
Less: Common stock acquired by:
ESOP(4)............................................. ($9,180) ($10,800) ($12,420) ($14,283)
RRP(5).............................................. ($4,590) ($5,400) ($6,210) ($7,142)
--------- ------------ ------------ ------------
Pro forma stockholder's equity(6)............... $164,044 $181,293 $198,543 $218,380
======== ======== ======== ========
Stockholders' Equity (Book Value)(8):
Per Share(7):
Historical........................................... $5.87 $4.99 $4.34 $3.77
Pro Forma Adjustments:
Estimated net Conversion proceeds.................... $9.51 $9.52 $9.53 $9.54
Plus: Tax benefit of Stock Contribution.............. $0.12 $0.12 $0.12 $0.12
Less: Common stock acquired by:
ESOP(4)............................................. ($0.80) ($0.80) ($0.80) ($0.80)
RRP(5).............................................. ($0.40) ($0.40) ($0.40) ($0.40)
-------- ----------- ----------- -----------
Pro forma book value per share(6)............... $14.30 $13.43 $12.79 $12.23
====== ====== ====== ======
Pro forma offering price per share to book value per
share............................................... 69.95% 74.46% 78.19% 81.76%
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended March 31, 1997
-----------------------------------------------------
15% Above
Minimum Midpoint Maximum Maximum
11,140,777 13,106,796 15,072,815 17,333,738
Shares Sold at Shares Sold at Shares Sold at Shares Sold at
$10.00 per $10.00 per $10.00 per $10.00 per
Share Share Share Share
---------- ---------- ---------- ----------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds......................................... $111,408 $131,068 $150,728 $173,337
Plus: Shares issued to Foundation(1)................... $3,342 $3,392 $4,522 $5,200
-------- -------- -------- --------
Pro forma market capitalization........................ $114,750 $135,000 $155,250 $178,537
======== ======== ======== ========
Gross proceeds......................................... $111,408 $131,068 $150,728 $173,337
Less offering expenses and commissions................. ($2,326) ($2,543) ($2,759) ($3,007)
--------- --------- --------- ---------
Estimated net conversion proceeds..................... $109,082 $128,525 $147,969 $170,330
Less ESOP shares....................................... ($9,180) ($10,800) ($12,420) ($14,283)
Less RRP shares........................................ ($4,590) ($5,400) ($6,210) ($7,142)
--------- --------- --------- ---------
Estimated proceeds available for investment(2)........ $95,312 $112,325 $129,339 $148,905
======= ======== ======== ========
Net Income:
Historical........................................... $5,660 $5,660 $5,660 $5,660
Pro Forma Adjustments: $3,429 $4,042 $4,654 $5,358
Net earnings from proceeds(3).......................
ESOP(4)............................................. ($367) ($432) ($497) ($571)
RRP(5).............................................. ($551) ($648) ($745) ($857)
------- --------- --------- --------
Pro forma net income(5)........................... $8,171 $8,622 $9,072 $9,590
====== ====== ====== ======
Net Income Per Share:
Historical(7)...................................... $0.53 $0.45 $0.39 $0.34
Pro forma Adjustments:
Net earnings from proceeds........................ $0.32 $0.32 $0.32 $0.32
ESOP(4)........................................... ($0.03) ($0.03) ($0.03) ($0.03)
RRP(5)............................................ ($0.05) ($0.05) ($0.05) ($0.05)
-------- -------- -------- --------
Pro forma net income per share(5)(6).......... $0.77 $0.69 $0.63 $0.58
===== ===== ===== =====
Offering price to pro forma net income per
share........................................... 13.03x 14.53x 15.88x 17.28x
Stockholders' Equity (Book Value)(8):
Historical........................................... $65,129 $65,129 $65,129 $65,129
Pro Forma Adjustments:
Estimated net Conversion proceeds.................... $109,082 $128,525 $147,969 $170,330
Plus: Tax benefit of Stock Contribution.............. $1,337 $1,573 $1,809 $2,080
Less: Common stock acquired by: ($9,180) ($10,800) ($12,420) ($14,283)
ESOP(4).............................................
RRP(5).............................................. ($4,590) ($5,400) ($6,210) ($7,142)
--------- --------- --------- ---------
Pro forma stockholders' equity(6)............... $161,778 $179,027 $196,277 $216,114
======== ======== ======== ========
Stockholders' Equity (Book Value)(8):
Per Share(7):
Historical........................................... $5.68 $4.82 $4.20 $3.65
Pro Forma Adjustments:
Estimated net Conversion proceeds.................... $9.51 $9.52 $9.53 $9.54
Plus: Tax benefit of Stock Contribution.............. $0.12 $0.12 $0.12 $0.12
Less: Common stock acquired by:
ESOP(4)............................................. ($0.80) ($0.80) ($0.80) ($0.80)
RRP(5).............................................. ($0.40) ($0.40) ($0.40) ($0.40)
--------- -------- --------- --------
Pro forma book value per share(6)............... $14.11 $13.26 $12.65 $12.11
======== ======= ======== =======
Pro Forma offering price per share to pro forma book
value per share..................................... 70.93% 75.41% 79.10% 82.61%
</TABLE>
- ------------
(1) The Holding Company intends to contribute shares equal to 3% of the shares
issued in the Conversion to the Foundation within 12 months following the
completion of the Conversion. See "The Conversion--Establishment of The
Hudson River Bank & Trust Company Foundation." Since the contributed
shares will be donated or sold for nominal consideration, they will not add
to gross proceeds. However, since such shares are issued and outstanding,
they add to the Holding Company's market capitalization. The amount of the
Stock Contribution will be accrued as an expense in the fiscal quarter in
which the Conversion is completed.
27
<PAGE>
The pro forma net income data does not reflect such non-recurring accrual.
Both the historical and pro forma per share data assume that the Stock
Contribution is made.
(2) Reflects a reduction to net proceeds for the cost of the ESOP and the RRP
(assuming stockholder ratification is received) which it is assumed will be
funded from the net proceeds retained by the Holding Company.
(3) No effect has been given to withdrawals from deposit 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 Bank, have been deducted from net proceeds.
(4) It is assumed that 8% of the shares of Common Stock sold in the Conversion,
including shares issued to the Foundation, 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 Bank
intends to make contributions to the ESOP in amounts at least equal to the
principal and interest requirement of the debt. The Bank's payment of the
ESOP debt is based upon equal installments of principal and interest over a
15-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 Bank. Accordingly, the only expense to the Holding
Company on a consolidated basis will be related to the allocations of
earned ESOP shares which will be based on the number of shares committed to
be released to participants for the year at the average market value of the
shares during the year tax-effected at 40%. 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. Pursuant to SOP 93-6, only the ESOP shares
committed to be released are considered outstanding for the purposes of the
net income per share calculations.
(5) Adjustments to both book value and net income 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 (assuming stockholder
ratification of such plan is received) of an amount of shares equal to 4%
of the shares of Common Stock sold in the Conversion, including shares
issued to the Foundation, for the benefit of certain directors, officers
and employees. It is assumed that the sale of the shares to the RRP
occurred at the beginning of the period. 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 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. For purposes of calculating
pro forma net income per share, RRP shares are considered to be fully
vested. 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, including shares issued to the
Foundation, 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 nine months ended December 31, 1997 and year
ended March 31, 1997, pro forma net income per share (assuming all RRP
shares are treated as being fully vested) would be $0.33, $0.31, $0.29 and
$0.27 and $0.75, $0.68, $0.62 and $0.57, respectively, and pro forma
stockholders' equity per share would be $14.13, $13.30, $12.68 and $12.15
and $13.94, $13.14, $12.54 and $12.02, respectively, in each case at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range.
(6) 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, including shares issued to the Foundation, at $10.00 per share,
the interests of existing stockholders would be diluted as follows: pro
forma net income per share for the nine months ended December 31, 1997 and
the year ended March 31, 1997 would be $0.33, $0.30, $0.28 and $0.27 and
$0.73, $0.66, $0.60 and $0.56, respectively, and pro forma stockholders'
equity per share would be $13.91, $13.12, $12.54 and $12.03 and $13.73,
$12.96, $12.40 and $11.91, 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 are funded through open market
purchases at the Purchase Price of $10.00 per share, proceeds available for
reinvestment would be reduced by $11,475,000, $13,500,000, $15,525,000 and
$17,853,000 at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range. See "Management of the Bank - Benefit Plans
- Employee Stock Ownership Plan."
(7) Historical 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. Pursuant to SOP
93-6, only the ESOP shares committed to be released are considered
outstanding for the purposes of the net income per share calculations. All
ESOP shares have been considered outstanding for purposes of computing book
value per share.
(8) "Book value" represents the difference between the stated amounts of the
Bank's assets (generally based on historical cost) 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 Bank'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 -- Deposit Accounts and Loans"
"Regulation" and "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.
28
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO
STOCK CONTRIBUTION
In the event that the Stock Contribution to the Foundation is not made,
RP Financial has estimated that the amount of Common Stock offered for sale in
the Conversion would increase by approximately 893,200 shares and that the
overall market capitalization would increase by $5.0 million, both at the
midpoint of the Estimated Valuation Range as of December 31, 1997. Under such
circumstances, pro forma stockholders' equity of the Holding Company would be
approximately $188.0 million, at the midpoint, which is approximately $6.7
million greater than the pro forma stockholders' equity of the Holding Company
would be if the Stock Contribution is made. In preparing this estimate, it has
been assumed that the pro forma price to book value ratio and pro forma price to
earnings ratio would be approximately the same under both the current appraisal
and the estimate of the value of the Holding Company without the Stock
Contribution at the midpoint of the Estimated Valuation Range. Further, assuming
the midpoint of the Estimated Valuation Range, pro forma stockholders' equity
per share and pro forma net income per share would be substantially the same
with the Stock Contribution as without the Stock Contribution. In this regard,
pro forma stockholders' equity and pro forma net income per share at and for the
period ended December 31, 1997 would be $13.43 and $0.31 respectively, at the
midpoint of the Estimated Valuation Range, assuming no Stock Contribution, and
$13.43 and $0.30, respectively, with the Stock Contribution. The pro forma price
to book value ratio and the pro forma price to earnings ratio at and for the
period ended December 31, 1997 are 74.49% and 24.15x, respectively, at the
midpoint of the Estimated Valuation Range, assuming no Stock Contribution and
are 74.46% and 24.39x, respectively, with the Stock Contribution. There is no
assurance that in the event the Stock Contribution is not made that the
appraisal prepared at that time would conclude that the pro forma market value
of the Holding Company would be the same as that estimated herein.
For comparative purposes only, set forth below are certain pricing
ratios and financial data and ratios, at the minimum, midpoint, maximum and
maximum, as adjusted, of the Estimated Valuation Range, assuming the Conversion
was completed at December 31, 1997.
29
<PAGE>
<TABLE>
<CAPTION>
At the Maximum
At the Minimum At the Midpoint At the Maximum as Adjusted
----------------------- ---------------------- ---------------------- ----------------------
With No With No With No With No
Stock Cont. Stock Cont. Stock Cont. Stock Cont. Stock Cont. Stock Cont. Stock Cont. Stock Cont
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
11,140,777 11,900,000 13,106,796 14,000,000 15,072,816 16,100,000 17,333,738 18,515,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Estimated offering amount ......... $111,408 $119,000 $131,068 $140,000 $150,728 $161,000 $173,337 $185,150
Pro forma market capitalization ... $114,750 $119,000 $135,000 $140,000 $155,250 $161,000 $178,537 $185,150
Total assets ...................... $761,699 $767,361 $778,949 $785,610 $796,199 $803,859 $816,036 $824,846
Total liabilities ................. $597,656 $597,656 $597,656 $597,656 $597,656 $597,656 $597,656 $597,656
Pro forma stockholders' equity .... $164,043 $169,705 $181,293 $187,954 $198,543 $206,203 $218,380 $227,190
Pro forma net income(1) ........... $ 3,547 $ 3,693 $ 3,844 $ 4,017 $ 4,141 $ 4,341 $ 4,484 $ 4,713
Pro forma stockholders' equity
per share ........................ $ 14.30 $ 14.26 $ 13.43 $ 13.43 $ 12.79 $ 12.81 $ 12.23 $ 12.27
Pro forma net income
per share(1) .................... $ 0.33 $ 0.34 $ 0.30 $ 0.31 $ 0.28 $ 0.29 $ 0.26 $ 0.28
Pro Forma Pricing Ratios:
Offering price as a percentage
of pro forma stockholders'
equity per share .............. 69.95% 70.12% 74.46% 74.49% 78.19% 78.08% 81.76% 81.50%
Offering price to pro forma
net income per share(1) ....... 22.47x 22.32x 24.39x 24.15x 26.03x 25.70x 27.65x 27.22x
Market capitalication to assets . 15.07% 15.51% 17.33% 17.82% 19.50% 20.03% 21.88% 22.45%
Pro Forma Financial Ratios:
Return on assets(2) ............ 0.62% 0.64% 0.66% 0.68% 0.69% 0.72% 0.73% 0.76%
Return on stockholders'
equity(2) ..................... 2.88% 2.90% 2.83% 2.85% 2.78% 2.81% 2.74% 2.77%
Stockholders' equity to
assets ........................ 21.54% 22.12% 23.27% 23.92% 24.94% 25.65% 26.76% 27.54%
</TABLE>
- -------------
(1) For the nine month period ended December 31, 1997.
(2) Ratios for the nine month periods have been annualized.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Holding Company has only recently been formed and accordingly has no
results of operations at this time. As a result, the following discussion
principally reflects the operations of the Bank and its subsidiaries. The Bank's
primary market area, with 12 full-service branches and one loan production
office, consists of Columbia, Albany and Rensselaer counties in New York and
portions of Dutchess and Schenectady counties in New York. The Bank has been,
and intends to continue to be, a community-oriented financial institution
offering a variety of financial services. The Bank's principal business is
attracting deposits from customers within its market area and investing those
funds, together with funds from operations and, to a much lesser extent,
borrowings, in primarily residential mortgage loans, including home equity
loans, and to a lesser extent, in manufactured home loans, financed insurance
premiums and other consumer loans, commercial real estate, construction loans
and commercial business loans and government and corporate debt securities. See
"Business of the Bank - Lending Activities." The financial condition and
operating results of the Bank are dependent on its net interest income which is
the difference between the interest income earned on its assets, primarily loans
and investments, and the interest expense on its liabilities, primarily deposits
and borrowings. Net income is also affected by other operating income, such as
loan servicing income and fees on deposit related services, other operating
expenses, such as compensation and occupancy expenses, provisions for loan
losses, and Federal and state income taxes.
The Bank's results of operations are significantly affected by general
economic and competitive conditions (particularly changes in market interest
rates), government policies, changes in accounting standards and actions of
regulatory agencies. Future changes in applicable laws, regulations or
government policies may have a material impact on the Bank. Lending activities
are substantially influenced by the demand for and supply of housing,
competition among lenders, the level of interest rates and the availability of
funds. The ability to gather deposits and the cost of funds are influenced by
prevailing market interest rates, fees and terms on deposit products, as well as
the availability of alternative investments, including mutual funds and stocks.
MARKET RISK AND ASSET/LIABILITY MANAGEMENT
Interest rate risk is the most significant market risk affecting the
Bank. Other types of market risk, such as foreign currency exchange rate risk
and commodity price risk, do not arise in the normal course of the Bank's
business activities.
Interest rate risk is defined as an exposure to a movement in interest
rates that could have an adverse effect on the Bank's net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than earning
assets. When interest-bearing liabilities mature or reprice more quickly than
earning assets in a given period, a significant increase in market rates of
interest could adversely affect net interest
31
<PAGE>
income. Similarly, when earning assets mature or reprice more quickly than
interest-bearing liabilities, falling interest rates could result in a decrease
in net income.
In an attempt to manage its exposure to changes in interest rates,
management monitors the Bank's interest rate risk. Management's asset/liability
committee meets weekly to review the Bank's interest rate risk position and
profitability, and to recommend adjustments for consideration by the Board of
Trustees. Management also reviews loan and deposit pricing, and the Bank's
securities portfolio, formulates investment strategies and oversees the timing
and implementation of transactions. Notwithstanding the Bank's interest rate
risk management activities, the potential for changing interest rates is an
uncertainty that can adversely affect net income.
In adjusting the Bank's asset/liability position, the Board and
management attempt to manage the Bank's interest rate risk while enhancing net
interest margins. At times, depending on the level of general interest rates,
the relationship between long- and short-term interest rates, market conditions
and competitive factors, the Board and management may determine to increase the
Bank's interest rate risk position somewhat in order to increase its net
interest margins. The Bank's results of operations and net portfolio values
remain vulnerable to changes in interest rates and to fluctuations in the
difference between long- and short-term interest rates.
Consistent with the asset/liability management philosophy described
above, the Bank has taken several steps to manage its interest rate risk. First,
the Bank has structured the security portfolio to shorten the maturities of its
earning assets. The Bank's recent purchases of securities have had terms to
maturity of seven years or less. At December 31, 1997, the Bank had securities
with a carrying value of $106.3 million with contractual maturities of five
years or less. Except for approximately $74.5 million of fixed rate products,
the Bank's residential real estate portfolio is composed of either one, three or
five year adjustable rate mortgages or floating-rate home equity loans. The Bank
also manages interest rate risk by emphasizing lower cost, more stable non-time
deposit accounts. In the current low rate environment, longer-term time deposits
are welcomed although not particularly popular with the Bank's customer base.
One approach used to quantify interest rate risk is the net market
value analysis. In essence, this analysis calculates the difference between the
present value of liabilities and the present value of expected cash flows from
assets and off-balance sheet contracts. A second approach is to quantify the
impact on net interest income due to changes in cash flows, interest income and
interest expense resulting from shifts in interest rates. The following tables
set forth, at December 31, 1997, an analysis of the Bank's interest rate risk as
measured by the estimated changes in net market value of its assets and
liabilities and net interest income resulting from instantaneous and sustained
parallel shifts in interest rates (+ or - 200 basis points, measured in 50 basis
point increments).
32
<PAGE>
Net Market Value of Assets and Liabilities
----------------------------------------------------------------
Change in
Interest Rates Net
in Basis Points Market
(Rate Shock) Value $ Change % Change
------------ ----- -------- --------
(Dollars in thousands)
200 89,641 (2,322) (2.52)%
150 90,468 (1,495) (1.63)%
100 91,142 (821) (0.89)%
50 91,636 (327) (0.36)%
0 91,963 0 --
(50) 91,551 (412) (0.45)%
(100) 90,698 (1,265) (1.38)%
(150) 89,938 (2,025) (2.20)%
(200) 89,100 (2,863) (3.11)%
Net Interest Income
----------------------------------------------------------------
Change in
Interest Rates Net
in Basis Points Interest
(Rate Shock) Income $ Change % Change
------------ -------- -------- --------
(Dollars in thousands)
200 26,651 1,111 4.35%
150 26,406 866 3.39%
100 26,136 596 2.33%
50 25,855 315 1.23%
0 25,540 0 --
(50) 25,032 (508) (1.99)%
(100) 24,569 (971) (3.80)%
(150) 24,105 (1,435) (5.62)%
(200) 23,635 (1,905) (7.46)%
Certain assumptions utilized by management in assessing the interest
rate risk of the Bank were employed in preparing data included in the preceding
table. These assumptions were based upon proprietary data selected by management
and are reflective of historical results or current market conditions. These
assumptions relate to interest rates, prepayment rates, deposit decay rates, and
the market values of certain assets under the various interest rate scenarios.
Prepayment assumptions for mortgage backed securities and residential
mortgage loans were based upon industry standards for prepayments. Cash flows of
securities containing call provisions were determined based on what was in the
best interest of the issuer given the respective interest rate scenario. The
Bank's mortgage backed securities, residential mortgages, and callable
securities are the only assets or liabilities which management assumed possess
optionality for purposes of determining market value changes.
Management assumed that the majority of non-maturity deposits had
estimated lives ranging from 0 to 5 years, while only 15.6% of non-maturity
deposits had estimated lives ranging from 5 to 10 years. These assumptions are
based upon management's analysis of its customer base and competitive factors.
The net market value and net interest income tables presented above are
predicated upon a stable balance sheet with no growth or change in asset or
liability mix. In addition, the net market value table is based upon the present
value of discounted cash flows using management's estimates of current
replacement rates to discount the cash flows. The net interest income table is
based upon a cash flow simulation of the Bank's existing assets and liabilities.
It was also assumed that delinquency rates would 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 Bank's assets and liabilities would perform as set forth
above. Also, a change in the US Treasury rates in the designated amounts
accompanied by a change in the shape of the Treasury yield curve would cause
significantly different changes to the net market value and net interest income
other than those indicated above.
The Bank does not currently engage in trading activities or use
derivative instruments to manage interest rate risk. Instruments such as
interest rate swaps, caps and floors may be utilized under certain interest rate
risk scenarios in order to manage interest rate risk. Such activities may
33
<PAGE>
be permitted with the approval of the Board of Trustees, and management
continually evaluates the usefulness of such instruments in managing interest
rate risk.
Analysis of Net Interest Income
The following table sets forth the Bank's average consolidated balance
sheets, interest income and expense, average yields and costs, and certain other
information for the periods noted.
34
<PAGE>
The following table presents, for the periods indicated, the total
dollar amount of interest and dividend income from average 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. Management believes that the use of average monthly balances instead
of average daily balances does not have a material effect on the information
presented. Non-accruing loans have been included in the loan balances.
<TABLE>
<CAPTION>
Nine Months Ended December 31, Year Ended March 31,
--------------------------------------------------------------- ---------------------------------
1997 1996 1997
--------------------------------- ---------------------------- ---------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1) Balance Paid Rate
------- ---- ------- ------- ---- ------- ------- ---- ----
(Dollars in Thousands)
Earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold ............ $ 4,710 $ 202 5.69% $ 2,121 $ 87 5.44% $ 1,638 $ 89 5.43%
Securities available for sale . 39,703 1,960 6.55 55,729 2,879 6.86 53,445 3,658 6.84
Investment securities ......... 72,208 3,565 6.55 84,428 4,063 6.39 83,343 5,385 6.46
Federal Home Loan Bank of
NY stock .................... 2,812 151 7.13 2,565 124 6.42 2,575 164 6.37
Loans receivable .............. 509,634 35,575 9.27 465,883 32,220 9.18 471,295 43,585 9.25
------- ------ ---- ------- ------ ---- ------- ------ ----
Total earning assets ....... 629,067 41,453 8.75 610,726 39,373 8.56 612,296 52,881 8.64
------ ---- ------ ---- ------ ----
Cash and due from banks ....... 11,048 7,602 6,860
Allowance for loan losses ..... (6,953) (3,656) (3,886)
Other non-earning assets ...... 26,945 25,342 25,597
------ ------ ------
Total assets ............. 660,107 640,014 640,867
======= ======= =======
Interest-Bearing Liabilities:
Savings accounts .............. 137,841 3,584 3.45 132,886 3,388 3.38 133,209 4,523 3.40
N.O.W. and money market
accounts .................... 94,247 2,178 3.07 95,046 2,144 2.99 93,972 2,831 3.01
Time deposit accounts ......... 310,499 13,513 5.78 307,259 13,342 5.76 307,757 17,727 5.76
Escrow accounts ............... 5,088 89 2.32 5,198 87 2.22 4,579 106 2.31
Other borrowings .............. 4,266 176 5.48 3,303 130 5.22 4,459 239 5.36
----- --- ---- ----- --- ---- ----- --- ----
Total interest-bearing
liabilities ................ 551,941 19,540 4.70 543,692 19,091 4.66 543,976 25,426 4.67
------ ---- ------ ---- ------ ----
Non-interest-bearing
deposits ...................... 35,638 28,270 27,984
Other non-interest
bearing liabilities .......... 5,106 5,440 5,585
Equity ......................... 67,422 62,612 63,322
------ ------ ------
Total liabilities and
equity ..................... $ 660,107 $640,014 $640,867
========= ======== ========
Net interest income ............ $ 21,913 $ 20,282 27,455
========= ======== ======
Net interest rate spread........ 4.05% 3.90% 3.97%
==== ==== ====
Net interest margin............. 4.62% 4.41% 4.48%
==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1996 1995
------------------------------- ---------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Earning Assets:
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold ............ $4,908 $ 271 5.52% $7,206 $ 344 4.77%
Securities available for sale . 26,889 1,782 6.63 12,307 917 7.45
Investment securities ......... 92,243 6,062 6.57 94,001 6,503 6.92
Federal Home Loan Bank of
NY stock .................... 2,578 187 7.25 2,064 160 7.75
Loans receivable .............. 444,645 40,780 9.17 424,187 35,135 8.28
------- ------ ---- ------- ------ ----
Total earning assets ....... 571,263 49,082 8.59 539,765 43,059 7.98
------ ---- ------ ----
Cash and due from banks ....... 6,386 6,740
Allowance for loan losses ..... (3,304) (2,931)
Other non-earning assets ...... 23,090 22,869
------ ------
Total assets ............. 597,435 566,443
======= =======
Interest-Bearing Liabilities:
Savings accounts .............. 129,281 4,275 3.31 167,284 5,501 3.29
N.O.W. and money market
accounts .................... 93,813 2,932 3.13 97,131 2,769 2.85
Time deposit accounts ......... 283,149 16,713 5.90 219,008 10,796 4.93
Escrow accounts ............... 5,460 124 2.27 6,360 142 2.23
Other borrowings .............. 745 42 5.64 2,145 101 4.71
--- -- ---- ----- --- ----
Total interest-bearing
liabilities ................ 512,448 24,086 4.70 491,928 19,309 3.93
------ ---- ------ ----
Non-interest-bearing
deposits ...................... 24,096 21,021
Other non-interest
bearing liabilities .......... 4,630 3,983
Equity ......................... 56,261 49,511
------ ------
Total liabilities and
equity ..................... $597,435 $566,443
======== ========
Net interest income ............ $24,996 $ 23,750
======= ========
Net interest rate spread....... 3.89% 4.05%
==== ====
Net interest margin............ 4.38% 4.40%
==== ====
</TABLE>
- ------------------------
(1) Annualized
35
<PAGE>
The following schedule presents the dollar amount of changes in
interest and dividend income and interest expense for major components of
earning assets and interest-bearing liabilities. For each category of 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>
Nine Months Ended
December 31, Years Ended March 31, Years Ended March 31,
1997 vs. 1996 1997 vs. 1996 1996 vs. 1995
------------------------------ ------------------------------ ------------------------------
Increase Increase Increase
(Decrease) (Decrease) (Decrease)
Due to Total Due to Total Due to Total
----------------- Increase ------------------ Increase ----------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ---------- ------ ---- ----------
(Dollars in Thousands)
Interest and dividend income:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold ............. $ 111 $ 4 $ 115 $ (178) $ (4) $ (182) $ (121) $ 48 $ (73)
Securities available for
sale ......................... (796) (123) (919) 1,816 60 1,876 977 (112) 865
Investment securities .......... (601) 103 (498) (577) (100) (677) (120) (321) (441)
Federal Home Loan Bank
of NY stock .................. 13 14 27 -- (23) (23) 38 (11) 27
Loans receivable ............... 3,051 304 3,355 2,462 343 2,805 1,751 3,894 5,645
------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest and
dividend income ............ 1,778 302 2,080 3,523 276 3,799 2,525 3,498 6,023
------- ------- ------- ------- ------- ------- ------- ------- -------
Interest expense:
Savings accounts ................ 128 68 196 132 116 248 (1,256) 30 (1,226)
N.O.W. and money
market accounts .............. (18) 52 34 5 (106) (101) (97) 260 163
Time deposit accounts ........... 141 30 171 1,425 (411) 1,014 3,535 2,382 5,917
Escrow accounts ................. (2) 4 2 (20) 2 (18) (20) 2 (18)
Other borrowings ................ 39 7 46 199 (2) 197 (76) 17 (59)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest expense ....... 288 161 449 1,741 (401) 1,340 2,086 2,691 4,777
------- ------- ------- ------- ------- ------- ------- ------- -------
Net interest income ............. $ 1,490 $ 141 $ 1,631 $ 1,782 $ 677 $ 2,459 $ 439 $ 807 $ 1,246
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
36
<PAGE>
OPERATING RESULTS
Comparison of nine months ended December 31, 1997 and nine months ended December
31, 1996
Net income for the nine months ended December 31, 1997 was $1.9
million, down $3.0 million from the $4.9 million earned during the nine months
ended December 31, 1996. This decrease was primarily a result of a higher
provision for loan losses (up $4.6 million) and higher other operating expenses
(up $2.4 million). These increased expenses were partially offset by increased
net interest income (up $1.6 million), increased other operating income (up $529
thousand) and lower income tax expense (down $1.8 million). The Bank's return on
average assets (ROA) was .38% for the nine months ended December 31, 1997, down
from 1.01% for the same period in 1996. The Bank's return on average equity
(ROE) was also lower, 3.71% for the nine months ended December 31, 1997 down
from 10.36% for the nine months ended December 31, 1996.
Net Interest Income. Net interest income for the nine months ended
December 31, 1997 was $21.9 million, up $1.6 million versus the nine months
ended December 31, 1996. The increase was primarily the result of an increase in
average earning assets from $610.7 million for the nine months ended December
31, 1996 to $629.1 million for the same period in 1997. Interest-bearing
liabilities also increased during this same period, up $8.2 million to $551.9
million for the nine months ended December 31, 1997. The impact of these volume
increases resulted in an increase in net interest income of $1.5 million. The
remaining $141 thousand increase in net interest income is the result of
slightly higher interest rates. The Bank's net interest margin for the nine
months ended December 31, 1997 was 4.62%, up from 4.41% for the nine months
ended December 31, 1996. The yield on average earning assets increased from
8.56% to 8.75%, while the rate paid on interest-bearing liabilities increased
slightly from 4.66% to 4.70%.
Interest Income. Interest income for the nine months ended December 31,
1997 was $41.5 million, up from $39.4 million for the comparable period in 1996.
The largest component of interest income, as well as the increase from 1996 to
1997, is interest on loans. Interest on loans increased from $32.2 million for
the nine months ended December 31, 1996 to $35.6 million for the nine months
ended December 31, 1997. This increase of $3.4 million is the result of both
volume increases and rate increases. The average balance of loans increased
$43.8 million, while the yield on loans increased from 9.18% to 9.27%. The
increase in interest on loans was offset by decreases in interest on securities
available for sale and investment securities. Interest income on these
categories of earning assets decreased $919 thousand and $498 thousand,
respectively. Substantially all of the decreases in interest income on these
assets are attributed to reductions in volume. The average balance of securities
available for sale decreased from $55.7 million for the nine months ended
December 31, 1996 to $39.7 million for the nine months ended December 31, 1997.
This decrease in volume resulted in a decrease in interest income of $796
thousand. The average balance of investment securities decreased from $84.4
million in 1996 to $72.2 million in 1997, resulting in a $601 thousand decrease
in interest income due to volume. Management expects the average balance of
investment securities to continue to decrease as new purchases of securities are
generally classified as securities available for sale. The changes in rates on
securities available for sale and
37
<PAGE>
investment securities, as well as the changes in volume and rate on other
categories of interest earning assets was not significant.
Interest Expense. Interest expense increased slightly during the nine
months ended December 31, 1997 to $19.5 million up from $19.1 million for the
comparable period in 1996. Substantially all of the Bank's interest expense is
from the Bank's interest-bearing deposits. The largest category of
interest-bearing deposits is time deposits. Interest on time deposits for the
nine months ended December 31, 1997 was $13.5 million, up from $13.3 million in
1996. Most of this increase is attributable to an increase in the average
balance of time deposits, from $307.3 million in 1996 to $310.5 million in 1997.
Interest expense on savings accounts increased $196 thousand, from $3.4 million
for the nine months ended December 31, 1996 to $3.6 million for the nine months
ended December 31, 1997. This increase is attributed to an increase in the
average balance of savings accounts (up $5.0 million) as well as an increase of
7 basis points in the rates paid on these savings accounts, from 3.38% to 3.45%.
Interest expense on NOW/Money Market accounts was relatively flat, increasing
only $34 thousand from 1996 to 1997. Fluctuations in interest expense on other
categories of interest-bearing liabilities were not significant.
Provision for Loan Losses. The provision for loan losses increased from
$1.9 million in the nine months ended December 31, 1996 to $6.4 million in the
nine months ended December 31, 1997. This increase is primarily the result of
increases in net charge-offs from $1.2 million for the nine months ended
December 31, 1996 to $5.5 million for the nine months ended December 31, 1997,
largely due to one large lending relationship. This increase in net charge-offs
combined with continued growth in the higher risk elements of the Bank's loan
portfolio, continued economic weaknesses in the Bank's market area, declining
real estate values securing much of the loan portfolio as well as management's
evaluation of the prospects for its market area resulted in the increase in the
provision charged during the nine months ended December 31, 1997. Although the
Bank anticipates that the provision for loan losses will continue at current
levels through at least fiscal 1999, there can be no assurance that such losses
will not exceed estimated amounts or that the provision for loan losses will not
increase in future periods. See "Business of the Bank - Asset Quality -
Allowance for Loan Losses."
Other Operating Income. Total other operating income increased $529
thousand for the nine months ended December 31, 1997 as compared to the same
period in 1996. Other operating income is composed primarily of service charges
on deposit accounts and loan servicing income. Income from service charges on
deposits accounts increased from $815 thousand for the nine months ended
December 31, 1996 to $840 thousand for the nine months ended December 31, 1997.
This increase is attributed to the overall increase in the Bank's deposit
accounts during this time period. Loan servicing income decreased $49 thousand
from $402 thousand in the nine months ended December 31, 1996 to $353 thousand
in the nine months ended December 31, 1997. This decrease relates to the
termination of an agreement to service financed insurance premiums for an
unaffiliated premium finance company and the runoff of the corresponding
servicing portfolio. The servicing agreement was terminated due to the financial
difficulties and ultimate liquidation of the unaffiliated premium finance
company. Other income was $646 thousand for the nine months ended December 31,
1997, up from $121 thousand for the same period in 1996. A portion of this
increase is the result of a partial recovery of previous writedowns of the
Bank's investment in Nationar, a New York chartered
38
<PAGE>
institution that HCSI utilized for certain correspondent banking services prior
to its takeover and liquidation by the State Banking Department in 1995. A large
portion of the remaining increase resulted from the income generated by the
Bank's mortgage brokerage subsidiary, Hudson River Mortgage Company. This
subsidiary generates fee income on loan applications, which applications are
received and forwarded to independent third parties. Loan applications on
products not currently offered by the Bank or on credits which do not meet the
Bank's minimum credit standards are forwarded to other institutions, resulting
in brokerage fee income. Fluctuations in other categories of other operating
income were not significant.
Other Operating Expenses. Total other operating expenses increased $2.4
million to $14.2 million for the nine months ended December 31, 1997, up from
$11.8 million for the comparable period in 1996. Increases in compensation and
benefits ($549 thousand), equipment ($372 thousand), legal and other
professional fees ($529 thousand), and other expenses ($685 thousand) were the
primary contributors to the overall increase.
The increase in compensation and benefits is the result of establishing
a new branch in May 1997 in Hillsdale, New York, the increase in staff
necessitated by the Bank's acquisition (through its premium finance subsidiary)
of the customer list of an unaffiliated premium finance company and the related
sub-servicing agreement with this company, as well as general merit increases
for the Bank's employees during the nine months ended December 31, 1997.
The increase in equipment expenses is directly attributed to the
acquisition and integration of a new mainframe data processing system in
November 1996, as well as the addition of the new branch as referenced above.
The Bank's new data processing system resulted in increased depreciation and
maintenance expense during the nine months ended December 31, 1997. The Bank
anticipates that improvements in the products and services offered to its
customers as well the increased efficiencies the new system provides will
generally offset the increased expenses associated with this acquisition.
The increase in legal and other professional fees are the result of
several factors. During the nine months ended December 31, 1997, the Bank
considered several acquisition opportunities. Although only the aforementioned
acquisition of the customer list of an unaffiliated premium finance company was
consummated, legal and accounting expenses associated with considering these
opportunities resulted in higher expenses in 1997. In addition, the Bank hired
various consulting firms during the nine months ended December 31, 1997. These
firms assisted management in addressing certain strategic and organizational
issues as well as operational issues of the Bank.
The increase in other expenses is the result of increased goodwill
amortization from the previously mentioned acquisition of a premium finance
customer list, expenses relating to the consideration of various funding
alternatives relating to the Bank's premium finance subsidiary, a one-time
charge relating to a reduction of an asset deemed uncollectible, increases in
advertising, telephone and supplies relating to the Bank's new branch and
general increases in expenses relating to the servicing and collection of
nonperforming and other delinquent loans. The remaining categories of other
expenses and other operating expenses did not experience significant
fluctuations.
39
<PAGE>
Income Tax Expense. Income tax expense decreased from $3.1 million for
the nine months ended December 31, 1996 to $1.3 million for the comparable
period in 1997. The reduction is primarily the result of less income before
income tax expense; $3.2 million in 1997 as compared to $8.0 million in 1996.
The effect of reduced income before income tax expense was partially offset by
an increase in the Bank's effective tax rate due primarily to less tax-exempt
income and the effect of state taxes.
Comparison of year ended March 31, 1997 and year ended March 31, 1996
Net income for the year ended March 31, 1997 was $5.7 million, down
from $7.0 million for the year ended March 31, 1996. The provision for loan
losses increased $2.7 million and other operating expenses increased $2.0
million for the year ended March 31, 1997 as compared to the year previous.
These increases were offset in part by higher net interest income (up $2.5
million), increased other operating income (up $190 thousand), and lower income
tax expense (down $691 thousand). The Bank's ROA declined from 1.18% for the
year ended March 31, 1996 to .88% for the year ended March 31, 1997. The Bank's
ROE declined from 12.52% for the year ended March 31, 1996 to 8.94% for the year
ended March 31, 1997.
Net Interest Income. Net interest income for the year ended March 31,
1997 was $27.5 million, up $2.5 million versus the year ended March 31, 1996.
The increase was primarily the result of the increase of $41.0 million in
average earning assets from $571.3 million for the year ended March 31, 1996 to
$612.3 million for the same period in 1997. Interest-bearing liabilities also
increased during this same period, up $31.5 million. The net impact of these
volume increases resulted in an increase in net interest income of $1.8 million.
The remaining $677 thousand increase in net interest income is the result of
higher yields earned on interest earning assets and lower rates paid on interest
bearing liabilities. The Bank's net interest margin for the year ended March 31,
1997 was 4.48%, up 10 basis points from 4.38% for the year ended March 31, 1996.
The yield on average earning assets increased from 8.59% to 8.64%, while the
rate paid on average interest-bearing liabilities decreased slightly from 4.70%
to 4.67%.
Interest Income. Interest income for the year ended March 31, 1997 was
$52.9 million, up from $49.1 million for the comparable period in 1996. The
largest component of interest income, as well as the increase from 1996 to 1997,
is interest on loans. Interest on loans increased from $40.8 million for the
year ended March 31, 1996 to $43.6 million for the year ended March 31, 1997.
This increase of $2.8 million is primarily the result of volume increases. The
average balance of loans increased $26.7 million to $471.3 million, while the
yield on loans increased 8 basis points from 9.17% to 9.25%. The increase in
interest on loans was complemented by an increase in interest on securities
available for sale, offset by a decrease in interest on investment securities.
Interest income on securities available for sale increased $1.9 million while
interest income on investment securities fell $677 thousand. Substantially all
of the increases in interest income on securities available for sale are
attributed to higher volume. The average balance of securities available for
sale increased from $26.9 million for the year ended March 31, 1996 to $53.4
million for the year ended March 31, 1997. This increase in volume resulted in
an increase in interest income of $l.8 million. The average balance of
investment securities decreased from $92.2 million in 1996 to $83.3 million in
1997, resulting in a $577 thousand decrease in interest income due to volume.
The changes in
40
<PAGE>
rates on securities available for sale and investment securities account for the
remainder of the fluctuations in interest income on these asset categories. The
changes in volume and rate on other categories of interest earning assets were
not significant.
Interest Expense. Interest expense increased during the year ended
March 31, 1997 to $25.4 million, up from $24.1 million for the comparable period
in 1996. Substantially all of the Bank's interest expense is from the Bank's
interest-bearing deposits. The largest category of interest-bearing deposits is
time deposits. Interest on time deposits for the year ended March 31, 1997 was
$17.7 million, up $1.0 million from the $16.7 million in 1996. This increase is
the result of an increase in the average balance of time deposits, from $283.1
million in 1996 to $307.8 million in 1997, offset by a reduction of 14 basis
points in the rates paid on these deposits from 5.90% in 1996 to 5.76% in 1997.
Interest expense on savings accounts increased $248 thousand, from $4.3 million
for the year ended March 31, 1996 to $4.5 million for the year ended March 31,
1997. This increase is attributable to an increase in the average balance of
savings accounts (up $3.9 million) as well as an increase of 9 basis points in
the rates paid on these savings accounts, from 3.31% to 3.40%. Interest expense
on NOW/Money Market accounts was relatively flat, decreasing $101 thousand from
1996 to 1997, almost entirely attributed to lower interest rates. Fluctuations
in interest expense on other categories of interest-bearing liabilities were not
significant.
Provision for Loan Losses. The provision for loan losses increased from
$1.1 million in the year ended March 31, 1996 to $3.8 million in the year ended
March 31, 1997. This increase is primarily the result of increases in net
charge-offs from $774 thousand for the year ended March 31, 1996 to $1.5 million
for the year ended March 31, 1997. In addition, the increase of $9.1 million, or
84%, in nonperforming loans from $10.9 million to $20.0 million, necessitated
the increase in the provision during the year ended March 31, 1997. The increase
in net charge offs combined with the continued growth in the higher risk
elements of the loan portfolio, continued economic weaknesses in the Bank's
market area, declining real estate values securing much of the loan portfolio as
well as management's evaluation of the prospects for its market area resulted in
the increase in the provision. See "Business of the Bank - Asset Quality -
Allowance for Loan Losses".
Other Operating Income. Total other operating income increased $190
thousand for the year ended March 31, 1997 as compared to the same period in
1996. Income from service charges on deposits accounts increased only slightly
to $1.1 million for the year ended March 31, 1997, from $1.0 million for the
year ended March 31, 1996. Loan servicing income increased $208 thousand from
$272 thousand in the year ended March 31, 1996 to $480 thousand in the year
ended March 31, 1997. This increase relates to the existence for a full year of
an agreement to service financed insurance premiums for an unaffiliated premium
finance company. As noted previously, the servicing agreement was terminated.
Fluctuations in other categories of other operating income were not significant.
Other Operating Expenses. Total other operating expenses increased $2.0
million to $16.2 million for the year ended March 31, 1997, up from $14.2
million for the comparable period in 1996. Increases in compensation and
benefits ($1.1 million), occupancy ($101 thousand), equipment ($173 thousand),
and other expenses ($709 thousand) were the primary contributors to the overall
increase, offset by a decrease in the FDIC assessment of $272 thousand.
41
<PAGE>
The increase in compensation and benefits is the result of establishing
two new branches, located in East Greenbush and Rotterdam, New York, in January
1996, the increase in staff associated with the growth of the Bank's premium
finance subsidiary, the establishment of the Bank's mortgage brokerage
subsidiary in July 1996, as well as general merit increases for the Bank's
employees during the year ended March 31, 1997.
The increases in occupancy and equipment expenses are attributed to the
addition of the two new branches and the mortgage brokerage subsidiary as
referenced above. Management believes that adding these new outlets for the
services offered by the Bank is an important investment and a strong commitment
to our customer base.
The increase in other expenses is the result of general increases in
printing and supplies, and telephone expenses related to the two new branches
and the mortgage brokerage subsidiary, expenses relating to the investigation of
financing alternatives at the Bank's premium finance subsidiary, increased
marketing expenses at the Bank's premium finance subsidiary and general
increases in expenses relating to the servicing and collection of nonperforming
and other delinquent loans. The increases in these expense items offset a
decrease in fiscal 1997 expense relating to the write down during fiscal 1996 of
the Bank's investment in Nationar. The remaining categories of other expenses
and other operating expenses did not experience significant fluctuations.
Income Tax Expense. Income tax expense decreased from $4.3 million for
the year ended March 31, 1996 to $3.6 million for the comparable period in 1997.
The reduction is primarily the result of less income before income tax expense,
$9.3 million in 1997 as compared to $11.3 million in 1996.
Comparison of year ended March 31, 1996 and year ended March 31, 1995
Net income for the year ended March 31, 1996 was up $1.1 million from
the $6.0 million earned for year ended March 31, 1995. This increase was
primarily the result of higher net interest income and lower operating expenses,
offset by higher income tax expense during the year ended March 31, 1996. The
provision for loan losses was relatively flat between the two years as was other
operating income. The increased net income contributed to an increase in the
Bank's ROA, 1.18% for the year ended March 31, 1996, up from 1.05% for the year
previous. The Bank's ROE was also higher for the year ended March 31, 1996 at
12.52%, up from 12.06% for the year ended March 31, 1995.
Net Interest Income. Net interest income for the year ended March 31,
1996 was $25.0 million, up $1.2 million versus the year ended March 31, 1995.
The increase was primarily the result of the increase of $31.5 million in
average earning assets from $539.8 million for the year ended March 31, 1995 to
$571.3 million for the same period in 1996. Interest-bearing liabilities also
increased during this same period, up $20.5 million. The net impact of these
volume increases resulted in an increase in net interest income of $439
thousand. The remaining $807 thousand increase in net interest income is the
result of generally higher interest rates. The effects of the 61 basis point
increase in the rates earned on earning assets from 7.98% in 1995 to 8.59% in
1996 more than offset the effects of the 77 basis point increase in the rates
paid on interest-bearing liabilities,
42
<PAGE>
from 3.93% in 1995 to 4.70% in 1996. The Bank's net interest margin for the year
ended March 31, 1996 was 4.38%, virtually unchanged from 4.40% for the year
ended March 31, 1995.
Interest Income. Interest income for the year ended March 31, 1996, was
$49.1 million, up from $43.1 million for the comparable period in 1995. The
largest component of interest income, as well as the increase from 1995 to 1996,
is interest on loans. Interest on loans increased from $35.1 million for the
year ended March 31, 1995 to $40.8 million for the year ended March 31, 1996. Of
the $5.6 million increase, rate increases accounted for $3.9 million, and volume
increases accounted for the remainder. The average balance of loans increased
$20.5 million to $444.6 million, while the yield on loans increased 89 basis
points from 8.28% to 9.17%. This increase in the yield earned on loans was
driven by increases in the balances of the higher yielding components of the
loan portfolio. See "Business of the Bank - Consumer Lending". The increase in
interest on loans was complemented by an increase in interest on securities
available for sale, offset by a decrease in interest on investment securities.
Interest income on securities available for sale increased $865 thousand while
interest income on investment securities fell $441 thousand. Substantially all
of the increases in interest income on securities available for sale are
attributed to higher volume. The average balance of securities available for
sale increased from $12.3 million for the year ended March 31, 1995 to $26.9
million for the year ended March 31, 1996. This increase in volume resulted in
an increase in interest income of $977 thousand. This increase was offset by a
decrease in the yield on securities available for sale of 82 basis points,
resulting in a reduction of interest income on securities available for sale due
to rate of $112 thousand. The average balance of investment securities decreased
from $94.0 million in 1995 to $92.2 million in 1996, resulting in a $120
thousand decrease in interest income. A decrease in the rate on investment
securities from 6.92% in the year ended March 31, 1995 to 6.57% in the year
ended March 31, 1996 resulted in a reduction of interest income on investment
securities of $321 thousand. The changes in volume and rate on other categories
of interest earning assets were not significant.
Interest Expense. Interest expense increased during the year ended
March 31, 1996 to $24.1 million, up from $19.3 million for the comparable period
in 1995. Substantially all of the Bank's interest expense is from the Bank's
interest-bearing deposits. The largest category of interest-bearing deposits is
time deposits. Interest on time deposits for the year ended March 31, 1996 was
$16.7 million, up $5.9 million from the $10.8 million in 1995. This increase is
the result of an increase in the average balance of time deposits, from $219.0
million in 1995 to $283.1 million in 1996, combined with an increase of 97 basis
points in the rates paid on these deposits from 4.93% in 1995 to 5.90% in 1996.
Interest expense on savings accounts decreased $l.2 million, from $5.5 million
for the year ended March 31, 1995 to $4.3 million for the year ended March 31,
1996. This decrease is attributable to a decrease in the average balance of
savings accounts (down $38.0 million) offset by an increase of 2 basis points in
the rates paid on these savings accounts, from 3.29% to 3.31%. The decrease in
savings accounts is attributable to customers seeking higher yielding investment
alternatives. Interest expense on NOW/Money Market accounts increased $163
thousand from 1995 to 1996, almost entirely attributed to higher interest rates.
Fluctuations in interest expense on other categories of interest-bearing
liabilities were not significant.
Provision for Loan Losses. The provision for loan losses of $1.1
million for the year ended March 31, 1996 remained level with the $1.2 million
provision in the year ended March 31, 1995.
43
<PAGE>
This level of provision is attributed to the slight decline in net charge-offs
from $899 thousand for the year ended March 31, 1995 to $774 thousand for the
year ended March 31, 1996.
Other Operating Income. Total other operating income for the year ended
March 31, 1996 was $1.6 million, an increase of $103 thousand over the $1.5
million for the same period in 1995. Other operating income is composed
primarily of service charges on deposit accounts ($1.0 million for each of the
years ended March 31, 1996 and 1995) and loan servicing income (approximately
$270 thousand for each of the years ended March 31, 1996 and 1995). There were
no significant fluctuations in other categories of other operating income.
Other Operating Expenses. Total other operating expenses decreased $1.0
million to $14.2 million for the year ended March 31, 1996, down from $15.2
million for the comparable period in 1995. An increase in compensation and
benefits ($631 thousand) was offset by decreases in the FDIC assessment ($871
thousand), and OREO and repossessed property expenses ($503 thousand).
The increase in compensation and benefits is the result of adding 2 new
branches (the Bank's Greenport Price Chopper and Millerton, New York locations
in June and August 1994, respectively) the increase in staff associated with the
growth of the Bank's premium finance subsidiary, as well as general merit
increases to the Bank's employees during the year ended March 31, 1996.
The decrease in the FDIC assessment is the result of legislation which
mandated a reduction in insurance rates when the Bank Insurance Fund achieved a
1.25% reserve ratio. That target was reached in May 1995, resulting in reduced
premiums for the September 1995 and December 1995 quarters as well as a refund
of premiums for the June 1995 quarter. The reduced premium level continued
through the remainder of the year ended March 31, 1996.
The decrease in OREO and repossessed property expenses during the year
ended March 31, 1996 as compared to the year ended March 31, 1995 is the result
of increased gains on sale of these properties during 1996, offset by slightly
higher writedowns to fair value of OREO and repossessed property during this
time period.
Income Tax Expense. Income tax expense increased from $2.9 million for
the year ended March 31, 1995 to $4.3 million for the comparable period in 1996.
The increase is the result of more income before income tax expense, $11.3
million in 1996 as compared to $8.9 million in 1995 as well as a reduction in
the Bank's deferred tax asset valuation allowance of $248 thousand and higher
tax-exempt income during the year ended March 31, 1995.
FINANCIAL CONDITION
Comparison of December 31, 1997 and March 31, 1997
Total assets at December 31, 1997 stood at $665.1 million, up $14.0
million, or 2.2% from the $651.0 million at March 31, 1997. Most of the increase
was concentrated in the loan portfolio, which increased $18.9 million, ending
December 31, 1997 at $511.9 million. This growth in loans
44
<PAGE>
was funded by an increase in deposits from $564.6 million on March 31, 1997 to
$586.2 at December 31, 1997.
Loans. The overall increase in total loans is primarily made up of
increases in residential real estate, commercial real estate, manufactured home
loans, and warehouse lines, offset by a decrease in commercial business loans.
Although total residential real estate increased $4.0 million, the level of
total residential real estate, as a percentage of total loans, remained
relatively flat at 54.3%, down slightly from 55.6%. The growth in this portfolio
is primarily a result of the Bank's decision to retain in its portfolio a
limited amount of 15 to 20 year fixed rate residential real estate loans at a
time when adjustable rate loans are less popular. Commercial real estate
increased from $67.7 million at March 31, 1997, or 13.7% of total loans, to
$73.9 million or 14.4% of total loans at December 31, 1997.
Manufactured home loans increased $5.7 million from $92.7 million at
March 31, 1997 to $98.3 million at December 31, 1997. The Bank utilizes a third
party institution to forward mobile home loan applications to the Bank for
underwriting and approval. In exchange for these loan referrals and other
specified activities, the Bank pays the third party institution a premium that
is capitalized and amortized over the estimated life of the loan originated. The
warehouse line of credit represents a relationship with a mortgage broker in the
Capital District area in which loans are funded via draws on the outstanding
line. The line is repaid upon ultimate sale of the loan to unrelated third
parties. The balance at December 31, 1997 was $7.1 million, up from $3.6 million
at March 31, 1997. Commercial loans decreased $2.2 million to a balance of $13.9
million at December 31, 1997 from $16.1 million at March 31, 1997. Most of this
decrease relates to a large lending relationship that was charged off during
December 1997.
Allowance for Loan Losses. The allowance for loan losses increased from
$5.9 million at March 31, 1997 to $6.8 million at December 31, 1997, an increase
of $884 thousand. This increase is the result of the $6.4 million provision for
loan losses taken in the nine months ended December 31, 1997 offset by $5.5
million in net charge offs for the same period. The adequacy of the allowance
for loan losses is evaluated monthly by management based upon a review of
significant loans, with particular emphasis on nonperforming and delinquent
loans that management believes warrant special attention. At December 31, 1997
the allowance for loan losses provided coverage of 41.2% of total nonperforming
loans, up from 29.4% at March 31, 1997. The balance of the allowance is
maintained at a level which is, in management's judgment, representative of the
amount of risk inherent in the loan portfolio. See "Business of the Bank - Asset
Quality - Allowance for Loan Losses."
Securities Available for Sale and Investment Securities. The balances
of securities available for sale and investment securities (collectively
"securities") decreased from $45.6 million and $79.1 million, respectively, at
March 31, 1997 to $43.3 million and $71.2 million, respectively, as of December
31, 1997. These decreases were driven by maturities and calls of these
securities totaling $31.8 million during the nine months ended December 31,
1997, offset by purchases of securities totaling $21.0 million. Management's
intention is to continue allowing investment securities to mature and paydown
with the reinvestment of the proceeds primarily in the securities available for
sale or loan portfolios. During the nine months ended December 31, 1997, loan
demand was higher.
45
<PAGE>
The proceeds were reinvested in loans and used to pay down short-term
borrowings, resulting in an overall decrease in securities during this time
period.
Premises and Equipment. The balance of premises and equipment increased
from $15.0 million at March 31, 1997 to $15.8 million at December 31, 1997. This
increase was a result of approximately $1.7 million in expenditures relating to
a new addition to the Bank's main office building to accommodate current and
future growth, as well as the relocation of the Bank's Warren Street, Hudson
branch to the first floor of the Bank's main office building. This relocation
occurred on January 5, 1998. During the month of January 1998, the former branch
building at Warren Street was sold resulting in a gain of approximately $450
thousand.
OREO and Repossessed Property. The balance of OREO and repossessed
property decreased from $3.4 million at March 31, 1997 to $l.1 million at
December 31, 1997, a decrease of approximately $2.4 million. The majority of
this decrease relates to the sale in November 1997 of the Bank's largest OREO
property that had a balance of $2.4 million at March 31, 1997.
Other Assets. The balance of other assets increased $2.6 million from
$2.6 million at March 31, 1997 to $5.1 million at December 31, 1997. This
increase is almost entirely a result of increases in the Bank's net deferred tax
asset and the amount of prepaid taxes resulting from the timing of the Bank's
estimated tax payments for Federal and state income taxes.
Deposits. Total deposits increased $21.6 million, or 3.8%, from $564.6
million at March 31, 1997 to $586.2 million at December 31, 1997. Of this total
increase, time deposits increased $7.9 million (2.6%), savings accounts
increased $4.4 million (3.2%), NOW/Money market accounts increased $1.7 million
(1.8%), and non-interest bearing accounts increased $7.7 million (26.7%). During
the nine months ended December 31, 1997, the Bank had a special 18-month CD
campaign centered on the Bank's supermarket branches to celebrate the opening of
its new Hillsdale branch. The addition of this branch, the CD campaign, as well
as general seasonal fluctuations have resulted in the increases noted above.
Short-term Borrowings. The balance of short-term borrowings decreased
$10.6 million from $12.6 million at March 31, 1997 to $2.0 million at December
31, 1997. This decrease was driven by the proceeds generated by the maturities
and calls of our securities portfolios as detailed above as well as the growth
in the deposit balances.
UDAG Payable. The balance of the Urban Development Action Grant
("UDAG") payable, which stood at $835 thousand at March 31, 1997, was satisfied
in September 1997. The UDAG payable was a loan received from a local economic
development agency during the original construction of the main office building
in the early 1990's. This loan, which was to be repaid at the end of calendar
year 2000, was repaid early in order to provide the economic development agency
with the funds available to spur further economic growth in the City of Hudson,
New York.
46
<PAGE>
Comparison of March 31, 1997 and March 31, 1996
Total assets at March 31, 1997 stood at $651.0 million, up $27.8
million, or 4.5%, from $623.2 million at March 31, 1996. Most of the increase
was concentrated in the loan portfolio which increased $42.3 million, ending
March 31, 1997 at $493.0 million, partially offset by a reduction in securities
(securities available for sale and investment securities) of $9.7 million. This
growth in loans was funded by an increase of $9.4 million in deposits from
$555.2 million on March 31, 1996 to $564.6 at March 31, 1997, as well as an
increase in short-term borrowings of $12.6 million. These increases as well as
fluctuations in other asset and liability categories are discussed below.
Loans. The overall increase in total loans is primarily made up of
increases in residential real estate, manufactured home loans, and financed
insurance premium loans, offset by decreases in the Bank's warehouse line of
credit, commercial real estate and commercial business loans. Total residential
real estate increased $32.9 million, or 13.7%, which increased the level of
total residential real estate as a percentage of total loans from 53.5% at March
31, 1996 to 55.6% at March 31, 1997. The growth in this portfolio is primarily a
result in the Bank's decision to retain in its portfolio a limited amount of
fixed rate 15 and 20 year residential real estate loans. Manufactured home loans
increased $12.3 million from $80.4 million at March 31, 1996 to $92.7 million at
March 31, 1997. Financed insurance premiums are generated by the Bank's premium
finance subsidiary. This loan category increased from $13.5 million or 3.0% of
total loans at March 31, 1996 to $23.5 million or 4.8% of total loans at March
31, 1997. The increase in this category is a result of management's efforts to
grow the Bank's investment in this area through marketing and new relationships
with insurance agents located primarily in New York, New Jersey and
Pennsylvania.
The Bank's warehouse line of credit represents a relationship with a
mortgage broker in the Capital District area in which loans are funded via draws
on the outstanding line. The line is repaid upon ultimate sale of the loan to
unrelated third parties. The balance outstanding on this line decreased from
$11.8 million at March 31, 1996 to $3.6 million at March 31,1997. Commercial
real estate fell slightly from $70.9 million at March 31, 1996 to $67.7 million
at March 31, 1997. At March 31, 1997, commercial real estate represented 13.7%
of total loans. Commercial business loans decreased $1.2 million to a balance of
$16.1 million at March 31, 1997 from $17.4 million at March 31, 1996. Commercial
business loans are loans to businesses which are either unsecured or are secured
by non-real estate business assets.
Allowance for Loan Losses. The allowance for loan losses increased from
$3.5 million at March 31, 1996 to $5.9 million at March 31, 1997, an increase of
$2.3 million. This increase is the result of the $3.8 million provision for loan
losses taken in the year ended March 31, 1997 offset by $1.5 million in net
charge offs for the same period. At March 31, 1997 the allowance for loan losses
provided coverage of 29.4% of total non-performing loans, down slightly from
32.6% at March 31, 1996. The balance of the allowance is maintained at a level
which is, in management's judgment, representative of the amount of risk
inherent in the Bank's loan portfolio. See "Business of the Bank - Asset Quality
- - Allowance for Loan Losses."
Securities Available for Sale and Investment Securities. The balances
of securities available for sale and investment securities (collectively
"securities") decreased from $51.4 million and $83.0 million, respectively, at
March 31, 1996 to $45.6 million and $79.1 million, respectively, as of March 31,
1997. These decreases during the year ended March 31, 1997 were driven by
maturities
47
<PAGE>
and calls of these securities totaling $30.4 million and sales totaling $10.0
million, which were offset by purchases of securities totaling $30.9 million.
During the year ended March 31, 1997, loan demand was higher, therefore more of
the proceeds were reinvested in loans, resulting in an overall decrease in
securities during this time period.
Premises and Equipment. The balance of premises and equipment increased
from $14.3 million at March 31, 1996 to $15.0 million at March 31, 1997. This
increase was a result of expenditures relating to a new data processing system
during November 1996.
OREO and Repossessed Property. The balance of OREO and repossessed
property increased from $1.7 million at March 31, 1996 to $3.4 million at March
31, 1997, an increase of approximately $1.7 million. This increase directly
relates to the addition during the year ended March 31, 1997 of an OREO property
that had a balance of $2.4 million at March 31, 1997.
Deposits. Total deposits increased $9.4 million, or 1.7%, from $555.2
million at March 31, 1996 to $564.6 million at March 31, 1997. Of this total
increase, time deposits increased $4.6 million (1.5%), savings accounts
increased $6.1 million (4.7%), while NOW/Money market accounts and non-interest
bearing accounts remained relatively flat.
Short-term Borrowings. Short-term borrowings increased $12.6 during the
year ended March 31, 1997. There were no short-term borrowings at March 31,
1996. This increase was a result of the growth in loan demand that exceeded the
increase in deposit balances.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Liquidity is defined as the ability to generate sufficient cash flow to
meet all present and future funding commitments, depositor withdrawals and
operating expenses. Management monitors the Bank's liquidity position on a daily
basis and evaluates its ability to meet depositor withdrawals or make new loans
or investments. The Bank's liquid assets are defined as cash and cash
equivalents, investment securities that mature within one year, and its
portfolio of securities available for sale. At December 31, 1997, the Bank's
liquid assets as a percentage of deposits which have no withdrawal restrictions,
time deposits which mature within one year, and short-term borrowings was 18.8%.
The Bank's cash inflows result primarily from loan repayments,
maturities, calls and pay downs of securities, new deposits, and to a lesser
extent, drawing upon the Bank's credit lines with other financial institutions,
including the Federal Home Loan Bank of New York. The Bank's cash outflows are
substantially new loan originations, securities purchases, and deposit
withdrawals. The timing of cash inflows and outflows are closely monitored by
management although changes in interest rates, economic conditions, and
competitive forces strongly impact the predictability of these cash flows. The
Bank attempts to provide stable and flexible sources of funding through the
management of its liabilities, including core deposit products offered through
its branch network as well as with limited use of borrowings. Management
believes that the level of the Bank's liquid
48
<PAGE>
assets combined with daily monitoring of cash inflows and outflows provide
adequate liquidity to fund outstanding loan commitments, meet daily withdrawal
requirements of our depositors, and meet all other daily obligations of the
Bank.
Capital
Consistent with its goals to operate a sound and profitable financial
organization, the Bank actively seeks to maintain a "well capitalized"
institution in accordance with regulatory standards. Total equity was $67.4
million at December 31, 1997, 10.1% of total assets on that date. As of March
31, 1997 and 1996, total equity was $65.1 million and $59.6 million,
respectively, or 10.0% and 9.6% of total assets at the respective dates. As of
December 31, 1997, the Bank exceeded all of the capital requirements of the
FDIC. The Bank's regulatory capital ratios at December 31, 1997 were as follows:
Tier I (leverage) capital, 10.1%; Tier I risk-based capital, 14.1%; and Total
risk- based capital, 15.4%. The regulatory capital minimum requirements to be
considered well capitalized are 5.0%, 6.0%, and 10.0% respectively.
IMPACT OF THE YEAR 2000
The Bank has conducted a comprehensive review of its computer systems
to identify applications that could be affected by the "Year 2000" issue, and
has developed an implementation plan to address the issue. The Bank's data
processing is performed primarily in-house; however software and hardware
utilized is under maintenance agreements with third party vendors, consequently
the Bank is very dependent on those vendors to conduct its business. The Bank
has already contacted each vendor to request time tables for year 2000
compliance and expected costs, if any, to be passed along to the Bank. To date,
the Bank has been informed that its primary service providers anticipate that
all reprogramming efforts will be completed by December 31, 1998, allowing the
Bank adequate time for testing. Certain other vendors have not yet responded,
however, the Bank will pursue other options if it appears that these vendors
will be unable to comply. Management does not expect these costs to have a
significant impact on its financial position or results of operations however,
there can be no assurance that the vendors' systems will be 2000 compliant,
consequently the Bank could incur incremental costs to convert to another
vendor.
The risks associated with this issue go beyond the Bank's own ability
to solve year 2000 problems. Should significant commercial customers fail to
address year 2000 issues effectively, their ability to meet debt service
requirements could be impaired, resulting in increased credit risk and potential
increases in loan charge offs. In addition, should suppliers of critical
services fail in their efforts to become year 2000 compliant, or if significant
third party interfaces fail to be compatible with the Bank's or fail to be year
2000 compliant, it could have significant adverse affects on the operations and
financial results of the Bank.
IMPACT ON INFLATION AND CHANGING PRICES
The Bank's consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require the measurement of
financial position and operating
49
<PAGE>
results in terms of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increasing cost of the Bank's operations. Unlike
most industrial companies, nearly all assets and liabilities of the Bank are
monetary. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. In addition,
interest rates do not necessarily move in the direction, or to the same extent
as the price of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
In November 1993, the AICPA issued Statement of Position 93-6 ("SOP
93-6"), "Employers' Accounting for Employee Stock Ownership Plans," which is
effective for years beginning after December 15, 1993. SOP 93-6 requires the
measure of compensation expense recorded by employers for leveraged ESOPs to be
the fair value of ESOP shares. The Holding Company has adopted an ESOP in
connection with the Conversion, which is expected to purchase 8% of the Common
Stock issued in the conversion, including shares issued to the Foundation. Under
SOP 93- 6, the Holding Company will recognize compensation cost equal to the
average fair value of the ESOP shares during the periods in which they become
committed to be released. Employers with internally leveraged ESOPs such as the
Holding Company will not report the loan receivable from the ESOP as an asset
and will not report the ESOP debt from the employer as a liability. The effects
of SOP 93-6 on future operating results cannot be determined at this time.
In November 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock Based Compensation" ("SFAS No. 123"). This statement establishes
financial accounting standards for stock-based employee compensation plans. SFAS
No. 123 permits the Bank to choose either a new fair value based method or the
Accounting Principles Board ("APB") Opinion 25 intrinsic value based method of
accounting for its stock-based compensation arrangements. SFAS No. 123 requires
pro forma disclosures of net income and earnings per share computed as if the
fair value based method had been applied in financial statements of companies
that follow accounting for such arrangements under APB Opinion 25. SFAS No. 123
applies to all stock-based employee compensation plans in which an employer
grants shares of its stock or other equity instruments to employees except for
employee stock ownership plans. SFAS No. 123 also applies to plans in which the
employer incurs liabilities to employees in amounts based on the price of the
employer's stock, (e.g., stock option plans, stock purchase plans, restricted
stock plans, and stock appreciation rights). The Statement also specifies the
accounting for transactions in which a company issues stock options or other
equity instruments for services provided by nonemployees or to acquire goods or
services from outside suppliers or vendors. The Company expects to utilize the
intrinsic value based method prescribed by APB Opinion No. 25. Accordingly, the
impact of adopting this Statement will not be material to the Company's
consolidated financial statements.
In February 1997, the FASB issued SFAS No. 128,"Earnings per Share".
SFAS No. 128 establishes standards for computing and presenting earnings per
share (EPS). This Statement supersedes APB Opinion No. 15, "Earnings per Share"
and related interpretations. SFAS No. 128 replaces the presentation of primary
EPS with the presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
50
<PAGE>
complex capital structures and requires a reconciliation of the numerator and
denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Unvested restricted stock awards are considered
outstanding common shares and included in the computation of basic EPS as of the
date that they are fully vested. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. This Statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. The Bank will adopt this Statement for all
financial statements prepared after the Bank's conversion.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure", which establishes standards for disclosure
about an entity'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 disclosures required by SFAS
No. 129 are for financial statements for periods ending after December 15, 1997.
Management anticipates providing the required information in the March 31, 1998
consolidated financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and displaying
comprehensive income. SFAS No. 130 states that comprehensive income includes the
reported net income of an enterprise 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 both interim and annual
periods after December 15, 1997. Management anticipates developing the required
information in accordance with this new Statement.
In June 1997, the FASB issued SFAS No. 131, "Disclosure 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. At this time, management does not
anticipate that the adoption of this Statement will significantly impact the
Company's financial reporting.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which amends the disclosure
requirements of SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Statement No. 132
standardizes the disclosure requirements of Statements No. 87 and No. 106 to the
extent practicable and recommends a parallel format for presenting information
and pensions and other
51
<PAGE>
postretirement benefits. This Statement is applicable to all entities and
addresses disclosure only. The Statement does not change any of the measurement
or recognition provisions provided for in Statements No. 87, No. 88, or No. 106.
The Statement is effective for fiscal years beginning after December 15, 1997.
Management anticipates providing the required disclosures in the March 31, 1999
consolidated financial statements.
BUSINESS OF THE HOLDING COMPANY
The Holding Company, a Delaware corporation, was organized on March 5,
1998 at the direction of the Board of Trustees of the Bank for the purpose of
owning all of the outstanding capital stock of the Bank upon consummation of the
Conversion. Upon consummation of the Conversion, the Holding Company, as the
sole stockholder of the Bank, will be a savings and loan holding company
regulated by the OTS. See "Regulation--The Holding Company."
The Holding Company is currently not an operating company. Following
the Conversion, in addition to directing, planning and coordinating the business
activities of the Bank, the Holding Company will initially invest the proceeds
of the Conversion primarily in federal funds, government and federal agency
mortgage-backed securities, other debt securities, equity securities, deposits
of or loans to the Bank or a combination thereof. In addition, the Holding
Company intends to fund the loan to the ESOP to enable the ESOP to purchase up
to 8% of the Common Stock to be issued in the Conversion, including shares
issued to the Foundation. See "Use of Proceeds." In the future, the Holding
Company may acquire or organize other operating subsidiaries, including other
financial institutions, or it may merge with or acquire other financial
institutions and financial services related companies, although there are no
current plans for any such expansion. Initially, the Holding Company will
neither own nor lease any property but will instead use the premises, equipment
and furniture of the Bank. The Holding Company does not currently intend to
employ any persons other than certain officers of the Bank who will not be
separately compensated by the Holding Company. The Holding Company may utilize
the support staff of the Bank from time to time, if needed. Additional employees
will be hired as appropriate to the extent the Holding Company expands its
business in the future.
BUSINESS OF THE BANK
General
The Bank is a community-oriented mutual savings bank which was
chartered by the State of New York in 1850. The principal business of the Bank
consists of attracting retail deposits from the general public and using those
funds, together with funds from operations and, to a much lesser extent,
borrowings, to originate primarily residential mortgage loans, including home
equity loans, and, to a lesser extent, manufactured home loans, financed
insurance premiums and other consumer loans, commercial real estate,
construction and commercial business loans. The Bank originates its loans in the
Bank's primary market area, with the exception of manufactured home loans, which
are primarily originated outside the Bank's primary market area including states
contiguous with New York, and financed insurance premiums, which are originated
primarily in New York, New Jersey and Pennsylvania. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The Bank also
invests in corporate debt securities and U.S. Government and agency obligations.
Revenues are derived primarily from interest on loans and securities.
HCSI offers a variety of deposit accounts having a wide range of
interest rates and terms. The Bank's deposit accounts are insured up to
applicable limits by the Federal Deposit Insurance Corporation (the "FDIC"). The
Bank only solicits deposits in its primary market area and does not have
brokered deposits. HCSI is a member of the Federal Home Loan Bank of New York.
Subsequent to the Conversion, the Bank will have leverage capital of
17.01% assuming the sale of stock at the maximum of the Estimated Valuation
Range. While the Bank has no plans at this time to utilize the increased capital
to expand its lending operations and geographical presence, the Bank will
consider opportunities to increase its market presence through both lending
operations and geographical expansion in an effort to utilize its excess
capital in the future.
52
<PAGE>
Market Area
The Bank has been, and intends to continue to be, a community-oriented
financial institution offering a variety of financial services to meet the needs
of the communities it serves. HCSI's primary market area is comprised of
Columbia, Albany and Rensselaer Counties in New York and portions of Dutchess
and Schenectady Counties in New York, which are serviced through the Bank's main
office and eleven other full service banking offices and one loan production
office. The Bank's main office and six of its branch offices are located in
Columbia County. Based on the most recent information available, the Bank had
approximately 59.5% of total bank and thrift deposits in Columbia County.
HCSI's primary market area consists principally of suburban and rural
communities with service, wholesale/retail trade, government and manufacturing
serving as the basis of the local economy. Service jobs represent the largest
type of employment in the Bank's primary market area, with jobs in
wholesale/retail trade accounting for the second largest employment sector.
Management believes that its market area continues to show economic weakness
with declining real estate values.
Lending Activities
General. The Bank primarily originates fixed- and adjustable-rate,
residential mortgage loans, including home equity loans, secured by the
borrower's primary residence. Currently, the Bank's general practice is to
originate fixed-rate mortgage loans with terms between 15 and 30 years and to
sell substantially all 30-year fixed rate mortgage loans on the secondary
market. The Bank generally retains 15 and 20-year fixed rate mortgage loans in
its portfolio. The Bank also originates to a lesser extent commercial real
estate, manufactured home, financed insurance premiums and other consumer loans,
construction and commercial business loans. In- market loan originations are
generated by the Bank's marketing efforts, which include print, radio and
television advertising, lobby displays and direct contact with local civic and
religious organizations, as well as by the Bank's present customers, walk-in
customers and referrals from real estate agents, brokers and builders. The
marketing for manufactured home loans is conducted through Tammac Corporation
with which the Bank has an agreement relating to such loans. The marketing for
financed insurance premiums is conducted through the Bank's premium finance
subsidiary. See "-- Consumer Lending." At December 31, 1997, the Bank's total
loan portfolio totaled approximately $511.9 million.
The Bank originates fixed and adjustable rate consumer loans.
Adjustable rate mortgage ("ARM") and consumer loans are originated in order to
increase the percentage of loans with more frequent terms to repricing or
shorter maturities than long-term fixed-rate, residential mortgage loans. See
"--Loan Portfolio Composition" and "--Residential Real Estate Lending."
Loan applications are initially considered and approved at various
levels of authority, depending on the type and amount of the loan. Bank
employees with lending authority are designated, and their lending limit
authority defined, by the Board of Trustees of the Bank. The approval of the
Bank's Board of Trustees is required for any loans over $250,000. Pursuant to
the Bank's lending policy, senior lending officers may approve loans up to
$250,000. The Bank generally requires personal guarantees for all commercial
loans.
53
<PAGE>
At December 31, 1997, the Bank's largest lending relationship consisted
of a commitment to lend up to $10 million pursuant to a warehouse line of credit
to a mortgage banker for residential mortgages. The line of credit is secured by
assignments of the underlying mortgages. The next largest lending relationship
consisted of five loans aggregating approximately $4.0 million primarily secured
by a nursing home. The third largest lending relationship consisted of two loans
totaling approximately $3.5 million secured by a medical office facility. The
fourth largest lending relationship consisted of three loans totaling
approximately $2.3 million secured by a commercial shopping plaza. The fifth
largest lending relationship was a $2.4 million loan secured by a hotel.
Subsequent to December 31, 1997, the Bank extended additional credit to this
borrower to finance the construction of an adjoining restaurant, which increased
the size of this lending relationship to $4.0 million. As of December 31, 1997,
each of the five relationships discussed above were performing in accordance
with their applicable terms.
The types of loans that the Bank may originate are subject to federal
and state laws and regulations. Interest rates charged by the Bank on loans are
affected by the demand for such loans, the supply of money available for lending
purposes and the rates offered by competitors. These factors are in turn
affected by, among other things, economic conditions, monetary policies of the
federal government, including the FRB, and tax policies.
54
<PAGE>
Loan Portfolio Composition. The following table sets forth the
composition of the Bank's loan portfolio in dollar amounts and in percentages as
of the dates indicated.
<TABLE>
<CAPTION>
March 31,
December 31, -----------------------------------------------------------------------------
1997 1997 1996 1995
--------------------- ------------------- --------------------- --------------------
Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential mortgage . $ 250,649 48.96% $246,462 49.99 $ 214,226 47.53% $225,437 51.37%
Home equity .......... 27,441 5.36 27,630 5.60 26,936 5.98 27,938 6.37
------ ---- ------ ---- ------ ---- ------ ----
Total residential
real estate ..... 278,090 54.32 274,092 55.59 241,162 53.51 253,375 57.74
Commercial ........... 73,902 14.44 67,697 13.73 70,854 15.72 70,328 16.02
Construction ......... 3,980 0.78 2,725 0.55 4,317 0.96 6,446 1.47
----- ---- ----- ---- ----- ---- ----- ----
Total real estate
loans ........... 355,972 69.54 344,514 69.87 316,333 70.19 330,149 75.23
Consumer loans:
Manufactured home
loans ............... 98,307 19.20 92,651 18.79 80,399 17.84 72,184 16.45
Financed insurance
premiums(1) ......... 23,395 4.57 23,535 4.78 13,503 3.00 8,674 1.98
Other consumer loans . 12,140 2.37 11,577 2.35 10,155 2.25 8,448 1.93
------ ---- ------ ---- ------ ---- ----- ----
Total consumer loans 133,842 26.14 127,763 25.92 104,057 23.09 89,306 20.36
Commercial business
loans ............... 13,907 2.72 16,146 3.27 17,393 3.86 13,821 3.15
Warehouse lines of
credit .............. 7,062 1.38 3,567 0.72 11,797 2.62 4,599 1.05
Net deferred loan
costs and unearned
discount ............ 1,115 0.22 1,029 0.22 1,091 0.24 1,000 0.21
----- ---- ----- ---- ----- ---- ----- ----
Total loans .......... 511,898 100.00% 493,019 100.00% 450,671 100.00% 438,875 100.00%
====== ====== ====== ======
Less:
Allowance for loan
losses .............. (6,756) (5,872) (3,546) (3,187)
------ ------ ------ ------
Total loans
receivable, net .. $ 505,142 $487,147 $447,125 $435,688
========= ======== ======== ========
</TABLE>
<PAGE>
March 31,
----------------------------------------------
1994 1993
-------------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
Residential mortgage . $ 203,819 49.83% $ 186,874 47.94%
Home equity .......... 26,620 6.51 25,540 6.55
------ ---- ------ ----
Total residential
real estate ..... 230,439 56.34 212,414 54.49
Commercial ........... 65,571 16.03 59,268 15.20
Construction ......... 9,899 2.42 11,159 2.86
- ---------------------- ----- ---- ------ ----
Total real estate
loans ........... 305,909 74.79 282,841 72.55
Consumer loans:
Manufactured home
loans ............... 65,285 15.96 78,858 20.23
Financed insurance
premiums(1) ......... 7,098 1.74 5,248 1.35
Other consumer loans . 7,789 1.90 9,727 2.50
----- ---- ----- ----
Total consumer loans 80,172 19.60 93,833 24.08
Commercial business
loans ............... 12,827 3.14 8,086 2.07
Warehouse lines of
credit .............. 9,520 2.33 8,901 2.28
Net deferred loan
costs and unearned
discount ............ 561 0.14 (3,856) (.98)
--- ---- ------ ----
Total loans .......... 408,989 100.00% 389,805 100.00%
====== ======
Less:
Allowance for loan
losses .............. (2,917) (1,999)
------ ------
Total loans
receivable, net .. $ 406,072 $ 387,806
========= =========
- -------------------
(1) Includes personal as well as commercial insurance premiums.
55
<PAGE>
The following table shows the composition of the Bank's loan portfolio
by fixed-and adjustable-rate as of December 31, 1997.
December 31,
1997
-----------------------------
Amount Percent
------ -------
(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
Residential(1) .............................. $ 74,528 14.56%
Commercial .................................. 28,556 5.58
--------- ------
Total real estate loans ................... 103,084 20.14
Consumer:
Manufactured home loans ..................... 47,175 9.21
Financed insurance premiums ................. 23,395 4.57
Other consumer loans ........................ 12,140 2.37
--------- ------
Total consumer loans ...................... 82,710 16.15
Commercial business loans ................... 2,084 0.41
--------- ------
Total fixed-rate loans ................... 187,878 36.70
Adjustable-Rate Loans
Real estate:
Residential(1) .............................. 203,562 39.76
Construction ................................ 3,980 0.78
Commercial .................................. 45,346 8.86
--------- ------
Total real estate loans ................... 252,888 49.40
Consumer:
Manufactured home loans ..................... 51,132 9.99
Other consumer loans ........................ -- --
--------- ------
Total consumer loans ...................... 51,132 9.99
Commercial business loans(2) ................ 18,885 3.69
--------- ------
Total adjustable-rate loans ............... 322,905 63.08
Net deferred loan costs and
unearned discount ....................... 1,115 0.22
--------- ------
Total loans ............................... 511,898 100.00%
Less:
Allowance for loan losses ................... (6,756)
-------
Total loans receivable, net ............... $ 505,142
=======
- -----------------
(1) Includes home equity loans.
(2) Includes warehouse lines of credit.
56
<PAGE>
The following table illustrates the contractual maturity of the Bank's
loan portfolio at December 31, 1997. Mortgages which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
--------------------------- ---------------------------------------
Commercial Financed Other
Residential Commercial Business Manufactured Insurance Consumer
Real Estate(1) Real Estate Loans(2) Home Loans Premiums Loans Total
-------------- ----------- -------- ---------- -------- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
0 months to 1 year.......... $ 5,706 $11,843 $12,986 $ 222 $23,395 $ 3,174 $57,326
After 1 year:
1 to 2 years.............. 1,165 6,217 707 304 --- 1,227 9,620
2 to 3 years.............. 998 7,213 2,524 608 --- 2,425 13,768
3 to 5 years.............. 6,649 24,280 2,707 2,096 --- 4,287 40,019
5 to 10 years ............ 17,895 13,219 2,045 15,477 --- 811 49,447
10 to 15 years............ 59,037 4,245 --- 42,422 --- 213 105,917
Over 15 years............. 190,620 6,885 --- 37,178 --- 3 234,686
--------- --------- ------------- ------- ------------ ------------ -------
Total due after one year.... 276,364 62,059 7,983 98,085 --- 8,966 453,457
--------- -------- ---------- -------- ------------ --------- -------
Total amount due............ $282,070 $73,902 $ 20,969 $98,307 $23,395 $12,140 510,783
======== ======= ======== ======= ======= =======
Net deferred loan costs
and unearned discount..... 1,115
---------
Total loans............ 511,898
Less:
Allowance for loan losses... (6,756)
--------
Total loans receivable,
net.................... $505,142
========
</TABLE>
- ------------
(1) Includes home equity and construction loans.
(2) Includes warehouse lines of credit.
57
<PAGE>
The following table sets forth the dollar amounts in each loan category
at December 31, 1997 that are contractually due after December 31, 1998, and
whether such loans have fixed interest rates or adjustable interest rates.
Due after December 31, 1998
-------------------------------------
Fixed Adjustable Total
----- ---------- -----
(In Thousands)
Residential real estate(1) ........... $ 74,222 $202,142 $276,364
Commercial real estate ............... 23,671 38,388 62,059
Commercial business loans(2) ......... 1,884 6,099 7,983
Manufactured home loans ............. 47,135 50,950 98,085
Other consumer loans ............... 8,966 -- 8,966
-------- -------- --------
Total ................................ $155,878 $297,579 $453,457
======== ======== ========
- -----------
(1) Includes home equity loans.
(2) Includes warehouse lines of credit.
Residential Real Estate Lending
HCSI's residential real estate loans consist of primarily one- to
four-family, owner occupied mortgage loans, including home equity loans. At
December 31, 1997, $278.1 million, or 54.3% of HCSI's total loans consisted of
residential first mortgage loans and home equity loans. Of such loans, $27.4
million, or 5.4% of total loans receivable, consisted of home equity loans
secured by the borrower's primary residence. At December 31, 1997, approximately
$74.5 million of HCSI's residential first mortgage loans and home equity loans
provided for fixed rates of interest and for repayment of principal over a fixed
period not to exceed 30 years. HCSI does not originate fixed-rate loans for
terms longer than 30 years. HCSI's fixed-rate residential mortgage loans and
home equity loans are priced competitively with the market. Accordingly, HCSI
attempts to distinguish itself from its competitors based on quality of service.
HCSI generally underwrites its fixed-rate residential first mortgage
loans using accepted secondary market standards. The Bank sells substantially
all fixed-rate residential mortgage loans it originates with terms in excess of
20 years to the secondary market, and continues to service substantially all the
loans it sells. HCSI generally holds for investment all adjustable and 15 and 20
year fixed residential first mortgage loans it originates. In underwriting
residential first mortgage loans, HCSI evaluates, among other things, the
borrower's ability to make monthly payments and the value of the property
securing the loan. Properties securing real estate loans made by HCSI are
appraised by independent fee appraisers approved by the Bank's Board of
Trustees. HCSI requires borrowers to obtain title insurance, and fire and
property insurance (including flood insurance, if necessary) in an amount not
less than the amount of the loan.
58
<PAGE>
The Bank currently offers one- and three-year residential ARM loans
with an interest rate that adjusts annually in the case of one-year ARM loans,
and every three years in the case of a three-year ARM loan, based on the change
in the relevant United States Treasury index. These loans provide for up to a
2.0% periodic cap and a lifetime cap of 6.0% over the initial rate. As a
consequence of using caps, the interest rates on these loans may not be as rate
sensitive as the Bank's cost of funds. Borrowers of one-year residential ARM
loans are generally qualified at a rate of 2.0% above the initial interest rate.
The Bank offers ARM loans that are convertible into fixed-rate loans with
interest rates based upon the then current market rates. ARM loans generally
pose greater credit risks than fixed-rate loans, primarily because as interest
rates rise, the required periodic payment by the borrower rises, increasing the
potential for default. However, as of December 31, 1997, the Bank had not
experienced higher default rates on these loans relative to its other loans. See
"--Asset Quality-Non-Performing Assets."
The Bank's residental mortgage loans do not contain prepayment
penalties and do not permit negative amortization of principal. Real estate
loans originated by the Bank generally contain a "due on sale" clause allowing
the Bank to declare the unpaid principal balance due and payable upon the sale
of the security property. The Bank has waived the due on sale clause on loans
held in its portfolio from time to time to permit assumptions of the loans by
qualified borrowers.
Generally, HCSI does not originate residential mortgage loans where the
ratio of the loan amount to the value of the property securing the loan (i.e.,
the "loan-to-value" ratio) exceeds 95%, although HCSI may lend up to 97% of the
value of the property securing the loan. If the loan-to-value ratio exceeds 80%,
HCSI generally requires that the borrower obtain private mortgage insurance in
amounts intended to reduce the Bank's exposure to 80% or less of the lower of
the appraised value or the purchase price of the property securing the loan. See
"-- Loan Originations Sales."
HCSI's home equity loans and lines of credit are secured by a lien on
the borrower's residence and generally do not exceed $250,000. HCSI uses the
same underwriting standards for home equity loans as it uses for residential
mortgage loans. Home equity loans are generally originated in amounts which,
together with all prior liens on such residence, do not exceed 80% of the
appraised value of the property securing the loan. The interest rates for home
equity loans and lines of credit either float at a stated margin over the prime
rate or have fixed interest rates. Home equity lines of credit require interest
and principal payments on the outstanding balance for the term of the loan. The
terms of the Bank's home equity lines of credit are generally five years, with a
15- year payback period. The Bank also has home equity lines of credit with
terms of ten years, with a 20-year payback period; such lines of credit are not
frequently utilized. As of December 31, 1997, HCSI had $27.4 million, or 5.4% of
the Bank's total loan portfolio outstanding, in home equity loans and lines of
credit, with an additional $11.9 million of unused home equity lines of credit.
Commercial Real Estate Lending
The Bank has engaged in commercial real estate lending secured
primarily by apartment buildings, office buildings, motels, nursing homes, strip
shopping centers and mobile home parks
59
<PAGE>
located in the Bank's primary market area. At December 31, 1997, the Bank had
$73.9 million of commercial real estate loans, representing 14.4% of the Bank's
total loan portfolio.
Commercial real estate loans generally have adjustable rates and terms
to maturity that do not exceed 25 years. HCSI's current lending guidelines
generally require that the property securing a loan generate net cash flows of
at least 125% of debt service after the payment of all operating expenses,
excluding depreciation, and the loan-to-value ratio not exceed 75% on loans
secured by such properties. As a result of a decline in the value of some
properties in the Bank's primary market area and due to economic conditions, the
current loan-to-value ratio of some commercial real estate loans in the Bank's
portfolio may exceed the initial loan-to-value ratio and the current debt
service ratio may exceed the initial debt service ratio. Adjustable rate
commercial real estate loans provide for interest at a margin over a designated
index, often a designated prime rate, with periodic adjustments, generally at
frequencies of up to five years. In underwriting commercial real estate loans,
the Bank analyzes the financial condition of the borrower, the borrower's credit
history, the reliability and predictability of the net income generated by the
property securing the loan and the value of the property itself. The Bank
generally requires personal guarantees of the borrowers in addition to the
security property as collateral for such loans. Appraisals on properties
securing commercial real estate loans originated by the Bank are performed by
independent fee appraisers approved by the Board of Trustees.
Commercial real estate loans generally 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 effect of general economic conditions on income
producing properties and the increased difficulty of evaluating and monitoring
these types of loans. Furthermore, the repayment of loans secured by commercial
real estate is typically 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, or a bankruptcy court modifies a lease
term, or a major tenant is unable to fulfill its lease obligations), the
borrower's ability to repay the loan may be impaired and the value of the
property may be reduced.
Construction Lending
HCSI makes construction loans to individuals for the construction of
their personal residences. The Bank has occasionally made loans to builders for
the construction of homes. The Bank generally requires construction stage
inspections before funds may be released to borrowers pursuant to such loans.
Such inspections are generally performed by Bank personnel or independent fee
appraisers approved by the Bank's Board of Trustees.
At December 31, 1997, the Bank's construction loan portfolio totaled
$4.0 million, or .8% of its total loan portfolio. Substantially all of these
construction loans were to individuals intending to occupy the homes being
constructed and were secured by properties located within the Bank's primary
market area. Although no construction loans were classified as non-performing as
of December 31, 1997, such loans do involve a higher level of risk than
conventional residential mortgage loans. For example, if a project is not
completed and the borrower defaults, HCSI may have to hire another contractor to
complete the project at a higher cost.
60
<PAGE>
Consumer Lending
HCSI offers a variety of secured and unsecured consumer loans,
including manufactured home loans (loans secured by prefabricated or mobile
homes which serve as the borrower's dwelling), financed insurance premiums and,
to a lesser extent, lines of credit and loans secured by automobiles.
Substantially all of the Bank's manufactured home loans and financed insurance
premium loans are originated outside the Bank's primary market area. The balance
of the Bank's consumer loans are originated inside the Bank's market area. At
December 31, 1997, the Bank's consumer loan portfolio totaled $133.8 million, or
26.1% of the Bank's total loan portfolio.
The underwriting standards employed by the Bank for consumer loans
other than financed insurance premiums generally include a determination of the
applicant's payment history on other debts and an assessment of ability to meet
existing obligations and payments on the proposed loan. Although
creditworthiness of the applicant is the primary consideration, the underwriting
process also includes a comparison of the value of the property securing the
loan, if any, in relation to the proposed loan amount. For information regarding
underwriting of financed insurance premiums, see "- Financed Insurance
Premiums."
Manufactured Home Loans. In order to expand its origination of
manufactured home lending, the Bank is party to an agreement with Tammac
Corporation ("Tammac"), pursuant to which Tammac solicits manufactured home loan
applications on behalf of the Bank. Under the agreement, the Bank may refuse to
accept for any reason any application referred to it by Tammac. Tammac provides
certain collection services to the Bank, which include, for any loan that is
more than 30 days past due, attempting to cause the borrower to pay delinquent
installments and to bring his or her delinquent loan payments up to date. Tammac
also provides repossession and liquidation services, at the direction of the
Bank, for certain delinquent loans. Tammac is paid a fixed percentage of the
amount financed by the borrower and does not receive additional compensation for
collection, repossession or any other services provided to the Bank.
Substantially all of the manufactured home loans originated by the Bank have
been referred to it by Tammac. See "Risk Factors--Source of Manufactured Home
Loan Applications."
Manufactured home loans represent the largest component of the Bank's
consumer loan portfolio. At December 31, 1997, the Bank's portfolio of
manufactured home loans totaled $98.3 million, or 19.2% of its total loan
portfolio. HCSI's manufactured home loans are typically originated at a higher
rate than residential first mortgage loans, and generally have terms of up to 20
years. Historically, HCSI's manufactured home loans have been made with both
fixed and adjustable rates of interest. Currently, however, the Bank originates
only fixed rate manufactured home loans. The Bank's adjustable-rate manufactured
home loans typically have an interest rate of 4% above the one year United
States Treasury index, adjusted annually, with a 2% maximum annual adjustment
and a 16% interest rate cap. The initial interest rate represents the floor.
Because the loan may be based on the cost of the manufactured home as well as
improvements and because manufactured homes may decline in value due to wear and
tear following their initial sale, the value of the collateral securing a
manufactured home loan may be substantially less than the loan balance. At the
time of origin, inspections are made to substantiate current market values on
all manufactured homes.
61
<PAGE>
Financed Insurance Premiums. The second largest component of the Bank's
consumer loan portfolio is financed insurance premiums. The Bank conducts such
lending through a general partnership known as Premium Payment Plan ("PPP") in
which Hudson City Associates, Inc., a wholly owned subsidiary of the Bank, holds
a 65% ownership interest. The remaining 35% interest is held by F.G.O.
Corporation, which is responsible for the marketing of PPP's business. Hudson
City Associates receives 65% of any profits but absorbs 100% of any losses of
PPP. No profit distributions are made to F.G.O. Corporation until any past
losses have been recouped. PPP is currently licensed to provide insurance
premium financing in nine states, but does business primarily in New York, New
Jersey and Pennsylvania. Management estimates that approximately 75% of premiums
financed are for non-standard and sub-standard (assigned risk) personal
automobile insurance and the remaining 25% are for various commercial lines of
insurance. Interest rates charged on these loans are substantially higher than
those charged on other types of loans. Terms on these loans are primarily eight
months.
The Bank has experienced a relatively high level of delinquencies in
its financed insurance premium portfolio resulting in higher charge-offs. See
"--Asset Quality - Non-Performing Assets." The Bank may continue to experience a
high level of delinquencies and charge-offs in this class of loans due to the
nature of this type of lending. The underwriting of these loans is generally not
based upon the credit risk of the borrower. In the typical case, Bank funds are
advanced to the insurance company for the full amount of the premium upon
receipt of a down payment from the insured. If the insured defaults on the loan,
the Bank sustains a loss to the extent the premium has been earned by (and is
therefore unrecoverable from) the insurance company. The Bank's most significant
exposure to loss occurs when the initial insurance premium quoted by an
insurance broker, and used as the basis for the loan and the related down
payment, is increased by the underwriting insurance company subsequent to making
the loan. In these instances, if the borrower decides not to pay the increased
premium amount, the Bank is left with an insufficient down payment, relative to
the increased premium, and little or no collateral in the way of insurance
premiums refundable by the insurance company. Accordingly, writing financed
insurance premiums through insurance brokers who accurately quote the initial
insurance premium is critical to this type of lending. At December 31, 1997, the
Bank had $23.4 million of financed insurance premiums through PPP, representing
4.6% of the Bank's total loan portfolio.
Consumer loans may entail greater credit risk than residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by assets which may decline in value. 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 high initial
loan-to-value ratios, repossession, rehabilitation and carrying costs, and the
greater likelihood of damage, loss or depreciation of the property, and thus are
more likely to be affected by adverse personal circumstances. In the case of
manufactured home loans, which may have loan balances in excess of the resale
value of the collateral, borrowers may abandon the collateral property making
repossession by the Bank and subsequent losses more likely. The application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on consumer loans, including
manufactured home loans.
62
<PAGE>
Commercial Business Lending
At December 31, 1997, commercial business loans comprised $13.9
million, or 2.7% of the Bank's total loan portfolio. Most of the Bank's
commercial business loans have been extended to finance local businesses and
include primarily short term loans to finance machinery and equipment purchases,
inventory and accounts receivable. Commercial business loans also involve the
extension of revolving credit for a combination of equipment acquisitions and
working capital needs.
The terms of loans extended on machinery and equipment are based on the
projected useful life of such machinery and equipment, generally not to exceed
seven years. Lines of credit are available to borrowers provided that the
outstanding balance is paid in full (i.e., the credit line has a zero balance)
for at least 30 days every year. All lines of credit are reviewed on an annual
basis. In the event the borrower does not meet this 30 day requirement, the line
of credit may be terminated and the outstanding balance may be converted into a
fixed term loan. The Bank has a few standby letters of credit outstanding which
are offered at competitive rates and terms and are generally on a secured basis.
Unlike residential mortgage loans, commercial business loans are
typically 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, is often dependent in part upon
general economic conditions). The Bank's commercial business loans are usually,
but not always, secured by business assets. However, the collateral securing the
loans may depreciate over time, may be difficult to appraise and may fluctuate
in value based on the success of the business.
HCSI's commercial business lending policy includes credit file
documentation and analysis of the borrower's background, capacity to repay the
loan, the adequacy of the borrower's capital and collateral as well as an
evaluation of other conditions affecting the borrower. Analysis of the
borrower's past, present and future cash flows is also an important aspect of
HCSI's current credit analysis. The Bank generally obtains personal guarantees
on its commercial business loans. Nonetheless, such loans are believed to carry
higher credit risk than more traditional savings bank loans.
Warehouse Lines of Credit. The Bank maintains a $10.0 million warehouse
line of credit with a mortgage banker located in the Capital District area of
New York. The mortgage banker primarily originates residential real estate loans
in the Bank's market area. The line of credit is secured by assignments of the
underlying mortgages. At December 31, 1997, the Bank had $7.1 million
outstanding under this warehouse line of credit.
Loan Originations and Sales
Mortgage and commercial loan originations are developed from the
continuing business with depositors and borrowers, soliciting realtors and other
brokers and walk-in customers. Residential and commercial loans are originated
by the Bank's staff of salaried and commissioned loan officers. Manufactured
home loans are originated indirectly through Tammac Corporation (see "- Consumer
63
<PAGE>
Lending - Manufactured Home Loans.") and financed insurance premiums are
originated through a partnership of the Bank's wholly owned subsidiary, Hudson
City Associates, Inc. and its relationship with insurance brokers (see "-
Consumer Lending - Financed Insurance Premiums.")
While the bank originates both fixed- and adjustable-rate loans, its
ability to originate loans is dependent upon demand for loans in the markets in
which it serves. Demand is affected by the applicable local economies and the
interest rate environment. The Bank generally retains new 15 and 20 year
fixed-rate and 30 year adjustable-rate real estate loans in its portfolio. To
reduce its vulnerability to changes in interest rates, the Bank's general
practice is to sell in the secondary market all conforming fixed rate
residential loans with maturities of greater than 20 years. The Bank's general
practice is to retain servicing on the loans it sells. At December 31, 1997, the
Bank serviced approximately $56.2 million of loans for others.
For the nine months ended December 31, 1997, the Bank originated $155.8
million of loans. During the year ended March 31, 1997, the Bank originated
$196.8 million of loans, compared to $127.0 million in fiscal 1996.
In periods of economic uncertainty, the Bank's ability to originate
large dollar volumes of loans with acceptable underwriting characteristics may
be substantially reduced or restricted which may result in a decrease in
operating earnings.
64
<PAGE>
The following table shows the loan origination and repayment activities
of the Bank for the periods indicated.
<TABLE>
<CAPTION>
Residential Commercial Commercial Warehouse Financed Other
Real Estate Real Estate Business Lines of Manufactured Insurance Consumer
Loans(1) Loans Loans Credit(2) Home Loans Premiums Loans Subtotals
-------- ----- ----- --------- ---------- -------- ----- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
March 31, 1995 ............ $ 259,821 $ 70,328 $ 13,821 $ 4,599 $ 72,184 $ 8,674 $ 8,448 $ 437,875
Add: loan originations,
other advances and
transfers ................ 27,246 9,145 16,997 7,198 23,402 34,417 8,601 127,006
Less: principal repayments
and other reductions ...... (41,477) (8,524) (13,425) -- (14,815) (29,015) (6,848) (114,104)
Less: charge-offs .......... (111) (95) -- -- (372) (573) (46) (1,197)
--------- -------- --------- -------- -------- -------- -------- ---------
Balance as of
March 31, 1996 ............ 245,479 70,854 17,393 11,797 80,399 13,503 10,155 449,580
Add: loan originations,
other advances and
transfers ................ 68,086 14,030 13,201 -- 26,773 63,932 10,749 196,771
Less: principal repayments
and other reductions ...... (36,586) (16,733) (14,321) (8,230) (14,305) (52,830) (9,286) (152,291)
Less: charge-offs .......... (162) (454) (127) -- (216) (1,070) (41) (2,070)
--------- -------- -------- ------- -------- -------- ------- ---------
Balance as of
March 31, 1997 ............ 276,817 67,697 16,146 3,567 92,651 23,535 11,577 491,990
Add: loan originations,
other advances and
transfers ................ 49,879 12,160 11,601 3,495 17,222 54,233 7,189 155,779
Less: principal repayments
and other reductions ...... (44,235) (4,722) (11,531) -- (11,235) (52,765) (6,545) (131,033)
Less: charge-offs .......... (391) (1,233) (2,309) -- (331) (1,608) (81) (5,953)
--------- --------- --------- --------- --------- --------- --------- ----------
Balance as of
December 31, 1997 ......... $ 282,070 $ 73,902 $ 13,907 $ 7,062 $ 98,307 $ 23,395 $ 12,140 $ 510,783
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
Net Deferred
Loan Costs
and Unearned Total
Discount Loans
-------- -----
(In thousands)
Balance as of
March 31, 1995 .............................. $ 1,000 $438,875
======== ========
Add: loan originations,
other advances and
transfers ..................................
Less: principal repayments
and other reductions ........................
Less: charge-offs ............................
Balance as of
March 31, 1996 .............................. $ 1,091 $450,671
======== ========
Add: loan originations,
other advances and
transfers ..................................
Less: principal repayments
and other reductions ........................
Less: charge-offs ............................
Balance as of
March 31, 1997 .............................. $ 1,029 $493,019
======== ========
Add: loan originations,
other advances and
transfers ..................................
Less: principal repayments
and other reductions ........................
Less: charge-offs ............................
Balance as of December 31, 1997 .............. $ 1,115 $511,898
======== ========
- -------------
(1) Includes home equity and construction loans.
(2) Activity represents the net drawdowns and repayments.
65
<PAGE>
Asset Quality
Delinquency Procedures. When a borrower fails to make a required
payment on a residential mortgage loan, the Bank attempts to cure the deficiency
by contacting the borrower. Written contacts are made after payment is 15 days
past due and, in most cases, deficiencies are cured promptly. If the delinquency
is not cured by the 30th day, the Bank attempts to contact the borrower by
telephone to arrange payment of the delinquency. If these efforts have not
resolved the delinquency within 45 days after the due date, a second written
notice is sent to the borrower, and on the 60th day a notice is sent to the
borrower warning that foreclosure proceedings will be commenced unless the
delinquent amount is paid. If the delinquency has not been cured within a
reasonable period of time after the foreclosure notice has been sent, the Bank
may obtain a forbearance agreement or may institute appropriate legal action to
foreclose upon the property. If foreclosed, property collateralizing the loan is
sold at a public sale and may be purchased by the Bank. If the Bank is in fact
the successful bidder at the foreclosure sale, upon receipt of a deed to the
property, the Bank generally sells the property at the earliest possible date.
Collection efforts on consumer and commercial real estate loans are
similar to efforts on residential mortgage loans, except that collection efforts
on consumer and commercial real estate loans generally begin within 15 days
after the payment date is missed. In the case of manufactured home loans, the
Company's agreement with Tammac requires Tammac to provide collection services
on any loan that is more than 30 days past due. The Bank also maintains periodic
contact with commercial loan customers and monitors and reviews the borrowers'
financial statements and compliance with debt covenants on a regular basis.
Real estate and other assets acquired by the Bank as a result of
foreclosure or by deed-in-lieu of foreclosure or repossession are classified as
Other Real Estate Owned ("OREO") and Repossessed Property until sold. When
property is classified as OREO and Repossessed Property, it is recorded at the
lower of cost or fair value (net of disposition costs) at that date and any
writedown resulting therefrom is charged to the allowance for loan losses.
Subsequent writedowns are charged to operating expenses. Net expense from OREO
is expensed as incurred.
66
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets. Loans are generally placed on non-accrual
status when the loan is contractually past due 90 days or more or when the
collection of principal and/or interest in full becomes doubtful. When loans are
designated as non-accrual, all accrued but unpaid interest is reversed against
current period income and, as long as the loan remains on non-accrual status,
interest is recognized only when received, if considered appropriate by
management. Foreclosed assets include assets acquired in settlement of loans.
<TABLE>
<CAPTION>
March 31,
December 31, ----------------------------------------------------------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Non-accruing loans:
<S> <C> <C> <C> <C> <C> <C>
Residential real estate(1)....... $4,485 $4,553 $3,496 $1,900 $2,418 $2,198
Commercial real estate........... 4,279 3,239 1,587 1,884 1,805 2,651
Commercial business.............. --- 2,318 75 27 125 112
Manufactured home loans.......... 3,241 2,260 1,597 1,581 1,363 1,125
Financed insurance premiums...... 3,013 2,867 1,527 819 1,114 1,172
Other consumer loans............. 63 45 4 10 39 96
------ -------- -------- ------- ------- --------
Total....................... 15,081 15,282 8,286 6,221 6,864 7,354
------ ------ ----- ----- ----- -----
Accruing loans contractually
past due 90 days or more:
Residential real estate(1)....... 435 570 1,262 400 125 617
Commercial real estate........... 867 3,874 1,316 591 1,686 1,131
Commercial business.............. --- 244 --- --- --- ---
Manufactured home loans.......... --- --- 22 16 63 54
Financed insurance premiums...... --- --- --- --- --- ---
Other consumer loans............. --- 23 --- 122 473 237
------ -------- -------- ------ ------ -------
Total....................... 1,302 4,711 2,600 1,129 2,347 2,039
------ ------- ----- ----- ----- ------
Total non-performing loans......... 16,383 19,993 10,886 7,350 9,211 9,393
====== ====== ====== ===== ===== =====
Foreclosed assets:
Residential real estate.......... 59 48 160 49 10 250
Commercial real estate........... 300 2,860 921 726 1,969 569
Repossessed property............. 700 539 635 503 577 468
------ ------- ------ ------ ------ ------
Total....................... 1,059 3,447 1,716 1,278 2,556 1,287
====== ====== ===== ===== ===== =====
Total non-performing assets........ 17,442 23,440 12,602 8,628 11,767 10,680
====== ====== ====== ===== ====== ======
Allowance for loan losses.......... 6,756 5,872 3,546 3,187 2,917 1,999
====== ======= ======= ===== ======= =======
Allowance for loan losses
as a percentage of
non-performing loans.............. 41.24% 29.37% 32.57% 43.36% 31.67% 21.28%
====== ====== ======= ===== ====== ======
Non-performing loans as
a percentage of total loans....... 3.20% 4.06% 2.42% 1.67% 2.25% 2.41%
==== ==== ==== ==== ==== ====
Non-performing assets
as a percentage of total assets... 2.62% 3.60% 2.02% 1.50% 2.12% 2.07%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------
(1) Includes home equity loans.
Non-Accruing Loans. At December 31, 1997, the Bank had approximately
$15.1 million in non-accruing loans, which constituted 2.9% of the Bank's total
loan portfolio. As of such date, there
67
<PAGE>
were no non-accruing loans or aggregate non-accruing loans-to-one-borrower in
excess of $1.0 million.
For the year ended March 31, 1997 and for the nine months ended
December 31, 1997, gross interest income which would have been recorded had the
non-accruing loans been current in accordance with their original terms amounted
to $1.5 million and $1.1 million, respectively. The amounts that were included
in interest income on such loans were $937 thousand and $586 thousand for the
year ended March 31, 1997, and for the nine months ended December 31, 1997,
respectively, which represented actual receipts. During the periods shown, there
were no troubled debt restructurings.
Accruing Loans Contractually Past Due 90 Days or More. As of December
31, 1997, the Bank had approximately $1.3 million in accruing loans
contractually past due 90 days or more. At December 31, 1997, there were no
accruing loans contractually past due 90 days or more in excess of $1.0 million.
Other Loans of Concern. As of December 31, 1997, there were $6.2
million of other loans not included in the table or discussed above where known
information about the possible credit or other problems of borrowers caused
management to have doubts as to the ability of the borrower to comply with
present loan repayment terms.
The largest of such other loans of concern was a $1.1 million
commercial real estate loan. Although this loan is current and has never been
delinquent, environmental issues related to the property require management to
monitor this loan closely.
There were no other loans in excess of $1.0 million being specially
monitored by the Bank as of December 31, 1997. These loans 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 replenished
through a provision for loan losses charged to operations. Loans are charged
against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Recoveries on loans previously
charged-off are credited to the allowance for loan losses. The allowance is an
amount that management believes will be adequate to absorb losses on existing
loans that may become uncollectible. Management's evaluation of the adequacy of
the allowance for loan losses is performed on a periodic basis and takes into
consideration such factors as the historical loan loss experience, changes in
the nature and volume of the loan portfolio, overall portfolio quality, review
of specific problem loans and current economic conditions that may affect
borrowers' ability to pay.
Although management believes that it uses the best information
available to determine the allowance, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in determining the level of the
allowance. Future additions to the Bank's allowance will be the result of
periodic loan, property and collateral reviews and thus cannot be predicted in
advance. In addition, regulatory agencies, as an integral part of the
examination process, periodically review the Bank's allowance
68
<PAGE>
for loan losses. Such agencies may require the Bank to recognize additions to
the allowance based upon their judgment of the information available to them at
the time of their examination. At December 31, 1997, the Bank had a total
allowance for loan losses of $6.8 million, representing 41.2% of total
non-performing loans.
The following table sets forth an analysis of the Bank's allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended March 31,
December 31, ---------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total loans outstanding
(end of period) ......................... $ 511,898 $ 493,019 $ 450,671 $ 438,875 $ 408,989 $ 389,805
========= ========= ========= ========= ========= =========
Average total loans
outstanding(period to date) ............. 509,634 471,295 444,645 424,187 422,752 376,218
========= ========= ========= ========= ========= =========
Allowance for loan losses
at beginning of period .................. 5,872 3,546 3,187 2,917 1,999 1,994
Loan charge-offs:
Residential real estate(1) ............. (391) (162) (111) (88) (9) (360)
Commercial real estate ................. (1,233) (454) (95) (36) (41) (943)
Commercial business(2) ................. (2,309) (127) -- (86) (113) (118)
Manufactured home loans ................ (331) (216) (372) (288) (95) (10)
Financed insurance premiums ............ (1,608) (1,070) (573) (711) (97) (939)
Other consumer loans ................... (81) (41) (46) (54) (31) (323)
--------- --------- --------- --------- --------- ---------
Total charge-offs ................... (5,953) (2,070) (1,197) (1,263) (386) (2,693)
--------- --------- --------- --------- --------- ---------
Loan recoveries:
Residential real estate(1) ............. 8 3 21 93 -- 8
Commercial real estate ................. 17 11 16 7 -- 45
Commercial business(2) ................. 7 74 6 4 1 1
Manufactured home loans ................ 82 45 70 33 18 15
Financed insurance premiums ............ 284 386 261 161 -- --
Other consumer loans ................... 31 51 49 66 84 86
--------- --------- --------- --------- --------- ---------
Total recoveries .................... 429 570 423 364 103 155
--------- --------- --------- --------- --------- ---------
Loan charge-offs, net
of recoveries ........................... (5,524) (1,500) (774) (899) (283) (2,538)
Provision charged to
operations .............................. 6,408 3,826 1,090 1,169 1,201 2,543
Allowance acquired from
acquisition ............................. -- -- 43 -- -- --
--------- --------- --------- --------- --------- ---------
Allowance for loan losses
at end of period ........................ 6,756 5,872 3,546 3,187 2,917 1,999
========= ========= ========= ========= ========= =========
Ratio of net charge-offs
during the period to
average loans outstanding
during the period ....................... 1.08% 0.32% 0.17% 0.21% 0.07% 0.67%
========= ========= ========= ========= ========= =========
Provision as a percentage
of average loans ........................ 1.26% 0.81% 0.25% 0.28% 0.28% 0.68%
========= ========= ========= ========= ========= =========
Allowance as a percentage
of non-performing loans ................. 41.24% 29.37% 32.57% 43.36% 31.67% 21.28%
========= ========= ========= ========= ========= =========
Allowance as a percentage
of total loans (end
of period) .............................. 1.32% 1.19% 0.79% 0.73% 0.71% 0.51%
========= ========= ========= ========= ========= =========
</TABLE>
- ---------
(1) Includes home equity and construction loans.
(2) Includes warehouse lines of credit.
69
<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 Bank. 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 may be 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>
March 31,
December 31, ----------------------------------------------------------------------
1997 1997 1996
------------------------------- -------------------------------- -----------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Percent of in Each Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category Allowance Allowance Category
for Loan to Total to Total for Loan to Total to Total for Loan to Total to Total
Losses Allowance Loans Losses Allowance Loans Losses Allowance Loans
------ --------- ----- ------ --------- ----- ------ --------- -----
(Dollars in Thousands)
Allocation of allowance
for loan losses:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential real estate(1) $1,285 19.02% 55.10% $ 998 17.00% 56.14% $ 846 23.86% 54.47%
Commercial real estate ... 1,719 25.44 14.44 758 12.91 13.73 658 18.56 15.72
Commercial business ...... 154 2.28 4.10 1,833 31.21 3.99 213 6.01 6.48
loans(2)
Manufactured home loans .. 1,879 27.81 19.20 1,040 17.71 18.79 1,049 29.58 17.84
Financed insurance ....... 1,479 21.90 4.57 1,127 19.19 4.78 442 12.46 3.00
premiums
Other consumer loans ..... 134 1.98 2.37 52 0.89 2.35 25 0.70 2.25
Net deferred loan costs
and unearned discount ... -- -- 0.22 -- -- 0.22 -- -- 0.24
Unallocated .............. 106 1.57 -- 64 1.09 -- 313 8.83 --
--- ---- ---- -- ---- ---- --- ---- ----
Total .................. $6,756 100.00% 100.00% $5,872 100.00% 100.00% $3,546 100.00% 100.00%
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------------------------------------------------
1995 1994 1993
------------------------------- -------------------------------- ----------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Percent of in Each Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category Allowance Allowance Category
for Loan to Total to Total for Loan to Total to Total for Loan to Total to Total
Losses Allowance Loans Losses Allowance Loans Losses Allowance Loans
------ --------- ----- ------ --------- ----- ------ --------- -----
(Dollars in Thousands)
Allocation of allowance
for loan losses:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential real estate(1) $ 815 25.57% 59.21% $ 480 16.46% 58.76% $ 826 41.32% 57.35%
Commercial real estate ... 538 16.88 16.02 356 12.20 16.03 287 14.36 15.20
Commercial business ...... 275 8.63 4.20 157 5.38 5.47 169 8.46 4.35
loans(2)
Manufactured home loans .. 699 21.93 16.45 418 14.33 15.96 334 16.71 20.23
Financed insurance ....... 272 8.54 1.98 355 12.17 1.74 184 9.20 1.35
premiums
Other consumer loans ..... 24 0.75 1.93 49 1.68 1.90 91 4.55 2.50
Net deferred loan costs
and unearned discount ... -- -- 0.21 -- -- 0.14 -- -- (0.98)
Unallocated .............. 564 17.70 -- 1,102 37.78 -- 108 5.40 --
--- ----- ---- ----- ----- ---- --- ---- ----
Total .................. $3,187 100.00% 100.00% $2,917 100.00% 100.00% $1,999 100.00% 100.00%
====== ====== ======
</TABLE>
- -------------
(1) Includes home equity and construction loans.
(2) Includes warehouse lines of credit.
70
<PAGE>
Investment Activities
The Bank is authorized 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, the Bank may also invest its assets in
investment grade commercial paper and corporate debt securities and mutual funds
whose assets conform to the investments that the Bank is otherwise authorized to
make directly. As of December 31, 1997, the Bank did not hold any securities to
one issuer which exceeded 10% of equity, excluding securities issued by U.S.
Government agencies.
Generally, the investment policy of the Bank is to invest funds among
various categories of investments and maturities based upon the Bank's need for
liquidity, to achieve the proper balance between its desire to minimize risk and
maximize yield, and, to a much lesser extent, to provide collateral for
borrowings and to fulfill the Bank's asset/liability management policies. To
date, the Bank's investment strategy has been directed toward high-quality
assets (primarily federal agency obligations and high grade corporate debt
securities) with short and intermediate terms (five years or less) to maturity.
At December 31, 1997, the weighted average term to maturity or repricing of the
security portfolio was 2.8 years. This did not take into account securities
which may be called prior to their contractual maturity or repricing. See Notes
3 and 4 of the Notes to Consolidated Financial Statements for information
regarding the maturities of the Bank's securities.
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and ability to hold debt
securities to maturity, they are stated at amortized cost. If securities are
purchased for the purpose of selling them in the near term, they are classified
as trading securities and are reported at fair value with unrealized holding
gains and losses reflected in current earnings. All other debt and marketable
equity securities are classified as securities available for sale and are
reported at fair value, with net unrealized gains or losses reported, net of
income taxes, as a separate component of equity. As a member of the FHLB of New
York, the Bank is required to hold FHLB of New York stock which is carried at
cost since there is no readily available market value. Historically, the Bank
has not held any securities considered to be trading securities.
71
<PAGE>
The following table sets forth the composition of the Bank's securities
portfolios at the dates indicated. As of December 31, 1997, the Bank did not
hold securities of any one issuer having an aggregate book value in excess of
10% of the Bank's equity.
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------
December 31, 1997 1997 1996 1995
------------------ ----------------- ------------------ ------------------
Carrying % of Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total Value Total
----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
Securities available for sale, at fair value:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities......... $36,943 85.35% $37,329 81.82% $33,452 65.05% $2,937 29.78%
Corporate debt securities..................... 6,339 14.65 8,294 18.18 17,977 34.95 6,926 70.22
-------- ----- ------- ------- -------- ------- ------- -------
Total securities available for sale......... $43,282 100.00% $45,623 100.00% $51,429 100.00% $9,863 100.00%
======= ====== ======= ====== ======= ====== ====== ======
Investment securities, at amortized cost:
U.S. Government and Agency securities......... $19,974 28.04% $17,960 22.71% $13,957 16.81% $14,937 16.67%
Mortgage-backed securities.................... 4,517 6.34 3,050 3.86 4,221 5.09 2,591 2.89
Corporate debt securities..................... 46,743 65.61 57,648 72.91 63,557 76.57 69,238 77.29
State, county and municipal.................... 10 .01 410 .52 1,268 1.53 2,820 3.15
-------- -------- -------- -------- -------- -------- --------- ------
Total investment securities................. $71,244 100.00% $79,068 100.00% $83,003 100.00% $89,586 100.00%
======= ====== ======= ====== ======= ====== ======= ======
Investment securities, at fair value............ $71,608 100.51% $78,753 99.60% $83,122 100.14% $87,608 97.79%
======= ====== ======= ===== ======= ====== ======= =====
</TABLE>
72
<PAGE>
The following table sets forth information regarding the scheduled
maturities, amortized cost, and weighted average yields for the Bank's
securities portfolios at December 31, 1997 by contractual maturity. The table
does not take into consideration the effects of scheduled repayments or possible
prepayments.
<TABLE>
<CAPTION>
Less than 1 year 1 to 5 years 5 to 10 years Over 10 years
--------------------- -------------------- -------------------- --------------------
Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield
---- ----- ---- ----- ---- ----- ---- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available
for sale:
U.S. Government and
Agency securities ......... $ -- --% $ 33,955 6.38% $3,000 6.94% $ -- --%
Corporate debt
securities ................ 1,000 7.27 5,274 6.88 -- -- -- --
-------- ----- --------- ---- ------ ---- ----- ----
Total securities
available for sale ........ $ 1,000 7.27% $39,229 6.45% $3,000 6.94% $ -- --%
======= ===== ========= ===== ====== ===== ====== ====
Investment securities:
U.S. Government
and Agency securities ..... $ 4,998 5.34% $14,976 6.41% $ -- --% $ -- --%
Mortgage-backed securities . -- -- 280 6.00 2,586 7.22 1,651 6.88
Corporate debt securities .. 20,894 6.21 24,863 6.72 986 6.64 -- --
State, county and municipal -- -- -- -- 10 9.32 -- --
------- ----- ------- ----- ------ ---- -------- -----
Total investment securities $25,892 6.04% $40,119 6.60% $3,582 7.07% $ 1,651 6.88%
======= ===== ======= ===== ======= ===== ======== =====
</TABLE>
Total Securities
--------------------------------
Weighted
Amortized Average Fair
Cost Yield Value
---- ----- -----
(Dolars in Thousands)
Securities available
for sale:
U.S. Government and
Agency securities ........ $ 36,955 6.43% $36,943
Corporate debt
securities ................ 6,274 6.94 6,339
------- ----- -------
Total securities
available for sale ........ $ 43,229 6.50% $43,282
======= ===== =======
Investment securities:
U.S. Government
and Agency securities ..... $ 19,974 6.14% $20,034
Mortgage-backed securities . 4,517 7.02 4,515
Corporate debt securities .. 46,743 6.49 47,049
State, county and municipal 10 9.32 10
-------- ---- -------
Total investment securities $ 71,244 6.43% $71,608
======= ===== =======
73
<PAGE>
Sources of Funds
General. The Bank's primary sources of funds are deposits, amortization
and prepayment of loan principal, maturities of securities, short-term
investments, funds provided from operations and borrowings.
Deposits. HCSI offers a variety of deposit accounts having a range of
interest rates and terms. The Bank's deposits consist of passbook and statement
savings accounts, money market accounts, transaction accounts, and time deposits
currently ranging in terms from three months to six years. The Bank only
solicits deposits from its primary market area and does not have brokered
deposits. The Bank relies primarily on competitive pricing policies, advertising
and customer service to attract and retain these deposits. At December 31, 1997,
the Bank's deposits totaled $586.2 million, of which $549.8 million were
interest bearing deposits.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition. The variety of deposit accounts offered by the Bank has allowed it
to be competitive in obtaining funds and to respond with flexibility to changes
in consumer demand. The Bank has become more susceptible to short-term
fluctuations in deposit flows, as customers have become more interest rate
conscious. The Bank manages the pricing of its deposits in keeping with its
asset/liability management, liquidity and profitability objectives. Based on its
experience, the Bank believes that its passbook and statement savings, money
market accounts and transaction accounts are relatively stable sources of
deposits. However, the ability of the Bank to attract and maintain time deposits
and the rates paid on these deposits has been and will continue to be
significantly affected by market conditions.
74
<PAGE>
The following table illustrates the Bank's deposit flows by account
type during the periods indicated.
<TABLE>
<CAPTION>
Time N.O.W./Money Non-interest Total Number
Savings Deposits Markets Bearing Total of Accounts
------- -------- ------- ------- ----- -----------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
Balance as of March 31, 1995........ $138,621 $263,840 $92,511 $19,479 $514,451
Net deposits/withdrawals............ (12,864) 22,201 (1,524) 9,004 16,817
Interest credited................... 4,275 16,713 2,932 --- 23,920
--------- ---------- --------- ---------- ----------
Balance as of March 31, 1996........ 130,032 302,754 93,919 28,483 555,188 60,138
Net deposits/withdrawals............ 1,554 (13,095) (4,403) 274 (15,670)
Interest credited................... 4,523 17,727 2,831 --- 25,081
---------- -------- --------- --------- --------
Balance as of March 31, 1997........ 136,109 307,386 92,347 28,757 564,599 63,866
Net deposits/withdrawals............ 790 (5,618) (479) 7,664 2,357
Interest credited................... 3,584 13,513 2,178 --- 19,275
---------- --------- --------- ---------- ----------
Balance as of December 31, 1997..... $140,483 $315,281 $94,046 $36,421 $586,231 76,854
======== ======== ======= ======= ========
</TABLE>
75
<PAGE>
The following tables sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Bank as of the dates indicated.
<TABLE>
<CAPTION>
Balance as of
Balance as of March 31,
December 31, ---------------------------------------------------------------------
1997 1997 1996 1995
--------------------- ------------------- --------------------- ---------------------
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts
(3.00% to 3.92%) .............. $140,483 23.97% $136,109 24.11% $130,032 23.42% $138,621 26.94%
N.O.W. and money
market accounts
(2.00% to 4.88%) ............... 94,046 16.04 92,347 16.36 93,919 16.92 92,511 17.98
Time deposits:
2.00 - 2.99% ................... 470 0.08 -- -- -- -- -- --
3.00 - 3.99% ................... 419 0.07 824 0.15 958 0.17 6,625 1.29
4.00 - 4.99% ................... 3,497 0.60 15,319 2.71 32,165 5.79 44,052 8.56
5.00 - 5.99% ................... 259,419 44.25 228,732 40.51 149,852 26.99 93,839 18.24
6.00 - 6.99% ................... 15,659 2.67 27,070 4.79 84,703 15.26 86,972 16.91
7.00 - 7.99% ................... 35,817 6.11 35,441 6.28 34,516 6.22 31,024 6.03
8.00 - 8.99% ................... -- -- -- -- 560 0.10 1,328 0.26
-------- ------ ------- ----- ------- ----- ------ ------
Total time
deposit accounts ........... 315,281 53.78 307,386 54.44 302,754 54.53 263,840 51.29
-------- ------ -------- ----- -------- ------ ------- ------
Non-interest bearing
accounts ...................... 36,421 6.21 28,757 5.09 28,483 5.13 19,479 3.79
Total deposits ................. $586,231 100.00% $564,599 100.00% $555,188 100.00% $514,451 100.00%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
76
<PAGE>
The following table shows rate and maturity information for the Bank's
time deposits as of December 31, 1997.
<TABLE>
<CAPTION>
Amount Due
-----------------------------------------------------------------------------------------------------------
12 month 12 month 12 month 12 month 12 month
period ended period ended period ended period ended period ended
December 31, December 31, December 31, December 31, December 31,
1998 1999 2000 2001 2002 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(In Thousands)
Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C>
2.00 - 2.99%..... $ 470 $ --- $ --- $ --- $ --- $ --- $ 470
3.00 - 3.99%..... 419 --- --- --- --- --- 419
4.00 - 4.99%..... 3,377 120 --- --- --- --- 3,497
5.00 - 5.99%..... 164,824 69,240 14,155 8,364 2,037 799 259,419
6.00 - 6.99%..... 7,737 5,609 1,203 902 208 --- 15,659
7.00 - 7.99%..... 1,533 26,050 2,824 5,410 --- --- 35,817
8.00 - 8.99%..... --- --- --- --- --- --- ---
-------- -------- ------- ------- ------ ------ --------
Total......... $178,360 $101,019 $18,182 $14,676 $2,245 $ 799 $315,281
======== ======== ======= ======= ====== ====== ========
</TABLE>
77
<PAGE>
The following table indicates, as of December 31, 1997, the amount of
the Bank's time deposits of $100,000 or more by time remaining until maturity.
<TABLE>
<CAPTION>
Maturity
-----------------------------------------------
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 of $100,000 or more....... $ 5,861 $4,401 $11,839 $20,344 $42,445
</TABLE>
Borrowings. Although deposits are the Bank's primary source of funds,
the Bank's practice has been to utilize borrowings when they are a less costly
source of funds, can be invested at a positive interest rate spread or when the
Bank needs additional funds to satisfy loan demand.
HCSI's borrowings historically have consisted of advances from the FHLB
of New York. Such advances can be made pursuant to several different credit
programs, each of which has its own interest rate and range of maturities. The
Bank currently maintains available lines of credit and is currently authorized
to borrow up to $65.2 million on lines of credit with the FHLB of New York. At
December 31, 1997, the Bank had outstanding $2.0 million in borrowings from the
FHLB of New York. See Note 15 of the Notes to Consolidated Financial Statements.
The Bank may increase its borrowings in order to fund the acquisition of
additional securities following the conversion.
Subsidiary and Other Activities
Hudson City Associates, Inc. Hudson City Associates, Inc. ("HCAI"), a
wholly owned subsidiary of the Bank, was incorporated in 1984 but remained
inactive until 1990. In 1990, HCAI formed a partnership known as Premium Payment
Plan (referred to herein as "PPP"), pursuant to which the Bank provides premium
financing for non-standard and sub-standard personal automobile insurance and
certain lines of commercial insurance. See "Lending Activities -- Consumer
Lending."
Hudson River Mortgage Corporation. A wholly owned subsidiary of the
Bank, Hudson River Mortgage Corporation ("HRMC") was organized in 1996 to broker
mortgages to the Bank and other financial institutions.
Hudson River Funding Corp. Hudson River Funding Corp. ("HRFC") is a
Real Estate Investment Trust formed in 1997 to enhance liquidity, portfolio
yields and capital growth. The Bank funded HRFC with approximately $185.0
million of earning assets consisting of residential mortgage loans, commercial
real estate loans, home equity loans, home improvement loans and debt
securities. Interest income earned on the assets held by HRFC is passed through
to the Bank in the form of dividends.
Trust Operations. The Bank began operating a trust department in 1995.
The Trust Department provides trust-related services for a variety of trust
account types, including personal trusts and estates and employee benefit
trusts. The Trust Department is administered by the Trust
78
<PAGE>
Committee of the Bank. Income from the Trust Department is currently an
immaterial portion of the Bank's total other operating income.
Competition
HCSI faces strong competition, both in originating real estate and
other loans and in attracting deposits. Competition in originating real estate
loans comes primarily from other savings institutions, commercial banks, credit
unions and mortgage bankers making loans secured by real estate located in the
Bank's primary market area. Other savings institutions, commercial banks, credit
unions and finance companies provide vigorous competition in consumer lending.
The Bank also faces strong competition in its efforts to provide insurance
premium financing through PPP from a variety of other lenders, some of which
have much greater assets and resources than the Bank.
The Bank attracts all of its deposits through its branch offices,
primarily from the communities in which those branch offices are located;
therefore, competition for those deposits is principally from mutual funds and
other savings institutions, commercial banks and credit unions located in the
same communities. The Bank competes for these deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours, and convenient
branch locations with interbranch deposit and withdrawal privileges. Automated
teller machine facilities are also available.
Employees
At December 31, 1997, the Bank had 269 full-time employees and 30
part-time employees. The Bank's employees are not represented by any collective
bargaining group. Management considers its employee relations to be good.
Properties
The Bank conducts its business at its main office and 11 other banking
offices. The following table sets forth information relating to each of the
Bank's offices as of December 31, 1997. The net book value of the Bank's
premises and equipment (including land, building and leasehold improvements and
furniture, fixtures and equipment) at December 31, 1997 was $15.8 million. See
Note 7 of Notes to Consolidated Financial Statements. HCSI believes that its
current facilities are adequate to meet the present and foreseeable needs of the
Bank and the Holding Company, subject to possible future expansion.
79
<PAGE>
<TABLE>
<CAPTION>
Total
Owned Lease Approximate
Date or Expiration Square Net Book
Location Acquired Leased Date Footage Value
- -------- -------- ------ ---- ------- -----
Main Office:
<S> <C> <C> <C> <C> <C>
One Hudson City Centre(1) 1990 Owned --- 64,433 $ 8,611,213
Corner of State and Green Streets
Hudson, New York 12534
Branch Offices:
Coleman Street 1970 Owned --- 6,330 402,466
Chatham, New York 12037
Route 9 (3) 1994 Owned --- 4,873 1,508,599
Valatie, New York 12184
Church Street 1974 Owned --- 1,798 270,073
Copake, New York 12516
Route 20 and McClellen 1975 Owned --- 3,260 269,316
Nassau, New York 12123
23 Fairview Plaza 1983 Leased April 1998(5) 4,500 48,368
160 Fairview Avene
Hudson, New York 12534
41 State Street 1989 Leased September 1999(5) 3,200 1,038
Albany, New York 12201
Greenport Town Center(2) 1994 Leased June 1999(5) 362 32,148
Fairview Avenue
Hudson, New York 12534
Route 44 East 1994 Owned --- 2,560 269,508
Millerton, New York 12546
622 Columbia Turnpike (4) 1996 Owned/ July 2000(5) 2,996 643,478
East Greenbush, New York 12061 Leased
3-93 Carman Road 1996 Leased December 2000(5) 2,300 137,638
Schenectady, New York 12303
2628 Route 23(2) 1997 Leased May 2002(5) 374 34,807
Hillsdale, New York 12529
</TABLE>
- ------------
(1) On January 5, 1998, the Bank's Warren Street branch was relocated to the
Bank's main office.
(2) Banking operations are located inside of supermarkets at these locations.
(3) Branch relocated to this address in 1994 from previous location.
(4) Bank owns the building and leases the land.
(5) Does not include renewable terms.
80
<PAGE>
Legal Proceedings
HCSI is involved as plaintiff or defendant in various legal actions
arising in the normal course of its business. While the ultimate outcome of
these proceedings cannot be predicted with certainty, management, after
consultation with counsel representing HCSI in the proceedings, does not expect
that the resolution of these proceedings will have a material effect on the
Bank's financial condition and results of operations.
REGULATION
Set forth below is a brief description of the laws and regulations
applicable to the Holding Company and the Bank which management currently
believes are material to an investor's decision whether to purchase Holding
Company Common Stock in the Offering. No assurance can be given, however, that
under certain circumstances, other laws and regulations will not be applicable
to and materially affect the Holding Company and the Bank. The description of
the laws and regulations hereunder, as well as descriptions of laws and
regulations contained elsewhere herein, does not purport to be complete and is
qualified in its entirety by reference to applicable laws and regulations.
The Holding Company
General. Upon consummation of the Conversion, the Holding Company will
become subject to regulation as a savings and loan holding company under the
Home Owners Loan Act, as amended ("HOLA"), instead of being subject to
regulation as a bank holding company under the Bank Holding Company Act of 1956
because the Bank has made an election under Section 10(1) of HOLA to be treated
as a "savings association" for purposes of Section 10(e) of HOLA. As a result,
the Company will be required to register with the OTS and will be subject to OTS
regulations, examinations, supervision and reporting requirements relating to
savings and loan holding companies. The Holding Company will also be required to
file certain reports with, and otherwise comply with the rules and regulations
of, the New York State Banking Board (the "NYBB" or the "Board" and the
Securities and Exchange Commission ("SEC"). As a subsidiary of a savings and
loan holding company, the Bank will be subject to certain restrictions in its
dealings with the Company and affiliates thereof.
Activities Restrictions. Upon consummation of the Conversion, the Bank
will be the sole savings association subsidiary of the Holding Company. There
are generally no restrictions on the activities of a savings and loan holding
company which holds only one subsidiary savings institution. However, if the
Director of the OTS determines that there is reasonable cause to believe that
the continuation by a savings and loan holding company of an activity
constitutes a serious risk to the financial safety, soundness or stability of
its subsidiary savings institution, he may impose such restrictions as are
deemed necessary to address such risk, including limiting (i) payment of
dividends by the savings institution; (ii) transactions between the savings
institution and its affiliates; and (iii) any activities of the savings
institution that might create a serious risk that the liabilities of the holding
company and its affiliates may be imposed on the savings institution.
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings institution subsidiary of
such a holding company fails to meet the qualified thrift lender
81
<PAGE>
("QTL") test, as discussed under "--Qualified Thrift Lender Test," then such
unitary holding company also shall become subject to the activities restrictions
applicable to multiple savings and loan holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, shall
register as, and become subject to the restrictions applicable to, a bank
holding company. See "--Qualified Thrift Lender Test."
If the Holding Company were to acquire control of another savings
institution, other than through merger or other business combination with the
Bank, the Holding Company would thereupon be become a multiple savings and loan
holding company. Except where such acquisition is pursuant to the authority to
approve emergency thrift acquisitions and where each subsidiary savings
institution meets the QTL test, as set forth below, the activities of the
Holding Company and any of its subsidiaries (other than the Bank or other
subsidiary savings institutions) would thereafter be subject to further
restrictions. Among other things, no multiple savings and loan holding company
or subsidiary thereof which is not a savings institution shall commence or
continue for a limited period of time after becoming a multiple savings and loan
holding company or subsidiary thereof any business activity other than: (i)
furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
savings institution; (iv) holding or managing properties used or occupied by a
subsidiary savings institution; (v) acting as trustee under deeds of trust; (vi)
those activities authorized by regulation as of March 5, 1987 to be engaged in
by multiple savings and loan holding companies; or (vii) unless the Director of
the OTS by regulation prohibits or limits such activities for savings and loan
holding companies, those activities authorized by the FRB as permissible for
bank holding companies. Those activities described in clause (vii) above also
must be approved by the Director of the OTS prior to being engaged in by a
multiple savings and loan holding company.
Qualified Thrift Lender Test. Under Section 2303 of the Economic Growth
and Regulatory Paperwork Reduction Act of 1996, a savings association can comply
with the QTL test by either meeting the QTL test set forth in the HOLA and
implementing regulations or qualifying as a domestic building and loan
association as defined in Section 7701(a)(19) of the Internal Revenue Code of
1986, as amended. A savings bank subsidiary of a savings and loan holding
company that does not comply with the QTL test must comply with the following
restrictions on its operations: (i) the institution may not engage in any new
activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the institution shall be restricted to those of a national bank, (iii)
the institution shall not be eligible to obtain any advances from its FHLB; and
(iv) payment of dividends by the institution shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings institution ceases to meet the QTL test, it must
cease any activity and not retain any investment not permissible for a national
bank and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
The QTL test set forth in the HOLA requires that qualified thrift
investments ("QTls") represent 65% of portfolio assets of the savings
institution and its consolidated subsidiaries. Portfolio assets are defined as
total assets less intangibles, property used by a savings association in its
business and liquidity investments in an amount not exceeding 20% of assets.
Generally, QTls
82
<PAGE>
are residential housing related assets. The 1996 amendments allow small business
loans, credit card loans, student loans and loans for personal, family and
household purposes to be included without limitation as qualified investments.
At December 31, 1997, approximately 88% of the Bank's assets were invested in
QTIs, which was in excess of the percentage required to qualify the Bank under
the QTL test in effect at that time.
Limitations on Transactions with Affiliates. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company or
entity which controls, is controlled by or is under common control with the
savings institution. In a holding company context, the parent holding company of
a savings institution (such as the Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
institution. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or,
at least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar transactions.
In addition, Sections 22(g) and (h) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22 (h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the institution and (ii) does not
give preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution. Section 22(h) also requires prior board approval for certain loans.
In addition, the aggregate amount of extensions of credit by a savings
institution to all insiders cannot exceed the institution's unimpaired capital
and surplus. Furthermore, Section 22(g) places additional restrictions on loans
to executive officers. At December 31, 1997, the Bank was in compliance with the
above restrictions.
Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or (ii)
more than 5% of the voting shares of a savings institution or holding company
thereof which is not a subsidiary. Except with the prior approval of the
Director, no director or officer of a savings and loan holding company or person
owning or controlling by proxy or otherwise more than 25% of such company's
stock, may acquire control of any savings institution, other than a subsidiary
savings institution, or of any other savings and loan holding company.
83
<PAGE>
The Director may only approve acquisitions resulting in the formation
of a multiple savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan holding
company involved controls a savings institution which operated a home or branch
office located in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant,,to the emergency acquisition provisions of the Federal
Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by the state-chartered institutions or savings and loan holding
companies located in the state where the acquiring entity is located (or by a
holding company that controls such state chartered savings institutions).
Federal Securities Laws. The Company has filed with the SEC a
registration statement under the Securities Act, for the registration of the
Common Stock to be issued pursuant to the Conversion. Upon completion of the
Conversion, the Company's Common Stock will be registered with the SEC under
Section 12(g) of the Exchange Act. The Company will then be subject to the proxy
and tender offer rules, insider trading reporting requirements and restrictions,
and certain other requirements under the Exchange Act.
The registration under the Securities Act of shares of the Common Stock
to be issued in the Conversion does not cover the resale of such shares. Shares
of Common Stock purchased by persons who are not affiliates of the Company may
be sold without registration. Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's sale
to be aggregated with those of certain other persons) would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks.
The Bank
General. The Bank is subject to extensive regulation and examination by
the NYSBD, as its chartering authority, and by the FDIC, as the insurer of its
deposits, and, upon Conversion, will be subject to certain requirements
established by the OTS as a result of the Company's savings and loan holding
company status. The federal and state laws and regulations which are applicable
to banks regulate, among other things, the scope of their business, their
investments, their reserves against deposits, the timing of the availability of
deposited funds and the nature and amount of and collateral for certain loans.
The Bank must file reports with the NYSBD and the FDIC concerning its activities
and financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as establishing branches and mergers
with, or acquisitions of, other depository institutions. There are periodic
examinations by the NYSBD and the FDIC to test the Bank's compliance with
various regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement
84
<PAGE>
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulation, whether by the NYSBD,
the FDIC or as a result of the enactment of legislation, could have a material
adverse impact on the Company, the Bank and their operations.
Capital Requirements. The FDIC has promulgated regulations and adopted
a statement of policy regarding the capital adequacy of state-chartered banks
which, like the Bank, will not be members of the Federal Reserve System.
The FDIC's capital regulations establish a minimum 3.0% Tier I leverage
capital requirement for the most highly-rated state-chartered, non-member banks,
with an additional cushion of at least 100 to 200 basis points for all other
state-chartered, non-member banks, which effectively will increase the minimum
Tier I leverage ratio for such other banks to 4.0% to 5.0% or more. Under the
FDIC's regulation, the highest-rated banks are those that the FDIC determines
are not anticipating or experiencing significant growth and have well
diversified risk, including no undue interest rate risk exposure, excellent
asset quality, high liquidity, good earnings and, in general, which are
considered a strong banking organization and are rated composite I under the
Uniform Financial Institutions Rating System. Leverage or core capital is
defined as the sum of common stockholders' equity (including retained earnings),
noncumulative perpetual preferred stock and related surplus, and minority
interests in consolidated subsidiaries, minus all intangible assets other than
certain qualifying supervisory goodwill and certain mortgage servicing rights.
The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier 1 capital and
supplementary (Tier 2) capital) to risk-weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off-balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the
FDIC believes are inherent in the type of asset or item. The components of Tier
I capital are equivalent to those discussed above under the 3% leverage capital
standard. The components of supplementary capital include certain perpetual
preferred stock, certain mandatory convertible securities, certain subordinated
debt and intermediate preferred stock and general allowances for loan and lease
losses. Allowance for loan and lease losses includable in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of
capital counted toward supplementary capital cannot exceed 100% of core capital.
At December 31, 1997, the Bank met each of its capital requirements.
In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account of
the exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate risk
management process, the overall financial condition of the bank and the level of
other risks at the bank for which capital is needed. Institutions with
significant interest rate risk may be required to hold additional capital. The
agencies recently issued a joint policy statement providing guidance on interest
rate risk management, including a discussion of the critical factors affecting
the agencies' evaluation of interest rate risk in connection with capital
adequacy. The agencies have determined
85
<PAGE>
not to proceed with a previously issued proposal to develop a supervisory
framework for measuring interest rate risk and an explicit capital component for
interest rate risk.
See "--Capital Requirements" for information with respect to the Bank's
historical leverage and risk-based capital at December 31, 1997 and pro forma
after giving effect to the issuance of shares in the Offerings.
Activities and Investments of New York-Chartered Savings Banks. The
Bank derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and regulations, as limited
by FDIC regulations and other federal laws and regulations. See "--Activities
and Investments of FDIC-Insured State--Chartered Banks." These New York laws and
regulations authorize savings banks, including the Bank, to invest in real
estate mortgages, consumer and commercial loans, certain types of debt
securities, including certain corporate debt securities and obligations of
federal, State and local governments and agencies, certain types of corporate
equity securities and certain other assets. Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities. Investment in stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below. Such
equity securities must meet certain tests of financial performance. A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers. A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
permitted under the New York State Banking Law. This authority permits
investments in otherwise impermissible investments of up to 1% of the savings
bank's assets in any single investment, subject to certain restrictions and to
an aggregate limit for all such investments of up to 5% of assets. Additionally,
in lieu of investing in such securities in accordance with the reliance upon the
specific investment authority set forth in the New York State Banking Law,
savings banks are authorized to elect to invest under a "prudent person"
standard in a wider range of debt and equity securities as compared to the types
of investments permissible under such specific investment authority. However, in
the event a savings bank elects to utilize the "prudent person" standard, it
will be unable to avail itself of the other provisions of the New York State
Banking Law and regulations which set forth specific investment authority. A New
York chartered stock savings bank may also exercise trust powers upon approval
of the Department.
New York-chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power to
invest in corporations that engage in various activities authorized for savings
banks, plus any additional activities which may be authorized by the NYBB.
Investment by a savings bank in the stock, capital notes and
86
<PAGE>
debentures of its service corporations is limited to 3% of the bank's assets,
and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets.
With certain limited exceptions, a New York-chartered savings bank may
not make loans or extend credit for commercial, corporate or business purposes
(including lease financing) to a single borrower, the aggregate amount of which
would be in excess of 15% of the bank's net worth. The Bank currently complies
with all applicable loans-to-one-borrower limitations.
Activities and Investments of FDIC-Insured State-Chartered Banks. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally may
not directly or indirectly acquire or retain any equity investment of a type, or
in an amount, that is not permissible for a national bank. An insured state bank
is not prohibited from, among other things, (i) acquiring or retaining a
majority interest in a subsidiary, (ii) investing as a limited partner in a
partnership the sole purpose of which is direct or indirect investment in the
acquisition, rehabilitation or new construction of a qualified housing project,
provided that such limited partnership investments may not exceed 2% of the
bank's total assets, (iii) acquiring up to 10% of the voting stock of a company
that solely provides or reinsures directors', trustees' and officers' liability
insurance coverage or bankers' blanket bond group insurance coverage for insured
depository institutions, and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met. In addition, an
FDIC-insured state-chartered bank may not directly, or indirectly through a
subsidiary, engage as "principal" in any activity that is not permissible for a
national bank unless the FDIC has determined that such activities would pose no
risk to the insurance fund of which it is a member and the bank is in compliance
with applicable regulatory capital requirements.
Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. 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 against banking organizations and institution-affiliated
parties, as defined. 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 regulatory authorities.
Under the New York State Banking Law, the Department may issue an order
to a New York- chartered banking institution to appear and explain an apparent
violation of law, to discontinue unauthorized or unsafe practices and to keep
prescribed books and accounts. Upon a finding by the Department that any
director, trustee or officer of any banking organization has violated any law,
or has continued unauthorized or unsafe practices in conducting the business of
the banking organization after having been notified by the Department to
discontinue such practices, such director, trustee or officer may be removed
from office by the Department after notice and an opportunity to be heard. The
Bank does not know of any past or current practice, condition or violation that
might lead to any proceeding by the Department against the Bank or any of its
87
<PAGE>
directors or officers. The Department also may take possession of a banking
organization under specified statutory criteria.
Prompt Corrective Action. Section 38 of the Federal Deposit Insurance
Act ("FDIA") provides the federal banking regulators with broad power to take
"prompt corrective action" to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Under regulations adopted by the federal banking regulators,
an institution shall be deemed to be (i) "well capitalized" if it has total
risk-based capital ratio of 10.0% or more, has a Tier I risk-based capital ratio
of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure, (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of
4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0% under
certain circumstances) and does not meet the definition of "well capitalized,"
(iii) "undercapitalized" if it has a total risk-based capital ratio that is less
than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I
leverage capital ratio that is less than 4.0% (3.0% under certain
circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital
ratio that is less than 3.0% or a Tier I leverage capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. The regulations also
provide that a federal banking regulator may, after notice and an opportunity
for a hearing, reclassify a "well capitalized" institution as "adequately
capitalized" and may require an "adequately capitalized" institution or an
"undercapitalized" institution to comply with supervisory actions as if it were
in the next lower category if the institution is in an unsafe or unsound
condition or engaging in an unsafe or unsound practice. The federal banking
regulator may not, however, reclassify a "significantly undercapitalized"
institution as "critically undercapitalized."
An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with an appropriate federal banking
regulator within 45 days of the date that the institution receives notice or is
deemed to have notice that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Immediately upon becoming
undercapitalized, an institution becomes subject to statutory provisions which,
among other things, set forth various mandatory and discretionary restrictions
on the operations of such an institution.
At December 31, 1997, the Bank had capital levels which qualified it as
a "well capitalized" institution.
FDIC Insurance Premiums. The Bank is a member of the BIF administered
by the FDIC but has accounts insured by both the BIF and the SAIF. The
SAIF-insured accounts are held by the Bank as a result of certain acquisitions
and branch purchases and amounted to $4.1 million as of December 31, 1997. As
insurer, the FDIC is authorized to conduct examinations of, and to require
reporting by, FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from
88
<PAGE>
engaging in any activity the FDIC determines by regulation or order to pose a
serious threat to the FDIC.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances which would result in
termination of the Bank's deposit insurance.
Brokered Deposits. The FDIA restricts the use of brokered deposits by
certain depository institutions. Under the FDIA and applicable regulations, (i)
a "well capitalized insured depository institution" may solicit and accept,
renew or roll over any brokered deposit without restriction, (ii) an "adequately
capitalized insured depository institution" may not accept, renew or roll over
any brokered deposit unless it has applied for and been granted a waiver of this
prohibition by the FDIC and (iii) an "undercapitalized insured depository
institution" may not (x) accept, renew or roll over any brokered deposit or (y)
solicit deposits by offering an effective yield that exceeds by more than 75
basis points the prevailing effective yields on insured deposits of comparable
maturity in such institution's normal market area or in the market area in which
such deposits are being solicited. The term "undercapitalized insured depository
institution" is defined to mean any insured depository institution that fails to
meet the minimum regulatory capital requirement prescribed by its appropriate
federal banking agency. The FDIC may, on a case-by-case basis and upon
application by an adequately capitalized insured depository institution, waive
the restriction on brokered deposits upon a finding that the acceptance of
brokered deposits does not constitute an unsafe or unsound practice with respect
to such institution. The Bank had no brokered deposits outstanding at December
31, 1997.
Community Investment and Consumer Protection Laws. In connection with
its lending activities, the Bank is subject to a variety of federal laws
designed to protect borrowers and promote lending to various sectors of the
economy and population. Included among these are the federal Home Mortgage
Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act,
Equal Credit Opportunity Act, Fair Credit Reporting Act and Community
Reinvestment Act ("CRA").
The CRA requires insured institutions to define the communities that
they serve, identify the credit needs of those communities and adopt and
implement a "Community Reinvestment Act Statement" pursuant to which they offer
credit products and take other actions that respond to the credit needs of the
community. The responsible federal banking regulator (in the case of the Bank,
the FDIC) must conduct regular CRA examinations of insured financial
institutions and assign to them a CRA rating of "outstanding," "satisfactory,"
"needs improvement" or "unsatisfactory." The Bank's current federal CRA rating
is "outstanding."
89
<PAGE>
The Bank is also subject to provisions of the New York State Banking
Law which impose continuing and affirmative obligations upon banking
institutions organized in New York State to serve the credit needs of its local
community ("NYCRA"), which are similar to those imposed by the CRA. Pursuant to
the NYCRA, a bank must file an annual NYCRA report and copies of all federal CRA
reports with the Department. The NYCRA requires the Department to make an annual
written assessment of a bank's compliance with the NYCRA, utilizing a
four-tiered rating system, and make such assessment available to the public. The
NYCRA also requires the Department to consider a bank's NYCRA rating when
reviewing a bank's application to engage in certain transactions, including
mergers, asset purchases and the establishment of branch offices or automated
teller machines, and provides that such assessment may serve as a basis for the
denial of any such application. The Bank's latest NYCRA rating, received from
the Department was "satisfactory."
Limitations on Dividends. The Company is a legal entity separate and
distinct from the Bank. The Company's principal source of revenue consists of
dividends from the Bank. The payment of dividends by the Bank is subject to
various regulatory requirements including a requirement, as a result of the
Company's savings and loan holding company status, that the Bank notify the
Director of the OTS not less than 30 days in advance of any proposed declaration
by its directors of a dividend.
Under New York State Banking Law, a New York-chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Department is required if the total
of all dividends declared in a calendar year would exceed the total of its net
profits for that year combined with its retained net profits of the preceding
two years, subject to certain adjustments.
Miscellaneous. The Bank is subject to certain restrictions on loans to
the Company or its non-bank subsidiaries, on investments in the stock or
securities thereof, on the taking of such stock or securities as collateral for
loans to any borrower, and on the issuance of a guarantee or letter of credit on
behalf of the Company or its non-bank subsidiaries. The Bank also is subject to
certain restrictions on most types of transactions with the Company or its
non-bank subsidiaries, requiring that the terms of such transactions be
substantially equivalent to terms of similar transactions with non-affiliated
firms.
Federal Home Loan Bank System. The Bank is a member of the FHLB of New
York, which is one of 12 regional FHLBs that administers the home financing
credit function of savings institutions. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the 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. The Bank had
$2.0 million of FHLB advances at December 31, 1997.
As a FHLB member, the Bank is required to purchase and maintain stock
in the FHLB of New York in an amount equal to at least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year or 5% of its advances
90
<PAGE>
from the FHLB of New York, whichever is greater. At December 31, 1997, the Bank
had approximately $2.8 million in FHLB stock, which resulted in its compliance
with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid in the past and could
continue to do so in the future. These contributions also could have an adverse
effect on the value of FHLB stock in the future.
Federal Reserve System. The FRB requires all depository institutions to
maintain reserves against their transaction accounts (primarily checking
accounts, including NOW and Super NOW accounts) and non-personal time deposits.
As of December 31, 1997, the Bank was in compliance with applicable
requirements. However, because required reserves must be maintained in the form
of vault cash or a non-interest-bearing account at a Federal Reserve Bank, the
effect of this reserve requirement is to reduce an institution's earning assets.
TAXATION
Federal Taxation
General. The Company and the Bank will be subject to federal income
taxation in the same general manner as other corporations with some exceptions
discussed below. The following discussion of federal taxation is intended only
to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to the Bank. The Bank's
federal income tax returns have been audited or closed without audit by the
Internal Revenue Service through 1993.
Method of Accounting. For federal income tax purposes, the Bank
currently reports its income and expenses on the accrual method of accounting
and uses a tax year ending December 31 for filing its consolidated federal
income tax returns. As of March 31, 1998, the Bank will file its consolidated
federal income tax returns using a tax year ending March 31. The Small Business
Protection Act of 1996 (the "1996 Act") eliminated the use of the reserve method
of accounting for bad debt reserves by savings institutions, effective for
taxable years beginning after 1995.
Bad Debt Reserves. Prior to the 1996 Act, the Bank was permitted to
establish a reserve for bad debts and to make annual additions to the reserve.
These additions could, within specified formula limits, be deducted in arriving
at the Bank's taxable income. As a result of the 1996 Act, the Bank must use the
specific charge off method in computing its bad debt deduction beginning with
its 1996 Federal tax return. In addition, the federal legislation requires the
recapture (over a six year period) of the excess of tax bad debt reserves at
December 31, 1995 over those established as of December 31, 1987. The amount of
such reserve subject to recapture as of December 31, 1997 is approximately
$540,000.
91
<PAGE>
As discussed more fully below, the Bank and subsidiaries file combined
New York State Franchise tax returns. The basis of the determination of the tax
is the greater of a tax on entire net income (or on alternative entire net
income) or a tax computed on taxable assets. However, for state purposes, New
York State enacted legislation in 1996, which among other things, decoupled the
Federal and New York State tax laws regarding thrift bad debt deductions and
permits the continued use of the bad debt reserve method under section 593.
Thus, provided the Bank continues to satisfy certain definitional tests and
other conditions, for New York State income tax purposes, the Bank is permitted
to continue to use the special reserve method for bad debt deductions. The
deductible annual addition to the state reserve may be computed using a specific
formula based on the Bank's loss history ("Experience Method") or a statutory
percentage equal to 32% of the Bank's New York State taxable income ("Percentage
Method").
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
New federal legislation eliminated these thrift related recapture rules.
However, under current law, pre-1988 reserves remain subject to recapture should
the Bank make certain non-dividend distributions, dividend distributions in
excess of historical earnings and profits or cease to maintain a bank charter.
At March 31, 1997, the Bank's total federal base-year reserve was
approximately $2.7 million and the "supplemental" reserve (as defined) was
approximately $10.3 million. These reserves reflect the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a
rate of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount and regular income tax. Net
operating losses can offset no more than 90% of AMTI. Certain payments of
alternative minimum tax may be used as credits against regular tax liabilities
in future years. The Bank has not been subject to the alternative minimum tax
and has no such amounts available as credits for carryover.
Net Operating Loss Carryovers. For the years beginning after August 5,
1997, a financial institution may carry back net operating losses to the
preceding two taxable years and forward to the succeeding 20 taxable years. At
March 31, 1997, the Bank had no net operating loss carryforwards for federal
income tax purposes.
Corporate Dividends-Received Deduction. The Company may exclude from
its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
80% in the case of dividends received from corporations with which a corporate
recipient does not file a consolidated tax return, and corporations which own
less than 20% of the stock of a corporation distributing a dividend may deduct
only 70% of dividends received or accrued on their behalf.
92
<PAGE>
State and Local Taxation
New York State Taxation. The Company and the Bank will report income on
a combined basis utilizing a fiscal year. New York State Franchise Tax on
corporations is imposed in an amount equal to the greater of (a) 9% of "entire
net income" allocable to New York State (b) 3% of "alternative entire net
income" allocable to New York State (c) 0.01% of the average value of assets
allocable to New York State or (d) nominal minimum tax. Entire net income is
based on federal taxable income, subject to certain modifications.
Delaware State Taxation. As a Delaware holding company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware. The tax is imposed as a percentage of the capital base of the
Company with an annual maximum of $150,000.
MANAGEMENT OF THE HOLDING COMPANY
Directors and Executive Officers
The Board of Directors of the Holding Company currently consists of
nine members, each of whom is also a trustee of the Bank. As discussed below,
upon consummation of the Conversion, the current trustees of the Bank will
become directors of the stock-chartered Bank. See "Management of the Bank --
Trustees." Each director of the Holding Company has served as such since the
Holding Company's incorporation in March 1998. 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. One class of directors,
consisting of Schram, Collins and Florio, has a term of office expiring at the
Holding Company's first Annual Meeting of Stockholders, a second class,
consisting of Herrington, Kelly and Bardwell, has a term of office expiring at
the Holding Company's second Annual Meeting of Stockholders, and a third class,
consisting of Race, Jones and Phelan, has a term expiring at the Holding
Company's third Annual Meeting of Stockholders. For biographical information
regarding each director of the Holding Company, see "Management of the Bank --
Trustees."
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 executive
officers of the Holding Company are as follows: Carl A. Florio, President and
Chief Executive Officer; Timothy E. Blow, Chief Financial Officer; Sidney D.
Richter, Senior Vice President; and Pamela M. Wood, Senior Vice President and
Secretary. It is not anticipated that the executive officers of the Holding
Company will receive any remuneration in their capacity as Holding Company
executive officers. For information regarding compensation of trustees and
executive officers of the Bank, see "Management of the Bank--Meetings and
Committees of the Board of Trustees of the Bank" and "--Executive Compensation."
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
93
<PAGE>
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 conduct was unlawful.
The certificate of incorporation of the Holding Company 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, or provision of the
certificate of incorporation, bylaws of the Holding Company, agreement, vote of
shareholders or disinterested directors or otherwise.
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.
In addition, the certificate of incorporation of the Holding Company
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 intends to obtain such insurance.
MANAGEMENT OF THE BANK
Trustees
The direction and control of the Bank, as a mutual savings bank, has
been vested in its Board of Trustees. Upon consummation of the Conversion, each
of the current trustees of the Bank will become directors of the Bank in stock
form. The Board of Directors of the converted Bank will consist of nine
directors divided into three classes, with approximately one-third of the
directors elected at each annual meeting of stockholders. Because the Holding
Company will own all of the issued and outstanding shares of capital stock of
the Bank after the Conversion, the Holding Company, as sole stockholder, will
elect the directors of the Bank.
94
<PAGE>
The following table sets forth certain information regarding the
trustees of the Bank.
Position(s) Held Trustee
Name With the Bank Age(1) Since
---- ------------- ------ -----
Carl A. Florio, CPA Trustee, President and Chief 49 1997
Executive Officer
Earl Schram, Jr. Trustee and Chairman 74 1987
of the Board
Stanley Bardwell, M.D. Trustee 73 1981
William E. Collins Trustee 72 1983
John E. Kelly Trustee 72 1981
Joseph W. Phelan Trustee 55 1990
William H. Jones Trustee 54 1991
Marilyn A. Herrington Trustee 54 1994
Marcia M. Race Trustee 53 1989
- ------------
(1) At December 31, 1997.
The business experience of each trustee for at least the past five
years is set forth below.
Carl A. Florio, CPA. Mr. Florio has served as President and Chief
Executive Officer of the Bank since 1996. From 1993 until his appointment as
President and Chief Executive Officer, Mr. Florio served as Chief Financial
Officer of the Bank. Prior to his becoming the Bank's Chief Financial Officer,
Mr. Florio was a partner in the accounting firm of Pattison, Koskey, Rath &
Florio. Mr. Florio serves on the Executive Committee, Trust Committee and as a
director of Hudson City Associates, Inc.
Earl Schram, Jr. Mr. Schram is currently Chairman of the Board of
Trustees of the Bank, a position he has held since 1995. Mr. Schram is an
attorney and President of the law firm of Connor, Curran & Schram, P.C. in
Hudson, New York. He is also Vice President and Director of Taconic Farms, Inc.
Mr. Schram serves on the Charitable Contributions Committee, Executive Committee
and Trust Committee.
Stanley Bardwell, M.D. Dr. Bardwell is a retired physician in
Craryville, New York. From 1958 until 1988, Dr. Bardwell specialized in internal
medicine and cardiology. He has served as Chief of Medicine in Columbia Memorial
Hospital and Greene County Hospital, served on the Board of Health and was
President of the Potts Memorial Foundation as well as other various charitable
groups. Dr. Bardwell serves on the Executive Committee, Examining Committee and
Charitable Contributions Committee.
William E. Collins. Mr. Collins served as President and Chief Executive
Officer of the Bank from 1983 until his retirement in 1990. Prior to becoming
President and Chief Executive Officer, Mr. Collins served as Executive Vice
President of the Bank from March 1982 to December 1982. From 1991 to 1996, Mr.
Collins served as a director of Hudson City Associates, Inc., a wholly owned
subsidiary of the Bank and general partner of Premium Payment Plan. See
"Business of the Bank - Lending Activities - Consumer Lending," and "-Subsidiary
and Other Activities." Mr. Collins serves on the Executive Committee and the
Examining Committee.
95
<PAGE>
John E. Kelly. Since 1992, Mr. Kelly has owned and operated Berkshire
Telephone Corp. Kinderhook, New York. Mr. Kelly is Chairman of the Board of
Berkshire Telephone Corp. He has been with Berkshire Telephone Company since
1946 in various capacities. Berkshire Telephone Corp. provides long distance,
internet, cellular, paging and TV cable services. Mr. Kelly serves on the
Executive Committee and Compensation Committee.
Joseph W. Phelan. Since 1983, Mr. Phelan has served as President of
Taconic Farms, Inc. Germantown, New York, a provider of laboratory animals for
research. He is also Treasurer of the Reformed Church in Germantown, New York.
Mr Phelan serves on the Executive Committee, Trust Committee and Compensation
Committee.
William H. (Tony) Jones. Since 1986, Mr. Jones has owned and served as
President and Publisher of Roe Jan Independent Publishing Co., Inc., Hillsdale,
New York, a publisher of community newspapers and similar publications. Mr.
Jones serves on the Executive Committee, Charitable Contributions Committee,
Examining Committee and as a director of Hudson City Associates, Inc.
Marilyn A. Herrington. Ms. Herrington is the Vice President and
Secretary of Herrington- Yaffe Auto Center, an auto repair facility, Secretary
of Richmond Telephone Company, a provider of long distance telephone service and
involved in real estate investments. Ms. Herrington serves on the Executive
Committee, Charitable Contributions Committee and Compensation Committee.
Marcia M. Race. Ms. Race was employed by the Bank from 1962 until her
retirement in 1997. Ms. Race served as Assistant Secretary of the Bank from 1972
to 1978, Corporate Secretary from 1978 to 1989 and Assistant to the President
from 1989 to 1997. She is also Trustee of the Nativity/St. Mary's Parish
Community Church. Ms. Race serves on the Executive Committee.
Executive Officers Who Are Not Trustees
Each of the executive officers of the Bank will retain his or her
office in the Bank after the Conversion. Officers are elected annually by the
Board of Directors of the Bank. There are no arrangements or understandings
between the person named and any other person pursuant to which such officer was
selected.
The business experience of the executive officers who are not also
trustees is set forth below.
Timothy E. Blow, CPA. Mr. Blow, age 31, became Chief Financial
Officer of the Bank in May 1997. Prior to his appointment as Chief Financial
Officer, Mr. Blow was a senior manager at the accounting firm of KPMG Peat
Marwick LLP. Mr. Blow also serves as a director of Hudson City Associates, Inc.
and as Secretary and Treasurer of Hudson River Funding Corp., wholly owned
subsidiaries of the Bank. See "Business of the Bank--Subsidiary and Other
Activities."
Pamela M. Wood. Ms. Wood, age 50, has been employed by the Bank since
1969 and has served as Senior Vice President and Corporate Secretary since 1993.
She also serves as Secretary of Hudson River Mortgage Corporation, Hudson City
Center, Inc. and Hudson City Associates, Inc. From 1990 to 1993, she served as
Vice President and Corporate Secretary. From 1984 to 1990 she
96
<PAGE>
served as Assistant Vice President. From 1969 to 1984 she served as
Administrative Assistant and Executive Secretary.
Sidney D. Richter. Mr. Richter, age 57, has served as the Bank's Senior
Vice President of Lending since 1993. From 1990 to 1993, Mr. Richter served as
the Bank's Vice President for Commercial Lending. Mr. Richter also serves as a
director of each of the Bank's wholly owned subsidiaries. See
"Business--Subsidiary and Other Activities."
Meetings and Committees of the Board of Trustees of the Bank
The Bank's Board of Trustees meets at least monthly and held 12
meetings during the fiscal year ended March 31, 1997. During fiscal 1997, no
trustee of the Bank 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 Trustee on which he or she served. The current committees of the Board
of Trustees of the Bank are the Executive Committee, Trust Committee, Audit
Committee, Examining Committee and the Compensation Committee. Following the
Conversion, the Board of Directors of the Bank may revise the membership and
structure of the current committees of the Board of Trustees.
The Executive Committee is comprised of all of the Trustees with Jack
Kelly serving as Chairman. The Executive Committee meets on an as needed basis
and exercises the power of the Board of Trustees between Board meetings, to the
extent permitted by applicable law. The Executive Committee met 14 times during
fiscal 1997.
The Audit Committee is responsible for the oversight of the Bank's
Internal Audit Department and for the review of the Bank's annual audit report
prepared by the Bank's independent auditors. Only non-employee directors may
serve on the Audit Committee. The current members of the committee are Trustees
Bardwell (Chairman), Collins and Phelan. The Audit Committee met one time during
fiscal 1997.
The Trust Committee oversees the Bank's trust operations. The current
members of the Trust Committee are Trustees Phelan and Schram and officers
Richter and Blow. The Trust Committee met 12 times during fiscal 1997.
Trustee Compensation
During fiscal 1997, each trustee of the Bank received a fee of $1,100
per Board meeting attended. During fiscal 1997, members of the Executive
Committee each received $550 per committee meeting attended, members of the
Audit Committee each received $450 per committee meeting attended and members of
the Trust Committee each received $200 per committee meeting attended. In
addition, non-employee Directors of Hudson City Associates, Inc. receive $200
per meeting attended.
97
<PAGE>
Trustees Emeritus
Under the Bank's Bylaws, a retiring Trustee may, with the approval of
the Board of Trustees, serve as a Trustee Emeritus of the Bank. A Trustee
Emeritus is entitled to attend all meetings of the Board of Trustees,
participate in all discussions and receive the same fees as a Trustee. Trustees
Emeritus are not, however, entitled to vote or meet as a separate body. Warren
H. Bohnsack and Morton A. Ginsberg currently serve as Trustees Emeritus of the
Bank. It is anticipated that following the Conversion, Messrs. Bohnsack and
Ginsberg will serve as Directors Emeritus of the Bank and the Holding Company
and act in an advisory capacity to the entire Board but have no voting rights.
Executive Compensation
The following table sets forth information concerning the compensation
paid to the Bank's Chief Executive Officer and the Bank's only other executive
officer whose salary and bonus for fiscal 1997 exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
--------------------------------------- --------------------------
Other Annual Restricted Stock Options All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Award ($)(1) (#)(1) Compensation($)(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Carl A. Florio, President
and Chief Executive Officer 1997 $150,000(3) $13,125 $--- N/A N/A $ 4,700
Sidney D. Richter
Senior Vice President 1997 103,000 13,375 --- N/A N/A 4,300
===================================================================================================================================
</TABLE>
- -------
(1) As a mutual institution, the Bank does not have any stock options or
restricted stock plans. The Holding Company does, however, intend to adopt
such plans following the Conversion. See "-- Benefit Plans - Employee Stock
Ownership Plan" and "--Recognition and Retention Plan."
(2) Represents $400 and $400 of life insurance premiums paid by the Bank and
the Bank's contributions of $4,300 and $3,900 to the Bank's 401(k) plan on
behalf of Messrs. Florio and Richter, respectively.
(3) Salary represents service as the Chief Financial Officer of the Bank from
April 1996 to June 1996 and as the Chief Executive Officer from June 1996
to March 1997.
Employment Agreements
Upon the Conversion, the Bank and the Company intends to enter into
employment agreements with Mr. Florio and three other officers of the Bank
(individually, the "Executive") and the Company intend to enter into employment
agreements with Carl Florio, Sidney Richter and two other executive officers of
the Bank (collectively, the "Employment Agreements"). The Employment Agreements
are intended to ensure that the Bank and the Company will be able to maintain a
stable and competent management base after the Conversion. The continued success
of the Bank and the Company depends to a significant degree on the skills and
competence of the above referenced officers.
The Employment Agreements provide for either three-year or two-year terms
for each Executive. The terms of the Employment Agreements shall be extended on
a daily basis unless written notice of non-renewal is given by the Board of
Directors. The Employment Agreements provide that the Executive's base salary
will be reviewed annually. The base salary which will be effective for such
Employment Agreement for Mr. Florio will be $235,000. In addition to the base
salary, the Employment Agreements provide for, among other things, participation
in stock benefits plans and other fringe benefits applicable to executive
personnel. The agreements provide for
98
<PAGE>
termination by the Bank or the Company for cause, as defined in the Employment
Agreements, at any time. In the event the Bank or the Company chooses to
terminate the Executive's employment for reasons other than for cause, or in the
event of the Executive's resignation from the Bank and the Company upon; (i)
failure to re-elect the Executive to his current offices; (ii) a material change
in the Executive's functions, duties or responsibilities; (iii) a reduction in
the benefits and perquisites being provided to the Executive under the
Employment Agreement; (iv) liquidation or dissolution of the Bank or the
Company; or (v) a breach of the agreement by the Bank or the Company, the
Executive or, in the event of death, his beneficiary would be entitled to
receive an amount equal to the remaining base salary payments due to the
Executive for the remaining term of the Employment Agreement and the
contributions that would have been made on the Executive's behalf to any
employee benefit plans of the Bank and the Company during the remaining term of
the agreement. The Bank and the Company would also continue and pay for the
Executive's life, health, dental and disability coverage for the remaining term
of the Agreement. Upon any termination of the Executive, other than following a
change in control, the Executive is subject to a one year non-competition
agreement.
Under the Employment Agreements, if voluntary or involuntary termination
follows a change in control of the Bank or the Company, the Executive or, in the
event of the Executive's death, his beneficiary, would be entitled to a
severance payment equal to the greater of: (i) the payments due for the
remaining terms of the agreement; or (ii) three times the average of the five
preceding taxable years' annual compensation. The Bank and the Company would
also continue the Executive's life, health, and disability coverage for
thirty-six months. Under the Employment Agreements, a voluntary termination
following a change in control means the executive's voluntary resignation
following any demotion, loss of title, office authority or responsibility, a
reduction in compensation or benefits or relocation. Notwithstanding that both
the Bank and Company Employment Agreements provide for a severance payment in
the event of a change in control, the Executive would only be entitled to
receive a severance payment under one agreement.
Payments to the Executive under the Bank's Employment Agreement will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payment under the Company's Employment Agreement would be made by the
Company. The Company's Employment Agreement also provides that the Company will
compensate the Executive for excise taxes imposed on any "excess parachute
payments," as defined under section 280G of the Code, made thereunder, and any
additional income and excise taxes imposed as a result of such compensation. All
reasonable costs and legal fees paid or incurred by the Executive pursuant to
any dispute or question of interpretation relating to the Employment Agreements
shall be paid by the Bank or Company, respectively, if the Executive is
successful on the merits pursuant to a legal judgment, arbitration or
settlement. The Employment Agreements also provide that the Bank and Company
shall indemnify the Executive to the fullest extent allowable under New York and
Delaware law, respectively. In the event of a change in control of the Bank or
the Company, the total amount of payments due under the Agreements, based solely
on cash compensation paid to the officers who will receive Employment Agreements
over the past five fiscal years and excluding any benefits under any employee
benefit plan which may be payable, would be approximately $2.2 million.
99
<PAGE>
Change in Control Agreements
Upon Conversion, the Bank intends to enter into two-year Change in Control
Agreements (the "CIC Agreements") with five officers of the bank, none of whom
will be covered by employment contracts. Commencing on the first anniversary
date and continuing on each anniversary thereafter, the Bank CIC Agreements may
be renewed by the Board of Directors of the Bank for an additional year. The
Bank's CIC Agreements will provide that in the event voluntary or involuntary
termination follows a change in control of the Company or the Bank, the officer
would be entitled to receive a severance payment equal to two times the
officer's average annual compensation for the five most recent taxable years.
The Bank would also continue and pay for the officer's life, health and
disability coverage for twenty-four months following termination. Under the CIC
Agreements, a voluntary termination following a change in control means the
executive's voluntary resignation following any demotion, loss of title, office
authority or responsibility, a reduction in compensation or benefits or
relocation. In the event of a change in control of the Company or the Bank, the
total payments that would be due under the CIC Agreements, based solely on the
current annual compensation paid to the officers covered by the CIC Agreements
and excluding any benefits under any employee benefit plan which may be payable,
would be approximately $876,000.
Employee Severance Compensation Plan
The Bank's Board of Directors intends to, upon Conversion, establish the
Hudson River Bank & Trust Company Employee Severance Compensation Plan
("Severance Plan") which will provide eligible employees with severance pay
benefits in the event of a change in control of the Bank or the Company
following Conversion. Management personnel with Employment Agreements or CIC
Agreements are not eligible to participate in the Severance Plan. Generally,
employees are eligible to participate in the Severance Plan if they have
completed at least one year of service with the Bank. The Severance Plan vests
in each participant a contractual right to the benefits such participant is
entitled to thereunder. Under the Severance Plan, in the event of a change in
control of the Bank or the Company, eligible employees who are terminated from
or terminate their employment within one year (for reasons specified under the
Severance Plan), will be entitled to receive a severance payment. If the
participant, whose employment has terminated, has completed at least one year of
service, the participant will be entitled to a cash severance payment equal to
one-twelfth of annual compensation for each year of service up to a maximum of
100% of annual compensation. Such payments may tend to discourage takeover
attempts by increasing costs to be incurred by the Bank in the event of a
takeover. In the event the provisions of the Severance Plan are triggered, the
total amount of payments that would be due thereunder, based solely upon current
salary levels, would be approximately $196,000. However, it is management's
belief that substantially all of the Bank's employees would be retained in their
current positions in the event of a change in control, and that any amount
payable under the Severance Plan would be considerably less than the total
amount that could possibly be paid under the Severance Plan.
100
<PAGE>
Independent Compensation Expert
Pursuant to NYBB regulations, an independent compensation expert must
review the total compensation for the executive officers and trustees of the
Bank as a whole and on an individual basis and determine whether such
compensation is reasonable and proper in comparison to the compensation provided
to executive officers, directors or trustees of similar publicly-traded
financial institutions. William M. Mercer, Incorporated has conducted such
review on behalf of the Bank and determined that, based upon published
professional survey data of similarly situated publicly-traded financial
institutions operating in the relevant markets, with respect to the total cash
compensation for executive officers and total remuneration for trustees of the
Bank, such compensation, viewed as a whole and on an individual basis, is
reasonable and proper in comparison to the compensation provided to similarly
situated publicly-traded financial institutions, and that, with respect to the
amount of shares of Common Stock to be reserved under the ESOP, and expected to
be reserved under the RRP and the Stock Option Plan, as a whole, such amounts
reserved for granting are reasonable in comparison to similar publicly-traded
financial institutions.
Benefit Plans
General. The Bank currently provides health care benefits to its employees,
including hospitalization, major medical, dental, life and disability insurance,
subject to certain deductibles and copayments by employees.
Defined Benefit Pension Plan. The Bank sponsors a defined benefit pension
plan for its employees (the "Pension Plan"). Salaried employees are eligible to
participate in the Pension Plan following the completion of one year of service
(1,000 hours worked during a continuous 12-month period) and attainment of 21
years of age. A participant must reach five years of service before attaining a
vested interest in his or her retirement benefits, after which such participant
is 100% vested. The Pension Plan is funded solely through contributions made by
the Bank.
The benefit provided to a participant at normal retirement age (generally
age 65) is based on the average of the participant's basic annual compensation
during the 36 consecutive months of service within the last 120 completed months
of a participant's service which yields the highest average compensation
("average annual compensation"). Compensation for this purpose is the
participant's basic annual salary, including any contributions through a salary
reduction arrangement to a cash or deferred plan under Section 401(k) of the
Code, but exclusive of overtime, bonuses, severance pay, or any special payments
or other deferred compensation arrangements. The annual benefit provided to a
participant, without offset for the participant's anticipated Social Security
benefit, who retires at age 65 is equal to 2% of average annual compensation for
each year of service up to a maximum of 30 years.
The annual benefit provided to participants (i) at early retirement age
(generally age 62) with five years of service who elect to defer the payment of
their benefits to normal retirement age, (ii) at early retirement age with five
years of service who elect to receive payment of their benefits prior to normal
retirement age, or (iii) who postpone annual benefits beyond normal retirement
age, are calculated basically the same as the benefits for normal retirement
age, with annual average
101
<PAGE>
compensation being multiplied by 2% for each year of such individual's actual
years of service. A participant eligible for early retirement benefits who does
not meet the requirements set forth above will have his or her benefits adjusted
as further described in the Pension Plan.
The Pension Plan also provides for disability and death benefits.
The following table sets forth, as of March 31, 1997, estimated annual
pension benefits for individuals at age 65 payable in the form of a life annuity
under the most advantageous plan provisions for various levels of compensation
and years of service. The figures in this table are based upon the assumption
that the Pension Plan continues in its present form and does not reflect offsets
for Social Security benefits and does not reflect benefits payable under the
ESOP. At March 31, 1997, the estimated years of credited service of Messrs.
Florio and Richter were three and six years, respectively.
Pension Plan Table
Years of Credited Service
----------------------------------------------------------
Remuneration 15 20 25 30 35*
- ------------ -- -- -- -- ---
$ 75,000 $22,500 $30,000 $37,500 $45,000 $46,875
$100,000 $30,000 $40,000 $50,000 $60,000 $62,500
$125,000 $37,500 $50,000 $62,500 $75,000 $78,125
$150,000 $45,000 $60,000 $75,000 $90,000 $93,750
$175,000 $45,000 $60,000 $75,000 $90,000 $93,750
$200,000 $45,000 $60,000 $75,000 $90,000 $93,750
$225,000 $45,000 $60,000 $75,000 $90,000 $93,750
$250,000 $45,000 $60,000 $75,000 $90,000 $93,750
$300,000 $45,000 $60,000 $75,000 $90,000 $93,750
$400,000 $45,000 $60,000 $75,000 $90,000 $93,750
$500,000 $45,000 $60,000 $75,000 $90,000 $93,750
- -----------
* Assumes that participant had 30 or more years of Credited Servie as of July
14, 1995.
401(k) Savings Plan. The Bank has a qualified, tax-exempt savings plan with
a cash or deferred feature qualifying under Section 401(k) of the Code (the
"401(k) Plan"). All salaried employees who have attained age 21 and completed
one year of employment, 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 between 2% to 10% of the participant's annual salary. Each
participant's salary reduction contribution is matched by the Bank in an amount
equal to 50% of the participant's before-tax contribution up to a maximum
contribution by the Bank of 4% of such participant's annual salary
102
<PAGE>
for the Plan Year. All participant contributions and earnings are fully and
immediately vested. All matching contributions are vested at a rate of 20% per
year over a five year period commencing after one year of employment with the
Bank. However, in the event of retirement, permanent disability or death, a
participant will automatically become 100% vested in the value of all matching
contributions and earnings thereon, regardless of the number of years of
employment with the Bank.
Participants may invest amounts contributed to their 401(k) Plan accounts
in one or more investment options available under the 401(k) Plan. Changes in
investment directions among the funds are permitted on a quarterly basis
pursuant to procedures established by the Plan Administrator. Each participant
receives a quarterly statement which provides information regarding, among other
things, the market value of his investments and contributions made to the 401(k)
Plan on his behalf. Participants are permitted to borrow against their account
balance in the 401(k) Plan. For the year ended March 31, 1997, the Bank's
contributions to the 401(k) Plan on behalf of Messrs. Florio and Richter were
$4,300 and $3,900, respectively.
Employee Stock Ownership Plan. The Boards of Directors of HCSI and the
Holding Company have approved the adoption of an ESOP for the benefit of
full-time salaried employees of HCSI. The ESOP is 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 Holding Company's Common Stock.
It is anticipated that the ESOP will be initially funded with a loan from
the Holding Company. The proceeds from this loan are expected to be used by the
ESOP to purchase 8% of the Common Stock issued in the Conversion, including
shares issued to the Foundation. After the Conversion, as a qualified employee
pension plan under Section 401(a) of the Code, the ESOP will be in the form of a
stock bonus plan and will provide for contributions, predominantly in the form
of either the Holding Company's Common Stock or cash, which will be used within
a reasonable period after the date of contributions primarily to purchase the
Holding Company Common Stock. The maximum tax-deductible contribution by the
Bank in any year is an amount equal to the maximum amount that may be deducted
by the Bank under Section 404 of the Code, subject to reduction based on
contributions to other tax-qualified employee plans. Additionally, the Bank will
not make contributions if such contributions would cause the Bank to violate its
regulatory capital requirements. The assets of the ESOP will be invested
primarily in the Holding Company's Common Stock. The Bank will receive a tax
deduction equal to the amount it contributes to the ESOP.
From time to time the ESOP may purchase additional shares of Common Stock
for the benefit of plan participants through purchases of outstanding shares in
the market, upon the original issuance of additional shares by the Holding
Company or upon the sale of shares held in treasury by the Holding Company. Such
purchases, which are not currently contemplated, would be subject to
then-applicable laws, regulations and market conditions.
All full-time salaried employees of the Bank are eligible to participate in
the ESOP after they attain age 21 and complete one year of service during which
they work at least 1,000 hours.
103
<PAGE>
Employees will be credited for years of service to the Bank prior to the
adoption of the ESOP for participation and vesting purposes. The Bank's
contribution to the ESOP is allocated among participants on the basis of
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. A participant will become vested
in his or her ESOP account at a rate of 20% per year and after completing five
years of service a participant will be 100% vested in his or her ESOP account.
ESOP participants are entitled to receive distributions from their ESOP accounts
only upon termination of service. Distribution 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.
Participating employees are entitled to instruct the trustee of the
ESOP as to how to vote the shares held in their account. Unallocated shares will
be voted by the trustee in the same proportion as allocated shares.
_______________, the trustee, who has dispositive power over the shares in the
Plan, is an independent party and will not be affiliated with the Holding
Company or HCSI following the Conversion. The ESOP may be amended by the Board
of Directors of the Holding Company, 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 to purposes other than the benefit of
participants or their beneficiaries.
Benefit Restoration Plan. The Bank also maintains a non-qualified
deferral compensation plan, known as the Hudson River Bank & Trust Company
Benefit Restoration Plan (the "Restoration Plan"). The Restoration Plan provides
certain officers and highly compensated executives with supplemental retirement
income from the Bank when such amounts cannot be paid from the tax-qualified
Retirement Plan or 401(k) Plan. Participants in the Restoration Plan receive a
benefit equal to the amount they would have received under the Retirement Plan
and the 401(k) Plan, but for reductions in such benefits imposed by operation of
Sections 401(a)(17), 401(m), 401(k)(3), 402(g) and 415 of the Code. In addition,
the Restoration Plan is intended to make up benefits lost under the ESOP
allocation procedures to participants who retire prior to the complete repayment
of the ESOP loan. At the retirement of a participant, the benefits under the
Restoration Plan are determined by first: (i) projecting the number of shares
that would have been allocated to the participant under the ESOP if they had
been employed throughout the period of the ESOP loan (measured from the
participant's first date of ESOP participation); and (ii) first reducing the
number determined by (i) above by the number of shares actually allocated to the
Participant's account under the ESOP; and second, by multiplying the number of
shares that represent the difference between such figures by the average fair
market value of the Common Stock over the preceding five years. Benefits under
the Restoration Plan vest in 20% annual increments over a five year period
commencing as of the date of a Participant's participation in the Restoration
Plan. The vested portion of the Restoration Plan Participant's benefits are
payable upon the retirement of the Participant upon or after the attainment of
age 65 or in accordance with the requirements of early retirement under the
Retirement Plan.
Stock Option and Incentive Plan. Among the benefits to the Bank and the
Holding Company anticipated from the Conversion is the ability to attract and
retain directors and key personnel through stock option and other stock-related
incentive programs. A Stock Option Plan is intended to be adopted by the Board
of Directors of the Holding Company and then submitted to the Holding Company's
Stockholders for their approval (at a meeting to be held no earlier than six
months following the Conversion).
The Company anticipates reserving an amount equal to 10% of the shares of
Common Stock issued in the Conversion, including shares issued to the Foundation
(or 1,552,500 shares based upon the issuance of 15,525,000 shares), for issuance
under the Stock Option Plan. If the Holding Company implements an option plan
within one year following completion of the Conversion, NYBB regulations provide
that no individual officer or employee of the Bank may receive more than 25% of
the options granted under the plan and non-employee directors may not receive
more than 5% individually, or 30% in the aggregate, of the options granted under
the plan. NYBB and FDIC regulations also provide that the exercise price of any
options granted under any such plan implemented within one year after the
Conversion must equal or exceed the market price of the Common Stock as of the
date of grant. Additionally, OTS regulations, as applied by the FDIC, provide
that with respect to any stock option plan adopted within one year after
conversion, the vesting or the exercisability of any options granted under such
a plan may not be accelerated except upon death or disability.
It is anticipated that the Stock Option Plan will allow for the granting
of: (i) stock options for employees intended to qualify as incentive stock
options under Section 422 of the Code ("Incentive Stock Options"), (ii) options
for all plan participants that do not qualify as incentive stock options
("Non-Statutory Stock Options"); and (iii) Limited Option Rights (discussed
below) which participants may exercise only upon a change in control of the Bank
or the Holding Company. Unless sooner terminated, the Stock Option Plan will
remain in effect for a period of ten years from
104
<PAGE>
the earlier of adoption by the Board of Directors or approval by the Holding
Company's stockholders. Subject to applicable regulations, upon exercise of a
"Limited Option Right" in the event of a change in control, the optionee will be
entitled to receive a lump sum cash payment equal to the difference between the
exercise price of any unexercised option, whether exercisable or unexercisable
at such time, and the fair market value of the shares of common stock subject to
the option on the date of exercise in lieu of purchasing the stock underlying
the option. A change in control would be defined in the Stock Option Plan and
would generally occur when a person or group of person acting in concert
acquires beneficial ownership of 20% or more of any class of equity security of
the Holding Company or the Bank or in the event of a tender or exchange offer,
merger or other form of business combination, sale of all or substantially all
of the assets of the Holding Company or the Bank or contested election of
directors which resulted in the replacement of a majority of the Board of
Directors by persons not nominated by the directors in office prior to the
contested election.
It is intended that under the Stock Option Plan, an optionee would not
be required to make any payment for an option granted thereunder; accordingly,
until the optionee exercised the option, he or she would not be placing any
personal funds at risk. The Stock Option Plan will be administered by a
committee (the "Compensation Committee") the members of which are each
"non-employee directors," as defined in the SEC's regulations, and "outside
directors," as defined under Section 162(m) of the Code and the regulations
thereunder. The Stock Option Committee will determine which directors, officers
and employees may receive options and Limited Options, whether such options will
qualify as Incentive Stock Options, the number of shares subject to each option,
the exercise price of each option, the manner of exercise of the options and the
time when such options will become exercisable.
The Holding Company anticipates that options granted pursuant to the Stock
Option Plan will remain exercisable for at least three months following the date
on which a participant ceases to perform services for the Bank or the Holding
Company, except in the event of death or disability, in which case options would
accelerate and become fully vested and remain exercisable for up to one year
thereafter, or such longer period as determined by the Stock Option Committee.
However, any Incentive Stock Option exercised more than three months following
the date on which an employee ceased to perform services as an employee, other
than termination due to death or disability, would not be treated for tax
purposes as an Incentive Stock Option. It is intended that the Stock Option Plan
would provide that the Stock Option Committee, if requested by the optionee,
could elect, in exchange for vested options, to pay the optionee, or beneficiary
in the event of death, the amount by which the fair market value of the Common
Stock exceeds the exercise price of the options on the date of the employee's
termination of employment.
Recognition and Retention Plan. Following consummation of the Conversion,
the Board of Directors of the Company intends to adopt a Recognition and
Retention Plan ("RRP") for directors, officers and employees. The objective of
the RRP will be to enable the Company to provide directors, officers and
employees with a proprietary interest in the Company as an incentive to
contribute to its success. The Company intends to present the RRP to
stockholders for their approval at a meeting of stockholders which, pursuant to
applicable NYBB and FDIC regulations, may be held no earlier than six months
subsequent to completion of the Conversion.
The RRP will be administered by the Compensation Committee of the Board of
Directors. The Holding Company will contribute funds to the RRP to enable it to
acquire in the open market
105
<PAGE>
or from authorized but unissued shares, following stockholder ratification of
such plan, an amount of stock equal to 4% of the shares of Common Stock issued
in the Conversion, including shares issued to the Foundation (representing
621,000 shares in the aggregate, having a value of $6,210,000 based on the
offering price per share of $10.00). Although no specific award determinations
have been made, the Holding Company anticipates that it will provide stock
awards to the directors, executive officers and employees of the Holding Company
or the Bank or their affiliates to the extent permitted by applicable
regulations. NYBB regulations provide that, to the extent the Holding Company
implements the RRP within one year after Conversion, no individual employee may
receive more than 25% of the shares of any plan and non-employee directors may
not receive more than 5% of any plan individually or 30% in the aggregate for
all directors. Additionally, OTS regulations, as applied by the FDIC, provide
that Awards granted under the RRP may not be accelerated except upon death or
disability for plans adopted within one year after conversion.
Under the terms of the proposed RRP, awards ("Awards") can be granted to
key employees in the form of shares of Common Stock held by the RRP. Awards are
non-transferable and non- assignable. Recipients will earn (i.e., become vested
in), over a period of time, the shares of Common Stock covered by the Award.
Certain Transactions
The Bank's policies do not permit the Bank to make loans to any of its
Trustees. Federal laws require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and must not involve more than
the normal risk of repayment or present other unfavorable features. As of March
31, 1997, all outstanding loans to the Bank's executive officers were made in
the ordinary course of business and on the same terms, including collateral and
interest rates, as those prevailing at the time for comparable transactions with
the general public, and do not involve more than the normal risk of
collectiblity.
Chairman of the Board of Trustees Earl Schram, Jr. is President of the
law firm of Connor, Curran & Schram P.C. ("Connor Curran"). Connor Curran serves
as outside counsel to the Bank and performs various legal services for the Bank.
During fiscal 1997, the Bank paid Connor Curran approximately $184 thousand in
fees for services rendered. Connor Curran also receives an indirect benefit from
the Bank to the extent borrowers of Hudson City engage Connor Curran to close
their loans. Services provided by Connor Curran to the Bank are provided on
terms comparable to those which are available to unaffiliated parties.
106
<PAGE>
Proposed Purchases by Executive Officers and Trustees
The following table sets forth the number of shares of Common Stock
that the executive officers and trustees, and their associates, propose to
purchase in the Offerings, assuming shares of Common Stock are issued at $10.00
per share at the minimum ($111,407,770) and maximum ($150,728,150) of the
Estimated Valuation Range and that sufficient shares will be available to
satisfy their orders. The table also sets forth the total expected beneficial
ownership of Common Stock as to all trustees and executive officers as a group.
<TABLE>
<CAPTION>
At the Minimum of the At the Maximum of the
Estimated Valuation Estimated Valuation
Range(1) Range(1)
------------------------- -----------------------------
As a Percent
of
Number of Shares Number of As a Percent of
Name Amount Shares Offered Shares Shares Offered
---- ------ ------ ------- ------ --------------
<S> <C> <C> <C> <C> <C>
Carl A. Florio...................... $ 400,000 40,000 .36% 40,000 .27%
Earl Schram, Jr..................... 1,000,000 100,000 .90 100,000 .66
Stanley Bardwell.................... 200,000 20,000 .18 20,000 .13
William E. Collins.................. 150,000 15,000 .13 15,000 .10
John E. Kelly....................... 3,000 300 -(2) 300 -(2)
Joseph W. Phelan.................... 250,000 25,000 .22 25,000 .17
William H. Jones.................... 200,000 20,000 .18 20,000 .13
Marilyn A. Herrington............... 250,000 25,000 .22 25,000 .17
Marcia M. Race...................... 15,000 1,500 .01 1,500 .01
Timothy E. Blow..................... 20,000 2,000 .02 2,000 .01
Pamela M. Wood...................... 20,000 2,000 .02 2,000 .01
Sidney D. Richter................... 200,000 20,000 .18 20,000 .13
------------ -------- ----- ------- ----
All directors and executive
officers as a group
(12 persons)...................... $2,708,000 270,800 2.43% 270,800 1.80%
========== ======= ===== ======== =====
</TABLE>
- -------
(1) Includes proposed subscriptions, if any, by associates. Does not include
subscription orders by the ESOP. Intended purchases by the ESOP are
expected to be 8% of the shares issued in the Conversion, including shares
issued to the Foundation. Also does not include shares to be contributed to
the Foundation equal to 3% of the Common Stock sold or 334,223 shares and
452,184 shares at the minimum and the maximum, respectively of the
Estimated Valuation Range, Common Stock which may be awarded under the
Recognition and Retention Plan to be adopted equal to 4% of the Common
Stock issued in the Conversion, including shares issued to the Foundation,
(or 459,000 shares and 621,000 shares at the minimum and the maximum,
respectively, of the Estimated Valuation Range), and Common Stock which may
be purchased pursuant to options which may be granted under the Stock
107
<PAGE>
Option Plan equal to 10% of the number of shares of Common stock issued in
the Conversion, including shares issued to the Foundation, (or 1,147,500
shares or 1,552,500 shares at the minimum and the maximum, respectively, of
the Estimated Valuation Range.)
(2) Less than .01%.
108
<PAGE>
THE CONVERSION
THE BOARD OF TRUSTEES OF THE BANK AND THE SUPERINTENDENT OF BANKS OF THE
STATE OF NEW YORK HAVE APPROVED THE PLAN OF CONVERSION, SUBJECT TO APPROVAL BY
THE BANK'S DEPOSITORS ENTITLED TO VOTE ON THE MATTER AND THE SATISFACTION OF
CERTAIN OTHER CONDITIONS. SUCH APPROVAL, HOWEVER, DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE SUPERINTENDENT.
General
On November 20, 1997, the Bank's Board of Trustees unanimously adopted
the Plan of Conversion pursuant to which the Bank will be converted from a New
York mutual savings bank to a New York stock savings bank. The Plan was amended
by the Board of Trustees as of February 19, 1998. It is currently intended that
all of the outstanding capital stock issued by the Bank pursuant to the Plan
will be held by the Holding Company, which is incorporated under Delaware law.
The Plan was approved by the Superintendent, and the Bank has received a notice
of intent not to object to the Plan from the FDIC, subject to, among other
things, approval of the Plan by the Bank's depositors. A special meeting of
depositors has been called for this purpose to be held on _____________, 1998.
The Holding Company has received approval from the OTS to become a
savings and loan holding company and to acquire all of the capital stock of the
Bank to be issued in the Conversion. The Holding Company plans to retain 50% of
the net proceeds from the sale of the Common Stock and to use the remaining net
proceeds to purchase all of the then issued and outstanding capital stock of the
Bank. The Conversion will be effected only upon completion of the sale of all of
the shares of Common Stock of the Holding Company (or of the Bank, if the
holding company form of organization is not utilized) to be issued pursuant to
the Plan.
The Plan provides that the Board of Trustees of the Bank may, at any
time prior to the issuance of the Common Stock and for any reason, decide not to
use the holding company form of organization. Such reasons may include possible
delays resulting from overlapping regulatory processing or policies which could
adversely affect the Bank's or the Holding Company's ability to consummate the
Conversion and transact its business as contemplated herein and in accordance
with the Bank's operating policies. In the event such a decision is made, the
Bank will withdraw the Holding Company's registration statement from the SEC and
take steps necessary to complete the Conversion without the Holding Company,
including filing any necessary documents with the NYSBD and the FDIC. In such
event, and provided there is no regulatory action, directive or other
consideration upon which basis the Bank determines not to complete the
Conversion, if permitted by the NYSBD, the Bank will issue and sell the common
stock of the Bank and subscribers will be notified of the elimination of a
holding company and will be solicited (i.e., be permitted to affirm their
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
funds will be promptly refunded with interest at the Bank's passbook rate of
interest; or be permitted to modify or rescind their subscriptions), and
109
<PAGE>
notified of the time period within which the subscriber must affirmatively
notify the Bank of such subscriber's intention to affirm, modify or rescind such
subscriber's subscription. The following description of the Plan assumes that a
holding company form of organization will be used in the Conversion. In the
event that a holding company form of organization is not used, all other
pertinent terms of the Plan as described below will apply to the conversion of
the Bank from the mutual to stock form of organization and the sale of the
Bank's common stock.
The Plan provides generally that (i) the Bank will convert from a
mutual savings bank to a capital stock savings bank and (ii) the Holding Company
will offer shares of Common Stock for sale in the Subscription Offering to the
Bank's Eligible Account Holders, Employee Plans, including the ESOP and
Supplemental Eligible Account Holders. The Plan also provides that shares not
subscribed for in the Subscription Offering may be offered in a Community
Offering to certain members of the general public. It is anticipated that all
shares not subscribed for in the Subscription and Community Offerings will be
offered for sale by the Holding Company to the general public in a Syndicated
Community Offering. The Holding Company and the Bank have reserved the right to
accept or reject, in whole or in part, any orders to purchase shares of the
Common Stock received in the Community Offering or in the Syndicated Community
Offering. See "-Community Offering" and "- Syndicated Community Offering."
The aggregate price of the shares of Common Stock to be issued in the
Conversion within the Estimated Valuation Range, currently estimated to be
between $111,407,770 and $150,728,150 is based upon an independent appraisal
prepared by RP Financial, a consulting firm experienced in the valuation and
appraisal of savings institutions, of the estimated pro forma market value of
the Common Stock of the Holding Company. All shares of Common Stock to be issued
and sold in the Conversion will be sold at the same price. The independent
appraisal will be affirmed or, if necessary, updated at the completion of the
Offerings. See "- Stock Pricing" for additional information as to the
determination of the estimated pro forma market value of the Common Stock.
The following is a brief summary of pertinent aspects of the Plan. The
summary is qualified in its entirety by reference to the provisions of the Plan.
A copy of the Plan is available from the Bank upon written request and is
available for inspection at the offices of the Bank and at the office of the
Superintendent. The Plan is also filed as an Exhibit to the Registration
Statement of which this Prospectus is a part, copies of which may be obtained
from the SEC.
Purposes of Conversion
The Bank, as a New York mutual savings bank, does not have shareholders
and has no authority to issue capital stock. By converting to the capital stock
form of organization, the Bank will be structured in the form used by commercial
banks, other business entities and a growing number of savings institutions. The
Conversion will be important to the future growth and performance of the Bank by
providing a larger capital base on which the Bank may operate, enhanced future
access to capital markets, enhanced ability to diversify into other financial
services related activities and enhanced ability to render services to the
public.
110
<PAGE>
The holding company form of organization, if used, would provide
additional flexibility to diversify the Bank's business activities through
newly-formed subsidiaries, or through acquisitions of or mergers with both
mutual and stock institutions, as well as other companies. Although there are no
current arrangements, understandings or agreements, written or oral, regarding
any such opportunities, the Company will be in a position after the Conversion,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise. While there are benefits
associated with the holding company form of organization, such form of
organization may involve additional costs associated with its maintenance and
regulation as a savings and loan company, such as additional administrative
expenses, taxes and regulatory filings or examination fees.
The potential impact of the Conversion upon the Bank's capital base is
significant. The Bank had Tier I Leverage Capital of $66.8 million, or 10.1% of
assets, at December 31, 1997. Assuming that $148.0 million of net proceeds are
realized from the sale of Common Stock (being the maximum of the Estimated
Valuation Range established by the Board of Directors based on the Valuation
Range which has been estimated by RP Financial to be from a minimum of
$111,407,770 to a maximum of $150,728,150 (see "Pro Forma Data" for the basis of
this assumption)) and assuming that $74.0 million of the net proceeds are used
by the Holding Company to purchase the capital stock of the Bank, the Bank's
Tier I Leverage capital ratio, on a pro forma basis, will increase to 17.0%
after the Conversion. The investment of the net proceeds from the sale of the
Common Stock will provide the Bank with additional income to further enhance its
capital position. The additional capital may also assist the Bank in offering
new programs and expanded services to its customers.
After completion of the Conversion, the unissued common and preferred
stock authorized by the Holding Company's Certificate of Incorporation will
permit the Company, subject to market conditions and regulatory approval, to
raise additional equity capital through further sales of securities and to issue
securities in connection with possible acquisitions. At the present time, the
Holding Company has no plans with respect to additional offerings of securities,
other than the issuance of additional shares to the Foundation or upon exercise
of stock options granted pursuant to the Stock Option Plan or the possible
issuance of authorized but unissued shares to the RRP. Following the Conversion,
the Company will also be able to use stock-related incentive programs to attract
and retain executive and other personnel for itself and its subsidiaries. See
"Management of the Bank - Executive Compensation."
Effects of Conversion
General. Each depositor in a mutual savings bank has both a deposit
account in the institution and a pro rata ownership interest in the equity of
the institution based upon the balance in such depositor's account, which
interest may only be realized in the event of a liquidation of the institution.
However, this ownership interest is tied to the depositor's account and has no
tangible market value separate from such deposit account. Any depositor who
opens a deposit account obtains a pro rata ownership interest in the equity of
the institution without any additional payment beyond the amount of the deposit.
A depositor who reduces or closes such depositor's account receives the balance
in the account but receives nothing for such depositor's ownership interest in
the equity of the institution, which is lost to the extent that the balance in
the account is reduced.
111
<PAGE>
Consequently, depositors of a mutual savings bank have no way to
realize the value of their ownership interest, which has realizable value only
in the unlikely event that the mutual savings bank is liquidated. In such event,
the depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves after other claims, including claims of depositors
to the amounts of their deposits, are paid.
When a mutual savings bank converts to stock form, permanent
non-withdrawable capital stock is created to represent the ownership of the
institution's equity and the former pro rata ownership of, depositors is
thereafter represented exclusively by their liquidation rights. See "Liquidation
Rights." Such common stock is separate and apart from deposit accounts and
cannot be and is not insured by the FDIC or any other governmental agency.
Certificates are issued to evidence ownership of the capital stock. The stock
certificates are transferable, and, therefore, the stock may be sold or traded
if a purchaser is available with no effect on any account the seller may hold in
the institution.
Continuity. While the Conversion is being accomplished, and after the
consummation of the Conversion, the normal business of the Bank of accepting
deposits and making loans will continue without interruption. The Bank will
continue to be subject to regulation by the Superintendent and the FDIC. After
Conversion, the Bank will continue to provide services for depositors and
borrowers under current policies by its present management and staff.
The trustees serving the Bank immediately before the Conversion will
serve as directors of the Bank after the Conversion. The directors of the
Holding Company will consist of all of the individuals currently serving on the
Board of Trustees of the Bank. It is anticipated that all officers of the Bank
serving immediately before the Conversion will retain their positions after the
Conversion. See "Management of the Holding Company" and "Management of the
Bank."
Deposit Accounts and Loans. Under the Plan, each depositor in the Bank
at the time of Conversion will automatically continue as a depositor after the
Conversion, and each such deposit account will remain the same with respect to
deposit balance, interest rate and other terms, except to the extent affected by
withdrawals made to purchase Common Stock in the Conversion. See "--Procedure
for Purchasing Shares in Subscription and Community Offerings." Each such
account will be insured by the FDIC to the same extent as before the Conversion
(i.e., up to $100,000 per depositor). Depositors will continue to hold their
existing certificates of deposit, passbooks and other evidences of their
accounts.
Furthermore, no loan outstanding from the Bank will be affected by the
Conversion, and the amount, interest rate, maturity and security for each loan
will remain as they were contractually fixed prior to the Conversion.
Voting Rights. In its current mutual form, voting rights and control of
the Bank are vested exclusively in the Board of Trustees. After the Conversion,
direction of the Bank will be under the control of the Board of Directors of the
Bank. The Holding Company, as the holder of all of the outstanding common stock
of the Bank, will have exclusive voting rights with respect to any matters
concerning the Bank requiring shareholder approval, including the election of
directors of the Bank.
112
<PAGE>
After the Conversion, subject to the rights of the holders of preferred
stock that may be issued in the future, the holders of the Common Stock will
have exclusive voting rights with respect to any matters concerning the Holding
Company. Each holder of Common Stock will, subject to the restrictions and
limitations set forth in the Holding Company's Certificate of Incorporation
discussed below, be entitled to vote on any matters to be considered by the
Holding Company's shareholders, including the election of directors of the
Holding Company.
Liquidation Rights. In the unlikely event of a complete liquidation of
the Bank in its present mutual form, each depositor would receive such
depositor's pro rata share of any assets of the Bank remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of such
depositor's deposit account was to the total value of all deposit accounts in
the Bank at the time of liquidation. After the Conversion, each depositor, in
the event of a complete liquidation, would have a claim as a creditor of the
same general priority as the claims of all other general creditors of the Bank.
However, except as described below, such depositor's claim would be solely in
the amount of the balance in such depositor's deposit account plus accrued
interest. Such depositor would not have an interest in the value or assets of
the Bank above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" (which is a memorandum account
only) for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders in an amount equal to the surplus and reserves of the Bank as of
the date of its latest balance sheet contained in the final Prospectus used in
connection with the Conversion. Each Eligible Account Holder and Supplemental
Eligible Account Holder, if such account holder were to continue to maintain
such account holder's deposit account at the Bank, would be entitled, on a
complete liquidation of the Bank after the Conversion, to an interest in the
liquidation account prior to any payment to the shareholders of the Bank,
whether or not such Eligible Account Holder or Supplemental Eligible Account
Holder purchased 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, including passbook accounts,
demand accounts, money market deposit accounts and time deposits, with an
aggregate balance of $100 or more held in the Bank on September 30, 1996 (with
respect to an Eligible Account Holder) and ________, 1998 (with respect to a
Supplemental Eligible Account Holder) (each a "Qualifying Deposit"). Each
Eligible Account Holder and Supplemental Eligible Account Holder will have a pro
rata interest in the total liquidation account for such account holder's deposit
accounts based on the proportion that the aggregate balance of such person's
Qualifying Deposits on the Eligibility Record Date or Supplemental Eligibility
Record Date, as applicable, bore to the total amount of all Qualifying Deposits
of all Eligible Account Holders and Supplemental Eligible Account Holders.
If, however, on any annual closing date (i.e., the anniversary of the
Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable) of the Bank, commencing on or after the effective date of the
Conversion, the amount in any deposit account is less than the amount in such
deposit account on September 30, 1996 (with respect to an Eligible Account
Holder), or _____________, 1998 (with respect to a Supplemental Eligible Account
Holder), or any other
113
<PAGE>
annual closing date, then the interest in the liquidation account relating to
such deposit account would be reduced from time to time by the proportion of any
such reduction, and such interest will cease to exist if such deposit account is
closed. For purposes of the liquidation account, time deposit accounts shall be
deemed to be closed upon maturity regardless of renewal. In addition, no
interest in the liquidation account would ever be increased despite any
subsequent increase in the related deposit account. Any assets remaining after
the above liquidation rights of Eligible Account Holders and Supplemental
Eligible Account Holders are satisfied would be distributed to the Holding
Company as the sole shareholder of the Bank.
Tax Aspects. Consummation of the Conversion is expressly conditioned
upon the receipt by the Bank of either a favorable ruling from the IRS and New
York taxing authorities or opinions of counsel with respect to federal and New
York income taxation, to the effect that the Conversion will not be a taxable
transaction to the Company, the Bank, Eligible Account Holders or Supplemental
Eligible Account Holders, except as noted below.
No private ruling will be received from the IRS with respect to the
proposed Conversion. Instead, the Bank has received an opinion of its counsel,
Silver, Freedman & Taff, L.L.P., based on customary certificates delivered by
management of the Company and the Bank, that for federal income tax purposes,
among other matters: (i) the Bank's change in form from mutual to stock
ownership will constitute a reorganization under section 368(a)(I)(F) of the
Code, (ii) neither the Bank nor the Holding Company will recognize any gain or
loss as a result of the Conversion; (iii) no gain or loss will be recognized by
the Bank or the Holding Company upon the purchase of the Bank's capital stock by
the Holding Company or by the Holding Company upon the purchase of its Common
Stock in the Conversion; (iv) no gain or loss will be recognized by Eligible
Account Holders or Supplemental Eligible Accounts Holders upon the issuance to
them of deposit accounts in the Bank in its stock form plus their interests in
the liquidation account in exchange for their deposit accounts in the Bank; (v)
the tax basis of the depositors' deposit accounts in the Bank immediately after
the Conversion will be the same as the basis of their deposit accounts
immediately prior to the Conversion; (vi) the tax basis of each Eligible Account
Holder's and each Supplemental Eligible Account Holders interest in the
liquidation account will be zero; (vii) no gain or loss will be recognized by
Eligible Account Holders or Supplemental Eligible Account Holders upon the
distribution to them of non-transferable subscription rights to purchase shares
of the Common Stock, provided, that the amount to be paid for the Common Stock
is equal to the fair market value of such stock; and (viii) the tax basis to the
shareholders of the Common Stock of the Holding Company purchased in the
Conversion pursuant to the subscription rights will be the amount paid therefor
and the holding period for the shares of Common Stock purchased by such persons
will begin on the date on which their subscription rights are exercised.
KPMG Peat Marwick LLP has also opined, subject to the limitations and
qualifications in its opinion, that the Conversion will not be a taxable
transaction to the Holding Company or to the Bank for New York income and
franchise tax purposes or to Eligible Account Holders or to Supplemental
Eligible Account Holders for New York income tax purposes. The opinions of
Silver, Freedman & Taff, L.L.P. and KPMG Peat Marwick LLP have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
114
<PAGE>
Unlike private rulings, opinions of counsel are not binding on the IRS
or the New York taxing authorities and the IRS or the New York taxing
authorities could disagree with conclusions reached therein. In the event of
such disagreement, there can be no assurance that the IRS or the New York taxing
authorities would not prevail in a judicial or administrative proceeding.
Certain portions of both the federal and the state tax opinions are
based upon the opinion of RP Financial that subscription rights issued in
connection with the Conversion will have no value. In the opinion of RP
Financial, which opinion is not binding on the IRS or the New York taxing
authorities, the subscription rights do not have any value based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration, and afford the recipients the right only
to purchase the Common Stock at a price equal to its estimated fair market
value, which will be the same price as the Purchase Price for the unsubscribed
shares of Common Stock. If the subscription rights granted to Eligible Account
Holders, Supplemental Eligible Account Holders and Other Depositors are deemed
to have an ascertainable value, such Eligible Account Holders, Supplemental
Eligible Account Holders and Other Depositors could be taxed upon the receipt or
exercise of the subscription rights in an amount equal to such value, and the
Bank could recognize gain on such distribution. Eligible Account Holders,
Supplemental Eligible Account Holders and Other Depositors are encouraged to
consult with their own tax advisors as to the tax consequences in the event that
such subscription rights are deemed to have an ascertainable value.
Establishment of The Hudson River Bank and Trust Company Foundation
General. In furtherance of the Bank's commitment to its local
community, the Plan of Conversion provides for the establishment of a charitable
foundation in connection with the Conversion. The Plan provides that the Bank
and the Holding Company will incorporate the Foundation under Delaware law as a
non-stock corporation. and will fund the Foundation with Common Stock of the
Holding Company, as further described below. The Holding Company and the Bank
believe that the funding of the Foundation with Common Stock of the Company is a
means to establish a common bond between the Bank and its community, enabling
the Bank's community to share in the potential growth and success of the Holding
Company over the long term. By further enhancing the Bank's visibility and
reputation in its local community, the Bank believes that the Foundation will
enhance the long-term value of the Bank's community banking franchise. The
Foundation will be dedicated to charitable purposes within the Bank's local
community, including community development activities.
Purpose of the Foundation. The purpose of the Foundation is to provide
funding to support charitable causes and community development activities. In
recent years, the Bank has emphasized community lending and community
development activities within the Bank's local community. The Bank received a
"satisfactory" CRA rating in its last CRA examination. The Foundation is being
formed to complement the Bank's existing community activities, not as a
replacement for such activities. The Bank intends to continue to emphasize
community lending and community development activities following the Conversion.
However, such activities are not the Bank's sole corporate purpose. The
Foundation will be completely dedicated to community activities and the
promotion of charitable causes, and may be able to support such activities in
ways that are not presently available to the Bank. In this regard, the Board of
Trustees believes the establishment of
115
<PAGE>
a charitable foundation is consistent with the Bank's commitment to community
service. The Board further believes that the funding of the Foundation with
Common Stock of the Holding Company is a means of enabling the Bank's community
to share in the potential growth and success of the Holding Company long after
completion of the Conversion. The Foundation will accomplish that goal by
providing for continued ties between the Foundation and the Bank, thereby
forming a partnership with the Bank's community. The establishment of the
Foundation will also enable the Holding Company and the Bank to develop a
unified charitable donation strategy and will centralize the responsibility for
administration and allocation of corporate charitable funds. Charitable
foundations have been formed by other financial institutions for this purpose,
among others. The Bank, however, does not expect the contribution to the
Foundation to take the place of the Bank's traditional community lending and
charitable activities.
Although the Board of Trustees of the Bank and the Board of Directors
of the Holding Company have carefully considered each of the above factors, the
establishment of a charitable foundation in connection with a conversion is a
relatively new concept that has been implemented by only a few other converting
banks. Accordingly, certain persons may raise challenges as to the validity of
the establishment of the Foundation that, if not resolved promptly, could delay
the consummation of the Conversion or result in the elimination of the
Foundation.
Structure of the Foundation. The Foundation was incorporated under
Delaware law as a non-stock corporation. The Foundation's Certificate of
Incorporation provides that it is organized exclusively for charitable purposes,
including community development, as set forth in Section 501 (c) (3) of the
Code. The Foundation's Certificate of Incorporation further provides that no
part of the net earnings of the Foundation will inure to the benefit of, or be
distributable to its directors, officers or members. Four members of the Board
of Directors of the Foundation will initially consist of individuals who are
officers or trustees of the Bank, and the remaining two members of the Board
will consist of civic and community leaders within the Bank's local community. A
Nominating Committee of such Board, which is to be comprised of a minimum of
three members of the Board, will nominate individuals eligible for election to
the Board of Directors. The members of the Foundation, who are comprised of its
Board members, will elect the directors at the annual meeting of the Foundation
from those nominated by the Nominating Committee. Only persons serving as
directors of the Foundation qualify as members of the Foundation, with voting
authority. Directors will be divided into three classes with each class
appointed for three-year terms.
The authority for the affairs of the Foundation will be vested in the
Board of Directors of the Foundation. The directors of the Foundation will be
responsible for establishing the policies of the Foundation with respect to
grants or donations by the Foundation, consistent with the purposes for which
the Foundation was established. Although no formal policy governing Foundation
grants exists at this time, the Foundation's Board of Directors will adopt such
a policy upon establishment of the Foundation. As directors of a non-profit
corporation, directors of the Foundation will at all times be bound by their
fiduciary duty to advance the Foundation's charitable goals, to protect the
assets of the Foundation and to act in a manner consistent with the charitable
purpose for which the Foundation is established. The directors of the Foundation
will also be responsible for directing the activities of the Foundation,
including the management of the Common Stock of the Holding Company held by the
Foundation. However, as a condition to receiving the non-objection of the
116
<PAGE>
FDIC to the Bank's Conversion and the approval of the Conversion by the
Superintendent, the Foundation will commit in writing to the FDIC and the
Superintendent that all shares of Common Stock held by the Foundation will be
voted in the same ratio as all other shares of the Holding Company's Common
Stock on all proposals considered by shareholders of the Holding Company;
provided, however, that, consistent with the condition, the FDIC and the
Superintendent shall waive this voting restriction under certain circumstances
if compliance with the voting restriction would: (i) cause a violation of the
law of the State of Delaware; (ii) cause the Foundation to lose its tax-exempt
status, or cause the IRS to deny the Foundation's request for a determination
that it is an exempt organization or otherwise have a material and adverse tax
consequence on the Foundation; or (iii) cause the Foundation to be subject to an
excise tax under Section 4941 of the Code. In order for the FDIC and the
Superintendent to waive such voting restriction, the Holding Company's or the
Foundation's legal counsel must render an opinion satisfactory to the FDIC and
the Superintendent that compliance with the voting restriction would have an
effect described in clauses (i), (ii) or (iii) above. Under those circumstances,
the FDIC and the Superintendent shall grant a waiver of the voting requirement
upon submission of such legal opinion(s) by the Holding Company or the
Foundation that are satisfactory to the FDIC and the Superintendent. In the
event that the FDIC and the Superintendent were to waive such voting
requirement, the directors would direct the voting of the Common Stock held by
the Foundation. However, the Superintendent may, in the case of a waiver, impose
additional conditions regarding the composition of the Board of Directors. As of
the date hereof, no event has occurred which would require the Holding Company
to seek a waiver of the voting restriction.
The Foundation's place of business will be located at the Bank's
administrative offices and initially the Foundation is expected to have no
employees but will utilize the staff of the Holding Company and the Bank. The
Board of Directors of the Foundation will appoint such officers as may be
necessary to manage the operations of the Foundation. In this regard, the Bank
has provided the FDIC with a commitment that, to the extent applicable, the Bank
will comply with the affiliate restrictions set forth in Sections 23A and 23B of
the Federal Reserve Act with respect to any transactions between the Bank and
the Foundation.
The Holding Company intends to capitalize the Foundation with Common
Stock of the Holding Company in an amount equal to 3% of the total amount of
Common Stock to be sold in connection with the Conversion. At the minimum,
midpoint and maximum of the Estimated Valuation Range, the contribution to the
Foundation would equal 334,223, 393,204 and 452,184 shares, which would have a
market value of $3.3 million, $3.9 million and $4.5 million, respectively,
assuming the Purchase Price of $10.00 per share. The Holding Company and the
Bank determined to fund the Foundation with Common Stock rather than cash
because it desired to form a bond with its community in a manner that would
allow the community to share in the potential growth and success of the Holding
Company and the Bank over the long term. The funding of the Foundation with
stock also provides the Foundation with a potentially larger endowment than if
the Holding Company contributed cash to the Foundation since, as a shareholder,
the Foundation will share in the potential growth and success of the Holding
Company. As such, the contribution of stock to the Foundation has the potential
to provide a self-sustaining funding mechanism which reduces the amount of cash
that the Holding Company, if it were not making the stock donation, would have
to contribute to the Foundation in future years in order to maintain a level
amount of charitable grants and donations.
117
<PAGE>
The Foundation will receive working capital from any dividends that may
be paid on the Holding Company's Common Stock in the future, and subject to
applicable federal and state laws, loans collateralized by the Common Stock or
from the proceeds of the sale of any of the Common Stock in the open market from
time to time as may be permitted to provide the Foundation with additional
liquidity. As a private foundation under Section 501 (c) (3) of the Code, the
Foundation will be required to distribute annually in grants or donations, a
minimum of 5% of the average fair market value of its net investment assets. One
of the conditions imposed on the gift of Common Stock by the Holding Company is
that the amount of Common Stock that may be sold by the Foundation in any one
year shall not exceed 5% of the average market value of the assets held by the
Foundation, except where the Board of Directors of the Foundation determines
that the failure to sell an amount of common stock greater than such amount
would result in a long-term reduction of the value of the Foundation's assets
and as such would jeopardize the Foundation's capacity to carry out its
charitable purposes. Upon completion of the Conversion and the contribution of
shares to the Foundation immediately following the Conversion, the Holding
Company would have 11,475,000, 13,500,000 and 15,525,000 shares issued and
outstanding at the minimum, midpoint and maximum of the Estimated Valuation
Range. Because the Holding Company will have an increased number of shares
outstanding, the voting and ownership interests of shareholders in the Holding
Company's common stock would be diluted by 2.9%, as compared to their interests
in the Holding Company if the Foundation were not established. For additional
discussion of the dilutive effect, see "Pro Forma Data."
Tax Considerations. The Holding Company and the Bank have received an
opinion of Silver, Freedman & Taff, L.L.P. that an organization created for the
above purposes would qualify as an organization exempt from taxation under
Section 501(c)(3) of the Code, and would likely be classified as a private
foundation. The Foundation will submit an application to the IRS to be
recognized as an exempt organization. If the Foundation files such an
application within 15 months from the date of its organization, and if the IRS
approves the application, the effective date of the Foundation's status as a
Section 501(c)(3) organization will be retroactive to the date of its
organization. Silver, Freedman & Taff, L.L.P., however, has not rendered any
advice on the condition to the contribution to be agreed to by the Foundation
which requires that all shares of Common Stock of the Holding Company held by
the Foundation must be voted in the same ratio as all other outstanding shares
of Common Stock of the Holding Company on all proposals considered by
shareholders of the Holding Company. Consistent with this condition, in the
event that the Holding Company or the Foundation receives an opinion of its
legal counsel that compliance with this voting restriction would have the effect
of causing the Foundation to lose its tax-exempt status or otherwise have a
material and adverse tax consequence on the Foundation, or subject the
Foundation to an excise tax for "self-dealing" under Section 4941 of the Code,
the Company would request a waiver from the FDIC and the Superintendent of such
voting restriction upon submission by the Holding Company or the Foundation of a
legal opinion(s) to that effect satisfactory to the FDIC and the Superintendent.
However, no assurance can be given that such waiver would be granted. See "-
Regulatory Conditions Imposed on the Foundation."
Under the Code, the Holding Company is entitled to a deduction for
charitable contributions in an amount not exceeding 10% of its taxable income
(computed without regard to the contributions) for the year of the contribution,
and any contributions in excess of the deductible amount may be carried forward
and deducted in the Holding Company's five succeeding taxable
118
<PAGE>
years, subject, in each such year, to the 10% of taxable income limitation. The
Holding Company and the Bank believe that the Conversion presents a unique
opportunity to establish and fund a charitable foundation given the substantial
amount of additional capital being raised in the Conversion. In making such a
determination, the Holding Company and the Bank considered the dilutive impact
of the contribution of Common Stock to the Foundation on the amount of Common
Stock available to be offered for sale in the Conversion. Based on such
consideration, the Holding Company and Bank believe that the contribution to the
Foundation in excess of the 10% annual limitation is justified given the Bank's
capital position and its earnings, the substantial additional capital being
raised in the Conversion and the potential benefits of the Foundation to the
Bank's community. In this regard assuming the sale of the Common Stock at the
maximum of the Estimated Valuation Range, the Holding Company would have pro
forma consolidated capital of $198.5 million or 24.94% of pro forma consolidated
assets and the Bank's pro forma leverage and risk-based capital ratios would be
17.01% and 25.59%, respectively. See "Regulation -The Bank -Capital
Requirements," "Capitalization," and "Comparison of Valuation and Pro Forma
Information with No Stock Contribution." Thus, the amount of the contribution
will not adversely impact the financial condition of the Holding Company and the
Bank, and the Holding Company and the Bank therefore believe that the amount of
the charitable contribution is reasonable and will not raise safety and
soundness concerns.
The Holding Company and the Bank have received the opinion of Silver,
Freedman & Taff, L.L.P. that the Holding Company's contribution of its own stock
to the Foundation would not constitute an act of self-dealing, and that the
Holding Company will be entitled to a deduction in the amount of the fair market
value of the stock at the time of the contribution, subject to the 10% of
taxable income limitation. As discussed above, the Holding Company will be able
to carry forward and deduct any portion of the contribution in excess of such
10% limitation for five years following the year of the contribution. If the
Holding Company and the Foundation had been established in the fiscal year ended
March 31, 1997, the Holding Company would have been entitled to a charitable
contribution deduction in its taxable year ended December 31, 1997 of
approximately $_____ and would have been able to carry forward and deduct
approximately $___ million over its next succeeding five taxable years (based on
the Bank's estimated pre-tax income for 1997 and a contribution in 1997 of
Common Stock equal to $___ million). Assuming the close of the Offerings at the
midpoint of the Estimated Valuation Range, the Holding Company estimates that
the entire amount of the contribution should be deductible over a six-year
period. Neither the Holding Company nor the Bank expect to make any further
contributions to the Foundation within the first five years following the
initial contribution. After that time, the Holding Company and the Bank may
consider future contributions to the Foundation. Any such decisions would be
based on an assessment of, among other factors, the financial condition of the
Holding Company and the Bank at that time, the interests of shareholders and
depositors of the Holding Company and the Bank, and the financial condition and
operations of the Foundation.
Although the Holding Company and the Bank have received the opinion of
Silver, Freedman & Taff, L.L.P. that the Holding Company is entitled to a
deduction for the charitable contribution, there can be no assurances that the
IRS will recognize the Foundation as an organization exempt from taxation under
section 501(c)(3) of the Code or that the deduction will be permitted. If the
IRS successfully maintains that the Foundation is not so exempt or that the
deduction is not permitted,
119
<PAGE>
the Holding Company's tax benefit related to the contribution to the Foundation
would be expensed without tax benefit, resulting in a reduction in earnings in
the year in which the IRS makes such a determination. See "Risk Factors -
Establishment of the Charitable Foundation."
In general, the income of a private foundation is exempt from federal
and state taxation. However, investment income, such as interest, dividends and
capital gains, will be subject to a federal excise tax of 2.0%. The Foundation
will be required to make an annual filing with the IRS within four and one-half
months after the close of the Foundation's taxable year to maintain its
tax-exempt status. The Foundation will also be required to publish a notice that
the annual information return will be available for public inspection for a
period of 180 days after the date of such public notice. The information return
for a private foundation must include, among other things, an itemized list of
all grants made or approved, showing the amount of each grant, the recipient,
any relationship between a grant recipient and the Foundation's managers, and a
concise statement of the purpose of each grant. The Foundation will also be
required to file an annual report with the Charities Bureau of the Office of the
Attorney General of the State of New York.
Regulatory Conditions Imposed on the Foundation. Establishment of the
Foundation is subject to the following conditions to be agreed to by the
Foundation in writing as a condition to receiving the FDIC's nonobjection of the
Bank's Conversion and the approval of the Conversion by the Superintendent: (i)
the Foundation will be subject to examination by the FDIC and the
Superintendent; (ii) the Foundation must comply with supervisory directives
imposed by the FDIC and the Superintendent; (iii) the Foundation will operate in
accordance with written policies adopted by its Board of Directors, including a
conflict of interest policy; and (iv) any shares of Common Stock of the Holding
Company held by the Foundation must be voted in the same ratio as all other
outstanding shares of Common Stock of the Holding Company on all proposals
considered by shareholders of the Holding Company; provided, however that,
consistent with this condition, the FDIC and the Superintendent shall waive this
voting restriction under certain circumstances if compliance with the voting
restriction would: (a) cause a violation of the law of the State of Delaware;
(b) would cause the Foundation to lose its tax-exempt status or otherwise have a
material and adverse tax consequence on the Foundation; or (c) would cause the
Foundation to be subject to an excise tax under Section 4941 of the Code. In
order for the FDIC and the Superintendent to waive such voting restriction, the
Holding Company's or the Foundation's legal counsel must render an opinion
satisfactory to FDIC and the Superintendent that compliance with the voting
restriction would have the effect described in clauses (a), (b) or (c) above.
Under those circumstances, the FDIC and the Superintendent shall grant a waiver
of the voting restriction upon submission of such opinion(s) by the Holding
Company or the Foundation which are satisfactory to the FDIC and the
Superintendent. There can be no assurances that a legal opinion addressing these
issues will be rendered, or if rendered, that the FDIC and the Superintendent
will grant an unconditional waiver of the voting restriction. If the
Superintendent waives the voting restriction, the NYSBD may (1) impose a
condition that a certain portion of the members of the Foundation's Board of
Directors shall be persons who are not directors, officers or employees of the
Bank or the Holding Company or any affiliate thereof or (2) impose such other
condition relating to control of the Common Stock held by the Foundation as
determined by the NYSBD to be appropriate. In no event will the voting
restriction survive the sale of shares of the Common Stock held by the
Foundation.
120
<PAGE>
Stock Pricing
The Plan of Conversion requires that the purchase price of the Common
Stock must be based on the appraised pro forma market value of the Common Stock,
as determined on the basis of an independent valuation. The Bank and the Holding
Company have retained RP Financial to make such valuation. For its services in
making such appraisal, RP Financial will receive a fee of $_____, plus
out-of-pocket expenses. The Bank and the Holding Company have agreed to
indemnify RP Financial and its employees and affiliates against certain losses
(including any losses in connection with claims under the federal securities
laws) arising out of its services as appraiser, except where RP's liability
results from its negligence or bad faith.
An appraisal has been made by RP Financial in reliance upon the
information contained in this Prospectus, including the financial statements. RP
Financial also considered the following factors, among others: the present and
projected operating results and financial condition of the Holding Company and
the Bank, and the economic and demographic conditions in the Bank's existing
market area; certain historical, financial and other information relating to the
Bank; a comparative evaluation of the operating and financial statistics of the
Bank with those of other similarly situated publicly-traded savings associations
and savings institutions located in the Bank's market area and the State of New
York; the aggregate size of the offering of the Common Stock; the impact of the
Conversion on the Bank's equity and earnings potential; the proposed dividend
policy of the Holding Company and the Bank; and the trading market for
securities of comparable institutions and general conditions in the market for
such securities.
On the basis of the foregoing, RP Financial has advised the Holding
Company and the Bank that, in its opinion, dated as of February 27, 1998, the
estimated pro forma market value of the Common Stock ranged from a minimum of
$111,407,770 to a maximum of $150,728,150 with a midpoint of $131,067,960. The
Board of Trustees of the Bank held a meeting to review and discuss the appraisal
report prepared by RP Financial. A representative of RP Financial participated
in the meeting to explain the contents of the appraisal report. In connection
with its review of the reasonableness and adequacy of such appraisal consistent
with NYBB and FDIC regulations and policies, the Board of Trustees reviewed the
methodology that RP Financial employed to determine the pro forma market value
of the Common Stock and the appropriateness of the assumptions that RP Financial
used in determining this value.
Based upon the Valuation Range and the Purchase Price of $10.00 per
share for the Common Stock established by the Board of Trustees, the Board of
Trustees has established the Estimated Valuation Range of $111,407,770 to
$150,728,150, with a midpoint of $131,067,960, and the Holding Company expects
to issue between 11,140,777 and 15,072,815 shares of Common Stock. The Estimated
Valuation Range may be amended with the approval of the Superintendent and FDIC
(if required), if necessitated by subsequent developments in the financial
condition of the Holding Company or the Bank or market conditions generally.
The valuation prepared by RP Financial is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
such shares. RP Financial did not independently verify the financial statements
and other information
121
<PAGE>
provided by the Bank, nor did RP Financial value independently the assets or
liabilities of the Bank. The valuation considers the Bank as a going concern and
should not be considered as an indication of the liquidation value of the Bank.
Moreover, because such valuation is necessarily based upon estimates and
projections of a number of matters, all of which are subject to change from time
to time, no assurance can be given that persons purchasing such shares in the
Conversion will thereafter be able to sell such shares at prices at or above the
Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
Following commencement of the Subscription Offering or Community
Offering, if any, the maximum of the Estimated Valuation Range may be increased
up to 15% and the number of shares of Common Stock to be issued in the
Conversion may be increased to 17,333,738 shares due to regulatory
considerations, changes in the market and general financial and economic
conditions, without the resolicitation of subscribers. See "--Limitations on
Common Stock Purchases" as to the method of distribution and allocation of
additional shares that may be issued in the event of an increase in the
Estimated Valuation Range to fill unfilled orders in the Subscription and
Community Offerings.
No sale of shares of Common Stock may be consummated unless, prior to
such consummation, RP Financial confirms to the Bank, Holding Company,
Superintendent and FDIC that, to the best of its knowledge, nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause RP Financial to conclude that the value of the Common Stock at the
price so determined is incompatible with its estimate of the pro forma market
value of the Common Stock at the conclusion of the Subscription Offering and
Community Offering, if any.
If, based on RP Financial's estimate, the pro forma market value of the
Common Stock, as of the date that RP Financial so confirms, is not more than 15%
above the maximum and not less than the minimum of the Estimated Valuation Range
then, (1) with the approval of the Superintendent, if required, and the FDIC,
the number of shares of Common Stock to be issued in the Conversion may be
increased or decreased, pro rata to the increase or decrease in value, without
resolicitation of subscriptions, to no more than 17,333,738 shares or no less
than 11,140,777 shares, and (2) all shares purchased in the Subscription and
Community Offerings will be purchased for the Purchase Price of $10.00 per
share. If the number of shares issued in the Conversion is increased due to an
increase of up to 15% in the Estimated Valuation Range to reflect changes in
market or financial conditions, persons who subscribed for the maximum number of
shares will not be given the opportunity to subscribe for an adjusted maximum
number of shares, except for the Employee Plans which will be able to subscribe
for such adjusted amount up to their 10% subscription. See "- Limitations on
Common Stock Purchases."
If the pro forma market value of the Common Stock is either more than
15% above the maximum of the Estimated Valuation Range or less than the minimum
of the Estimated Valuation Range, the Bank and the Holding Company, after
consulting with the Superintendent and the FDIC, may terminate the Plan and
return all funds promptly with interest at the Bank's passbook rate of interest
on payments made by check, draft or money order, extend or hold new Subscription
and Community Offerings, establish a new Estimated Valuation Range, commence a
resolicitation of
122
<PAGE>
subscribers or take such other actions as permitted by the Superintendent and
the FDIC in order to complete the Conversion. In the event that a resolicitation
is commenced, unless an affirmative response is received within a reasonable
period of time, all funds will be promptly returned to investors as described
above. A resolicitation, if any, following the conclusion of the Subscription
and Community Offerings would not exceed 45 days unless such resolicitation is
further extended by the Superintendent and the FDIC for periods of up to 60 days
not to extend beyond ___________, 2000.
If all shares of Common Stock are not sold through the Subscription and
Community Offerings, then the Bank and the Holding Company expect to offer the
remaining shares in a Syndicated Community Offering, which would occur as soon
as practicable following the close of the Subscription Offering or Community
Offering, if any, but may commence during the Subscription Offering and
Community Offering, if any, subject to the prior rights of subscribers. All
shares of Common Stock will be sold at the same price per share in the
Syndicated Community Offering as in the Subscription and Community Offerings.
See "--Syndicated Community Offering."
No sale of shares of Common Stock may be consummated unless, prior to
such consummation, RP Financial confirms to the Bank, the Holding Company,
Superintendent and the FDIC that, to the best of its knowledge, nothing of a
material nature has occurred which, taking into account all relevant factors,
including those which would be involved in a cancellation of the Syndicated
Community Offering, would cause RP Financial to conclude that the aggregate
value of the Common Stock at the Purchase Price is incompatible with its
estimate of the pro forma market value of the Common Stock of the Holding
Company at the time of the Syndicated Community Offering. Any change which would
result in an aggregate purchase price which is below, or more than 15% above,
the Estimated Valuation Range would be subject to Superintendent and FDIC
approval. If such confirmation is not received, the Bank may extend the
Conversion, extend, reopen or commence new Subscription and Community Offerings
or a Syndicated Community Offering, establish a new Estimated Valuation Range
and commence a resolicitation of all subscribers with the approval of the
Superintendent and FDIC or take such other actions as permitted by the
Superintendent and FDIC in order to complete the Conversion, or terminate the
Plan and cancel the Subscription and Community Offerings and/or the Syndicated
Community Offering. In the event market or financial conditions change so as to
cause the aggregate purchase price of the shares to be below the minimum of the
Estimated Valuation Range or more than 15% above the maximum of such range, and
the Holding Company and the Bank determine to continue the Conversion,
subscribers will be resolicited (i.e., be permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest at the Bank's passbook rate of interest,
or be permitted to decrease or cancel their subscriptions). Any change in the
Estimated Valuation Range must be approved by the Superintendent and FDIC. A
resolicitation, if any, following the conclusion of the Subscription Offering or
the Community Offering would not exceed 45 days, or if following the Syndicated
Community Offering, 60 days, unless further extended by the Superintendent for
periods up to 60 days not to extend beyond _______, 2000. If such resolicitation
is not effected, the Bank will return with interest all funds promptly at the
Bank's passbook rate of interest on payments made by check, savings bank draft
or money order.
123
<PAGE>
Copies of the appraisal report of RP Financial, including any
amendments thereto, and the detailed memorandum of the appraiser setting forth
the method and assumptions for such appraisal are available for inspection at
the offices of the Bank and the other locations specified under "Additional
Information."
Number of Shares to be Issued
Depending upon market or financial conditions following the
commencement of the Subscription Offering and Community Offering, if any, the
total number of shares to be issued in the Conversion may be increased or
decreased without a resolicitation of subscribers; provided, that the product of
the total number of shares times the price per share is not below the minimum or
more than 15% above the maximum of the Estimated Valuation Range, and the total
number of shares to be issued in the Conversion is not less than 11,140,777 or
greater than 15,072,815 (or 17,333,738 if the Estimated Valuation Range is
increased by 15%).
In the event market or financial conditions change so as to cause the
aggregate purchase price of the shares to be below the minimum of the Estimated
Valuation Range or more than 15% above the maximum of such range, if the Plan is
not terminated by the Holding Company and the Bank after consultation with the
Superintendent and FDIC, purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded, or be permitted to modify or
rescind their subscriptions). Any change in the Estimated Valuation Range must
be approved by the Superintendent and FDIC. If the number of shares issued in
the Conversion is increased due to an increase of up to 15% in the Estimated
Valuation Range to reflect changes in market or financial condition, persons who
subscribed for the maximum number of shares will not be given the opportunity to
subscribe for an adjusted maximum number of shares, except for the Employee
Plans, which will be able to subscribe for such adjusted amount up to their 10%
subscription. See "--Limitations on Common Stock Purchases."
An increase in the number of shares to be issued in the Conversion as a
result of an increase in the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Holding Company's pro forma net
earnings and shareholders' equity on a per share basis while increasing pro
forma net earnings and shareholders' equity on an aggregate basis. A decrease in
the number of shares to be issued in the Conversion would increase both a
subscriber's ownership interest and the Holding Company's pro forma net earnings
and shareholders' equity on a per share basis while decreasing pro forma net
earnings and shareholder's equity on an aggregate basis. For a presentation of
the effects of such changes see "Pro Forma Data."
To fund the Foundation, the number of shares to be issued and
outstanding as a result of the sale of Common Stock in the Conversion will be
increased by a number of shares equal to 3% of the Common Stock sold in the
Conversion. Assuming the sale of shares in the Offerings at the maximum of the
Estimated Valuation Range, the Holding Company will contribute 452,184 shares of
its Common Stock from authorized but unissued shares to the Foundation
immediately following the completion of the Conversion. In that event, the
Holding Company will have total shares of Common Stock outstanding of 15,525,000
shares. Funding the Foundation with authorized but
124
<PAGE>
unissued shares will have the effect of diluting the ownership and voting
interests of persons purchasing shares in the Conversion by 2.9% since a greater
number of shares will be outstanding upon completion of the Conversion than
would be if the Foundation were not established. See "Pro Forma Data."
Subscription Offering and Subscription Rights
In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority: (1) depositors
whose deposits in qualifying accounts in the Bank totaled $100 or more on
September 30, 1996 ("Eligible Account Holders"); (2) the Employee Plans,
including the ESOP; and (3) depositors whose deposits in qualifying accounts in
the Bank totaled $100 or more on __________, 1998, other than (i) those
depositors who would otherwise qualify as Eligible Account Holders or (ii)
trustees or executive officers of the Bank or their Associates, (as defined
herein) ("Supplemental Eligible Account Holders"). All subscriptions received
will be subject to the availability of 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 and as described below under "- Limitations on Common Stock
Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, first priority, non-transferable subscription
rights to subscribe for Common Stock in the Subscription Offering up to the
greatest of (i) the amount permitted to be purchased in the Community Offering,
which amount is currently $250,000 of the Common Stock offered, (ii) one- tenth
of one percent (0.10%) of the total offering of shares of Common Stock or (iii)
fifteen times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction the numerator of which is the amount of the Eligible Account Holder's
qualifying deposit and the denominator of which is the total amount of
qualifying deposits of all Eligible Account Holders, in each case on the
Eligibility Record Date, subject to the overall maximum and minimum purchase
limitations and exclusive of an increase in the shares issued pursuant to an
increase in the Estimated Valuation Range of up to 15%. See "- Limitations on
Common Stock Purchases."
In the event that Eligible Account Holders exercise subscription rights
for a number of shares in excess of the total number of shares eligible for
subscription, the shares will be allocated so as to permit each subscribing
Eligible Account Holder to purchase a number of shares sufficient to make such
Eligible Account Holder's total allocation equal to the lesser of 100 shares or
the number of shares subscribed for. Thereafter, unallocated shares will be
allocated among the remaining subscribing Eligible Account Holders whose
subscriptions remain unfilled in the proportion that the amounts of their
respective qualifying deposits bear to the total amount of qualifying deposits
of all remaining Eligible Account Holders whose subscriptions remain unfilled.
125
<PAGE>
To ensure a proper allocation of stock, each Eligible Account Holder
must list on his or her stock order form all accounts in which such Eligible
Account Holder has an ownership interest. Failure to list an account could
result in fewer shares being allocated than if all accounts had been disclosed.
The subscription rights of Eligible Account Holders who are also trustees or
executive officers of the Bank or their Associates will be subordinated to the
subscription rights of other Eligible Account Holders to the extent attributable
to increased deposits in the one-year period preceding the Eligibility Record
Date.
Priority 2: The Employee Plans. To the extent that there are sufficient
shares remaining after satisfaction of the subscriptions by Eligible Account
Holders, the Employee Plans, including the ESOP, will receive, without payment
therefor, second priority, non-transferable subscription rights to purchase up
to 10% of the Common Stock to be issued in the Conversion, including shares to
be issued to the Foundation, subject to the purchase limitations set forth in
the Plan of Conversion and as described below under "- Limitations on Common
Stock Purchases." As an Employee Plan, the ESOP intends to purchase 8% of the
shares to be issued in the Conversion, or 918,000 shares and 1,242,000 shares,
based on the issuance of 11,475,000 shares and 15,525,000 shares, respectively,
at the minimum and the maximum of the Estimated Valuation Range, including the
shares of Common Stock to be issued to the Foundation. Subscriptions by the ESOP
will not be aggregated with shares of Common Stock purchased directly by or
which are otherwise attributable to any other participants in the Subscription
and Community Offerings, including subscriptions of any of the Bank's trustees,
officers, employees or associates thereof. See "Management of the
Bank - Benefit Plans - Employee Stock Ownership Plan."
Priority 3.- Supplemental Eligible Account Holders. To the extent that
there are sufficient shares remaining after satisfaction of the subscriptions by
the Eligible Account Holders and Employee Plans, Supplemental Eligible Account
Holders will receive, without payment therefor, third priority, non-transferable
subscription rights to subscribe for Common Stock in the Subscription Offering
up to the greatest of (i) the amount permitted to be subscribed for in the
Community Offering, which amount is currently $250,000 of the Common Stock
offered, (ii) one- tenth of one, percent (0.10%) of the total offering of shares
of Common Stock or (iii) fifteen times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of Common Stock
to be issued by a fraction of which the numerator is the amount of the
Supplemental Eligible Account Holder's qualifying deposit and the denominator is
the total amount of qualifying deposits of all Supplemental Eligible Account
Holders, in each case on the Supplemental Eligibility Record Date, subject to
the overall maximum and minimum purchase limitations and exclusive of an
increase in the shares issued pursuant to an increase in the Estimated Valuation
Range of up to 15%. See "--Limitations on Common Stock Purchases."
In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares in excess of the total number of
shares eligible for subscription, the shares will be allocated so as to permit
each subscribing Supplemental Eligible Account Holder, to the extent possible,
to purchase a number of shares sufficient to make such Supplemental Eligible
Account Holder's total allocation equal to the lesser of 100 shares or the
number of shares subscribed for. Thereafter, unallocated shares will be
allocated among the remaining subscribing Supplemental Eligible Account Holders
whose subscriptions remain unfilled in the proportion that the amounts of
126
<PAGE>
their respective qualifying deposits bear to the total amount of qualifying
deposits of all remaining Supplemental Eligible Account Holders whose
subscriptions remain unfilled.
To ensure a proper allocation of stock, each Supplemental Eligible
Account Holder must list on his or her stock order form all accounts in which
such Supplemental Eligible Account Holder has an ownership interest. Failure to
list an account could result in fewer shares being allocated than if all
accounts had been disclosed.
Expiration Date for the Subscription Offering. The Subscription
Offering will expire at 12:00 noon, Eastern time, on ________________, 1998,
unless extended for an initial period of up to 45 days by the Bank or additional
60 day periods with the approval of the Superintendent and if necessary, the
FDIC. Subscription rights which have not been exercised prior to the Expiration
Date will become void.
The Bank will not execute orders until all shares of Common Stock have
been subscribed for or otherwise sold. If all shares have not been subscribed
for or sold within 45 days after the Subscription Expiration Date, unless such
period is extended with the consent of the Superintendent, all funds delivered
to the Bank pursuant to the Subscription Offering will be returned with interest
promptly to the subscribers and all withdrawal authorizations will be canceled.
If an extension beyond the 45-day period following the Subscription Expiration
Date is granted, the Bank will notify subscribers of the extension of time and
of any rights of subscribers to modify or rescind their subscriptions. Each such
extension may not exceed 60 days, and such extensions, in the aggregate, may not
last beyond ___________, 2000.
Persons in Non-qualified States or Foreign Countries. The Holding
Company and the Bank will make reasonable efforts to comply with the securities
laws of all states in the United States in
127
<PAGE>
which persons entitled to subscribe for stock pursuant to the Plan reside.
However, the Bank and the Holding Company are not required to offer stock in the
Subscription Offering to any person who resides in a foreign country.
Community Offering
Upon completion of the Subscription Offering, to the extent that shares
remain available for purchase after satisfaction of all subscriptions of the
Eligible Account Holders, the Employee Plans and the Supplemental Eligible
Account Holders, the Bank will offer shares pursuant to the Plan in the
Community Offering to certain members of the general public to whom a copy of
this prospectus has been delivered, subject to the right of the Holding Company
and the Bank to accept or reject any such orders, in whole or in part, in its
sole discretion. The Community Offering, if any, shall commence upon the
completion of the Subscription Offering and shall terminate seven days after the
close of the Subscription Offering unless extended by the Bank and the Holding
Company, with the approval of the Superintendent and the FDIC, if necessary.
Such persons, together with associates of and persons acting in concert with
such persons, may purchase up to $250,000 of Common Stock subject to the maximum
purchase limitation. See "- Limitations on Common Stock Purchases." This amount
may be increased to up to a maximum of 5% or decreased to less than $250,000 of
Common Stock at the discretion of the Holding Company and the Bank. The
opportunity to subscribe for shares of Common Stock in the Community Offering
category is subject to the right of the Bank and the Holding Company, in their
sole discretion, to accept or reject any such orders in whole or in part either
at the time of receipt of an order or as soon as practicable following the
Expiration Date. However, no such rejection will be in contravention of any
applicable law or regulation. If the Holding Company or the Bank rejects a
subscription in part, the subscriber will not have the right to cancel the
remainder of his or her subscription.
Subject to the foregoing, if the amount of stock remaining is
insufficient to fill the orders of subscribers in the Community Offering after
completion of the Subscription and Community Offerings, such stock will be
allocated first to each subscriber whose order is accepted by the Bank, in an
amount equal to 2% of the shares offered in the Conversion.
Marketing and Underwriting Arrangements
The Bank and the Holding Company have engaged Sandler O'Neill as a
financial and marketing advisor in connection with the offering of the Common
Stock and Sandler O'Neill has agreed to use its best efforts to assist the
Holding Company with the solicitation of subscriptions and purchase orders for
shares of Common Stock in the Offerings. Based upon negotiations between the
Bank and the Holding Company, Sandler O'Neill will receive a fee for services
provided in connection with the Offerings equal to 1.10% of the aggregate
Purchase Price of Common Stock sold in the Offerings. No fees will be paid to
Sandler O'Neill with respect to any shares of Common Stock purchased by any
trustee, director, executive officer or employee of the Bank or the Holding
128
<PAGE>
Company or members of their immediate families or any employee benefit plan of
the Holding Company or the Bank. In the event of a Syndicated Community
Offering, Sandler O'Neill will negotiate with the Holding Company for the
receipt of an additional fee to be remitted to selected dealers under one or
more selected dealer agreements to be entered into by Sandler O'Neill with
certain dealers; provided, however, that the aggregate fees payable to Sandler
O'Neill and any selected dealers in connection with any Syndicated Community
Offering will not exceed 7% of the aggregate Purchase Price of the Common Stock
sold in the Syndicated Community Offering. Fees to Sandler O'Neill and to any
other broker-dealer may be deemed to be underwriting fees and Sandler O'Neill
and such broker-dealer may be deemed to be underwriters. Sandler O'Neill will
also be reimbursed for its reasonable out-of pocket expenses, including legal
fees and expenses up to a maximum of $125,000. Notwithstanding the foregoing, in
the event the Offerings are not consummated or Sandler O'Neill ceases, under
certain circumstances after the subscription solicitation activities are
commenced, to provide assistance to the Holding Company, Sandler O'Neill will be
entitled to reimbursement for its reasonable out-of-pocket expenses as described
above. The Holding Company and the Bank have agreed to indemnify Sandler O'Neill
for costs and expenses in connection with certain claims or liabilities related
to or arising out of the services to be provided by Sandler O'Neill pursuant to
its engagement by the Bank and the Holding Company as financial advisor in
connection with the Conversion, including certain liabilities under the
Securities Act. Total marketing fees to Sandler O'Neill are estimated to be $1.2
million and $1.6 million at the minimum and the maximum of the Estimated
Valuation Range, respectively. See "Pro Forma Data" for the assumptions used to
arrive at these estimates.
Sandler O'Neill will also perform proxy solicitation services,
conversion agent services and records management services for the Bank in the
Conversion and will receive a fee for these services of $65,000, plus
reimbursement of reasonable out-of-pocket expenses.
Directors, trustees and executive officers of the Holding Company and
the Bank may participate in the solicitation of offers to purchase Common Stock.
Questions of prospective purchasers will be directed to executive officers or
registered representatives. Other employees of the Bank may participate in the
Offerings in ministerial capacities or provide clerical work in effecting a
sales transaction. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. 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, trustees, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of the
Holding Company or the Bank will be compensated in connection with his or her
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the Common Stock.
Procedure for Purchasing Shares in Subscription and Community Offerings
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the respective expiration dates for the Offerings, in accordance with
Rule 15c2-8 of the Exchange Act, no Prospectus will be mailed later than five
days prior to such date or hand delivered any later than two days prior to such
date. Execution of the stock order form will confirm receipt or delivery in
129
<PAGE>
accordance with Rule 15c2-8. Stock order forms will only be distributed with a
Prospectus and a certification form requiring each prospective investor to
acknowledge, among other things, that the shares of Common Stock are not insured
by the Bank, the FDIC or any other governmental agency and that such prospective
investor has received a copy of this Prospectus, which, among other things,
describes the risks involved in the investment in the Common Stock.
To purchase shares in the Subscription Offering and, if a Community
Offering is held, the Community Offering, an executed order form with the
required payment for each share subscribed for, or with appropriate
authorization for withdrawal from the Bank's deposit account (which may be given
by completing the appropriate blanks in the stock order form), must be received
by the Bank at its office by 12:00 noon, Eastern time, on the Expiration Date,
in the case of the Subscription Offering, or 7 days after the close of the
Subscription Offering, in the case of the Community Offering. Stock order forms
which are not received by such time or are executed defectively or are received
without full payment (or appropriate withdrawal instructions) are not required
to be accepted. In addition, the Holding Company and Bank are not obligated to
accept orders submitted on photocopied or facsimile order forms and will not
accept order forms unaccompanied by an executed certification form. The Holding
Company and the Bank have the power 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 may not be modified, amended or
rescinded without the consent of the Bank unless the Conversion has not been
completed within 45 days after the end of the Subscription and Community
Offerings, unless such period has been extended.
In order to ensure that Eligible Account Holders and Supplemental
Eligible Account Holders are properly identified as to their stock purchase
priorities, depositors must list all accounts on the stock order form giving all
names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in
person to the office of the Bank, (ii) by check, bank draft or money order, or
(iii) by authorization of withdrawal from deposit accounts maintained with the
Bank. No wire transfers will be accepted. Interest will be paid on payments made
by cash, check, cashier's check or money order at the Bank's passbook rate of
interest from the date payment is received until the completion or termination
of the Conversion. If payment is made by authorization of withdrawal from
deposit accounts, the funds authorized to be withdrawn from a deposit account
will continue to accrue interest at the contractual rates until completion or
termination of the Conversion, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion. Notwithstanding the foregoing, the Holding Company shall have the
right, in its sole discretion, to permit institutional investors to submit
irrevocable orders together with a legally binding commitment for payment and to
thereafter pay for the shares of Common Stock for which they subscribe in the
Community Offering at any time prior to 48 hours before the completion of the
Conversion.
If a subscriber authorizes the Bank to withdraw the amount of the
purchase price from such subscriber's deposit account, the Bank will do so as of
the effective date of the Conversion. The Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the
130
<PAGE>
remaining balance in a certificate account is reduced below the applicable
minimum balance requirement at the time that the funds actually are transferred
under the authorization, the certificate will be canceled at the time of the
withdrawal, without penalty, and the remaining balance will be converted into a
passbook account and will earn interest at the passbook rate. Upon completion of
the Conversion, funds withdrawn from depositors' accounts for stock purchases
will no longer be insured by the FDIC.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes but, rather, may pay for such shares of Common Stock
subscribed for at the Purchase Price upon consummation of the Offerings;
provided, that there is in force from the time of its subscription until such
time, a loan commitment acceptable to the Holding Company from an unrelated
financial institution or the Holding Company to lend to the ESOP, at such time,
the aggregate Purchase Price of the shares for which it subscribed. The Holding
Company intends to provide such a loan to the ESOP.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use
the assets of such IRAs to purchase shares of Common Stock in the Subscription
and Community Offerings, provided that such IRAs are not maintained at the Bank.
Persons with IRAs maintained at the Bank must have their accounts transferred to
an unaffiliated institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings. In addition, the provisions of ERISA and
IRS regulations require that officers, trustees and ten percent shareholders who
use self-directed IRA funds to purchase shares of Common Stock in the
Subscription and Community Offerings make such purchases for the exclusive
benefit of the IRAs.
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 Bank, or to such other address 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.
Restrictions on Transfer of Subscription Rights and Shares of Common Stock
Prior to the completion of the Conversion, the NYBB conversion
regulations prohibit any person with subscription rights (i.e., the Eligible
Account Holders, the Employee Plans and the Supplemental Eligible Account
Holders) 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.
Certificates representing shares of Common Stock purchased in the Subscription
Offering must be registered in the name of the Eligible Account Holder or
Supplemental Eligible Account Holder, as the case may be. Joint registrations
will be allowed only if the qualifying deposit account is so registered. Such
rights may be exercised only by the person to whom they are granted and only for
such person's account. Each person exercising such subscription rights will be
required to certify that such person is purchasing shares solely for such
person's own account and that such person has no agreement or understanding
regarding the sale or transfer of such shares. The regulations also prohibit any
person from offering or making an announcement of an offer or
131
<PAGE>
an intent to make an offer to purchase such subscription rights or shares of
Common Stock prior to the completion of the Conversion.
The Bank and the Holding Company will pursue any and all legal and
equitable remedies (including forfeiture) 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.
Syndicated Community Offering
As a final step in the Conversion, the Plan provides that, if feasible,
all shares of Common Stock not purchased in the Subscription Offering or the
Community Offering, if any, will be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed and managed by Sandler O'Neill acting as agent of the Holding
Company. There are no known agreements between Sandler O'Neill and any
broker-dealer in connection with a possible Syndicated Community Offering. The
Holding Company and the Bank have reserved the right to reject orders in whole
or in part in their sole discretion in the Syndicated Community Offering.
However, no such rejection will be in contravention of any applicable law or
regulation. If the Holding Company or the Bank rejects an order in part, the
subscriber will not have the right to cancel the remainder of his or her
subscription. Neither Sandler O'Neill nor any registered broker-dealer shall
have any obligation to take or purchase any shares of the Common Stock in the
Syndicated Community Offering; however, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.
The price at which Common Stock is sold in the Syndicated Community
Offering will be determined as described above under "- Stock Pricing." Subject
to overall purchase limitations, no person, together with any associate or group
of persons acting in concert, will be permitted to subscribe in the Syndicated
Community Offering for more than 1% of the Common Stock offered in the
Conversion; provided, however, that shares of Common Stock purchased in the
Community Offering by any persons, together with associates of or persons acting
in concert with such persons, will be aggregated with purchases in the
Syndicated Community Offering and be subject to a maximum purchase limitation of
1% of the Common Stock offered.
Payments made in the form of a check, bank draft, money order or in
cash will earn interest at the Bank's passbook rate of interest from the date
such payment is actually received by the Bank until completion or termination of
the Conversion.
In addition to the foregoing, if a syndicate of broker-dealers
("selected dealers") is formed to assist in the Syndicated Community Offering, a
purchaser may pay for his or her 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 Bank 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 to place orders for shares. Such
selected dealers shall subsequently contact their customers who indicated an
interest and seek their confirmation as to their
132
<PAGE>
intent to purchase. Those indicating an intent to purchase shall execute order
forms and forward them 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 or her intent to purchase ("debit date") and on or before noon of the next
business day following the debit date, will send order forms and funds to the
Bank for deposit in a segregated account. Although purchasers' funds are not
required to be in their accounts with selected dealers until the debit date, in
the event that such alternative procedure is employed once a confirmation of an
intent to purchase has been received by the selected dealer, the purchaser has
no right to rescind his or her order.
Certificates representing shares of Common Stock purchased, together
with any refund due, will be mailed to purchasers at the address specified in
the order form, as soon as practicable following consummation of the sale of the
Common Stock. Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.
The Syndicated Community Offering will terminate no more than 45 days
following the Subscription Expiration Date, unless extended by the Holding
Company with the approval of the Superintendent and FDIC. Such extensions may
not be beyond ____________, 2000. See "- Stock Pricing" above for a discussion
of rights of subscribers, if any, in the event an extension is granted.
Limitations on Common Stock Purchases
The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased during the Conversion:
(1) No subscription for fewer than 25 shares will be accepted;
(2) Each Eligible Account Holder may subscribe for and purchase Common
Stock in the Subscription Offering in an amount up to the greatest of (a) the
amount permitted to be purchased in the Community Offering, currently $250,000
of the Common Stock offered, (b) one-tenth of one percent (0.10%) of the total
offering of shares of Common Stock or (c) fifteen times the product (rounded
down to the net whole number) obtained by multiplying the total number of shares
of Common Stock to be issued in the Conversion by a fraction the numerator of
which is the amount of the qualifying deposit of the Eligible Account Holder and
the denominator of which is the total amount of qualifying deposits of all
Eligible Account Holders in each case on the Eligibility Record Date, subject to
the overall limitation in (8) below and exclusive of an increase in the total
number of shares issued due to an increase in the Estimated Valuation Range of
up to 15%;
(3) The Employee Plans are permitted to purchase up to 10% of the
shares of Common Stock issued in the Conversion and as an Employee Plan, the
ESOP intends to purchase 8% of the shares of Common Stock issued in the
Conversion, in each case, including shares to be issued to the Foundation;
133
<PAGE>
(4) Each Supplemental Eligible Account Holder may subscribe for and
purchase Common Stock in the Subscription Offering in an amount up to the
greatest of (a) the amount permitted to be purchased in the Community Offering,
currently $250,000 of the Common Stock offered, (b) one-tenth of one percent
(0.10%) of the total offering of shares of Common Stock or (c) fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued in the Conversion by a
fraction the numerator of which is the amount of the qualifying deposit of the
Supplemental Eligible Account Holder and the denominator of which is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders in
each case on the Supplemental Eligibility Record Date, subject to the overall
limitation in (8) below and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Valuation Range of up to 15%;
(5) Persons purchasing shares of Common Stock in the Community
Offering, together with associates of and groups of persons acting in concert
with such persons, may purchase Common Stock in the Community Offering in an
amount up to $250,000 of the Common Stock offered in the Conversion subject to
the overall limitation in (7) below;
(6) Persons purchasing shares of Common Stock in the Syndicated
Community Offering, together with associates of and persons acting in concert
with such persons, may purchase Common Stock in the Syndicated Offering in an
amount up to $250,000 of the shares of Common Stock offered in the Conversion
subject to the overall limitation in (7) below; provided, that shares of Common
Stock purchased in the Community Offering by any persons, together with
associates of and persons acting in concert with such persons, will be
aggregated with purchases by such persons in the Syndicated Community Offering
in applying the $250,000 purchase limitation;
(7) Eligible Account Holders, Supplemental Eligible Account Holders and
certain members of the general public may purchase stock in the Community
Offering and Syndicated Community Offering subject to the purchase limitations
described in (5) and (6) above; provided, that, except for the Employee Plans,
the maximum number of shares of Common Stock subscribed for or purchased in all
categories of the Conversion by any person, together with associates of and
groups of persons acting in concert with such persons, shall not exceed 1.0% of
the shares of Common Stock offered for sale in the Conversion; and
(8) The directors and officers of the Bank and their associates in the
aggregate, excluding purchases by the Employee Plans, may purchase up to 25% of
shares offered for sale in the Conversion.
134
<PAGE>
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the depositors
of the Bank, both the individual amount permitted to be subscribed for and the
overall maximum purchase limitation may be increased to up to a maximum of 5% of
the shares offered for sale in the Offering at the sole discretion of the
Holding Company and the Bank. It is currently anticipated that the overall
maximum purchase limitation may be increased if, after a Community Offering, the
Holding Company has not received subscriptions for an aggregate amount equal to
at least the minimum of the Estimated Valuation Range. If such amount is
increased, subscribers for the maximum amount will be, and certain other large
subscribers in the sole discretion of the Holding Company and the Bank may be,
given the opportunity to increase their subscriptions up to the then applicable
limit. Requests to purchase additional shares of Common Stock under this
provision will be determined by the Board of Directors of the Holding Company
and the Board of Trustees of the Bank and, if approved, allocated on a pro rata
basis giving priority in accordance with the priority rights set forth in the
Plan and described herein.
The overall maximum purchase limitation may not be reduced to less than
1.0%; the individual amount permitted to be subscribed for in the Offerings,
however, may be reduced by the Bank to less than $250,000 of the Common Stock
offered. An individual Eligible Account Holder or Supplemental Eligible Account
Holder may not purchase individually in the Subscription Offering the overall
maximum purchase limitation of 1.0% of the shares offered for sale, but may make
such purchase, together with associates of and persons acting in concert with
such person, by also purchasing in other available categories of the Conversion,
subject to availability of shares and the maximum overall purchase limitation
for purchases in the Conversion.
In the event of an increase in the total number of shares offered in
the Conversion due to an increase in the Estimated Valuation Range of up to 15%
("Adjusted Maximum"), the additional shares will be allocated in the following
order of priority in accordance with the Plan: (i) in the event that there is an
oversubscription by Eligible Account Holders, to fill unfilled subscriptions of
Eligible Account Holders, exclusive of the Adjusted Maximum; (ii) to fill the
Employee Plans' subscription of up to 10% of the Adjusted Maximum number of
shares; (iii) in the event that there is an oversubscription by Supplemental
Eligible Account Holders, to fill unfilled subscriptions of Supplemental
Eligible Account Holders. exclusive of the Adjusted Maximum; and (iv) to fill
unfilled subscriptions in the Community Offering, exclusive of the Adjusted
Maximum, each to the extent possible.
The term "Associate" of a person is defined to mean: (i) any
corporation or organization (other than the Holding Company, the Bank or a
majority-owned subsidiary of the Bank) of which such person is an officer,
partner or is directly or indirectly, either alone or with one or more members
of his or her immediate family, the beneficial owner of 10% or more of any class
of equity securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, except that the term "Associate" does not
include any employee stock benefit plan maintained by the Holding Company or the
Bank in which a person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity, and except that, for purposes of
aggregating total shares that may be acquired or
135
<PAGE>
held by officers and directors and their Associates, the term "Associate" does
not include any tax-qualified employee stock benefit plan; and (iii) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person or who is a director or officer of the Holding Company
or the Bank. Trustees, directors and officers are not treated as associates of
each other solely by virtue of holding such positions. For a further discussion
of limitations on purchases of a converting institution's stock at the time of
Conversion and subsequent to Conversion, see "--Certain Restrictions on Purchase
or Transfer of Shares After Conversion," "Management of the Bank - Proposed
Purchases by Executive Officers and Directors" and "Restrictions on Acquisition
of the Holding Company and the Bank."
Certain Restrictions on Purchase or Transfer of Shares After Conversion
All shares of Common Stock purchased in connection with the Conversion
by a director or an executive officer of the Bank will be subject to a
restriction that the shares not be sold for a period of one year following the
Conversion, except in the event of the death or judicial declaration of
incompetence of such director or executive officer. Each certificate for
restricted shares will bear a legend giving notice of this restriction on
transfer, and instructions will be issued to the effect that any transfer within
such time period of any certificate or record ownership of such shares other
than as provided above is a violation of the restriction. Any shares of Common
Stock issued at a later date as a stock dividend, stock split, or otherwise,
with respect to such restricted stock will be subject to the same restrictions.
The directors and executive officers of the Holding Company and the Bank will
also be subject to the insider trading rules promulgated pursuant to the
Exchange Act and any other applicable requirements of the federal securities
laws.
Purchases of outstanding shares of Common Stock of the Holding Company
by directors, executive officers (or any person who was an executive officer or
director of the Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the Superintendent. This restriction does not apply,
however, to the purchase of stock pursuant to the Stock Option Plan or the RP
Financial to be established after the Conversion.
Interpretation, Amendment and Termination
All interpretations of the Plan by the Board of the Bank will be final,
subject to the authority of the Superintendent and FDIC. The Plan provides that,
if deemed necessary or desirable by the Board of Trustees of the Bank, the Plan
may be substantively amended prior to the solicitation of proxies from
depositors by a vote of the Board of Trustees; amendment of the Plan thereafter
requires the approval of the Superintendent and FDIC. The Plan will terminate if
the sale of all shares of stock being offered pursuant to the Plan is not
completed prior to 24 months after the date of the approval of the Plan by the
Superintendent unless a longer time period is permitted by governing laws and
regulations. The Plan may be terminated by a vote of the Board of Trustees of
the Bank at any time prior to the Special Meeting, and thereafter by such a vote
with the approval of the Superintendent and FDIC.
136
<PAGE>
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE BANK
General
The Bank's Plan of Conversion provides for the Conversion of the Bank
from the mutual to the stock form of organization and, in connection therewith,
a Restated Organization Certificate and Bylaws to be adopted by depositors of
the Bank. The Plan also provides for the concurrent formation of a holding
company, which form of organization may or may not be utilized at the option of
the Board of Trustees of the Bank. See "The Conversion - General." In the event
that the holding company form of organization is utilized, as described below,
certain provisions in the Holding Company's Certificate of Incorporation and
Bylaws and in its management remuneration plans and agreements entered into in
connection with the Conversion, together with provisions of the Delaware General
Corporation Law ("DGCL"), may have anti-takeover effects. In the event that the
holding company form of organization is not utilized, the Bank's Restated
Organization Certificate and Bylaws and management remuneration plans and
agreements entered into in connection with the Conversion may have anti-takeover
effects as described below. In addition, regulatory restrictions may make it
difficult for persons or companies to acquire control of either the Holding
Company or the Bank.
Restrictions in the Holding Company's Certificate of Incorporation and Bylaws
The following discussion is a general summary of certain provisions of
the Holding Company's Certificate of Incorporation and Bylaws and certain other
statutory and regulatory provisions relating to stock ownership and transfers,
the Board of Directors and business combinations, that might have a potential
"anti-takeover" effect. The Certificate of Incorporation and Bylaws of the
Holding Company are filed as exhibits to the Registration Statement, of which
this Prospectus is a part, and the descriptions herein of such documents are
qualified in their entirety by reference to such documents. A number of
provisions of the Holding Company's Certificate of Incorporation and Bylaws deal
with matters of corporate governance and certain rights of shareholders. These
provisions might have the effect of discouraging future takeover attempts which
are not approved by the Board of Directors but which individual Holding Company
shareholders may deem to be in their best interests or in which shareholders may
receive substantial premiums for their shares over then current market prices.
As a result, shareholders who might desire to participate in such transactions
may not have an opportunity to do so. Such provisions will also render the
removal of the current Board of Directors or management of the Holding Company
more difficult. The following description of certain of the provisions of the
Certificate of Incorporation and Bylaws of the Holding Company is necessarily
general and reference should be made in each case to such Certificate of
Incorporation and Bylaws, which are incorporated herein by reference. See
"Additional Information" as to how to obtain a copy of these documents.
Limitation on Voting Rights. The Certificate of Incorporation of the
Holding Company provides that 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 then outstanding shares of Common
Stock ("Limit") shall be entitled or permitted to only one one-hundredth (1
/100) of a vote with respect of each share held in excess of the Limit.
Beneficial ownership of shares includes shares beneficially owned by such person
or any of his affiliates, shares which such person
137
<PAGE>
or his affiliates 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 the ESOP or shares that are subject to a revocable proxy and that are
not otherwise beneficially owned or deemed by the Holding Company to be
beneficially owned by such person and his affiliates. The Certificate of
Incorporation further provides that this provision limiting voting rights may
only be amended upon (i) the approval of the Board of Directors, and (ii) the
affirmative vote of the holders of a majority of the total votes eligible to be
cast by the holders of all outstanding shares of capital stock entitled to vote
thereon and (iii) by the affirmative vote of either (1) not less than a majority
of the authorized number of directors and, if one or more Interested
Shareholders exist, by not less than a majority of the Disinterested Directors
(as defined in the Certificate of Incorporation) or (2) the holders of not less
than two-thirds of the total votes eligible to be cast by the holders of all
outstanding shares of the capital stock of the Company entitled to vote thereon
and, if the amendment is proposed by or on behalf of an Interested Shareholder
or a director who is an Affiliate or Associate of an Interested Shareholder, by
the affirmative vote of the holders of not less than a majority of the total
votes eligible to be cast by holders of all outstanding shares entitled to vote
thereon not beneficially owned by an Interested Shareholder or an Affiliate or
Associate thereof.
Board of Directors. The Board of Directors of the Holding Company is
divided into three classes, each of which shall contain approximately one-third
of the total number of members of the Board. Each class shall serve a staggered
term, with approximately one-third of the total number of directors being
elected each year. The Holding Company's Certificate of Incorporation and Bylaws
provide that the size of the Board shall be determined by a majority of the
directors but shall not be less than seven nor more than 20. The Certificate of
Incorporation and the Bylaws provide that any vacancy occurring in the Board,
including a vacancy created by an increase in the number of directors or
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, shall be filled for the remainder of the unexpired term
exclusively by a majority vote of the directors then in office. The classified
Board is intended to provide for continuity of the Board of Directors and to
make it more difficult and time consuming for a shareholder group to fully use
its voting power to gain control of the Board of Directors without the consent
of the incumbent Board of Directors of the Holding Company. The Certificate of
Incorporation of the Holding Company provides that a director may be removed
from the Board of Directors prior to the expiration of his term only for cause,
upon the affirmative vote of at least 80% of the outstanding shares of voting
stock. In the absence of these provisions, the vote of the holders of a majority
of the shares could remove the entire Board, with or without cause, and replace
it with persons of such holders' choice.
Cumulative Voting, Special Meetings and Action by Written Consent. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, special meetings of shareholders of the Company may be called
only by resolution of at least three-fourths of the Board of Directors then in
office or by the Chairman, if one has been elected by the Board, or the Chief
Executive Officer of the Company. The Certificate of Incorporation also provides
that any action required or permitted to be taken by the shareholders of the
Company may be taken only at an annual or special meeting and prohibits
shareholder action by written consent in lieu of a meeting.
138
<PAGE>
Authorized Shares. The Certificate of Incorporation authorizes the
issuance of forty five million (45,000,000) shares of capital stock, consisting
of forty million (40,000,000) shares of Common Stock and five million
(5,000,000) shares of preferred stock ("Preferred Stock"). The shares of Common
Stock and Preferred Stock were authorized in an amount greater than that to be
issued in the Conversion to provide the Company's Board of Directors with as
much flexibility as possible to effect, among other transactions, financings,
acquisitions, stock dividends, stock splits and employee stock options. However,
these additional authorized shares may also be used by the Board of Directors,
consistent with its fiduciary duty, to deter future attempts to gain control of
the Company. The Board of Directors also has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of Preferred Stock, the Board has the power, to the
extent consistent with its fiduciary duty, to issue a series of Preferred Stock
to persons friendly to management in order to attempt to block a post-tender
offer merger or other transaction by which a third party seeks control, and
thereby assist management to retain its position. The Company's Board of
Directors currently has no plans for the issuance of additional shares, other
than the issuance of additional shares pursuant to the terms of the RRP and upon
exercise of stock options to be issued pursuant to the terms of the Stock Option
Plan, all of which, if implemented prior to the first anniversary of the
Conversion, will be presented to shareholders for approval at a meeting of
shareholders to be held no earlier than six months after completion of the
Conversion.
Shareholder Vote Required to Approve Business Combinations with
Principal Shareholders. The Certificate of Incorporation requires the approval
of the holders of at least 80% of the Holding Company's outstanding shares of
voting stock, together with the affirmative vote of at least 50% of the Holding
Company's outstanding shares of voting stock not beneficially owned by an
Interested Shareholder (as defined below) to approve certain "Business
Combinations," as defined therein, and related transactions. Under Delaware law,
absent this provision, Business Combinations, including mergers, consolidations
and sales of all or substantially all of the assets of a corporation must,
subject to certain exceptions, be approved by the vote of the holders of only a
majority of the outstanding shares of Common Stock of the Holding Company and
any other affected class of stock. Under the Certificate of Incorporation, at
least 80% approval of shareholders is required in connection with any
transaction involving an Interested Shareholder except (i) in cases where the
proposed transaction has been approved in advance by a majority of those members
of the Holding Company's Board of Directors who are unaffiliated with the
Interested Shareholder and were directors prior to the time when the Interested
Shareholder became an Interested Shareholder or (ii) if the proposed transaction
meets certain conditions set forth therein which are designed to afford the
shareholders a fair price in consideration for their shares in which case, if a
shareholder vote is required, approval of only a majority of the outstanding
shares of voting stock would be sufficient. The term "Interested Shareholder" is
defined to include any individual, corporation, partnership or other entity
(other than the Holding Company or its subsidiary or any employee benefit plan
maintained by the Holding Company or its subsidiary) which owns beneficially or
controls, directly or indirectly, 10% or more of the outstanding shares of
voting stock of the Holding Company. This provision of the Certificate of
Incorporation applies to any "Business Combination," which is defined to include
(i) any merger or consolidation of the Holding Company or any of its
subsidiaries with or into any Interested Shareholder or Affiliate (as defined in
the Certificate of Incorporation) of an Interested Shareholder-, (ii) any sale,
lease, exchange, mortgage, pledge, transfer, or other
139
<PAGE>
disposition to or with any Interested Shareholder or Affiliate of 5% or more of
the assets of the Holding Company or combined assets of the Holding Company and
its subsidiary; (iii) the issuance or transfer to any Interested Shareholder or
its Affiliate by the Holding Company (or any subsidiary) of any securities of
the Holding Company other than on a pro rata basis to all shareholders; (iv) the
adoption of any plan for the liquidation or dissolution of the Holding Company
proposed by or on behalf of any Interested Shareholder or Affiliate thereof, (v)
any reclassification of securities, recapitalization, merger or consolidation of
the Holding Company which has the effect of increasing the proportionate share
of Common Stock or any class of equity or convertible securities of the Holding
Company owned directly or indirectly by an Interested Shareholder or Affiliate
thereof-, and (vi) the acquisition by the Holding Company or its subsidiary of
any securities of an Interested Shareholder or its Affiliates or Associates.
The trustees and executive officers of the Bank are purchasing in the
aggregate approximately 1.80% of the shares of the Common Stock at the maximum
of the Estimated Valuation Range. In addition, the ESOP intends to purchase 8%
of the Common Stock to be issued in the Conversion, including shares to be
issued to the Foundation. Additionally, if, the proposed RRP and Stock Options
Plan are implemented, the Company expects to acquire 4% of the Common Stock
issued in the Conversion, including shares to be issued to the Foundation, on
behalf of the RRP and expects to issue an amount equal to 10% of the Common
Stock issued in the Conversion, including shares to be issued to the Foundation,
under the Stock Option Plan to directors, executive officers and employees. As a
result, assuming the RRP and Stock Option Plan are implemented, the directors,
executive officers and employees have the potential to control the voting of
approximately 25% of the Holding Company's Common Stock, on a fully diluted
basis at the maximum of the Estimated Valuation Range, thereby enabling them to
prevent the approval of the transactions requiring the approval of at least 80%
of the Holding Company's outstanding shares of voting stock described
hereinabove.
Amendment of Certificate of Incorporation and Bylaws. The Certificate
of Incorporation provides that certain provisions of the Certificate of
Incorporation may not be altered, amended, repealed or rescinded without the
affirmative vote of either (1) not less than a majority of the authorized number
of directors and, if one or more Interested Shareholders exist, by not less than
a majority of the Disinterested Directors (as defined in the Certificate of
Incorporation) or (2) the holders of not less than two-thirds of the total votes
eligible to be cast by the holders of all outstanding shares of the capital
stock of the Holding Company entitled to vote thereon and, if the alteration,
amendment, repeal, or rescission is proposed by or on behalf of an Interested
Shareholder or a director who is an Affiliate or Associate of an Interested
Shareholder, by the affirmative vote of the holders of not less than a majority
of the total votes eligible to be cast by holders of all outstanding shares
entitled to vote thereon not beneficially owned by an Interested Shareholder or
an Affiliate or Associate thereof. Amendment of the provision relating to
business combinations must also be approved by either (i) a majority of the
Disinterested Directors, or (ii) the affirmative vote of not less than eighty
percent (80%) of the total number of votes eligible to be cast by the holders of
all outstanding shares of the Voting Stock, voting together as a single class,
together with the affirmative vote of not less than fifty percent (50%) of the
total number of votes eligible to be cast by the holders of all outstanding
shares of the Voting Stock not beneficially owned by any Interested Shareholder
or Affiliate or Associate thereof, voting together as a single class.
140
<PAGE>
Furthermore, the Holding Company's Certificate of Incorporation provides that
provisions of the Bylaws that contain supermajority voting requirements may not
be altered, amended, repealed or rescinded without a vote of the Board or
holders of capital stock entitled to vote thereon that is not less than the
supermajority specified in such provision. Absent these provisions, the DGCL
provides that a corporation's certificate of incorporation and bylaws may be
amended by the holders of a majority of the corporation's outstanding capital
stock. The Certificate of Incorporation also provides that the Board of
Directors is authorized to make, alter, amend, rescind or repeal any of the
Holding Company's bylaws in accordance with the terms thereof, regardless of
whether the Bylaw was initially adopted by the shareholders. However, this
authorization neither divests the shareholders of their right, nor limits their
power to adopt, amend, rescind or repeal any Bylaw under the DGCL. These
provisions could have the effect of discouraging a tender offer or other
takeover attempt where the ability to make fundamental changes through Bylaw
amendments is an important element of the takeover strategy of the acquiror.
Certain By-Law Provisions. The Bylaws of the Company also require a
shareholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at an annual shareholder meeting to give
approximately 60 days notice in advance of the anniversary of the prior year's
annual shareholders' meeting to the Secretary of the Company. The notice
provision requires a shareholder who desires to raise new business to provide
certain information to the Company concerning the nature of the new business,
the shareholder and the shareholder's interest in the business matter.
Similarly, a shareholder wishing to nominate any person for election as a
director must provide the Company with certain information concerning the
nominee and the proposing shareholder.
Anti-Takeover Effects of the Holding Company's Certificate of Incorporation and
Bylaws and Certain Benefit Plans Adopted in the Conversion
The provisions described above are intended to reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by members of its Board of
Directors. The provisions of the Employment Agreements, the ESOP, the RRP and
the Stock Option Plan to be established may also discourage takeover attempts by
increasing the costs to be incurred by the Bank and the Company in the event of
a takeover. See "Management of the Bank--Employment Agreements," and "- Benefit
Plans --Employee Stock Ownership Plan," and "--Recognition and Retention Plan."
The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation, Bylaws and management remuneration plans to be
established are in the best interests of the Company and its shareholders. An
unsolicited non-negotiated proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Holding Company and its
shareholders to encourage potential acquirers to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts, It is also the Board of Directors'
view that these provisions should not discourage persons from proposing a merger
or
141
<PAGE>
other transaction at a price that reflects the true value of the Holding Company
and that otherwise is in the best interests of all shareholders.
Delaware Corporate Law
The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the DGCL ("Section 203"), is
intended to discourage certain takeover practices by impeding the ability of a
hostile acquiror to engage in certain transactions with the target company.
In general, Section 203 provides that a "Person" (as defined therein)
who owns 15% or more of the outstanding voting stock of a Delaware corporation
(a "DGCL Interested Shareholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became a DGCL Interested Shareholder.
The term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
a DGCL Interested Shareholder, the Board of Directors approved either the
business combination or the transaction which resulted in the shareholder
becoming a DGCL Interested Shareholder; (ii) any business combination involving
a person who acquired at least 85% of the outstanding voting stock in the
transaction in which he became a DGCL Interested Shareholder, with the number of
shares outstanding calculated without regard to those shares owned by the
corporation's directors who are also officers and by certain employee stock
plans; (iii) any business combination with an Interested Shareholder that is
approved by the Board of Directors and by a two-thirds vote of the outstanding
voting stock not owned by the DGCL Interested Shareholder; and (iv) certain
business combinations that are proposed after the corporation had received other
acquisition proposals and which are approved or not opposed by a majority of
certain continuing members of the Board of Directors. A corporation may exempt
itself from the requirement of the statute by adopting an amendment to its
Certificate of Incorporation or Bylaws electing not to be governed by Section
203 of the DGCL. At the present time, the Board of Directors does not intend to
propose any such amendment.
Restrictions in the Bank's Restated Organization Certificate and Bylaws
Although the Board of Trustees of the Bank is not aware of any effort
that might be made to obtain control of the Bank after the Conversion, the Board
of Directors believes that it is appropriate to adopt certain provisions
permitted by the Banking Law and the conversion regulations of the NYBB to
protect the interests of the converted Bank and its shareholders from any
hostile takeover. Such provisions may, indirectly, inhibit a change in control
of the Company, as the Bank's sole stockholder. See "Risk Factors - Takeover
Defensive Provisions."
In the event that the Company is not formed and the subscription rights
are deemed to be subscriptions to purchase the common stock of the Bank, the
provisions contained in the Restated
142
<PAGE>
Organization Certificate and Bylaws of the Bank, to be effective on the
effective date of the Conversion, will govern corporate procedure and certain
rights of shareholders. The anti-takeover effects of such provisions are
generally similar to those described above for the Company, except that the
issuance of any additional capital stock of the Bank would require the prior
approval of the Superintendent, and the consent of the holders of two-thirds of
the outstanding shares of capital stock of the Bank would be required prior to
effecting a merger of, or certain acquisitions of assets by, the Bank.
Limitation on Voting Rights. The Bank's Restated Organization
Certificate will contain a provision whereby the acquisition of or offer to
acquire beneficial ownership of more than 10% of the issued and outstanding
shares of any class of equity securities of the Bank by any person (i.e., any
individual, corporation, group acting in concert, trust, partnership, joint
stock company or similar organization), either directly or indirectly, will be
prohibited for a period of three years following the date of completion of the
Conversion. Any stock in excess of 10% acquired in violation of this provision
will not be counted as outstanding for voting purposes. This limitation shall
not apply to (a) any offer or sale with a view towards public resale made
exclusively by the Bank to any underwriter acting on behalf of the Bank in
connection with a public offering of the common stock of the Bank; (b) any
corporation formed by the Bank in connection with its conversion from mutual to
stock form to acquire all of the shares of stock of the Bank to be issued in
connection with such conversion; or (c) any reclassification of securities
(including any reverse stock split), or recapitalization of the Bank, or any
merger or consolidation of the Bank with any of its subsidiaries or any other
transaction or reorganization (including a transaction in which the Bank shall
form a holding company) that does not have the effect, directly or indirectly,
of changing the beneficial ownership interests of the Bank's shareholders, other
than pursuant to the exercise of any appraisal rights.
In the event that holders of revocable proxies for more than 10% of the
shares of the Common Stock of the Holding Company seek, among other things, to
elect one-third or more of the Holding Company's Board of Directors, to cause
the Holding Company's shareholders to approve the acquisition or corporate
reorganization of the Holding Company or to exert a continuing influence on a
material aspect of the business operations of the Holding Company, which actions
could indirectly result in a change in control of the Bank, the Board of
Directors of the Bank will be able to assert this provision of the Bank's
Restated Organization Certificate against such holders. Although the Board of
Directors of the Bank is not currently able to determine when and if it would
assert this provision of the Bank's Restated Organization Certificate, the
Bank's Board of Directors, in exercising its fiduciary duty, may assert this
provision if it were deemed to be in the best interests of the Bank, the Holding
Company and its shareholders. It is unclear, however, whether this provision, if
asserted, would be successful against such persons in a proxy contest which
could result in a change in control of the Bank indirectly through a change in
control of the Holding Company.
Board of Directors. The Board of Directors of the Bank is divided into
three classes, each of which shall contain approximately one-third of the total
number of members of the Board of Directors. Each class shall serve a staggered
term, with approximately one-third of the total number of directors being
elected each year. The staggered terms of the Bank's Board of Directors could
have an anti-takeover effect by making it more difficult for a majority of
shares to force an immediate change in the Board since only one-third of the
Board is elected each year. The purpose
143
<PAGE>
of these provisions is to assure stability and continuity of management of the
Bank in the years immediately following the Conversion. In addition,
shareholders will not be permitted to cumulate their votes in the election of
directors. The Restated Organization Certificate and Bylaws of the Bank provide
that any director, or the entire Board of Directors, may be removed at any time,
but only for cause and only by the affirmative vote of at least 80% of the
outstanding shares of voting stock. The Restated Organization Certificate and
Bylaws of the Bank also provide that any vacancy occurring in the Board of
Directors, including any vacancy created by an increase in the number of
directors, shall be filled by the shareholders of the Bank, except that
vacancies not exceeding one-third of the entire Board of Directors may be filled
by the affirmative vote of a majority of the directors then holding office.
Preferred Stock. Although the Bank has no arrangements, understandings
or plans at the present time, the Board of Directors believes that the
availability of unissued shares of Preferred Stock will provide the Bank with
increased flexibility in structuring possible future financings and acquisitions
and in meeting other corporate needs which may arise. In the event of a proposed
merger, tender offer or other attempt to gain control of the Bank of which
management does not approve, it might be possible for the Bank's Board of
Directors to authorize the issuance of one or more series of Preferred Stock
with rights and preferences which could impede the completion of such a
transaction. An effect of the possible issuance of such Preferred Stock,
therefore, may be to deter a future takeover attempt. The Bank's Board of
Directors does not intend to issue any Preferred Stock except on terms which the
Board deems to be in the best interests of the Bank and its then existing
shareholders.
Shareholder Vote Required for Certain Business Combinations. The Bank's
Restated Organization Certificate contains provisions requiring a higher
shareholder vote for certain business combinations, which provisions are
substantially identical to those contained in the Holding Company's Certificate
of Incorporation. See "- Restrictions in the Holding Company's Certificate of
Incorporation and Bylaws - Shareholder Vote Required to Approve Business
Combinations with Principal Shareholders."
Evaluation of Offers. The Restated Organization Certificate of the Bank
also provides that the Board of Directors of the Bank, when evaluating any offer
to the Bank or to the shareholders of the Bank from another party relating to a
change or potential change in control of the Bank, including, without
limitation, any offer to (a) purchase for cash or exchange any securities or
property for any outstanding equity securities of the Bank, (b) merge or
consolidate the Bank with another corporation or (c) purchase or otherwise
acquire all or substantially all of the properties and assets of the Bank,
shall, in connection with the exercise of its judgment in determining what is in
the best interest of the Bank and its shareholders, give due consideration not
only to the price or other consideration being offered, but also to all other
relevant factors including, without limitation, (1) both the long-term and the
short-term interests of the Bank and its shareholders and (2) the effects that
the Bank's actions may have in the short-term or in the long-term upon any of
the following: (i) the prospects for potential growth, development, productivity
and profitability of the Bank; (ii) the Bank's current employees; (iii) the
Bank's retired employees and other beneficiaries receiving or entitled to
receive retirement, welfare or similar benefits from or pursuant to any plan
sponsored, or agreement entered into, by the Bank; (iv) the Bank's customers and
creditors; and (v)
144
<PAGE>
the ability of the Bank to provide, as a going concern, goods, services,
employment opportunities and employment benefits and otherwise to contribute to
the communities in which is does business. By having these standards in the
Restated Organization Certificate, the Board of Directors of the Bank may be in
a stronger position to oppose such a transaction if the Board concludes that the
transaction would not be in the best interests of the Bank, even if the price
offered is significantly greater than the then market price of any equity
security of the Bank.
Amendment of Restated Organization Certificate and Bylaws. The Bank's
Restated Organization Certificate provides that certain provisions of the
Restated Organization Certificate may not be altered, amended, repealed or
rescinded without the affirmative vote of either (i) not less than a majority of
the authorized number of directors and, if one or more Interested Shareholders
exist, by not less than a majority of the Disinterested Directors, or (ii) the
holders of not less than two-thirds of the total votes eligible to be cast by
the holders of all outstanding shares of capital stock entitled to vote thereon
and, if the alteration, amendment, repeal or rescission is proposed by or on
behalf of an Interested Shareholder or a director who is an Affiliate or
Associate of an Interested Shareholder, the holders of not less than a majority
of the total votes eligible to be cast by holders of all outstanding shares of
capital stock entitled to vote thereon not beneficially owned by an Interested
Shareholder or an Affiliate or Associate thereof.
In addition, provisions of the Bylaws of the Bank that contain
supermajority voting requirements may not be altered, amended, repealed or
rescinded without a vote of the Board or holders of capital stock entitled to
vote thereon that is not less than the supermajority specified in such
provision.
Regulatory Restrictions
New York State Banking Board Conversion Regulations. NYBB regulations
prohibit any person, prior to the completion of the Conversion, from
transferring, or from entering into any agreement or understanding to transfer,
to the account of another, legal or beneficial ownership of the subscription
rights issued under the Plan of Conversion or the Common Stock to be issued upon
their exercise. The NYBB regulations also prohibit any person, prior to the
completion of the Conversion, from offering, or making an announcement of an
offer or intent to make an offer, to purchase such subscription rights or Common
Stock. See "The Conversion - Restrictions on Transfer of Subscription Rights and
Shares." For one year following the Conversion, NYBB regulations prohibit any
person from acquiring or making an offer to acquire more than 10% of the stock
of any converted savings institution, except with the prior approval of the
Superintendent.
OTS Regulations. In addition, any proposal to acquire 10% of any class
of equity security of the Holding Company generally would be subject to approval
by the OTS under the Change in Bank Control Act (the "CBCA") and the HOLA. The
OTS requires all persons seeking control of a savings institution, either
directly or indirectly through its holding company, to obtain regulatory
approval prior to offering to obtain control. Federal law generally provides
that no "person," acting directly or indirectly or through or in concert with
one or more other persons, may acquire directly or indirectly "control," as that
term is defined in OTS regulations, of an OTS-regulated savings and loan holding
company without giving at least 60 days' written notice to the OTS and providing
the
145
<PAGE>
OTS an opportunity to disapprove the proposed acquisition. Such acquisitions of
control may be disapproved if it is determined, among other things, that (i) the
acquisition would substantially lessen competition; (ii) the financial condition
of the acquiring person might jeopardize the financial stability of the savings
institution or prejudice the interests of its depositors; or (iii) the
competency, experience or integrity of the acquiring person or the proposed
management personnel indicates that it would not be in the interest of the
depositors or the public to permit the acquisition of control by such person.
Such change in control restrictions on the acquisition of the holding company
stock are not limited to a set time period but will apply for as long as the
CBCA is in effect. Persons holding revocable or irrevocable proxies may be
deemed to be beneficial owners of such securities under OTS regulations and
therefore prohibited from voting all or the portion of such proxies in excess of
10% aggregate beneficial ownership limit. Such regulatory restrictions may
prevent or inhibit proxy contests for control of the Company or the Bank which
have not received prior regulatory approval. Acquisitions of control of a
savings bank are subject to the approval of the FDIC under the CBCA. However,
transactions involving the Company for which OTS approval must be sought under
HOLA are exempted from this requirement.
New York State Bank Holding Company Regulation. Under New York Banking
Law, the prior approval of the NYBB is required before: (1) any action is taken
that causes any company to become a bank holding company; (2) any action is
taken that causes any banking institution to become or be merged or consolidated
with a subsidiary of a bank holding company; (3) any bank holding company
acquires direct or indirect ownership or control of more than 5% of the voting
stock of a banking institution; (4) any bank holding company or subsidiary
thereof acquires all or substantially all of the assets of a banking
institution; or (5) any action is taken that causes any bank holding company to
merge or consolidate with another bank holding company. See "Regulation --
Holding Company Regulation -- New York State Holding Company Regulation."
Accordingly, the prior approval of the NYBB would be required before any bank
holding company, as defined in the banking law, could acquire 5% of more of the
common stock of the Company.
New York State Change in Control Regulation. Prior approval of the NYBB
is also required before any action is taken that causes any company to acquire
direct or indirect control of a banking institution. Control is presumed to
exist if any company directly or indirectly owns, controls or holds with power
to vote 10% or more of the voting stock of a banking institution or of any
company that owns, controls or holds with power to vote 10% or more of the
voting stocking stock of a banking institution. Accordingly, prior approval of
the NYBB would be required before any company could acquire 10% or more of the
Common Stock of the Company.
Federal Reserve Board Regulations. In the event the Bank does not
qualify to be QTL and does not elect to be treated as a "savings association"
under Section 10 of HOLA, attempts to acquire control of the Bank become subject
to regulations of the Federal Reserve Board under the CBCA.
146
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
General
The Holding Company is authorized to issue forty million (40,000,000)
shares of Common Stock having a par value of $.0l per share and five million
(5,000,000) shares of Preferred Stock having a par value of $.0l per share. In
connection with the Conversion, the Holding Company currently expects to issue
15,072,815 shares of Common Stock (or 17,333,738 in the event of an increase of
15% in the Estimated Valuation Range) and does not expect to issue any shares of
Preferred Stock. Except as discussed above in "Restrictions on Acquisition of
the Holding Company and the Bank," each share of the Company's Common Stock will
have the same relative rights as, and will be identical in all respects with,
each other share of Common Stock. Upon payment of the Purchase Price for the
Common Stock, in accordance with the Plan, all such stock will be duly
authorized, fully paid and non-assessable. The Common Stock of the Holding
Company will represent non-withdrawable capital, will not be an account of an
insurable type, and will not be insured by the FDIC.
Common Stock
Dividends. The Holding Company can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by the Company is subject to limitations
which are imposed by law and applicable regulation. See "Dividends" and
"Regulation." The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor. If the Holding Company issues Preferred Stock, the holders thereof may
have a priority over the holders of the Common Stock with respect to dividends.
Voting Rights. Upon Conversion, the holders of Common Stock of the
Holding Company will possess exclusive voting rights in the Holding Company.
They will elect the Holding Company's Board of Directors and act on such other
matters as are required to be presented to them under Delaware law or the
Holding Company's Certificate of Incorporation or as are otherwise presented to
them by the Board of Directors. Except as discussed in "Restrictions on
Acquisition of the Holding Company and the Bank," each holder of Common Stock
will be entitled to one vote per share and will not have any right to cumulate
votes in the election of directors. If the Holding Company issues Preferred
Stock, holders of the Preferred Stock may also possess voting rights. Certain
matters require an 80% or two-thirds shareholder vote. See "Restrictions on
Acquisition of the Holding Company and the Bank."
As a New York mutual savings bank, corporate powers and control of the
Bank are vested in its Board of Trustees, who elect the officers of the Bank and
who fill any vacancies on the Board of Trustees as it exists upon Conversion.
Subsequent to Conversion, voting rights will be vested exclusively in the owners
of the shares of capital stock of the Bank, which owner will be the Holding
Company, and voted at the direction of the Holding Company's Board of Directors.
Consequently, the holders of the Common Stock will not have direct control of
the Bank.
147
<PAGE>
Liquidation. In the event of any liquidation, dissolution or winding up
of the Bank, the Holding Company, as holder of the Bank's capital stock, would
be entitled to receive, after payment or provision for payment of all debts and
liabilities of the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account, which is a memorandum account only, to Eligible Account Holders and
Supplemental Eligible Account Holders (see "The Conversion - Effects of
Conversion - Liquidation Rights"), all assets of the Bank available for
distribution in cash or in kind. 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. If Preferred Stock is issued, the holders thereof may have a
priority over the holders of the Common Stock in the event of the liquidation or
dissolution of the Holding Company.
Preemptive Rights. Holders of the Common Stock of the Holding Company
will not be entitled to preemptive rights with respect to any shares which may
be issued. The Common Stock is not subject to redemption.
Preferred Stock
None of the shares of the Holding Company's authorized Preferred Stock
will be issued in the Conversion. Such stock may be issued with such preferences
and designations as the Board of Directors may from time to time determine. The
Board of Directors can, without shareholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unsolicited takeover or attempted change in control.
DESCRIPTION OF CAPITAL STOCK OF THE BANK
General
The Restated Organization Certificate of the Bank, to be effective upon
the Conversion, authorizes the issuance of capital stock consisting of forty
million (40,000,000) shares of common stock, par value $.0l per share, and five
million (5,000,000) shares of preferred stock, par value $.01 per share, which
preferred stock may be issued in series and classes having such rights,
preferences, privileges and restrictions as the Board of Directors may
determine. Except as discussed above in "Restrictions on Acquisition of the
Holding Company and the Bank," each share of common stock of the Bank will have
the same relative rights as, and will be identical in all respects with, each
other share of common stock. After the Conversion, the Board of Directors will
be authorized to approve the issuance of Common Stock up to the amount
authorized by the Restated Organization Certificate without the approval of the
Bank's shareholders, except to the extent that such approval is required by
governing law. All of the issued and outstanding common stock of the Bank will
be held by the Company as the Bank's sole shareholder. The capital stock of the
Bank will represent non-withdrawable capital, will not be an account of an
insurable type, and will not be insured by the FDIC.
148
<PAGE>
Common Stock
Dividends. The holders of the Bank's common stock (the Company upon
consummation of the Conversion) will be entitled to receive and to share equally
in such dividends as may be declared by the Board of Directors of the Bank out
of funds legally available therefor. See "Dividends" for certain restrictions on
the payment of dividends and "Taxation" for a discussion of the consequences of
the payment of cash dividends from income appropriated to bad debt reserves.
Voting Rights. Immediately after the Conversion, the holders of the
Bank's common stock (the Company upon consummation of the Conversion) will
possess exclusive voting rights in the Bank. Each holder of shares of common
stock will be entitled to one vote for each share held. Cumulation of votes will
not be permitted. See "Restrictions on Acquisition of the Holding Company and
the Bank - Anti-Takeover Effects of the Holding Company's Certificate of
Incorporation and Bylaws and Certain Benefit Plans Adopted in the Conversion."
Liquidation. In the event of any liquidation, dissolution, or winding
up of the Bank, the holders of its common stock (the Holding Company upon
consummation of the Conversion) will be entitled to receive, after payment of
all debts and liabilities of the Bank (including all deposit accounts and
accrued interest thereon), and distribution of the balance in the special
liquidation account, which is a memorandum account only, to Eligible Account
Holders and Supplemental Eligible Account Holders (see "The Conversion - Effects
of Conversion - Liquidation Rights"), all assets of the Bank available for
distribution in cash or in kind. If preferred stock is issued subsequent to the
Conversion, the holders thereof may also have priority over the holders of
common stock in the event of liquidation or dissolution.
Preemptive Rights and Redemption. Holders of the common stock of the
Bank (the Holding Company upon consummation of the Conversion) will not be
entitled to preemptive rights with respect to any shares of the Bank which may
be issued. The common stock will not be subject to redemption. Upon receipt by
the Bank of the full specified purchase price therefor, the common stock will be
fully paid and non-assessable.
Preferred Stock
None of the shares of the Bank's authorized preferred stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without shareholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights.
EXPERTS
The consolidated financial statements of the Bank as of March 31, 1997
and 1996 and for each of the years in the three-year period ended March 31,
1997, included in this Prospectus have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as indicated
149
<PAGE>
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
RP Financial has consented to the publication herein of the summary of
its report to the Bank and Company setting forth its belief as to the estimated
pro forma market value of the Common Stock upon Conversion and its belief with
respect to subscription rights.
LEGAL AND TAX OPINIONS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for the Bank and the Holding
Company by Silver, Freedman & Taff, L.L.P., Washington, D.C., special counsel to
the Bank and the Company. The New York State income tax consequences of the
Conversion will be passed upon for the Bank and the Holding Company by KPMG Peat
Marwick LLP, Albany, New York. Certain legal matters will be passed upon for
Sandler O'Neill by Peabody & Brown, Boston, Massachusetts.
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. Such
information, including the Conversion Valuation Appraisal Report, which is an
exhibit to the Registration Statement, can be examined without charge at the
public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of such material can be obtained from the SEC
at prescribed rates. In addition, the SEC maintain a web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC,
including the Company. The Conversion Valuation Appraisal Report may also be
inspected by Eligible Account Holders at the offices of the Bank during normal
business hours. Copies of the appraisal may also be requested by Eligible
Account Holders or Supplemental Eligible Account Holders; provided, however,
that such Eligible Account Holders or Supplemental Eligible Account Holders
shall be responsible for all costs associated with the copying and transmittal
of such appraisal. This Prospectus contains a description of the material terms
and features of all material contracts, reports or exhibits to the registration
statement required to be described; however, the statements contained in this
Prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are, of necessity, brief descriptions
thereof and are not necessarily complete; each such statement is qualified by
reference to such contract or document.
The Bank has filed an application for approval of conversion with the
Superintendent and the FDIC. Pursuant to the rules and regulations of the
Superintendent, this Prospectus omits certain information contained in that
application. The application may be examined at the principal office of the
Superintendent, Two Rector Street, New York, New York, 10006.
150
<PAGE>
The Holding Company has filed with the Office of Thrift Supervision an
Application to Form a Holding Company. This prospectus omits certain information
contained in such Application. Such Application may be inspected at the offices
of the OTS, 1700 G Street, N.W., Washington, D.C. 20552.
In connection with the Conversion, the Holding Company will register
its 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 stock will become
subject to the proxy solicitation rules, reporting requirements and restrictions
on stock purchases and sales by Directors, officers and greater than 10%
stockholders, the annual and periodic reporting and certain other requirements
of the Exchange Act. Under the Plan, the Holding Company has undertaken that it
will not terminate such registration for a period of at least three years
following the Conversion. In the event that the Bank amends the Plan to
eliminate the concurrent formation of the Holding Company as part of the
Conversion, the Bank will register its stock with the Federal Deposit Insurance
Corporation under Section 12(g) of the Exchange Act and, upon such registration,
the Bank and the holders of its stock will become subject to the same
obligations and restrictions.
A copy of the Certificate of Incorporation and the Bylaws of the
Holding Company and the Restated Organization Certificate and Bylaws of the Bank
are available without charge from the Bank. See "Restrictions on Acquisition of
the Holding Company and the Bank," "Description of Capital Stock of the Holding
Company" and "Description of Capital Stock of the Bank." The Bank's principal
office is located at One Hudson City Centre, Hudson, New York, 12534, and its
telephone number is (518) 828-4600.
151
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets at December 31, 1997 (unaudited) and
March 31, 1997 and 1996................................................ F-3
Consolidated Income Statements for the Nine Months Ended
December 31, 1997 and 1996 (unaudited) and the Years Ended
March 31, 1997, 1996 and 1995.......................................... F-4
Consolidated Statements of Changes in Equity for the Nine Months Ended
December 31, 1997 (unaudited) and the Years Ended March 31, 1997,
1996 and 1995.......................................................... F-5
Consolidated Statements of Cash Flows for the Nine Months Ended
December 31, 1997 and 1996 (unaudited) and the Years Ended
March 31, 1997, 1996 and 1995.......................................... F-6
Notes to Consolidated Financial Statements (data as of
December 31, 1997 and for the nine months ended December 31, 1997
and 1996 is unaudited)................................................. F-8
All schedules are omitted because the required information is not applicable or
is included in the Consolidated 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 that of an organizational nature.
F-1
<PAGE>
Independent Auditors' Report
The Board of Trustees
The Hudson City Savings Institution:
We have audited the accompanying consolidated balance sheets of The Hudson City
Savings Institution and subsidiaries (the Bank) as of March 31, 1997 and 1996,
and the related consolidated income statements, changes in equity and cash flows
for each of the years in the three-year period ended March 31, 1997. These
consolidated financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on the consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Hudson City
Savings Institution and subsidiaries as of March 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Albany, New York
June 20, 1997, except for note 17,
which is as of November 20, 1997
F-2
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited) March 31,
December 31, -----------------
Assets 1997 1997 1996
- ------ ------------ ---- ----
(In thousands)
Cash and due from banks $ 12,284 10,457 9,243
Federal funds sold 3,336 -- 4,990
-------- ------- -------
Cash and cash equivalents 15,620 10,457 14,233
-------- ------- -------
Loans held for sale -- 84 201
Securities available for sale 43,282 45,623 51,429
Investment securities 71,244 79,068 83,003
Federal Home Loan Bank of New York stock 2,812 2,812 2,596
Loans receivable 511,898 493,019 450,671
Less: Allowance for loan losses (6,756) (5,872) (3,546)
-------- ------- -------
Net loans receivable 505,142 487,147 447,125
-------- ------- -------
Accrued interest receivable 4,946 4,880 5,254
Premises and equipment, net 15,840 14,965 14,349
Other real estate owned and repossessed property 1,059 3,447 1,716
Other assets 5,106 2,551 3,314
-------- ------- -------
Total assets $665,051 651,034 623,220
======== ======= =======
Liabilities and Equity
- ----------------------
Liabilities:
Deposits 586,231 564,599 555,188
Short-term borrowings 2,000 12,585 --
Urban Development Action Grant payable -- 835 835
Mortgagors' escrow deposits 4,935 3,746 4,027
Other liabilities 4,490 4,140 3,564
-------- ------- -------
Total liabilities 597,656 585,905 563,614
-------- ------- -------
Commitments and contingent liabilities (note 14)
Equity:
Surplus 13,839 13,839 13,689
Undivided profits 53,524 51,638 46,128
Net unrealized gain (loss) on securities
available for sale, net of tax 32 (348) (211)
-------- ------- -------
Total equity 67,395 65,129 59,606
-------- ------- -------
Total liabilities and equity $665,051 651,034 623,220
======== ======= =======
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Consolidated Income Statements
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Years Ended
December 31, March 31,
----------------- ------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 35,575 32,220 43,585 40,780 35,135
Securities available for sale 1,960 2,879 3,658 1,782 917
Investment securities 3,565 4,063 5,385 6,062 6,503
Federal funds sold 202 87 89 271 344
Federal Home Loan Bank of New York stock 151 124 164 187 160
-------- ------ ------ ------ ------
Total interest and dividend income 41,453 39,373 52,881 49,082 43,059
-------- ------ ------ ------ ------
Interest expense:
Deposits 19,364 18,961 25,187 24,044 19,208
Short-term borrowings 176 130 239 42 101
-------- ------ ------ ------ ------
Total interest expense 19,540 19,091 25,426 24,086 19,309
-------- ------ ------ ------ ------
Net interest income 21,913 20,282 27,455 24,996 23,750
Provision for loan losses 6,408 1,858 3,826 1,090 1,169
-------- ------ ------ ------ ------
Net interest income after provision
for loan losses 15,505 18,424 23,629 23,906 22,581
-------- ------ ------ ------ ------
Other operating income:
Service charges on deposit accounts 840 815 1,063 1,026 1,033
Loan servicing income 353 402 480 272 265
Net securities transactions 12 28 28 28 (16)
Net gain (loss) on sale of loans 39 (5) 17 92 14
Other income 646 121 237 217 236
-------- ------ ------ ------ ------
Total other operating income 1,890 1,361 1,825 1,635 1,532
-------- ------ ------ ------ ------
Other operating expenses:
Compensation and benefits 6,985 6,436 8,592 7,471 6,840
Occupancy 993 916 1,285 1,184 1,162
Equipment 1,232 860 1,230 1,057 1,194
FDIC assessment 55 8 27 299 1,170
Other real estate owned and repossessed
property expenses 274 190 292 348 851
Legal and other professional fees 843 314 397 330 371
Postage and item transportation 557 470 655 510 447
Other expenses 3,249 2,564 3,709 3,000 3,188
-------- ------ ------ ------ ------
Total other operating expenses 14,188 11,758 16,187 14,199 15,223
-------- ------ ------ ------ ------
Income before income tax expense 3,207 8,027 9,267 11,342 8,890
Income tax expense 1,321 3,142 3,607 4,298 2,917
-------- ------ ------ ------ ------
Net income $ 1,886 4,885 5,660 7,044 5,973
======== ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Securities
Available
Undivided for Sale, Net Total
Surplus Profits of Tax Equity
------- --------- -------------- ------
(In thousands)
<S> <C> <C> <C> <C>
Balance as of April 1, 1994 $12,470 33,769 111 46,350
Net income -- 5,973 -- 5,973
Transfers to surplus 549 (549) -- --
Adjustment of securities available for sale
to fair value, net of tax -- -- (185) (185)
------- ------ ---- ------
Balance as of March 31, 1995 13,019 39,193 (74) 52,138
Net income -- 7,044 -- 7,044
Transfers to surplus 670 (670) -- --
Net increase in equity from acquisition -- 561 -- 561
Adjustment of securities available for sale
to fair value, net of tax -- -- (137) (137)
------- ------ ---- ------
Balance as of March 31, 1996 13,689 46,128 (211) 59,606
Net income -- 5,660 -- 5,660
Transfers to surplus 150 (150) -- --
Adjustment of securities available for sale
to fair value, net of tax -- -- (137) (137)
------- ------ ---- ------
Balance as of March 31, 1997 13,839 51,638 (348) 65,129
Net income (unaudited) -- 1,886 -- 1,886
Adjustment of securities available for sale
to fair value, net of tax (unaudited) -- -- 380 380
------- ------ ---- ------
Balance as of December 31, 1997 (unaudited) $13,839 53,524 32 67,395
======= ====== ==== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Years Ended
December 31, March 31,
------------------ ----------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,886 4,885 5,660 7,044 5,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,021 832 1,183 1,000 1,090
Provision for loan losses 6,408 1,858 3,826 1,090 1,169
Deferred tax benefit (682) (63) (791) (394) (105)
Net securities transactions (12) (28) (28) (28) 16
Net (gain) loss on sales of loans held for sale (39) 5 (17) (92) (14)
Net loans originated for sale (2,342) (1,911) (2,539) (4,632) (2,101)
Proceeds from sales of loans held for sale 2,465 2,037 2,673 6,697 5,958
Adjustments of other real estate owned and
repossessed property to fair value 217 103 169 336 207
Net gain on sales of other real estate owned and
repossessed property (441) (444) (556) (454) (67)
(Increase) decrease in accrued interest receivable (66) (13) 374 (863) (624)
(Increase) decrease in other assets (2,125) 133 763 (559) (483)
Increase in other liabilities 350 1,541 1,323 1,031 892
------- ------- ------- ------- -------
Total adjustments 4,754 4,050 6,380 3,132 5,938
------- ------- ------- ------- -------
Net cash provided by operating activities 6,640 8,935 12,040 10,176 11,911
------- ------- ------- ------- -------
Cash flows from investing activities:
Proceeds from sales of securities available for sale -- 7,025 7,025 3,982 7,067
Proceeds from maturities and calls of securities
available for sale 17,995 19,564 21,564 5,024 --
Purchases of securities available for sale (15,010) (21,976) (22,975) (38,998) (2,939)
Proceeds from sales of investment securities -- 2,979 2,979 -- 1,020
Proceeds from maturities, calls and paydowns of
investment securities 13,805 6,237 8,860 10,057 18,817
Purchases of investment securities (5,981) (7,911) (7,911) (13,165) (30,725)
Purchase of FHLB of New York stock -- -- (309) -- (2,569)
Redemption of FHLB of New York stock -- 93 93 -- --
Net loans made to customers (27,506) (35,958) (49,875) (13,952) (33,860)
Proceeds from sales of and payments received on
other real estate owned and repossessed property 5,715 3,443 4,817 3,281 4,213
Capital expenditures (1,896) (1,547) (1,799) (1,713) (1,041)
Net cash provided by acquisition activity -- -- -- 195 --
------- ------- ------- ------- -------
Net cash used in investing activities (12,878) (28,051) (37,531) (45,289) (40,017)
------- ------- ------- ------- -------
Cash flows from financing activities:
Net increase in deposits 21,632 14,143 9,411 37,181 15,774
Net (decrease) increase in short-term borrowings (10,585) 1,715 12,585 -- --
Repayment of UDAG payable (835) -- -- -- --
Increase (decrease) in mortgagors' escrow deposits 1,189 943 (281) (1,767) 68
------- ------- ------- ------- -------
Net cash provided by financing activities 11,401 16,801 21,715 35,414 15,842
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents 5,163 (2,315) (3,776) 301 (12,264)
Cash and cash equivalents at beginning of period 10,457 14,233 14,233 13,932 26,196
------- ------- ------- ------- -------
Cash and cash equivalents at end of period $15,620 11,918 10,457 14,233 13,932
======= ======= ======= ======= =======
</TABLE>
(Continued)
F-6
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Years Ended
December 31, March 31,
------------------ ----------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Supplemental information:
Interest paid $19,538 19,336 25,305 24,086 19,561
======= ======= ======= ======= =======
Taxes paid $ 4,012 3,812 4,593 3,981 2,976
======= ======= ======= ======= =======
Non-cash investing and financing activities:
Loans transferred to other real estate owned
and repossessed property $ 3,103 4,944 6,027 3,557 3,075
======= ======= ======= ======= =======
Loans transferred from loans held for sale to
the loan portfolio $ -- -- -- 239 --
======= ======= ======= ======= =======
Investment securities transferred to securities
available for sale $ -- -- -- 13,775 --
======= ======= ======= ======= =======
Securities available for sale transferred to
investment securities $ -- -- -- 2,000 --
======= ======= ======= ======= =======
Adjustment of securities available for sale to
fair value, net of tax $ 380 136 (137) (137) (185)
======= ======= ======= ======= =======
Acquisition activity (see note 2):
Non-cash assets acquired $ -- -- -- 4,004 --
Non-cash liabilities assumed -- -- -- 3,638 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of The Hudson City Savings Institution and its subsidiaries
(the "Bank"). All material intercompany accounts and transactions have
been eliminated.
The consolidated balance sheet as of December 31, 1997 and the related
consolidated income statements and consolidated statements of cash
flows for the nine month periods ended December 31, 1997 and 1996 and
consolidated statement of changes in equity for the nine month period
ended December 31, 1997 are unaudited and, in the opinion of
management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation have been made as of December 31,
1997 and for the results for the unaudited periods.
(b) Basis of Presentation
---------------------
The accompanying consolidated financial statements conform, in all
material respects, to generally accepted accounting principles and to
general practice within the banking industry. The Bank utilizes the
accrual method of accounting for financial reporting purposes.
(c) Use of Estimates
----------------
Management of the Bank has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance
for loan losses and the valuation of other real estate owned and
repossessed property acquired in connection with foreclosures or
in-substance foreclosures. In connection with the determination of the
allowance for loan losses and the valuation of other real estate owned
and repossessed property, management obtains appraisals for
significant properties.
Management believes that the allowance for loan losses is adequate and
that other real estate owned and repossessed property is recorded at
its fair value less an estimate of the costs to sell the properties.
While management uses available information to recognize losses on
loans, other real estate owned and repossessed property, future
additions to the allowance or write downs of other real estate owned
and repossessed property may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's
allowance for loan losses and other real estate owned and repossessed
property. Such agencies may require the Bank to recognize additions to
the allowance or write downs of other real estate owned and
repossessed property based on their judgments about information
available to them at the time of their examination which may not be
currently available to management.
(Continued)
F-8
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
A substantial portion of the Bank's loans are secured by real estate
located in the New York State counties of Columbia, Albany,
Rensselaer, Dutchess, and Schenectady. In addition, a substantial
portion of the other real estate owned and repossessed property is
located in those same markets, as well as in the states contiguous to
New York. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's loan portfolio and the recovery of a substantial
portion of the carrying amount of other real estate owned and
repossessed property is dependent upon market conditions in these
market areas.
(d) Cash and Cash Equivalents
-------------------------
For purposes of the consolidated statements of cash flows, cash and
cash equivalents consists of cash on hand, due from banks, and federal
funds sold.
(e) Securities Available for Sale, Investment Securities and Federal Home
----------------------------------------------------------------------
Loan Bank of New York Stock
---------------------------
Management determines the appropriate classification of securities at
the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are stated at
amortized cost. If securities are purchased for the purpose of selling
them in the near term, they are classified as trading securities and
are reported at fair value with unrealized holding gains and losses
reflected in current earnings. All other debt and marketable equity
securities are classified as securities available for sale and are
reported at fair value, with net unrealized gains or losses reported,
net of income taxes, as a separate component of equity. As a member of
the Federal Home Loan Bank of New York (FHLB), the Bank is required to
hold FHLB stock which is carried at cost since there is no readily
available market value. At December 31, 1997, March 31, 1997 and 1996,
the Bank did not hold any securities considered to be trading
securities.
Gains or losses on disposition of securities are based on the net
proceeds and the adjusted carrying amount of the securities sold,
using the specific identification method. Unrealized losses on
securities which reflect a decline in value which is other than
temporary are charged to income and reported as a component of "net
securities transactions" in the consolidated income statements. The
carrying amount of securities is adjusted for amortization of premium
and accretion of discount, which is calculated on an effective
interest method.
In November 1995, the staff of the Financial Accounting Standards
Board released its Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities." The Special Report contained, among other things, a
unique provision that allowed entities to, concurrent with the initial
adoption of the Special Report (November 15, 1995) but not later than
December 31, 1995, reassess the appropriateness of the classifications
of all securities held at that time. In conjunction with the
provisions of this Special Report, as of December 31, 1995, the Bank
transferred securities with an amortized cost of $13,775,000 and an
estimated fair value of $14,017,000 from investment securities to
securities available for sale.
(Continued)
F-9
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(f) Net Loans Receivable
--------------------
Loans are carried at the principal amount outstanding net of unearned
discount, net deferred loan origination fees and costs and the
allowance for loan losses.
Non-performing loans include non-accrual loans, loans which are
contractually past due 90 days or more and still accruing interest and
troubled debt restructurings. Generally, loans are placed on
non-accrual status, either due to the delinquency status of principal
and/or interest payments, or a judgment by management that, although
payments of principal and/or interest are current, such action is
prudent. Loans are generally placed on non-accrual status when
principal and/or interest payments are contractually past due 90 days
or more. When a loan is placed on non-accrual status, all interest
previously accrued but not collected is reversed against current year
interest income. Interest income on non-accrual loans is recognized
only if received, if considered appropriate by management. Loans are
removed from non-accrual status when they become current as to
principal and interest or when, in the opinion of management, the
loans are expected to be fully collectible as to principal and
interest.
The Bank accounts for fees and costs associated with loan originations
in accordance with Statement of Financial Accounting Standards (SFAS)
No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating and Acquiring Loans and Initial Direct Costs of Leases."
As of April 1, 1995, the Bank adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures." Under these Statements, a loan (generally
commercial-type loans) is considered impaired when it is probable that
the borrower will not make principal and interest payments according
to the original contractual terms of the loan agreement, or when a
loan (of any loan type) is restructured in a troubled debt
restructuring subsequent to the adoption of these Statements. These
Statements prescribe recognition criteria for loan impairment,
generally related to commercial type loans, and measurement methods
for impaired loans. Impaired loans are included in non-performing
loans, generally as non-accrual commercial type loans.
The allowance for loan losses related to impaired loans is based on
the discounted cash flows using the loan's initial effective rate or
the fair value of the collateral for certain loans where repayment of
the loan is expected to be provided solely by the underlying
collateral (collateral dependent loans). The Bank's impaired loans are
generally collateral dependent. The Bank considers estimated costs to
sell, on a discounted basis, when determining the fair value of
collateral in the measurement of impairment if those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans. The adoption of SFAS Nos. 114 and 118 did not have
a significant effect on the Bank's consolidated financial statements.
(Continued)
F-10
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(g) Allowance for Loan Losses
-------------------------
The allowance for loan losses is replenished through a provision for
loan losses charged to operations. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. Recoveries on loans
previously charged-off are credited to the allowance for loan losses.
The allowance is an amount that management believes will be adequate
to absorb losses on existing loans that may become uncollectible.
Management's evaluation of the adequacy of the allowance for loan
losses is performed on a periodic basis and takes into consideration
such factors as the historical loan loss experience, changes in the
nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans and current economic conditions that
may affect borrowers' ability to pay.
(h) Loans Held for Sale
-------------------
Loans are classified as held for investment purposes or held for sale
when the Bank enters into interest rate lock agreements with the
potential borrowers. Loans held for sale are recorded at the lower of
aggregate cost or fair value. Gains and losses on the disposition of
loans held for sale are determined on the specific identification
method. Loans held for sale at March 31, 1997 and 1996 was comprised
of residental mortgage loans. There were no loans held for sale at
December 31, 1997.
(i) Premises and Equipment
----------------------
Premises and equipment are carried at cost, less accumulated
depreciation. Depreciation is computed on a straight-line basis over
the estimated useful lives of the assets (up to fifty years for
buildings and generally five years for furniture and equipment).
Leasehold improvements are depreciated over the shorter of the term of
the related leases or the estimated useful lives of the assets.
(j) Other Real Estate Owned and Repossessed Property
------------------------------------------------
Other real estate owned, comprised of real estate acquired through
foreclosure and in-substance foreclosures, and repossessed property
are recorded at the lower of "cost" (defined as the fair value at
initial foreclosure) or fair value of the asset acquired, less
estimated costs to dispose of the property. A loan is categorized as
an in-substance foreclosure when the Bank has taken possession of the
collateral, regardless of whether formal foreclosure proceedings have
taken place. At the time of foreclosure, or when foreclosure occurs
in-substance, the excess, if any, of the loan value over the fair
value of the property received is charged to the allowance for loan
losses. Subsequent declines in the value of such property and net
operating expenses of such properties are charged directly to other
operating expenses. Properties are reappraised, as considered
necessary by management, and written down to the fair value less the
estimated cost to sell the property, if necessary. Repossessed
property consists primarily of manufactured homes abandoned by their
owners or repossessed by the Bank.
(Continued)
F-11
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(k) Income Taxes
------------
The Bank accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Under the asset and liability method of
SFAS No. 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 the 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.
(l) Statutory Transfer of Surplus
-----------------------------
A required quarterly transfer of 10% of net income is made to surplus
in accordance with New York State Banking Regulations. No transfer is
required if total equity as a percent of deposits exceeds 10% at the
end of each quarter. In accordance with State of New York Banking Law,
surplus is subject to certain restrictions, including a prohibition of
its use for payment of dividends, except with the approval of the
Superintendent of Banks.
(m) Financial Instruments
---------------------
In the normal course of business, the Bank 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 Bank's policy is to record such instruments when funded.
(n) Mortgage Servicing Rights
-------------------------
SFAS No. 122, "Accounting for Mortgage Servicing Rights," as
superceded by SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," requires that
entities recognize, as separate assets, the rights to service mortgage
loans for others, regardless of how those servicing rights are
acquired. Additionally, SFAS No. 125 requires that the capitalized
mortgage servicing rights be assessed for impairment based on the fair
value of those rights, and that impairment, if any, be recognized
through a valuation allowance. The Bank's adoption of SFAS No. 122, as
superceded by SFAS No. 125, as of April 1, 1996, did not have a
material effect on the consolidated financial statements.
(o) Trust Department Assets and Service Fees
----------------------------------------
Assets held by the Bank in a fiduciary or agency capacity for its
customers are not included in the consolidated balance sheets since
these items are not assets of the Bank. Trust service fees are
reported on the accrual basis.
(Continued)
F-12
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(p) Transfers of Financial Assets and Extinguishment of Liabilities
---------------------------------------------------------------
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," provides accounting and
reporting standards for determining whether a variety of transactions
should be accounted for as sales or financings, based on consistent
application of a financial-components approach that focuses on control
and superceded SFAS No. 122, as discussed above. SFAS No. 125 is
generally effective for transfers and servicing of financial assets
and extinguishment 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 Bank's consolidated financial
statements.
(q) Reclassifications
-----------------
Amounts in the prior years' consolidated financial statements are
reclassified whenever necessary to conform with the current year's
presentation.
(2) Acquisition Activity
--------------------
On December 20, 1995, The Hudson City Savings Institution acquired all of
the assets and assumed all of the liabilities of Valatie Savings and Loan
Association. This transaction was accounted for as a pooling-of-interests
and resulted in an increase in equity of $561,000. Amounts related to this
transaction are not material.
(3) Securities Available for Sale
-----------------------------
The amortized cost and approximate fair value of securities available for
sale at December 31, 1997, March 31, 1997 and 1996, are as follows:
December 31, 1997
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $36,955 55 (67) 36,943
Corporate debt securities 6,274 68 (3) 6,339
------- --- ---- ------
Total securities available
for sale $43,229 123 (70) 43,282
======= === ==== ======
March 31, 1997
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $37,933 7 (611) 37,329
Corporate debt securities 8,269 47 (22) 8,294
------- --- ---- ------
Total securities available
for sale $46,202 54 (633) 45,623
======= === ==== ======
(Continued)
F-13
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
March 31, 1996
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $33,990 16 (554) 33,452
Corporate debt securities 17,791 216 (30) 17,977
------- --- ---- ------
Total securities available
for sale $51,781 232 (584) 51,429
======= === ==== ======
The following sets forth information with regard to contractual maturities
of securities available for sale as of December 31 and March 31, 1997
(actual maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties):
December 31, 1997
-----------------------------------------------------------------
U.S. Government and Corporate Debt Total Securities
Agency Securities Securities Available for Sale
--------------------- --------------------- ---------------------
Amortized Approximate Amortized Approximate Amortized Approximate
cost fair value cost fair value cost fair value
--------- ----------- --------- ----------- --------- -----------
(In thousands)
Within one year $ -- -- 1,000 1,006 1,000 1,006
One through
five years 33,955 33,941 5,274 5,333 39,229 39,274
Five through
ten years 3,000 3,002 -- -- 3,000 3,002
------- ------ ----- ----- ------ ------
$36,955 36,943 6,274 6,339 43,229 43,282
======= ====== ===== ===== ====== ======
March 31, 1997
-----------------------------------------------------------------
U.S. Government and Corporate Debt Total Securities
Agency Securities Securities Available for Sale
--------------------- --------------------- ---------------------
Amortized Approximate Amortized Approximate Amortized Approximate
cost fair value cost fair value cost fair value
--------- ----------- --------- ----------- --------- -----------
(In thousands)
Within one year $ -- -- 4,003 4,014 4,003 4,014
One through
five years 37,933 37,329 4,266 4,280 42,199 41,609
------- ------ ----- ----- ------ ------
$37,933 37,329 8,269 8,294 46,202 45,623
======= ====== ===== ===== ====== ======
(Continued)
F-14
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
During the years ended March 31, 1997, 1996 and 1995, and the nine months
ended December 31, 1996, the Bank received $7,025,000, $3,982,000,
$7,067,000, and $7,025,000, respectively, in proceeds from the sale of
securities available for sale, realizing gross gains of $36,000, $28,000,
$46,000, and $36,000, respectively, and gross losses of $0, $0, $7,000, and
$0, respectively. The Bank realized gross gains of $12,000 and no gross
losses during the nine months ended December 31, 1997, related to calls of
securities available for sale. Write-downs of securities available for sale
due to credit deterioration amounted to $76,000 during the year ended March
31, 1995.
(4) Investment Securities
---------------------
The amortized cost and approximate fair value of investment securities as
of December 31, 1997, March 31, 1997 and 1996, are as follows:
December 31, 1997
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $19,974 90 (30) 20,034
Corporate debt securities 46,743 318 (12) 47,049
Mortgage backed securities 4,517 26 (28) 4,515
State, county and municipal 10 -- -- 10
------- --- ---- ------
Total investment securities $71,244 434 (70) 71,608
======= === ==== ======
March 31, 1997
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $17,960 14 (135) 17,839
Corporate debt securities 57,648 110 (219) 57,539
Mortgage backed securities 3,050 37 (123) 2,964
State, county and municipal 410 1 -- 411
------- --- ---- ------
Total investment securities $79,068 162 (477) 78,753
======= === ==== ======
March 31, 1996
----------------------------------------------
Gross Gross Approximate
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- -----------
(In thousands)
U.S. Government and Agency
securities $13,957 43 (170) 13,830
Corporate debt securities 63,557 439 (152) 63,844
Mortgage backed securities 4,221 58 (113) 4,166
State, county and municipal 1,268 14 -- 1,282
------- --- ---- ------
Total investment securities $83,003 554 (435) 83,122
======= === ==== ======
(Continued)
F-15
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
At December 31, 1997, March 31, 1997 and 1996, mortgage backed securities
consisted entirely of Government National Mortgage Association (GNMA),
Fannie Mae, and Freddie Mac securities.
The amortized cost and approximate fair value of investment securities at
December 31 and March 31, 1997, by contractual maturity (mortgage backed
securities are included by final contractual maturity), are as follows
(actual maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties):
December 31, 1997
----------------------------------------------
U.S. Government
and Agency Corporate Debt
Securities Securities
---------------------- ----------------------
Approximate Approximate
Amortized fair Amortized fair
cost value cost value
--------- ----------- --------- -----------
(In thousands)
Within one year $ 4,998 4,989 20,894 20,935
One through five years 14,976 15,045 24,863 25,116
Five through ten years -- -- 986 998
After ten years -- -- -- --
------- ------ ------ ------
$19,974 20,034 46,743 47,049
======= ====== ====== ======
<TABLE>
<CAPTION>
Mortgage Backed State, County Total
Securities and Municipal Investment Securities
--------------------- --------------------- ---------------------
Approximate Approximate Approximate
Amortized fair Amortized fair Amortized fair
cost value cost value cost value
--------- ----------- --------- ----------- --------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Within one year $ -- -- -- -- 25,892 25,924
One through five years 280 272 -- -- 40,119 40,433
Five through ten years 2,586 2,643 10 10 3,582 3,651
After ten years 1,651 1,600 -- -- 1,651 1,600
------ ----- --- --- ------ ------
$4,517 4,515 10 10 71,244 71,608
====== ===== === === ====== ======
</TABLE>
(Continued)
F-16
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
<TABLE>
<CAPTION>
March 31, 1997
---------------------------------------------------------------------
U.S. Government
and Agency Corporate Debt Mortgage Backed
Securities Securities Securities
---------------------- ---------------------- ---------------------
Approximate Approximate Approximate
Amortized fair Amortized fair Amortized fair
cost value cost value cost value
--------- ----------- --------- ----------- --------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Within one year $ 999 1,000 12,953 12,970 373 374
One through five years 16,961 16,839 44,695 44,569 308 293
Five through ten years -- -- -- -- 656 674
After ten years -- -- -- -- 1,713 1,623
------- ------ ------ ------ ----- -----
$17,960 17,839 57,648 57,539 3,050 2,964
======= ====== ====== ====== ===== =====
</TABLE>
State, County Total
and Municipal Investment Securities
--------------------- ---------------------
Approximate Approximate
Amortized fair Amortized fair
cost value cost value
--------- ----------- --------- -----------
(In thousands)
Within one year $400 401 14,726 14,745
One through five years -- -- 61,963 61,701
Five through ten years 10 10 666 684
After ten years -- -- 1,713 1,623
---- --- ------ ------
$410 411 79,068 78,753
==== === ====== ======
Investment securities with a carrying value of $6.0 million, $5.0 million
and $5.0 million at December 31, 1997, March 31, 1997 and 1996,
respectively, were pledged to secure public deposits and for other purposes
as required by law.
During the year ended March 31, 1997, the nine months ended December 31,
1996, and the year ended March 31, 1995, the Bank received $2,979,000,
$2,979,000, and $1,020,000, respectively, in proceeds from the sale of
investment securities, realizing gross gains of $0, $0, and $21,000,
respectively, and gross losses of $8,000, $8,000, and $0, respectively.
These securities were sold due to significant deterioration in the issuers'
creditworthiness. No investment securities were sold during the nine months
ended December 31, 1997 or the year ended March 31, 1996.
(Continued)
F-17
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(5) Net Loans Receivable
--------------------
A summary of net loans receivable as of December 31, 1997, March 31, 1997
and 1996 is as follows:
March 31,
December 31, ------------------
1997 1997 1996
------------ ---- ----
(In thousands)
Loans secured by real estate:
Residential one-to-four-family $250,649 246,462 214,226
Home equity 27,441 27,630 26,936
Commercial 73,902 67,697 70,854
Construction 3,980 2,725 4,317
-------- ------- -------
Total loans secured by real estate 355,972 344,514 316,333
-------- ------- -------
Other loans:
Manufactured housing 98,307 92,651 80,399
Commercial 13,907 16,146 17,393
Mortgage warehouse lines of credit 7,062 3,567 11,797
Financed insurance premiums 23,395 23,535 13,503
Consumer and other 12,140 11,577 10,155
-------- ------- -------
Total other loans 154,811 147,476 133,247
-------- ------- -------
Net deferred loan origination costs and
unearned discount 1,115 1,029 1,091
Allowance for loan losses (6,756) (5,872) (3,546)
-------- ------- -------
Net loans receivable $505,142 487,147 447,125
======== ======= =======
Changes in the allowance for loan losses during the nine months ended
December 31, 1997 and 1996, and the years ended March 31, 1997, 1996 and
1995 were as follows:
Nine Months Ended Years Ended
December 31, March 31,
----------------- -------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
Allowance for loan losses
at beginning of period $ 5,872 3,546 3,546 3,187 2,917
Provision charged to operations 6,408 1,858 3,826 1,090 1,169
Loans charged-off (5,953) (1,676) (2,070) (1,197) (1,263)
Recoveries on loans charged-off 429 464 570 423 364
Allowance acquired through
merger -- -- -- 43 --
------- ------ ------ ------ ------
Allowance for loan losses
at end of period $ 6,756 4,192 5,872 3,546 3,187
======= ====== ====== ====== ======
(Continued)
F-18
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The following table sets forth information with regard to non-performing
loans:
March 31,
December 31, ------------------------
1997 1997 1996 1995
---- ---- ---- ----
(In thousands)
Loans in non-accrual status $15,081 15,282 8,286 6,221
Loans contractually past due 90 days or
more and still accruing interest 1,302 4,711 2,600 1,129
------- ------ ------ -----
$16,383 19,993 10,886 7,350
======= ====== ====== =====
At December 31, 1997, March 31, 1997, 1996 and 1995, respectively, there
were no troubled debt restructurings. There are no material commitments to
extend further credit to borrowers with non-performing loans.
Accumulated interest on non-accrual loans, as shown above, of approximately
$493,000 and $586,000, was not recognized in interest income during the
nine months ended December 31, 1997 and the year ended March 31, 1997,
respectively. Approximately $637,000 and $937,000 of interest on
non-accrual loans, as shown above, was collected and recognized in interest
income during the nine months ended December 31, 1997 and the year ended
March 31, 1997, respectively. Accumulated interest on non-accrual loans, as
shown above, not recognized in interest income and collected and recognized
in interest income for the years ended March 31, 1996 and 1995 was not
significant.
At December 31, 1997 and March 31, 1997 and 1996, the recorded investment
in loans that are considered to be impaired under SFAS No. 114 totaled
$4,279,000, $5,361,000, and $646,000, respectively, for which the related
allowance for loan losses was $682,000, $2,010,000, and $71,000,
respectively. As of December 31, 1997, March 31, 1997 and 1996, 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 nine months ended December 31, 1997 and 1996,
and the years ended March 31, 1997 and 1996, was $5,975,000, $1,304,000,
$1,621,000, and $569,000, respectively. The interest income recognized on
those impaired loans and the interest income recognized on those impaired
loans using the cash basis of income recognition was not significant for
the nine months ended Decmeber 31, 1997 and 1996, and the years ended March
31, 1997 and 1996.
Certain executive officers of the Bank were customers of and had other
transactions with the Bank in the ordinary course of business. Loans to
these parties were made in the ordinary course of business at the Bank's
normal credit terms, including interest rate and collateralization. The
aggregate of such loans totaled less than 5% of total equity at December
31, 1997, March 31, 1997 and 1996.
(Continued)
F-19
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(6) Accrued Interest Receivable
---------------------------
Accrued interest receivable consists of the following at December 31, 1997,
March 31, 1997 and 1996:
March 31,
December 31, -----------------
1997 1997 1996
---- ---- ----
(In thousands)
Loans and loans held for sale $3,090 3,115 3,097
Securities available for sale 739 664 851
Investment securities 1,117 1,101 1,306
------ ----- -----
$4,946 4,880 5,254
====== ===== =====
(7) Premises and Equipment
----------------------
A summary of premises and equipment at December 31, 1997, March 31, 1997
and 1996 is as follows:
March 31,
December 31, -----------------
1997 1997 1996
---- ---- ----
(In thousands)
Bank buildings and land $16,576 15,224 15,182
Furniture and equipment 4,923 4,505 2,997
Leasehold improvements 854 786 759
------- ------ ------
22,353 20,515 18,938
Less: Accumulated depreciation (6,513) (5,550) (4,589)
------- ------ ------
Premises and equipment, net $15,840 14,965 14,349
======= ====== ======
Depreciation was approximately $1.0 million and $832,000 for the nine
months ended December 31, 1997 and 1996, respectively. Depreciation was
approximately $1.2 million, $1.0 million, and $1.1 million for the years
ended March 31, 1997, 1996, and 1995, respectively.
At December 31 and March 31, 1997, the Bank held one of its branch
buildings for sale. The carrying value of the building was approximately
$750,000 at both December 31 and March 31, 1997, which represented the
lower of the cost basis of the building or fair value less estimated costs
to sell.
(8) Other Real Estate Owned and Repossessed Property
------------------------------------------------
Other real estate owned and repossessed property consists of the following
at December 31, 1997, March 31, 1997 and 1996:
March 31,
December 31, -----------------
1997 1997 1996
---- ---- ----
(In thousands)
Repossessed real estate:
Commercial $ 300 2,860 921
Residential 59 48 160
Repossessed property 700 539 635
------ ----- -----
$1,059 3,447 1,716
====== ===== =====
(Continued)
F-20
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(9) Deposits
--------
Deposit account balances at December 31, 1997 and March 31, 1997 and 1996
are summarized as follows:
March 31,
December 31, -----------------
1997 1997 1996
---- ---- ----
(In thousands)
Savings accounts (3.00% to 3.92%) $140,483 136,109 130,032
N.O.W. and money market accounts
(2.00% to 4.88%) 94,046 92,347 93,919
Time deposit accounts:
2.00 to 2.99% 470 -- --
3.00 to 3.99% 419 824 958
4.00 to 4.99% 3,497 15,319 32,165
5.00 to 5.99% 259,419 228,732 149,852
6.00 to 6.99% 15,659 27,070 84,703
7.00 to 7.99% 35,817 35,441 34,516
8.00 to 8.99% -- -- 560
-------- ------- -------
Total time deposit accounts 315,281 307,386 302,754
-------- ------- -------
Non-interest bearing accounts 36,421 28,757 28,483
-------- ------- -------
Total deposits $586,231 564,599 555,188
======== ======= =======
The aggregate amount of time deposit accounts with a balance of $100,000 or
greater was $42.4 million, $44.3 million, and $46.5 million at December 31,
1997, March 31, 1997 and 1996, respectively.
The approximate amounts of contractual maturities of time deposit accounts
at December 31, 1997 are as follows:
(In thousands)
Years ending December 31,
1998 $178,360
1999 101,019
2000 18,182
2001 14,676
2002 2,245
Thereafter 799
--------
$315,281
========
The approximate amounts of contractual maturities of time deposit accounts
at March 31, 1997 are as follows:
(In thousands)
Years ending March 31,
1998 $153,807
1999 110,830
2000 22,208
2001 15,380
2002 3,288
Thereafter 1,049
--------
$306,562
========
(Continued)
F-21
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
Interest expense on deposits for the nine months ended December 31, 1997
and 1996, and the years ended March 31, 1997, 1996 and 1995 is summarized
as follows:
Nine Months Ended Years Ended
December 31, March 31,
----------------- -------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
Time deposit accounts $13,513 13,342 17,727 16,713 10,796
Savings accounts 3,584 3,388 4,523 4,275 5,501
N.O.W. and money market accounts 2,178 2,144 2,831 2,932 2,769
Mortgagors' escrow deposits 89 87 106 124 142
------- ------ ------ ------ ------
$19,364 18,961 25,187 24,044 19,208
======= ====== ====== ====== ======
(10) Urban Development Action Grant Payable
--------------------------------------
Hudson City Center, Inc. (a subsidiary of the Bank) was awarded an $835,000
"Urban Development Action Grant (UDAG) Equity Participation in Cash Flow"
by the Hudson Development Corporation for the purpose of constructing an
office building in the City of Hudson, New York. This loan was to be repaid
in December 2000. Since January 1991, the Bank had expensed approximately
$25,000 per year under the terms of the agreement. During September 1997,
the loan was satisfied.
(11) Income Taxes
------------
The components of income tax expense for the nine months ended December 31,
1997 and 1996 and the years ended March 31, 1997, 1996, and 1995 are as
follows:
Nine Months Ended Years Ended
December 31, March 31,
----------------- -------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
Current tax expense:
Federal $1,724 2,710 3,702 3,951 2,697
State 279 495 696 741 325
Deferred tax benefit (682) (63) (791) (394) (105)
------ ----- ----- ----- -----
$1,321 3,142 3,607 4,298 2,917
====== ===== ===== ===== =====
(Continued)
F-22
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The following is a reconciliation of the expected income tax expense and
the actual income tax expense. The expected income tax expense has been
computed by applying the statutory federal tax rate to income before income
tax expense:
Nine Months Ended Years Ended
December 31, March 31,
----------------- -------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
Income tax at applicable
federal statutory rate $1,090 2,729 3,151 3,856 3,023
Increase (decrease) in income
tax expense resulting from:
Tax exempt securities income (8) (12) (14) (82) (85)
State income taxes, net of
federal tax benefit 184 327 459 489 214
Reduction in the valuation
allowance for deferred
tax assets -- -- -- -- (248)
Other 55 98 11 35 13
------ ----- ----- ----- -----
Income tax expense $1,321 3,142 3,607 4,298 2,917
====== ===== ===== ===== =====
Effective tax rate 41.2% 39.1% 38.9% 37.9% 32.8%
====== ===== ===== ===== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997, March 31, 1997 and 1996 are presented below:
March 31,
December 31, -----------------
1997 1997 1996
---- ---- ----
(In thousands)
Deferred tax assets:
Differences in reporting the provision for
loan losses and tax bad debt deduction $2,547 1,880 1,344
Differences in reporting other real estate
owned and repossessed property 157 221 102
Accrued postretirement benefits 268 203 115
Deferred compensation 163 136 107
Other 69 49 47
------ ----- -----
Total gross deferred tax assets 3,204 2,489 1,715
Less valuation allowance (141) (141) (141)
------ ----- -----
Net deferred tax assets 3,063 2,348 1,574
------ ----- -----
Deferred tax liabilities:
Differences in reporting depreciation (73) (60) (35)
Differences in reporting bond discount
accretion (232) (184) (199)
Differences in reporting pension costs (465) (493) (520)
------ ----- -----
Total deferred tax liabilities (770) (737) (754)
------ ----- -----
Net deferred tax asset at end of period 2,293 1,611 820
Net deferred tax asset at beginning of period 1,611 820 426
------ ----- -----
Deferred tax benefit for the period $ (682) (791) (394)
====== ===== =====
(Continued)
F-23
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
In addition to the deferred tax assets and liabilities described above, the
Bank had a deferred tax liability of $21,000 at December 31, 1997, and a
deferred tax asset of $232,000 and $141,000 at March 31, 1997 and 1996,
respectively, related to the net unrealized gain or loss on securities
available for sale.
The valuation allowance, as established by the Bank at December 31, 1997,
March 31, 1997 and 1996, takes into consideration the nature and timing of
the deferred tax asset items, as well as the amount of available open tax
carrybacks. The Bank has fully reserved its New York State net deferred tax
asset, which is a component of deferred tax assets, due to the lack of
carryback and carryforward provisions available in New York State. The
decrease of $248,000 in the deferred tax asset valuation allowance during
the year ended March 31, 1995 was based upon the Bank's continuing
evaluation of the level of such allowance and the realizability of the
temporary differences creating the deferred tax assets, particularly
reserves for loan losses, and after considering the estimates of future
taxable income. Based on recent historical and anticipated future taxable
income, management believes it is more likely than not that the Company
will realize its net deferred tax assets.
As a thrift institution, the Bank 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 Bank 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 Bank'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.
(Continued)
F-24
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
In accordance with SFAS No. 109, deferred tax liabilities have not been
recognized with respect to the Federal base-year reserve of $2.7 million
and "supplemental" reserve (as defined) of $10.3 million at both December
31 and March 31 1997, and the state base-year reserve of $18.3 million at
both December 31 and March 31, 1997, since the Bank does not expect that
these amounts will become taxable in the foreseeable future. Under New York
State tax law, as amended, events that would result in taxation of these
reserves include the failure of the Bank to maintain a specified qualifying
assets ratio or meet other thrift definition tests for tax purposes. The
unrecognized deferred tax liability at both December 31 and March 31, 1997
with respect to the Federal base-year reserve and supplemental reserve was
$933,000 and $3.5 million, respectively. The unrecognized deferred tax
liability at December 31 and March 31, 1997 with respect to the state
base-year reserve was $1.1 million (net of Federal benefit).
(12) Employee Benefit Plans
----------------------
The Bank maintains a non-contributory pension plan with Retirement Systems
Incorporated (RSI) Retirement Trust, covering substantially all of its
employees meeting certain eligibility requirements. The benefits are
computed as a percentage of the highest three year average annual earnings,
as defined by the Plan, multiplied by years of credited service. Prior to
July 14, 1995, the percentages utilized were two percent for the first
thirty years of credited service and one-half percent thereafter.
Subsequent to July 14, 1995, the Plan was amended to limit credited service
for benefit calculations to a maximum of thirty years. The amounts
contributed to the plan are determined annually on the basis of (a) the
maximum amount that can be deducted for federal income tax purposes or (b)
the amount certified by a consulting actuary as necessary to avoid an
accumulated funding deficiency as defined by the Employee Retirement Income
Security Act of 1974. Contributions are intended to provide not only for
benefits attributed to service to date but also those expected to be earned
in the future. Plan assets consist primarily of investments in RSI
Retirement Trust administered fixed-income and equity funds.
The following table sets forth the Plan's funded status and amounts
recognized in the Bank's consolidated financial statements at March 31,
1997 and 1996:
1997 1996
---- ----
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $6,477,000 and $5,947,000 at
March 31, 1997 and 1996, respectively $(6,659) (6,387)
======= ======
Projected benefit obligation (8,183) (7,977)
Estimated fair value of Plan assets 9,272 8,647
------- ------
Plan assets in excess of projected benefit obligation 1,089 670
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 149 575
Unrecognized transition asset at January 1, 1988 being
recognized over approximately 12 years (71) (124)
Unrecognized past service liability 64 72
------- ------
Prepaid pension cost included in other assets $ 1,231 1,193
======= ======
(Continued)
F-25
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
Net periodic pension cost included in the Bank's consolidated income
statements for the years ended March 31, 1997, 1996, and 1995 included the
following components:
1997 1996 1995
---- ---- ----
(In thousands)
Service cost $353 327 321
Interest cost 573 536 471
Actual return on plan assets (753) (1,160) (544)
Net amortization and deferral 40 543 (44)
---- ------ ----
Net periodic pension cost $213 246 204
==== ====== ====
The actuarial assumptions used in determining the actuarial present value
of the projected benefit obligation as of March 31 were as follows:
1997 1996 1995
---- ---- ----
Weighted average discount rate 7.75% 7.50% 8.25%
Rate of increase in future compensation levels 5.50 5.50 6.00
Expected long term rate of return 8.00 8.00 8.00
In addition, the Bank provides a defined benefit postretirement plan which
provides medical and life insurance benefits to substantially all
employees, as well as dental benefits to a closed group of retirees. The
Bank adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," as of April 1, 1995. Under SFAS No. 106, the
cost of postretirement benefits other than pensions must be recognized on
an accrual basis as employees perform services to earn the benefits.
Active employees are eligible for retiree medical and life insurance
coverage upon reaching age 55 with 10 years of service. The medical portion
of the plan is contributory, with retiree contributions based on years of
service and their retirement date. The Bank's contributions for employees
retiring on or after September 1, 1995 are limited to 150% of the premium
rates in effect at the time of retirement. The life insurance portion of
the plan is non-contributory, with the pre-retirement benefit equal to two
times annual earnings. The post-retirement life insurance benefit is
reduced based on the retiree's age and the length of time since retirement,
with a maximum retiree benefit of $50,000. Post-retirement dental coverage
is in effect for a closed group of retirees. The dental portion of the plan
is non-contributory. The funding policy of the plan is to pay claims and/or
insurance premiums as they come due.
(Continued)
F-26
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The following table presents the amounts recogized in the Bank's
consolidated financial statements at March 31, 1997 and 1996:
1997 1996
---- ----
(In thousands)
Accumulated post-retirement benefit obligation:
Retirees and eligible beneficiaries $(1,856) (1,815)
Active employees fully eligible for benefits (190) (214)
Other active plan participants (533) (545)
------- ------
(2,579) (2,574)
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions 32 130
Unrecognized transition obligation at
April 1, 1995 being recognized over 20 years 2,126 2,244
------- ------
Accrued post-retirement benefit cost included
in other liabilities $ (421) (200)
======= ======
Net periodic post-retirement benefit cost included in the Bank's
consolidated income statements for the years ended March 31, 1997 and 1996,
included the following components:
1997 1996
---- ----
(In thousands)
Service cost $ 60 47
Interest cost 188 189
Net amortization and deferral 118 118
---- ----
Net periodic post-retirement benefit cost $366 354
==== ====
The discount rate used in determining the accumulated post-retirement
benefit obligation was 7.75% and 7.50% at March 31, 1997 and 1996,
respectively.
For measurement purposes, an 8.00% annual rate of increase in the per
capita cost of covered health benefits was assumed for medical coverage
starting in 1998; the rate was assumed to decrease uniformly to 5.00% by
2001 and to remain at that level thereafter. A 5.00% annual rate of
increase in the per capita cost of covered dental benefits was assumed for
dental coverage starting in 1998; the rate was assumed to decrease
uniformly to 4.00% by 2000 and to remain at that level thereafter The
medical and dental care cost trend rate assumptions have a significant
effect on the amounts reported. To illustrate, increasing the assumed
medical and dental care cost trend rates by one percentage point in each
year would increase the accumulated post-retirement benefit obligation as
of March 31, 1997 by $217,000 and the aggregate of the service and interest
cost for the year ended March 31, 1997 would increase by $20,000.
(Continued)
F-27
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The Bank also sponsors a defined contribution 401(k) plan covering
substantially all employees meeting certain eligibility requirements. The
Bank matches 50% of employee pre-tax contributions up to a maximum
contribution by the Bank of 4% of the employee's annual salary. The amount
of 401(k) contribution expense was $88,000, $88,000, $117,000, $100,000,
and $89,000 for the nine months ended December 31, 1997 and 1996 and the
years ended March 31, 1997, 1996, and 1995, respectively.
(13) Regulatory Capital
------------------
Federal Deposit Insurance Corporation (FDIC) regulations require banks to
maintain a minimum leverage ratio of Tier 1 capital to total adjusted
quarterly average assets of 4.0%, and minimum ratios of Tier 1 capital and
total capital to risk-weighted assets of 4.0% and 8.0%, respectively.
Under its prompt corrective action regulations, the FDIC is required to
take certain supervisory actions (and may take additional discretionary
actions) with respect to an undercapitalized bank. Such actions could have
a direct material effect on a bank's financial statements. The regulations
establish a framework for the classification of banks into five categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, a bank is
considered well capitalized if it has a Tier 1 capital ratio of at least
5.0% (based on total adjusted quarterly average assets); a Tier 1
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 regulators
about capital components, risk weightings, and other factors.
Management believes that, as of December 31 and March 31, 1997, the Bank
met all capital adequacy requirements to which it was subject. Further, the
most recent FDIC notification categorized the Bank as a well capitalized
institution under the prompt corrective action regulations. There have been
no conditions or events since the notification that management believes
have changed the Bank's capital classification.
(Continued)
F-28
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The following is a summary of actual capital amounts and ratios as of
December 31 and March 31, 1997 for the Bank, compared to the requirements
for minimum capital adequacy and for classification as well capitalized:
December 31, 1997
---------------------------------------------------
Required Ratios
Actual Captial ----------------------------------
-------------- Minimum Capital Classification as
Amount Ratio Adequacy Well Capitalized
------ ----- --------------- -----------------
(Dollars in thousands)
Tier 1 (leverage) capital $66,753 10.1% 4.0% 5.0%
Risk-based capital:
Tier 1 66,753 14.1 4.0 6.0
Total 72,672 15.4 8.0 10.0
March 31, 1997
---------------------------------------------------
Required Ratios
Actual Captial ----------------------------------
-------------- Minimum Capital Classification as
Amount Ratio Adequacy Well Capitalized
------ ----- --------------- -----------------
(Dollars in thousands)
Tier 1 (leverage) capital $65,133 10.1% 4.0% 5.0%
Risk-based capital:
Tier 1 65,133 13.8 4.0 6.0
Total 71,005 15.1 8.0 10.0
(14) Commitments and Contingent Liabilities
--------------------------------------
(a) Off-Balance-Sheet Financing and Concentrations of Credit
--------------------------------------------------------
The Bank 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 Bank's commitments to extend credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the consolidated financial statements. The contract
amounts of those instruments reflect the extent of involvement the
Bank has in particular classes of financial instruments.
The Bank'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 Bank uses
the same credit policies in making commitments as it does for
on-balance-sheet instruments.
Unless otherwise noted, the Bank does not require collateral or other
security to support financial instruments with credit risk.
(Continued)
F-29
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
Contract amounts of financial instruments that represent credit risk
as of December 31, 1997, March 31, 1997 and 1996, at fixed and
variable interest rates, are as follows:
December 31, 1997
-----------------------------
Fixed Variable Total
----- -------- -----
(In thousands)
Financial instruments whose contract
amounts represent credit risk:
Commitments outstanding:
Residential mortgages $ 4,863 3,264 8,127
Residential construction loans 185 421 606
Commercial mortgage loans 736 522 1,258
Commercial loans -- 915 915
Home equity loans 306 197 503
Manufactured home loans 1,586 -- 1,586
------- ------ ------
7,676 5,319 12,995
------- ------ ------
Unused lines of credit on advanced funds:
Construction loans 361 1,297 1,658
Home equity loans 4,574 7,288 11,862
Commercial lines of credit 269 9,424 9,693
Personal lines of credit 1,972 -- 1,972
------- ------ ------
7,176 18,009 25,185
------- ------ ------
Standby letters of credit -- 3,422 3,422
------- ------ ------
$14,852 26,750 41,602
======= ====== ======
March 31, 1997
-----------------------------
Fixed Variable Total
----- -------- -----
(In thousands)
Financial instruments whose contract
amounts represent credit risk:
Commitments outstanding:
Residential mortgages $ 4,541 5,501 10,042
Residential construction loans 285 427 712
Commercial mortgage loans 1,400 1,099 2,499
Commercial loans 600 160 760
Home equity loans 808 130 938
Manufactured home loans 3,182 866 4,048
------- ------ ------
10,816 8,183 18,999
------- ------ ------
Unused lines of credit on advanced funds:
Construction loans 753 369 1,122
Home equity loans 3,844 6,036 9,880
Commercial lines of credit 226 15,356 15,582
Personal lines of credit 1,889 -- 1,889
------- ------ ------
6,712 21,761 28,473
------- ------ ------
Standby letters of credit -- 2,523 2,523
------- ------ ------
$17,528 32,467 49,995
======= ====== ======
(Continued)
F-30
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
March 31, 1996
-----------------------------
Fixed Variable Total
----- -------- -----
(In thousands)
Financial instruments whose contract
amounts represent credit risk:
Commitments outstanding:
Residential mortgages $ 2,603 1,739 4,342
Residential construction loans 118 299 417
Commercial mortgage loans 300 2,319 2,619
Commercial loans 55 171 226
Home equity loans 768 274 1,042
Manufactured home loans 2,118 706 2,824
------- ------ ------
5,962 5,508 11,470
------- ------ ------
Unused lines of credit on advanced funds:
Construction loans 126 1,117 1,243
Home equity loans 3,193 7,916 11,109
Commercial lines of credit 1,635 11,602 13,237
Personal lines of credit 1,830 -- 1,830
------- ------ ------
6,784 20,635 27,419
------- ------ ------
Standby letters of credit -- 2,538 2,538
------- ------ ------
$12,746 28,681 41,427
======= ====== ======
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 certain
commitments are expected to expire without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral, if any, required by the
Bank upon the extension of credit is based on management's credit
evaluation of the customer.
Commitments to extend credit may be written on a fixed rate basis
exposing the Bank to interest rate risk given the possibility that
market rates may change between commitment and actual extension of
credit.
Standby letters of credit are conditional commitments issued by the
Bank to guarantee payment on behalf of a customer and guarantee the
performance of a customer to a third party. The credit risk involved
in issuing these instruments is essentially the same as that involved
in extending loans to customers. Since a portion of these instruments
will expire unused, the total amounts do not necessarily represent
future cash requirements. Each customer is evaluated individually for
creditworthiness under the same underwriting standards used for
commitments to extend credit and on-balance sheet instruments. Bank
policies governing loan collateral apply to standby letters of credit
at the time of credit extension.
(Continued)
F-31
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
Certain mortgage loans are written on an adjustable basis and include
interest rate caps which limit annual and lifetime increases in the
interest rates on such loans. Generally, adjustable rate mortgages
have an annual rate increase cap of 2% and lifetime rate increase cap
of 5% to 6%. These caps expose the Bank to interest rate risk should
market rates increase above these limits. As of December 31 and March
31, 1997, approximately $203.6 million and $202.2 million,
respectively, of mortgage loans had interest rate caps.
The Bank generally enters into rate lock agreements at the time that
residential mortgage loan applications are taken. These rate lock
agreements fix the interest rate at which the loan, if ultimately
made, will be originated. Such agreements may exist with borrowers
with whom commitments to extend loans have been made, as well as with
individuals who have not yet received a commitment. The Bank makes its
determination of whether or not to identify a loan as held for sale at
the time rate lock agreements are entered into. Accordingly, the Bank
is exposed to interest rate risk to the extent that a rate lock
agreement is associated with a loan application or a loan commitment
which is intended to be held for sale, as well as with respect to
loans held for sale.
At December 31, 1997, March 31, 1997 and 1996, the Bank had rate lock
agreements (certain of which relate to loan applications for which no
formal commitment has been made) and conventional mortgage loans held
for sale amounting to approximately $1,201,000, $300,000, and
$753,000, respectively.
In order to reduce the interest rate risk associated with the
portfolio of conventional mortgage loans held for sale, as well as
outstanding loan commitments and uncommitted loan applications with
rate lock agreements which are intended to be held for sale, the Bank
enters into agreements to sell loans in the secondary market to
unrelated investors on a loan by loan basis. At December 31, 1997,
March 31, 1997 and 1996, the Bank had commitments to sell conventional
fixed rate mortgage loans amounting to approximately $1,130,000,
$216,000, and $448,000, respectively. The remaining conventional
mortgage loans held for sale, as well as the outstanding loan
commitments and uncommitted loan applications with rate lock
agreements which are intended to be held for sale, exposed the Bank to
interest rate risk.
(b) Concentrations of Credit
------------------------
The Bank originates residential loans (including home equity and
construction loans) and commercial-related loans primarily to
customers located in the New York State counties of Columbia, Albany,
Rensselaer, Dutchess, and Schenectady. Manufactured home loans are
originated primarily in New York State and in states contiguous to New
York. Financed insurance premiums are originated primarily in New
York, New Jersey, and Pennsylvania. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors'
ability to honor their contracts is dependent upon economic conditions
in these areas.
(Continued)
F-32
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(c) Leases
------
The Bank leases certain of its branches and equipment under various
noncancelable operating leases. The future minimum payments by year
and in the aggregate under all significant noncancelable operating
leases with initial or remaining terms of one year or more as of
December 31 and March 31, 1997 are as follows:
(In thousands)
Years ending December 31,
1998 $ 216
1999 200
2000 153
2001 114
2002 105
Thereafter 1,118
------
$1,906
======
(In thousands)
Years ending March 31,
1998 $ 193
1999 138
2000 91
2001 58
2002 30
Thereafter 1,003
------
$1,513
======
(d) Serviced Loans
--------------
The total amount of loans serviced by the Bank for unrelated third
parties was approximately $56.2 million, $67.7 million, and $68.1
million at December 31, 1997, March 31, 1997 and 1996, respectively.
(e) Reserve Requirement
-------------------
The Bank is required to maintain certain reserves of vault cash and/or
deposits with the Federal Reserve Bank. The amount of this reserve
requirement, included in cash and due from banks, was approximately
$4.5 million and $3.8 million at December 31 and March 31, 1997,
respectively.
(f) Contingent Liabilities
----------------------
In the ordinary course of business there are various legal proceedings
pending against the Bank. Based on consultation with outside counsel,
management considers that the aggregate exposure, if any, arising from
such litigation would not have a material adverse effect on the Bank's
consolidated financial statements.
(Continued)
F-33
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
(15) Borrowing Arrangements
----------------------
The Bank has two lines of credit, expiring in October 1998, which are
available with the FHLB of New York. The first is an overnight line of
credit for approximately $32.6 million with interest based on existing
market conditions. The second is a one-month overnight repricing line of
credit for approximately $32.6 million with interest based on existing
market conditions. There were no amounts outstanding on these lines at
December 31, 1997. There was approximately $12.6 million outstanding under
the overnight line of credit at March 31, 1997, which carried an interest
rate of 6.88%. There were no amounts outstanding under the one-month
overnight repricing line of credit at March 31, 1997. At December 31, 1997,
the Bank had $2.0 million in short-term borrowings from the FHLB of New
York in the form of an advance which comes due in August 1998 and carries
an interest rate of 5.88%. Borrowings from the FHLB of New York are secured
by a blanket lien on all assets of the Bank, including FHLB stock.
(16) Disclosures About the Fair Value of Financial Instruments
---------------------------------------------------------
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires that the Bank disclose estimated fair values for its financial
instruments. The definition of a financial instrument includes many of the
assets and liabilities recognized in the Bank's consolidated balance
sheets, as well as certain off-balance sheet items.
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 Bank's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the Bank'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. 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 significant intangible assets that SFAS No. 107 does
not recognize, such as the value of "core deposits," the Bank's branch
network, and other items generally referred to as "goodwill."
Short-Term Financial Instruments
--------------------------------
The fair value of certain financial instruments is estimated to approximate
their carrying value because the remaining term to maturity or period to
repricing of the financial instrument is less than 90 days. Such financial
instruments include cash and cash equivalents, accrued interest receivable,
and short-term borrowings.
(Continued)
F-34
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
Securities Available for Sale and Investment Securities
-------------------------------------------------------
Securities available for sale and investment securities are financial
instruments which are usually traded in broad markets. Fair values are
generally based upon market prices. If a quoted market price is not
available for a particular security, the fair value is determined by
reference to quoted market prices for securities with similar
characteristics.
Federal Home Loan Bank of New York Stock
----------------------------------------
The estimated fair value of stock in the Federal Home Loan Bank of New York
equals the carrying value since the stock is non-marketable but redeemable
at its par value.
Loans
-----
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type including residential real
estate, commercial real estate, other commercial loans and consumer loans.
The estimated 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 respective loan portfolio.
Estimated fair value for non-performing loans is based on estimated cash
flows 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.
Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no market for many of these
financial instruments, management has no basis to determine whether the
estimated fair value would be indicative of the value negotiated in an
actual sale.
Loans Held for Sale
-------------------
The estimated fair value of loans held for sale is based on quoted market
rates or, in the case where a firm commitment has been made to sell the
loan, the firm committed price.
Deposit Liabilities
-------------------
The estimated fair value of deposits with no stated maturity, such as
savings, N.O.W., money market, non-interest bearing accounts, and
mortgagors' escrow deposits, is regarded to be the amount payable on
demand. The estimated fair value of time deposit accounts 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. The fair value estimates for deposits do not include the
benefit that results from the low-cost funding provided by the deposit
liabilities as compared to the cost of borrowing funds in the market.
Urban Development Action Grant Payable
--------------------------------------
Based on the terms of the grant agreement and rates currently available
under similar programs, the estimated fair value of the Urban Development
Action Grant payable approximates its carrying value at both March 31, 1997
and 1996.
(Continued)
F-35
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The carrying values and estimated fair values of financial assets and
liabilities as of December 31, 1997 and March 31, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
March 31,
December 31, ----------------------------------------
1997 1997 1996
------------------- ------------------- -------------------
Estimated Estimated Estimated
Carrying Fair Carrying Fair Carrying Fair
Value Value Value Value Value Value
-------- --------- -------- --------- -------- ---------
(In thousands)
Financial assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 15,620 15,620 10,457 10,457 14,233 14,233
Loans held for sale -- -- 84 84 70 72
Securities available
for sale 43,282 43,282 45,623 45,623 51,429 51,429
Investment securities 71,244 71,608 79,068 78,753 83,003 83,122
Federal Home Loan Bank
of New York stock 2,812 2,812 2,812 2,812 2,596 2,596
Loans receivable 511,898 511,241 493,019 492,236 450,671 451,306
Less: Allowance for
loan losses (6,756) -- (5,872) -- (3,546) --
-------- ------- ------- ------- ------- -------
Net loans receivable $505,142 511,241 487,147 492,236 447,125 451,306
======== ======= ======= ======= ======= =======
Accrued interest receivable 4,946 4,946 4,880 4,880 5,254 5,254
Financial liabilities:
Deposits:
Savings, N.O.W., money
market, and non-interest
bearing accounts 270,950 270,950 257,213 257,213 252,434 252,434
Time deposit accounts 315,281 317,192 307,386 309,550 302,754 306,685
Short-term borrowings 2,000 2,000 12,585 12,585 -- --
Urban Development
Action Grant payable -- -- 835 835 835 835
Mortgagors' escrow deposits 4,935 4,935 3,746 3,746 4,027 4,027
</TABLE>
Note: Loans held for sale represent the only trading financial instruments;
all other financial instruments are considered to be held for purposes
other than trading.
(Continued)
F-36
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The fair value of commitments to extend credit, unused lines of credit and
standby letters of 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 commitments to extend credit and unused lines of credit, fair
value also considers the difference between current levels of interest
rates and the committed rates. Based upon the estimated fair value of
commitments to extend credit, unused lines of credit, and standby letters
of credit, there are no significant unrealized gains or losses associated
with these financial instruments.
(17) Subsequent Event - Adoption of Plan of Conversion
-------------------------------------------------
On November 20, 1997, the Board of Trustees of the Bank, subject to
regulatory approval and approval by members of the Bank, unanimously
adopted a Plan of Conversion (the Plan) to convert from a New York State
chartered mutual savings bank to a New York State chartered stock savings
bank with the concurrent formation of a holding company. The conversion is
expected to be accomplished through amendment of the Bank charter and the
sale of the holding company's common stock in an amount equal to the
proforma market value of the Bank after giving effect to the conversion. A
subscription offering of the sale of the holding company's common stock
will be offered initially to the Bank's depositors, then to other members
and trustees, officers and employees of the Bank. Any shares of the holding
company's common stock not sold in the subscription offering will be
offered for sale to the general public in the Bank's market area.
At the time of conversion, the Bank will establish a liquidation account in
an amount equal to its total equity as of the date of the latest
consolidated 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 Bank 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 Bank may not pay dividends that would
reduce stockholders' equity below the required liquidation account balance.
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. As of December 31, 1997, approximately
$164,000 of conversion costs had been deferred.
Pursuant to the Plan, the holding company intends to establish a Charitable
Foundation in connection with the conversion. The Plan provides that the
Bank and the holding company will create the Foundation immediately
following the conversion by contributing holding company common stock in an
amount equal to 3.0% of the total amount of common stock to be sold in the
conversion. The Foundation is being formed as a complement to the Bank's
existing community activities and will be dedicated to community activities
and the promotion of charitable causes.
(Continued)
F-37
<PAGE>
THE HUDSON CITY SAVINGS INSTITUTION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Data as of December 31, 1997 and for the nine months ended
December 31, 1997 and 1996 is unaudited)
The Foundation will submit a request to the Internal Revenue Service to be
recognized as a tax-exempt organization and will likely be classified as a
private foundation. A contribution of common stock to the Foundation by the
holding company would be tax deductible, subject to an annual limitation
based on 10% of the holding company's annual taxable income. The holding
company, however, would be able to carry forward any unused portion of the
deduction for five years following the contribution. Upon funding the
Foundation, the holding company will recognize an expense in the full
amount of the contribution, offset in part by the corresponding tax
benefit, during the quarter in which the contribution is made.
F-38
<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 Bank. 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 Bank since any of
the dates as of which information is furnished herein or since the date hereof.
---------------
TABLE OF CONTENTS
Page
Summary...................................................
Selected Consolidated Financial and
Other Data of the Bank.................................
Risk Factors..............................................
Hudson River Bancorp, Inc.................................
The Hudson City Savings Institution.......................
Use of Proceeds...........................................
Dividends.................................................
Market for Common Stock...................................
Pro Forma Regulatory Capital Analysis.....................
Capitalization............................................
Pro Forma Data............................................
Comparison of Valuation and Pro Forma Information
With No Stock Contribution.............................
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................
Business of the Holding Company...........................
Business of the Bank......................................
Regulation................................................
Taxation..................................................
Management of the Holding Company.........................
Management of the Bank....................................
The Conversion............................................
Restrictions on Acquisitions of the Holding Company
and the Bank...........................................
Description of Capital Stock of the Holding Company
Description of Capital Stock of the Bank..................
Experts...................................................
Legal and Tax Opinions....................................
Additional Information]...................................
Index to Consolidated Financial Statements
Until the later of ________, 1998 or __ 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.
_________________ Shares
HUDSON CITY BANCORP, INC.
(Proposed Holding Company for The Hudson City
Savings Institution)
COMMON STOCK
--------------
PROSPECTUS
--------------
Sandler O'Neill & Partners, L.P.
_________, 1998
<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 fees.................................. $ 52,669
NASD fee............................................... 18,354
Nasdaq registration fee................................ 50,000
New York State Banking Department filing fee........... 5,000
Counsel fees and expenses.............................. 250,000
Accounting fees and expenses........................... 190,000
Appraisal and business plan fees and expenses.......... 37,500
Conversion agent fees and expenses..................... 65,000
Marketing agent's expenses............................. 125,000
Marketing agent's fees (1)............................. 1,628,442
Printing, postage and mailing.......................... 300,000
Blue sky fees and expenses............................. 5,000
Other expenses......................................... 32,035
TOTAL............................................. 2,759,000
- ----------
(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
II-1
<PAGE>
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).
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 The Hudson City Savings Institution pursuant to the Plan
of Conversion (filed as Exhibit 2 herein), and no sales of its securities have
occurred to date.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
1.1 Letter Agreement regarding marketing and consulting services*
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 Restated Organization Certificate of Hudson River Bank & Trust
Company in stock form
3.4 Bylaws of Hudson River Bank & Trust Company 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 Letter of RP Financial LC. with respect to Subscription Rights*
10.1 Form of proposed Employment Agreement of Hudson River Bank &
Trust Company and certain executive officers*
10.2 Form of proposed Employment Agreement between Hudson River
Bancorp, Inc. and certain executive officers*
10.3 Form of Change-In-Control Severance Agreement with certain
officers of Hudson River Bank & Trust Company*
10.4 Hudson River Bank & Trust Company Employee Severance Compensation
Plan*
10.5 Employee Stock Ownership Plan*
10.6 Form of Hudson City Savings Institution 401(k) Savings Plan
10.7 Form of Benefit Restoration Plan
22 Subsidiaries*
24.1 Consent of Silver, Freedman & Taff, L.L.P.
24.2 Consent of KPMG Peat Marwick LLP
24.3 Consent of RP Financial*
25 Power of Attorney (set forth on signature page)
27 Financial Data Schedule
99.1 Appraisal
99.2 Draft of Hudson River Bank & Trust Company Foundation Gift
Instrument
99.3 Marketing Materials
99.4 Stock Order Form
- --------
* Previously filed.
II-3
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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
II-4
<PAGE>
prospectus filed by the Registrant pursuant 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, thereunto duly authorized in the City of Hudson, New York on
April 30, 1998.
HUDSON RIVER BANCORP, INC.
By: /s/ Carl A. Florio
-----------------------------------
Carl A. Florio, President and Chief
Executive Officer
(Duly Authorized Representative)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl A. Florio his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
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 said attorney-in-fact and agent or his substitute or
substitutes 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/ Carl A. Florio /s/ Earl Schram, Jr.
- ------------------------------- ------------------------------
Carl A. Florio, Director, Earl Schram, Jr.,
President and Chief Executive Chairman of the Board
Office (Principal Executive and
Operating Officer)
Date: April 30, 1998 Date: April 30, 1998
II-6
<PAGE>
/s/ Stanley Bardwell /s/ Joseph W. Phelan
- --------------------------- -----------------------------
Stanley Bardwell, M.D. Joseph W. Phelan, Director
Date: April 30, 1998 Date: April 30, 1998
/s/ Willam E. Collins /s/ William H. Jones
- --------------------------- -----------------------------
William E. Collins William H. Jones
Date: April 30, 1998 Date: April 30, 1998
/s/ John E. Kelly /s/ Marcia M. Race
- --------------------------- -----------------------------
John E. Kelly, Director Marcia M. Race, Director
Date: April 30, 1998 Date: April 30, 1998
/s/ Marilyn A. Herrington /s/ Timothy E. Blow
- --------------------------- -----------------------------
Marilyn A. Herrington, Timothy E. Blow, Chief
Director Financial Officer
(Principal Financial and
Accounting Officer)
Date: April 30, 1998 Date: April 30, 1998
II-7
<PAGE>
As filed with the Securities and Exchange Commission on May 1, 1998
Registration No.333-47605
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
EXHIBITS TO FORM S-1
UNDER
THE SECURITIES ACT OF 1933
--------------------
HUDSON RIVER BANCORP, INC
One Hudson City Centre
Hudson, New York 12534
================================================================================
<PAGE>
EXHIBIT INDEX
Exhibits:
1.1 Letter Agreement regarding marketing and consulting services*
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 Restated Organization Certificate of Hudson River Bank & Trust
Company in stock form
3.4 Bylaws of Hudson River Bank & Trust Company 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 Letter of RP Financial LC. with respect to Subscription Rights*
10.1 Form of proposed Employment Agreement Hudson River Bank & Trust
Company and certain executive officers*
10.2 Form of proposed Employment Agreement between Hudson River
Bancorp, Inc. and certain executive officers*
10.3 Form of Change-In-Control Severance Agreement with certain
officers of Hudson River Bank & Trust Company*
10.4 Hudson River Bank & Trust Company Employee Severance Compensation
Plan*
10.5 Employee Stock Ownership Plan*
10.6 Form of Hudson City Savings Institution 401(k) Savings Plan
10.7 Benefit Restoration Plan
22 Subsidiaries*
24.1 Consent of Silver, Freedman & Taff, L.L.P.
24.2 Consent of KPMG Peat Marwick LLP
24.3 Consent of RP Financial*
25 Power of Attorney (set forth on signature page)
99.1 Appraisal
99.2 Draft of Hudson River Bank & Trust Company Foundation Gift
Instrument
99.3 Marketing Materials
99.4 Stock Order Form
- -------------
* Previously Filed.
15,072,815 Shares
(subject to increase up to 17,333,738 shares
in the event of an oversubscription)
HUDSON RIVER BANCORP, INC.
(a Delaware corporation)
Common Stock
(par value $0.01 per share)
AGENCY AGREEMENT
, 1998
SANDLER O'NEILL & PARTNERS, L.P.
Two World Trade Center, 104th Floor
New York, New York 10048
Ladies and Gentlemen:
HUDSON RIVER BANCORP, INC., a Delaware corporation (the "Company"), and THE
HUDSON RIVER SAVINGS INSTITUTION, a New York State-chartered mutual savings bank
(the "Bank"), hereby confirm their agreement with Sandler O'Neill & Partners,
L.P. ("Sandler O'Neill" or the "Agent"), with respect to the offer and sale by
the Company of 15,072,815 shares (subject to increase up to 17,333,738 shares in
the event of an oversubscription) of the Company's Common Stock, par value $0.01
per share (the "Common Stock"). The shares of Common Stock to be sold by the
Company are hereinafter referred to as the "Securities." In addition, as
described herein, the Company expects to contribute shares of Common Stock in an
amount equal to 3% of the Securities sold in the Offerings (as hereinafter
defined) to The Hudson River Bank & Trust Company Foundation (the "Foundation"),
such shares being hereinafter referred to as the "Foundation Shares."
The Securities are being offered for sale and the Foundation Shares are
being contributed in accordance with the Plan of Conversion (the "Plan") adopted
by the Board of Trustees of the Bank pursuant to which the Bank intends to
convert from a New York State-chartered mutual savings bank to a New York
State-chartered stock savings bank to be known as Hudson River Bank & Trust
Company and issue all of its stock to the Company. Pursuant to the Plan, the
Company is offering to certain of the Bank's depositors and to the Bank's and
the Company's tax-qualified employee benefit plans, including the Bank's
Employee Stock Ownership Plan (the "ESOP")
<PAGE>
2
(collectively, the "Employee Plans") rights to subscribe for the Securities in a
subscription offering (the "Subscription Offering"). To the extent Securities
are not subscribed for in the Subscription Offering, such Securities may be
offered through Sandler O'Neill in a community offering to selected persons (the
"Community Offering"). It is currently anticipated by the Bank and the Company
that any Securities not subscribed for in the Subscription Offering and the
Community Offering will be offered to certain members of the general public in a
syndicated community offering (the "Syndicated Community Offering"). The
Subscription Offering, the Community Offering and the Syndicated Community
Offering are hereinafter referred to collectively as the "Offerings," and the
conversion of the Bank from mutual to stock form, the acquisition of the capital
stock of the Bank by the Company and the Offerings are hereinafter referred to
collectively as the "Conversion." It is acknowledged that the number of
Securities to be sold in the Conversion may be increased or decreased as
described in the Prospectus (as hereinafter defined). If the number of
Securities is increased or decreased in accordance with the Plan, the term
"Securities" shall mean such greater or lesser number, where applicable. In the
event that a holding company form of organization is not utilized, all pertinent
terms of this Agreement will apply to the conversion of the Bank from the mutual
to stock form of organization and the sale of the Bank's common stock.
In connection with the Conversion and pursuant to the terms of the Plan as
described in the Prospectus, the Company has established the Foundation.
Immediately following the consummation of the Conversion, subject to compliance
with certain conditions as may be imposed by regulatory authorities, the Company
will contribute newly-issued shares of Common Stock in an amount equal to 3% of
the Securities sold in the Offering, or between 334,223 and 452,184 shares of
Common Stock (subject to increase in certain circumstances to 520,012 shares).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-____), including a
related prospectus, for the registration of the Securities under the Securities
Act of 1933, as amended (the "Securities Act"), has filed such amendments
thereto, if any, and such amended prospectuses as may have been required to the
date hereof by the Commission in order to declare such registration statement
effective, and will file such additional amendments thereto and such amended
prospectuses and prospectus supplements as may hereafter be required. Such
registration statement (as amended to date, if applicable, and as from time to
time amended or supplemented hereafter) and the prospectuses constituting a part
thereof (including in each case all documents incorporated or deemed to be
incorporated by reference therein and the information, if any, deemed to be a
part thereof pursuant to the rules and regulations of the Commission under the
Securities Act, as from time to time amended or supplemented pursuant to the
Securities Act or otherwise (the "Securities Act Regulations")), are hereinafter
referred to as the "Registration Statement" and the "Prospectus," respectively,
except that if any revised prospectus shall be used by the Company in connection
with the Subscription Offering, the Community Offering or the Syndicated
Community Offering which
<PAGE>
3
differs from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective (whether or not such revised prospectus
is required to be filed by the Company pursuant to Rule 424(b) of the Securities
Act Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Agent for such use.
Concurrently with the execution of this Agreement, the Company is
delivering to the Agent copies of the Prospectus of the Company to be used in
the Subscription Offering. Such Prospectus contains information with respect to
the Bank, the Company and the Common Stock.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company and the Bank jointly and severally represent and warrant to
the Agent as of the date hereof as follows:
(i) The Registration Statement has been declared effective by the
Commission, no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the knowledge of the
Company and the Bank, threatened by the Commission. At the time the
Registration Statement became effective and at the Closing Time referred to
in Section 2 hereof, the Registration Statement complied and will comply in
all material respects with the requirements of the Securities Act and the
Securities Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading. The Prospectus at the date hereof does not and at the Closing
Time referred to in Section 2 hereof will not include 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 subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with written information with respect to the Agent
furnished to the Company or the Bank by the Agent expressly for use in the
Registration Statement or Prospectus (the "Agent Information," which the
Company and the Bank acknowledge appears only in the first two paragraphs
of the section captioned "THE CONVERSION -- Marketing and Underwriting
Arrangements" of the Prospectus).
(ii) The Company has filed with the Department of the Treasury, Office
of Thrift Supervision (the "OTS"), the Company's application for approval
of its acquisition of the Bank (the "Holding Company Application") on Form
H-(e)1-S promulgated under the savings and loan holding company provisions
of the Home Owners' Loan Act, as amended ("HOLA") and the regulations
promulgated thereunder. The Company has received written notice from
<PAGE>
4
the OTS dated __________, 1998, of its approval of the Holding Company
Application, such approval remains in full force and effect and no order
has been issued by the OTS suspending or revoking such approval and no
proceedings therefor have been initiated or, to the knowledge of the
Company or the Bank, threatened by the OTS. At the date of such approval
and at the Closing Time referred to in Section 2, the Holding Company
Application complied and will comply in all material respects with the
applicable provisions of HOLA and the regulations promulgated thereunder.
In addition, the Bank has filed with the OTS an application to be deemed to
be a savings association for purposes of holding company regulation (the
"Thrift Election"). The Bank has received written notice from the OTS dated
___________, 1998, of its approval of the Thrift Election, such approval
remains in full force and effect and no order has been issued by the OTS
suspending or revoking such approval and no proceedings therefor have been
initiated or, to the knowledge of the Company or the Bank, threatened by
the OTS. At the date of such approval and at the Closing Time referred to
in Section 2, the Thrift Election complied and will comply in all material
respects with the applicable provisions of HOLA and the regulations
promulgated thereunder. At the date of such approval and at the Closing
Time referred to in Section 2, the Company was not and will not be required
to obtain approval of the Federal Reserve Board or to register with such
Board to become a "bank holding company" as defined in the Bank Holding
Company Act of 1956, as amended, and the regulations promulgated
thereunder.
(iii) Pursuant to the General Regulations of the Banking Board of the
State of New York and the rules and regulations of the Federal Deposit
Insurance Corporation (the "FDIC") governing the conversion of New York
State-chartered mutual savings banks to stock form (the "Conversion
Regulations"), the Bank has filed with the Superintendent of Banks of the
State of New York (the "Superintendent") an Application for Approval of
Conversion on Form 86-AC, including copies of the Bank's Proxy Statement,
dated ______________, 1998, relating to the Conversion (the "Proxy
Statement") and the Prospectus (such application, as amended to date, if
applicable, and as from time to time amended or supplemented hereafter, is
hereinafter referred to as the "Conversion Application"); the Bank has
filed with the FDIC a Notice of Intention to Convert (the "Conversion
Notice"), including the Form H-(e)1-S and the Form 86-AC; and the Bank has
filed such amendments to the Conversion Application and the Conversion
Notice and such supplementary materials as may have been required to the
date hereof. The Superintendent has, by letter dated __________, 1998,
approved the Conversion Application, such order remains in full force and
effect and no order has been issued by the Superintendent suspending or
revoking such order and no proceedings therefor have been initiated or, to
the knowledge of the Company or the Bank, threatened by the Superintendent.
The FDIC has, by letter dated _____________, 1998, issued a letter of
intent not to object to the Conversion Notice, such letter remains in full
force and effect and no letter or order has been issued by the FDIC
suspending or revoking such letter and no proceedings
<PAGE>
5
therefor have been initiated or, to the knowledge of the Company or the
Bank, threatened by the FDIC. At the date of such approval by the
Superintendent and at the Closing Time referred to in Section 2, the
Conversion Application, and at the date of the FDIC letter of intent not to
object and at the Closing Time referred to in Section 2, the Conversion
Notice, complied and will comply in all material respects with the
applicable provisions of the Conversion Regulations.
(iv) At the time of their use, the Proxy Statement and any other proxy
solicitation materials will comply in all material respects with the
applicable provisions of the Conversion Regulations and 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. The Company and
the Bank will promptly file the Prospectus and any supplemental sales
literature with the Commission, the Superintendent and the FDIC. The
Prospectus and all supplemental sales literature, as of the date the
Registration Statement became effective and at the Closing Time referred to
in Section 2, complied and will comply in all material respects with the
applicable requirements of the Conversion Regulations and, at or prior to
the time of their first use, will have received all required authorizations
of the Superintendent and the FDIC for use in final form.
(v) Neither the Commission, the Superintendent nor the FDIC has, by
order or otherwise, prevented or suspended the use of the Prospectus or any
supplemental sales literature authorized by the Company or the Bank for use
in connection with the Offerings.
(vi) At the Closing Time referred to in Section 2, the Company and the
Bank will have completed the conditions precedent to the Conversion and the
establishment of the Foundation in accordance with the Plan, the applicable
Conversion Regulations and all other applicable laws, regulations,
decisions and orders, including all material terms, conditions,
requirements and provisions precedent to the Conversion imposed upon the
Company or the Bank by the OTS, the Superintendent, the FDIC or any other
regulatory authority, other than those which the regulatory authority
permits to be completed after the Conversion.
(vii) RP Financial, L.C., which prepared the valuation of the Bank as
part of the Conversion, has advised the Company and the Bank in writing
that it satisfies all requirements for an appraiser set forth in the
Conversion Regulations and any interpretations or guidelines issued by the
Superintendent and the FDIC with respect thereto; and William M. Mercer,
Incorporated, which prepared the opinion filed as Exhibit ___ of the
Conversion Application as required by the Conversion Regulations, satisfies
all requirements for an "independent executive compensation expert" within
the meaning of the Conversion Regulations.
<PAGE>
6
(viii) The accountants who certified the consolidated financial
statements and supporting schedules of the Bank included in the
Registration Statement have advised the Company and the Bank in writing
that they are independent public accountants within the meaning of the Code
of Ethics of the American Institute of Certified Public Accountants, and
such accountants are, with respect to the Company, the Bank and each
subsidiary of the Bank, independent certified public accountants as
required by the Securities Act and the Securities Act Regulations.
(ix) Except for the Bank, the only business entities (individually, a
"Subsidiary" and collectively, the "Subsidiaries") in which the Company and
the Bank own, directly or indirectly, a 25 percent or greater legal or
beneficial interest, and the percentage of such interest, are as follows:
Hudson City Associates, Inc., wholly owned by the Bank; Hudson River
Mortgage Corporation, wholly owned by the Bank; Hudson River Funding Corp.,
__ percent owned by the Bank; Hudson City Centre, Inc., wholly owned by the
Bank; and Premium Payment Plan ("PPP"), a partnership 65 percent owned by
Hudson City Associates, Inc.
(x) The consolidated financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present
fairly the financial position of the Company, the Bank and the Subsidiaries
at the dates indicated and the results of operations, retained earnings and
cash flows for the periods specified, and comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
Regulations and the Conversion Regulations; except as otherwise stated in
the Registration Statement, such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis; and the supporting schedules and tables included in the
Registration Statement present fairly the information required to be stated
therein.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein (A) there has been no material adverse change in the financial
condition, results of operations or business affairs of the Company, the
Bank and the Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and (B) except for transactions
specifically referred to or contemplated in the Prospectus, there have been
no transactions entered into by the Company, the Bank or any of the
Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company, the Bank and the Subsidiaries,
considered as one enterprise.
(xii) The Company has been duly incorporated and is validly existing
as a
<PAGE>
7
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and to enter into
and perform its obligations under this Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in the State of New York and in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to
be so qualified would not have a material adverse effect on the financial
condition, results of operations or business affairs of the Company, the
Bank and the Subsidiaries, considered as one enterprise.
(xiii) Upon consummation of the Conversion and the contribution of the
Foundation Shares as described in the Prospectus, the authorized, issued
and outstanding capital stock of the Company will be as set forth in the
Prospectus under "CAPITALIZATION" (except for subsequent issuances, if any,
pursuant to reservations, agreements or employee benefit plans referred to
in the Prospectus); no shares of Common Stock have been or will be issued
prior to the Closing Time referred to in Section 2; at the time of
Conversion, the Securities will have been duly 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 stated
on the cover page of the Prospectus, will be duly and validly issued and
fully paid and non-assessable; the terms and provisions of the Common Stock
and the capital stock of the Company conform to all statements relating
thereto contained in the Prospectus; the certificates representing the
shares of Common Stock conform to the requirements of applicable law and
regulations; and the issuance of the Securities is not subject to
preemptive or other similar rights.
(xiv) The Bank, as of the date hereof, is a New York State-chartered
savings bank in mutual form and upon consummation of the Conversion will be
a New York State-chartered savings bank in stock form, in both instances
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus; the
Company, the Bank and the Subsidiaries have obtained all licenses, permits
and other governmental authorizations currently required for the conduct of
their respective businesses or required for the conduct of their respective
businesses as contemplated by the Holding Company Application and the
Conversion Application, except where the failure to obtain such licenses,
permits or other governmental authorizations would not have a material
adverse effect on the financial condition, results of operations or
business affairs of the Company, the Bank and the Subsidiaries, considered
as one enterprise; all such licenses, permits and other governmental
authorizations are in full force and effect and the Company, the Bank and
the Subsidiaries are in all material respects in compliance therewith;
neither the Company, the Bank nor any of the Subsidiaries has received
notice of any
<PAGE>
8
proceeding or action relating to the revocation or modification of any such
license, permit or other governmental authorization which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
might have a material adverse effect on the financial condition, results of
operations or business affairs of the Company, the Bank and the
Subsidiaries, considered as one enterprise; and the Bank is in good
standing under the laws of the State of New York and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
ownership or leasing of property or the conduct of business, except where
the failure to be so qualified would not have a material adverse effect on
the financial condition, results of operations or business affairs of the
Company, the Bank and the Subsidiaries, considered as one enterprise.
(xv) The deposit accounts of the Bank are insured by the FDIC up to
the applicable limits and, 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. The Bank is
a "qualified thrift lender" within the meaning of 12 U.S.C. Section
1467a(m).
(xvi) Upon consummation of the Conversion, the authorized capital
stock of the Bank will be 40,000,000 shares of common stock, par value $.01
per share (the "Bank Common Stock"), and 5,000,000 shares of preferred
stock, par value $.01 per share (the "Bank Preferred Stock"), and the
issued and outstanding capital stock of the Bank will be 1,000 shares of
Bank Common Stock and no shares of the Bank Preferred Stock; no shares of
Bank Common Stock or Bank Preferred Stock have been or will be issued prior
to the Closing Time referred to in Section 2; the shares of Bank Common
Stock to be issued to the Company will have been duly authorized for
issuance and, when issued and delivered by the Bank pursuant to the Plan
against payment of the consideration calculated as set forth in the Plan
and as described in the Prospectus, will be duly and validly issued and
fully paid and non-assessable, and all such Bank Common Stock will be owned
beneficially and of record by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance or legal or equitable claim;
the terms and provisions of Bank Common Stock and the Bank Preferred Stock
conform to all statements relating thereto contained in the Prospectus, and
the certificates representing the shares of Bank Common Stock will conform
with the requirements of applicable laws and regulations; and the issuance
of the Bank Common Stock is not subject to preemptive or similar rights.
(xvii) The Foundation has been duly incorporated and is validly
existing as a non-stock corporation in good standing under the laws of the
State of Delaware with corporate power and authority to own, lease and
operate its properties and to conduct its business as
<PAGE>
9
described in the Prospectus; the Foundation will not be a savings and loan
holding company within the meaning of 12 C.F.R. Section 574.2(q) as a
result of the issuance of shares of Common Stock to it in accordance with
the terms of the Plan and in the amounts as described in the Prospectus; no
approvals are required to establish the Foundation and to contribute the
shares of Common Stock thereto as described in the Prospectus other than
those imposed by the Superintendent and the FDIC; except as specifically
disclosed in the Prospectus and the Proxy Statement, there are no
agreements and/or understandings, written or oral, between the Company
and/or the Bank and the Foundation with respect to the control, directly or
indirectly, over the voting and the acquisition or disposition of the
Foundation Shares; at the time of the Conversion, the Foundation Shares
will have been duly authorized for issuance and, when issued and
contributed by the Company pursuant to the Plan, will be duly and validly
issued and fully paid and non-assessable; and the issuance of the
Foundation Shares is not subject to preemptive or similar rights.
(xviii) Each Subsidiary has been duly incorporated (or, in the case of
PPP, formed) and is validly existing as a corporation (or, in the case of
PPP, a partnership) in good standing under the laws of the jurisdiction of
its incorporation or formation, as the case may be, has full corporate or
partnership, as the case may be, power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and Prospectus, and is duly qualified to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect on the financial condition,
results of operations or business affairs of the Company, the Bank and the
Subsidiaries, considered as one enterprise; the activities of each
Subsidiary are permitted to subsidiaries of a savings association holding
company and of a New York State-chartered savings bank by the rules,
regulations, resolutions and practices of the OTS, the Superintendent and
the FDIC, as the case may be; all of the issued and outstanding capital
stock of each Subsidiary that is a corporation has been duly authorized and
validly issued, is fully paid and non-assessable and is owned (or, in the
case of Hudson River Funding Corp., ____ percent of such issued and
outstanding capital stock is owned) beneficially and of record by the Bank
free and clear of any security interest, mortgage, pledge, lien,
encumbrance or legal or equitable claim; 65 percent of the ownership
interests in PPP have been duly acquired and are owned beneficially and of
record by Hudson City Associates, Inc., free and clear of any security
interest, mortgage, pledge, lien, encumbrance or legal or equitable claim
and the other 35 percent of the ownership interests are owned by
______________.
(xix) The Company and the Bank have taken all corporate action
necessary for them to execute, deliver and perform this Agreement, and this
Agreement has been duly executed
<PAGE>
10
and delivered by, and is the valid and binding agreement of, the Company
and the Bank, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other laws affecting the
enforceability of the rights of creditors generally and judicial
limitations on the right of specific performance and except as the
enforceability of indemnification and contribution provisions may be
limited by applicable securities laws.
(xx) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the
Closing Time referred to in Section 2, except as otherwise may be indicated
or contemplated therein, none of the Company, the Bank or any Subsidiary
will have (A) issued any securities or incurred any liability or
obligation, direct or contingent, or borrowed money, except borrowings in
the ordinary course of business from the same or similar sources and in
similar amounts as indicated in the Prospectus, or (B) entered into any
transaction or series of transactions which is material in light of the
business of the Company, the Bank and the Subsidiaries, considered as one
enterprise, excluding the origination, purchase and sale of loans or the
purchase or sale of investment securities or mortgaged-backed securities in
the ordinary course of business.
(xxi) 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 Securities and the Foundation Shares that
has not been obtained and a copy of which has been delivered to the Agent,
except for the filing with the Superintendent of the Bank's amended and
restated organization certificate and as may be required under the
securities laws of various jurisdictions.
(xxii) Neither the Company, the Bank nor any of the Subsidiaries is in
violation of its certificate of incorporation, organization certificate,
articles of incorporation or charter, as the case may be, or bylaws (and
the Bank will not be in violation of its organization certificate or bylaws
in stock form upon consummation of the Conversion); and neither the
Company, the Bank nor any of the Subsidiaries is in default (nor has any
event occurred which, with notice or lapse of time or both, would
constitute a default) in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Company, the Bank or any of the Subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company, the Bank or any of the Subsidiaries is subject, except for such
defaults that would not, individually or in the aggregate, have a material
adverse effect on the financial condition, results of operations or
business of the Company, the Bank and the Subsidiaries, considered as one
enterprise; and there are no contracts or documents of the Company, the
Bank or any of the Subsidiaries which are required to be filed as exhibits
to the Registration Statement or the Conversion Application which have not
been so filed.
<PAGE>
11
(xxiii) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein do not and will
not conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, the Bank or any of the Subsidiaries
pursuant to, any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which the Company, the Bank or any of the
Subsidiaries is a party or by which any of them may be bound, or to which
any of the property or assets of the Company, the Bank or any of the
Subsidiaries is subject, except for such defaults that would not,
individually or in the aggregate, have a material adverse effect on the
financial condition, results of operations or business affairs of the
Company, the Bank and the Subsidiaries, considered as one enterprise; nor
will such action result in any violation of the provisions of the
certificate of incorporation, organization certificate, articles of
incorporation or charter or by-laws of the Company, the Bank or any of the
Subsidiaries, or any applicable law, administrative regulation or
administrative or court decree.
(xxiv) No labor dispute with the employees of the Company, the Bank or
any of the Subsidiaries exists or, to the knowledge of the Company or the
Bank, is imminent or threatened; and the Company and the Bank are not aware
of any existing or threatened labor disturbance by the employees of any of
their principal suppliers or contractors which might be expected to result
in any material adverse change in the financial condition, results of
operations or business affairs of the Company, the Bank and the
Subsidiaries, considered as one enterprise.
(xxv) Each of the Company, the Bank and the Subsidiaries have good and
marketable title to all properties and assets for which ownership is
material to its business and to those properties and assets described in
the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the
Prospectus or are not material in relation to the business of the Company,
the Bank and the Subsidiaries, considered as one enterprise; and all of the
leases and subleases material to the business of the Company, the Bank and
the Subsidiaries, considered as one enterprise, under which the Company,
the Bank or any of the Subsidiaries holds properties, including those
described in the Prospectus, are valid and binding agreements of the
Company, the Bank or such Subsidiary, enforceable in accordance with their
respective terms.
(xxvi) None of the Company, the Bank nor any of the Subsidiaries is in
violation of any directive from the OTS, the Superintendent or the FDIC to
make any material change in the method of conducting its business; the Bank
and the Subsidiaries have conducted and are
<PAGE>
12
conducting their businesses so as to comply in all material respects with
all applicable statutes, regulations and administrative and court decrees
(including, without limitation, all regulations, decisions, directives and
orders of the Superintendent and the FDIC).
(xxvii) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company or the Bank, threatened, against or affecting
the Company, the Bank or any of the Subsidiaries which is required to be
disclosed in the Registration Statement (other than as disclosed therein),
or which might result in any material adverse change in the financial
condition, results of operations or business affairs of the Company, the
Bank and the Subsidiaries, considered as one enterprise, or which might
materially and adversely affect the properties or assets thereof or which
might materially and adversely affect the performance thereof under this
Agreement or the consummation of the Conversion; all pending legal or
governmental proceedings to which the Company, the Bank or any of the
Subsidiaries is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, are, considered in the aggregate not material; and there are no
contracts or documents of the Company, the Bank or any of the Subsidiaries
which are required to be filed as exhibits to the Registration Statement or
the Conversion Application which have not been so filed.
(xxviii) The Bank has obtained an opinion of its counsel, Silver,
Freedman & Taff, L.L.P., with respect to the legality of the Securities and
the Foundation Shares to be issued and the federal income tax consequences
of the Conversion and the Foundation, copies of which are filed as exhibits
to the Registration Statement; all material aspects of the aforesaid
opinions are accurately summarized in the Prospectus; the facts and
representations upon which such opinions are based are truthful, accurate
and complete in all material respects; and neither the Bank nor the Company
has taken or will take any action inconsistent therewith.
(xxix) The Bank has obtained an opinion of KPMG Peat Marwick LLP with
respect to certain New York State income and franchise tax consequences of
the Conversion, a copy of which is filed as an exhibit to the Registration
Statement; all material aspects of such opinion are accurately summarized
in the Prospectus; the facts and representations upon which such opinions
is based are truthful, accurate and complete in all material respects, and
neither the Bank nor the Company has taken or will take any action
inconsistent therewith.
(xxx) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(xxxi) All of the loans represented as assets on the most recent
consolidated financial
<PAGE>
13
statements or consolidated selected financial information of the Bank
included in the Prospectus meet or are exempt from all requirements of
federal, state or local law pertaining to lending, including without
limitation truth in lending (including the requirements of Regulations Z
and 12 C.F.R. Part 226 and Section 563.99), real estate settlement
procedures, consumer credit protection, equal credit opportunity and all
disclosure laws applicable to such loans, except for violations which, if
asserted, would not result in a material adverse effect on the financial
condition, results of operations or business of the Company, the Bank and
the Subsidiaries, considered as one enterprise.
(xxxii) With the exception of the intended loan to the Bank's ESOP by
the Company to enable the ESOP to purchase Securities in an amount of up to
10% of the aggregate of the Securities sold in the Offerings and the
Foundation Shares, none of the Company, the Bank or, to the knowledge of
the Company and the Bank, any employee of the Bank has made any payment of
funds of the Company or the Bank as a loan for the purchase of Common Stock
or made any other payment of funds prohibited by law, and no funds have
been set aside to be used for any payment prohibited by law.
(xxxiii) The Company, the Bank and the Subsidiaries are in compliance
in all material respects with the applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transaction Reporting
Act of 1970, as amended, and the rules and regulations thereunder, and the
lending practices of the Bank are and have been in conformity with the Real
Estate Settlement Procedures Act, as amended, and the rules and regulations
thereunder.
(xxxiv) Neither the Company, the Bank or any of the Subsidiaries nor
any properties owned or operated by the Company, the Bank or any of the
Subsidiaries is in violation of or liable under any Environmental Law (as
defined below), except for such violations or liabilities that,
individually or in the aggregate, would not have a material adverse effect
on the financial condition, results of operations or business affairs of
the Company, the Bank and the Subsidiaries, considered as one enterprise.
There are no actions, suits or proceedings, or demands, claims, notices or
investigations (including, without limitation, notices, demand letters or
requests for information from any environmental agency) instituted or
pending, or to the knowledge of the Company or the Bank, threatened,
relating to the liability of any property owned or operated by the Company,
the Bank or any of the Subsidiaries under any Environmental Law. For
purposes of this subsection, the term "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any regulatory authority relating to
(i) the protection, preservation or restoration of the environment
(including, without limitation, air, water, vapor, surface water,
groundwater,
<PAGE>
14
drinking water supply, surface soil, subsurface soil, plant and animal life
or any other natural resource), and/or (ii) the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
(xxxv) The Company, the Bank and the Subsidiaries have filed all
federal income and state and local income and franchise tax returns
required to be filed and have made timely payments of all taxes shown as
due and payable in respect of such returns, and no deficiency has been
asserted with respect thereto by any taxing authority.
(xxxvi) The Company has received approval, subject to regulatory
approval to consummate the Offerings and issuance, to have the Securities
quoted on the National Market of The Nasdaq Stock Market, Inc. ("Nasdaq
National Market"), effective as of the Closing Time referred to in Section
2 hereof.
(xxxvii) The Company has filed a registration statement for the Common
Stock (the "Exchange Act Registration Statement") under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
has requested that the Exchange Act Registration Statement become effective
concurrent with the effectiveness of the Registration Statement.
(b) Any certificate signed by any officer of the Company or the Bank and
delivered to either of the Agent or counsel for the Agent shall be deemed a
representation and warranty by the Company or the Bank to the Agent as to each
of the matters covered thereby.
<PAGE>
15
SECTION 2. APPOINTMENT OF SANDLER O'NEILL; SALE AND DELIVERY OF THE
SECURITIES; CLOSING.
On the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company hereby
appoints Sandler O'Neill as its Agent to consult with and advise the Company,
and to assist the Company with the solicitation of subscriptions and purchase
orders for Securities, in connection with the Company's sale of the Securities
in the Offerings. On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, Sandler
O'Neill accepts such appointment and agrees to use its best efforts to assist
the Company with the solicitation of subscriptions and purchase orders for
Securities in accordance with this Agreement; provided, however, that the Agent
shall not be obligated to take any action which is inconsistent with any
applicable laws, regulations, decisions or orders. The services to be rendered
by Sandler O'Neill pursuant to this appointment include the following: (i)
consulting as to the securities marketing implications of any aspect of the Plan
or related corporate documents; (ii) reviewing with the Board of Directors the
independent appraiser's appraisal of the Common Stock, particularly with regard
to aspects of the appraisal involving the methodology employed; (iii) reviewing
all offering documents, including the Prospectus, stock order forms and related
offering materials (it being understood that preparation and filing of such
documents are the responsibility solely of the Company and the Bank and their
counsel); (iv) assisting in the design and implementation of a marketing
strategy for the Offerings; (v) assisting the Company and the Bank in obtaining
all requisite regulatory approvals; (vi) assisting Bank management in scheduling
and preparing for meetings with potential investors and broker-dealers; and
(vii) providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion.
The appointment of the Agent hereunder shall terminate upon the earliest to
occur of (a) forty-five (45) days after the last day of the Subscription and
Community Offerings, unless the Company and the Agent agree in writing to extend
such period and the Superintendent and the FDIC agree to extend the period of
time in which the Securities may be sold, or (b) the receipt and acceptance of
subscriptions and purchase orders for all of the Securities or (c) the
completion of the Syndicated Community Offering.
If any of the Securities remain available after the expiration of the
Subscription and Community Offerings, at the request of the Company and the Bank
Sandler O'Neill will seek to form a syndicate of registered brokers or dealers
(the "Selected Dealers") to assist in the solicitation of purchase orders of
such Securities on a best efforts basis, subject to the terms and conditions set
forth in a selected dealer's agreement (the "Selected Dealer's Agreement"),
substantially in the form set forth as Exhibit A to this Agreement. Sandler
O'Neill will endeavor to limit the aggregate fees to be paid by the Company and
the Bank under any such Selected Dealer's Agreement to an amount
<PAGE>
16
competitive with gross underwriting discounts charged at such time for
underwritings of comparable amounts of stock sold at a comparable price per
share in a similar market environment; provided, however, that the aggregate
fees payable to Sandler O'Neill and any Selected Dealers in connection with any
Syndicated Community Offering shall not exceed 7% of the aggregate Purchase
Price (as defined in the Prospectus) of the Securities sold in the Syndicated
Community Offering. Sandler O'Neill will endeavor to distribute the Securities
among the Selected Dealers in a fashion which best meets the distribution
objectives of the Company and the Bank and the requirements of the Plan and
applicable law, which may result in limiting the allocation of stock to certain
Selected Dealers. It is understood that in no event shall Sandler O'Neill be
obligated to act as a Selected Dealer or to take or purchase any Securities.
In the event the Company is unable to sell at least the Minimum Total of
the Securities, as set forth on the cover page of the Prospectus, within the
period herein provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Securities the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the others hereunder, except for the obligations of the Company and the Bank as
set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as
provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing the
funds received from subscriptions for Securities or other offers to purchase
Securities in special interest-bearing accounts with the Bank until all
Securities are sold and paid for were made prior to the commencement of the
Subscription Offering, with provision for refund to the purchasers as set forth
above, or for delivery to the Company if all of the Securities are sold.
If at least the Minimum Total of the Securities, as set forth on the cover
page of the Prospectus, are sold, the Company agrees to issue or have issued the
Securities sold and to release for delivery certificates for such Securities at
the Closing Time against payment therefor by release of funds from the special
interest-bearing accounts referred to above. The closing shall be held at the
offices of Silver, Freedman & Taff, L.L.P., at 10:00 a.m., Eastern time, or at
such other place and time as shall be agreed upon by the parties hereto, on a
business day to be agreed upon by the parties hereto. The Company shall notify
the Agent by telephone, confirmed in writing, when funds shall have been
received for all of the Securities. Certificates for Securities shall be
delivered directly to the purchasers thereof in accordance with their
directions. Notwithstanding the foregoing, certificates for Securities purchased
through Selected Dealers shall be made available to the Agent for inspection at
least 48 hours prior to the Closing Time at such office as the Agent shall
designate. The hour and date upon which the Company shall release for delivery
all of the Securities, in accordance with the terms hereof, is herein called the
"Closing Time."
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Securities.
<PAGE>
17
In addition to reimbursement of the expenses specified in Section 4 hereof,
the Agent will receive the following compensation for its services hereunder:
(a) one and one-tenth percent (1.10%) of the aggregate Purchase Price
(as defined in the Prospectus) of the Securities sold in the Offerings,
excluding in each case shares purchased by (i) any trustee, director,
executive officer or employee of the Company or the Bank or members of
their immediate families (which term shall mean parents, grandparents,
spouse, siblings, children and grandchildren); and (ii) any employee
benefit plan of the Company or the Bank.
(b) with respect to any Securities sold by an NASD member firm (other
than Sandler O'Neill) under the Selected Dealer's Agreement in the event of
a Syndicated Community Offering, an additional fee to be negotiated by
Sandler O'Neill with the Company to be remitted to Selected Dealers
consisting of (i) the fees payable to Selected Dealers under any Selected
Dealer's Agreement and (ii) the fees payable to any Sponsoring Dealers (as
defined in Exhibit A) under any Selected Dealer's Agreement; provided that
the aggregate fees payable to Sandler O'Neill and any Selected Dealers in
connection with any Syndicated Community Offering shall not exceed seven
percent (7%) of the aggregate Purchase Price of the Securities sold in the
Syndicated Community Offering.
If this Agreement is terminated by the Agent in accordance with the
provisions of Section 9(a) hereof or the Conversion is terminated by the Company
or the Bank, no fees shall be payable by the Company or the Bank to Sandler
O'Neill; however, the Company and/or the Bank shall reimburse the Agent for all
of its reasonable out-of-pocket expenses incurred prior to termination,
including the reasonable fees and disbursements of counsel for the Agent, in
accordance with the provisions of Section 4 hereof.
All fees payable to the Agent hereunder shall be payable in immediately
available funds at the Closing Time, or upon the termination of this Agreement,
as the case may be. In recognition of the long lead times involved in the
conversion process, the Bank agrees to make advance payments to the Agent in the
aggregate amount of $25,000, all of which has been previously paid, which shall
be credited against any fees or reimbursement of expenses payable hereunder.
<PAGE>
18
SECTION 3. COVENANTS OF THE COMPANY.
The Company and the Bank covenant with the Agent as follows:
(a) The Company and the Bank will prepare and file such amendments or
supplements to the Registration Statement, the Prospectus, the Conversion
Application and the Proxy Statement as may hereafter be required by the
Securities Act Regulations or the Conversion Regulations or as may
hereafter be requested by the Agent. Following completion of the
Subscription and Community Offerings, in the event of a Syndicated
Community Offering, the Company and the Bank will (i) promptly prepare and
file with the Commission a post-effective amendment to the Registration
Statement relating to the results of the Subscription and Community
Offerings, any additional information with respect to the proposed plan of
distribution and any revised pricing information or (ii) if no such
post-effective amendment is required, will file with, or mail for filing
to, the Commission a prospectus or prospectus supplement containing
information relating to the results of the Subscription and Community
Offerings and pricing information pursuant to Rule 424 of the Securities
Act Regulations, in either case in a form acceptable to the Agent. The
Company and the Bank will notify the Agent immediately, and confirm the
notice in writing, (i) of the effectiveness of any post-effective amendment
of the Registration Statement, the filing of any supplement to the
Prospectus and the filing of any amendment to the Conversion Application,
(ii) of the receipt of any comments from the Superintendent, the FDIC, the
OTS or the Commission with respect to the transactions contemplated by this
Agreement or the Plan, (iii) of any request by the Superintendent, the
FDIC, the OTS or the Commission for any amendment to the Registration
Statement, the Conversion Application or the Holding Company Application or
any amendment or supplement to the Prospectus or for additional
information, (iv) of the issuance by the Superintendent or the FDIC of any
order suspending the Offerings or the use of the Prospectus or the
initiation of any proceedings for that purpose, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose and (vi) of the receipt of any notice with respect to the
suspension of any qualification of the Securities for offering or sale in
any jurisdiction. The Company and the Bank will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company and the Bank will give the Agent notice of its
intention to file or prepare any amendment to the Conversion Application,
the Holding Company Application or the Registration Statement (including
any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for
use in connection with the Syndicated Community Offering of the Securities
which differs from the prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the
Securities Act Regulations), will furnish the Agent with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Agent or counsel for the
Agent may object.
<PAGE>
19
(c) The Company and the Bank will deliver to the Agent as many signed
copies and as many conformed copies of the Conversion Application, the
Holding Company Application and the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) as the Agent may reasonably request, and
from time to time such number of copies of the Prospectus as the Agent may
reasonably request.
(d) During the period when the Prospectus is required to be delivered,
the Company and the Bank will comply, at their own expense, with all
requirements imposed upon them by the Superintendent, the FDIC and the OTS,
by the applicable Conversion Regulations, as from time to time in force,
and by the Securities Act, the Securities Act Regulations, the Exchange Act
and the rules and regulations of the Commission promulgated under the
Exchange Act, including, without limitation, Regulation M under the
Exchange Act, 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 Prospectus.
(e) If any event or circumstance shall occur as a result of which it
is necessary, in the opinion of counsel for the Agent, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, the Company and the Bank will forthwith amend or supplement the
Prospectus (in form and substance satisfactory to counsel for the Agent) so
that, as so amended or supplemented, the Prospectus will not include 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 existing at the time it is delivered to a purchaser, not
misleading, and the Company and the Bank will furnish to the Agent a
reasonable number of copies of such amendment or supplement. For the
purpose of this subsection, the Company and the Bank will each furnish such
information with respect to itself as the Agent may from time to time
reasonably request.
(f) The Company and the Bank will take all necessary action, in
cooperation with the Agent, to qualify the Securities for offering and sale
under the applicable securities laws of such states of the United States
and other jurisdictions as the Conversion Regulations may require and as
the Agent and the Company have agreed; provided, however, that neither the
Company nor the Bank shall be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified. In each jurisdiction in which
the Securities have been so qualified, the Company and the Bank will file
such statements and reports as may be required by the laws of such
jurisdiction to
<PAGE>
20
continue such qualification in effect for a period of not less than one
year from the effective date of the Registration Statement.
(g) The Company authorizes Sandler O'Neill and any Selected Dealers to
act as agent of the Company in distributing the Prospectus to persons
entitled to receive subscription rights and other persons to be offered
Securities having record addresses in the states or jurisdictions set forth
in a survey of the securities or "blue sky" laws of the various
jurisdictions in which the Offerings will be made (the "Blue Sky Survey").
(h) The Company will make generally available to its security holders
as soon as practicable, but not later than 60 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the Securities Act Regulations) 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 such Rule
158) of the Registration Statement.
(i) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to its stockholders as
soon as practicable after the end of each such fiscal year an annual report
(including consolidated statements of financial condition and consolidated
statements of income, stockholders' equity and cash flows, certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information for such quarter in
reasonable detail. In addition, such annual report and quarterly
consolidated summary financial information shall be made public through the
issuance of appropriate press releases at the same time or prior to the
time of the furnishing thereof to stockholders of the Company.
(j) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to the Agent (i) as
soon as publicly available, a copy of each report or other document of the
Company furnished generally to stockholders of the Company or furnished to
or filed with the Commission under the Exchange Act or any national
securities exchange or system on which any class of securities of the
Company is listed and (ii) from time to time, such other information
concerning the Company as the Agent may reasonably request.
(k) The Company and the Bank will conduct the Conversion, including
the formation and operation of the Foundation, in all material respects in
accordance with the Plan, the Conversion Regulations and all other
applicable regulations, decisions and orders,
<PAGE>
21
including all applicable terms, requirements and conditions precedent to
the Conversion imposed on the Company or the Bank by the Superintendent,
the FDIC or the OTS.
(l) Each of the Company and the Bank will use the net proceeds
received by it from the sale of the Securities or the sale to the Company
of the Bank Common Stock to be purchased by the Company, as the case may
be, in the manner specified in the Prospectus under "Use of Proceeds."
(m) The Company will maintain the effectiveness of the Exchange Act
Registration Statement for not less than three years. The Company will file
with The Nasdaq Stock Market, Inc., all documents and notices required by
The Nasdaq Stock Market, Inc., of companies that have issued securities
that are traded in the over-the-counter market and quotations for which are
reported on the Nasdaq National Market.
(n) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the Agent
to ensure compliance with the National Association of Securities Dealers,
Inc.'s "Interpretation Relating to Free-Riding and Withholding."
(o) Other than in connection with any employee benefit plan or
arrangement described in the Prospectus, the Company will not, without the
prior written consent of the Agent, sell or issue, contract to sell or
otherwise dispose of any shares of Common Stock other than the Securities
for a period of 180 days following the Closing Time.
(p) During the period beginning on the date hereof and ending on the
later of the third anniversary of the Closing Time or the date on which the
Agent receives full payment in satisfaction of any claim for
indemnification or contribution to which it may be entitled pursuant to
Sections 6 or 7 of this Agreement, neither the Company nor the Bank shall,
without the prior written consent of the Agent, take or permit to be taken
any action that could result in the Bank Common Stock or the Bank Preferred
Stock becoming subject to any security interest, mortgage, pledge, lien or
encumbrance; provided, however, that this covenant shall be null and void
if the Board of Governors of the Federal Reserve System, or any other
federal agency having jurisdiction over the Bank, by regulation, policy
statement or interpretive release, or by written order or written advice
addressed to the Bank or the Agent specifically addressing the provisions
of Section 6(a) hereof, permits indemnification of the Agent by the Bank as
contemplated by such provisions.
(q) The Company and the Bank will comply with the conditions imposed
by or agreed to with the OTS in connection with its approval of the Holding
Company Application
<PAGE>
22
and with the Superintendent and the FDIC in connection with their approval
of, or non-objection to, the Conversion Application, including those
conditions relating to the establishment and the operation of the
Foundation; the Company and the Bank shall use their best efforts to ensure
that the Foundation submits within the time frames required by applicable
law a request to the Internal Revenue Service to be recognized as a
tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended (the "Code"); the Company and the Bank will take
no action which will result in the possible loss of the Foundation's tax
exempt status; and neither the Company nor the Bank will contribute any
additional assets to the Foundation until such time that such additional
contributions will be deductible for federal and state income tax purposes.
(r) During the period ending on the first anniversary of the Closing
Time or, if sooner, until such time as approval of the Company's
application to the Federal Reserve Board to become a bank holding company
shall have become effective, the Bank will comply with all applicable law
and regulation necessary for the Bank to continue to be a "qualified thrift
lender" within the meaning of 12 U.S.C. Section 1467a(m).
(s) The Company shall not deliver the Securities until the Company and
the Bank have satisfied each condition set forth in Section 5 hereof,
unless such condition is waived by the Agent.
(t) The Company or the Bank will furnish to Sandler O'Neill as early
as practicable prior to the Closing Time, but no later than two (2) full
business days prior thereto, a copy of the latest available unaudited
interim consolidated financial statements of the Bank and the Subsidiaries
which have been read by KPMG Peat Marwick LLP, as part of the procedures
referred to in their letters to be furnished pursuant to subsections (e)
and (f) of Section 5 hereof.
<PAGE>
23
SECTION 4. PAYMENT OF EXPENSES.
The Company and the Bank jointly and severally agree to pay all expenses
incident to the performance of their obligations under this Agreement, including
but not limited to (i) the cost of obtaining all securities and bank regulatory
approvals, (ii) the printing and filing of the Registration Statement and the
Conversion Application as originally filed and of each amendment thereto, (iii)
the preparation, issuance and delivery of the certificates for the Securities to
the purchasers in the Offerings, (iv) the fees and disbursements of the
Company's and the Bank's counsel, accountants, conversion agent, appraiser and
other advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the fees and disbursements of counsel in connection therewith and in connection
with the preparation of the Blue Sky Survey, (vi) the printing and delivery to
the Agent of copies of the Registration Statement as originally filed and of
each amendment thereto and the printing and delivery of the Prospectus and any
amendments or supplements thereto to the purchasers in the Offerings and the
Agent, (vii) the printing and delivery to the Agent of copies of the Blue Sky
Survey and (viii) the fees and expenses incurred in connection with the listing
of the Securities on the Nasdaq National Market. In the event the Agent incurs
any such fees and expenses on behalf of the Bank or the Company, the Bank will
reimburse the Agent for such fees and expenses whether or not the Conversion is
consummated; provided, however, that the Agent shall not incur any substantial
expenses on behalf of the Bank or the Company pursuant to this Section without
the prior approval of the Bank.
The Company and the Bank jointly and severally agree to pay certain
expenses incident to the performance of the Agent's obligations under this
Agreement, regardless of whether the Conversion is consummated, including (i)
the filing fees paid or incurred by the Agent in connection with all filings
with the National Association of Securities Dealers, Inc., and (ii) all
reasonable out of pocket expenses incurred by the Agent relating to the
Offerings up to a maximum of $125,000, including, without limitation,
advertising, promotional, syndication and travel expenses and fees and expenses
of the Agent's counsel. All fees and expenses to which the Agent is entitled to
reimbursement under this paragraph of this Section 4 shall be due and payable
upon receipt by the Company or the Bank of a written accounting therefor setting
forth in reasonable detail the expenses incurred by the Agent.
<PAGE>
24
SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS.
The Company, the Bank and the Agent agree that the issuance and sale of the
Securities and all obligations of the Agent hereunder are subject to the
accuracy of the representations and warranties of the Company and the Bank
herein contained as of the date hereof and the Closing Time, to the accuracy of
the statements of officers, directors and trustees of the Company and the Bank
made pursuant to the provisions hereof, to the performance by the Company and
the Bank of their obligations hereunder and to the following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission, no order suspending the
Offerings or authorization for final use of the Prospectus shall have been
issued or proceedings therefor initiated or threatened by the
Superintendent or the FDIC and no order suspending the sale of the
Securities in any jurisdiction shall have been issued.
(b) At Closing Time, the Agent shall have received:
(1) The favorable opinion, dated as of Closing Time, of Silver,
Freedman & Taff, L.L.P., counsel for the Company and the Bank, in form
and substance satisfactory to counsel for the Agent, 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 full corporate power and authority to
own, lease and operate its properties and to conduct its business
as described in the Registration Statement and Prospectus and to
enter into and perform its obligations under this Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in the State of New
York and in each other jurisdiction in which such qualification
is required whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to
be so qualified would not have a material adverse effect upon the
financial condition, results of operations or business affairs of
the Company, the Bank and the Subsidiaries, considered as one
enterprise.
<PAGE>
25
(iv) Upon consummation of the Conversion and the issuance of
the Foundation Shares to the Foundation immediately upon
completion thereof, the authorized, issued and outstanding
capital stock of the Company will be as set forth in the
Prospectus under "Capitalization" and no shares of Common Stock
have been issued prior to the Closing Time.
(v) The Securities and the Foundation Shares have been duly
and validly authorized for issuance and sale and, when issued and
delivered by the Company pursuant to the Plan against payment of
the consideration calculated as set forth in the Plan, or
contributed by the Company pursuant to the Plan in the case of
the Foundation Shares, will be duly and validly issued and fully
paid and non-assessable.
(vi) The issuance of the Securities and the Foundation
Shares is not subject to preemptive or other similar rights
arising by operation of law or, to the best of such counsel's
knowledge, otherwise.
(vii) The Bank has been at all times prior to the Closing
Time duly organized, and is validly existing and in good standing
under the laws of the State of New York as a New York
State-chartered savings bank in mutual form, and, at the Closing
Time, has become duly organized, validly existing and in good
standing under the laws of the State of New York as a New York
State-chartered savings bank in stock form, in both instances
with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the
Registration Statement and the Prospectus; and the Bank is duly
qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to
be so qualified would not have a material adverse effect upon the
financial condition, results of operations or business affairs of
the Company, the Bank and the Subsidiaries, considered as one
enterprise.
(viii) The Bank is a member in good standing of the Federal
Home Loan Bank of New York and the deposit accounts of the Bank
are insured by the FDIC up to the applicable limits.
(ix) Each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the jurisdiction of
<PAGE>
26
its incorporation, has full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement and is duly qualified as
a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to
be so qualified would not have a material adverse effect upon the
financial condition, results of operations or business affairs of
the Company, the Bank and the Subsidiaries, considered as one
enterprise; the activities of each Subsidiary are permitted to
subsidiaries of a savings association holding company and of a
New York State-chartered savings bank by the rules, regulations,
resolutions and practices of the OTS, the Superintendent and the
FDIC, as the case may be; all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by
the Bank directly, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or legal or equitable claim.
(x) The Foundation has been duly incorporated and is validly
existing as a non-stock corporation in good standing under the
laws of the State of Delaware with corporate power and authority
to own, lease and operate its properties and to conduct its
business as described in the Prospectus; the Foundation is not a
savings and loan holding company within the meaning of 12 C.F.R.
Section 574.2(q) as a result of the issuance of shares of Common
Stock to it in accordance with the terms of the Plan and in the
amounts as described in the Prospectus; no approvals are required
to establish the Foundation and to contribute the shares of
Common Stock thereto as described in the Prospectus other than
those set forth in any written notice or order of approval of, or
non-objection to, the Conversion, the Conversion Application or
the Holding Company Application, copies of which were provided to
the Agent prior to the Closing Time;
(xi) The shares of Bank Common Stock to be issued to the
Company in the Conversion have been duly and validly authorized
for issuance and, when issued and delivered pursuant to the Plan
against payment of the consideration calculated as set forth in
the Plan and as described in the Prospectus, will be duly and
validly issued and fully paid and non-assessable and will
constitute all of the issued and outstanding capital stock of the
Bank, and all such Bank Common Stock will be owned beneficially
and of record by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance or legal or
equitable claim.
<PAGE>
27
(xii) The OTS has approved the Holding Company Application
and the Thrift Election, the Superintendent has approved the
Conversion Application and the FDIC has issued a letter of intent
not to object to the Conversion Notice, and no action is pending
or, to the best of such counsel's knowledge, threatened
respecting the Holding Company Application, the Thrift Election,
the Conversion Application (including the establishment of the
Foundation and the contribution thereto of the Foundation Shares)
or the Conversion Notice, or the acquisition by the Company of
all of the Bank's issued and outstanding capital stock; the
Holding Company Application and the Thrift Election each comply
with the applicable requirements of the OTS, the Conversion
Application complies with the applicable requirements of the
Superintendent and the Conversion Notice complies with the
applicable requirements of the FDIC, and the Holding Company
Application, the Thrift Election, the Conversion Application and
the Conversion Notice include all documents required to be filed
as exhibits thereto, and are, to the best of such counsel's
knowledge, truthful, accurate and complete; and the Company is
duly authorized to become a savings association holding company
and is duly authorized to own all of the issued and outstanding
capital stock of the Bank to be issued pursuant to the Plan.
(xiii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the
consummation of the transactions contemplated hereby, including
the establishment of the Foundation and the contribution thereto
of the Foundation Shares, (A) have been duly and validly
authorized by all necessary action on the part of each of the
Company and the Bank, and this Agreement constitutes the legal,
valid and binding agreement of each of the Company and the Bank,
enforceable in accordance with its terms, except as rights to
indemnity and contribution hereunder may be limited under
applicable law (it being understood that such counsel may avail
itself of customary exceptions concerning the effect of
bankruptcy, insolvency or similar laws and the availability of
equitable remedies); (B) will not result in any violation of the
provisions of the charter or by-laws of the Company, the Bank or
any of the Subsidiaries; and (C) will not conflict with or
constitute a breach of, or default under, and no default exists
nor has any event occurred which, with notice or lapse of time or
both, would constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, the Bank or any of the
Subsidiaries
<PAGE>
28
pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company, the Bank or
any of the Subsidiaries is a party or by which any of them may be
bound, or to which any of the property or assets of the Company,
the Bank or any of the Subsidiaries is subject, that,
individually or in the aggregate, would have a material adverse
effect on the financial condition, results of operations or
business affairs of the Company, the Bank and the Subsidiaries,
considered as one enterprise.
(xiv) The Prospectus has been duly authorized by the
Superintendent and the FDIC for final use pursuant to the
Conversion Regulations, and no action is pending or, to the best
of such counsel's knowledge, threatened by the Superintendent or
the FDIC to revoke such authorization.
(xv) The Registration Statement is effective under the
Securities Act, and no stop order suspending the effectiveness of
the Registration Statement has been issued under the Securities
Act or proceedings therefor initiated or, to the best of such
counsel's knowledge, threatened by the Commission.
(xvi) No further approval, authorization, consent or other
order of any public board or body is required in connection with
the execution and delivery of this Agreement, the issuance of the
Securities and the Foundation Shares and the consummation of the
Conversion, except as may be required under the securities or
Blue Sky laws of various jurisdictions, as to which no opinion
need be rendered.
(xvii) At the time the Registration Statement became
effective, the Registration Statement (other than the financial
statements and statistical data included therein, as to which no
opinion need be rendered) complied as to form in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations and the Conversion Regulations.
(xviii) The Common Stock conforms to the description thereof
contained in the Prospectus, and the form of certificate used to
evidence the Common Stock is in due and proper form and complies
with all applicable statutory requirements.
(xix) There are no legal or governmental proceedings pending
or, to the best of such counsel's knowledge, threatened against
or affecting the
<PAGE>
29
Company, the Bank, any of the Subsidiaries or the Foundation
which are required, individually or in the aggregate, to be
disclosed in the Registration Statement and the Prospectus, other
than those disclosed therein, and all pending legal or
governmental proceedings to which the Company, the Bank or any of
the Subsidiaries is a party or to which any of its property is
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business,
are, considered in the aggregate, not material.
(xx) The information in the Prospectus under "RISK FACTORS
--Risks Associated with the Establishment of the Charitable
Foundation Possible Nondeductibility of the Stock Contribution"
and "- Potential AntiTakeover Effect," and "-- Takeover Defensive
Provisions," "DIVIDENDS," "BUSINESS OF THE BANK -- Legal
Proceedings," "REGULATION," "TAXATION," "THE CONVERSION --
Effects of Conversion- Liquidation Rights" and "- Tax Aspects,"
"-- Establishment of The Hudson River Bank and Trust Company
Foundation," and "-- Certain Restrictions on Purchase or Transfer
of Shares After Conversion," "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY AND THE BANK," "DESCRIPTION OF CAPITAL STOCK OF
THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
BANK," 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 complete and
accurate in all material respects and to the extent it
constitutes summaries of written legal opinions rendered by a
person or entity other than such counsel, has been reviewed by
such counsel and is a complete and accurate summary of such
opinions in all material respects.
(xxi) To the best of such counsel's knowledge, there are no
contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed as
exhibits thereto, and the descriptions thereof or references
thereto are correct.
(xxii) The Plan has been duly authorized by the Board of
Directors of the Company and the Board of Trustees of the Bank
and the Superintendent's approval of and the FDIC's non-objection
to the Plan remain in full force and effect; the Bank's
organization certificate has been amended
<PAGE>
30
and restated, effective upon consummation of the Conversion and
the filing of such amended and restated organization certificate
with the Superintendent, to authorize the issuance of permanent
capital stock; to the best of such counsel's knowledge, the
Company and the Bank have conducted the Conversion and the
establishment and funding of the Foundation in all material
respects in accordance with applicable requirements of the
Conversion Regulations, the Plan and all other applicable
regulations, decisions and orders thereunder, including all
material applicable terms, conditions, requirements and
conditions precedent to the Conversion imposed upon the Company
or the Bank by the Superintendent, the FDIC or the OTS and no
order has been issued by the Superintendent, the FDIC or the OTS
to suspend the Conversion or the Offerings and no action for such
purpose has been instituted or, to the best of such counsel's
knowledge, threatened by the Superintendent, the FDIC or the OTS;
and, to the best of such counsel's knowledge, no person has
sought to obtain review of the final action of the Superintendent
in approving or the FDIC in not objecting to the Conversion
Application (which includes the Plan which provides for the
establishment of the Foundation) or of the OTS in approving the
Holding Company Application.
(xxiii) To the best of such counsel's knowledge, the
Company, the Bank and the Subsidiaries have obtained all
licenses, permits and other governmental authorizations currently
required for the conduct of their respective businesses as
described in the Registration Statement and the Prospectus, and
all such licenses, permits and other governmental authorizations
are in full force and effect, and the Company and the Bank and
the Subsidiaries are in all material respects complying
therewith.
(xxiv) Neither the Company, the Bank nor any of the
Subsidiaries is in violation of its certificate of incorporation,
organization certificate, articles of incorporation or charter,
as the case may be, or by-laws (and the Bank will not be in
violation of its organization certificate and by-laws in stock
form upon consummation of the Conversion); and to the best of
such counsel's knowledge, none of the Company, the Bank or any of
the Subsidiaries is in default (nor has any event occurred which,
with notice or lapse of time or both, would constitute a default)
in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which the Company, the Bank or any of the Subsidiaries is a party
or by which the
<PAGE>
31
Company, the Bank or any of the Subsidiaries or any of their
property may be bound.
(xxv) The Company is not required to be registered as an
investment company under the Investment Company Act of 1940.
(2) The favorable opinion, dated as of Closing Time, of Peabody &
Brown, counsel for the Agent, with respect to the matters set forth in
Section 5(b)(1)(i), (iv), (v), (vi) (solely as to preemptive rights
arising by operation of law), (xii), (xvi) and (xvii) and such other
matters as the Agent may reasonably require.
(3) In giving their opinions required by subsections (b)(l) and
(b)(2), respectively, of this Section, Silver, Freedman and Taff,
L.L.P., and Peabody & Brown shall each additionally state that nothing
has come to their attention that would lead them to believe that the
Registration Statement (except for financial statements and schedules
and other financial or statistical data included therein, as to which
counsel need make no statement), at the time it became effective,
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 not misleading or that the Prospectus (except for
financial statements and schedules and other financial or statistical
data included therein, as to which counsel need make no statement), at
the time the Registration Statement became effective or at Closing
Time, included an untrue statement of a material fact or omitted 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. In giving their opinions, Silver Freedman & Taff,
L.L.P., and Peabody & Brown may rely as to matters of fact on
certificates of officers, directors and trustees of the Company and
the Bank and certificates of public officials, and Peabody & Brown may
also rely on the opinion of Silver, Freedman & Taff, L.L.P.
(c) At Closing Time, the Company and the Bank shall have completed in
all material respects the conditions precedent to the Conversion in
accordance with the Plan, the applicable 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 Bank by the OTS, the Superintendent, the
FDIC or any other regulatory authority other than those which the OTS, the
Superintendent or the FDIC permit to be completed after the Conversion.
(d) At Closing Time, there shall not have been, since the date hereof
or since the
<PAGE>
32
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change in the financial
condition, results of operations or business affairs of the Company, the
Bank and the Subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business, and the Agent shall have
received a certificate of the President and Chief Executive Officer of the
Company and of the Bank and the Chief Financial Officer of the Company and
of the Bank, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) there has been no material
transaction entered into by the Company or the Bank from the latest date as
of which the financial condition of the Company or the Bank is set forth in
the Registration Statement and the Prospectus other than transactions
referred to or contemplated therein and transactions in the ordinary course
of business, (iii) neither the Company nor the Bank has received from the
OTS, the Superintendent or the FDIC any direction (oral or written) to make
any material change in the method of conducting its business with which it
has not complied (which direction, if any, shall have been disclosed to the
Agent) or which materially and adversely would affect the financial
condition, results of operations or business affairs of the Company, the
Bank and the Subsidiaries, considered as one enterprise, (iv) the
representations and warranties in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and as of the
Closing Time, (v) the Company and the Bank have complied with all
agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to Closing Time, (vi) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or threatened by the
Commission and (vii) no order suspending the Offerings or the authorization
for final use of the Prospectus has been issued and no proceedings for that
purpose have been initiated or threatened by the Superintendent or the FDIC
and no person has sought to obtain regulatory or judicial review of the
action of the Superintendent in approving the Plan in accordance with the
Conversion Regulations, nor has any person sought to obtain regulatory or
judicial review of the action of the OTS in approving the Holding Company
Application.
(e) At the time of the execution of this Agreement, the Agent shall
have received from KPMG Peat Marwick LLP a letter dated such date, in form
and substance satisfactory to the Agent, to the effect that (i) they are
independent public accountants with respect to the Company, the Bank and
the Subsidiaries within the meaning of the Code of Ethics of the American
Institute of Certified Public Accountants, the Securities Act and the
Securities Act Regulations and the Conversion Regulations; (ii) it is their
opinion that the consolidated financial statements and supporting schedules
included in the Registration Statement and covered by their opinions
therein comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, the Securities Act
Regulations and the Conversion Regulations; (iii) based upon limited
procedures as agreed upon by the Agent and KPMG Peat Marwick LLP set forth
in detail in such letter, nothing has come to their
<PAGE>
33
attention which causes them to believe that (A) the unaudited financial
statements and supporting schedules of the Bank and the Subsidiaries
included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act, the Securities Act Regulations and the Conversion
Regulations or are not presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financial statements included in the Registration Statement
and the Prospectus, (B) the unaudited amounts set forth under "SELECTED
CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK" in the Registration
Statement and the Prospectus do not agree with the amounts set forth in
unaudited consolidated financial statements as of and for the dates and
periods presented under such caption or such unaudited amounts were not
determined on a basis substantially consistent with that used in
determining the corresponding amounts in the audited financial statements
included in the Registration Statement and the Prospectus, (C) at a
specified date not more than five days prior to the date of this Agreement,
there has been any increase in the consolidated long term or short term
debt of the Bank and the Subsidiaries or any decrease in consolidated total
assets, the allowance for loan losses, total deposits or net worth of the
Bank and the Subsidiaries, in each case as compared with the amounts shown
in the December 31, 1997 balance sheet included in the Registration
Statement or (D) during the period from December 31, 1997 to a specified
date not more than five days prior to the date of this Agreement, there
were any decreases, as compared with the corresponding period in the
preceding year, in total interest income, net interest income, net interest
income after provision for loan losses, income before income tax expense or
net income of the Bank and the Subsidiaries, except in all instances for
increases or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur; and (iv) in addition to the
examination referred to in their opinions and the limited procedures
referred to in clause (iii) above, they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information which are included in the
Registration Statement and the Prospectus and which are specified by the
Agent, and have found such amounts, percentages and financial information
to be in agreement with the relevant accounting, financial and other
records of the Company, the Bank and the Subsidiaries identified in such
letter.
(f) At Closing Time, the Agent shall have received from KPMG Peat
Marwick LLP a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection
(d) of this Section, except that the specified date referred to shall be a
date not more than five days prior to Closing Time.
(g) At Closing Time, the Securities shall have been approved for
listing on the Nasdaq National Market upon notice of issuance.
<PAGE>
34
(h) At Closing Time, the Agent shall have received a letter from RP
Financial, L.C., dated as of the Closing Time, confirming its appraisal.
(i) At Closing Time, counsel for the Agent shall have been furnished
with such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the
Agent and counsel for the Agent.
(j) At any time prior to Closing Time, (i) there shall not have
occurred any material adverse change in the financial markets in the United
States or elsewhere or any outbreak of hostilities or escalation thereof or
other calamity or crisis the effect of which it, in the judgment of the
Agent, are so material and adverse as to make it impracticable to market
the Securities or to enforce contracts, including subscriptions or orders,
for the sale of the Securities, and (ii) trading generally on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
shall not have been suspended, and minimum or maximum prices for trading
shall not have been fixed, or maximum ranges for prices for securities have
been required, by either of such Exchanges or the Nasdaq Stock Market or by
order of the Commission or any other governmental authority, and a banking
moratorium shall not have been declared by either federal or New York
authorities.
SECTION 6. INDEMNIFICATION.
(a) The Company and the Bank, jointly and severally, agree to
indemnify and hold harmless the Agent, each person, if any, who controls
the Agent within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, and their respective partners, directors, officers,
employees, agents and counsel as follows:
(i) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, related to or arising out of the
Conversion (including the establishment of the Foundation and the
contribution of the Foundation Shares thereto by the Company) or any
action taken by the Agent where acting as agent of the Company or the
Bank or otherwise as described in Section 2 hereof;
(ii) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, based upon or arising out of any
untrue statement or alleged untrue
<PAGE>
35
statement of a material fact contained in the Registration Statement
(or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (or any amendment or supplement thereto)
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(iii) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever described in clauses (i) or
(ii) above, if such settlement is effected with the written consent of
the Company or the Bank, which consent shall not be unreasonably
withheld; and
(iv) from and against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements
of counsel chosen by the Agent), reasonably incurred in investigating,
preparing for or defending against any litigation, or any
investigation, proceeding or inquiry by any governmental agency or
body, commenced or threatened, or any claim whatsoever described in
clauses (i) or (ii) above, to the extent that any such expense is not
paid under (i), (ii) or (iii) above;
provided, however, that the indemnification provided for in this paragraph
(a) shall not apply to any loss, liability, claim, damage or expense (i) to
the extent arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
which was made in reliance upon and in conformity with the Agent
Information or (ii) found in a final judgment by a court of competent
jurisdiction to have resulted primarily from the bad faith, willful
misconduct or gross negligence of the person seeking indemnification
hereunder. Notwithstanding the foregoing, the indemnification provided for
in this paragraph (a) shall not apply to the Bank to the extent that such
indemnification by the Bank is found in a final judgment by a court of
competent jurisdiction to constitute a covered transaction under Section
23A of the Federal Reserve Act.
(b) The Agent agrees to indemnify and hold harmless the Company, the
Bank, their directors and trustees, each of their officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in the
<PAGE>
36
indemnity contained in paragraph (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue
statements or omissions, of a material fact made in the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
the Agent Information.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to no
more than one local counsel in each separate jurisdiction in which any
action or proceeding is commenced) separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
(d) The Company and the Bank also agree that the Agent shall not have
any liability (whether direct or indirect, in contract or tort or
otherwise) to the Bank, the Company, its security holders or the Bank's or
the Company's creditors relating to or arising out of the engagement of the
Agent pursuant to, or the performance by the Agent of the services
contemplated by, this Agreement, except to the extent that any loss, claim,
damage or liability is found in a final judgment by a court of competent
jurisdiction to have resulted primarily from the Agent's bad faith, willful
misconduct or gross negligence.
(e) In addition to, and without limiting, the provisions of Section
(6)(a)(iv) hereof, in the event that any Agent, any person, if any, who
controls the Agent within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or any of their respective partners,
directors, officers, employees or agents is requested or required to appear
as a witness or otherwise gives testimony in any action, proceeding,
investigation or inquiry brought by or on behalf of or against the Company,
the Bank, the Agent or any of their respective affiliates or any
participant in the transactions contemplated hereby in which the Agent or
such person or agent is not named as a defendant, the Company and the Bank
jointly and severally agree to reimburse the Agent for all reasonable and
necessary out-of-pocket expenses incurred by it in connection with
preparing or appearing as a witness or otherwise giving testimony and to
compensate the Agent in an amount to be mutually agreed upon.
<PAGE>
37
SECTION 7. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances in
which the indemnity agreement provided for in Section 6 hereof is for any reason
held to be unenforceable by the indemnified parties although applicable in
accordance with its terms, the Company, the Bank and the Agent shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the Company or the Bank and
the Agent, as incurred, in such proportions (i) that the Agent is responsible
for that portion represented by the percentage that the maximum aggregate
marketing fees appearing on the cover page of the Prospectus bears to the
maximum aggregate gross proceeds appearing thereon and the Company and the Bank
are jointly and severally responsible for the balance or (ii) if, but only if,
the allocation provided for in clause (i) is for any reason held unenforceable,
in such proportion as is appropriate to reflect not only the relative benefits
to the Company and the Bank on the one hand and the Agent on the other, as
reflected in clause (i), but also the relative fault of the Company and the Bank
on the one hand and the Agent on the other, as well as any other relevant
equitable considerations; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section, each person, if any,
who controls the Agent within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Agent, and each director of the Company, each trustee of the Bank, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company or the Bank within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company and the Bank. Notwithstanding anything to the
contrary set forth herein, to the extent permitted by applicable law, in no
event shall the Agent be required to contribute an aggregate amount in excess of
the aggregate marketing fees to which the Agent is entitled and actually paid
pursuant to this Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement,
or contained in certificates of officers of the Company or the Bank submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Agent or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Securities.
<PAGE>
38
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Agent may terminate this Agreement, by notice to the Company,
at any time at or prior to Closing Time (i) if there has been, since the
date of this Agreement or since the respective dates as of which
information is given in the Registration Statement, any material adverse
change in the financial condition, results of operations or business
affairs of the Company or the Bank, or the Company, the Bank and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or elsewhere
or any outbreak of hostilities or escalation thereof or other calamity or
crisis the effect of which it, in the judgment of the Agent, are so
material and adverse as to make it impracticable to market the Securities
or to enforce contracts, including subscriptions or orders, for the sale of
the Securities, (iii) or if trading generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq Stock Market has been
suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of
such Exchanges or the Nasdaq Stock Market or by order of the Commission or
any other governmental authority, or if a banking moratorium has been
declared by either federal or New York authorities, (iv) if any condition
specified in Section 5 has not been fulfilled when and as required to be
fulfilled; (v) if there has been such material adverse change in the
condition or prospects of the Company or the Bank or the prospective market
for the Company's securities as in the Agent's good faith opinion would
make it inadvisable to proceed with the offering, sale or delivery of the
Securities; (vi) if in the Agent's good faith opinion, the price for the
Securities established by RP Financial L.C. is not reasonable or equitable
under then prevailing market conditions, or (vii) if the Conversion is not
consummated on or prior to ____________________.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party
except as provided in Section 4 hereof relating to the reimbursement of
expenses and except that the provisions of Sections 6 and 7 hereof shall
survive any termination of this Agreement.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Agent shall be directed to the Agent
at Two World Trade Center, 104th Floor, New York, New York 10048, attention of
Catherine A. Lawton, Principal, with a copy to Kevin J. Handly, Esq., Peabody &
Brown, 101 Federal Street, Boston, Massachusetts 02110-1832; notices to the
Company and the Bank shall be directed to either of them at 1 Hudson City
Center, Hudson, New
<PAGE>
39 York 12534, attention of Carl A. Florio, President and Chief Executive
Officer, with a copy to _____________________, Silver, Freedman & Taff, L.L.P.,
Suite 700, East Tower, 1100 New York Avenue, N.W., Washington, DC 20005.
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the Agent,
the Company and the Bank and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Agent, the Company and the Bank and
their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein or therein contained. This
Agreement and all conditions and provisions hereof and thereof are intended to
be for the sole and exclusive benefit of the Agent, the Company and the Bank and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation.
<PAGE>
40
SECTION 12. ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made, except for the engagement
letter dated January 14, 1998, by and between the Agent and the Bank, relating
to the Agent's providing conversion agent services to the Company and the Bank
in connection with the Conversion. No waiver, amendment or other modification of
this Agreement shall be effective unless in writing and signed by the parties
hereto.
SECTION 13. GOVERNING LAW AND TIME.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in said State without regard to the conflicts of laws provisions thereof. Unless
otherwise noted, specified times of day refer to Eastern time.
SECTION 14. SEVERABILITY.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
SECTION 15. HEADINGS.
Sections headings are not to be considered part of this Agreement, are for
convenience and reference only, and are not to be deemed to be full or accurate
descriptions of the contents of any paragraph or subparagraph.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent, the Company and the Bank in accordance with its terms.
Very truly yours,
HUDSON RIVER BANCORP, INC.
By: ____________________________________________
Carl A. Florio
Title: President and Chief Executive Officer
THE HUDSON RIVER SAVINGS INSTITUTION
By: ____________________________________________
Carl A. Florio
Title: President and Chief Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
SANDLER O'NEILL & PARTNERS, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
By: ______________________________
Catherine A. Lawton
Title:
<PAGE>
Exhibit A
---------
[17,333,738] Shares
(Maximum Offered in Conversion)
Common Stock
(Par Value $0.01 Per Share)
SELECTED DEALER'S AGREEMENT
_______________, 1998
We have agreed to assist Hudson River Bancorp, Inc. (the "Company"), in
connection with the offer and sale of shares (the "Shares") of Common Stock, par
value $0.01 per share, of the Company, to be issued in connection with the
conversion of The Hudson River Savings Institution, a New York State-chartered
savings bank (the "Bank"), from mutual to stock form. The Company, in connection
with its plan to effect such conversion, offered [17,333,738] Shares for
subscription by certain of the Bank's depositors and the Bank's employee stock
ownership plan in a subscription offering and to selected persons in a community
offering. The Shares which were not subscribed for pursuant to such subscription
and direct community offerings are being offered to certain members of the
general public in a syndicated community offering (the "Syndicated Community
Offering") in accordance with the rules of the New York State Banking Department
(the "NYBD") and the conversion regulations of the Federal Deposit Insurance
Corporation (the "FDIC"). The Shares, the bases on which the number of Shares to
be issued may change, and certain of the terms on which they are being offered
are more fully described in the enclosed Prospectus (the "Prospectus").
We are offering to Selected Dealers (of which you are one) the opportunity
to participate in the solicitation of offers to buy the Shares in the Syndicated
Community Offering, and we will pay you a fee in the amount of ______________
percent (_________) of the dollar amount of the Shares sold on behalf of the
Company by you. The number of Shares sold by you shall be determined based on
the authorized designation of your firm on the order form or forms for such
Shares accompanying the funds transmitted for payment therefor (whether in the
form of a check payable to the Bank or a withdrawal from an existing account at
the Bank) to the special account established by the Company for the purpose of
holding such funds. It is understood, of course, that payment of your fee will
be made only out of compensation received by us for the Shares sold on behalf of
the Company by you, as evidenced in accordance with the preceding sentence. The
Bank has requested us to invite you to become a "Sponsoring Dealer," that is, a
Selected Dealer who solicits offers which result in the sale on behalf of the
Bank of at least ___________ Shares. You may become a Sponsoring Dealer (subject
to your fulfillment of the requirement in the preceding sentence) by checking
the box on the confirmation at the end of this letter. If you become a
Sponsoring Dealer, you shall be entitled to an additional fee in the amount of
_______ percent (_______%) of the dollar amount of the Shares sold on behalf of
the Company by you as evidenced in the manner set forth above.
<PAGE>
2
Each order form for the purchase of Shares must set forth identity, address
and tax identification number of each person ordering Shares, regardless of
whether the Shares will be registered in street name or in the purchaser's name.
Such order form should clearly identify your firm.
As soon as practicable after all the Shares are sold, we will remit to you,
out of your compensation as provided above, the fees to which you are entitled
hereunder, including your Sponsoring Dealer fee.
This offer is made subject to the terms and conditions herein set forth and
is made only to Selected Dealers which are (i) members in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") which agree to
comply with all applicable rules of the NASD, including, without limitation, the
NASD's Interpretation With Respect to Free-Riding and Withholding and Rule 2740
of the NASD's Conduct Rules, or (ii) foreign dealers not eligible for membership
in the NASD which agree (A) not to sell any Shares within the United States, its
territories or possessions or to persons who are citizens thereof or resident
therein and (B) in making other sales to comply with the above-mentioned NASD
Interpretation, Rules 2730, 2740 and 2750 of the above-mentioned Conduct Rules
as if they were NASD members and Rule 2420 of such Conduct Rules as it applies
to non-member brokers or dealers in a foreign country.
Orders for Shares will be strictly subject to confirmation and we, acting
on behalf of the Company, reserve the right in our absolute discretion to reject
any order in whole or in part, to accept or reject orders in the order of their
receipt or otherwise, and to allot. Neither you nor any other person is
authorized by the Company, the Bank or by us to give any information or make any
representations other than those contained in the Prospectus in connection with
the sale of any of the Shares. No Selected Dealer is authorized to act as agent
for us when soliciting offers to buy the Shares from the public or otherwise. No
Selected Dealer shall engage in any transaction prohibited by Regulation M
promulgated under the Securities Exchange Act of 1934 with respect to the
Company's Common Stock during the offering.
We and each Selected Dealer assisting in selling Shares pursuant hereto
agree to comply with the applicable requirements of the Securities Exchange Act
of 1934 and applicable rules and regulations issued by the Federal Reserve Board
and the Office of Thrift Supervision. In addition, we and each Selected Dealer
confirm that the Securities and Exchange Commission interprets Rule 15c2-8
promulgated under the Securities Exchange Act of 1934 as requiring that a
prospectus be supplied to each person who is expected to receive a confirmation
of sale 48 hours prior to delivery of such person's order form.
We and each Selected Dealer further agree to the extent that our customers
desire to pay for Shares with funds held by or to be deposited with us, in
accordance with the interpretation of the Securities and Exchange Commission of
Rule 15c2-4 promulgated under the Securities Exchange Act of 1934, either (a)
upon receipt of an executed order form or direction to execute an order form on
behalf of a customer to forward the syndicated community offering price for the
Shares ordered on or before 12:00 noon on the business day following receipt or
execution of an order form by us to the Bank for deposit in a segregated account
or (b) to solicit indications of interest, in which event (i) we will
subsequently contact any customers indicating interest to confirm the interest
and give instructions to execute and return an order form or to receive
authorization to execute an order form on their behalf, (ii) we will mail
<PAGE>
3
acknowledgments of receipt of orders to each customer confirming interest on the
business day following such confirmation, (iii) we will debit accounts of such
customers on the fifth business day (the "debit date") following receipt of the
confirmation referred to in (i), and (iv) we will forward completed order forms
together with such funds to the Bank on or before 12:00 noon on the next
business day following the debit date for deposit in a segregated account. We
acknowledge that if the procedure in (b) is adopted, our customer's funds are
not required to be in their accounts until the debit date. We and each Selected
Dealer further acknowledge that, in order to use the foregoing "sweep
arrangements," we comply with the net capital requirements for broker/dealers
under Rule 15c3-1(a)(1) of the Securities Exchange Act of 1934.
Unless earlier terminated by us, this Agreement shall terminate 45 full
business days after the date hereof, but may be extended by us for an additional
period or periods not exceeding 30 full business days in the aggregate. We may
terminate this Agreement or any provisions hereof at any time by written or
telegraphic notice to you. Of course, our obligations hereunder are subject to
the successful completion of the offering, including the sale of all of the
Shares.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of Shares sold on
behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect to all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective blue sky laws of such states, but we assume no
responsibility or obligation as to your rights to sell Shares in any state.
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of New York.
Please confirm your agreement hereto by signing and returning the
confirmation accompanying this letter at once to us at Sandler O'Neill &
Partners, L.P., Two World Trade Center, 104th Floor, New York, New York 10048.
The enclosed duplicate copy will evidence the agreement between us.
Very truly yours,
SANDLER O'NEILL & PARTNERS, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
By: _______________________________
CONFIRMED AND ACCEPTED
as of the date first above written:
___________________________________
By: _______________________________
Exhibit 2
The Hudson City Savings Institution
Hudson, New York
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On November 20, 1997, the Board of Trustees of The Hudson City Savings
Institution (the "Bank") unanimously adopted a Plan of Conversion whereby the
Bank would convert from a New York chartered mutual savings institution to a New
York chartered stock savings institution to be known as the Hudson River Bank
and Trust Company or such other name as may be selected by the Board of
Trustees. The Plan of Conversion was amended by the Board of Trustees on
February 19, 1998 and April 16, 1998. The Bank was chartered by the State of New
York by an act of the State legislature on April 4, 1850, such Act having been
amended and supplemented from time to time thereafter. The principal office of
the Bank is located at One Hudson City Centre, in the city of Hudson, county of
Columbia, New York. The Plan includes, as part of the conversion, the concurrent
formation of a holding company, to be named in the future. The Plan provides
that non-transferable subscription rights to purchase Holding Company Conversion
Stock will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Holding Company and the Bank's
Tax-Qualified Employee Plans and then to Supplemental Eligible Account Holders
of record as of the Supplemental Eligibility Record Date. Concurrently with, at
any time during, or promptly after the Subscription Offering, and on a lowest
priority basis, an opportunity to subscribe may also be offered to the general
public in a Community Offering and/or a Public Offering. The price of the
Holding Company Conversion Stock will be based upon an independent appraisal of
the Bank and will reflect its estimated pro forma market value, as converted. It
is the desire of the Board of Trustees of the Bank to attract new capital to the
Bank in order to increase its capital, support future savings growth and
increase the amount of funds available for residential and other mortgage
lending. The Converted Bank is also expected to benefit from its management and
other personnel having a stock ownership in its business, since stock ownership
is viewed as an effective performance incentive and a means of attracting,
retaining and compensating management and other personnel. No change will be
made in the Board of Trustees or management as a result of the Conversion.
In furtherance of the Bank's long term commitment to its community, the
Plan provides that, in connection with the Conversion, the Holding Company will
make a donation of an undetermined amount of its stock to a foundation ("The
Foundation"), the name of which will be determined, established by the Holding
Company.
This Plan has been unanimously approved by the Board of Trustees of the
Bank, based upon its determination that the Conversion is in the best interests
of the Bank, its depositors and the communities served by the Bank. This Plan
sets forth the terms and conditions of the Conversion, and the procedures for
effecting the same. This Plan must be approved by the Superintendent or his or
her designees, must not be objected to by the FDIC and certain waivers must be
granted by the Superintendent. This Plan must also be approved by the
affirmative vote of at least seventy-five percent (75%) in amount of deposit
liabilities of Voting Depositors represented in person or by proxy at the
Special Meeting, and the affirmative vote of at least a majority of the amount
of votes eligible to be cast at the Special Meeting.
P-1
<PAGE>
Upon the Conversion, each Person having a Deposit Account at the Bank
prior to the Conversion will continue to have a Deposit Account, without payment
therefor, in the same amount and subject to the same terms and conditions
(except for voting and liquidation rights) as in effect prior to the Conversion.
After the Conversion, the Bank will succeed to all the rights, interests, duties
and obligations of the Bank before the Conversion, including, but not limited
to, all rights and interests of the Bank in and to its assets and properties,
whether real, personal or mixed. The Bank will continue to be a member of the
Federal Home Loan Bank System. All of the Bank=s insured Deposit Accounts will
continue to be insured by the Bank Insurance Fund of the FDIC to the extent
provided by applicable law.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in '574.2(c) of the Rules and Regulations of the OTS.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Bank or a majority-owned subsidiary of the Holding Company)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, 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 Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified Employee
Plan shall not be deemed to be an associate of any director or officer of the
Holding Company or the Bank, to the extent provided in Section V hereof.
Bank: The Hudson City Savings Institution or such other name as the
institution may adopt.
Banking Board: The Banking Board of the State of New York.
BIF: Bank Insurance Fund.
Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Conversion: Change of the Bank's mutual charter and bylaws to stock
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of Converted Bank Common
Stock to the Holding Company, all as provided for in the Plan.
Converted Bank: The stock savings institution resulting from the
Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Bank including Savings Accounts and demand accounts.
P-2
<PAGE>
Depositor: Any person or entity that qualifies as a depositor of the
Bank pursuant to its Charter and bylaws.
Eligibility Record Date: The close of business on September 30, 1996.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holding Company: A corporation which upon completion of the Conversion
will own all of the outstanding common stock of the Converted Bank, and the name
of which will be selected in the future.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
Local Community: The geographic area encompassing counties in which the
Bank has offices.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
OTS: Office of Thrift Supervision, Department of the Treasury, and its
successors.
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
P-3
<PAGE>
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
approved as provided in this Plan.
Public Offering: The offering for sale through the Underwriters to
selected depositors or the general public of any shares of Holding Company
Conversion Stock not subscribed for in the Subscription Offering or the
Community Offering, if any.
Public Offering Price: The price per share at which any unsubscribed
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
Qualifying Deposit: The aggregate balance of $100 or more of each
Deposit Account of an Eligible Account Holder as of the Eligibility Record Date
or of a Supplemental Eligible Account Holder as of the Supplemental Eligibility
Record Date.
Regulatory Authorities: The FDIC, the FRB, the Superintendent and the
OTS.
Savings Account: The term ASavings Account@ means any withdrawable
account in the Bank except a demand account.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Depositors called for the
purpose of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders to subscribe for shares of Holding Company
Conversion Stock in the Subscription Offering.
Superintendent: Superintendent of Banks of the State of New York.
Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the FDIC.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
P-4
<PAGE>
Underwriters: The investment banking firm or firms agreeing to offer
and sell Holding Company Conversion Stock in the Public Offering.
Voting Depositor: Any person holding a Qualifying Deposit at the close
of business on March 31, 1998 for purposes of determing those Persons entitled
to vote on the Plan of Conversion at the Special Meeting.
Voting Record Date: The date set by the Board of Trustees for
determining Depositors eligible to vote at the Special Meeting is March 31,
1998.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE DEPOSITORS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Depositors for
approval, the Bank must receive from the appropriate Regulatory Authorities
prior written approval of the Application for Approval of Conversion to convert
to the stock form of organization. The following steps must be taken prior to
such regulatory approval:
A. The Board of Trustees shall adopt the Plan by not less than a two-thirds
vote.
B. The Bank shall notify its Depositors of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in each
community in which the Bank maintains an office.
C. Copies of the Plan adopted by the Board of Trustees shall be made available
for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of Conversion to
be prepared and filed with the Superintendent for his/her approval, and for
the granting of any waivers, if necessary, and with the FDIC (in the form
of a notice for their non-objection). Additionally, a Holding Company
Application will be prepared and filed with the OTS for its approval and a
Registration Statement on Form S-1 will be prepared and filed with the SEC.
Following (i) approval of the Bank's Application for Conversion by the
Superintendent, (ii) the non-objection of the FDIC and (iii) the receipt of all
necessary waivers from the Superintendent, the Bank shall submit the Plan to the
Bank's Voting Depositors for approval at the Special Meeting. The Bank shall
mail to each Voting Depositor, at his or her last known address appearing on the
records of the Bank, a copy of the Plan and the proposed Restated Organization
Certificate of the Bank and proposed By-Laws of the Bank, a Notice of Special
Meeting, Proxy Card and Subscription Order form and a long-form Proxy Statement
(which contains a detailed description of the Conversion and contains offering
material relating to the Subscription Offering) in the forms required by the
Conversion Regulations, describing the Plan and certain other matters relating
to the Bank and its Conversion. Separate and readily distinguishable
postage-paid envelopes shall be provided for the return of Proxy Cards and
Subscription Order Forms.
The Special Meeting shall be held upon written notice given no less than 20
days nor more than 45 days prior to the date of the Special Meeting. At the
Special Meeting, each Voting Depositor shall be entitled to cast one vote in
person or by proxy for every one hundred dollars ($100.00) such Voting Depositor
had on deposit with the Bank as of the Voting Record Date; provided, however,
that no Voting Depositor shall be eligible to cast more than one thousand
(1,000) votes. The Board of Trustees shall appoint an
P-5
<PAGE>
independent custodian and tabulator to receive and hold proxies to be voted at
the Special Meeting and count the votes cast in favor of and in opposition to
the Plan.
The Superintendent shall be notified of the results of the Special Meeting
by a certificate signed by the President and Secretary of the Bank within five
days after the conclusion of the Special Meeting. The Plan must be approved by
the affirmative vote of (i) at least seventy-five percent (75%) in amount of
deposit liabilities of the Voting Depositors represented in person or by proxy
at the Special Meeting and (ii) at least a majority of the amount of votes
entitled to be cast at the Special Meeting. If the Plan is so approved, the Bank
will take all other necessary steps to effect the Conversion subject to the
terms and conditions of the Plan. If the Plan is not so approved, upon
conclusion of the Special Meeting and any adjournment or postponement thereof,
the Plan shall not be implemented without further vote and all funds submitted
in the Subscription Offering and Community Offering will be returned to
subscribers, with interest as provided herein, and all withdrawal authorizations
will be canceled.
IV. CONVERSION PROCEDURE
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Subscription Price to Eligible Account Holders,
Tax-Qualified Employee Plans and Supplemental Eligible Account Holders prior to
or within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Community Offering and/or a Public
Offering; provided that the Bank's Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account Holders shall have the priority
rights to subscribe for Holding Company Conversion Stock set forth in Section V
of this Plan. However, the Holding Company and the Bank may delay commencing the
Subscription Offering beyond such 45-day period in the event there exist
unforeseen material adverse market or financial conditions. If the Subscription
Offering commences prior to the Special Meeting, subscriptions will be accepted
subject to the approval of the Plan at the Special Meeting. No offer for sale of
the Holding Company Conversion Stock will be made prior to the mailing of the
proxy statement for the Special Meeting.
The period for the Subscription Offering and Community Offering will be
not less than 20 days nor more than 45 days unless extended by the Bank. Upon
completion of the Subscription Offering and the Community Offering any
unsubscribed shares of Holding Company Conversion Stock may be sold through the
Underwriters to the general public in the Public Offering. If for any reason all
of the shares are not sold in the Subscription Offering, the Community Offering
and the Public Offering, if any, the Holding Company and the Bank will use their
best efforts to obtain other purchasers, subject to the prior written approval
of the appropriate Regulatory Authorities. Completion of the sale of all shares
of Holding Company Conversion Stock not sold in the Subscription Offering is
required within 45 days after termination of the Subscription Offering, subject
to extension of such 45-day period by the Holding Company and the Bank with the
prior written approval of the appropriate Regulatory Authorities. The Holding
Company and the Bank may jointly seek one or more extensions of such 45-day
period if necessary to complete the sale of all shares of Holding Company
Conversion Stock. In connection with such extensions, subscribers and other
purchasers will be permitted to increase, decrease or rescind their
subscriptions or purchase orders to the extent required by the prior written
approval of the appropriate Regulatory Authorities in approving the extensions.
Completion of the sale of all shares of Holding Company Conversion Stock is
required within 24 months after the date of the Special Meeting.
P-6
<PAGE>
V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company Conversion Stock to be
issued in the Conversion will be determined jointly by the Board of
Directors of the Holding Company and the Board of Trustees of the Bank
prior to the commencement of the Subscription Offering, subject to
adjustment if necessitated by market or financial conditions prior to
consummation of the Conversion. The total number of shares of Holding
Company Conversion Stock shall also be subject to increase in connection
with any oversubscriptions in the Subscription Offering or Community
Offering.
The aggregate price for which all shares of Holding Company Conversion
Stock will be issued will be based on an independent appraisal of the
estimated total pro forma market value of the Holding Company and the
Converted Bank. Such appraisal shall be performed in accordance with the
guidelines of the appropriate Regulatory Authorities and will be updated as
appropriate under or required by applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of
the historical and pro forma operating results and net worth of the
Converted Bank and a comparison of the Holding Company, the Converted Bank
and the Conversion Stock with comparable thrift institutions and holding
companies and their respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Bank will jointly fix the Subscription Price.
If, following completion of the Subscription Offering and Community
Offering, a Public Offering is effected, the Actual Subscription Price for
each share of Holding Company Conversion Stock will be the same as the
Public Offering Price at which unsubscribed shares of Holding Company
Conversion Stock are initially offered for sale by the Underwriters in the
Public Offering.
If, upon completion of the Subscription Offering, Community Offering
and Public Offering, if any, all of the Holding Company Conversion Stock is
subscribed for or only a limited number of shares remain unsubscribed for,
subject to Part VII hereof, the Actual Subscription Price for each share of
Holding Company Conversion Stock will be determined by dividing the
estimated appraised aggregate pro forma market value of the Holding Company
and the Converted Bank, based on the independent appraisal as updated upon
completion of the Subscription Offering or other sale of all of the Holding
Company Conversion Stock, by the total number of shares of Holding Company
Conversion Stock to be issued by the Holding Company upon Conversion. Such
appraisal will then be expressed in terms of a specific aggregate dollar
amount rather than as a range. However, such shares must be sold at a
uniform price pursuant to ss563(b)7 of the Rules and Regulations of the
OTS.
B. Subscription Rights
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified
P-7
<PAGE>
Employee Plans and Supplemental Eligible Account Holders of the Bank as set
forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company
Conversion Stock in an amount equal to the greater of $250,000, or
one-tenth of one percent (.10%) of the total offering of shares, 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 Eligible Account Holder and the denominator is the
total amount of qualifying deposits of all Eligible Account Holders in
the converting Bank in each case on the Eligibility Record Date.
If sufficient shares are not available, 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.
Non-transferable Subscription Rights to purchase Holding Company
Conversion Stock received by Trustees and Officers of the Bank and
their Associates, based on their increased deposits in the Bank in the
one-year period preceding the Eligibility Record Date, shall be
subordinated to all other subscriptions involving the exercise of
non-transferable Subscription Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the
shares of Holding Company Conversion Stock, provided that singly or in
the aggregate such plans (other than that portion of such plans which
is self-directed) shall not purchase more than 10% of the shares of
the Holding Company Conversion Stock. 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.
3. Preference Category No. 3: Supplemental Eligible Account Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of
Holding Company Conversion Stock in an amount equal to the greater of
$250,000, or one-tenth of one percent (.10%) of the total offering of
shares, 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 qualifying deposits of all
Supplemental Eligible Account Holders in the converting Bank in each
case on the Supplemental Eligibility Record Date.
P-8
<PAGE>
Subscription Rights received pursuant to this category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1
and 2 above.
Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with Category No.
1 shall reduce to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
In the event of an oversubscription for shares under the
provisions of this subparagraph, 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.
P-9
<PAGE>
C. Community Offering and Public Offering
1. Any shares of Holding Company Conversion Stock not subscribed for
in the Subscription Offering will be offered for sale in a Community
Offering. This will involve an offering of all unsubscribed shares directly
to the general public with a preference to those natural persons residing
in the Local Community. The Community Offering, if any, shall be for a
period of not less than 20 days nor more than 45 days unless extended by
the Holding Company and the Bank, and shall commence concurrently with,
during or promptly after the Subscription Offering. The purchase price per
share to the general public in a Community Offering shall be the same as
the Actual Subscription Price. The Holding Company and the Bank shall use
an investment banking firm or firms on a best efforts basis to sell the
unsubscribed shares in the Subscription and Community Offering. The Holding
Company and the Bank shall pay a commission or other fee to such investment
banking firm or firms as to the shares sold by such firm or firms in the
Subscription and Community Offering and may also reimburse such firm or
firms for expenses incurred in connection with the sale. The Holding
Company Conversion Stock will be offered and sold in the Community
Offering, if any, in accordance with the regulations of the appropriate
Regulatory Authorities, so as to achieve the widest distribution of the
Holding Company Conversion Stock. No person, by himself or herself, or with
an Associate or group of Persons acting in concert, may subscribe for or
purchase more than $250,000 of Holding Company Conversion Stock in the
Community Offering, if any. Further, the Bank may limit total subscriptions
under this Section V.C.1 so as to assure that the number of shares
available for the Public Offering may be up to a specified percentage of
the number of shares of Holding Company Conversion Stock. Finally, the Bank
may reserve shares offered in the Community Offering for sales to
institutional investors.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain available)
to cover the orders of any person subscribing for shares in the Community
Offering so that each such person may receive 2% of the shares offered in
the Conversion, and thereafter, on a pro rata basis to such persons based
on the amount of their respective subscriptions.
The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this
Section V.C. Further, the Bank and the Holding Company may, at their sole
discretion, elect to forego a Community Offering and instead effect a
Public Offering as described below.
2. Any shares of Holding Company Conversion Stock not sold in the
Subscription Offering or in the Community Offering, if any, may then be
sold at a uniform price through the Underwriters to selected Depositors or
the general public in the Public Offering. It is expected that the Public
Offering will commence as soon as practicable after termination of the
Subscription
P-10
<PAGE>
Offering and the Community Offering, if any. The Bank and the Holding
Company, in their sole discretion, may reject any subscription, in whole or
in part, received in the Public Offering. The Public Offering shall be
completed within 45 days after the termination of the Subscription
Offering, unless such period is extended as provided in Section IV hereof.
No person, by himself or herself, or with an Associate or group of Persons
acting in concert, may purchase more than $250,000 in the Public Offering,
if any.
3. If for any reason any shares remain unsold after the Subscription
Offering, the Community Offering and the Public Offering, if any, the Board
of Directors of the Holding Company and the Board of Trustees of the Bank
will seek to make other arrangements for the sale of the remaining shares.
Such other arrangements will be subject to the prior written approval of
the appropriate Regulatory Authorities and to compliance with applicable
securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding Company
Conversion Stock
The following additional limitations shall be imposed on all purchases
of Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or group of
Persons acting in concert, may subscribe for or purchase in the Conversion
a number of shares of Holding Company Conversion Stock which exceeds an
amount of shares equal to 1% of the total offering of shares sold in the
Conversion. For purposes of this paragraph, an Associate of a Person does
not include a Tax-Qualified 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.
2. Trustees and Officers and their Associates may not purchase in all
categories in the Conversion an aggregate of more than 25% of the Holding
Company Conversion Stock. For purposes of this paragraph, an Associate of a
Person does not include any Tax-Qualified Employee Plan. Moreover, any
shares attributable to the Officers and Trustees and their Associates, but
held by one or more Tax-Qualified Employee Plans shall not be included in
calculating the number of shares which may be purchased under the
limitation in this paragraph.
3. The minimum purchase amount of Holding Company Conversion Stock
that may be purchased by any Person in the Conversion is 25 shares.
4. The Board of Directors of the Holding Company and the Board of
Trustees of the Bank may, in their sole discretion, increase the maximum
purchase limitation referred to in subparagraph 1. herein up to 9.99%,
provided that orders for shares exceeding 5% of the shares being offered in
the Conversion shall not exceed, in the aggregate, 10% of the shares being
offered in the Conversion. Requests to purchase additional shares of
Holding Company Conversion Stock under this provision will be allocated by
the Board of Directors of the Holding Company and the Board of Trustees of
the Bank on a pro rata basis giving priority in accordance with the
priority rights set forth in this Section V.
P-11
<PAGE>
Depending upon market and financial conditions, the Board of Directors
of the Holding Company and the Board of Trustees of the Bank, with the prior
written approval of the appropriate Regulatory Authorities and without further
approval of the Depositors, may increase or decrease any of the above purchase
limitations. However, no increase in the purchase limitations shall occur
without the prior written approval of the appropriate Regulatory Authorties.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Holding Company Conversion Stock
Being Sold
1. Transferability. Holding Company Conversion Stock purchased by
Persons other than Trustees and Officers of the Holding Company or the Bank
will be transferable without restriction. Shares purchased by Trustees or
Officers shall not be sold or otherwise disposed of for value for a period
of one year from the date of Conversion, except for any disposition of such
shares (i) following the death of the original purchaser, or (ii) resulting
from an exchange of securities in a merger or acquisition approved by the
applicable regulatory authorities. Any transfers that could result in a
change of control of the Bank or the Holding Company or result in the
ownership by any Person or group acting in concert of more than 10% of any
class of the Bank's or the Holding Company's equity securities are subject
to the prior written approval of the OTS and the Superintendent.
The certificates representing shares of Holding Company Conversion
Stock issued to Trustees and Officers shall bear a legend giving
appropriate notice of the one-year holding period restriction. Appropriate
instructions shall be given to the transfer agent for such stock with
respect to the applicable restrictions relating to the transfer of
restricted stock. Any shares of common stock of the Holding Company
subsequently issued as a stock dividend, stock split, or otherwise, with
respect to any such restricted stock, shall be subject to the same holding
period restrictions for Holding Company or Bank Trustees and Officers as
may be then applicable to such restricted stock.
No Trustee or Officer of the Holding Company or of the Bank, or
Associate of such a Trustee or Officer, shall purchase any outstanding
shares of capital stock of the Holding Company for a period of three years
following the Conversion without the prior written approval of the
Superintendent and, as applicable, the FDIC, except through a broker or
dealer registered with the SEC.
P-12
<PAGE>
2. Repurchase and Dividend Rights. Except as permitted by applicable
regulations, for a period of three years following Conversion, the
Converted Bank shall not repurchase any shares of its capital stock, except
with the prior permission of the Superintendent.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its stock (i) if the
result thereof would be to reduce the regulatory capital of the Converted
Bank below the amount required for the liquidation account to be
established pursuant to Section XIII hereof, and (ii) except in compliance
with requirements of the Rules and Regulations of the appropriate
Regulatory Authorities.
The above limitations are subject to the Rules and Regulations of the
appropriate Regulatory Authorities which generally provide that the Holding
Company of the Converted Bank may repurchase its capital stock provided (i)
no repurchases occur within one year following conversion, (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 Bank's outstanding capital stock during a twelve-month
period without the prior written approval of the appropriate Regulatory
Authorities, (iii) the repurchases do not cause the Bank to become
undercapitalized. In addition, the above limitations shall not preclude
payments of dividends or repurchases of capital stock by the Converted Bank
in the event applicable federal regulatory limitations are liberalized or
waived subsequent to regulatory approval of the Plan.
3. Voting Rights. After Conversion, exclusive voting rights as to the
Bank will be vested in the Holding Company, as the sole stockholder of the
Bank. Voting rights as to the Holding Company will be held exclusively by
its stockholders. Presently all voting rights are vested in the Board of
Trustees.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account Holder,
Tax-Qualified Employee Plan and Supplemental Eligible Account Holder at
their last known address as shown on the records of the Bank. However, the
Bank may, and if the Subscription Offering commences after the Special
Meeting the Bank shall, furnish a subscription prospectus and Order Form
only to Eligible Account Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders who have returned to the Bank by a
specified date prior to the commencement of the Subscription Offering a
post card or other written communication requesting a subscription
prospectus and Order Form. In such event, the Bank shall provide a
postage-paid post card for this purpose and make appropriate disclosure in
its proxy statement for the solicitation of proxies to be voted at the
Special Meeting and/or letter sent in lieu of the proxy statement to those
Eligible Account Holders, Tax-Qualified Employee Plans or Supplemental
Eligible Account Holders who are not Depositors on the Voting Record Date.
P-13
<PAGE>
2. Each Order Form will be preceded or accompanied by a subscription
prospectus describing the Holding Company and the Converted Bank and the
shares of Holding Company Conversion Stock being offered for subscription
and containing all other information required by the appropriate Regulatory
Authorities or necessary to enable Persons to make informed investment
decisions regarding the purchase of Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
(i) A clear and intelligible explanation of the Subscription Rights
granted under the Plan to Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account Holders;
(ii) A specified expiration date by which Order Forms must be returned
to and actually received by the Bank or its representative for
purposes of exercising Subscription Rights, which date will be
not less than 20 days after the Order Forms are mailed by the
Bank;
(iii) The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum purchase amount for
Holding Company Conversion Stock that may be subscribed for under
the Plan;
(v) A specifically designated blank space for indicating the number
of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the Order
Form including a statement as to the available alternative
methods of payment for the shares being subscribed for;
(vii) Specifically designated blank spaces for dating and signing the
Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly complete
and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified
on the Order Form unless such expiration date is extended by the
Holding Company and the Bank, and that the Subscription Rights
may be exercised only by delivering the Order Form, properly
completed and executed, to the Bank or its representative by the
expiration date, together with required payment of the Maximum
Subscription Price for all shares of Holding Company Conversion
Stock subscribed for;
(x) A statement that the Subscription Rights are non-transferable and
that all shares of Holding Company Conversion Stock subscribed
P-14
<PAGE>
for upon exercise of Subscription Rights must be purchased on
behalf of the Person exercising the Subscription Rights for his
own account; and
(xi) A statement that, after receipt by the Bank or its
representative, a subscription may not be modified, withdrawn or
canceled without the consent of the Bank.
G. Method of Payment
Payment for all shares of Holding Company Conversion Stock subscribed
for, computed on the basis of the Maximum Subscription Price, must accompany all
completed Order Forms. Payment may be made in cash (if presented in Person), by
check, or, if the subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank to charge the
subscriber's account.
If a subscriber authorizes the Bank to charge his or her account, the
funds will continue to earn interest, but may not be used by the subscriber
until all Holding Company Conversion Stock has been sold or the Plan of
Conversion is terminated, whichever is earlier. The Bank will allow subscribers
to purchase shares by withdrawing funds from certificate accounts without the
assessment of early withdrawal penalties with the exception of prepaid interest
in the form of promotional gifts. In the case of early withdrawal of only a
portion of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the applicable
minimum balance requirement, in which event the remaining balance will earn
interest at the passbook rate. This waiver of the early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of Holding
Company Conversion Stock under the Plan of Conversion. Interest will also be
paid, at not less than the then-current passbook rate, on all orders paid in
cash, by check or money order, from the date payment is received until
consummation of the Conversion. Payments made in cash, by check or money order
will be placed by the Bank in an escrow or other account established
specifically for this purpose.
In the event of an unfilled amount of any subscription order, the
Converted Bank will make an appropriate refund or cancel an appropriate portion
of the related withdrawal authorization, after consummation of the Conversion,
including any difference between the Maximum Subscription Price and the Actual
Subscription Price (unless subscribers are afforded the right to apply such
difference to the purchase of additional whole shares). If for any reason the
Conversion is not consummated, purchasers will have refunded to them all
payments made and all withdrawal authorizations will be canceled in the case of
subscription payments authorized from accounts at the Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the Subscription Offering, such plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
may pay for such shares of Holding Company Conversion Stock subscribed for upon
consummation of the Conversion. In the event that, after the completion of the
Subscription Offering, the amount of shares to be issued is increased above the
maximum of the appraisal range included in the Prospectus, the Tax Qualified and
Non-Tax Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase in the amount of
shares to be issued above the maximum of the appraisal range provided that such
subscriptions shall continue to be subject to applicable purchase limits and
stock allocation procedures.
P-15
<PAGE>
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Holding Company and the Bank shall have
the absolute right, in their sole discretion, to reject any Order Form,
including but not limited to, any Order Forms which (i) are not delivered
or are returned by the United States Postal Service (or the addressee
cannot be located); (ii) are not received back by the Bank or its
representative, or are received after the termination date specified
thereon; (iii) are defectively completed or executed; (iv) are not
accompanied by the total required payment for the shares of Holding Company
Conversion Stock subscribed for (including cases in which the subscribers'
Deposit Accounts or certificate accounts are insufficient to cover the
authorized withdrawal for the required payment); or (v) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Bank believe to be false or who they otherwise
believe, either alone or acting in concert with others, is violating,
evading or circumventing, or intends to violate, evade or circumvent, the
terms and conditions of this Plan. In such event, the Subscription Rights
of the Person to whom such rights have been granted will not be honored and
will be treated as though such Person failed to return the completed Order
Form within the time period specified therein. The Bank may, but will not
be required to, waive any irregularity relating to any Order Form or
require submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Bank may specify. The
interpretation of the Holding Company and the Bank of the terms and
conditions of this Plan and of the proper completion of the Order Form will
be final, subject to the authority of the appropriate Regulatory
Authorities.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable efforts to
comply with the securities laws of all states in the United States in which
Persons entitled to subscribe for Holding Company Conversion Stock pursuant
to the Plan reside. However, the Bank and the Holding Company are not
required to offer stock in the Subscription Offering to any person who
resides in a foreign country.
VI. RESTATED ORGANIZATION CERTIFICATE AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate steps
to amend its organization certificate to read in the form of a stock
savings institution restated organization certificate as prescribed by the
Regulatory Authorities. The name of the Bank, as converted, will be "Hudson
River Bank & Trust Company." A copy of the proposed restated organization
certificate is available upon request. By their approval of the Plan, the
Depositors of the Bank will thereby approve and adopt such restated
organization certificate.
P-16
<PAGE>
B. The Bank will also take appropriate steps to amend its bylaws to
read in the form prescribed by the appropriate Regulatory Authorities for a
stock savings institution. A copy of the proposed stock bylaws is available
upon request.
C. The effective date of the adoption of the Bank's restated
organization certificate and bylaws shall be the date of the issuance and
sale of the Holding Company Conversion Stock as specified by the
appropriate Regulatory Authorities.
VII. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION
As part of the Conversion, and notwithstanding any other statement
herein to the contrary, the Holding Company intends to issue an amount equal to
no more than 8% of the shares of its Common Stock from its authorized but
unissued shares to The Foundation, a charitable organization created under
Section 501(c)(3) of the Internal Revenue Code. Such issuance (the
"Contribution") shall be in the form of a direct contribution of stock by the
Holding Company. The Contribution is being made in connection with the
Conversion in order to complement the Bank's existing community reinvestment
activities and to support the communities in which the Bank operates. The
Contribution is expected to be completed not later than twelve months after the
completion of the Conversion.
The Foundation is dedicated to the promotion of charitable purposes
within the communities in which the Bank operates, including, but not limited
to, grants or donations to support not-for-profit medical facilities, cultural
activities, community groups and other types of organizations or projects. As a
private foundation, the Foundation is required to distribute annually in grants
or donations at least 5% of its net investment assets.
The authority for the affairs of the Foundation is vested in the Board
of Trustees of the Foundation, none of whom may vote as directors of the Bank or
the Holding Company on the Donation.
VIII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
A copy of the proposed certificate of incorporation of the Holding
Company will be made available to depositors upon request.
XI. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Trustees of the Bank at
the time of the Conversion will thereupon become a director of the Converted
Bank.
P-17
<PAGE>
X. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
In order to provide an incentive for Directors, Officers and employees
of the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a recognition and retention plan
sometime following the Conversion in accordance with such regulations as are
applicable to the plans at that time.
XI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XII. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register
its stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such stock,
without the prior written approval of the appropriate Regulatory Authorities,
for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more market makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System or to be listed on a
national or regional securities exchange.
XIII. STATUS OF DEPOSIT ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or Accounts in the Converted Bank, equal in amount
to the withdrawable value of such account holder's Deposit Account or Accounts
prior to Conversion. All Deposit Accounts will continue to be insured by the BIF
up to the applicable limits of insurance coverage, and shall be subject to the
same terms and conditions (except as to voting and liquidation rights) as such
Deposit Account in the Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as these loans had prior to Conversion.
XIV. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final offering
circular (prospectus) used in connection with the Conversion. The creation and
maintenance of the liquidation account will not operate to restrict the use or
application of any of the regulatory capital accounts of the Converted Bank;
P-18
<PAGE>
provided, however, that such regulatory capital accounts will not be voluntarily
reduced below the required dollar amount of the liquidation account. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to the Deposit Account held, have a related inchoate interest in a
portion of the liquidation account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date and/or the Supplemental Eligibility
Record Date and the denominator is the total amount of the Qualifying Deposits
of all Eligible Account Holders and Supplemental Eligible Account Holders on
such record dates in the Bank. For Deposit Accounts in existence at both dates,
separate subaccounts shall be determined on the basis of the Qualifying Deposits
in such Deposit Accounts on such record dates. Such initial subaccount balance
shall not be increased, and it shall be subject to downward adjustment as
provided below.
If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the record date is less than the lesser of (i)
the deposit balance in such Deposit Account at the close of business on any
other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Bank (and only in such
event), each Eligible Account Holder and Supplemental Eligible Account Holder
shall be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then-current adjusted subaccount balances for
Deposit Accounts then held before any liquidation distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with assumptions
of Deposit Accounts and other liabilities, or similar transactions with another
institution the accounts of which are insured by the BIF, shall be considered to
be a complete liquidation. In such transactions, the liquidation account shall
be assumed by the surviving institution.
XV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK
Regulations of the Regulatory Authorities limit acquisitions, and
offers to acquire, direct or indirect beneficial ownership of more than 10% of
any class of an equity security of the Converted Bank or the Holding Company. In
addition, consistent with the regulations of the Regulatory Authorities, the
restated organization certificate of the Converted Bank shall provide that for a
period of three years following completion of the Conversion: (i) no Person
(i.e., no individual, group acting in concert, corporation, partnership,
association, joint stock company, trust, or unincorporated organization or
similar company, syndicate, or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution) shall
directly or indirectly offer to acquire or acquire beneficial ownership of more
than 10% of any class of the Bank's equity securities. Shares beneficially owned
in violation of this restated organization certificate provision shall not be
counted as shares entitled to vote and shall not be voted by any Person or
counted as voting shares in connection with any matter submitted to the
shareholders for a vote. This limitation shall not apply to any offer to acquire
or acquisition of beneficial ownership of more than 10% of the common stock of
the Bank by a corporation whose ownership is or will be substantially the same
as the
P-19
<PAGE>
ownership of the Bank, provided that the offer or acquisition is made more than
one year following the date of completion of the Conversion; (ii) shareholders
shall not be permitted to cumulate their votes for elections of trustees or
directors; and (iii) special meetings of the shareholders relating to changes in
control or amendment of the restated organization certificate may only be called
by the Board of Trustees or Directors, as appropriate.
XVI. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Voting Depositors by a
two-thirds vote of the Board of Directors of the Holding Company and the Board
of Trustees of the Bank. After submission of the Plan and proxy materials to the
Voting Depositors, the Plan may be amended by a two-thirds vote of the
respective Board of Directors of the Holding Company and the Board of Trustees
of the Bank only with the concurrence of the appropriate Regulatory Authorities.
In the event that the Bank determines that for tax purposes or otherwise it is
in the best interest of the Bank to convert from a mutual to a stock institution
without the concurrent formation of a holding company, the Plan may be
substantively amended, with the prior written approval of the appropriate
Regulatory Authorities, in such respects as the Board of Trustees of the Bank
deems appropriate to reflect such change from a holding company conversion to a
direct conversion. In the event the Plan is so amended, common stock of the Bank
will be substituted for Holding Company Conversion Stock in the Subscription,
Community or Public Offerings, and subscribers will be resolicited as described
in Section V hereof. Any amendments to the Plan (including amendments to reflect
the elimination of the concurrent holding company formation) made after approval
by the Voting Depositors with the concurrence of the appropriate regulatory
authorities shall not necessitate further approval by the Voting Depositors
unless otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Trustees at any time prior to the Special Meeting of Voting Depositors, and at
any time following such Special Meeting with the concurrence of the appropriate
Regulatory Authorities. In its discretion, the Board of Trustees of the Bank may
modify or terminate the Plan upon the order or with the prior written approval
of the appropriate Regulatory Authorities and without further approval by Voting
Depositors. The Plan shall terminate if the sale of all shares of Conversion
Stock is not completed within 24 months of the date of the Special Meeting. A
specific resolution approved by a majority of the Board of Trustees of the Bank
is required in order for the Bank to terminate the Plan prior to the end of such
24-month period.
XVII. EXPENSES OF THE CONVERSION
The Holding Company and the Bank will assure that expenses incurred by
them in connection with the Conversion shall be reasonable.
XVIII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the New York taxation authorities or an opinion of tax counsel or other tax
advisor with respect to New York taxation, to the effect that consummation of
the transactions contemplated herein will not be taxable to the Holding Company
or the Bank.
XIX. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Bank may not loan funds or otherwise extend credit to any Person to
purchase in the Conversion shares of Holding Company Conversion Stock.
P-20
Exhibit 3.3
RESTATED ORGANIZATION CERTIFICATE
OF
HUDSON RIVER BANK & TRUST COMPANY
UNDER SECTION 8007 OF
THE BANKING LAW
We, Carl A. Florio, being the President and Chief Executive Officer,
and Pamela M. Wood, being the Secretary, of Hudson River Bank & Trust Company,
in accordance with Section 8007 of the Banking Law of the State of New York (the
"New York Banking Law"), do hereby certify as follows:
FIRST, the name of the Corporation is Hudson River Bank & Trust
Company, originally formed under the name "The Hudson City Savings Institution."
SECOND, the Corporation was created under the name "The Hudson City
Savings Institution" by an Act of the Legislature of the State of New York,
passed April 4, 1850, such Act having been amended and supplemented from time to
time thereafter. Under Section 1001(5) of the Banking Law, such Act is the
Organization Certificate of the Corporation.
THIRD, the text of the Organization Certificate of the Corporation is
hereby amended and restated in its entirety to read as follows:
Section 1. Name.
The name by which the Corporation is to be known is Hudson River Bank
& Trust Company (the "Bank").
Section 2. Principal Office.
The principal office of the Bank shall be located in the City of
Hudson, County of Columbia, State of New York.
Section 3. Duration.
The duration of the Bank is perpetual.
Section 4. Capital Stock.
The total number of shares of all classes of the capital stock which
the Bank has authority to issue is forty-five million (45,000,000), of which
forty million (40,000,000) shall be common stock, par value $.01 per share
(ACommon Stock@) and of which five million (5,000,000) shall be preferred stock,
par value $.01 per share (APreferred Stock@). 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 4 or to the extent
<PAGE>
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), 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.
Nothing contained in this Section 4 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, provided,
that this restriction on voting separately by class or series shall not apply:
(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, but 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
any regulatory authority;
(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 4 (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 institution
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 of and
series(if any) of capital stock are as follows:
-2-
<PAGE>
A. Common Stock. Except as provided in this Section 4 (or in any
supplementary sections hereto) 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. Shareholders shall not be entitled to cumulate
their 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, or retirement
fund, or other retirement payments, if any, to which such holders
are respectively entitled in preference to the Common Stock, then
dividends may be paid on the Common Stock and on any class or
series of stock entitled to participate therewith as to dividends
out of any assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of
the 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 provision 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 amendments to this
Restated Organization Certificate 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 an amendment to this
Restated Organization Certificate. 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 the shares of
such series;
-3-
<PAGE>
(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;
(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 an amendment to this Restated
Organization Certificate, any authorized class of Preferred
Stock into series, and, within the limitations set forth in
this section and the remainder of this Restated Organization
Certificate, 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 an amendment to this Restated Organization
Certificate adopted by the Board of Directors, the Bank
shall make any filings of such amendments as may be required
by applicable law.
Section 5. 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.
-4-
<PAGE>
Section 6. Liquidation Account.
Pursuant to the regulations of the New York State Banking Board, the
Bank shall establish and maintain a liquidation account for the benefit of its
deposit account holders as of September 30, 1996 and March 31, 1998 ("eligible
depositors"). 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 of the Bank's eligible depositor's inchoate interest in the
liquidation account, to the extent it is still in existence; provided, that an
eligible depositor's inchoate interest in the liquidation account shall not
entitle such eligible depositor to any voting rights at meetings of the Bank's
stockholders.
Section 7. Certain Provisions Applicable for Three Years.
Notwithstanding anything contained in the Bank's Restated Organization
Certificate or bylaws to the contrary, for a period of three years from the date
of consummation of the conversion of the Bank from mutual to stock form no
person shall directly or indirectly acquire the beneficial ownership of more
than 10 percent of any class of any equity security of the Bank. This limitation
shall not apply to a transaction in which the Bank forms a holding company in
conjunction with conversion, or thereafter, if such formation is without change
in the respective beneficial ownership interests of the Bank's 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. In the event
shares are acquired in violation of this Section 7, 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; provided, however a person shall not be deemed to
be the beneficial owner of shares represented by proxies held by such person
unless such shares are otherwise deemed beneficially owned by such person.
For the purposes of this Section 7, the following definitions apply:
(i) The term "person" includes an individual, a firm, a group acting
in concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, any
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 or any other
entity.
(ii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(iii) 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
-5-
<PAGE>
combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise.
Section 8. Call for Special Meetings.
Special meetings of the stockholders for any purpose or purposes may be
called at any time by the Chairman of the Board of Directors or the majority of
the Whole Board of Directors (the term "Whole Board of Directors" shall mean the
number of authorized directorships, whether or not there exists any vacancies in
any previously authorized directorships).
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
less than seven nor more than 30 except when a greater number is approved by the
Superintendent of Banks of the State of New York (the "Superintendent") or his
delegatees. The Board 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.
-6-
<PAGE>
Section 10. Amendment of Restated Organization Certificate.
Except as provided in Section 4, no amendment, addition, alteration,
change, or repeal of this Restated Organization Certificate shall be made,
unless such is first proposed by a majority of the Whole Board of Directors of
the Bank and then approved by the affirmative vote of the holders of at least a
majority of the total votes eligible to be cast at a legal meeting. Any
amendment, addition, alteration, change or repeal so acted upon shall be
effective upon approval and filing by the Superintendent of Banks in accordance
with applicable regulatory procedures.
Section 11. Amendment of Bylaws.
No amendment, addition, alteration, change or repeal of the Bylaws of
the Bank shall be made, unless made in a manner consistent with the New York
Banking Law and the regulations thereunder and approved by a majority of the
Whole Board of Directors or by the affirmative vote of at least 80% of the votes
eligible to be cast by the stockholders of the Bank at any legal meeting.
Section 12. Indemnification.
(a) Scope of Indemnification. The Bank shall, to the maximum extent
permitted and in the manner provided by the New York Banking Law
and any applicable federal law, indemnify each person made, or
threatened to be made, a party to any action, suit or proceeding,
whether criminal or civil, by reason of the fact that such person
or such person's testator or intestate is or was a director or
officer of the Bank, or is or was serving, in any capacity, at
the request of the Bank, any other corporation, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses, including attorneys' fees and
expenses actually and necessarily incurred in connection
therewith, or any appeal therein, provided that the person to be
indemnified has met the applicable standard of conduct to be so
indemnified under the New York Banking Law or any other
applicable law.
(b) Reimbursement of Expenses. The Bank shall advance or promptly
reimburse upon request any person entitled to indemnification
hereunder for all reasonable expenses, including attorneys' fees
and expenses, reasonably incurred in defending any action or
proceeding in advance of the final disposition thereof upon
receipt of an undertaking by or on behalf of such person to repay
such amount if such person is ultimately found not to be entitled
to indemnification or, where indemnification is granted, to the
extent the expenses so advanced or reimbursed exceed the amount
to which such person is entitled; provided, however, that such
person shall cooperate in good faith with any request by the Bank
that common counsel be used by the parties to any action or
proceeding who are similarly situated unless to do so would be
inappropriate due to actual or potential differing interest
between or among parties.
-7-
<PAGE>
(c) Additional Rights. Nothing herein shall limit or affect any right
of any director, officer, or other corporate personnel otherwise
than hereunder to indemnification or expenses, including
attorneys' fees and expenses, under any statute, rule,
regulation, certificate of incorporation, bylaws, insurance
policy, contract, or otherwise; without affecting or limiting the
rights of any director, officer or other corporate personnel
pursuant to this Section 12, the Bank is authorized to enter into
agreements with any of its directors, officers or other corporate
personnel extending rights to indemnification and advancement of
expenses to the fullest extent permitted by applicable law.
(d) Notice of Amendments or Elimination. Anything in this Restated
Organization Certificate to the contrary notwithstanding, no
elimination or amendment of this Section 12 adversely affecting
the right of any person to indemnification or advancement of
expenses hereunder shall be effective until the 60th day
following notice to such person of such action, and no
elimination of or amendment to this Section 12 shall deprive any
such person's rights hereunder arising out of alleged or actual
occurrences, act or failures to act prior to such 60th day. Any
amendments or eliminations made pursuant to this Section 12 are
only effective with regard to acts occurring after such date.
(e) Continuation of Benefit. The indemnification of any person
provided by this Section 12 shall continue after such person has
ceased to be a director or officer of the Bank and shall inure to
the benefit of such person's heirs, executors, administrators and
legal representatives.
(f) Severability of Provisions. In case any provision in this Section
12 shall be determined at any time to be unenforceable in any
respect, the other provisions of this Section 12 shall not in any
way be affected or impaired thereby, and the affected provision
shall be given the fullest possible enforcement in the
circumstances, it being the intention of the Bank to afford
indemnification and advancement of expenses to its directors or
officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law.
As approved by a majority of the Board of Trustees of the Bank on
_________, 1998 and approved by at least 75% in amount of the deposit
liabilities of voting depositors of the Bank present in person or by proxy at a
meeting of voting depositors held on _________ __ 1998, to be effective on the
date filed by the Superintendent of Banks of the State of New York in his
office.
_____________________________________ _______________________________
Carl A. Florio Pamela M. Wood
President and Chief Executive Officer Secretary
-8-
Exhibit 3.4
BYLAWS OF
HUDSON RIVER BANK & TRUST COMPANY
ARTICLE I. PRINCIPAL OFFICE
The principal office of Hudson River Bank & Trust Company (the "Bank")
shall be located in the City of Hudson, County of Columbia, State of New York.
ARTICLE II. STOCKHOLDERS
Section l. Place of Meetings.
All annual and special meetings of stockholders shall be held at the
principal 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 the stockholders of the Bank for the election of Directors
and for the transaction of any other appropriate business of the Bank shall be
held annually within 120 days after the end of each calendar year.
Section 3. Special Meetings.
Special meetings of stockholders for any purpose or purposes, may be
called at any time by the Chairman of the Board of Directors or by a majority of
the Whole Board of Directors. The term "Whole Board of Directors" shall mean the
number of authorized directorships, whether or not there exists any vacancies in
any previously authorized directorships.
Section 4. Conduct of Meetings.
The Chairman of the Board of Directors shall preside at all meetings
and in his absence, a person designated by a majority of the Board of Directors
shall preside at all meetings. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such regulations of the manner of voting and the conduct of discussion as seem
to him in order.
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 10
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 of Directors, the
Secretary, or the Board of Directors calling the meeting, to each stockholder 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 stockholder at the
address as it appears on the stock transfer books or records of the Bank as of
<PAGE>
the record date prescribed in Section 7 of this Article II or at such other
address as the stockholders shall have furnished in writing to the Secretary of
the Bank, with postage prepaid. When any stockholders' meeting, either annual or
special, is adjourned to another time or place, no notice of the adjourned
meeting need be given, other than an announcement at the meeting at which such
adjournment is taken giving the time and place to which the meeting is
adjourned. However, if, after adjournment, the Board of Directors fixes a new
record date for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record as of the new record date.
Section 6. Waiver of Notice.
Notice of any annual or special meeting need not be given to any
stockholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by such stockholder.
Section 7. Fixing of Record Date.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment, or stockholders entitled
to receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors shall fix in
advance a date as the record date for any such determination of stockholders.
Such date in any case shall be not more than 50 days and, in case of a meeting
of stockholders, not fewer than 10 days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment unless the Board of Directors fixes a new record date
for the adjourned meeting.
Section 8. Voting Lists.
A list of stockholders as of the record date, certified by the officer
responsible for its preparation or by a transfer agent of the Bank, shall be
produced at any meeting of stockholders upon the request thereat or prior
thereto of any stockholder. If the right to vote at any meeting is challenged,
the inspectors of election, or person presiding thereat, shall require such list
of stockholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list to
be stockholders entitled to vote thereat may vote at such meeting.
Section 9. 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
stockholders. The stockholders present at a duly organized meeting may continue
-2-
<PAGE>
to transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to constitute less than a quorum. 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 existence of a quorum at any meeting, or the existence
of a duly organized meeting at which enough stockholders have withdrawn from
such meeting to constitute less than a quorum, however, shall not serve to
amend, alter or modify any provisions in the Bank's Restated Organization
Certificate or these Bylaws which require the vote of more than a majority of
the outstanding shares entitled to vote at a duly organized meeting.
Section 10. Proxies.
At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Proxies solicited on behalf of the management of the Bank shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by 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 11. 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
stockholders of the Bank any one or more of such stockholders may cast, in
person or by proxy, all votes to which such ownership is entitled. In the event
an attempt is made to cast conflicting votes, in person or by proxy, by the
several persons in whose names shares of stock stand, the vote or votes to which
those persons are entitled shall be cast as directed by a majority of those
holding such and present in person or by proxy at such meeting, but no votes
shall be cast for such stock if a majority cannot agree.
Section 12. 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, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name as trustee or into the name of his nominee. Shares held by or
under the control of a receiver may be voted by such receiver without the
transfer into his 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.
-3-
<PAGE>
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee or
nominee 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 13. Cumulative Voting.
Stockholders shall not be entitled to cumulate their votes for the
election of directors.
Section 14. Nominations.
The Board of Directors, or a committee appointed by the Board of
Directors, shall select the nominees for election as directors of the Bank.
Except in the case of a nominee substituted as a result of the death,
incapacity, withdrawal or other inability to serve of a nominee, the Board of
Directors shall deliver written nominations to the Secretary of the Bank at
least 20 days prior to the date of the annual meeting. Provided the Board of
Directors, or a committee appointed by the Board of Directors, makes such
nominations, no nominations for directors except those made by the Board of
Directors or such committee shall be voted upon at the annual meeting unless
other nominations by stockholders are made in writing and delivered to the
secretary of the Bank at least 30 days prior to the date of the annual meeting.
Ballots bearing the names of all persons nominated by the nominating committee
and stockholders shall be provided for use at the annual meeting.
Section 15. New Business.
Any new business to be taken up at an annual meeting shall be stated in
writing and filed with the Bank at least 45 days before the date of the annual
meeting, and all business so stated, proposed, and filed shall be considered at
the annual meeting, but no other proposal shall be acted upon at the annual
meeting. Any stockholder may make any other proposal at the annual meeting and
the same may be discussed and considered, but unless stated in writing and filed
with the secretary at least 45 days before the meeting, such proposal shall be
laid over for action at an adjourned, special, or annual meeting of the
stockholders taking place 30 days or more thereafter. This provision shall not
prevent the consideration and approval or disapproval at the annual meeting of
reports of officers, directors and committees; but in connection with such
reports no new business shall be acted upon at such annual meeting unless stated
and filed as herein provided.
Section 16. Informal Action by Stockholders.
Any action required to be taken at a meeting of stockholders, or any
other action which may be taken at a meeting of the stockholders, may be taken
without a meeting if consent in writing, setting forth the action so taken,
-4-
<PAGE>
shall be given by all of the stockholders entitled to vote with respect to the
subject matter.
ARTICLE III. BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors.
The business and affairs of the Bank shall be under the direction of
its Board of Directors. The Board of Directors shall consist of not less than 7
nor more than 30 directors. Within the foregoing limits, the number of directors
shall be determined by resolution of the Board of Directors. The Board of
Directors 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 2. Qualifications.
Each director shall be at least 18 years of age and at least one-half
of the directors shall be citizens of the United States at the time of their
election and during their continuance in office.
Section 3. Age of Directors.
No person who has attained seventy-five (75) years of age may be
appointed or elected as a director of the Bank. This restriction shall not apply
to any person who was serving as a trustee of the Bank immediately prior to its
mutual-to-stock conversion.
Section 4. Regular and Annual Meetings.
An annual meeting of the Board of Directors for the election of
officers shall be held, without notice other than these By-Laws, immediately
after, and at the same place as, the annual meeting of stockholders of the Bank,
or at such other time or place within 25 days following the annual meeting of
stockholders as the Board of Directors may fix by resolution. The Board of
Directors shall hold at least 10 regular meetings per year and shall be required
to meet at least twice during any three consecutive months during the calendar
year. For these purposes, the annual meeting shall be considered a regular
meeting. The Board of Directors may provide, by resolution, the time and place
for the holding of regular meetings of the Board of Directors without notice
other than such resolution.
Section 5. Special Meetings.
Special meetings of the Board of Directors may be called at any time by
or at the request of the Chairman, if one has been elected, or by the President.
Special meetings of the Board of Directors shall also be convened by the
Secretary upon the written request of at least three directors. The persons
authorized to call special meetings of the Board of Directors shall give notice
of such meetings in the manner prescribed by these By-Laws and may fix any
place, within or without the Bank's regular business area, as the place for
-5-
<PAGE>
holding any special meeting of the Board of Directors called by such persons. No
business shall be conducted at a special meeting other than that specified in
the notice of meeting.
Section 6. Conduct of Meetings.
Meetings of the Board of Directors shall be presided over by the
Chairman, if a Chairman has been elected by the Board of Directors, or such
other director or officer as the Chairman shall designate. If a Chairman has not
been elected by the Board of Directors or the Chairman is absent or otherwise
unable to preside over the meeting, the presiding officer shall be the
President. If the President is absent or otherwise unable to preside over the
meeting, the presiding officer shall be the then senior member of the Board of
Directors in terms of length of service on the Board of Directors (including its
predecessor body, the Board of Trustees of the Bank prior to the Bank's
mutual-to-stock conversion). The Secretary, or in the absence or disability of
the Secretary, a person appointed by the Chairman (or other presiding person),
shall act as secretary of the meeting. The Chairman (or other presiding person)
shall conduct all meetings of the Board of Directors in accordance with the best
interests of the Bank and shall have the authority and discretion to establish
reasonable procedural rules for the conduct of Board of Directors meetings. Any
one or more directors may participate in a meeting of the Board of Directors or
committee thereof by means of a conference telephone or communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at any
such meeting.
Section 7. Notice of Meetings; Waiver of Notice.
Except as otherwise provided herein, at least 24 hours' notice of
meetings shall be given to each director if given in person or by telephone,
telegraph, telex, facsimile, or other electronic transmission, and at least two
business days notice of meetings shall be given if notice is given in writing
and delivered by courier or by postage-prepaid mail. The purpose of any special
meeting shall be stated in the notice. Such notice shall be deemed given when
sent or given to any such mail or courier service or company providing
electronic transmission service. Any director may waive notice of any meeting by
filing a signed waiver of notice with the Secretary of the Bank, whether before
or after the meeting. The attendance of a director at a meeting shall constitute
a waiver of notice of such meeting if the director does not protest, prior
thereto or at its commencement, the lack of notice to such director.
Section 8. Quorum and Voting Requirements.
A quorum at any meeting of the Board of Directors shall consist of not
less than a majority of the Whole Board of Directors or such greater number as
shall be required by law, these By-Laws or the Restated Organization Certificate
of the Bank. If less than a quorum is present, the majority of those directors
present may adjourn the meeting to another time and place without further
notice. At such adjourned meeting at which a quorum shall be represented, any
-6-
<PAGE>
business may be transacted that might have been transacted at the meeting as
originally noticed. Except as otherwise provided by law, the Restated
Organization Certificate of the Bank or these By-Laws, a majority vote of the
directors present at a meeting, if a quorum is present at the time of such vote,
shall constitute an act of the Board of Directors.
Section 9. Resignation.
Any director may resign at any time by sending a written notice of such
resignation to the principal office of the Bank addressed to the Chairman, if
one has been elected, or the President. Unless otherwise specified therein, such
resignation shall take effect upon receipt thereof.
Section 10. Removal.
Notwithstanding any other provision of the Restated Organization
Certificate of the Bank or these By-Laws, any director may be removed at any
time with or without cause, upon the affirmative vote of the holders of record
of not less than 80% of the outstanding shares of capital stock of the Bank
entitled to vote generally in the election of directors at a meeting of the
stockholders called for that purpose.
Section 11. Vacancies.
Subject to the limitations prescribed by law, the Restated Organization
Certificate of the Bank and these By-Laws, all vacancies in the office of
director, including vacancies created by newly created directorships resulting
from an increase in the number of directors, shall be filled by the
stockholders, except that vacancies not exceeding one-third of the entire Board
of Directors may be filled by the affirmative vote of a majority of the
directors then holding office. No person shall be elected a director unless
nominated at a previous regular or special meeting, called for that purpose,
upon the recommendation of the Board of Directors, or a committee appointed by
the Board of Directors. Any director so elected shall serve for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until his successor shall be elected and
qualified.
Section 12. Compensation.
The compensation of the directors of the Bank shall be fixed by the
Board of Directors.
Section 13. Emergency Authority.
In the event there shall occur an acute emergency resulting from a
hostile attack, as defined in Article 7 of the New York State Defense Emergency
Act, which shall be of such severity as to prevent the conduct and management of
the affairs and business of the Bank by its Directors and officers as otherwise
provided in these Bylaws, any three or more available members of the then
incumbent Executive Committee shall constitute an emergency Board of Directors
-7-
<PAGE>
which shall have the power, subject to limitations prescribed in Article 7 of
the New York State Defense Emergency Act, by a majority of such persons present,
to take any and every action which may be necessary to meet the exigencies of
the acute emergency and to enable the Bank to conduct its business during such
period, including the relocation elsewhere of any office of the Bank which shall
be unable to function because of the acute emergency. If during the period of
acute emergency there shall be no Executive Committee, or a minimum of three
members of the then incumbent Executive Committee shall not be available, then
and in that event such other available Directors as may be needed to obtain the
minimum of three members shall serve on the emergency Board of Directors.
ARTICLE IV. COMMITTEES
Section 1. Enumeration of Committees.
The standing committees of the Board of Directors shall be an Executive
Committee, an Audit Committee, and a Nominating Committee. The Board of
Directors, by vote of a majority of the whole Board of Directors, may from time
to time designate additional committees of the Board of Directors, either
temporary or permanent, with such lawfully delegable powers and duties as it
thereby confers not inconsistent with these By-laws, to serve at the pleasure of
the Board of Directors and shall, for these 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 ("Alternate
Directors") who may replace any absent or disqualified member at any meeting of
the committee; provided however, that the Chairman shall be a member of, and
shall serve as the chairman of the Executive Committee and he shall be an
ex-officio member of all other committees, except the Audit Committee and any
other committee on which he is prohibited from being a member, by law, the
Restated Organization Certificate or these Bylaws. The Board of Directors, by a
resolution adopted by a majority of the Whole Board of Directors may terminate
any committee previously established.
Section 2. The Executive Committee.
The Executive Committee shall consist of the Chairman of the Board of
Directors and four additional Directors elected annually by the vote of the
majority of the Whole Board of Directors. If any member of the Executive
Committee shall be absent from any meeting of the committee, the Chairman shall
designate some other Director, other than one serving as a salaried officer, to
act as a member of the committee at that meeting. In the event there shall be a
vacancy in the office of Chairman, then and in that event such other additional
Director or Directors as may be needed to obtain the full complement of five
members shall be elected by the Board of Directors to serve until the vacancy is
filled, or until the next annual meeting. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the Whole Board of Directors. 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
committee may be called by the Chairman or at any time by any two members of the
committee, upon twenty-four hours' notice by mail, in person, or by telegraph or
telephone. The notice of a special meeting of the committee, however given,
-8-
<PAGE>
shall state the time when and the place, which shall be within the State of New
York, where the meeting is to be held and the business which is to be presented
and no business other than that stated in the notice shall be transacted at said
meeting. The Executive Committee may make rules for the regulation of its
meetings and proceedings not inconsistent with these Bylaws. Four members of the
committee, including designees designated to act for an absent member or members
of the committee, shall be necessary for a quorum at any meeting of the
committee. Attendance by Alternate Directors shall constitute membership on the
Committee for determining quorum requirements. 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. 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. Except as otherwise provided
herein, the Executive Committee, when the Board of Directors is not in session,
shall have and may exercise all of the authority of the Board of Directors,
except to the extent, if any, that such authority may be limited by resolution
adopted by a majority of the Whole Board of Directors or by the laws of the
State of New York. In addition, the Executive Committee shall not have the
authority of the Board of Directors with reference to: the submission to
stockholders of any action that requires stockholders' authorization under New
York law; the filling of vacancies in the Board of Directors or in any committee
of the Board of Directors; the fixing of compensation of the Directors for
serving on the Board of Directors or any committee thereof; the amendment or
repeal of any resolution of the Board of Directors which by its terms shall not
be so amendable or repealable; the taking of any action which is expressly
required by New York law to be taken at a meeting of the Board of Directors or
by a specified proportion of Directors; the amendment or repeal of the Restated
Organization Certificate or Bylaws of the Bank or adoption of new Bylaws of the
Bank; recommending to the stockholders a plan of merger, consolidation, or
conversion; the sale, lease or other disposition of all or substantially all of
the property and assets of the 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. The Nominating Committee.
The Board of Directors, by resolution adopted by a majority of the
Whole Board of Directors, shall appoint a Nominating Committee of the Board of
the Board of Directors, consisting of not less than three Directors. The
Nominating Committee shall have authority (a) to review any nominations for
election to the Board of Directors made by a stockholder of the Bank and (b) to
recommend to the Whole Board of Directors nominees for election to the Board of
Directors (i) to replace those Directors whose terms expire at the annual
meeting of stockholders next ensuing and (ii) to fill vacancies resulting from
death, resignation, retirement, disqualification, removal from office or other
cause, or resulting from an increase in the authorized number of Directors.
-9-
<PAGE>
Section 4. The Audit Committee.
The Audit Committee shall consist of two or more Directors, none of
whom shall be a salaried officer of the Bank, who shall be elected to said
Committee at the annual meeting of the Board of Directors, or in the case of the
filling of a vacancy (such vacancy, in every case to be filled by an existing
non-salaried Director) at any regular or special meeting of the Board of
Directors. The Audit Committee shall assist the Board of Directors in fulfilling
its obligation to oversee the appropriateness of accounting policies, and Bank
procedures and controls and shall be charged with the duty of carrying out the
requirements of Section 254 of the Banking Law of the State of New York (the
ANew York Banking Law@) as the same now is in force or as it may be amended or
of any law substituted therefor. In performing its functions, the Audit
Committee shall utilize the expertise of the Bank's internal Auditing Department
under the direction of the Bank's internal Auditor. The Audit Committee shall
hold formal meetings with the Bank's internal auditors on a quarterly basis.
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. Any two
or more offices may be held by the same person, except for the offices of
President and Secretary. 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 stockholders. If
the election of officers is not held at such meeting, such election shall be
held as soon thereafter as possible. Each officer shall hold office until a
successor has been duly elected and qualified or until the officer's death,
resignation, or removal in the manner hereinafter provided. Election or
appointment of an officer, employee, or agent shall not of itself create
contractual rights. The Board of Directors may authorize the Bank to enter into
an employment contract with any officer in accordance with applicable law, 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 at any time with
or without cause, but such removal, other than for cause, shall be without
prejudice to the contractual rights, if any, of the person so removed.
-10-
<PAGE>
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. SECURITIES AND INVESTMENTS
Section 1. Loans and Investments.
The Board of Directors shall from time to time determine and direct to
what extent the funds and property of the Bank shall be invested, and, subject
to all applicable provisions of law, the kind and character of the investments
which are to be made and how the same shall be handled and dealt with. 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 2. Care and Custody of Securities.
All stocks, bonds and other securities, including bonds and mortgages,
not directed by the Board of Directors to be held in bearer form, or in the name
of a nominee, shall be in the name of the Bank and, to the extent that the form
of the several securities may permit or as may be permitted or required by law,
shall be registered or recorded in the name of the Bank. All securities
including bonds and mortgages held by the Bank shall be kept in such manner and
at such places as the Board of Directors, having due regard for the safety and
protection thereof, may direct, and all or any part thereof may be lodged or
deposited for safekeeping with such other institutions as the Board of Directors
may from time to time approve.
Section 3. Transfers of Securities, Etc.
Transfers and assignments of stocks, bonds and other securities
standing, issued or registered in the name of the Bank may be signed by any two
of the following officers acting by virtue of their several offices, to wit: the
Chairman, the President, an Executive Vice President, the Secretary, or may be
signed by any one of said officers together with such other officer or officers,
or person or persons, as the Board of Directors may from time to time authorize
or designate.
The Chairman or the President, or in their absence an Executive Vice
President or the Secretary, shall execute any and all instruments for the proper
transaction of the business of the Bank relating to its mortgage investments,
including extensions, modifications, alterations, and amendments, assignments
and satisfaction pieces. The Board of Directors may, nevertheless, at any time
authorize and empower other additional officers or employees to do any one or
more of these things.
-11-
<PAGE>
ARTICLE VII. DEPOSITORIES, CHECKS AND DRAFTS
Section 1. Depositaries and Withdrawals.
The Board of Directors may from time to time designate banks, trust
companies or similar institutions to be depositaries of funds of the Bank and
may by resolution designate the officer or officers, or employee or employees,
who shall be authorized to sign the checks, drafts, vouchers or orders of the
Bank upon which such depositaries shall be authorized to pay out the moneys so
deposited. Unless and until the Board of Directors shall otherwise provide, such
checks, drafts, vouchers or orders for the payment of deposited funds shall be
signed by any two of the following officers: the Chairman, the President, the
Chief Financial Officer, an Executive Vice President, a Senior Vice President, a
Vice President, the Secretary, the Controller, an Assistant Vice President, an
Assistant Secretary, an Assistant Controller and the Assistant to the President,
if the Board of Directors shall have established the offices of Assistant Vice
President, Assistant Secretary, Assistant Controller or Assistant to the
Chairman.
Section 2. Depositors' Withdrawals.
The Chairman, the President, an Executive Vice President or the
Secretary shall designate those officers and employees who shall be authorized
to sign or countersign checks drawn upon the general deposit accounts of the
Bank issued in payment of depositor withdrawals. The Board of Directors may also
adopt such other means of payment of depositor withdrawals as to it may seem
proper and expedient.
ARTICLE VIII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section l. 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. Such certificates
shall be signed by the Chairman of the Board of Directors 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 and
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.
-12-
<PAGE>
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 legal representative, who shall furnish proper
evidence of such authority, or by his attorney authorized by a duly executed
power of attorney and filed with the 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 IX. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Bank shall be as fixed by the Board of
Directors. 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 stockholders.
ARTICLE X. DIVIDENDS
Subject to the terms of the Bank's Restated Organization Certificate
and applicable law, the Board of Directors may, from time to time, declare, and
the Bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE XI. 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, or in such other
form deemed appropriate by the Board of Directors. The year of incorporation or
an emblem may appear in the center.
ARTICLE XII. SURETY BONDS
Section 1. Surety Bonds and Premiums Thereon.
The Bank shall procure from a responsible surety company approved by
the Board of Directors and shall keep continuously in force and effect a
banker's blanket bond of insurance or a fidelity bond of similar type and
character covering all of the officers and employees of the Bank in such amount
as the Board of Directors may fix. The Board of Directors may also require that
individual officers or employees shall furnish separate bonds conditioned for
the faithful performance of their several duties. It shall be obligatory upon
the officers and employees to furnish to the Bank and to the surety company
involved any and all information necessary or appropriate to the procurement of
any bond or bonds herein provided for. The Bank may dismiss any officer or
employee who shall fail when asked or who shall refuse to give any and all
proper and relevant information required by the designated surety company or as
to whom such surety company shall decline to give a bond or whom the surety
company shall decline to include in a general bond.
-13-
<PAGE>
All expenses connected with such bond or bonds and all premiums thereon
shall be borne by the Bank.
ARTICLE XIII. RULES AND REGULATIONS
Management shall adopt rules and regulations not inconsistent with law
for the payment of deposits and interest and, generally, for the transaction and
management of the affairs of the Bank. Such rules and regulations shall be
posted in a conspicuous place in the offices of the Bank and shall be available
to depositors upon request. Such posting shall be taken and held as actual
notice to and be binding upon each depositor and to all persons claiming any
interest in any account. All notices to the Bank from depositors, or other
persons claiming any interest in any account, shall be not effective unless they
are in writing and signed by the persons giving such notice.
Rules and regulations adopted by management or any amendments thereto
shall be transmitted to the Board of Directors at its next regular monthly
meeting following the adoption of same.
ARTICLE XIV. AMENDMENTS
These Bylaws may be amended in a manner consistent with the New York
Banking Law and the regulations thereunder at any time by a majority vote of the
Whole Board of Directors, or by the affirmative vote of at least 80% of the
votes eligible to be cast by the stockholders of the Bank at any legal meeting.
-14-
April 29, 1998
Board of Trustees
The Hudson City Savings Institution
1 Hudson City Centre
Hudson, New York 12534
Re: The Offering of up to 15,525,000 Shares of Hudson River Bancorp, Inc.
Common Stock
Gentlemen:
You have requested our opinion concerning certain matters of Delaware
law in connection with the conversion of The Hudson City Savings Institution
(the "Bank"), a New York chartered savings bank, from the mutual form of
ownership to the stock form of ownership (the "Conversion"), and the related
subscription offering, community offering and syndicated community offering (the
"Offerings") by Hudson River Bancorp, Inc., a Delaware corporation (the
"Company"), of up to 15,525,000 shares of its common stock, par value $.01 per
share, ("Common Stock"), 17,853,750 shares if the Estimated Valuation Range is
increased up to 15% to reflect changes in market and financial conditions
following commencement of the Offerings).
In connection with your request for our opinion, you have provided to
us and we have reviewed the Company's certificate of incorporation filed with
the Delaware Secretary of State on March 5, 1998 (the "Certificate of
Incorporation"); the Company's Bylaws; the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange Commission initially on
March 9, 1998 (the "Registration Statement"); resolutions of the Board of
Directors of the Company (the "Board") concerning the organization of the
Company, the Offerings and designation of a Pricing Committee of the Board, and
the form of stock certificate approved by the Board to represent shares of
Common Stock. We have also been furnished a certificate of the Delaware
Secretary of State certifying the Company's good standing as a Delaware
corporation. Capitalized terms used but not defined herein shall have the
meaning given them in the Certificate of Incorporation.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
Page 2
We understand that the Company will loan to the trust for the Bank's
Employee Stock Ownership Plan (the "ESOP") the funds which the ESOP Trust will
use to purchase shares of Common Stock for which the ESOP Trust subscribes
pursuant to the Offerings and for purposes of rendering the opinion set forth in
paragraph 2 below, we assume that:
(a) the Board has duly authorized the loan to the ESOP Trust (the
"Loan"); (b) the ESOP serves a valid corporate purpose; (c) the Loan
will be made at an interest rate and on other terms that are fair to
the Company; (d) the terms of the Loan will be set forth in customary
and appropriate documents including, without limitation, a promissory
note representing the indebtedness of the ESOP Trust to the Company as
a result of the Loan; and (e) the closing for the Loan and for the sale
of Common Stock to the ESOP Trust will be held after the closing for
the sale of the other shares of Common Stock sold in the Offerings and
the receipt by the Company of the proceeds thereof.
Based upon and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Company has been duly organized and is validly existing in good
standing as a corporation under the laws of the State of Delaware.
2. Upon the due adoption by the Pricing Committee of a resolution
fixing the number of shares of Common stock to be sold in the Offerings, the
Common Stock to be issued in the Offerings (including the shares to be issued to
the ESOP Trust and the shares to be granted to a charitable foundation to be
established by the Company in connection with the Conversion) will be duly
authorized and, when such shares are sold and paid for in accordance with the
terms set forth in the Prospectus and such resolution of the Pricing Committee,
and certificates representing such shares in the form provided to us are duly
and properly issued, will be validly issued, fully paid and nonassessable.
This opinion is furnished in connection with the Company's Registration
Statement on Form S-1. We consent to the filing of this opinion as an exhibit to
the Registration Statement on Form S-1, Notice of the Application for
Conversion, and the Form 86-AC and to the use of the name of our firm where it
appears in the Registration Statement, Notice of the Application for Conversion,
Form 86-AC and in the Prospectus.
Very truly yours,
/s/ SILVER FREEDMAN AND TAFF, L.L.P.
SILVER FREEDMAN AND TAFF, L.L.P.
Exhibit 8.1
March 3, 1998
Board of Trustees
The Hudson City Savings Institution
1 Hudson City Center
Hudson, New York 12534
RE: Federal Income Tax Opinion Relating To The Conversion Of The
Hudson City Savings Institution From A State-Chartered Mutual
Savings Institution To A State-Chartered Stock Savings
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
The Hudson City Savings Institution (AMutual@) from a New York chartered mutual
savings institution to a New York chartered stock savings institution ("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
20, 1997 (the "Plan").
The following assumptions have been made in connection with our
opinions hereinbelow:
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.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 2
- --------------------------------------------------------------------------------
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 Stock Institution. 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 Stock Institution 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,
Stock Institution 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 Stock Institution
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 Stock
Institution.
6. Following the Conversion, Stock Institution 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 Stock Institution to be liquidated
or merged with another corporation following the consummation of the Conversion.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 3
- --------------------------------------------------------------------------------
8. The fair market value of each savings account plus an interest in
the liquidation account of Stock Institution 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. Holding Company has no plan or intention to sell or otherwise
dispose of the stock of Stock Institution received by it in the proposed
transaction.
10. Both Stock Institution 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 (a) shares
that may be issued to employees, directors and/or trustees pursuant to certain
stock option and stock incentive plans or that may be issued to employee benefit
plans and (b) up to 3% of Holding Company Common Stock to the Hudson River Bank
& Trust Company Foundation of Holding Company, a charitable organization created
under Section 501 (c)(3) of the Code (the "Foundation").
11. 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 from the proceeds of the sale of Holding
Company Conversion Stock.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 4
- --------------------------------------------------------------------------------
12. 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.
13. 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.
14. 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.
15. Mutual's Eligible Account Holders and Supplemental Eligible Account
Holders will pay expenses of the Conversion solely attributable to them, if any.
16. The liabilities of Mutual assumed by Stock Institution 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.
17. There will be no purchase price advantage for Mutual's deposit
account holders who purchase Holding Company Conversion Stock.
18. 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 Stock Institution will be received by any deposit account
holder-employee as separate consideration for, or will otherwise be allocable
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 5
- --------------------------------------------------------------------------------
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.
19. 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
depositors prior to the Conversion of Mutual as the equity holders of Mutual.
20. The proposed transaction does not involve the payment to Stock
Institution or Mutual of financial assistance from federal agencies within the
meaning of Notice 89-102, 1989-40 C.B. 1.
21. 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.
22. Mutual has received or will receive an opinion from RP Financial
LC. ("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, 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.
23. Mutual will not have any net operating losses, capital loss
carryovers or built-in losses at the time of the Conversion.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 6
- --------------------------------------------------------------------------------
As part of the Conversion, Holding Company intends to donate to the
Foundation up to 3% shares of its common stock.
The Plan states that the Foundation is intended to complement Mutual's
existing community reinvestment activities and to support the communities in
which Mutual operates.
The Foundation will be dedicated to the promotion of charitable
purposes within the communities that Mutual operates, including, but not limited
to grants or donations to support not-for-profit medical facilities, cultural
activities, community groups and other types of organizations or projects. The
Foundation will annually distribute total grants and donations to assist
charitable organizations or to fund projects of not less than five percent (5%)
of its net investment assets.
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 Stock Institution will
recognize any gain or loss as a result of the transaction (Rev. Rul. 80-105,
1980-1 C.B. 78). Mutual and Stock Institution will each be a party to a
reorganization within the meaning of Section 368(b) of the Code.
(2) Stock Institution 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.)
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 7
- --------------------------------------------------------------------------------
(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 Stock Institution 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) Mutual Stock Institution and Holding Company are each corporations
within the meaning of Section 7701(a)(3) of the Code.
(6) Mutual and Stock Institution are not investment companys as defined
in Section 368(a)(2)(F)(iii) and (iv) fo the Code.
(7) Stock Institution'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).
(8) Stock Institution, 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 Stock
Institution 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 Stock
Institution 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).
(9) Depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of Stock Institution,
Subscription Rights and/or interests in the liquidation account of Stock
Institution. 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
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 8
- --------------------------------------------------------------------------------
thereon, we give the following opinions: (a) no taxable income will be
recognized by the trustees, 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, Stock Institution 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 Stock Institution 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.
(10) The creation of the liquidation account on the records of Stock
Institution will have no effect on Mutual's or Stock Institution's taxable
income, deductions, or tax bad debt reserve.
(11) A depositor's basis in the savings deposits of Stock Institution
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
Stock Institution received by Eligible Account Holders and 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.
<PAGE>
Board of Trustees
The Hudson City Savings Institution
March 3, 1998
Page 9
- --------------------------------------------------------------------------------
(12) The basis of Holding Company Conversion Stock to its shareholders
will be the purchase price thereof. (Section 1012 of the Code).
(13) 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. Stock Institution 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. No opinion
is expressed as to the tax treatment of the establishment or funding of the
Foundation.
Respectfully submitted,
SILVER, FREEDMAN & TAFF, L.L.P.
/s/ SILVER, FREEDMAN & TAFF, L.L.P.
-----------------------------------
KPMG Peat Marwick LLP
515 Broadway
Albany NY 12207
Telephone 518 427 4600
April 7, 1998
Board of Trustees
The Hudson City Savings Institution
One Hudson City Centre
P.O. Box 76
Hudson, New York 12534-0076
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 The Hudson City Savings Institution (to
be known as Hudson River Bank & Trust Company) from a state chartered mutual
savings bank to a state chartered stock savings bank (Stock Bank) and the
formation of Hudson River 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") dated April 2 , 1998 relating to the federal income tax consequences
of the proposed transaction prepared by your counsel, Silver, Freedman & Taff,
L.L.P.
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 (o) and Regulation Sections 18-2.3,
18-2.4 and 18-2.5 of the Franchise Tax on Banking Corporations).
<PAGE>
KPMG Peat Marwick LLP
Board of Trustees
The Hudson City Savings Institution
April 7, 1998
Page 2
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.
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 1 12.2 through 1 12.13 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
The Hudson City Savings Institution, Stock Bank, and Hudson River Bancorp 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
/s/ Brian C. Flynn
Brian C. Flynn
Partner
BCF/ms
The Hudson City Savings Institution
401(k) Savings Plan
In RSI Retirement Trust
(As Amended And Restated Effective January 1, 1997
Including Provisions Effective through April 2, 1998, and the Conversion Date)
<PAGE>
TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................... i
INTRODUCTION ............................................................... 1
ARTICLE I -- DEFINITIONS ................................................... 3
ARTICLE II -- ELIGIBILITY AND PARTICIPATION ................................ 16
2.1 Eligibility ....................................................... 16
2.2 Ineligible Employees .............................................. 17
2.3 Participation ..................................................... 17
2.4 Termination of Participation ...................................... 18
2.5 Eligibility upon Reemployment ..................................... 18
ARTICLE III -- CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS .............. 19
3.1 Before-Tax Contributions .......................................... 19
3.2 Limitation on Before-Tax Contributions ............................ 19
3.3 Changes in Before-Tax Contributions ............................... 23
3.4 Matching Contributions ............................................ 24
3.5 Special Contributions ............................................. 25
3.6 Limitation on Matching Contributions .............................. 26
3.7 Aggregate Limit; Multiple Use of Alternative Limitation ........... 27
3.8 Interest on Excess Contributions .................................. 29
3.9 Payment of Contributions to the Trust and the Separate Agency ..... 31
3.10 Rollover Contributions ............................................ 31
3.11 Section 415 Limits on Contributions ............................... 31
ARTICLE IV -- VESTING AND FORFEITURES ...................................... 37
4.1 Vesting ........................................................... 37
4.2 Forfeitures ....................................................... 38
4.3 Vesting upon Reemployment ......................................... 40
ARTICLE V -- TRUST FUND, INVESTMENT ACCOUNTS AND VOTING RIGHTS.............. 41
5.1 Trust Fund and Separate Assets .................................... 41
5.2 Interim Investments ............................................... 42
5.3 Account Values .................................................... 42
5.4 Voting Rights ..................................................... 43
5.5 Tender Offers and Other Offers .................................... 45
5.6 Dissenters' Rights ................................................ 46
5.7 Separate Assets ................................................... 47
5.8 Power to Invest in Employer Securities ............................ 47
ARTICLE VI -- INVESTMENT DIRECTIONS, CHANGES OF INVESTMENT DIRECTIONS
AND TRANSFERS BETWEEN INVESTMENT ACCOUNTS .................... 48
6.1 Investment Directions ............................................. 48
6.2 Change of Investment Directions ................................... 48
6.3 Transfers Between Investment Accounts ............................. 49
6.4 Employees Other than Participants ................................. 49
6.5 Liabilities for Investments in the Employer Stock Fund
for Certain Participants .......................................... 50
ARTICLE VII -- PAYMENT OF BENEFITS ......................................... 51
7.1 General ........................................................... 51
7.2 Non-Hardship Withdrawals .......................................... 52
7.3 Hardship Distributions ............................................ 52
7.4 Distribution of Benefits Following Retirement Or Termination
of Service ........................................................ 57
7.5 Payments upon Retirement or Disability ............................ 58
7.6 Payments upon Termination of Service for Reasons Other Than
Retirement or Disability .......................................... 61
7.7 Payments Upon Death ............................................... 62
7.8 Direct Rollover of Eligible Rollover Distributions ................ 64
7.9 Commencement of Benefits .......................................... 66
7.10 Manner of Payment of Distributions from the Employer Stock Fund ... 68
- --------------------------------------------------------------------------------
i The Hudson City Savings Institution
<PAGE>
TABLE OF CONTENTS (Continued)
ARTICLE VIII -- LOANS TO PARTICIPANTS ...................................... 69
8.1 Definitions and Conditions ........................................ 69
8.2 Loan Amount ....................................................... 69
8.3 Term of Loan ...................................................... 70
8.4 Operational Provisions ............................................ 70
8.5 Repayments ........................................................ 72
8.6 Default ........................................................... 73
8.7 Coordination of Outstanding Account and Payment of Benefits ....... 74
ARTICLE IX -- ADMINISTRATION ............................................... 75
9.1 General Administration of the Plan ................................ 75
9.2 Designation of Named Fiduciaries .................................. 75
9.3 Responsibilities of Fiduciaries ................................... 76
9.4 Plan Administrator ................................................ 77
9.5 Committee ......................................................... 77
9.6 Powers and Duties of the Committee ................................ 78
9.7 Certification of Information ...................................... 80
9.8 Authorization of Benefit Payments ................................. 81
9.9 Payment of Benefits to Legal Custodian ............................ 81
9.10 Service in More Than One Fiduciary Capacity ....................... 81
9.11 Payment of Expenses ............................................... 81
9.12 Administration of Separate Assets ................................. 82
ARTICLE X -- BENEFIT CLAIMS PROCEDURE ...................................... 83
10.1 Definition ........................................................ 83
10.2 Claims ............................................................ 83
10.3 Disposition of Claim .............................................. 83
10.4 Denial of Claim ................................................... 84
10.5 Inaction by Plan Administrator .................................... 84
10.6 Right to Full and Fair Review ..................................... 84
10.7 Time of Review .................................................... 85
10.8 Final Decision .................................................... 85
ARTICLE XI -- AMENDMENT, TERMINATION, AND WITHDRAWAL ....................... 86
11.1 Amendment and Termination ......................................... 86
11.2 Withdrawal from the Trust Fund .................................... 87
ARTICLE XII -- TOP-HEAVY PLAN PROVISIONS ................................... 88
12.1 Introduction ...................................................... 88
12.2 Definitions ....................................................... 88
12.3 Minimum Contributions ............................................. 94
12.4 Impact on Section 415 Maximum Benefits ............................ 95
ARTICLE XIII -- MISCELLANEOUS PROVISIONS ................................... 96
13.1 No Right to Continued Employment .................................. 96
13.2 Merger, Consolidation, or Transfer ................................ 96
13.3 Nonalienation of Benefits ......................................... 96
13.4 Missing Payee ..................................................... 97
13.5 Affiliated Employers .............................................. 97
13.6 Successor Employer ................................................ 98
13.7 Return of Employer Contributions .................................. 98
13.8 Adoption of Plan by Affiliated Employer ........................... 98
13.9 Construction of Language .......................................... 99
13.10 Headings .......................................................... 99
13.11 Governing Law ..................................................... 99
- --------------------------------------------------------------------------------
ii The Hudson City Savings Institution
<PAGE>
INTRODUCTION
Effective as of May 1, 1986 ("Effective Date"), The Hudson City Savings
Institution ("Employer") adopted the Retirement System for Savings Institutions
Agreement and Declaration of Trust ("Agreement") and The Hudson City Savings
Institution 401(k) Savings Plan in Retirement System for Savings Institutions.
Effective as of August 1, 1990, Retirement System for Savings Institutions
effectuated a reorganization through a transfer of its operating assets and
business and certain intangible assets to subsidiaries of a newly organized
corporation, Retirement System Group Inc., in exchange for shares of the common
stock of such company and the spin-off of such company through the allocation of
such shares to the plans of the affected organizations participating in the
Trust on such date. Subsequently, under the Stockholders' Agreement with
Retirement System Group Inc., the Plan sold all of its holdings of Retirement
System Group stock. Also effective as of August 1, 1990, (a) the Trust became
known as the RSI Retirement Trust; and (b) all investment, advisory,
administrative, distribution and consulting services previously performed by the
Trustees are performed under contracts with the newly organized corporation
and/or its subsidiaries, or such other servicing agencies as may be selected by
the Trustees from time to time.
The Plan as amended and restated hereunder incorporates a cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").
The Plan shall constitute a profit-sharing plan within the meaning of Section
401(a) of the Code, without regard to current or accumulated profits of the
Employer, as provided in Section 401(a)(27) of the Code.
The Plan complies with all Internal Revenue Service legislation and regulations
issued to date addressing tax-qualified plans, including the Small Business Job
Protection Act of 1996 and the Taxpayer Relief Act of 1997.
Effective as of the Conversion Date (the date of conversion of the Employer from
mutual to stock ownership), the Employer adopted resolutions which (i) added an
investment fund to the Plan
- --------------------------------------------------------------------------------
1 The Hudson City Savings Institution
<PAGE>
consisting of common stock of Hudson River Bancorp, Inc., and (ii) established
the Plan as a Plan of Partial Participation as defined under the Agreement. In
conjunction with such resolutions, the Employer adopted a Separate Agreement to
provide for the investment of such common stock and designated a Separate Agency
to act as trustee/custodian of such Separate Assets.
The Employer has established, and from time to time, amended the Plan with the
intention that (A) the Plan shall at all times be qualified under Section 401(a)
of the Code, (B) the Agreement, and commencing on the Conversion Date, the
Separate Agreement shall be tax-exempt under Section 501(a) of the Code, and (C)
Employer contributions under the Plan shall be tax deductible under Section 404
of the Code. The provisions of the Plan, the Agreement and commencing on the
Conversion Date, the Separate Agreement shall be construed to effectuate such
intentions.
- --------------------------------------------------------------------------------
2 The Hudson City Savings Institution
<PAGE>
ARTICLE I --
DEFINITIONS
The following words and phrases shall have the meanings hereinafter ascribed to
them. Those words and phrases which have limited application are defined in the
respective Articles in which such terms appear.
1.1 Accounts means the Before-Tax Contribution Account (including Special
Contributions, if any), Matching Contribution Account and Rollover
Contribution Account established under the Plan on behalf of an Employee.
1.2 Actual Contribution Percentage means the ratio (expressed as a percentage)
of the Matching Contributions under the Plan which are made on behalf of an
Eligible Employee for the Plan Year to such Eligible Employee's
compensation (as defined under Section 414(s) of the Code) for the Plan
Year. An Eligible Employee's compensation hereunder shall include
compensation receivable from the Employer for that portion of the Plan Year
during which the Employee is an Eligible Employee, up to a maximum of
$160,000, adjusted in multiples of $10,000 for increases in the
cost-of-living, as prescribed by the Secretary of the Treasury under
Section 401(a)(17)(B) of the Code.
1.3 Actual Deferral Percentage means the ratio (expressed as a percentage) of
the sum of Before-Tax Contributions, and those Qualified Nonelective
Contributions taken into account under the Plan for the purpose of
determining the Actual Deferral Percentage, which are made on behalf of an
Eligible Employee for the Plan Year to such Eligible Employee's
compensation (as defined under Section 414(s) of the Code) for the Plan
Year. An Eligible Employee's compensation hereunder shall include
compensation receivable from the Employer for that portion of the Plan Year
during which the Employee is an Eligible Employee, up to a maximum of
$160,000, adjusted in multiples of $10,000 for increases in the
cost-of-living, as prescribed by the Secretary of the Treasury under
Section 401(a)(17)(B) of the Code.
- --------------------------------------------------------------------------------
3 The Hudson City Savings Institution
<PAGE>
1.4 Affiliated Employer means a member of an affiliated service group (as
defined under Section 414(m) of the Code), a controlled group of
corporations (as defined under Section 414(b) of the Code), a group of
trades or businesses under common control (as defined under Section 414(c)
of the Code) of which the Employer is a member, any leasing organization
(as defined under Section 414(n) of the Code) providing the services of
Leased Employees to the Employer, or any other group provided for under any
and all Income Tax Regulations promulgated by the Secretary of the Treasury
under Section 414(o) of the Code.
1.5 Affiliated Service means employment with an employer during the period that
such employer is an Affiliated Employer.
1.6 Agreement means the RSI Retirement Trust Agreement and Declaration of Trust
as amended and restated August 1, 1990, as amended from time to time. The
Agreement shall be incorporated herein and constitute a part of the Plan.
1.7 Average Actual Contribution Percentage means the average of the Actual
Contribution Percentages of (a) the group comprised of Eligible Employees
who are Highly Compensated Employees or (b) the group comprised of Eligible
Employees who are Non-Highly Compensated Employees, whichever is
applicable.
1.8 Average Actual Deferral Percentage means the average of the Actual Deferral
Percentages of (a) the group comprised of Eligible Employees who are Highly
Compensated Employees or (b) the group comprised of Eligible Employees who
are Non-Highly Compensated Employees, whichever is applicable.
1.9 Before-Tax Contribution Account means the separate, individual account
established on behalf of a Participant to which Before-Tax Contributions
and Special Contributions if any, made on his behalf are credited, together
with all earnings and appreciation thereon, and against which are charged
any withdrawals, loans and other distributions made from such account and
any losses, depreciation or expenses allocable to amounts credited to such
account.
- --------------------------------------------------------------------------------
4 The Hudson City Savings Institution
<PAGE>
1.10 Before-Tax Contributions means the contributions of the Employer made in
accordance with the Compensation Reduction Agreements of Participants
pursuant to Section 3.1.
1.11 Beneficiary means any person who is receiving or is eligible to receive a
benefit under Section 7.7 of the Plan upon the death of an Employee or
former Employee.
1.12 Board means the board of trustees, directors or other governing body of the
Sponsoring Employer.
1.13 Code means the Internal Revenue Code of 1986, as amended from time to time.
1.14 Committee means the person or persons appointed by the Employer in
accordance with Section 9.2(b).
1.15 Compensation means the base compensation receivable by an Employee from the
Employer for the calendar year prior to any reduction pursuant to a
Compensation Reduction Agreement. Base compensation shall include salary,
Before-Tax Contributions, wages and wage continuation payments to an
Employee who is absent due to illness or disability of a short-term nature,
and exclude overtime, commissions, expense allowances, severance pay, fees,
bonuses, contributions other than Before-Tax Contributions made by the
Employer to the Plan, and contributions made by the Employer to any other
pension, insurance, welfare, or other employee benefit plan. In lieu of any
other Compensation paid to sales commission Employees, hereunder,
Compensation shall include only draw against commissions paid to such sales
commission Employees.
Compensation shall not exceed $160,000, adjusted in multiples of $10,000
for increases in the cost-of-living, as prescribed by the Secretary of the
Treasury under Section 401(a)(17)(B) of the Code. For purposes of this
Section 1.15, if the Plan Year in which a Participant's Compensation is
being made is less than twelve (12) calendar months, the amount of
Compensation taken into account for such Plan Year shall be the adjusted
amount, as prescribed by the Secretary of the Treasury under Section
401(a)(17) of the Code, for
- --------------------------------------------------------------------------------
5 The Hudson City Savings Institution
<PAGE>
such Plan Year multiplied by a fraction, the numerator of which is the
number of months taken into account for such Plan Year and the denominator
of which is twelve (12). In determining the dollar limitation hereunder,
compensation received from any Affiliated Employer shall be recognized as
Compensation.
1.16 Compensation Reduction Agreement means an agreement between the Employer
and an Eligible Employee whereby the Eligible Employee agrees to reduce his
Compensation during the applicable payroll period by an amount equal to any
whole percentage thereof, to the extent provided in Section 3.1, and the
Employer agrees to contribute to the Trust, on behalf of such Eligible
Employee, an amount equal to the specified reduction in Compensation.
1.17 Conversion Date means the date of the conversion of the Sponsoring Employer
from mutual to stock ownership on , 1998.
1.18 Disability means a physical or mental condition, determined after review of
those medical reports deemed satisfactory for this purpose, which renders
the Participant totally and permanently incapable of engaging in any
substantial gainful employment based on his education, training and
experience.
1.19 Early Retirement Date means the first day of any month coincident with or
following the Participant's completion of a minimum of five (5) consecutive
years of credited service with the Employer, provided (a) the Participant
has attained age sixty (60) or (b) the sum of the Participant's attained
age and vested service equals or exceeds seventy-five (75) years. For
purposes of this Section 1.19, credited service and vested service mean
credited service and vested service as defined under the Employer's defined
benefit retirement plan.
1.20 Effective Date means May 1, 1986.
1.21 Eligible Employee means an Employee who is eligible to participate in the
Plan pursuant to the provisions of Article II.
1.22 Employee means any person employed by the Employer.
- --------------------------------------------------------------------------------
6 The Hudson City Savings Institution
<PAGE>
1.23 Employer means The Hudson City Savings Institution and any Participating
Affiliate or any successor organization which shall continue to maintain
the Plan set forth herein.
1.24 Employer Resolutions means resolutions adopted by the Board.
1.25 Employer Stock means, commencing on the Conversion Date, the common stock
of Hudson River Bancorp, Inc., the "holding company" of the Sponsoring
Employer.
1.26 Employer Stock Fund means, commencing on the Conversion Date, the Separate
Assets consisting of Employer Stock which shall be maintained in an
Investment Account established for such purpose.
1.27 Employment Commencement Date means the date on which an Employee first
performs an Hour of Service for the Employer upon initial employment or, if
applicable, upon reemployment.
1.28 ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
1.29 Forfeitures means any amounts forfeited pursuant to Section 4.2.
1.30 Hardship means the condition described in Section 7.3.
1.31 Highly Compensated Employee means, with respect to a Plan Year, an Employee
or an employee of an Affiliated Employer who is such an Employee or
employee during the Plan Year for which a determination is being made and
who:
(a) during the Plan Year immediately preceding the Plan Year for which a
determination is being made:
- --------------------------------------------------------------------------------
7 The Hudson City Savings Institution
<PAGE>
(i) received compensation as defined under Section 414(q)(4) of the
Code ("Section 414(q) Compensation") from the Employer, in excess
of $80,000, adjusted as prescribed by the Secretary of the
Treasury under Section 415(d) of the Code, and
(ii) if the Employer elects the application of this clause for the
preceding Plan Year, was a member of the top-paid group of
Employees (as defined under Section 414(q)(3) of the Code)
("Top-Paid Group"), or
(b) at any time during the Plan Year for which a determination is being
made or at any time during the Plan Year immediately preceding the
Plan Year for which a determination is being made, was a five-percent
owner as described under Section 414(q)(2) of the Code.
Highly Compensated Employee also means a former Employee who (A) incurred a
Termination of Service prior to the Plan Year of the determination, (B) is
not credited with an Hour of Service during the Plan Year of the
determination and (C) satisfied the requirements of subsection (a) or (b)
during either the Plan Year of his Termination of Service or any Plan Year
ending coincident with or subsequent to the Employee's attainment of age
fifty-five (55).
The determination of the number and identity of Employees in the Top-Paid
Group shall be made in accordance with Section 414(q) of the Code and
regulations promulgated thereunder by the Secretary of the Treasury.
1.32 Hour of Service means each hour for which an Employee is paid or entitled
to be paid by the Employer for the performance of duties.
1.33 Investment Accounts means, prior to the Conversion Date, any and all of the
investment accounts established by a separate written agreement between the
Employer and the Trustees for the purpose of investing contributions made
to the Trust Fund in accordance with the
- --------------------------------------------------------------------------------
8 The Hudson City Savings Institution
<PAGE>
provisions of the Agreement. The securities and other property in which
contributions to the Investment Accounts of the Trust Fund may be invested
shall be specified in the Agreement and the rights of the Trustees shall be
established in accordance with the provisions of such Agreement. Commencing
on the Conversion Date, Investment Accounts means any and all of the
investment accounts established by Board Resolution and presented to the
Trustees, for the purpose of investing contributions made to the Plan Funds
in accordance with the provisions of the Agreement or the Separate
Agreement, as applicable. The securities and other property in which
contributions to the Investment Accounts of the Plan Funds may be invested
shall be specified in the Agreement or the Separate Agreement, and the
rights of the Trustees or Separate Agency shall be established in
accordance with the provisions of such Agreement and Separate Agreement,
respectively.
1.34 Leased Employee means any individual (other than an Employee of the
Employer or an employee of an Affiliated Employer) who, pursuant to an
agreement between the Employer or any Affiliated Employer and any other
person ("leasing organization"), has performed services for the Employer or
any Affiliated Employer on a substantially full-time basis for a period of
at least one (1) year, and such services are performed under the primary
direction of and control by the Employer or any Affiliated Employer. A
determination as to whether a Leased Employee shall be treated as an
Employee of the Employer or an Affiliated Employer shall be made in
accordance with Section 414(n) of the Code and any and all Income Tax
Regulations promulgated thereunder.
1.35 Matching Contribution Account means the separate, individual account
established on behalf of a Participant to which the Matching Contributions
made on such Participant's behalf are credited, together with all earnings
and appreciation thereon, and against which are charged any withdrawals,
loans and other distributions made from such account and any losses,
depreciation or expenses allocable to amounts credited to such account.
1.36 Matching Contributions means the contributions made by the Employer
pursuant to Section 3.4.
- --------------------------------------------------------------------------------
9 The Hudson City Savings Institution
<PAGE>
1.37 Named Fiduciaries means the Trustees, the Committee, and commencing on the
Conversion Date, the Separate Agency, and such other parties who are
designated by the Sponsoring Employer to control and manage the operation
and administration of the Plan.
1.38 Net Value means the value of an Employee's Accounts as determined as of the
Valuation Date coincident with or next following the event requiring such
determination.
1.39 Non-Highly Compensated Employee means, with respect to a Plan Year, an
Employee who is not a Highly Compensated Employee.
1.40 Normal Retirement Age means the later of (a) the date an Employee attains
age sixty-five (65) or (b) the date an Employee completes six (6) years of
employment with the Employer.
1.41 Normal Retirement Date means the first day of the month coincident with or
next following the Participant's Normal Retirement Age.
1.42 One Year Period of Severance means a twelve (12) consecutive month period
following an Employee's Termination of Service with the Employer during
which the Employee did not perform an Hour of Service.
Notwithstanding the foregoing, if an Employee is absent from employment for
maternity or paternity reasons, such absence during the twenty-four (24)
month period commencing on the first date of such absence shall not
constitute a One Year Period of Severance. An absence from employment for
maternity or paternity reasons means an absence (a) by reason of pregnancy
of the Employee, or (b) by reason of a birth of a child of the Employee, or
(c) by reason of the placement of a child with the Employee in connection
with the adoption of such child by such Employee, or (d) for purposes of
caring for such child for a period beginning immediately following such
birth or placement.
- --------------------------------------------------------------------------------
10 The Hudson City Savings Institution
<PAGE>
1.43 Participant means an Eligible Employee who participates in accordance with
the provisions of Section 2.3, and whose participation in the Plan has not
been terminated in accordance with the provisions of Section 2.4.
1.44 Participating Affiliate means any corporation that is a member of a
controlled group of corporations (within the meaning of Section 414(b) of
the Code) of which the Sponsoring Employer is a member and any
unincorporated trade or business that is a member of a group of trades or
businesses under common control (within the meaning of Section 414(c) of
the Code) of which the Sponsoring Employer is a member, which, with the
prior approval of the Sponsoring Employer and subject to such terms and
conditions as may be imposed by such Sponsoring Employer and the Trustees,
shall adopt this Plan in accordance with the provisions of Section 13.8 and
the Agreement. Such entity shall continue to be a Participating Affiliate
until such entity terminates its participation in the Plan in accordance
with Section 13.8.
1.45 Period of Service means a period commencing with an Employee's Employment
Commencement Date and ending on the date such Employee first incurs a
Termination of Service.
Notwithstanding the foregoing, the period between the first and second
anniversary of the first date of a maternity or paternity absence described
under Section 1.39 shall not be included in determining a Period of
Service.
A period during which an individual was not employed by the Employer shall
nevertheless be deemed to be a Period of Service if such individual
incurred a Termination of Service and:
(a) such Termination of Service was the result of resignation, discharge
or retirement and such individual is reemployed by the Employer within
one (1) year after such Termination of Service; or
- --------------------------------------------------------------------------------
11 The Hudson City Savings Institution
<PAGE>
(b) such Termination of Service occurred when the individual was otherwise
absent for less than one (1) year and he was reemployed by the
Employer within one (1) year after the date such absence began.
All Periods of Service not disregarded under Sections 2.5 and 4.3 shall be
aggregated.
Wherever used in the Plan, a Period of Service means the quotient obtained
by dividing the days in all Periods of Service not disregarded hereunder by
three hundred sixty-five (365) and disregarding any fractional remainder.
1.46 Plan means The Hudson City Savings Institution 401(k) Savings Plan in RSI
Retirement Trust, as herein restated and as it may be amended from time to
time. Commencing on the Conversion Date, the Plan shall be a Plan of
Partial Participation as defined under the Agreement.
1.47 Plan Administrator means the person or persons who have been designated as
such by the Employer in accordance with the provisions of Section 9.4.
1.48 Plan Funds means the assets of the Plan held in the Trust Fund and
commencing on the Conversion Date, Separate Assets held under any Separate
Agreement.
1.49 Plan Year means the calendar year.
1.50 Postponed Retirement Date means the first day of the month coincident with
or next following a Participant's date of actual retirement which occurs
after his Normal Retirement Date.
1.51 Prior Plan means The Hudson City Savings Institution 401(k) Savings Plan in
Retirement System for Savings Institutions as in effect on the date
immediately preceding the Restatement Date.
- --------------------------------------------------------------------------------
12 The Hudson City Savings Institution
<PAGE>
1.52 Qualified Nonelective Contributions means contributions, other than
Matching Contributions, made by the Employer, which (a) Participants may
not elect to receive in cash in lieu of their being contributed to the
Plan; (b) are one hundred percent (100%) nonforfeitable when made; and (c)
are not distributable under the terms of the Plan to Participants or their
Beneficiaries until the earliest of:
(i) the Participant's death, Disability or separation from service for
other reasons;
(ii) the Participant's attainment of age fifty-nine and one-half (59-1/2);
or
(iii) termination of the Plan.
Special Contributions defined under Section 1.60 are Qualified Nonelective
Contributions.
1.53 Restatement Date means January 1, 1997.
1.54 Retirement Date means the Participant's Normal Retirement Date, Early
Retirement Date or Postponed Retirement Date, whichever is applicable.
1.55 Rollover Contribution means (a) a contribution to the Plan of money
received by an Employee from a qualified plan or (b) a contribution to the
Plan of money transferred directly from another qualified plan on behalf of
the Employee, which the Code permits to be rolled over into the Plan.
1.56 Rollover Contribution Account means the separate, individual account
established on behalf of an Employee to which his Rollover Contributions
are credited together with all earnings and appreciation thereon, and
against which are charged any withdrawals, loans and other distributions
made from such account and any losses, depreciation or expenses allocable
to amounts credited to such account.
- --------------------------------------------------------------------------------
13 The Hudson City Savings Institution
<PAGE>
1.57 Separate Agency means, commencing on the Conversion Date, a trustee or a
custodian holding Plan Funds that maintains a Separate Agreement.
1.58 Separate Agreement means, commencing on the Conversion Date, the agreement
between the Employer and a trustee or a custodian to provide for the
investment in Employer Stock. Such Separate Agreement shall be incorporated
herein and constitute a part of the Plan.
1.59 Separate Assets means, commencing on the Conversion Date, those assets of
the Plan as described in Article V which are held in a trust other than the
Trust.
1.60 Special Contributions means the contributions made by the Employer pursuant
to Section 3.5. Special Contributions are Qualified Nonelective
Contributions as defined under Section 1.52.
1.61 Sponsoring Employer means The Hudson City Savings Institution, or any
successor organization which shall continue to maintain the Plan set forth
herein.
1.62 Spouse means a person to whom the Employee was legally married and which
marriage had not been dissolved by formal divorce proceedings that had been
completed prior to the date on which payments to the Employee are scheduled
to commence.
1.63 Termination of Service means the earlier of (a) the date on which an
Employee's service is terminated by reason of his resignation, retirement,
discharge, death or Disability or (b) the first anniversary of the date on
which such Employee's active service ceases for any other reason.
Service in the Armed Forces of the United States of America shall not
constitute a Termination of Service but shall be considered to be a period
of employment by the Employer provided that (i) such military service is
caused by war or other emergency or the Employee is required to serve under
the laws of conscription in time of peace, (ii) the Employee returns to
employment with the Employer within six (6) months following
- --------------------------------------------------------------------------------
14 The Hudson City Savings Institution
<PAGE>
discharge from such military service and (iii) such Employee is reemployed
by the Employer at a time when the Employee had a right to reemployment at
his former position or substantially similar position upon separation from
such military duty in accordance with seniority rights as protected under
the laws of the United States of America. Notwithstanding any provision of
the Plan to the contrary, contributions, benefits and calculation of
Periods of Service with respect to qualified military service will be
provided in accordance with Section 414(u) of the Code.
A leave of absence granted to an Employee by the Employer shall not
constitute a Termination of Service provided that the Participant returns
to the active service of the Employer at the expiration of any such period
for which leave has been granted.
Notwithstanding the foregoing, an Employee who is absent from service with
the Employer beyond the first anniversary of the first date of his absence
for maternity or paternity reasons set forth in Section 1.42 shall incur a
Termination of Service for purposes of the Plan on the second anniversary
of the date of such absence.
1.64 Trust means the trust established or maintained under the Agreement with
respect to the Plan.
1.65 Trust Fund means the assets held in accordance with the Agreement.
1.66 Trustees means the Trustees of the RSI Retirement Trust.
1.67 Units means the units of measure of an Employee's proportionate undivided
beneficial interest in one or more of the Investment Accounts, valued as of
the close of business.
1.68 Valuation Date means each business day.
- --------------------------------------------------------------------------------
15 The Hudson City Savings Institution
<PAGE>
ARTICLE II --
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility
(a) Every Employee who was a Participant in the Prior Plan immediately
prior to the Restatement Date shall continue to be a Participant on
the Restatement Date.
(b) Every other employee who is not excluded under the provisions of
Section 2.2 shall become an Eligible Employee upon satisfying each of
the following conditions:
(i) completion of a Period of Service of one (1) year;
(ii) attainment of age twenty-one (21); and
(iii) classification as a salaried Employee; or classification as a
sales commission Employee; or commencing September 1, 1997,
classification as an hourly paid Employee.
(c) For purposes of determining (i) if an Employee completed a Period of
Service of one (1) year and (ii) Periods of Service pursuant to
Section 2.5, employment with an Affiliated Employer shall be deemed
employment with the Employer.
(d) An Employee who otherwise satisfies the requirements of this Section
2.1 but who is excluded under the provisions of Section 2.2 shall
become an Eligible Employee immediately upon classification as an
Employee under the provisions of subsection (b)(iii).
- --------------------------------------------------------------------------------
16 The Hudson City Savings Institution
<PAGE>
2.2 Ineligible Employees
The following classes of Employees are ineligible to participate in the
Plan:
(a) Employees compensated on an hourly, daily, fee, or retainer basis,
and, commencing September 1, 1997, the exclusion for Employees
compensated on an hourly basis shall no longer apply for contributions
only, there will be no Matching Contributions by The Hudson City
Savings Institution;
(b) Leased Employees;
(c) Employees in a unit of Employees covered by a collective bargaining
agreement with the Employer pursuant to which employee benefits were
the subject of good faith bargaining and which agreement does not
expressly provide that Employees of such unit be covered under the
Plan.
2.3 Participation
An Eligible Employee shall automatically participate as of the first day of
any payroll period of any calendar month following satisfaction of the
eligibility requirements set forth in Section 2.1, and, either: (a) an
election for Before-Tax Contributions in accordance with Section 3.1 or (b)
eligibility for Special Contributions in accordance with Section 3.5. An
election for Before-Tax Contributions shall be evidenced by completing and
filing the form prescribed by the Committee not less than ten (10) days
prior to the date participation is to commence. Such form shall include,
but not be limited to, a Compensation Reduction Agreement, a designation of
Beneficiary, and an investment direction as described in Section 6.1. By
completing and filing such form, the Eligible Employee authorizes the
Employer to make the applicable payroll deductions from Compensation,
commencing on the first applicable payday coincident with or next following
the effective date of the Eligible Employee's election to participate. In
the case of Special Contributions, a Participant shall complete a form
prescribed by the Committee, designating a Beneficiary and an investment
direction as described in Section 6.1.
- --------------------------------------------------------------------------------
17 The Hudson City Savings Institution
<PAGE>
2.4 Termination of Participation
Participation in the Plan shall terminate on the earlier of the date a
Participant dies or the entire vested interest in the Net Value of such
Participant's Accounts has been distributed.
2.5 Eligibility upon Reemployment
If an Employee incurs a One Year Period of Severance prior to satisfying
the eligibility requirements of Section 2.1, service prior to such One Year
Period of Severance shall be disregarded and such Employee must satisfy the
eligibility requirements of Section 2.1 as a new Employee.
If an Employee incurs a One Year Period of Severance after satisfying the
eligibility requirements of Section 2.1 and:
(a) if such Employee is not vested in any Matching Contributions, incurs a
One Year Period of Severance and again performs an Hour of Service,
the Employee shall receive credit for Periods of Service prior to a
One Year Period of Severance only if the number of consecutive One
Year Periods of Severance is less than the greater of: (i) five (5)
years or (ii) the aggregate number of such Employee's Periods of
Service credited before his One Year Period of Severance. If such
former Employee's Periods of Service prior to his One Year Period of
Severance are recredited under this Section 2.5, such former Employee
shall be eligible to participate immediately upon reemployment,
provided such Employee is not excluded from participating under the
provisions of Section 2.2. If such former Employee's Periods of
Service prior to his One Year Period of Severance are not recredited
under this Section 2.5, such Employee must satisfy the eligibility
requirements of Section 2.1 as a new Employee;
(b) if such Employee is vested in any Matching Contributions, incurs a One
Year Period of Severance and again performs an Hour of Service, the
Employee shall receive credit for Periods of Service prior to his One
Year Period of Severance and shall be eligible to participate in the
Plan immediately upon reemployment, provided such Employee is not
excluded from participating under the provisions of Section 2.2.
- --------------------------------------------------------------------------------
18 The Hudson City Savings Institution
<PAGE>
ARTICLE III --
CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS
3.1 Before-Tax Contributions
The Employer shall make Before-Tax Contributions for each payroll period in
an amount equal to the amount by which a Participant's Compensation has
been reduced with respect to such period under his Compensation Reduction
Agreement. Subject to the limitations set forth in Sections 3.2 and 3.11,
the amount of reduction authorized by the Eligible Employee shall not be
less than two percent (2%) nor greater than ten percent (10%). Commencing
April 2, 1998, the amount of reduction authorized by the Eligible Employee
shall not be less than two percent (2%) nor greater than fifteen percent
(15%). The Before-Tax Contributions made on behalf of a Participant shall
be credited to such Participant's Before-Tax Contribution Account and shall
be invested in accordance with Article VI of the Plan.
3.2 Limitation on Before-Tax Contributions
(a) The percentage of Before-Tax Contributions made on behalf of a
Participant who is a Highly Compensated Employee shall be limited so
that the Average Actual Deferral Percentage for the group of such
Highly Compensated Employees for the Plan Year does not exceed the
greater of:
(i) the Average Actual Deferral Percentage for the group of Eligible
Employees who are Non-Highly Compensated Employees for
(A) in the case of the 1997 Plan Year, the current or preceding
Plan Year (as determined by the Plan Administrator)
multiplied by 1.25; and
(B) in the case of Plan Years beginning on and after January 1,
1998, the preceding Plan Year multiplied by 1.25; or
- --------------------------------------------------------------------------------
19 The Hudson City Savings Institution
<PAGE>
(ii) the Average Actual Deferral Percentage for the group of Eligible
Employees who are Non-Highly Compensated Employees for
(A) in the case of the 1997 Plan Year, the current or preceding
Plan Year (as determined by the Plan Administrator),
multiplied by two (2); and
(B) in the case if Plan Years beginning on and after January 1,
1998, the preceding Plan Year multiplied by two,
provided, in the case of (ii)(A) or (ii)(B) above, that the
difference in the Average Actual Deferral Percentage for eligible
Highly Compensated Employees and eligible Non-Highly Compensated
Employees does not exceed two percent (2%). Use of this
alternative limitation shall be subject to the provisions of
Income Tax Regulations Section issued under Code Section
401(m)(9) regarding the multiple use of the alternative deferral
tests set forth in Sections 401(k) and 401(m) of the Code.
The above subsections (i) and (ii) shall be subject to the
distribution provisions of the last paragraph of Section 3.11(f).
If the Average Actual Deferral Percentage for the group of eligible
Highly Compensated Employees exceeds the limitations set forth in the
preceding paragraph, the amount of excess Before-Tax Contributions for
a Highly Compensated Employee shall be determined by "leveling" (as
hereafter defined), the highest Before-Tax Contributions made by
Highly Compensated Employees until the Average Actual Deferral
Percentage test for the group of eligible Highly Compensated Employees
complies with such limitations. For purposes of this paragraph,
"leveling" means reducing the Before-Tax Contribution of the Highly
Compensated Employee with the highest Before-Tax Contribution amount
to the extent required to:
- --------------------------------------------------------------------------------
20 The Hudson City Savings Institution
<PAGE>
(A) enable the Average Actual Deferral Percentage limitations to
be met, or
(B) cause such Highly Compensated Employee's Before-Tax
Contribution amount to equal the dollar amount of the
Before-Tax Contribution of the Highly Compensated Employee
with the next highest Before-Tax Contribution amount by
distribution of such excess Before-Tax Contributions, as
described below, to the Highly Compensated Employee whose
Before-Tax Contributions equal the highest dollar amount,
and repeating such process until the Average Actual Deferral
Percentage for the group of eligible Highly Compensated Employees
complies with the Average Actual Deferral Percentage limitations.
If Before-Tax Contributions made on behalf of a Participant during any
Plan Year exceed the maximum amount applicable to a Participant as set
forth above, any such contributions, including any earnings thereon as
determined under Section 3.8, shall be characterized as Compensation
payable to the Participant and shall be paid to the Participant from
his Before-Tax Contribution Account no later than two and one-half
(2-1/2) months after the close of such Plan Year.
If Before-Tax Contributions during any Plan Year exceed the maximum
amount applicable to a Participant as set forth above, any Matching
Contributions, including any earnings thereon as determined under
Section 3.7, that are attributable to Before-Tax Contributions which
are returned to the Participant as provided hereunder, shall be
treated as Forfeitures under Section 4.2.
In the event that the Plan satisfies the requirements of Section
401(a)(4) or 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of
Section 401(a)(4) or 410(b) of the Code only if aggregated with the
Plan, then this Section 3.2 shall be applied by determining the Actual
Deferral Percentages of Eligible Employees as if all such plans were a
single plan.
- --------------------------------------------------------------------------------
21 The Hudson City Savings Institution
<PAGE>
If any Highly Compensated Employee is a Participant in two (2) or more
cash or deferred arrangements of the Employer, for purposes of
determining the Actual Deferral Percentage with respect to such Highly
Compensated Employee, all cash or deferred arrangements shall be
treated as one (1) cash or deferred arrangement.
(b) Before-Tax Contributions, and elective deferrals (as defined under
Section 402(g) of the Code) under all other plans, contracts or
arrangements of the Employer made on behalf of any Participant during
the 1997 Plan Year shall not exceed $9,500. During the 1998 Plan Year,
such amount shall be increased to $10,000. For Plan Years commencing
after December 31, 1998, Before-Tax Contributions and any elective
deferrals (as defined under Section 402(g) of the Code) under all
other plans, contracts or arrangements of the Employer may be further
adjusted as prescribed by the Secretary of the Treasury under Section
415(d) of the Code. This Section 3.2(b) shall be subject to the
distribution provisions of the last paragraph of Section 3.11(f).
(c) If Before-Tax Contributions made on behalf of a Participant during any
Plan Year exceed the dollar limitation set forth in subsection (b),
such contributions, including any earnings thereon as determined under
Section 3.8, shall be characterized as Compensation payable to the
Participant and shall be paid to the Participant from his Before-Tax
Contribution Account no later than April 15th of the calendar year
following the close of such Plan Year.
If Before-Tax Contributions during any Plan Year exceed the maximum
dollar amount applicable to a Participant as set forth in subsection
(b), any Matching Contributions, including any earnings thereon as
determined under Section 3.7, that are attributable to Before-Tax
Contributions which are returned to the Participant as provided
hereunder, shall be treated as Forfeitures under Section 4.2.
(d) Subject to the requirements of Sections 401(a) and 401(k) of the Code,
the maximum amounts under subsections (a) and (b) may differ in amount
or percentage as between individual Participants or classes of
Participants, and any Compensation
- --------------------------------------------------------------------------------
22 The Hudson City Savings Institution
<PAGE>
Reduction Agreement may be terminated, amended, or suspended without
the consent of any such Participant or Participants in order to comply
with the provisions of such subsections (a) and (b).
3.3 Changes in Before-Tax Contributions
Unless (a) an election is made to the contrary, or (b) a Participant
receives a Hardship distribution pursuant to Section 7.3(c)(iii), the
percentage of Before-Tax Contributions made under Section 3.1 shall
continue in effect so long as the Participant has a Compensation Reduction
Agreement in force. A Participant may, by completing the applicable form,
prospectively increase or decrease the rate of Before-Tax Contributions
made on his behalf to any of the percentages authorized under Section 3.1
or suspend Before-Tax Contributions without withdrawing from participation
in the Plan. Such form must be filed at least ten (10) days prior to the
first day of the payroll period with respect to which such change is to
become effective. A Participant who has Before-Tax Contributions made on
his behalf suspended may resume such contributions by completing and filing
the applicable form. Only twice in any Plan Year may an election be made
which would prospectively increase, decrease, suspend or resume Before-Tax
Contributions made on behalf of a Participant.
Notwithstanding the foregoing, a Participant who receives a Hardship
distribution pursuant to Section 7.3(c)(iii) shall have his Compensation
Reduction Agreement deemed null and void and all Before-Tax Contributions
made on behalf of such Participant shall be suspended until the later to
occur of: (i) twelve (12) months after receipt of the Hardship distribution
and (ii) the first payroll period which occurs ten (10) days following the
completion and filing of a Compensation Reduction Agreement authorizing the
resumption of Before-Tax Contributions to be made on his behalf. Before-Tax
Contributions following a Hardship distribution made pursuant to Section
7.3(c)(iii) shall be subject to the following limitations:
(A) Before-Tax Contributions for the Participant's taxable year
immediately following the taxable year of the Hardship distribution
shall not exceed the applicable limit under Section 402(g) of the Code
for such next taxable year less the amount of such Participant's
Before-Tax Contributions for the taxable year of the Hardship
distribution, and
- --------------------------------------------------------------------------------
23 The Hudson City Savings Institution
<PAGE>
(B) the percentage of Before-Tax Contributions for the twelve (12) month
period following the mandatory twelve (12) month suspension period
shall not exceed the percentage of Before-Tax Contributions made on
behalf of the Participant as set forth in the last Compensation
Reduction Agreement in effect prior to the Hardship distribution.
Before-Tax Contributions based on Compensation for the period during which
such contributions had been suspended or decreased may not be made up at a
later date.
3.4 Matching Contributions
(a) The Employer shall make contributions on behalf of each Participant,
other than Participants compensated on an hourly basis in accordance
with Section 2.2(a), in an amount equal to fifty percent (50%) of such
Participant's Before-Tax Contributions up to a maximum of four percent
(4%) of the Participant's Compensation.
(b) Matching Contributions shall be credited to the Participant's Matching
Contribution Account and shall be invested in accordance with Article
VI of the Plan.
(c) If a Participant terminates his Before-Tax Contributions, Matching
Contributions attributable to such contributions will also cease. If
Before-Tax Contributions are suspended, the Matching Contributions
attributable to such contributions will be suspended for the same
period. Subject to the limitations set forth in subsection (a), if
Before-Tax Contributions are increased or decreased, Matching
Contributions attributable to such contributions will be increased or
decreased during the same period. Matching Contributions for the
period during which Before-Tax Contributions had been suspended or
decreased may not be made up at a later date.
(d) Matching Contributions may be reviewed and modified by the Employer's
Board, from time to time.
- --------------------------------------------------------------------------------
24 The Hudson City Savings Institution
<PAGE>
3.5 Special Contributions
In addition to any other contributions, the Employer may, in its
discretion, make Special Contributions for a Plan Year to the Before-Tax
Contribution Account of any Eligible Employees. Such Special Contributions
may be limited to the amount necessary to insure that the Plan complies
with the requirements of Section 401(k) of the Code. The Special
Contributions made on behalf of a Participant shall be invested in
accordance with Article VI of the Plan.
The Employer may provide that Special Contributions be made only on behalf
of each Eligible Employee who is a Non-Highly Compensated Employee on the
last day of the Plan Year. Such Special Contributions shall be allocated in
proportion to each such Eligible Employee's Compensation for the Plan Year.
Any other provision of the Plan to the contrary notwithstanding, no
Matching Contributions shall be made with respect to any Special
Contributions.
3.6 Limitation on Matching Contributions
The Actual Contribution Percentage made on behalf of a Participant who is a
Highly Compensated Employee shall be limited so that the Average Actual
Contribution Percentage for the group of such Highly Compensated Employees
for the Plan Year shall not exceed the greater of:
(a) the Average Actual Contribution Percentage for the group of Eligible
Employees who are Non-Highly Compensated Employees for
(i) in the case of the 1997 Plan Year, the current or preceding Plan
Year (as determined by the Plan Administrator) multiplied by
1.25; and
- --------------------------------------------------------------------------------
25 The Hudson City Savings Institution
<PAGE>
(ii) in the case of the Plan Years beginning on and after January 1,
1998, the preceding Plan Year multiplied by 1.25; or
(b) the Average Actual Contribution Percentage for the group of Eligible
Employees who are Non-Highly Compensated Employees for
(i) in the case of the 1997 Plan Year, the current or preceding Plan
Year (as determined by the Plan Administrator) multiplied by two
(2), and
(ii) in the case of Plan Years beginning on and after January 1, 1998,
the preceding Plan Year, multiplied by two (2);
provided, in the case of (b)(i) and (b)(ii) above, that the difference
in the Average Actual Contribution Percentage for Highly Compensated
Employees and Non-Highly Compensated Employees does not exceed two
percent (2%). Use of this alternative limitation shall be subject to
the provisions of Income Tax Regulations issued under Code Section
401(m)(9) regarding the multiple use of the alternative deferral tests
set forth in Sections 401(k) and 401(m) of the Code.
The above subsections (a) and (b) shall be subject to the distribution
provisions of the last paragraph of Section 3.11(f).
If the Average Actual Contribution Percentage for the group of eligible
Highly Compensated Employees exceeds the limitations set forth in the
preceding paragraph, the amount of excess Matching Contributions for a
Highly Compensated Employee shall be determined by "leveling" (as hereafter
defined,) the highest Matching Contributions until the Average Actual
Contribution Percentage test for the group of eligible Highly Compensated
Employees complies with such limitations. For purposes of this paragraph,
"leveling" means reducing the Matching Contributions made on behalf of the
Highly Compensated Employee with the highest Matching Contribution amount
to the extent required to:
- --------------------------------------------------------------------------------
26 The Hudson City Savings Institution
<PAGE>
(A) enable the Average Actual Contribution Percentage limitations to
be met, or
(B) cause such Highly Compensated Employee's Matching Contribution
amount to equal the dollar amount of the Matching Contribution
made on behalf of the Highly Compensated Employee with the next
highest Matching Contribution amount
and repeating such process until the Average Actual Contribution Percentage
for the group of eligible Highly Compensated Employees complies with the
Average Actual Contribution Percentage limitations.
If Matching Contributions during any Plan Year exceed the maximum amount
applicable to a Participant as set forth above, any such contributions,
including any earnings thereon as determined under Section 3.8, shall,
whether or not vested, be treated as Forfeitures under Section 4.2.
In the event that the Plan satisfies the requirements of Section 410(b) of
the Code only if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Section 410(b) of the Code only if
aggregated with the Plan, then this Section 3.6 shall be applied by
determining the Actual Contribution Percentages of Eligible Employees as if
all such plans were a single plan.
3.7 Aggregate Limit; Multiple Use of Alternative Limitation
Multiple use of the alternative limitation in determining the Average
Actual Deferral Percentage and Average Actual Contribution Percentage shall
not be permitted.
Multiple use of the alternative limitation occurs if, for the group of
Eligible Employees who are Highly Compensated Employees, the sum of the
Average Actual Deferral Percentage and the Average Actual Contribution
Percentage exceeds the Aggregate Limit.
- --------------------------------------------------------------------------------
27 The Hudson City Savings Institution
<PAGE>
For purposes of this Section 3.7, Aggregate Limit shall mean the greater of
(a) or (b), where (a) and (b) are as follows:
(a) the sum of:
(i) one hundred twenty-five percent (125%) of the greater of:
(A) the Average Actual Deferral Percentage for the group of
Eligible Employees who are Non-Highly Compensated Employees
for the Plan Year; or
(B) the Average Actual Contribution Percentage for the group of
Eligible Employees who are Non-Highly Compensated Employees
for the Plan Year; and
(ii) two (2) plus the lesser of subsection (a)(i)(A) or (a)(i)(B). In
no event shall this amount exceed two hundred percent (200%) of
the lesser of subsection (a)(i)(A) or (a)(i)(B).
(b) the sum of:
(i) one hundred twenty-five percent (125%) of the lesser of:
(A) the Average Actual Deferral Percentage for the group of
Eligible Employees who are Non-Highly Compensated Employees
for the Plan Year; or
(B) the Average Actual Contribution Percentage for the group of
Eligible Employees who are Non-Highly Compensated Employees
for the Plan Year; and
- --------------------------------------------------------------------------------
28 The Hudson City Savings Institution
<PAGE>
(ii) two (2) plus the greater of subsection (b)(i)(A) or (b)(i)(B). In
no event shall this amount exceed two hundred percent (200%) of
the greater of subsection (b)(i)(A) or (b)(i)(B).
If multiple use of the alternative limitation occurs, the excess Before-Tax
Contributions for Highly Compensated Employees under the Plan shall be
reduced in accordance with the provisions of Income Tax Regulations issued
under Code Section 401(m)(9) .
3.8 Interest on Excess Contributions
In the event Before-Tax Contributions and/or Matching Contributions made on
behalf of a Participant during a Plan Year exceed the maximum allowable
amount as described in Section 3.2(a), 3.2(b) or 3.7 ("Excess
Contributions") and such Excess Contributions and earnings thereon are
payable to the Participant under the applicable provisions of the Plan,
earnings on such Excess Contributions for the period commencing with the
first day of the Plan Year in which the Excess Contributions were made and
ending with the date of payment to the Participant ("Allocation Period")
shall be determined in accordance with the provisions of this Section 3.8.
The earnings allocable to excess Before-Tax Contributions for an Allocation
Period shall be equal to the sum of (a) plus (b) where (a) and (b) are
determined as follows:
(a) The amount of earnings attributable to the Participant's Before-Tax
Contribution Account for the Plan Year multiplied by a fraction, the
numerator of which is the excess Before-Tax Contributions and Special
Contributions for the Plan Year, and the denominator of which is the
sum of (i) the Net Value of the Participant's Before-Tax Contribution
Account as of the last day of the immediately preceding Plan Year and
(ii) the contributions (including the Excess Contributions) made to
the Before-Tax Contribution Account on the Participant's behalf during
such Plan Year.
- --------------------------------------------------------------------------------
29 The Hudson City Savings Institution
<PAGE>
(b) The amount of earnings attributable to the Participant's Before-Tax
Contribution Account for the period commencing with the first day of
the Plan Year in which payment is made to the Participant and ending
with the date of payment to the Participant multiplied by a fraction,
the numerator of which is the excess Before-Tax Contributions and
Special Contributions made to the Before-Tax Contribution Account on
the Participant's behalf during the Plan Year immediately preceding
the Plan Year in which the payment is made to the Participant, and the
denominator of which is the Net Value of the Participant's Before-Tax
Contribution Account on the first day of the Plan Year in which the
payment is made to the Participant.
The earnings allocable to excess Matching Contributions for an Allocation
Period shall be equal to the sum of (A) and (B) where (A) and (B) are
determined as follows:
(A) The amount of earnings attributable to the Participant's Matching
Contribution Account for the Plan Year multiplied by a fraction, the
numerator of which is the excess Matching Contributions for the Plan
Year, and the denominator of which is the sum of (I) the Net Value of
the Participant's Matching Contribution Account as of the last day of
the immediately preceding Plan Year and (II) the contributions
(including the Excess Contributions) made to the Matching Contribution
Account on the Participant's behalf during such Plan Year.
(B) The amount of earnings attributable to the Participant's Matching
Contribution Account for the period commencing with the first day of
the Plan Year in which payment is made to the Participant and ending
with the date of payment to the Participant multiplied by a fraction,
the numerator of which is the excess Matching Contributions made to
the Matching Contribution Account on the Participant's behalf during
the Plan Year immediately preceding the Plan Year in which the payment
is made to the Participant, and the denominator of which is the Net
Value of the Participant's Matching Contribution Account on the first
day of the Plan Year in which the payment is made to the Participant.
- --------------------------------------------------------------------------------
30 The Hudson City Savings Institution
<PAGE>
3.9 Payment of Contributions to the Trust and the Separate Agency
As soon as possible after each payroll period, but not less often than once
a month, the Employer shall deliver (a) to the Trustees: (i) the Before-Tax
Contributions required to be made to the Trust during such payroll period
under the applicable Compensation Reduction Agreements, and (ii) the amount
of all Matching Contributions required to be made to the Trust for such
payroll period, and (b) commencing on the Conversion Date, to the Separate
Agency: (i) the Before-Tax Contributions required to be made to the
Separate Agency during such payroll period under the applicable
Compensation Reduction Agreements and (ii) the amount of all Matching
Contributions required to be made to the Separate Agency for such payroll
period.
Special Contributions to the Trust and commencing on the Conversion Date,
to the Separate Agency, shall be forwarded by the Employer to the Trustees
and to the Separate Agency no later than the time for filing the Employer's
federal income tax return, plus any extensions thereon, for the Plan Year
to which they are attributable.
3.10 Rollover Contributions
Subject to such terms and conditions as may from time to time be
established by the Committee, the Trustees and commencing on the Conversion
Date, the Separate Agency, an Employee, whether or not a Participant, may
contribute a Rollover Contribution to the Plan Fund; provided, however,
that such Employee shall submit a written certification, in form and
substance satisfactory to the Committee, that the contribution qualifies as
a Rollover Contribution. The Committee shall be entitled to rely on such
certification and shall accept the contribution on behalf of the Trustees
and the Separate Agency. Rollover Contributions shall be credited to an
Employee's Rollover Contribution Account and shall be invested in
accordance with Article VI of the Plan.
3.11 Section 415 Limits on Contributions
(a) For purposes of this Section 3.11, the following terms and phrases
shall have the meanings hereafter ascribed to them:
- --------------------------------------------------------------------------------
31 The Hudson City Savings Institution
<PAGE>
(i) "Annual Additions" shall mean the sum of the following amounts
credited to a Participant's Accounts for the Limitation Year: (A)
Employer contributions, including Before-Tax Contributions and
Matching Contributions; (B) any Employee contributions; (C)
forfeitures; and (D) contributions attributable to medical
benefits as described in Sections 415(1)(1) and 419A(d)(2) of the
Code. Annual Additions include the following contributions
credited to a Participant's Accounts for the Limitation Year,
regardless of whether such contributions have been distributed to
the Participant:
(I) Before-Tax Contributions which exceed the limitations set
forth in Section 3.2(a);
(II) Before-Tax Contributions made on behalf of a Highly
Compensated Employee which exceed the limitations set forth
in Section 3.2(b); and
(III) Matching Contributions made on behalf of a Highly
Compensated Employee which exceed the limitations set forth
in Section 3.7.
(ii) "Current Accrued Benefit" shall mean a Participant's annual
accrued benefit under a defined benefit plan, determined in
accordance with the meaning of Section 415(b)(2) of the Code, as
if the Participant had separated from service as of the close of
the last Limitation Year beginning before January 1, 1987. In
determining the amount of a Participant's Current Accrued
Benefit, the following shall be disregarded:
(A) any change in the terms and conditions of the defined
benefit plan after May 5, 1986; and
(B) any cost of living adjustment occurring after May 5, 1986.
- --------------------------------------------------------------------------------
32 The Hudson City Savings Institution
<PAGE>
(iii) "Defined Benefit Plan" and "Defined Contribution Plan" shall
have the meanings set forth in Section 415(k) of the Code.
(iv) "Defined Benefit Plan Fraction" for a Limitation Year shall mean
a fraction, (A) the numerator of which is the aggregate
projected annual benefit (determined as of the last day of the
Limitation Year) of the Participant under all defined benefit
plans (whether or not terminated) maintained by the Employer,
and (B) the denominator of which is the lesser of: (I) the
product of 1.25 (or such adjustment as required under Section
12.4) and the dollar limitation in effect under Section
415(b)(1)(A) of the Code, adjusted as prescribed by the
Secretary of the Treasury under Section 415(d) of the Code, or
(II) the product of 1.4 and the amount which may be taken into
account with respect to such Participant under Section
415(b)(1)(B) of the Code for such Limitation Year.
Notwithstanding the above, if the Participant was a participant
in one or more defined benefit plans of the Employer in
existence on May 6, 1986, the dollar limitation of the
denominator of this fraction will not be less than the
Participant's Current Accrued Benefit.
(v) "Defined Contribution Plan Fraction" for a Limitation Year shall
mean a fraction, (A) the numerator of which is the sum of the
Participant's Annual Additions under all defined contribution
plans (whether or not terminated) maintained by the Employer for
the current year and all prior Limitation Years (including
annual additions attributable to the Participant's nondeductible
employee contributions to all defined benefit plans (whether or
not terminated) maintained by the Employer), and (B) the
denominator of which is the sum of the maximum aggregate amounts
for the current year and all prior Limitation Years with the
Employer (regardless of whether a defined contribution plan was
maintained by the Employer). "Maximum aggregate amounts" shall
mean the lesser of (I) the product of 1.25 (or such adjustment
as required under Section 12.4) and the dollar limitation in
effect under Section 415(c)(1)(A) of the Code, adjusted as
prescribed by the Secretary of the Treasury under Section 415(d)
of the Code, or (II) the product of 1.4 and the amount that may
be taken into account under Section 415(c)(1)(B) of the
- --------------------------------------------------------------------------------
33 The Hudson City Savings Institution
<PAGE>
Code; provided, however, that the Committee may elect, on a
uniform and nondiscriminatory basis, to apply the special
transition rule of Section 415(e)(6) of the Code applicable to
Limitation Years ending before January 1, 1983 in determining
the denominator of the Defined Contribution Plan Fraction.
(vi) "Limitation Year" shall mean the calendar year.
(vii) "Section 415 Compensation" shall be a Participant's remuneration
as defined in Income Tax Regulations Sections 1.415-2(d)(2), (3)
and (6).
(b) For purposes of applying the Section 415 limitations, the Employer and
all members of a controlled group of corporations (as defined under
Section 414(b) of the Code as modified by Section 415(h) of the Code),
all commonly controlled trades or businesses (as defined under Section
414(c) of the Code as modified by Section 415(h) of the Code), all
affiliated service groups (as defined under Section 414(m) of the
Code) of which the Employer is a member, any leasing organization (as
defined under Section 414(n) of the Code) that employs any person who
is considered an Employee under Section 414(n) of the Code and any
other group provided for under any and all Income Tax Regulations
promulgated by the Secretary of the Treasury under Section 414(o) of
the Code, shall be treated as a single employer.
(c) If the Employer maintains more than one qualified Defined Contribution
Plan on behalf of its Employees, such plans shall be treated as one
Defined Contribution Plan for purposes of applying the Section 415
limitations of the Code.
(d) Notwithstanding anything contained in the Plan to the contrary, in no
event shall the Annual Additions to a Participant's Accounts for a
Limitation Year exceed the lesser of:
- --------------------------------------------------------------------------------
34 The Hudson City Savings Institution
<PAGE>
(i) $30,000 as adjusted in multiples of $5,000 for increases in the
cost-of-living as prescribed by the Secretary of the Treasury
under Section 415(d) of the Code; or
(ii) twenty-five percent (25%) of the Participant's Section 415
Compensation for such Limitation Year. For purposes of this
subsection (d)(ii), Section 415 Compensation shall not include
(A) any contribution for medical benefits within the meaning of
Section 419A(f)(2) of the Code after separation from service,
which is otherwise treated as an Annual Addition, and (B) any
amount otherwise treated as an Annual Addition under Section
415(l)(1) of the Code.
(e) If the Annual Additions to a Participant's Accounts for a Limitation
Year exceed the limitation set forth in subsection (d) above during
the Limitation Year, any or all of the following contributions on
behalf of such Participant shall be immediately adjusted to that
amount which will result in such Annual Additions not exceeding the
limitation set forth in subsection (d):
(i) Before-Tax Contributions;
(ii) Special Contributions; and
(iii) Matching Contributions.
(f) If the Annual Additions to a Participant's Accounts for a Limitation
Year exceed the limitations set forth in subsection (d) above at the
end of a Limitation Year, such excess amounts shall not be treated as
Annual Additions in such Limitation Year but shall instead be treated
in accordance with the following:
(i) such excess amounts shall be used to reduce the Before-Tax
Contributions, Matching Contributions and/or Special
Contributions to be made on behalf
- --------------------------------------------------------------------------------
35 The Hudson City Savings Institution
<PAGE>
of such Participant in the succeeding Limitation Year, provided
that such Participant is an Eligible Employee during such
succeeding Limitation Year. If such Participant is not an
Eligible Employee or ceases to be an Eligible Employee during
such succeeding Limitation Year, any remaining excess amounts
from the preceding Limitation Year shall be allocated during such
succeeding Limitation Year to each Participant then actively
participating in the Plan. Such allocation shall be in proportion
to the Before-Tax Contributions made to date on his behalf for
such Limitation Year, or the prior Limitation Year with respect
to an allocation as of the beginning of a Limitation Year, before
any other contributions are made in such succeeding Limitation
Year; or
(ii) such excess amounts may be reduced by the distribution of such
Participant's Before-Tax Contributions to such Participant.
The Employer will, at the end of the Limitation Year in which such
excess amounts were made, choose the manner in which to treat such
excess amounts on a uniform and nondiscriminatory basis on behalf of
all affected Participants. If such excess amounts are reduced by the
distribution in subsection (ii), the amounts of such distribution
shall not be taken into account for purposes of Sections 3.2(a)(i) and
(ii), 3.6(a) and (b), or in determining the limitation in Section
3.2(b). In addition, any Matching Contributions attributable to such
amounts shall constitute Forfeitures as described in Section 4.2.
(g) If a Participant participates in both (i) the Plan and/or any other
defined contribution plan maintained by the Employer and (ii) any
defined benefit plan or plans maintained by the Employer, the sum of
the Defined Contribution Plan Fraction and the Defined Benefit Plan
Fraction shall not exceed the sum of 1.0. This subsection (g) shall
not apply with respect to Plan Years beginning on or after January 1,
2000.
(h) If, for any Plan Year commencing prior to January 1, 2000, the sum
determined under subsection (g) for any Participant exceeds 1.0, the
Defined Benefit Plan Fraction of such Participant as provided in the
defined benefit plan or plans maintained by the Employer shall be
reduced in order that such sum shall not exceed 1.0.
- --------------------------------------------------------------------------------
36 The Hudson City Savings Institution
<PAGE>
ARTICLE IV --
VESTING AND FORFEITURES
4.1 Vesting
(a) An Employee shall always be fully vested in the Net Value of his
Before-Tax Contribution Account and the Net Value of his Rollover
Contribution Account.
(b) A Participant shall become fully vested in the Net Value of his
Matching Contribution Account upon the earlier of such Participant's
(i) Normal Retirement Age or (ii) termination of employment by reason
of death, Disability or reaching his Retirement Date.
(c) A Participant who is not fully vested under subsection (b) shall be
vested in the Net Value of his Matching Contribution Account in
accordance with the following schedule:
Vested
Period of Service Percentage
----------------------------- ----------
Less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 or more years 100%
For purposes of determining a Participant's Period of Service under
this subsection (c) and under Section 4.3, employment with an
Affiliated Employer shall be deemed employment with the Employer.
- --------------------------------------------------------------------------------
37 The Hudson City Savings Institution
<PAGE>
For purposes of determining a Participant's vested percentage of the
Net Value of his Matching Contribution Account, all Periods of Service
shall be included except Periods of Service during which the Employer
did not maintain the Plan and Prior Plan.
(d) The vested Net Value of a Participant's Matching Contribution Account,
shall be determined as follows:
(i) the Participant's Matching Contribution Account shall first be
increased to include (A) that portion of such Account which had
been previously withdrawn in accordance with Section 7.3 and (B)
that portion of such Account which had been borrowed in
accordance with Article VIII and is outstanding on the date of
this determination;
(ii) the applicable vested percentage determined in accordance with
subsection (c) shall then be applied to such Account as
determined in accordance with clause (i);
(iii) the amount determined in accordance with clause (ii) shall then
be reduced by (A) that portion of such Account which had been
previously withdrawn in accordance with Section 7.3 and (B) that
portion of such Account which had been borrowed in accordance
with Article VIII and is outstanding on the date of this
determination.
4.2 Forfeitures
If a Participant who is not fully vested in the Net Value of his Accounts
terminates employment, the Units representing the nonvested portion of his
Accounts shall constitute Forfeitures. Forfeitures shall be treated as
Matching Contributions and shall be applied to reduce the amount of
subsequent Matching Contributions otherwise required to be made.
- --------------------------------------------------------------------------------
38 The Hudson City Savings Institution
<PAGE>
With respect to a Participant's Matching Contribution Account, anything in
Section 4.1 to the contrary notwithstanding, any Matching Contribution
forfeited in accordance with the fifth paragraph of Section 3.2(a), the
second paragraph of Section 3.2(c), the fourth paragraph of Section 3.6 or
the second paragraph of Section 3.11(f), shall be applied to reduce the
amount of subsequent Matching Contributions otherwise required to be made.
If a former Participant who is not fully vested in the Net Value of his
Accounts receives a distribution of his vested interest in the Net Value of
his Accounts and is subsequently reemployed by the Employer prior to
incurring five (5) consecutive One Year Periods of Severance, he shall have
the Net Value of his Accounts as of the date he previously terminated
employment reinstated provided he repays the full amount of his
distribution in cash or cash equivalents before the end of the five (5)
consecutive One Year Periods of Severance commencing with the date of
distribution. The reinstated amount shall be unadjusted by any gains or
losses occurring subsequent to the Participant's termination of employment
and prior to repayment of such distribution. Any forfeited amounts required
to be reinstated hereunder shall be made by an additional Employer
contribution for such Plan Year. If such former Participant does not repay
the full amount of his distribution in cash or cash equivalents before the
end of the five (5) consecutive One Year Periods of Severance commencing
with the date of distribution, the Net Value of his Accounts as of the date
he previously terminated employment shall not be reinstated.
If a former Participant who is not fully vested in the Net Value of his
Accounts elects to defer distribution of his vested account interest or
elects to receive installment payments pursuant to Section 7.5(d), the
nonvested portion of such former Participant's Account shall be forfeited
as of the date of his Termination of Service; provided, however, that if
such former Participant is reemployed before incurring five (5) consecutive
One Year Periods of Severance, the nonvested portion of his Accounts shall
be reinstated in its entirety, unadjusted by any gains or losses occurring
subsequent to the distribution.
- --------------------------------------------------------------------------------
39 The Hudson City Savings Institution
<PAGE>
4.3 Vesting upon Reemployment
(a) For purposes of this Section 4.3, "Period of Service" means an
Employee's Period of Service determined in accordance with Section
4.1(c).
(b) For the purpose of determining a Participant's vested interest in the
Net Value of his Matching Contribution Account:
(i) if an Employee is not vested in any Matching Contributions,
incurs a One Year Period of Severance and again performs an Hour
of Service, such Employee shall receive credit for his Periods
of Service prior to his One Year Period of Severance only if the
number of consecutive One Year Periods of Severance is less than
the greater of: (A) five (5) years or (B) the aggregate number
of his Periods of Service credited before his One Year Period of
Severance.
(ii) if a Participant is partially vested in any Matching
Contributions, incurs a One Year Period of Severance and again
performs an Hour of Service, such Participant shall receive
credit for his Periods of Service prior to his One Year Period
of Severance; provided, however, that after five (5) consecutive
One Year Periods of Severance, a former Participant's vested
interest in the Net Value of the Matching Contribution Account
attributable to Periods of Service prior to his One Year Period
of Severance shall not be increased as a result of his Periods
of Service following his reemployment date.
(iii) if a Participant is fully vested in any Matching Contributions,
incurs a One Year Period of Severance and again performs an Hour
of Service, such Participant shall receive credit for all his
Periods of Service prior to his One Year Period of Severance.
- --------------------------------------------------------------------------------
40 The Hudson City Savings Institution
<PAGE>
ARTICLE V --
TRUST FUND, INVESTMENT ACCOUNTS AND VOTING RIGHTS
5.1 Trust Fund and Separate Assets
The Employer has adopted the Agreement as the funding vehicle with respect
to the Investment Accounts. Commencing on the Conversion Date, the Employer
has adopted the Separate Agreement as the funding vehicle with respect to
the Employer Stock Fund.
All contributions forwarded by the Employer to the Trustees pursuant to the
Agreement shall be held by them in trust and shall be used to purchase
Units on behalf of the Plan in accordance with the terms and provisions of
the Agreement. Commencing on the Conversion Date, all contributions
forwarded by the Employer to the Separate Agency pursuant to the Plan and
the Separate Agreement shall be held by them in trust in accordance with
the terms and provisions of the Separate Agreement. Contributions
designated for investment in any Investment Account of the Plan Funds shall
be allocated proportionately to and among the classes of Units so selected
for such Investment Account.
All assets of the Plan shall be held for the exclusive benefit of
Participants, Beneficiaries or other persons entitled to benefits. No part
of the corpus or income of the Plan Funds shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants,
Beneficiaries or other persons entitled to benefits and for defraying
reasonable administrative expenses of the Plan, Trust and the Separate
Agency. No person shall have any interest in or right to any part of the
earnings of the Plan Funds, or any rights in, to or under the Plan Funds or
any part of its assets, except to the extent expressly provided in the
Plan.
The Trustees and the Separate Agency shall invest and reinvest the Plan
Funds, and the income therefrom, without distinction between principal and
income, in accordance with the terms and provisions of the Agreement and
the Separate Agreement, respectively.
- --------------------------------------------------------------------------------
41 The Hudson City Savings Institution
<PAGE>
The Trustees and the Separate Agency may maintain such part of the Trust
Fund and the Separate Assets, in cash uninvested as they shall deem
necessary or desirable. The Trustees shall be the owner of and have title
to all the assets of the Plan Funds other than the Separate Assets and
shall have full power to manage the same, except as otherwise specifically
provided in the Agreement. Commencing on the Conversion Date, the Separate
Agency shall be the owner of and shall have title to the Separate Assets,
and shall have full power to manage the same, except as otherwise
specifically provided in the Separate Agreement.
5.2 Interim Investments
The Trustees may temporarily invest any amounts designated for investment
in any of the Investment Accounts of the Trust Fund identified herein in
the Investment Account which provides for short-term investments and retain
the value of such contributions therein pending the allocation of such
values to the Investment Accounts designated for investment. Commencing on
the Conversion Date, the Separate Agency may temporarily invest any amounts
in short-term investments pending investment in the Employer Stock Fund.
5.3 Account Values
The Net Value of the Accounts of an Employee means the sum of the total Net
Value of each Account maintained on behalf of the Employee in the Trust and
the Separate Agency as determined as of the Valuation Date coincident with
or next following the event requiring the determination of such Net Value.
The assets of any Account shall consist of the Units credited to such
Account. The applicable Units shall be valued from time to time by the
Trustees and the Separate Agency, respectively, in accordance with the
Agreement and Separate Agreement, but not less often than monthly. On the
basis of such valuations, each Employee's Accounts shall be adjusted to
reflect the effect of income collected and accrued, realized and unrealized
profits and losses, expenses and all other transactions during the period
ending on the applicable Valuation Date.
- --------------------------------------------------------------------------------
42 The Hudson City Savings Institution
<PAGE>
Upon receipt by the Trustees of Before-Tax Contributions, Matching
Contributions, and, if applicable, Rollover Contributions and Special
Contributions, and commencing on the Conversion Date, upon receipt by a
Separate Agency of any Before-Tax Contributions, Matching Contributions,
and is applicable, Rollover Contributions and Special Contributions, such
contributions shall be applied to purchase for such Employee's Account, (a)
Units, other than Units of the Employer Stock Fund, using the value of such
Units as of the close of business on the date received and (b) Units of the
Employer Stock Fund using the value of such Units as of the close of
business on the date received. Whenever a distribution or withdrawal is
made, in cash, to a Participant, Beneficiary or other person entitled to
benefits, the appropriate number of Units credited to such Employee shall
be reduced accordingly and each such distribution or withdrawal shall be
charged against the Units of the Investment Accounts of such Employee pro
rata according to their respective values.
For the purposes of this Section 5.3, fractions of Units as well as whole
Units may be purchased or redeemed for the Account of an Employee.
5.4 Voting Rights
Commencing on the Conversion Date, each Participant with Units in the
Employer Stock Fund shall have the right to participate confidentially in
the exercise of voting rights appurtenant to shares held in such Investment
Account, provided that such person had Units in such Account as of the most
recent Valuation Date coincident with or preceding the applicable record
date for which records are available. Such participation shall be achieved
by completing and filing with the inspector of elections, or such other
person who shall be independent of the issuer of shares as the Committee
shall designate, at least ten (10) days prior to the date of the meeting of
holders of shares at which such voting rights will be exercised, a written
direction in the form and manner prescribed by the Committee. The inspector
of elections, or other such person designated by the Committee shall
tabulate the directions given on a strictly confidential basis, and shall
provide the Committee with only the final results of the tabulation. The
final results of the tabulation shall be followed by the Committee in the
direction as to the manner in
- --------------------------------------------------------------------------------
43 The Hudson City Savings Institution
<PAGE>
which such voting rights shall be exercised. As to each matter in which the
holders of shares are entitled to vote:
(a) a number of affirmative votes shall be cast equal to the product of:
(i) the total number of shares held in the Employer Stock Fund as of
the applicable record date; and
(ii) a fraction, the numerator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the
applicable record date) of the Units in the Employer Stock Fund
of all persons directing that an affirmative vote be cast, and
the denominator of which is the aggregate value (as of the
Valuation Date coincident with or immediately preceding the
applicable record date) of the Units in the Employer Stock Fund
of all persons directing that an affirmative or negative vote be
cast; and
(b) a number of negative votes shall be cast equal to the product of:
(i) the total number of shares held in the Employer Stock Fund as of
the applicable record date; and
(ii) a fraction, the numerator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the
applicable record date) of the Units in the Employer Stock Fund
of all persons directing that a negative vote be cast, and the
denominator of which is the aggregate value (as of the Valuation
Date coincident with or immediately preceding the applicable
record date) of the Units in the Employer Stock Fund of all
persons directing that an affirmative or negative vote be cast.
The Committee shall furnish, or cause to be furnished, to each person with
Units in the Employer Stock Fund, all annual reports, proxy materials and
other information known
- --------------------------------------------------------------------------------
44 The Hudson City Savings Institution
<PAGE>
to have been furnished by the issuer of the shares or by any proxy
solicitor, to the holders of shares.
5.5 Tender Offers and Other Offers
Commencing on the Conversion Date, each Participant with Units in the
Employer Stock Fund shall have the right to participate confidentially in
the response to a tender offer, or any other offer, made to the holders of
shares generally, to purchase, exchange, redeem or otherwise transfer
shares; provided that such person has Units in the Employer Stock Fund as
of the Valuation Date coincident with or immediately preceding the first
day for delivering shares or otherwise responding to such tender or other
offer. Such participation shall be achieved by completing and filing with
the inspector of elections, or such other person who shall be independent
of the issuer of shares as the Committee shall designate, at least ten (10)
days prior to the last day for delivering shares or otherwise responding to
such tender or other offer, a written direction in the form and manner
prescribed by the Committee. The inspector of elections, or other such
person designated by the Committee shall tabulate the directions given on a
strictly confidential basis, and shall provide the Committee with only the
final results of the tabulation. The final results of the tabulation shall
be followed by the Committee in the direction as to the number of shares to
be delivered. On the last day for delivering shares or otherwise responding
to such tender or other offer, a number of shares equal to the product of:
(a) the total number of shares held in the Employer Stock Fund; and
(b) a fraction, the numerator of which is the aggregate value (as of the
Valuation Date coincident with or immediately preceding the first day
for delivering shares or otherwise responding to such tender or other
offer) of the Units in the Employer Stock Fund of all persons
directing that shares be delivered in response to such tender or other
offer, and the denominator of which is the aggregate value (as of the
Valuation Date coincident with or immediately preceding the first day
for delivering shares or otherwise responding to such tender or other
offer) of the Units in the Employer Stock Fund of all persons
directing that shares be delivered or that the delivery of shares be
withheld;
- --------------------------------------------------------------------------------
45 The Hudson City Savings Institution
<PAGE>
shall be delivered in response to such tender or other offer. Delivery of
the remaining shares then held in the Employer Stock Fund shall be
withheld. The Committee shall furnish, or cause to be furnished, to each
person whose Account is invested in whole or in part in the Employer Stock
Fund, all information concerning such tender offer furnished by the issuer
of shares, or information furnished by or on behalf of the person making
the tender or such other offer.
5.6 Dissenters' Rights
Commencing on the Conversion Date, each Participant with Units in the
Employer Stock Fund shall have the right to participate confidentially in
the decision as to whether to exercise the Dissenters' rights appurtenant
to shares held in such Investment Account, provided that such person had
Units in such Account as of the most recent Valuation Date coincident with
or preceding the applicable record date for which records are available.
Such participation shall be achieved by completing and filing with the
inspector of elections, or such other person who shall be independent of
the issuer of shares as the Committee shall designate, at least ten (10)
days prior to the date of the meeting of holders of shares at which such
dissenters' rights will be exercised, a written direction in the form and
manner prescribed by the Committee. The inspector of elections, or other
such person designated by the Committee shall tabulate the directions given
on a strictly confidential basis, and shall provide the Committee with only
the final results of the tabulation. The final results of the tabulation
shall be followed by the Committee in the direction as to the manner in
which such dissenters' rights shall be exercised. As to each matter in
which the holders of shares are entitled to exercise dissenters' rights.
The number of shares for which dissenters' rights will be exercised shall
be equal to the product of:
(a) the total number of shares held in the Employer Stock Fund as of the
applicable record date; and
- --------------------------------------------------------------------------------
46 The Hudson City Savings Institution
<PAGE>
(b) a fraction, the numerator of which is the aggregate value (as of the
Valuation Date coincident with or immediately preceding the applicable
record date) of the Units in the Employer Stock Fund of all persons
directing that the dissenters' rights appurtenant to which shares be
exercised, and the denominator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the
applicable record date) of all of the Units in the Employer Stock
Fund.
Dissenters' rights shall not be exercised with respect to the remaining
shares held in the Employer Stock Fund.
5.7 Separate Assets
Commencing on the Conversion Date, subject to the terms and conditions of
the Agreement and upon approval by the Trustees, a designated portion of
the assets of the Plan may be held as Separate Assets under the Separate
Agreement pursuant to investment elections made by Plan Participants from
time to time. The Trustees shall have no responsibility or liability with
respect to the management and control of any Separate Assets and shall have
only those administrative duties with respect to such Separate Assets as
are set forth in the Plan and the Agreement.
5.8 Power to Invest in Employer Securities
Commencing on the Conversion Date, the Committee may direct the Separate
Agency to acquire or hold any security issued by the Employer or any
Affiliated Employer which is a "qualifying employer security" as such term
is defined under ERISA and to invest that portion of the assets of the Plan
Funds in such securities.
- --------------------------------------------------------------------------------
47 The Hudson City Savings Institution
<PAGE>
ARTICLE VI --
INVESTMENT DIRECTIONS, CHANGES OF INVESTMENT DIRECTIONS
AND TRANSFERS BETWEEN INVESTMENT ACCOUNTS
6.1 Investment Directions
Upon electing to participate, each Participant shall direct that the
contributions made to his Accounts shall be applied to purchase Units in
any one or more of the Investment Accounts of the Trust Fund, and
commencing on the Conversion Date, to purchase Units in the Employer Stock
Fund. Such direction shall indicate the percentage, in multiples of ten
percent (10%), in which Before-Tax Contributions, Matching Contributions,
Special Contributions, and Rollover Contributions shall be made to the
designated Investment Accounts.
To the extent a Participant shall fail to make an investment direction,
contributions made on his behalf shall be applied to purchase Units in the
Investment Account which provides for short-term investments.
6.2 Change of Investment Directions
A Participant may change any investment direction not more often than once
in any calendar quarter by completing and filing a notice in the form and
manner prescribed by the Committee at least ten (10) days prior to the
effective date of such direction. Commencing April 2, 1998, a Participant
may change any investment direction, at any time, in the form and manner
prescribed by the Committee, either: (a) by completing and filing a notice
at least ten (10) days prior to the effective date of such direction, or by
telephone or other electronic medium. Any such change shall be subject to
the same conditions as if it were an initial direction and shall be applied
only to any contributions to be invested on or after the effective date of
such direction.
- --------------------------------------------------------------------------------
48 The Hudson City Savings Institution
<PAGE>
6.3 Transfers Between Investment Accounts
By filing a notice in the form and manner prescribed by the Committee at
least ten (10) days prior to the effective date of such change, a
Participant or Beneficiary may, not more often than once in any calendar
quarter, direct that multiples of ten percent (10%) of the Net Value of any
one or more Investment Accounts be transferred to any one or more of the
other Investment Accounts. Commencing April 2, 1998, a Participant or
Beneficiary may, at any time, redirect the investment of his Investment
Accounts such that a percentage of any one or more Investment Accounts may
be transferred to any one or more other Investment Accounts, in the form
and manner prescribed by the Committee, either: (a) by filing a notice at
lease ten (10) days prior to the effective date of such change, or (b) by
telephone or other electronic medium. The requisite transfers shall be
valued as of the Valuation Date on which the direction is received by the
Trustees and shall be affected within seven (7) days of the Trustees'
receipt of such direction.
6.4 Employees Other than Participants
(a) Investment Direction
An Employee who is not a Participant but who has made a Rollover
Contribution in accordance with the provisions of Section 3.10, shall
direct, in the form and manner prescribed by the Committee, that such
contribution be applied to the purchase of Units in any one or more of
the Investment Accounts, and commencing on the Conversion Date, to
purchase Units in the Employer Stock Fund. Such direction shall
indicate the percentage, in multiples of ten percent (10%), in which
contributions shall be made to the designated Investment Accounts. To
the extent any Employee shall fail to make an investment direction,
the Rollover Contributions shall be applied to the purchase of Units
in the Investment Account which provides for short-term investments.
- --------------------------------------------------------------------------------
49 The Hudson City Savings Institution
<PAGE>
(b) Transfers Between Investment Accounts
An Employee who is not a Participant may, subject to the provisions of
Section 6.3, not more often than once in any calendar quarter, direct
that multiples of ten percent (10%) of the Net Value of any one or
more Investment Accounts be transferred to any one or more of the
other Investment Accounts. Commencing April 2, 1998, an Employee who
is not a Participant may, subject to the provisions of Section 6.3, at
any time, redirect the investment of his Investment Accounts such that
a percentage of any one or more Investment Accounts may be transferred
to any one or more other Investment Accounts. The requisite transfers
shall be valued as of the Valuation Date on which the direction is
received by the Trustees and shall be affected within seven (7) days
of the Trustees' receipt of such direction.
6.5 Liabilities for Investments in the Employer Stock Fund for Certain
Participants
Notwithstanding anything in the Plan to the contrary, commencing on the
Conversion Date, any Participant subject to the provisions of Section 16(b)
of the Securities Exchange Act of 1934 may be subject to Section 16(b)
liability if such Participant has an intra-plan transfer involving the
Employer Stock Fund. In addition, any Participant subject to the provisions
of Section 16(b) of the Securities Exchange Act of 1934 who elects to
receive a cash distribution from his Employer Stock Fund under the Plan,
including redemption of such stock for purposes of cash withdrawals under
Section 7.2 and 7.3 and loans under Article VIII, may similarly be subject
to Section 16(b) liability for any short swing profits.
However, unless otherwise required by rules and regulations of the
Securities and Exchange Commission, Section 16(b) liability will not result
from distributions made in connection with a Participant's death,
Disability, termination of employment or retirement; pursuant to a domestic
relations order described under Section 414(p) of the Code; as a result of
the minimum distribution requirements described under Section 401(a)(9) of
the Code; or as a result of the limitations described under Sections
401(k), 401(m), 402(g) and 415 of the Code.
- --------------------------------------------------------------------------------
50 The Hudson City Savings Institution
<PAGE>
ARTICLE VII --
PAYMENT OF BENEFITS
7.1 General
(a) The vested interest in the Net Value of any one or more of the
Accounts of a Participant, Beneficiary or any other person entitled to
benefits under the Plan shall be paid only at the times, to the
extent, in the manner, and to the persons provided in this Article
VII.
(b) Notwithstanding the foregoing, if payments are to be made on a monthly
basis and if, in the judgment of the Committee, payments are too small
to warrant monthly payments, the Committee, in its sole discretion,
may determine to make such payments in a lump sum or in quarterly,
semi-annual, or annual installments.
(c) The Net Value of any one or more of the Accounts of a Participant
shall be subject to the provisions of Section 8.6.
(d) Notwithstanding any provisions of the Plan to the contrary, any and
all withdrawals, distributions or payments made under the provisions
of this Article VII shall be made in accordance with Section 401(a)(9)
of the Code and any and all Income Tax Regulations promulgated
thereunder.
(e) Commencing on the Conversion Date, distributions from the Employer
Stock Fund, under this Article VII, shall be made in accordance with
Section 7.10 hereunder.
- --------------------------------------------------------------------------------
51 The Hudson City Savings Institution
<PAGE>
7.2 Non-Hardship Withdrawals
(a) Subject to the terms and conditions contained in this Section 7.2,
upon ten (10) days prior written notice to the Committee each
Participant, or each Employee who solely maintains a Rollover
Contribution Account, who has attained age fifty-nine and one-half
(59-1/2), shall be entitled to withdraw all or any portion of his
Accounts in the following order of priority not more often than twice
during any Plan Year:
(i) the Net Value of his Before-Tax Contribution Account;
(ii) the Net Value of the Employee's Rollover Contribution Account
provided that such Participant or Employee shall have satisfied
such additional terms and conditions, if any, as the Committee
may deem necessary; and
(iii) the vested interest in the Net Value of his Matching
Contribution Account.
(b) Withdrawals under this Section 7.2 shall be made by the redemption of
Units from each of the Participant's Accounts on a pro rata basis from
the Investment Accounts selected by the Participant pursuant to
Article VI.
(c) Commencing on the Conversion Date, any withdrawals under this Section
7.2 shall be subject to the restrictions of Section 6.5.
7.3 Hardship Distributions
(a) For purposes of this Section 7.3, a "Hardship" distribution shall mean
a distribution that is (i) made on account of a condition which has
given rise to immediate and heavy financial need of an Employee and
(ii) necessary to satisfy such financial need. A determination of the
existence of an immediate and heavy financial need and the amount
necessary to meet the need shall be made by the Committee in
accordance with uniform nondiscriminatory standards with respect to
similarly situated persons.
- --------------------------------------------------------------------------------
52 The Hudson City Savings Institution
<PAGE>
(b) Immediate and Heavy Financial Need:
A Hardship distribution shall be deemed to be made on account of an
immediate and heavy financial need if the distribution is on account
of:
(i) expenses for medical care described under Section 213(d) of the
Code which were previously incurred by the Employee, the
Employee's Spouse or any of the Employee's dependents as defined
under Section 152 of the Code or expenses which are necessary to
obtain medical care described under Section 213(d) of the Code
for the Employee, the Employee's Spouse or any of the Employee's
dependents as defined under Section 152 of the Code; or
(ii) purchase (excluding mortgage payments) of a principal residence
of the Employee; or
(iii) payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Employee,
the Employee's Spouse, children or any of the Employee's
dependents as defined under Section 152 of the Code; or
(iv) the need to prevent the eviction of the Employee from his
principal residence or foreclosure on the mortgage of the
Employee's principal residence; or
(v) any other condition which the Commissioner of Internal Revenue,
through the publication of revenue rulings, notices and other
documents of general applicability, deems to be an immediate and
heavy financial need.
- --------------------------------------------------------------------------------
53 The Hudson City Savings Institution
<PAGE>
(c) Necessary to Satisfy Such Financial Need:
(i) A distribution will be treated as necessary to satisfy an
immediate and heavy financial need of an Employee if: (A) the
amount of the distribution is not in excess of (1) the amount
required to relieve the financial need of the Employee and (2) if
elected by the Employee, an amount necessary to pay any federal,
state or local income taxes and penalties reasonably anticipated
to result from such distribution, and (B) such need may not be
satisfied from other resources that are reasonably available to
the Employee.
(ii) A distribution will be treated as necessary to satisfy a
financial need if the Committee reasonably relies upon the
Employee's representation that the need cannot be relieved:
(A) through reimbursement or compensation by insurance or
otherwise,
(B) by reasonable liquidation of the Employee's assets, to the
extent such liquidation would not itself cause an immediate
and heavy financial need,
(C) by cessation of Before-Tax Contributions or Employee
contributions, if any, under the Plan, or
(D) by other distributions or nontaxable loans from plans
maintained by the Employer or by any other employer, or by
borrowing from commercial sources on reasonable commercial
terms.
For purposes of this subsection (c)(ii), the Employee's resources
shall be deemed to include those assets of his Spouse and minor
children that are reasonably available to the Employee.
- --------------------------------------------------------------------------------
54 The Hudson City Savings Institution
<PAGE>
(iii) Alternatively, a Hardship distribution will be deemed to be
necessary to satisfy an immediate and heavy financial need of an
Employee if (A) or (B) are met:
(A) all of the following requirements are satisfied:
(I) the distribution is not in excess of (1) the amount of
the immediate and heavy financial need of the Employee
and (2) if elected by the Employee, an amount necessary
to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from such
distribution;
(II) the Employee has obtained all distributions, other than
Hardship distributions, and all nontaxable loans
currently available under all plans maintained by the
Employer;
(III)the Plan, and all other plans maintained by the
Employer, provide that the Employee's elective
contributions and Employee contributions, if any, will
be suspended for at least twelve (12) months after
receipt of the Hardship distribution; and
(IV) the Plan, and all other plans maintained by the
Employer, provide that the Employee may not make
elective contributions for the Employee's taxable year
immediately following the taxable year of the Hardship
distribution in excess of the applicable limit under
Section 402(g) of the Code for such next taxable year
less the amount of such Employee's elective
contributions for the taxable year of the Hardship
distribution; or
- --------------------------------------------------------------------------------
55 The Hudson City Savings Institution
<PAGE>
(B) the requirements set forth in additional methods, if any,
prescribed by the Commissioner of Internal Revenue (through
the publication of revenue rulings, notices and other
documents of general applicability) are satisfied.
(d) An Employee who has withdrawn the maximum amounts available to such
Employee under Section 7.2 or an Employee who is not eligible for a
withdrawal thereunder, may, in case of Hardship (as defined under this
Section 7.3), apply not more often than twice in any Plan Year to the
Committee for a Hardship distribution. Any application for a Hardship
distribution shall be made in writing to the Committee at least ten
(10) days prior to the requested date of payment. Hardship
distributions may be made by a distribution of all or a portion of an
Employee's (i) Before-Tax Contributions, (ii) earnings on Before-Tax
Contributions which accrued prior to January 1, 1989, (iii) Net Value
of his Rollover Contribution Account and (iv) his vested interest in
the Net Value of his Matching Contribution Account.
(e) Distributions under this Section 7.3 shall be made in the following
order of priority:
(i) Participant's Before-Tax Contributions and earnings on Before-
Tax Contributions which accrued prior to January 1, 1989;
(ii) the Net Value of the Employee's Rollover Contribution Account;
and
(iii) the vested interest in the Net Value of the Participant's
Matching Contribution Account.
(f) Distributions under this Section 7.3 shall be made by the redemption
of Units from each of the Employee's Accounts on a pro rata basis from
the Investment Accounts selected by the Employee pursuant to Article
VI.
- --------------------------------------------------------------------------------
56 The Hudson City Savings Institution
<PAGE>
(g) A Participant who receives a Hardship distribution under this Section
7.3 may have his Before-Tax Contributions suspended in accordance with
Section 3.3.
(h) Commencing on the Conversion Date, any withdrawals under this Section
7.3 shall be subject to the restrictions of Section 6.5.
7.4 Distribution of Benefits Following Retirement Or Termination of Service
(a) If an Employee incurs a Termination of Service for any reason other
than death, a distribution of the vested interest in the Net Value of
his Accounts shall be made to the Employee in accordance with the
provisions of Section 7.5, 7.6 or 7.8. The amount of such distribution
shall be the vested interest in the Net Value of his Accounts as of
the Valuation Date coincident with the date of receipt by the Trustees
of the proper documentation acceptable to the Trustees for such
purpose.
(b) An election by an Employee to receive the vested interest in the Net
Value of his Accounts in a form other than in the normal form of
benefit payment set forth in Sections 7.5(b) and (c) and Section
7.6(b) may not be revoked or amended by him after he terminates his
employment. Notwithstanding the foregoing, an Employee who elected to
receive payment of benefits as of a deferred Valuation Date or in the
form of installments, may, by completing and filing the form
prescribed by the Committee, change to another form of benefit
payment.
(c) An Employee who incurs a Termination of Service and is reemployed by
the Employer prior to the distribution of all or part of the entire
vested interest in the Net Value of his Accounts in accordance with
the provisions of Section 7.5 or 7.6, shall not be eligible to receive
or to continue to receive such distribution during his period of
reemployment with the Employer. Upon such Employee's subsequent
Termination of Service, his prior election to receive a distribution
in a form other than the normal form of benefit payment shall be null
and void and the vested interest in the Net Value of his Accounts
shall be distributed to him in accordance with the provisions of
Section 7.5, 7.6 or 7.8.
- --------------------------------------------------------------------------------
57 The Hudson City Savings Institution
<PAGE>
(d) A Participant's vested interest in the Net Value of his Accounts in
the Employer Stock Fund shall be distributed to the Participant by the
Separate Agency as soon as administratively possible following the
date the Employer is informed by the Trustees of the Participant's
vested interest in such Investment Accounts. The distribution shall be
made in accordance with Section 7.10 and the terms and provisions of
the Separate Agreement.
7.5 Payments upon Retirement or Disability
(a) If an Employee incurs a Termination of Service as of his Retirement
Date or if an Employee incurs a Termination of Service due to
Disability and the Net Value of his Accounts is less than or equals
three thousand five hundred dollars ($3,500) (and effective January 1,
1998, five thousand dollars ($5,000)), a lump sum distribution of the
Net Value of his Accounts shall be made to the Employee within seven
(7) days of the Valuation Date coincident with the date of receipt by
the Trustees of the proper documentation indicating that the Employee
incurred a Termination of Service as of such Retirement Date or date
of Disability.
(b) If an Employee incurs a Termination of Service as of his Normal
Retirement Date or Postponed Retirement Date and has not elected to
receive his benefit pursuant to an optional form of benefit payment in
accordance with the provisions of subsection (d), (e), (f) or (g) and
the Net Value of his Accounts exceeds three thousand five hundred
dollars ($3,500) (and effective January 1, 1998, five thousand dollars
($5,000)), a lump sum distribution of the vested interest in the Net
Value of his Accounts shall be made to the Employee within seven (7)
days of the Valuation Date coincident with the later of (i) the date
the Employee attained Normal Retirement Date or Postponed Retirement
Date, or (ii) the date of receipt by the Trustees of the proper
documentation indicating such Retirement Date.
(c) If an Employee incurs a Termination of Service as of his Early
Retirement Date or if an Employee incurs a Termination of Service due
to Disability, has not
- --------------------------------------------------------------------------------
58 The Hudson City Savings Institution
<PAGE>
elected to receive his benefit pursuant to an optional form of benefit
payment in accordance with the provisions of subsection (d), (e), (f)
or (g) and the Net Value of his Accounts exceeds three thousand five
hundred dollars ($3,500) (and effective January 1, 1998, five thousand
dollars ($5,000)), a lump sum distribution of the vested interest in
the Net Value of his Accounts shall be made to the Employee within
seven (7) days of the Valuation Date coincident with the later of (i)
the date the Employee would have attained his Normal Retirement Date
if he were still employed by the Employer, or (ii) the date of receipt
by the Trustees of the proper documentation indicating such Retirement
Date.
(d) In lieu of the normal form of benefit payment set forth in subsections
(b) and (c), an Employee who incurs a Termination of Service as of his
Retirement Date may, subject to the required minimum distribution
provisions of Sections 7.9(b) and 7.9(c), file an election form to
receive the vested interest in the Net Value of his Accounts in the
form of installments over a period not to exceed twenty (20) years.
The vested interest in the Net Value of his Accounts shall be
determined as of such Valuation Date or Valuation Dates in each such
Plan Year as may be elected by such Employee and shall be based on the
respective values of the Employee's Units in each Investment Account
as of such Valuation Date or Valuation Dates. The amount of the
installment payment shall be distributed by the redemption of Units
from the Employee's Accounts on a pro rata basis among such Employee's
Investment Accounts. Any portion of the vested interest in the Net
Value of the Accounts of such former Employee which shall not have
been so paid shall continue to be held for his benefit or for the
benefit of his Beneficiary in the Employee's Investment Accounts. If
an Employee elects to receive his benefit pursuant to this subsection
(d), the installment period may not extend beyond the life expectancy
of such Employee or the life expectancy of such Employee and his
Beneficiary.
(e) In lieu of the normal form of benefit payment set forth in subsection
(b) or (c) an Employee who incurs a Termination of Service as of his
Retirement Date and the Net Value of his Accounts exceeds three
thousand five hundred dollars ($3,500) (and effective January 1, 1998,
five thousand dollars ($5,000)), may file an election form to receive
the vested interest in the Net Value of his Accounts as a
- --------------------------------------------------------------------------------
59 The Hudson City Savings Institution
<PAGE>
lump sum distribution as of some other Valuation Date following his
termination; provided, however, that the Valuation Date may not be
later than thirteen (13) months following his Termination of Service.
The vested interest in the Net Value of his Accounts shall be
distributed to such Employee as a lump sum distribution within seven
(7) days of the Valuation Date coincident with the date of receipt by
the Trustees of the proper documentation indicating the Employee's
distribution date.
(f) In lieu of the normal form of benefit payment set forth in subsections
(b) and (c), an Employee who incurs a Termination of Service as of his
Retirement Date may elect to defer receipt of the vested interest in
the Net Value of his Accounts beyond his Normal Retirement Date or
Postponed Retirement Date. The applicable form must be filed at least
ten (10) days prior to the Employee's Retirement Date. If such an
election is made, the vested interest in the Net Value of his Accounts
shall continue to be held in the Trust Fund. Subject to the required
minimum distribution provisions of Sections 7.9(b) and 7.9(c), the
vested interest in the Net Value of his Accounts shall (i) be
distributed to such Employee as a lump sum distribution within seven
(7) days of the Valuation Date coincident with the date of receipt by
the Trustees of the proper documentation indicating the Employee's
deferred distribution date or (ii), upon the election of the Employee,
commence to be distributed in installments in accordance with the
provisions of subsection (d).
(g) In lieu of the normal form of benefit payment set forth in subsections
(b) and (c), an Employee who incurs a Termination of Service as of his
Retirement Date or incurs a Termination of Service due to Disability
may, at least ten (10) days prior to the date on which his benefit is
scheduled to be paid, file an election form that a lump sum
distribution equal to the vested interest in the Net Value of his
Accounts be paid in a Direct Rollover pursuant to Section 7.8. The
amount of such lump sum distribution shall be determined as of the
Valuation Date coincident with the date of receipt by the Trustees of
the proper documentation.
- --------------------------------------------------------------------------------
60 The Hudson City Savings Institution
<PAGE>
7.6 Payments upon Termination of Service for Reasons Other Than Retirement or
Disability
(a) If an Employee incurs a Termination of Service as of a date other than
a Retirement Date or for reasons other than Disability and the vested
interest in the Net Value of the Employee's Accounts is equal to or
less than $3,500 (and effective January 1, 1998, five thousand dollars
($5,000)), a lump sum distribution of the vested interest in the Net
Value of his Accounts shall be made to the Employee within seven (7)
days of the Valuation Date coincident with the date of receipt by the
Trustees of the proper documentation indicating that he incurred a
Termination of Service.
(b) If an Employee incurs a Termination of Service as of a date other than
a Retirement Date or for reasons other than Disability and the vested
interest in the Net Value of the Employee's Accounts, exceeds $3,500
(and effective January 1, 1998, five thousand dollars ($5,000)), a
lump sum distribution of the vested interest in the Net Value of his
Accounts shall be made to the Employee within seven (7) days of the
Valuation Date coincident with the later of (i) the date the Employee
would have attained his Normal Retirement Date if he were still
employed by the Employer or (ii) the date of receipt by the Trustees
of the proper documentation indicating the Employee's attainment of
Normal Retirement Date.
(c) In lieu of the normal form of benefit payment set forth in subsection
(b), an Employee who incurs a Termination of Service as of a date
other than a Retirement Date or for reasons other than Disability, may
file an election form to receive the vested interest in the Net Value
of his Accounts as a lump sum distribution within seven (7) days of
the Valuation Date following his Termination of Service. The vested
interest in the Net Value of his Accounts shall be distributed to such
Employee as a lump sum distribution within seven (7) days of the
Valuation Date coincident with the date of receipt by the Trustees of
the proper documentation indicating that the Employee incurred a
Termination of Service.
- --------------------------------------------------------------------------------
61 The Hudson City Savings Institution
<PAGE>
7.7 Payments Upon Death
(a) In the case of a married Participant, the Spouse shall be the
designated Beneficiary. Notwithstanding the foregoing, such
Participant may effectively elect to designate a person or persons
other than the Spouse as Beneficiary. Such an election shall not be
effective unless (i) such Participant's Spouse irrevocably consents to
such election in writing, (ii) such election designates a Beneficiary
which may not be changed without spousal consent or the consent of the
Spouse expressly permits designation by the Participant without any
requirement of further consent by the Spouse, (iii) the Spouse's
consent acknowledges understanding of the effect of such election and
(iv) the consent is witnessed by a Plan representative or acknowledged
before a notary public. Notwithstanding this consent requirement, if
the Participant establishes to the satisfaction of the Plan
representative that such written consent cannot be obtained because
there is no Spouse or the Spouse cannot be located, the consent
hereunder shall not be required. Any consent necessary under this
provision shall be valid only with respect to the Spouse who signs the
consent.
(b) In the case of a single Participant, Beneficiary means a person or
persons who have been designated under the Plan by such Participant or
who are otherwise entitled to a benefit under the Plan.
(c) The designation of a Beneficiary who is other than a Participant's
Spouse and the designation of any contingent Beneficiary shall be made
in writing by the Participant in the form and manner prescribed by the
Committee and shall not be effective unless filed prior to the death
of such person. If more than one person is designated as a Beneficiary
or a contingent Beneficiary, each designated Beneficiary in such
Beneficiary classification shall have an equal share unless the
Participant directs otherwise. For purposes of this Section 7.7,
"person" includes an individual, a trust, an estate, or any other
person or entity designated as a Beneficiary.
- --------------------------------------------------------------------------------
62 The Hudson City Savings Institution
<PAGE>
(d) A married Participant who has designated a person or persons other
than the Spouse as Beneficiary may, without the consent of such
Spouse, revoke such prior election by submitting written notification
of such revocation. Such revocation shall result in the reinstatement
of the Spouse as the designated Beneficiary unless the Participant
effectively designates another person as Beneficiary in accordance
with the provisions of subsection (a). The number of election forms
and revocations shall not be limited.
(e) Upon the death of a Participant the remaining vested interest in the
Net Value of his Accounts shall become payable, in accordance with the
provisions of subsection (g), to his Beneficiary or contingent
Beneficiary. If there is no such Beneficiary, the remaining vested
interest in the Net Value of his Accounts shall be payable to the
executor or administrator of his estate, or, if no such executor or
administrator is appointed and qualifies within a time which the
Committee shall, in its sole and absolute discretion, deem to be
reasonable, then to such one or more of the descendants and blood
relatives of such deceased Participant as the Committee, in its sole
and absolute discretion, may select.
(f) If a designated Beneficiary entitled to payments hereunder shall die
after the death of the Participant but before the entire vested
interest in the Net Value of Accounts of such Participant has been
distributed, then the remaining vested interest in the Net Value of
Accounts of such Participant shall be paid, in accordance with the
provisions of subsection (g), to the surviving Beneficiary who is not
a contingent Beneficiary, or, if there are no such surviving
Beneficiaries then living, to the designated contingent Beneficiaries
as shall be living at the time such payment is to be made. If there is
no designated contingent Beneficiary then living, the remaining
interest in the Net Value of his Accounts shall be paid to the
executor or administrator of the estate of the last to die of the
Beneficiaries who are not contingent Beneficiaries.
(g) If a Participant dies before his entire vested interest in the Net
Value of his Accounts has been distributed to him, the remainder of
such vested interest shall
- --------------------------------------------------------------------------------
63 The Hudson City Savings Institution
<PAGE>
be paid to his Beneficiary or, if applicable, his contingent
Beneficiary, in a lump sum distribution as soon as practicable
following the date of the Participant's death. Notwithstanding the
foregoing, if, prior to the Participant's death:
(i) the Participant had elected to receive a deferred lump sum
distribution and had not yet received such distribution, such
Beneficiary shall receive a lump sum distribution as of the
earlier of: (A) the Valuation Date set forth in the Participant's
election or (B) the last Valuation Date which occurs within one
(1) year of the Participant's death; or
(ii) the Participant had elected to receive and had begun receiving a
distribution in the form of installments, such Beneficiary shall
receive distributions over the remaining installment period, at
the times set forth in such election.
If the Beneficiary is the Participant's Spouse and if benefits are
payable to such Beneficiary as an immediate or deferred lump sum
distribution, such Spouse may defer the distribution up to the date on
which the Participant would have attained age seventy and one-half
(70-1/2). If such Spouse dies prior to such distribution, the prior
sentence shall be applied as if the Spouse were the Participant.
(h) Notwithstanding anything in the Plan to the contrary, the provisions
of subsections (a) through (g) shall also apply to a person who is not
a Participant but who has made a contribution to and maintains a
Rollover Contribution Account under the Plan.
7.8 Direct Rollover of Eligible Rollover Distributions
For purposes of this Section 7.8, the following definitions shall apply:
(a) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
- --------------------------------------------------------------------------------
64 The Hudson City Savings Institution
<PAGE>
(b) "Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee'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.
(c) "Eligible Retirement Plan" means 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 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) "Eligible Rollover Distribution" means 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 (10) 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).
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section, 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.
- --------------------------------------------------------------------------------
65 The Hudson City Savings Institution
<PAGE>
7.9 Commencement of Benefits
(a) Unless the Employee elects otherwise in accordance with the Plan, in
no event shall the payment of benefits commence later than the
sixtieth (60th) day after the close of the Plan Year in which the
latest of the following events occur: (i) the attainment by the
Employee of age sixty-five (65), (ii) the tenth (10th) anniversary of
the year in which the Participant commenced participation in the Plan
or Prior Plan, or (iii) the termination of the Employee's employment
with the Employer; provided, however, that if the amount of the
payment required to commence on the date determined under this
sentence cannot be ascertained by such date, a payment retroactive to
such date may be made no later than sixty (60) days after the earliest
date on which the amount of such payment can be ascertained under the
Plan.
(b) Distributions to five-percent owners:
The vested interest in the Net Value of the Accounts of a five-percent
owner (as described in Section 416(i) of the Code and determined with
respect to the Plan Year ending in the calendar year in which such
individual attains age seventy and one-half (70-1/2)) must be
distributed or commence to be distributed no later than the first day
of April following the calendar year in which such individual attains
age seventy and one-half (70-1/2). The vested interest in the Net
Value of the Accounts of an Employee who is not a five-percent owner
(as described in Section 416(i) of the Code) for the Plan Year ending
in the calendar year in which such person attains age seventy and
one-half (70-1/2) but who becomes a five-percent owner (as described
in Section 416(i) of the Code) for a later Plan Year must be
distributed or commence to be distributed no later than the first day
of April following the last day of the calendar year that includes the
last day of the first Plan Year for which such individual is a
five-percent owner (as described in Section 416(i) of the Code).
- --------------------------------------------------------------------------------
66 The Hudson City Savings Institution
<PAGE>
(c) Distributions to other than five-percent owners:
The vested interest in the Net Value of the Accounts of an Employee
who is not a five-percent owner and who attained age seventy and
one-half (70-1/2) prior to January 1, 1988, must be distributed or
commence to be distributed no later than the first day of April
following the calendar year in which occurs the later of: (i) his
termination of employment or (ii) his attainment of age seventy and
one-half (70-1/2).
Except as otherwise provided in the following paragraph, the vested
interest in the Net Value of the Accounts of any Employee who attains age
seventy and one-half (70-1/2) after December 31, 1987, must be distributed
or commence to be distributed no later than the first day of April
following the later of (A) the 1989 calendar year or (B) the calendar year
in which such individual attains age seventy and one-half (70-1/2);
provided, however, that effective January 1, 1997, an Employee otherwise
required to receive a distribution hereunder, may elect to defer
distribution of the Net Value of his Accounts to the date of his
termination of employment.
Notwithstanding the foregoing, the vested interest in the Net Value of the
Accounts of (i) any Employee who, on or after January 1, 1997, becomes a
Participant, or who solely maintains a Rollover Account first established
on or after such date, and who attains age seventy and one-half (70-1/2),
or (ii) any Employee who attains age seventy and one-half (70-1/2) on or
after January 1, 1999, must be distributed or commence to be distributed no
later than the first day of April following the calendar year of his
termination of employment. The vested interest in the Net Value of any
Participant, or any Employee who solely maintains a Rollover Account, and
who terminates employment prior to attainment of age seventy and one-half
(70-1/2), must be distributed or commence to be distributed no later than
the first day of April following the calendar year in which such individual
attains age seventy and one-half (70-1/2).
(d) The minimum amount required to be distributed under Section 7.9(b) or
7.9(c) shall be calculated in accordance with Proposed Treasury
Regulation Section 1.401(a)(9)-2.
- --------------------------------------------------------------------------------
67 The Hudson City Savings Institution
<PAGE>
7.10 Manner of Payment of Distributions from the Employer Stock Fund
Commencing on the Conversion Date, distributions from the Employer Stock
Fund shall be made to Participants and Beneficiaries in cash.
Notwithstanding the foregoing and except for withdrawals under Sections 7.2
and 7.3 and loans under Article VIII, the Participant or Beneficiary may
elect that such distributions be made wholly or partially in shares. If the
Participant or Beneficiary elects that such distributions may be made
wholly or partially in shares, subject to such terms and conditions as may
be established from time to time by the Committee, the maximum number of
shares to be distributed shall be equal to the number of whole shares that
could be purchased on the date of distribution based on the fair market
value of shares determined as of the date of payment and on the fair market
value of the Participant's Units in the Employer Stock Fund on the
valuation date preceding the distribution. An amount of money equal to any
remaining amount of the payment that is less than the fair market value of
a whole share shall be distributed in cash. For purposes of this Section
7.10, the fair market value of a share shall be determined on a uniform and
nondiscriminatory basis in such manner as the Separate Agency may, in its
discretion, prescribe.
- --------------------------------------------------------------------------------
68 The Hudson City Savings Institution
<PAGE>
ARTICLE VIII --
LOANS TO PARTICIPANTS
8.1 Definitions and Conditions
(a) For purposes of this Article VIII, the following terms and phrases
shall have the meanings hereafter ascribed to them:
(i) "Borrower" means a Participant or a "Party in Interest" (as
defined under Section 3(14) of ERISA) who maintains an Account,
provided such Participant or Party in Interest is not receiving a
benefit payment in accordance with the provisions of Section
7.5(d) or 7.7.
(ii) "Loan Account" means the separate, individual account established
on behalf of a Borrower in accordance with the provisions of
Section 8.4(d).
(b) To the extent permitted under the provisions of this Article VIII and
subject to the terms and conditions set forth herein, a Borrower may
request a loan from his Accounts. Any loans made in accordance with
this Article VIII shall not be subject to the provisions of Article
VI.
8.2 Loan Amount
Upon a finding by the Committee that all requirements hereunder have been
met, a Borrower may request a loan from his Accounts in an amount up to the
lesser of: (a) fifty percent (50%) of the Net Value as of the close of
business on the date the loan is processed of the Before-Tax Contribution
Account, vested Matching Contribution Account and Rollover Contribution
Account or (b) $50,000, reduced by the highest outstanding loan balance
during the preceding twelve (12) months. The minimum loan permitted shall
be $1,000. For purposes of this Section 8.2, the Net Value of a
- --------------------------------------------------------------------------------
69 The Hudson City Savings Institution
<PAGE>
Borrower's Accounts includes all outstanding loans within the Borrower's
Loan Account under Section 8.4(d).
8.3 Term of Loan
All loans shall be for a fixed term of not more than five (5) years, except
that a loan which shall be used to acquire any dwelling which within a
reasonable time is to be used as the principal residence of the
Participant, may, in the discretion of the Committee, be made for a term of
not more than fifteen (15) years. Interest on a loan shall be based on a
reasonable rate of interest. Such rate shall be the "prime rate" of
interest as published in The Wall Street Journal on the first day of the
month in which the loan was made, increased by one (1) percentage point.
Such rate shall remain in effect until the Loan Account is closed.
8.4 Operational Provisions
(a) An application for a loan shall be filed in the form and manner
prescribed by the Committee and shall be subject to the fees, if any
set forth in Section 9.11. If the Committee shall approve such
application, the Committee shall establish the amount of such loan and
such loan shall be effected as of the Valuation Date next following
receipt by the Trustee.
(b) The amount of the loan shall be distributed from the Investment
Accounts in which the Borrower's Accounts are invested in the
following order of priority:
(i) Before-Tax Contribution Account;
(ii) vested Matching Contribution Account; and
(iii) Rollover Contribution Account.
- --------------------------------------------------------------------------------
70 The Hudson City Savings Institution
<PAGE>
Distributions from each of the foregoing Accounts shall be made on a
pro rata basis among the Investment Accounts selected pursuant to
Section 6.1.
(c) The proceeds of a loan shall be distributed to the Borrower as soon as
practicable after the Valuation Date as of which the loan is
processed; provided, however, that the Borrower shall have satisfied
such reasonable conditions as the Committee shall deem necessary,
including, without limitation: (i) the delivery of an executed
promissory note for the amount of the loan, including interest,
payable to the order of the Trustees; (ii) an assignment to the Plan
of such Borrower's interest in his Accounts to the extent of such
loan; and (iii) if the Borrower is actively employed by the Employer,
an authorization to the Employer to make payroll deductions in order
to repay his loan to the Plan. The aforementioned promissory note
shall be duly acknowledged and executed by the Borrower and shall be
held by the Trustees, or the Committee as agent for the Trustees, as
an asset of the Borrower's Loan Account pursuant to subsection (d).
(d) A Loan Account shall be established for each Borrower with an
outstanding loan pursuant to this Article VIII. Each Loan Account
shall be comprised of a Borrower's (i) executed promissory note and
(ii) installment payments of principal and interest made pursuant to
Section 8.5(a). Upon full payment and satisfaction of the outstanding
Loan Account balance, a Borrower's promissory note shall be marked
paid in full, returned to the Borrower, and his Loan Account thereupon
closed.
(e) As of each Valuation Date coincident with or next succeeding each
payment of principal and interest on a loan, the then current balance
of each Borrower's Loan Account shall be debited by the amount of such
payment and such amount shall be transferred for investment in
accordance with Section 8.5(c) to the appropriate Borrower's Account.
If the Committee established a lien against the Borrower's Accounts
pursuant to Section 8.6(b), and foreclosure of such lien is deferred
until the Borrower's Termination of Service pursuant to Section
8.6(c)(i), for each month that foreclosure of the lien is deferred,
the then current balance of the
- --------------------------------------------------------------------------------
71 The Hudson City Savings Institution
<PAGE>
Borrower's Loan Account shall be charged with interest on the unpaid
principal and interest thereon.
(f) Only one (1) loan shall be outstanding to any Borrower under this
Article VIII at any time. Commencing April 2, 1998, no more than a
maximum of two (2) loans shall be outstanding to any Borrower under
this Article VIII at any time. The foregoing operational provisions of
this Section 8.4 shall apply individually to each outstanding loan.
(g) Commencing on the Conversion Date, any loans under this Article VIII
shall be subject to the restrictions of Section 6.5.
8.5 Repayments
(a) If the Borrower is on the payroll of the Employer and unless otherwise
agreed to by the Committee, repayments of loan principal, or the
unpaid balance thereof, and interest thereon shall be made through
payroll deductions. The first repayment shall be deducted as of the
first payroll date occurring no later than three (3) weeks after the
Committee submits the loan form for processing.
If the Borrower is not on the payroll of the Employer and unless
otherwise agreed to by the Committee, repayments of loan principal, or
the unpaid balance thereof, and interest thereon, shall be made in
cash or cash equivalencies to the Employer in equal monthly
installments for payment to his Loan Account.
(b) Any amount repaid to the Plan by a Borrower with respect to a loan,
including interest thereon, shall be invested as if such amount were a
contribution to be invested in accordance with Section 6.1.
(c) With respect to each Borrower's Loan Account, any repayment of
principal and interest made by a Borrower shall be credited, as of the
Valuation Date coincident with or next succeeding such payment, to the
Borrower's Accounts in the order of
- --------------------------------------------------------------------------------
72 The Hudson City Savings Institution
<PAGE>
priority established under Section 8.4(b). No Account having a lesser
degree of priority shall be credited until the Account having the
immediately preceding degree of priority has been restored by an
amount equal to that which had been borrowed from such Account.
(d) A Borrower may prepay his entire loan, plus all interest accrued and
unpaid thereon, as of any Valuation Date. A Borrower will not be
permitted to make partial prepayments to his or her Loan Account.
(e) In the event the Plan is terminated, the entire unpaid principal
amount of the loan hereunder, together with any accrued and unpaid
interest thereon, shall become immediately due and payable.
8.6 Default
(a) If a Borrower fails to make any payment on any loan when due under
this Article VIII, the entire unpaid principal amount of such loan,
together with any accrued and unpaid interest thereon, shall be deemed
in default and become due and payable ninety (90) days after the
initial date of payment delinquency.
(b) If a Borrower fails to make any payment on a loan and is deemed to be
in default pursuant to subsection (a), the Committee shall establish a
lien against the Borrower's Accounts in an amount equal to any unpaid
principal and interest. The lien shall be foreclosed by applying the
value of the Borrower's Loan Account (determined as of the next
Valuation Date immediately following foreclosure) in satisfaction of
said unpaid principal and interest as follows:
(i) if the Borrower is in the employment of the Employer, upon the
Borrower's Termination of Service; or
(ii) if the Borrower is not in the employment of the Employer,
immediately upon default.
- --------------------------------------------------------------------------------
73 The Hudson City Savings Institution
<PAGE>
Thereupon, the vested interest in the balance of the Borrower's
Accounts shall be distributed in accordance with the applicable
provisions of the Plan.
(c) The Committee may, in accordance with uniform rules established by it,
restrict the right of any Borrower who has defaulted on a loan from
the Plan to: (i) make withdrawals and/or loans from his Matching
Contribution Account, Before-Tax Contribution Account, and/or Rollover
Contribution Account for a period not exceeding twelve (12) months or
(ii) if the Borrower is an Eligible Employee, authorize Before-Tax
Contributions to be made on his behalf or make any other contributions
to the Plan for a period not exceeding twelve (12) months.
8.7 Coordination of Outstanding Account and Payment of Benefits
(a) If the Borrower has an outstanding Loan Account and is either (i)
scheduled to receive or elects to receive a lump sum distribution in
accordance with the provisions of Article VII, or (ii) scheduled to
receive the last installment payment under a previous election made in
accordance with the provisions of Article VII to receive payments in a
form other than the normal form of benefit payments, then, at the time
of the distribution or payment under clause (i) or (ii) above, the
entire unpaid principal amount of the loan together with any accrued
and unpaid interest thereon, shall become immediately due and payable.
No Plan distribution, except as permitted under Section 7.2 or Section
7.3, shall be made to any Borrower unless and until such Borrower's
Loan Account, including accrued interest thereunder, has been
liquidated and closed. If a Borrower fails to pay the outstanding
balance of his Loan Account hereunder, such loan shall be satisfied as
if a default had occurred pursuant to Section 8.6.
(b) Any reference in the Plan to the Net Value of Units in a Borrower's
Accounts available for distribution to any Borrower, shall mean the
value after the satisfaction of the entire unpaid principal loan
amount or loan amounts and any accrued, unpaid interest thereon, as
provided in this Article VIII.
- --------------------------------------------------------------------------------
74 The Hudson City Savings Institution
<PAGE>
ARTICLE IX --
ADMINISTRATION
9.1 General Administration of the Plan
The operation and administration of the Plan shall be subject to the
management and control of the Named Fiduciaries and Plan Administrator
designated by the Sponsoring Employer. The designation of such Named
Fiduciaries and Plan Administrator, the terms of their appointment, and
their duties and responsibilities allocated among them shall be as set
forth in this Article IX.
9.2 Designation of Named Fiduciaries
The management and control of the operation and administration of the Plan
shall be allocated in the following manner:
(a) The Sponsoring Employer shall designate the Trustees as a Named
Fiduciary to perform those functions set forth in (i) prior to the
Conversion Date, the Agreement or the Plan that are assigned to the
Trustees and (ii) commencing on the Conversion Date, the Agreement or
the Plan which are applicable to a Plan of Partial Participation.
(b) Commencing on the Conversion Date, the Sponsoring Employer shall
designate the Separate Agency to perform those functions relating to
the Separate Agency in the Plan or the Separate Agreement.
(c) The Sponsoring Employer shall designate one or more individuals to
serve as member(s) of an employee benefits Committee to perform those
functions set forth in the Agreement, the Separate Agreement or the
Plan that are assigned to such Committee.
- --------------------------------------------------------------------------------
75 The Hudson City Savings Institution
<PAGE>
(d) A Trust Participant (as defined under the Agreement) may delegate to a
person or persons the duties and responsibilities for voting Units set
forth under the Agreement.
(e) Commencing on the Conversion Date, the Sponsoring Employer shall
designate the Separate Agency as a Named Fiduciary to perform those
functions set forth in the Separate Agreement or the Plan that are
assigned to the Separate Agency, including the voting and tender of
shares of the Employer Stock.
9.3 Responsibilities of Fiduciaries
The Named Fiduciaries and Plan Administrator shall have only those powers,
duties, responsibilities and obligations that are specifically allocated to
them under the Plan the Agreement or the Separate Agreement.
To the extent permitted by ERISA, each Named Fiduciary and Plan
Administrator may rely upon any direction, information or action of another
Named Fiduciary, Plan Administrator or the Sponsoring Employer as being
proper under the Plan, the Agreement or the Separate Agreement and is not
required to inquire into the propriety of any such direction, information
or action and no Named Fiduciary or Plan Administrator shall be responsible
for any act or failure to act of another Named Fiduciary, Plan
Administrator or the Sponsoring Employer.
No Named Fiduciary, Plan Administrator or the Employer guarantees the Trust
Fund or Separate Assets in any manner against investment loss or
depreciation in asset value.
The allocation of responsibility between the Trustees and the Sponsoring
Employer or between the Separate Agency and the Sponsoring Employer may be
changed by written agreement. Such reallocation shall be evidenced by
Employer Resolutions and shall not be deemed an amendment to the Plan. To
the extent permitted by ERISA, the Trustees shall have no liability or
responsibility with respect to the administration of any Separate
- --------------------------------------------------------------------------------
76 The Hudson City Savings Institution
<PAGE>
Assets held outside the Trust except as specifically set forth in the
Agreement. The authority and responsibility of the Trustees shall extend
only to those Plan assets held by the Trustees.
9.4 Plan Administrator
Prior to the Conversion Date, the Sponsoring Employer shall designate the
Trustees as the Trustee Administrator and shall designate one or more
persons to act as Plan Administrator and to perform those functions set
forth in the Agreement or the Plan that are assigned to the Plan
Administrator. Commencing on the Conversion Date, the Sponsoring Employer
shall designate the Trustees as the Trustee Administrator to perform those
functions applicable to Plans of Partial Participation as set forth in the
Agreement. The Sponsoring Employer shall also designate one or more persons
to act as Plan Administrator and to perform those functions set forth in
the Agreement, Plan or the Separate Agreement that are assigned to the Plan
Administrator.
The duties and responsibilities of a plan administrator under ERISA shall
be allocated between the Plan Administrator and the Trustee Administrator
as set forth herein or in the Agreement. Such allocation may be changed
only by written agreement between the parties and shall not be deemed an
amendment to the Plan.
The Plan Administrator shall be solely responsible for monitoring and
notifying the Trustees of an Employee's age for all purposes under the
Plan.
The Plan Administrator is designated as the Plan's agent for the service of
legal process.
9.5 Committee
The members of the Committee designated by the Sponsoring Employer under
Section 9.2(b) shall serve for such term(s) as the Sponsoring Employer
shall determine and until their successors are designated and qualified.
The term of any member of the Committee may be renewed from time to time
without limitation as to the number of renewals. Any
- --------------------------------------------------------------------------------
77 The Hudson City Savings Institution
<PAGE>
member of the Committee may (a) resign upon at least sixty (60) days
written notice to the Sponsoring Employer or (b) be removed from office but
only for his failure or inability, in the opinion of the Sponsoring
Employer, to carry out his responsibilities in an effective manner.
Termination of employment with the Employer shall be deemed to give rise to
such failure or inability.
The powers and duties allocated to the Committee shall be vested jointly
and severally in its members. Notwithstanding specific instructions to the
contrary, any instrument or document signed on behalf of the Committee by
any member of the Committee may be accepted and relied upon by the Trustees
and the Separate Agency as the act of the Committee. The Trustees and the
Separate Agency shall not be required to inquire into the propriety of any
such action taken by the Committee nor shall they be held liable for any
actions taken by them in reliance thereon.
The Sponsoring Employer may, pursuant to Employer Resolutions and upon
notice to the Trustees and the Separate Agency, change the number of
individuals comprising the Committee, their terms of office or other
conditions of their incumbency provided that there shall be at all times at
least one individual member of the Committee. Any such change shall not be
deemed an amendment to the Plan.
9.6 Powers and Duties of the Committee
The Committee shall have authority to perform all acts it may deem
necessary or appropriate in order to exercise the duties and powers imposed
or granted by ERISA, the Plan, the Agreement, the Separate Agreement or any
Employer Resolutions. Such duties and powers shall include, but not be
limited to, the following:
(a) Power to Construe - Except as otherwise provided in the Agreement or
the Separate Agreement, the Committee shall have the power to construe
the provisions of the Plan and to determine any questions of fact
which may arise thereunder.
- --------------------------------------------------------------------------------
78 The Hudson City Savings Institution
<PAGE>
(b) Power to Make Rules and Regulations - The Committee shall have the
power to make such reasonable rules and regulations as it may deem
necessary or appropriate to perform its duties and exercise its
powers. Such rules and regulations shall include, but not be limited
to, those governing (i) the manner in which the Committee shall act
and manage its own affairs, (ii) the procedures to be followed in
order for Employees or Beneficiaries to claim benefits, and (iii) the
procedures to be followed by Participants, Beneficiaries or other
persons entitled to benefits with respect to notifications, elections,
designations or other actions required by the Plan or ERISA. All such
rules and regulations shall be applied in a uniform and
nondiscriminatory manner.
(c) Powers and Duties with Respect to Information - The Committee shall
have the power and responsibility:
(i) to obtain such information as shall be necessary for the proper
discharge of its duties;
(ii) to furnish to the Employer, upon request, such reports as are
reasonable and appropriate;
(iii) to receive, review and retain periodic reports of the financial
condition of the Plan Funds; and
(iv) to receive, collect and transmit to the Trustees all information
required by the Trustees in the administration of the Accounts
of the Employee as contemplated in Section 9.7.
(d) Power of Delegation - The Committee shall have the power to delegate
fiduciary responsibilities (other than trustee responsibilities
defined under Section 405(c)(3) of ERISA) to one or more persons who
are not members of the Committee. Unless otherwise expressly indicated
by the Sponsoring Employer,
- --------------------------------------------------------------------------------
79 The Hudson City Savings Institution
<PAGE>
the Committee must reserve the right to terminate such delegation upon
reasonable notice.
(e) Power of Allocation - Subject to the written approval of the
Sponsoring Employer, the Committee shall have the power to allocate
among its members specified fiduciary responsibilities (other than
trustee responsibilities defined under Section 405(c)(3) of ERISA).
Any such allocation shall be in writing and shall specify the persons
to whom such allocation is made and the terms and conditions thereof.
(f) Duty to Report - Any member of the Committee to whom specified
fiduciary responsibilities have been allocated under subsection (e)
shall report to the Committee at least annually. The Committee shall
report to the Sponsoring Employer at least annually regarding the
performance of its responsibilities as well as the performance of any
persons to whom any powers and responsibilities have been further
delegated.
(g) Power to Employ Advisors and Retain Services - The Committee may
employ such legal counsel, enrolled actuaries, accountants, pension
specialists, clerical help and other persons as it may deem necessary
or desirable in order to fulfill its responsibilities under the Plan.
9.7 Certification of Information
The Committee shall certify to the Trustees on such periodic or other basis
as may be agreed upon, but in no event later than ten (10) days before any
Valuation Date as of which the Trustees must effect any action with respect
to any Accounts held under the provisions of the Plan, relevant facts
regarding the establishment of the Accounts of an Employee, periodic
contributions with respect to such Accounts, investment elections and
modifications thereof and withdrawals and distributions therefrom. The
Trustees shall be fully protected in maintaining individual Account records
and in administering the Accounts of the Employee on the basis of such
certifications and shall have no duty
- --------------------------------------------------------------------------------
80 The Hudson City Savings Institution
<PAGE>
of inquiry or otherwise with respect to any transactions or communications
between the Committee and Employees relating to the information contained
in such certifications.
9.8 Authorization of Benefit Payments
The Committee shall forward to the Trustees any, if applicable, any
Separate Agency, any application for payment of benefits within a
reasonable time after it has approved such application. The Trustees and
such Separate Agency may rely on any such information set forth in the
approved application for the payment of benefits to the Participant,
Beneficiary or any other person entitled to benefits.
9.9 Payment of Benefits to Legal Custodian
Whenever, in the Committee's opinion, a person entitled to receive any
benefit payment is a minor or deemed to be physically, mentally or legally
incompetent to receive such benefit, the Committee may direct the Trustees
and Separate Agency to make payment for his benefit to such individual or
institution having legal custody of such person or to his legal
representative. Any benefit payment made in accordance with the provisions
of this Section 9.9 shall operate as a valid and complete discharge of any
liability for payment of such benefit under the provisions of the Plan.
9.10 Service in More Than One Fiduciary Capacity
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan, regardless of whether any such person is
an officer, employee, agent or other representative of a party in interest.
9.11 Payment of Expenses
The Sponsoring Employer will pay the ordinary administrative expenses of
the Plan and compensation of the Trustees and the Separate Agency to the
extent required. However,
- --------------------------------------------------------------------------------
81 The Hudson City Savings Institution
<PAGE>
any expenses directly related to the Trust Fund, such as transfer taxes,
brokers' commissions, registration charges, or administrative expenses of
the Trustees (including expenses of counsel retained by it in accordance
with the Agreement), shall be paid from the Trust Fund or from such
Investment Account to which such expenses directly relate. In addition, any
expenses directly related to the Employer Stock Fund such as transfer
taxes, brokers' commissions, registration charges, and other expenses
incurred in the sale and purchase of Employer Stock for the Employer Stock
Fund (including expenses of counsel retained by it in accordance with the
Separate Agreement), will be paid out of a cash account managed by the
Separate Agency.
The Sponsoring Employer may, if determined by the Committee, charge
Employees all or part of the reasonable expenses associated with
withdrawals and other distributions, loan origination fees and all annual
maintenance fees associated with loans or Account transfers.
9.12 Administration of Separate Assets
Commencing on the Conversion Date, the Committee and the Separate Agency
shall be solely responsible for the administration of the Separate Assets,
including the administration, collection and enforcement of any loans held
therein. All contributions to and withdrawals or disbursements from the
Separate Assets shall be made directly to or by the Separate Agency.
The Trustees may, as agreed upon with the Committee, provide such combined
or coordinated Plan records and reports, which include the Separate Assets.
The Trustees shall be fully protected in relying upon any information
provided to them by the Committee or Separate Agency with respect to such
Separate Assets. The inclusion of any information pertaining to Separate
Assets in such combined or coordinated Plan records and reports shall not
increase the responsibility or liability of the Trustees with respect to
the Separate Assets. If Plan Funds may be transferred between the Separate
Assets and the other Investment Accounts, the manner in which such
transfers may be made must be agreed to in a written instrument entered
into among the Committee, the Trustees and the Separate Agency.
- --------------------------------------------------------------------------------
82 The Hudson City Savings Institution
<PAGE>
ARTICLE X --
BENEFIT CLAIMS PROCEDURE
10.1 Definition
For purposes of this Article X, "Claimant" shall mean any Participant,
Beneficiary or any other person entitled to benefits under the Plan or his
duly authorized representative.
10.2 Claims
A Claimant may file a written claim for a Plan benefit with the Plan
Administrator on the appropriate form to be supplied by the Plan
Administrator. The Plan Administrator shall, in its sole and absolute
discretion, review the Claimant's application for benefits and determine
the disposition of such claim.
10.3 Disposition of Claim
The Plan Administrator shall notify the Claimant as to the disposition of
the claim for benefits under this Plan within ninety (90) days after the
appropriate form has been filed unless special circumstances require an
extension of time for processing. If such an extension of time is required,
the Plan Administrator shall furnish written notice of the extension to the
Claimant prior to the termination of the initial ninety (90) day period.
The extension notice shall indicate the special circumstances requiring the
extension of time and the date the Plan Administrator expects to render a
decision. In no event shall such extension exceed a period of one
hundred-eighty (180) days from the receipt of the claim.
- --------------------------------------------------------------------------------
83 The Hudson City Savings Institution
<PAGE>
10.4 Denial of Claim
If a claim for benefits under this Plan is denied in whole or in part by
the Plan Administrator, a notice written in a manner calculated to be
understood by the Claimant shall be provided by the Plan Administrator to
the Claimant and such notice shall include the following:
(a) a statement that the claim for the benefits under this Plan has been
denied;
(b) the specific reasons for the denial of the claim for benefits, citing
the specific provisions of the Plan which set forth the reason or
reasons for the denial;
(c) a description of any additional material or information necessary for
the Claimant to perfect the claim for benefits under this Plan and an
explanation of why such material or information is necessary; and
(d) appropriate information as to the steps to be taken if the Claimant
wishes to appeal such decision.
10.5 Inaction by Plan Administrator
A claim for benefits shall be deemed to be denied if the Plan Administrator
shall not take any action on such claim within ninety (90) days after
receipt of the application for benefits by the Claimant or, if later,
within the extended processing period established by the Plan Administrator
by written notice to the Claimant, in accordance with Section 10.3.
10.6 Right to Full and Fair Review
A Claimant who is denied, in whole or in part, a claim for benefits under
the Plan may file an appeal of such denial. Such appeal must be made in
writing by the Claimant or his duly authorized representative and must be
filed with the Committee within sixty (60) days after receipt of the
notification under Section 10.4 or the date his claim is deemed to
- --------------------------------------------------------------------------------
84 The Hudson City Savings Institution
<PAGE>
be denied under Section 10.5. The Claimant or his representative may review
pertinent documents and submit issues and comments in writing.
10.7 Time of Review
The Committee, independent of the Plan Administrator, shall conduct a full
and fair review of the denial of claim for benefits under this Plan to a
Claimant within sixty (60) days after receipt of the written request for
review described in Section 10.6; provided, however, that an extension, not
to exceed sixty (60) days, may apply in special circumstances. Written
notice shall be furnished to the Claimant prior to the commencement of the
extension period.
10.8 Final Decision
The Claimant shall be notified in writing of the final decision of such
full and fair review by such Committee. Such decision shall be written in a
manner calculated to be understood by the Claimant, shall state the
specific reasons for the decision and shall include specific references to
the pertinent Plan provisions upon which the decision is based. In no event
shall the decision be furnished to the Claimant later than sixty (60) days
after the receipt of a request for review, unless special circumstances
require an extension of time for processing, in which case a decision shall
be rendered within one hundred-twenty (120) days after receipt of such
request for review.
- --------------------------------------------------------------------------------
85 The Hudson City Savings Institution
<PAGE>
ARTICLE XI --
AMENDMENT, TERMINATION, AND WITHDRAWAL
11.1 Amendment and Termination
The Employer expects to continue the Plan indefinitely, but specifically
reserves the right, in its sole and absolute discretion, at any time, by
appropriate action of the Board, to terminate its Plan or to amend (subject
to the approval of the Trustees), in whole or in part, any or all of the
provisions of the Plan. Subject to the provisions of Section 13.7, no such
amendment or termination shall permit any part of the Plan Funds to be used
for or diverted to purposes other than for exclusive benefit of
Participants, Beneficiaries or other persons entitled to benefits, and no
such amendment or termination shall reduce the interest of any Participant,
Beneficiary or other person who may be entitled to benefits, without his
consent. In the event of a termination or partial termination of the Plan,
or upon complete discontinuance of contributions under the Plan, the
Accounts of each affected Participant shall become fully vested and shall
be distributable in accordance with the provisions of Article VII. In the
event of a complete termination of the Plan, the Accounts of each affected
Participant shall become fully vested and shall be distributable as a lump
sum distribution within seven (7) days of the Valuation Date coincident
with the date of receipt by the Trustees of the proper documentation
indicating the Participant's distribution date.
If any amendment changes the vesting schedule, any Participant who has a
Period of Service of three (3) or more years may, by filing a written
request with the Employer, elect to have his vested percentage computed
under the vesting schedule in effect prior to the amendment.
- --------------------------------------------------------------------------------
86 The Hudson City Savings Institution
<PAGE>
The period during which the Participant may elect to have his vested
percentage computed under the prior vesting schedule shall commence with
the date the amendment is adopted and shall end on the latest of:
(a) sixty (60) days after the amendment is adopted;
(b) sixty (60) days after the amendment becomes effective; or
(c) sixty (60) days after the Participant is issued written notice of the
amendment from the Employer.
11.2 Withdrawal from the Trust Fund
An Employer may withdraw its Plan from the Trust Fund in accordance with
and subject to the provisions of the Agreement.
- --------------------------------------------------------------------------------
87 The Hudson City Savings Institution
<PAGE>
ARTICLE XII --
TOP-HEAVY PLAN PROVISIONS
12.1 Introduction
Any other provisions of the Plan to the contrary notwithstanding, the
provisions contained in this Article XII shall be effective with respect to
any Plan Year in which this Plan is a Top-Heavy Plan, as hereinafter
defined.
12.2 Definitions
For purposes of this Article XII, the following words and phrases shall
have the meanings stated herein unless a different meaning is plainly
required by the context.
(a) "Account," for the purpose of determining the Top-Heavy Ratio, means
the sum of (i) a Participant's Accounts as of the most recent
Valuation Date and (ii) an adjustment for contributions due as of the
Determination Date.
(b) "Determination Date" means, with respect to any Plan Year, the last
day of the preceding Plan Year. With respect to the first Plan Year,
"Determination Date" means the last day of such Plan Year.
(c) "Five-Percent Owner" means, if the Employer is a corporation, any
Employee who owns (or is considered as owning within the meaning of
Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the
Code) more than five percent (5%) of the value of the outstanding
stock of, or more than five percent (5%) of the total combined voting
power of all the stock of, the Employer. If the Employer is not a
corporation, a Five-Percent Owner means any Employee who owns more
than five percent (5%) of the capital or profits interest in the
Employer.
- --------------------------------------------------------------------------------
88 The Hudson City Savings Institution
<PAGE>
(d) "Key Employee" means any Employee or former Employee (or, where
applicable, such person's Beneficiary) in the Plan who, at any time
during the Plan Year containing the Determination Date or any of the
preceding four (4) Plan Years, is: (i) an Officer having Top-Heavy
Earnings from the Employer of greater than fifty percent (50%) of the
dollar limitation in effect under Section 415(b)(1)(A) of the Code;
(ii) one of the ten (10) Employees having Top-Heavy Earnings from the
Employer of more than the dollar 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 modified by Section
416(i)(1)(B)(iii) of the Code) both more than a one-half of one
percent (1/2%) interest in value and the largest interests in the
value of the Employer; (iii) a Five-Percent Owner of the Employer; or
(iv) a One-Percent Owner of the Employer having Top-Heavy Earnings
from the Employer greater than $150,000. For purposes of computing the
Top-Heavy Earnings in subsections (d)(i), (d)(ii) and (d)(iv), the
aggregation rules of Sections 414(b), (c), (m) and (o) of the Code
shall apply.
(e) "Non-Key Employee" means an Employee or former Employee (or, where
applicable, such person's Beneficiary) who is not a Key Employee.
(f) "Officer" means an Employee who is an administrative executive in the
regular and continued service of his Employer; any Employee who has
the title but not the authority of an officer shall not be considered
an Officer for purposes of this Article XII. Similarly, an Employee
who does not have the title of an officer but has the authority of an
officer shall be considered an Officer. For purposes of this Article
XII, the maximum number of Officers that must be taken into
consideration shall be determined as follows: (i) three (3), if the
number of Employees is less than thirty (30); (ii) ten percent (10%)
of the number of Employees, if the number of Employees is between
thirty (30) and five hundred (500); or (iii) fifty (50), if the number
of Employees is greater than five hundred (500). In determining such
limit, the term "Employer" shall be determined in accordance with
Sections 414(b), (c), (m) and (o) of the Code and "Employee" shall
include Leased Employees and exclude employees described in Section
414(q)(5) of the Code.
- --------------------------------------------------------------------------------
89 The Hudson City Savings Institution
<PAGE>
(g) "One-Percent Owner" means, if the Employer is a corporation, any
Employee who owns (or is considered as owning within the meaning of
Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the
Code) more than one percent (1%) of the value of the outstanding stock
of, or more than one percent (1%) of the total combined voting power
of all the stock of, the Employer. If the Employer is not a
corporation, a One-Percent Owner means any Employee who owns more than
one percent (1%) of the capital or profits interest in the Employer.
(h) A "Permissive Aggregation Group" consists of one or more plans of the
Employer that are part of a Required Aggregation Group, plus one or
more plans that are not part of a Required Aggregation Group but that
satisfy the requirements of Sections 401(a)(4) and 410 of the Code
when considered together with the Required Aggregation Group. If two
(2) or more defined benefit plans are included in the aggregation
group, the same actuarial assumptions must be used with respect to all
such plans in determining the Present Value of Accrued Benefits.
(i) "Present Value of Accrued Benefits" shall be determined in accordance
with the actuarial assumptions set forth in the defined benefit plan
and the assumed benefit commencement date shall be determined taking
into account any nonproportional subsidy.
(j) "Related Rollover Contributions" means rollover contributions received
by the Plan that are not initiated by the Employee nor made from
another plan maintained by the Employer.
(k) A "Required Aggregation Group" consists of each plan of the Employer
(whether or not terminated) in which a Key Employee participates or
participated at any time during the Plan Year containing the
Determination Date or any of the four (4) preceding Plan Years and
each other plan of the Employer (whether or not terminated) which
enables any plan in which a Key Employee participates or
- --------------------------------------------------------------------------------
90 The Hudson City Savings Institution
<PAGE>
participated to meet the requirements of Section 401(a)(4) or 410 of
the Code. If two (2) or more defined benefit plans are included in the
aggregation group, the same actuarial assumptions must be used with
respect to all such plans in determining the Present Value of Accrued
Benefits.
(l) A "Super Top-Heavy Plan" means a Plan in which, for any Plan Year:
(i) the Top-Heavy Ratio (as defined under subsection (o)) for the
Plan exceeds ninety percent (90%) and the Plan is not part of
any Required Aggregation Group (as defined under subsection (k))
or Permissive Aggregation Group (as defined under subsection
(h)); or
(ii) the Plan is a part of a Required Aggregation Group (but is not
part of a Permissive Aggregation Group) and the Top-Heavy Ratio
for the group of plans exceeds ninety percent (90%); or
(iii) the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds ninety percent (90%).
(m) "Top-Heavy Earnings" means, for any year, compensation as defined
under Section 414(q)(4) of the Code, up to a maximum of $160,000
adjusted in multiples of $10,000 for increases in the cost-of-living,
as prescribed by the Secretary of the Treasury under Section
401(a)(17)(B) of the Code.
(n) A "Top-Heavy Plan" means a Plan in which, for any Plan Year:
(i) the Top-Heavy Ratio (as defined under subsection (o)) for the
Plan exceeds sixty percent (60%) and the Plan is not part of any
Required Aggregation Group (as defined under subsection (k)) or
Permissive Aggregation Group (as defined under subsection (h));
or
- --------------------------------------------------------------------------------
91 The Hudson City Savings Institution
<PAGE>
(ii) the Plan is a part of a Required Aggregation Group but is not
part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the group of plans exceeds sixty percent (60%); or
(iii) the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds sixty percent (60%).
(o) "Top-Heavy Ratio" means:
(i) if the Employer maintains one or more qualified defined
contribution plans and the Employer has not maintained any
qualified defined benefit plans which during the five (5) year
period ending on the Determination Date have or have had accrued
benefits, the Top-Heavy Ratio for the Plan alone or for the
Required Aggregation Group or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is the sum of
the Account balances under the aggregated defined contribution
plan or plans for all Key Employees as of the Determination
Date, including any part of any Account balance distributed in
the five (5) year period ending on the Determination Date but
excluding distributions attributable to Related Rollover
Contributions, if any, and the denominator of which is the sum
of all Account balances under the aggregated qualified defined
contribution plan or plans for all Participants as of the
Determination Date, including any part of any Account balance
distributed in the five (5) year period ending on the
Determination Date but excluding distributions attributable to
Related Rollover Contributions, if any, determined in accordance
with Section 416 of the Code and the regulations thereunder.
- --------------------------------------------------------------------------------
92 The Hudson City Savings Institution
<PAGE>
(ii) if the Employer maintains one or more qualified defined
contribution plans and the Employer maintains or has maintained
one or more qualified defined benefit plans which during the
five (5) year period ending on the Determination Date have or
have had any accrued benefits, the Top-Heavy Ratio for any
Required Aggregation Group or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is the sum of
the Account balances under the aggregated qualified defined
contribution plan or plans for all Key Employees, determined in
accordance with (i) above, and the sum of the Present Value of
Accrued Benefits under the aggregated qualified defined benefit
plan or plans for all Key Employees as of the Determination
Date, and the denominator of which is the sum of the Account
balances under the aggregated qualified defined contribution
plan or plans determined in accordance with (i) above, for all
Participants and the sum of the Present Value of Accrued
Benefits under the aggregated qualified defined benefit plan or
plans for all Participants as of the Determination Date, all
determined in accordance with Section 416 of the Code and the
regulations thereunder. The accrued benefits under a qualified
defined benefit plan in both the numerator and denominator of
the Top-Heavy Ratio are adjusted for any distribution of an
accrued benefit made in the five (5) year period ending on the
Determination Date.
(iii) For purposes of (i) and (ii) 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 the twelve (12) month period ending on the Determination
Date, except as provided in Section 416 of the Code and the
regulations thereunder for the first and second Plan Years of a
qualified defined benefit plan. The Account balances and Present
Value of Accrued Benefits of a Participant (A) who is a Non-Key
Employee but who was a Key Employee in a prior year, or (B) who
has not been credited with at least an Hour of Service with any
employer maintaining the Plan at any time during the five (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 Section 416
of the Code and the regulations thereunder. When aggregating
plans, the value of Account balances and the Present Value of
Accrued Benefits will be calculated with reference to the
Determination Date that falls within the same calendar year.
- --------------------------------------------------------------------------------
93 The Hudson City Savings Institution
<PAGE>
(p) "Valuation Date", for the purpose of computing the Top-Heavy Ratio (as
defined under subsection (o)) under subsections (1) and (n) means the
last date of the Plan Year.
For purposes of subsections (h), (j) and (k), the rules of Sections 414(b),
(c), (m) and (o) of the Code shall be applied in determining the meaning of
the term "Employer".
12.3 Minimum Contributions
If the Plan becomes a Top-Heavy Plan, then any provision of Article III to
the contrary notwithstanding, the following provisions shall apply:
(a) Subject to subsection (b), the Employer shall contribute on behalf of
each Participant who is employed by the Employer on the last day of
the Plan Year and who is a Non-Key Employee an amount with respect to
each Top-Heavy year which, when added to the amount of Matching
Contributions and Special Contributions made on behalf of such
Participant, shall not be less than the lesser of: (i) three percent
(3%) of such Participant's Section 415 Compensation (as defined under
Section 3.11(a)(vii) of the Plan and modified by Section 401(a)(17) of
the Code), or (ii) if the Employer has no defined benefit plan which
is designated to satisfy Section 416 of the Code, the largest of
Matching Contributions and Special Contributions, as a percentage of
the Key Employees' Top-Heavy Earnings; provided, however, that in no
event shall any contributions be made under this Section 12.3 in an
amount which will cause the percentage of contributions made by the
Employer on behalf of any Participant who is a Non-Key Employee to
exceed the percentage at which contributions are made by the Employer
on behalf of the Key Employee for whom the percentage of Matching
Contributions is highest in such Top-Heavy year. Any such contribution
shall be allocated to the Matching Contribution Account of each such
Participant and, for
- --------------------------------------------------------------------------------
94 The Hudson City Savings Institution
<PAGE>
purposes of vesting and withdrawals only, shall be deemed to be a
Matching Contribution.
(b) Notwithstanding the foregoing, this Section 12.3 shall not apply to
any Participant to the extent that such Participant is covered under
any other plan or plans of the Employer (determined in accordance with
Sections 414(b), (c), (m) and (o) of the Code) and such other plan
provides that the minimum allocation or benefit requirement will be
met by such other plan should this Plan become Top-Heavy.
(c) For purposes of this Article XII, the following shall be considered as
a contribution made by the Employer:
(i) Qualified Nonelective Contributions;
(ii) Matching Contributions made by the Employer on behalf of Key
Employees; and
(iii) Before-Tax Contributions made by the Employer on behalf of Key
Employees.
(d) Subject to the provisions of subsection (b), all Non-Key Employee
Participants who are employed by the Employer on the last day of the
Plan Year shall receive the defined contribution minimum provided
under subsection (a). A Non-Key Employee may not fail to accrue a
defined contribution minimum merely because such Employee was excluded
from participation or failed to accrue a benefit because (i) his
Compensation is less than a stated amount, or (ii) he failed to make
Before-Tax Contributions.
12.4 Impact on Section 415 Maximum Benefits
For any Plan Year in which the Plan is a Super Top-Heavy Plan, Sections
3.11(a)(iv) and (v) shall be read by substituting the number 1.0 for the
number 1.25 wherever it appears therein. For any Plan Year in which the
Plan is a Top-Heavy Plan but not a Super Top-Heavy Plan, the Plan shall be
treated as a Super Top-Heavy Plan under this Section 12.4, unless each
Non-Key Employee who is entitled to a minimum contribution or benefit
receives an additional minimum contribution or benefit. If the Non-Key
Employee is entitled to a minimum contribution under Section 12.3(a), the
Plan shall not be treated as a Super Top-Heavy Plan under this Section 12.4
if the minimum contribution satisfies Section 12.3(a) when four percent
(4%) is substituted for three percent (3%) in Section 12.3(a)(i).
- --------------------------------------------------------------------------------
95 The Hudson City Savings Institution
<PAGE>
ARTICLE XIII --
MISCELLANEOUS PROVISIONS
13.1 No Right to Continued Employment
Neither the establishment of the Plan, nor any provisions of the Plan, of
the Agreement establishing the Trust or of any Separate Agreement nor any
action of any Named Fiduciary, Plan Administrator or the Employer, shall be
held or construed to confer upon any Employee any right to a continuation
of his employment by the Employer. The Employer reserves the right to
dismiss any Employee or otherwise deal with any Employee to the same extent
and in the same manner that it would if the Plan had not been adopted.
13.2 Merger, Consolidation, or Transfer
The Plan shall not be merged or consolidated with, nor transfer its assets
or liabilities to, any other plan unless each Employee, Participant,
Beneficiary and other person entitled to benefits under the Plan, would (if
such other plan then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the
benefit he would have been entitled to receive if the Plan had terminated
immediately before the merger, consolidation or transfer.
13.3 Nonalienation of Benefits
Except, effective August 5, 1997, to the extent of any offset of a
Participant's benefits as a result of any judgment, order, decree or
settlement agreement provided in Section 401(a)(13)(C) of the Code,
benefits payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary and
- --------------------------------------------------------------------------------
96 The Hudson City Savings Institution
<PAGE>
any attempt to so anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge, garnish, execute, levy or otherwise affect any right to
benefits payable hereunder, shall be void. Notwithstanding the foregoing,
the Plan shall permit the payment of benefits in accordance with a
qualified domestic relations order as defined under Section 414(p) of the
Code.
13.4 Missing Payee
Any other provision in the Plan, Separate Agency or Agreement to the
contrary notwithstanding, if the Trustees and, if appropriate, any Separate
Agency are unable to make payment to any Employee, Participant, Beneficiary
or other person to whom a payment is due ("Payee") under the Plan because
the identity or whereabouts of such Payee cannot be ascertained after
reasonable efforts have been made to identify or locate such person
(including mailing a certified notice of the payment due to the last known
address of such Payee as shown on the records of the Employer), such
payment and all subsequent payments otherwise due to such Payee shall be
forfeited twenty-four (24) months after the date such payment first became
due. However, such payment and any subsequent payments shall be reinstated
retroactively, without interest, no later than sixty (60) days after the
date on which the Payee is identified and located.
13.5 Affiliated Employers
All employees of all Affiliated Employers shall, for purposes of the
limitations in Article XII and for measuring Hours of Service and Periods
of Service, be treated as employed by a single employer. No employee of an
Affiliated Employer shall become a Participant of this Plan unless employed
by the Employer or an Affiliated Employer which has adopted the Plan.
- --------------------------------------------------------------------------------
97 The Hudson City Savings Institution
<PAGE>
13.6 Successor Employer
In the event of the dissolution, merger, consolidation or reorganization of
the Employer, the successor organization may, upon satisfying the
provisions of the Agreement and the Plan, adopt and continue this Plan.
Upon adoption, the successor organization shall be deemed the Employer with
all its powers, duties and responsibilities and shall assume all Plan
liabilities.
13.7 Return of Employer Contributions
Any other provision of the Plan, Separate Agreement or Agreement to the
contrary notwithstanding, upon the Employer's request and with the consent
of the Trustees, and if appropriate, any Separate Agency, a contribution to
the Plan by the Employer which was (a) made by mistake of fact, or (b)
conditioned upon initial qualification of the Plan with the Internal
Revenue Service, or (c) conditioned upon the deductibility by the Employer
of such contributions under Section 404 of the Code, shall be returned to
the Employer within one (1) year after: (i) the payment of a contribution
made by mistake of fact, or (ii) the denial of such qualification or (iii)
the disallowance of the deduction (to the extent disallowed), as the case
may be.
Any such return shall not exceed the lesser of (A) the amount of such
contributions (or, if applicable, the amount of such contribution with
respect to which a deduction is denied or disallowed) or (B) the amount of
such contributions net of a proportionate share of losses incurred by the
Plan during the period commencing on the Valuation Date as of which such
contributions are made and ending on the Valuation Date as of which such
contributions are returned. All such refunds shall be limited in amount,
circumstances and timing to the provisions of Section 403(c) of ERISA.
13.8 Adoption of Plan by Affiliated Employer
An Affiliated Employer of the Sponsoring Employer may adopt the Plan and
Agreement upon satisfying the requirements set forth in the Agreement. Upon
such adoption, such Affiliated Employer shall become a Participating
Affiliate in the Plan, which Plan shall
- --------------------------------------------------------------------------------
98 The Hudson City Savings Institution
<PAGE>
be deemed a "single plan" within the meaning of Income Tax Regulations
Section 1.414(1)-1(b)(1).
For purposes of Article IX, Employer shall mean only the Sponsoring
Employer and each Participating Affiliate shall be deemed to accept and
designate the Named Fiduciaries, Committee, Plan Administrator, Trustee
Administrator and voter of Units designated by the Sponsoring Employer to
act on its behalf in accordance with the provisions of the Plan and
Agreement.
The Sponsoring Employer shall solely exercise for and on behalf of such
Participating Affiliate the powers reserved to the Employer under Articles
IX and XI. However, such Participating Affiliate may at anytime terminate
its future participation in the Plan for the purposes and in the manner set
forth in the Agreement.
13.9 Construction of Language
Wherever appropriate in the Plan, words used in the singular may be read in
the plural; words used in the plural may be read in the singular; and words
importing the masculine gender shall be deemed equally to refer to the
female gender. Any reference to a section number shall refer to a section
of this Plan, unless otherwise indicated.
13.10 Headings
The headings of articles and sections are included solely for convenience
of reference, and if there be any conflict between such headings and the
text of the Plan, the text shall control.
13.11 Governing Law
The Plan shall be governed by and construed and enforced in accordance with
the laws of the State of New York, except to the extent that such laws are
preempted by the Federal laws of the United States of America.
- --------------------------------------------------------------------------------
99 The Hudson City Savings Institution
EXHIBIT 10.7
BENEFIT RESTORATION PLAN
OF
HUDSON RIVER BANK & TRUST COMPANY
Effective as of January 1, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................................. 1
SECTION 1.1 ACTUARIAL EQUIVALENT.......................................... 1
SECTION 1.2 AFFILIATED EMPLOYER........................................... 1
SECTION 1.3 APPLICABLE LIMITATION......................................... 1
SECTION 1.4 BANK.......................................................... 2
SECTION 1.5 BENEFICIARY................................................... 2
SECTION 1.6 BOARD......................................................... 2
SECTION 1.7 CODE.......................................................... 2
SECTION 1.8 COMMITTEE..................................................... 2
SECTION 1.9 COMPANY....................................................... 2
SECTION 1.10 ELIGIBLE EMPLOYEE............................................. 2
SECTION 1.11 EMPLOYEE...................................................... 2
SECTION 1.12 EMPLOYER...................................................... 2
SECTION 1.13 EMPLOYER CONTRIBUTIONS........................................ 2
SECTION 1.14 ERISA......................................................... 2
SECTION 1.15 ESOP.......................................................... 2
SECTION 1.16 FAIR MARKET VALUE OF A SHARE.................................. 3
SECTION 1.17 FORMER PARTICIPANT............................................ 3
SECTION 1.18 SAVINGS PLAN.................................................. 3
SECTION 1.19 PARTICIPANT................................................... 3
SECTION 1.20 PLAN.......................................................... 3
SECTION 1.21 RETIREMENT PLAN............................................... 3
SECTION 1.22 SHARE......................................................... 3
SECTION 1.23 STOCK UNIT.................................................... 3
SECTION 1.24 TERMINATION OF SERVICE........................................ 3
ARTICLE II
PARTICIPATION............................................................... 4
SECTION 2.1 ELIGIBILITY FOR PARTICIPATION................................. 4
SECTION 2.2 COMMENCEMENT OF PARTICIPATION................................. 4
SECTION 2.3 TERMINATION OF PARTICIPATION.................................. 4
ARTICLE III
BENEFITS TO PARTICIPANTS.................................................... 5
SECTION 3.1 SUPPLEMENTAL RETIREMENT BENEFIT............................... 5
SECTION 3.2 SUPPLEMENTAL SAVINGS BENEFIT.................................. 5
SECTION 3.3 SUPPLEMENTAL ESOP BENEFITS.................................... 7
SECTION 3.4 RESTORED ESOP BENEFITS........................................ 8
<PAGE>
TABLE OF CONTENTS (Continued)
ARTICLE IV
DEATH BENEFITS.............................................................. 10
SECTION 4.1 SUPPLEMENTAL RETIREMENT PLAN DEATH BENEFITS................... 10
SECTION 4.2 SUPPLEMENTAL SAVINGS PLAN DEATH BENEFITS...................... 10
SECTION 4.3 SUPPLEMENTAL ESOP DEATH BENEFITS.............................. 10
SECTION 4.4 RESTORED ESOP DEATH BENEFITS.................................. 10
SECTION 4.5 BENEFICIARIES................................................. 11
ARTICLE V
TRUST FUND.................................................................. 12
SECTION 5.1 ESTABLISHMENT OF TRUST........................................ 12
SECTION 5.2 CONTRIBUTIONS TO TRUST........................................ 12
SECTION 5.3 UNFUNDED CHARACTER OF PLAN.................................... 12
ARTICLE VI
ADMINISTRATION.............................................................. 13
SECTION 6.1 THE COMMITTEE................................................. 13
SECTION 6.2 LIABILITY OF COMMITTEE MEMBERS AND THEIR DELEGATES............ 14
SECTION 6.3 PLAN EXPENSES................................................. 14
SECTION 6.4 FACILITY OF PAYMENT........................................... 14
ARTICLE VII
AMENDMENT AND TERMINATION................................................... 15
SECTION 7.1 AMENDMENT BY THE BANK......................................... 15
SECTION 7.2 TERMINATION................................................... 15
SECTION 7.3 AMENDMENT OR TERMINATION BY OTHER EMPLOYERS................... 15
ARTICLE VIII
MISCELLANEOUS PROVISIONS.................................................... 16
SECTION 8.1 CONSTRUCTION AND LANGUAGE..................................... 16
SECTION 8.2 HEADINGS...................................................... 16
SECTION 8.3 NON-ALIENATION OF BENEFITS.................................... 16
SECTION 8.4 INDEMNIFICATION............................................... 16
SECTION 8.5 SEVERABILITY.................................................. 17
SECTION 8.6 WAIVER........................................................ 17
SECTION 8.7 GOVERNING LAW................................................. 17
SECTION 8.8 TAXES......................................................... 17
SECTION 8.9 NO DEPOSIT ACCOUNT............................................ 17
SECTION 8.10 NO RIGHT TO CONTINUED EMPLOYMENT.............................. 17
SECTION 8.11 STATUS OF PLAN UNDER ERISA.................................... 18
<PAGE>
BENEFIT RESTORATION PLAN
OF
HUDSON RIVER BANK & TRUST COMPANY
ARTICLE I
DEFINITIONS
Wherever appropriate to the purposes of the Plan, capitalized terms shall
have the meanings assigned to them under the Retirement Plan, Savings Plan or
ESOP, as applicable; provided, however, that the following special definitions
shall apply for purposes of the Plan, unless a different meaning is clearly
indicated by the context:
SECTION 1.1 ACTUARIAL EQUIVALENT means a benefit of equivalent value
determined on the basis of interest rate and mortality assumptions prescribed
under the Retirement Plan. If it shall be necessary to determine an Actuarial
Equivalent in any case for which interest rate and mortality assumptions shall
not have been prescribed under the Retirement Plan, the Actuarial Equivalent
shall be determined using the interest rate and mortality assumptions prescribed
by the Commissioner of Internal Revenue pursuant to section 417(e) of the Code
for the month in which the determination is being made.
SECTION 1.2 AFFILIATED EMPLOYER means any corporation which is a member of
a controlled group of corporations (as defined in section 414(b) of the Code)
that includes the Company; any trade or business (whether or not incorporated)
that is under common control (as defined in section 414(c) of the Code) with the
Company; any organization (whether or not incorporated) that is a member of an
affiliated service group (as defined in section 414(m) of the Code) that
includes the Company; any leasing organization (as defined in section 414(n) of
the Code) to the extent that any of its employees are required pursuant to
section 414(n) of the Code to be treated as employees of the Company; and any
other entity that is required to be aggregated with the Company pursuant to
regulations under section 414(o) of the Code.
SECTION 1.3 APPLICABLE LIMITATION means any of the following: (a) the
limitation on annual compensation that may be recognized under a tax-qualified
plan for benefit computation purposes pursuant to section 401(a)(17) of the
Code; (b) the maximum limitation on annual benefits payable by a tax-qualified
defined benefit plan pursuant to section 415(b) of the Code; (c) the maximum
limitation on annual additions to a tax-qualified defined contribution plan
pursuant to section 415(c) of the Code; (d) the maximum limitation on aggregate
annual benefits and annual additions under a combination of tax-qualified
defined benefit and defined contribution plans maintained by a single employer
pursuant to section 415(e) of the Code; (e) the maximum limitation on annual
elective deferrals to a qualified cash or deferred arrangement pursuant to
section 402(g) of the Code; (f) the annual limitation on elective deferrals
under a qualified cash or
1
<PAGE>
deferred arrangement by highly compensated employees pursuant to section 401(k)
of the Code; and (g) the annual limitation on voluntary employee contributions
by, and employer matching contributions for, highly compensated employees
pursuant to section 401(m) of the Code.
SECTION 1.4 BANK means Hudson River Bank & Trust Company, a state stock
savings bank, and its successors or assigns.
SECTION 1.5 BENEFICIARY means any person, other than a Participant or
Former Participant, who is determined to be entitled to benefits under the terms
of the Plan.
SECTION 1.6 BOARD means the Board of Directors of the Bank.
SECTION 1.7 CODE means the Internal Revenue Code of 1986, as amended from
time to time (including the corresponding provisions of any prior law or
succeeding law).
SECTION 1.8 COMMITTEE means the Compensation Committee of the Board of
Directors of the Company, or such other person, committee or other entity as
shall be designated by or on behalf of the Board to perform the duties set forth
in Article VI.
SECTION 1.9 COMPANY means Hudson River Bancorp, Inc., a Delaware
corporation, or any successor thereto.
SECTION 1.10 ELIGIBLE EMPLOYEE means an Employee who is eligible for
participation in the Plan in accordance with the provisions of Article II.
SECTION 1.11 EMPLOYEE means any person, including an officer, who is
employed by the Employer.
SECTION 1.12 EMPLOYER means the Bank and any successor thereto and the
Company and any successor thereto and any Affiliated Employer which, with the
prior written approval of the Board of Directors of the Bank and subject to such
terms and conditions as may be imposed by the Board, shall adopt this Plan.
SECTION 1.13 EMPLOYER CONTRIBUTIONS means contributions by any Employer to
the Savings Plan or the ESOP.
SECTION 1.14 ERISA means the Employee Retirement Income Security Act of
l974, as amended from time to time (including the corresponding provisions of
any succeeding law).
SECTION 1.15 ESOP means the Hudson River Bancorp, Inc. Employee Stock
Ownership Plan, as amended from time to time (including the corresponding
provisions of any successor qualified employee stock ownership plan adopted by
the Company).
2
<PAGE>
SECTION 1.16 FAIR MARKET VALUE OF A SHARE means, with respect to a Share on
a specified date:
(a) the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on which
any reported sale occurred) as reported in the principal consolidated
reporting system with respect to securities listed or admitted to trading
on the principal United States securities exchange on which the Shares are
listed or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on
the National Association of Securities Dealers Automated Quotations System,
or, if no such quotation is provided, on another similar system, selected
by the Committee, then in use; or
(c) if sections 1.16(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
SECTION 1.17 FORMER PARTICIPANT means a person whose participation in the
Plan has terminated as provided under section 2.3.
SECTION 1.18 SAVINGS PLAN means the Hudson River Bank & Trust Company
401(k) Savings Plan, as amended from time to time (including the provisions of
any successor qualified defined contribution plan adopted by the Bank).
SECTION 1.19 PARTICIPANT means any person who is participating in the Plan
in accordance with its terms.
SECTION 1.20 PLAN means the Benefit Restoration Plan of Hudson River Bank &
Trust Company, as amended from time to time (including the corresponding
provisions of any successor plan adopted by the Bank).
SECTION 1.21 RETIREMENT PLAN means the Retirement Plan of the Hudson River
Bank & Trust Company, as amended from time to time (including the corresponding
provisions of any successor qualified defined benefit plan adopted by the Bank).
SECTION 1.22 SHARE means a share of the common stock of Hudson River
Bancorp, Inc.
SECTION 1.23 STOCK UNIT means a right to receive a payment under the Plan
in an amount equal, on the date as of which such payment is made, to the Fair
Market Value of a Share.
3
<PAGE>
SECTION 1.24 TERMINATION OF SERVICE means an Employee's separation from
employment with the Employer and all Affiliated Employers as an Employee,
whether by resignation, discharge, death, disability, retirement or otherwise.
ARTICLE II
PARTICIPATION
SECTION 2.1 ELIGIBILITY FOR PARTICIPATION.
Only Eligible Employees may be or become Participants. An Employee shall
become an Eligible Employee if:
(a) he holds the office of Chairman, President or Executive Vice
President of the Bank or the Company, or he has been designated an Eligible
Employee by resolution of the Board; and
(b) he is either (i) a Participant in the Retirement Plan, the Savings
Plan or the ESOP, or any combination thereof, and the benefits to which he
is entitled thereunder are limited by one or more of the Applicable
Limitations, and/or (ii) a Participant in the ESOP and is designated an
Eligible Employee for purposes of the restored ESOP benefit described in
section 3.4; provided, however, that no person shall be named an Eligible
Employee, nor shall any person who has been an Eligible Employee continue
as an Eligible Employee, to the extent that such person's participation, or
continued participation, in the Plan would cause the Plan to fail to be
considered maintained for the primary purpose of providing deferred
compensation for a select group of management or highly compensated
employees for purposes of ERISA.
SECTION 2.2 COMMENCEMENT OF PARTICIPATION.
An Employee shall become a Participant on the date when he first becomes an
Eligible Employee, unless the Committee shall, by resolution, establish an
earlier or later effective date of participation for a Participant.
SECTION 2.3 TERMINATION OF PARTICIPATION.
Participation in the Plan shall cease on the earlier of (a) the date of the
Participant's Termination of Service or (b) the date on which he ceases to be an
Eligible Employee.
4
<PAGE>
ARTICLE III
BENEFITS TO PARTICIPANTS
SECTION 3.1 SUPPLEMENTAL RETIREMENT BENEFIT.
(a) A Participant whose benefits under the Retirement Plan are limited by
one or more of the Applicable Limitations shall be eligible for a supplemental
retirement benefit under this Plan in an amount equal to the excess of:
(i) the retirement benefit to which he would be entitled under the
Retirement Plan in the absence of the Applicable Limitations; over
(ii) the actual retirement benefit to which he is entitled under the
Retirement Plan; in each case computed as of the date on which his benefit
under the Retirement Plan is scheduled to commence and on the basis of the
benefit form selected by him under the Retirement Plan; provided, however,
that if the Participant dies before the payment of such supplemental
retirement benefit begins, no benefit shall be payable under this section
3.1 and the survivor benefit, if any, which may be payable shall be
determined under section 4.1.
(b) The supplemental retirement benefit provided for in this section 3.1
shall be paid in the form of a single life annuity commencing on the first day
of the month coincident with or next following the Participant's Termination of
Service or, if later, the earliest date on which benefits under the Retirement
Plan could, with a proper election, begin to be paid. Notwithstanding the
foregoing, a Participant may, within 30 days after first becoming eligible to
participate in the Plan for purposes of receiving a supplemental retirement
benefit, elect that such supplemental retirement benefit be paid in a different
form or commencing at a different time by filing a written election, in such
form and manner as the Committee may provide, within such 30-day period, and the
amount of such benefit shall be the Actuarial Equivalent of the benefit payable
in the absence of such an election.
SECTION 3.2 SUPPLEMENTAL SAVINGS BENEFIT.
(a) A Participant whose benefits under the Savings Plan are limited by one
or more of the Applicable Limitations shall be eligible for a supplemental
savings benefit under this Plan in an amount equal to:
(i) the aggregate amount of Employer Contributions (including any
reallocation of amounts forfeited upon the termination of employment of
others participating in the Savings Plan) that would have been credited to
the Participant's account under the Savings Plan in the absence of the
Applicable Limitations if for all relevant periods he had made the maximum
amount of elective deferrals under section 402(g) of the Code or voluntary
employee contributions under section 401(a) of the Code required to qualify
for the
5
<PAGE>
maximum possible allocation of Employer Contributions (and without regard
to the amount of elective deferrals or voluntary employee contributions
actually made); over
(ii) the aggregate amount of Employer Contributions (including any
reallocation of amounts forfeited upon the termination of employment of
others participating in the Savings Plan) actually credited to the
Participant's account under the Savings Plan for such periods, adjusted for
earnings and losses as provided section 3.2(b); provided, however, that if
the Participant dies before the payment of such supplemental savings
benefit begins, no benefit shall be payable under this section 3.2 and the
survivor benefit, if any, which may be payable shall be determined under
section 4.2.
(b) The Committee shall cause to be maintained a bookkeeping account to
reflect all Employer Contributions (including any reallocation of amounts
forfeited upon the termination of employment of others participating in the
Savings Plan) that cannot be made to a Participant's account under the Savings
Plan due to the Applicable Limitations and shall cause such bookkeeping account
to be credited with all such Employer Contributions as of the date on which such
Employer Contributions would have been credited to the Participant's account in
the Savings Plan in the absence of the Applicable Limitations. The balance
credited to such bookkeeping account shall be adjusted for earnings or losses as
follows:
(i) except as provided in section 3.2(b)(ii), the balance credited to
such bookkeeping account shall be credited with interest as of the last day
of each calendar month at a rate for such month equal to one-twelfth of the
annualized yield on 30-year Treasury Securities, Constant Maturities,
prescribed by the Commissioner of Internal Revenue for such month pursuant
to section 417(e) of the Code; or
(ii) if and to the extent permitted by the Committee, as though such
Employer Contributions had been contributed to a trust fund and invested,
for the benefit of the Participant, in such investments at such time or
times as the Participant shall have designated in such form and manner as
the Committee shall prescribe.
(c) The supplemental savings benefit payable to a Participant hereunder
shall be paid in a single lump sum as soon as practicable following the last day
of the calendar year in which the Participant's Termination of Service occurs
and shall be equal to the balance credited to his bookkeeping account as of the
last day of the last calendar month to end prior to the date of payment.
Notwithstanding the foregoing, a Participant may, within 30 days after first
becoming eligible to participate in the Plan for purposes of receiving a
supplemental savings benefit, specify that such supplemental savings benefit be
paid in a different form or commencing at a different time by filing a written
election, in such form and manner as the Committee may prescribe, within such
30-day period.
6
<PAGE>
SECTION 3.3 SUPPLEMENTAL ESOP BENEFITS.
(a) A Participant whose benefits under the ESOP are limited by one or more
of the Applicable Limitations shall be eligible for a supplemental ESOP benefit
under this Plan in an amount equal to the sum of:
(i) a number of Stock Units equal to the excess (if any) of (A) the
aggregate number of Shares (including any reallocation of Shares forfeited
upon the termination of employment of others participating in the ESOP)
that would have been credited to the Participant's account under the ESOP
in the absence of the Applicable Limitations over (B) the number of Shares
actually credited to his account under the ESOP; plus
(ii) if and to the extent that Employer Contributions to the ESOP
result in allocations to the Participant's account of assets other than
Shares, an amount equal to the excess (if any) of (A) the aggregate amount
of Employer Contributions (including any reallocation of amounts forfeited
upon the termination of employment of others participating in the ESOP)
that would have been credited to the Participant's account under the ESOP
in the absence of the Applicable Limitations over (B) the aggregate amount
of Employer Contributions (including any reallocation of amounts forfeited
upon the termination of employment of others participating in the ESOP)
actually credited to the Participant's account under the ESOP; adjusted for
earnings and losses as provided section 3.3(b); provided, however, that if
the Participant dies before the payment of such supplemental ESOP benefit
begins, no benefit shall be payable under this section 3.3, and the
survivor benefit, if any, which may be payable shall be determined under
section 4.3.
(b) The Committee shall cause to be maintained a bookkeeping account to
reflect all Shares and Employer Contributions (including any reallocation of
amounts forfeited upon the termination of employment of others participating in
the ESOP) that cannot be allocated to a Participant's account under the ESOP due
to the Applicable Limitations and shall cause such bookkeeping account to be
credited with such Employer Contributions and Stock Units reflecting such Shares
as of the date on which such Employer Contributions and Shares, respectively,
would have been credited to the Participant's account in the ESOP in the absence
of the Applicable Limitations. The balance credited to such bookkeeping account
shall be adjusted for earnings or losses as follows:
(i) all Stock Units shall be adjusted from time to time so that the
value of a Stock Unit on any date is equal to the Fair Market Value of a
Share on such date, and the number of Stock Units shall be adjusted as and
when appropriate to reflect any stock dividend, stock split, reverse stock
split, exchange, conversion, or other event generally affecting the number
of Shares held by all holders of Shares; and
(ii) (A) except as provided in section 3.3(b)(ii)(B), the balance
credited to such bookkeeping account that does not consist of Stock
Units shall be credited with interest as of the last day of each
calendar month at a rate for such month equal to one-twelfth of the
7
<PAGE>
annualized yield on 30-year Treasury Securities, Constant Maturities,
prescribed by the Commissioner of Internal Revenue for such month
pursuant to section 417(e) of the Code; or
(B) if and to the extent permitted by the Committee, the balance
credited to such bookkeeping account that does not consist of Stock
Units shall be adjusted as though such Employer Contributions had been
contributed to a trust fund and invested, for the benefit of the
Participant, in such investments at such time or times as the
Participant shall have designated in such form and manner as the
Committee shall prescribe; provided, however, that to the extent that
the Participant shall receive on a current basis any dividend paid
with respect to Shares credited to his account under the ESOP, the
bookkeeping account established for him under this Plan shall not be
adjusted to reflect such dividend and, instead, the Participant shall
be paid an amount per Stock Unit equal to the dividend per Share
received by the Participant under the ESOP, at substantially the same
time as such dividend is paid under the ESOP.
(c) The supplemental ESOP benefit payable to a Participant hereunder shall
be paid in a single lump sum as soon as practicable following the last day of
the calendar year in which the Participant's Termination of Service occurs and
shall be in an amount equal to the balance credited to his bookkeeping account.
Notwithstanding the foregoing, a Participant may, within 30 days after first
becoming eligible to participate in the Plan for purposes of receiving a
supplemental ESOP benefit, specify that such supplemental ESOP benefit be paid
in a different form or commencing at a different time by filing a written
election, in such form and manner as the Committee may prescribe, within such 30
day period.
SECTION 3.4 RESTORED ESOP BENEFITS.
(a) A Participant who is designated an Eligible Employee for purposes of
the restored ESOP benefit described in this section 3.4, and who otherwise
satisfies section 2.1, shall be entitled, upon his Termination of Service upon
or after attaining normal retirement age or being eligible for an early
retirement benefit under the terms of the Retirement Plan, to an unfunded,
unsecured promise from the Bank to receive an amount determined by:
(i) projecting the total number of Shares that would have been
allocated to the Participant's account under the terms of the ESOP had the
Participant continued in the employ of the Bank measured from the date the
Participant was first eligible to participate in the ESOP until the ESOP
loan was repaid in full and the final allocation of Shares acquired when
the ESOP loan was made; and then
(ii) reducing the number of Shares projected in section 3.4(a)(i)
above by the actual number of Shares allocated to the Participant under the
terms of the ESOP as of the last day of the final plan year of the ESOP in
which the Participant was an active Participant for purposes of allocations
under the ESOP; and
8
<PAGE>
(iii) multiplying the number of Shares determined in section
3.4(a)(ii) above by the average of the closing prices of such Shares at the
end of each fiscal quarter during the preceding twelve fiscal quarters
immediately preceding (or such fewer quarters as the Participant has been a
Participant) the Participant's retirement.
(b) The projection of Shares required by section 3.4(a)(i) above shall be
performed by a public accountant based on assumptions which the Committee has
approved as reasonable at the time the calculation of the benefit payable to the
Participant is performed.
(c) The restored ESOP benefit payable to a Participant hereunder shall be
paid in a single lump sum as soon as practicable following the last day of the
calendar year in which the Participant's Termination of Service occurs and shall
be in an amount determined pursuant to section 3.4(a) above; provided, however,
that if the Participant dies before the payment of such restored ESOP benefit
begins, no benefit shall be payable under this section 3.4, and the survivor
benefit, if any, which may be payable shall be determined under section 4.4.
Notwithstanding the foregoing, a Participant may, within 30 days after first
becoming eligible to participate in the Plan for purposes of receiving a
restored ESOP benefit, specify that such restored ESOP benefit be paid in a
different form or commencing at a different time by filing a written election,
in such form and manner as the Committee may prescribe, within such 30-day
period.
9
<PAGE>
ARTICLE IV
DEATH BENEFITS
SECTION 4.1 SUPPLEMENTAL RETIREMENT PLAN DEATH BENEFITS.
If a Participant who is eligible for a supplemental retirement benefit
under section 3.3 dies before the payment of such benefit begins, a supplemental
survivor's retirement benefit shall be payable to the Participant's Beneficiary
under this Plan in amount equal to the excess (if any) of (a) the survivor's
benefit that would have been payable under the Retirement Plan commencing at the
earliest permissible date in the absence of the Applicable Limitations if the
Participant had effectively designated such Beneficiary as his beneficiary under
the Retirement Plan, over (b) the survivor's benefit that would have been
payable under the Retirement Plan commencing at the earliest permissible date
after giving effect to the Applicable Limitations if the Participant had
effectively designated such Beneficiary as his beneficiary under the Retirement
Plan. Such benefit shall be paid in a single lump sum which is the Actuarial
Equivalent of the benefit described in the preceding sentence as soon as
practicable following the death of the Participant.
SECTION 4.2 SUPPLEMENTAL SAVINGS PLAN DEATH BENEFITS.
If a Participant who is eligible for a supplemental savings benefit under
section 3.2 dies before the payment of such benefit begins, a supplemental
survivor's savings benefit shall be payable to the Participant's Beneficiary
under this Plan in amount equal to the balance credited to the bookkeeping
account established for the Participant under section 3.2(b). Such benefit shall
be paid in a single lump sum as soon as practicable following the death of the
Participant, and the bookkeeping account established for such Participant
pursuant to section 3.2(b) shall continue to be adjusted as provided therein
through the last day of the last calendar month to end prior to the date of
payment.
SECTION 4.3 SUPPLEMENTAL ESOP DEATH BENEFITS.
If a Participant who is eligible for a supplemental ESOP benefit under
section 3.3 dies before the payment of such benefit begins, a supplemental ESOP
death benefit shall be payable to the Participant's Beneficiary under this Plan
in amount equal to the balance credited to the bookkeeping account established
for the Participant under section 3.3(b). Such benefit shall be paid in a single
lump sum as soon as practicable following the death of the Participant, and the
bookkeeping account established for such Participant pursuant to section 3.3(b)
shall continue to be adjusted as provided therein through the last day of the
last calendar month to end prior to the date of payment.
SECTION 4.4 RESTORED ESOP DEATH BENEFITS.
If a Participant who is eligible for a restored ESOP benefit under section
3.4 dies before the payment of such benefit begins, a restored ESOP benefit
shall be payable to the
10
<PAGE>
Participant's Beneficiary under this Plan in an amount determined pursuant to
section 3.4(b). Such benefit shall be paid in a single lump sum as soon as
practicable following the death of the Participant.
SECTION 4.5 BENEFICIARIES.
A Participant or Former Participant may designate a Beneficiary or
Beneficiaries to receive any survivor benefits payable under the Plan upon his
death. Any such designation, or change therein or revocation thereof, shall be
made in writing in the form and manner prescribed by the Committee, shall be
revocable until the death of the Participant, and shall thereafter be
irrevocable; provided, however, that any change or revocation shall be effective
only if received by the Committee prior to the Participant's or Former
Participant's death. If a Participant or Former Participant shall die without
having effectively named a Beneficiary, he shall be deemed to have named his
estate as his sole Beneficiary. If a Participant or Former Participant and his
designated Beneficiary shall die in circumstances which give rise to doubt as to
which of them shall have been the first to die, the Participant or Former
Participant shall be deemed to have survived the Beneficiary. If a Participant
or Former Participant designates more than one Beneficiary, all shall be deemed
to have equal shares per stirpes unless the Participant or Former Participant
shall expressly provide otherwise.
11
<PAGE>
ARTICLE V
TRUST FUND
SECTION 5.1 ESTABLISHMENT OF TRUST.
The Bank, the Company or another Employer may establish a trust fund which
may be used to accumulate funds to satisfy benefit liabilities to Participants,
Former Participants and their Beneficiaries under the Plan; provided, however,
that the assets of such trust shall be subject to the claims of the creditors of
such entity in the event that it is determined that such entity is insolvent;
and provided, further, that the trust agreement shall contain such terms,
conditions and provisions as shall be necessary to cause such entity to be
considered the owner of the trust fund for federal, state or local income tax
purposes with respect to all amounts contributed to the trust fund or any income
attributable to the investments of the trust fund. The Bank, the Company or such
other Employer shall pay all costs and expenses incurred in establishing and
maintaining such trust. Any payments made to a Participant, Former Participant
or Beneficiary from a trust established under this section 5.1 shall offset
payments which would otherwise be payable by the Bank, the Company or such other
Employer in the absence of the establishment of such trust. Any such trust will
conform to the terms of the model trust described in Revenue Procedure 92-64, as
the same may be modified from time to time.
SECTION 5.2 CONTRIBUTIONS TO TRUST.
If a trust is established in accordance with section 5.1, the Bank, the
Company or any other Employer shall make contributions to such trust in such
amounts and at such times as may be specified by the Committee or as may be
required pursuant to the terms of the agreement governing the establishment and
operation of such trust.
SECTION 5.3 UNFUNDED CHARACTER OF PLAN.
Notwithstanding the establishment of a trust pursuant to section 5.1, the
Plan shall be unfunded for purposes of the Code and ERISA. Any liability of the
Bank, the Company or another Employer to any person with respect to benefits
payable under the Plan shall be based solely upon such contractual obligations,
if any, as shall be created by the Plan, and shall give rise only to a claim
against the general assets of the Bank, the Company or such Employer. No such
liability shall be deemed to be secured by any pledge or any other encumbrance
on any specific property of the Bank, the Company or any other Employer.
12
<PAGE>
ARTICLE VI
ADMINISTRATION
SECTION 6.1 THE COMMITTEE.
Except for the functions reserved to the Bank or the Board, the
administration of the Plan shall be the responsibility of the Committee. The
Committee shall have the power and the duty to take all actions and to make all
decisions necessary or proper to carry out the Plan. The determination of the
Committee as to any question involving the general administration and
interpretation of the Plan shall be final, conclusive and binding. Any
discretionary actions to be taken under the Plan by the Committee shall be
uniform in their nature and applicable to all persons similarly situated.
Without limiting the generality of the foregoing, the Committee shall have the
following powers:
(a) to furnish to all Participants, upon request, copies of the Plan
and to require any person to furnish such information as it may request for
the purpose of the proper administration of the Plan as a condition to
receiving any benefits under the Plan;
(b) to make and enforce such rules and regulations and prescribe the
use of such forms as it shall deem necessary for the efficient
administration of the Plan;
(c) to exercise discretion to interpret the Plan, and to resolve
ambiguities, inconsistencies and omissions, and the determinations of the
Committee in respect thereof shall be binding, final and conclusive upon
all interested parties;
(d) to decide on questions concerning the Plan in accordance with the
provisions of the Plan;
(e) to determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan, to hear and decide
claims for benefits, and to provide a full and fair review to any
Participant whose claim for benefits has been denied in whole or in part;
(f) to designate a person, who may or may not be a member of the
Committee, as "plan administrator" for purposes of ERISA;
(g) to allocate any such powers and duties to or among individual
members of the Committee; and
(h) the power to designate persons other than Committee members to
carry out any duty or power which would otherwise be a responsibility of
the Committee, under the terms of the Plan.
13
<PAGE>
SECTION 6.2 LIABILITY OF COMMITTEE MEMBERS AND THEIR DELEGATES
To the extent permitted by law, the Committee and any person to whom it may
delegate any duty or power in connection with administering the Plan, the Bank,
the Company, any Employer, and the officers and directors thereof, shall be
entitled to rely conclusively upon, and shall be fully protected in any action
taken or suffered by them in good faith in reliance upon, any actuary, counsel,
accountant, other specialist, or other person selected by the Committee, or in
reliance upon any tables, valuations, certificates, opinions or reports which
shall be furnished by any of them. Further, to the extent permitted by law, no
member of the Committee, nor the Bank, the Company, any Employer, nor the
officers or directors thereof, shall be liable for any neglect, omission or
wrongdoing of any other members of the Committee, agent, officer or employee of
the Bank, the Company or any Employer. Any person claiming benefits under the
Plan shall look solely to the Employer for redress.
SECTION 6.3 PLAN EXPENSES
All expenses incurred prior to the termination of the Plan that shall arise
in connection with the administration of the Plan (including, but not limited to
administrative expenses, proper charges and disbursements, compensation and
other expenses and charges of any actuary, counsel, accountant, specialist, or
other person who shall be employed by the Committee in connection with the
administration of the Plan), shall be paid by the Bank, the Company or any
Employer.
SECTION 6.4 FACILITY OF PAYMENT.
If the Bank, the Company or any Employer is unable to make payment to any
Participant, Former Participant, Beneficiary, or any other person to whom a
payment is due under the Plan, because it cannot ascertain the identity or
whereabouts of such Participant, Former Participant, Beneficiary, or other
person after reasonable efforts have been made to identify or locate such person
(including a notice of the payment so due mailed to the last known address of
such Participant, Former Participant, Beneficiary, or other person shown on the
records of the Bank, the Company or any Employer), such payment and all
subsequent payments otherwise due to such Participant, Former Participant,
Beneficiary or other person shall be forfeited 24 months after the date such
payment first became due; provided, however, that such payment and any
subsequent payments shall be reinstated, retroactively, no later than 60 days
after the date on which the Participant, Former Participant, Beneficiary, or
other person is identified or located.
14
<PAGE>
ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1 AMENDMENT BY THE BANK.
The Bank reserves the right, in its sole and absolute discretion, at any
time and from time to time, by action of the Board, to amend the Plan in whole
or in part. In no event, however, shall any such amendment adversely affect the
right of any Participant, Former Participant or Beneficiary to receive any
benefits under the Plan in respect of participation for any period ending on or
before the later of the date on which such amendment is adopted or the date on
which it is made effective.
SECTION 7.2 TERMINATION.
The Bank also reserves the right, in its sole and absolute discretion, by
action of the Board, to terminate the Plan. In such event, undistributed
benefits attributable to participation prior to the date of termination shall be
distributed as though each Participant terminated employment with the Bank, the
Company and all other Employers as of the effective date of termination of the
Plan.
SECTION 7.3 AMENDMENT OR TERMINATION BY OTHER EMPLOYERS.
In the event that a corporation or trade or business other than the Bank
shall adopt this Plan, such corporation or trade or business shall, by adopting
the Plan, empower the Bank to amend or terminate the Plan, insofar as it shall
cover employees of such corporation or trade or business, upon the terms and
conditions set forth in sections 7.1 and 7.2; provided, however, that any such
corporation or trade or business may, by action of its board of directors or
other governing body, prospectively discontinue its participation in this Plan
at any time.
15
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 CONSTRUCTION AND LANGUAGE.
Wherever appropriate in the Plan, words used in the singular may be read in
the plural, words in the plural may be read in the singular, and words importing
the masculine gender shall be deemed equally to refer to the feminine or the
neuter. Any reference to an Article or section shall be to an Article or section
of the Plan, unless otherwise indicated.
SECTION 8.2 HEADINGS.
The headings of Articles and sections are included solely for convenience
of reference. If there is any conflict between such headings and the text of the
Agreement, the text shall control.
SECTION 8.3 NON-ALIENATION OF BENEFITS.
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, Former Participant or Beneficiary shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, whether voluntary or involuntary, and any attempt
to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge
the same shall be void; nor shall any such distribution or payment be in any way
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person entitled to such distribution or payment. If any Participant,
Former Participant or Beneficiary is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
such distribution or payment, voluntarily or involuntarily, the Committee, in
its sole discretion, may cancel such distribution or payment or may hold or
cause to be held or applied such distribution or payment, or any part thereof,
to or for the benefit of such Participant, Former Participant or Beneficiary, in
such manner as the Committee shall direct; provided, however, that no such
action by the Committee shall cause the acceleration or deferral of any benefit
payments from the date on which such payments are scheduled to be made.
SECTION 8.4 INDEMNIFICATION.
The Bank shall indemnify, hold harmless and defend each Participant, Former
Participant and Beneficiary, against their reasonable costs, including legal
fees, incurred by them or arising out of any action, suit or proceeding in which
they may be involved, as a result of their efforts, in good faith, to defend or
enforce the obligation of the Bank, the Company and any other Employer under the
terms of the Plan.
16
<PAGE>
SECTION 8.5 SEVERABILITY.
A determination that any provision of the Plan is invalid or unenforceable
shall not affect the validity or enforceability of any other provision hereof.
SECTION 8.6 WAIVER.
Failure to insist upon strict compliance with any of the terms, covenants
or conditions of the Plan shall not be deemed a waiver of such term, covenant or
condition. A waiver of any provision of the Plan must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
SECTION 8.7 GOVERNING LAW.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by the
federal laws of the United States. Any payments made pursuant to this Plan are
subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k)
and any regulations promulgated thereunder.
SECTION 8.8 TAXES.
The Employer shall have the right to retain a sufficient portion of any
payment made under the Plan to cover the amount required to be withheld pursuant
to any applicable federal, state and local tax law.
SECTION 8.9 NO DEPOSIT ACCOUNT.
Nothing in this Plan shall be held or construed to establish any deposit
account for any Participant or any deposit liability on the part of the Bank.
Participants' rights hereunder shall be equivalent to those of a general
unsecured creditor of the Bank, the Company or any other affected Employer.
SECTION 8.10 NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the establishment of the Plan, nor any provisions of the Plan nor
any action of the Committee, the Bank, the Company or any Employer shall be held
or construed to confer upon any Employee any right to a continuation of
employment by the Bank, the Company or any other Employer. The Bank, the Company
or any other Employer reserves the right to dismiss any Employee or otherwise
deal with any Employee to the same extent as though the Plan had not been
adopted.
17
<PAGE>
SECTION 8.11 STATUS OF PLAN UNDER ERISA.
The Plan is intended to be (a) to the maximum extent permitted under
applicable laws, an unfunded, non-qualified excess benefit plan as contemplated
by section 3(36) of ERISA for the purpose of providing benefits in excess of the
limitations imposed under section 415 of the Code, and (b) to the extent not so
permitted, an unfunded, non-qualified plan maintained primarily for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees, as contemplated by sections 201(2), 301(a)(3) and
401(a)(1) of ERISA and section 2520.104-23 of the Labor Department Regulations.
The Plan is not intended to comply with the requirements of section 401(a) of
the Code or to be subject to Parts 2, 3 and 4 of Title I of ERISA. The Plan
shall be administered and construed so as to effectuate this intent.
18
April 30, 1998
The Board of Trustees
The Hudson City Savings Institution
One Hudson City Centre
Hudson, New York 12534
CONSENT OF SILVER FREEDMAN & TAFF, L.L.P.
Ladies and Gentlemen:
We hereby consent to the references to this firm and our opinions in:
the Registration Statement on Form S-1 filed by Hudson River Bancorp, Inc.,
Hudson, New York, and all amendments thereto; in the Form H-(e)l-S for Hudson
River Bancorp, Inc., and all amendments thereto; and in the Application for
Conversion on Form 86-AC filed by The Hudson City Savings Institution (the
"Bank"), and all amendments thereto, and in the Notice and Application for
Hudson City Savings Institution filed with the Federal Deposit Insurance
Corporation and all amendments thereto, relating to the conversion of the Bank
from a New York State chartered mutual savings bank to a New York State
chartered stock savings bank, the concurrent issuance of the Bank's outstanding
capital stock to Hudson River Bancorp, Inc., a holding company formed for such
purpose, and the offering of Hudson River Bancorp, Inc.'s common stock.
/s/ SILVER, FREEDMAN & TAFF, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
Exhibit 24.2
ACCOUNTANT'S CONSENT
The Board of Trustees
The Hudson City Savings Institution:
We consent to the use in Amendment No. 1 to the Registration Statement on Form
S-1 (File No. 333-47605) and in the Application for conversiion on Form 86-AC
and in the Notice and Application for Conversion of Hudson River Bancorp, Inc.
of our report dated June 20, 1997 (except for note 17, which is as of November
20, 1997), on the consolidated financial statements of The Hudson City Savings
Institution and subsidiaries as of March 31, 1997 and 1996, and for each of the
years in the three-year period ended March 31, 1997.
We consent to the filing of our opinion regarding the New York State franchise
and income tax consequences of the conversion as an exhibit to the Registration
Statement and the Application for Conversion Form 86-AC. We also consent to the
references to our firm under the headings "Experts" and "Legal and Tax Opinions"
and to such opinion in "The Conversion - Effects of Conversion - Tax Aspects" in
the related prospectus.
/s/ KPMG Peat Marwick
--------------------------------
Albany, New York
April 30, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,284
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,336
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,282
<INVESTMENTS-CARRYING> 71,244
<INVESTMENTS-MARKET> 71,608
<LOANS> 511,898
<ALLOWANCE> 6,756
<TOTAL-ASSETS> 665,051
<DEPOSITS> 586,231
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 9,425
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 67,395
<TOTAL-LIABILITIES-AND-EQUITY> 665,051
<INTEREST-LOAN> 35,575
<INTEREST-INVEST> 5,525
<INTEREST-OTHER> 353
<INTEREST-TOTAL> 41,453
<INTEREST-DEPOSIT> 19,364
<INTEREST-EXPENSE> 19,540
<INTEREST-INCOME-NET> 21,913
<LOAN-LOSSES> 6,408
<SECURITIES-GAINS> 39
<EXPENSE-OTHER> 14,188
<INCOME-PRETAX> 3,207
<INCOME-PRE-EXTRAORDINARY> 1,886
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,886
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.62
<LOANS-NON> 15,081
<LOANS-PAST> 1,302
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,200
<ALLOWANCE-OPEN> 5,872
<CHARGE-OFFS> 5,953
<RECOVERIES> 428
<ALLOWANCE-CLOSE> 6,756
<ALLOWANCE-DOMESTIC> 6,650
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 106
</TABLE>
-------------------------------------------------
CONVERSION APPRAISAL REPORT
HUDSON RIVER BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
THE HUDSON CITY SAVINGS INSTITUTION
Hudson, New York
Dated As Of:
February 27, 1998
-------------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
RP FINANCIAL, LC
- ---------------------------------------
Financial Services Industry Consultants
February 27, 1998
Board of Trustees
The Hudson City Savings Institution
One Hudson City Centre
Hudson, New York 12534
Members of the Board of Trustees:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion
transaction described below.
This Appraisal is furnished pursuant to the requirements of 563b.7 and has
been prepared in accordance with the "Guidelines for Appraisal Reports for the
Valuation of Savings and Loan Associations Converting from Mutual to Stock Form
of Organization" of the Office of Thrift Supervision ("OTS"), including the most
recent revisions as of October 21, 1994, and applicable interpretations thereof.
Such Valuation Guidelines are relied upon by the New York State Department of
Banking (the "Department") and the Federal Deposit Insurance Corporation
("FDIC") in evaluating conversion appraisals in the absence of separate written
valuation guidelines by the respective agencies.
Description of Reorganization
- -----------------------------
The Board of Trustees of The Hudson City Savings Institution ("HCSI" or the
"Bank") has adopted a Plan of Conversion (the "Plan") pursuant to which the Bank
will convert from a New York chartered mutual savings bank to a New York stock
savings bank and issue all of its outstanding shares to Hudson River Bancorp,
Inc. (the "Holding Company"). The Holding Company is a Delaware corporation
organized in February 1998 by the Bank for the purpose of becoming a unitary
savings and loan holding company of the Bank. Pursuant to the Plan, the Holding
Company will offer shares of Common Stock in the Subscription Offering. Upon
completion of the Subscription Offering, any shares of Common Stock not
subscribed for in Subscription Offering will be offered in the Community
Offering and, if necessary, in a Syndicated Community Offering. The Common Stock
is first being offered in the Subscription Offering with nontransferable
subscription rights being granted to Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders, and Other Depositors. In addition, the
Holding Company intends to donate to a charitable foundation, immediately
following the Conversion, authorized but unissued shares of Holding Company
Common Stock in an amount equal to 3.0 percent of the number of shares of Common
Stock sold in the Offerings. All capitalized terms not otherwise defined in this
letter have the meanings given such terms in the Plan.
- --------------------------------------------------------------------------------
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
February 27, 1998
Page 2
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank and the Holding Company in the preparation of
the post-conversion business plan, we are independent of the Bank and the
Holding Company and the other parties engaged by the Bank or the Holding Company
to assist in the stock conversion process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed the Bank's and the Holding
Company's Application for Approval of Conversion, including the Proxy Statement,
as filed with the Department and the FDIC, the Holding Company application 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 Bank that has included a review of its audited financial
information for fiscal years ended 1993 through 1997, a review of various
unaudited information and internal financial reports through December 31, 1997,
and due diligence related discussions with the Bank's management; KPMG Peat
Marwick LLP, the Bank's independent auditor; Silver, Freedman & Taff, L.L.P.,
the Bank's conversion counsel; and Sandler O'Neill & Partners, L.P., the Bank's
financial and marketing advisor in connection with the Holding Company's stock
offering. All conclusions set forth in the appraisal were reached independently
from such discussions. In addition, where appropriate, we have considered
information based on other available published sources that we believe are
reliable. While we believe the information and data gathered from all these
sources are reliable, we cannot guarantee the accuracy and completeness of such
information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment for
financial institutions and analyzed the potential impact on the Bank and the
industry as a whole. We have analyzed the potential effects of conversion on the
Bank's operating characteristics and financial performance as they relate to the
pro forma market value. We have reviewed the overall conditions in the Bank's
primary market area as set forth in demographic, economic and competitive
information prepared by CACI, SNL Securities and other third party private and
governmental sources. We have compared the Bank's financial performance and
condition with selected publicly-traded thrifts and thrift holding companies in
accordance with the Valuation Guidelines, as well as all publicly-traded thrifts
and thrift holding companies. We have reviewed the current conditions in the
securities markets in general and in the market for thrift stocks in particular,
including the market for existing thrift issues and the market for initial
public offerings by thrifts and thrift holding companies. We have excluded from
such analyses publicly-traded mutual holding companies and thrifts subject to
announced or rumored acquisition and/or other unusual characteristics.
<PAGE>
RP Financial, LC.
Board of Directors
February 27, 1998
Page 3
Our Appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank and its independent auditors, legal counsel and other authorized
agents are truthful, accurate and complete. We did not independently verify the
financial statements and other information provided by the Bank, its independent
auditors, legal counsel and other authorized agents nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and the Holding Company and for all thrifts
and their holding companies. Changes in the local, state and national economy,
the legislative and regulatory environment for financial institutions, the stock
market, interest rates, and other external forces (such as natural disasters or
significant world events) may occur from time to time, often with great
unpredictability and may materially impact the value of thrift stocks as a whole
or the Bank's and the Holding Company's values alone. It is our understanding
that there are no current plans for selling control of the Holding Company or
the Bank following Conversion. To the extent that such factors can be foreseen,
they have been factored into our analysis.
The estimated pro forma market value is defined as the price at which the
Holding Company's Common Stock, immediately upon completion of the conversion
offering, would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and both having reasonable
knowledge of relevant facts.
Valuation Conclusion
- --------------------
It is our opinion that, as of February 27, 1998, the aggregate pro forma
market value of the shares to be issued was $135.0 million. Based on this
valuation, the Boards of the Holding Company and the Bank have established the
Purchase Price and the number of shares of Common Stock to be offered, including
the range of value. Accordingly, the Boards have established a range of value of
15 percent above and below the appraised value of $135.0 million (or
"midpoint"), indicating a minimum value of $114.8 million and a maximum value of
$155.3 million. Based on the $10.00 per share offering price determined by the
Boards, this valuation range equates to an offering of 11,475,000 shares at the
minimum to 15,525,000 shares at the maximum, and 13,500,000 shares at the
midpoint. In the event that the appraised value is subject to an increase, up to
17,853,750 shares may be sold at an issue price of $10.00 per share, for an
aggregate market value of $178.5 million, without a resolicitation.
Based on this valuation range, incorporating the 3.0 percent shares issued
to the Foundation following consummation of the offering, the offering range is
as follows: $111,407,770 at the minimum, $131,067,960 at the midpoint,
$150,728,150 at the maximum and $173,337,380 at the supermaximum. Based on a
$10.00 per share offering price, the number of offering shares is as follows:
11,140,777 at the minimum, 13,106,796 at the midpoint, 15,072,815 at the maximum
and 17,333,738 at the supermaximum.
<PAGE>
RP Financial, LC.
Board of Directors
February 27, 1998
Page 4
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 estimated pro
forma market value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of December 31, 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 RP Financial,
its principals or employees from purchasing stock of its client institutions.
This valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes in the legislative
and regulatory environment for financial institutions, the stock market and the
market for thrift stocks, and interest rates. Should any such new developments
or changes be material, in our opinion, to the valuation of the shares,
appropriate adjustments to the estimated pro forma market value will be made.
The reasons for any such adjustments will be explained in the update at the date
of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
Ronald S. Riggins
President
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
THE HUDSON CITY SAVINGS INSTITUTION
Hudson, New York
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Plan of Conversion and Holding Company Reorganization 1.1
Establishment of a Charitable Foundation 1.2
Strategic Overview 1.2
Balance Sheet Trends 1.6
Income and Expense Trends 1.9
Interest Rate Risk Management 1.13
Lending Activities and Strategy 1.14
Asset Quality 1.18
Funding Composition and Strategy 1.19
Subsidiaries 1.20
Trust Activities 1.21
Legal Proceedings 1.21
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.4
Local Economy 2.8
Market Area Deposit Characteristics and Competition 2.9
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Trends 3.9
Loan Composition 3.12
Interest Rate Risk 3.14
Credit Risk 3.16
Summary 3.16
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
THE HUDSON CITY SAVINGS INSTITUTION
Hudson, New York
(continued)
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.6
5. Dividends 4.8
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.15
C. The Acquisition Market 4.16
8. Management 4.19
9. Effect of Government Regulation and Regulatory Reform 4.19
Summary of Adjustments 4.20
Valuation Approaches 4.20
1. Price-to-Earnings ("P/E") 4.21
2. Price-to-Book ("P/B") 4.22
3. Price-to-Assets ("P/A") 4.23
Comparison to Recent Conversions 4.23
Valuation Conclusion 4.24
<PAGE>
RP Financial, LC.
LIST OF TABLES
THE HUDSON CITY SAVINGS INSTITUTION
Hudson, New York
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Summary Balance Sheet Data 1.7
1.2 Historical Income Statement 1.10
2.1 Summary Demographic Data 2.3
2.2 Unemployment Trends 2.9
2.3 Deposit Summary 2.11
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 3.10
3.4 Loan Portfolio Composition Comparative Analysis 3.13
3.5 Interest Rate Risk Comparative Analysis 3.15
3.6 Credit Risk Comparative Analysis 3.17
4.1 Market Area Unemployment Rates 4.7
4.2 Conversion Pricing Characteristics 4.17
4.3 Market Pricing Comparatives 4.18
4.4 Public Market Pricing 4.25
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
The Hudson City Savings Institution ("HCSI" or the "Bank"), organized in
1850, is a state-chartered mutual savings bank headquartered in Hudson, New
York. In addition to its main office facility, which includes a full service
branch office, the Bank conducts banking operations out of 11 full service
branch offices in east-central New York. The Bank's branches are located in the
east-central New York counties of Albany, Columbia, Dutchess, Rensselaer and
Schenectady, with Columbia County, where the Bank is headquartered, accounting
for HCSI's largest market presence. A map of the Bank's office locations is
presented in Exhibit I-1. The Bank's primary regulator is the New York State
Banking Department. HCSI is a member of the Federal Home Loan Bank ("FHLB")
system and its deposits are insured up to the maximum allowable amount by the
Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
("FDIC"). As of December 31, 1997, HCSI had $665.1 million in assets, $586.2
million in deposits and total equity of $67.4 million, or 10.13 percent, of
total assets. The Bank held approximately $610,000 of intangible assets at
December 31, 1997. HCSI's audited financial statements are included by reference
as Exhibit I-2.
Plan of Conversion and Holding Company Reorganization
- -----------------------------------------------------
On November 20, 1997, the Board of Trustees of the Bank adopted a Plan of
Conversion, incorporated herein by reference, in which the Bank will convert
from mutual to stock form. Hudson River Bancorp, Inc. ("Bancorp" or the "Holding
Company"), a Delaware corporation, was recently organized to facilitate the
conversion of HCSI. In the course of the conversion, the Holding Company will
acquire all of the capital stock that the Bank will issue upon its conversion
from the mutual to stock form of ownership. Going forward, Bancorp will own 100
percent of the Bank's stock, and the Bank will be Bancorp's sole subsidiary. A
portion of the net proceeds received from the sale of common stock will be used
to purchase all of the then to be issued and outstanding capital stock of the
Bank, with the balance of the proceeds being retained by the Holding Company.
At this time, no other activities are contemplated for the Holding Company
other than the ownership of the Bank, a loan to the newly-formed employee stock
ownership plan ("ESOP") and reinvestment of the proceeds retained by the Holding
Company. In the future,
<PAGE>
RP Financial, LC.
Page 1.2
Bancorp may acquire or organize other operating subsidiaries, diversify into
other banking-related activities or repurchase its stock, although there are no
specific plans to undertake such activities at the present time.
Establishment of a Charitable Foundation
- ----------------------------------------
In order to enhance the Bank's existing historically strong service and
reinvestment activities in the local community, the Plan of Conversion provides
for the establishment of The Hudson River Bank and Trust Company Foundation (the
"Foundation"), a private charitable foundation in connection with the
conversion. The Plan provides that the Bank and the Holding Company will create
the Foundation and fund it with shares of common stock contributed by the
Holding Company from authorized but unissued shares in an amount equal to 3.0
percent of the number of shares of common stock sold in the offering. The Bank
believes that the conversion transaction provides a unique opportunity to put
its well-regarded name on an entity that has significant value -- an opportunity
for corporate activities outside of core banking. The Foundation is intended to
complement the Bank's existing community reinvestment activities and will be
dedicated to the promotion of charitable purposes and community development
activities within the communities served by the Bank. Funding the Foundation
with shares of common stock of Bancorp will enable the local community served to
share in the growth and the profitability of Bancorp over the long term through
dividends and price appreciation. As such, the Bank believes the Foundation will
generate a high level of community goodwill toward Bancorp, increase the Bank's
local visibility and further enhance the Bank's strong reputation for community
service, thereby strengthening HCSI's community banking franchise.
The formation and issuance of shares to the Foundation will result in
dilution of pro forma book value and earnings per share as the Holding Company
will not receive proceeds from the shares issued to the Foundation.
Strategic Overview
- ------------------
HCSI is a community-oriented thrift, with a primary strategic objective of
meeting the borrowing and savings needs of its local customer base.
Historically, HCSI's operating strategy has been fairly reflective of a
traditional thrift operating strategy in which 1-4 family residential mortgage
loans and retail deposits have constituted the principal components of the
<PAGE>
RP Financial, LC.
Page 1.3
Bank's assets and liabilities, respectively. While the origination of 1-4 family
residential mortgage loans remains an area of lending emphasis for the Bank,
diversification into higher yielding and higher risk types of loans has become a
more significant part of the HCSI's lending strategy in recent years. Lending
diversification by the Bank has been most notable in the area of consumer
lending, with manufactured home loans and loans to finance insurance premiums
representing the two major components of the consumer loan portfolio. The Bank's
loan portfolio composition also reflects fairly notable diversification into
commercial real estate loans and, to a lesser degree, commercial business loans
and construction loans.
HCSI's lending diversification has served to enhance the yield and interest
rate sensitivity of the loan portfolio, but at the same time has increased the
credit risk exposure associated with the loan portfolio. The higher degree of
credit risk associated with the loan portfolio has translated into increased
delinquencies, particularly with respect to manufactured home loans and loans to
finance insurance premiums. To address the recent deterioration in credit
quality, the Bank has established additional loss provisions and has curtailed
growth of the manufactured home loan portfolio. Notwithstanding the
establishment of additional loss reserves in recent years, the build-up of the
loss reserve balance has been somewhat offset by loan charge-offs. Accordingly,
it is expected the Bank will continue to establish additional loss provisions in
order to increase the level of loss reserves maintained as a percent of loans
and non-performing assets, reflective of the higher risk characteristics of the
Bank's loan portfolio.
Investments serve as a supplement to the Bank's lending activities, with
HCSI's investment portfolio being indicative of a low risk investment
philosophy. Investments securities held by the Bank consist of U.S. Government
and agency securities, highly rated corporate bonds, mortgage-backed securities
which are guaranteed or insured by federal agencies and FHLB stock. To limit the
interest rate risk associated with the investment portfolio, the Bank has
emphasized investing in short- and intermediate-term securities generally with
maturities of less than five and one-half years.
Retail deposits have consistently served as the primary interest-bearing
funding source for the Bank. The Bank has sustained positive deposit growth over
the past five and three- quarter fiscal years, which has been facilitated by
increasing the size of the branch network from 7 branches to 12 branches since
fiscal year end 1993. While CDs account for the largest portion of the Bank's
deposit composition, HCSI has been effective in maintaining a relatively high
concentration of its deposits in lower costing savings and transaction accounts.
As of
<PAGE>
RP Financial, LC.
Page 1.4
December 31, 1997, transaction and savings accounts comprised 46.2 percent of
the Bank's total deposits. On a limited basis, the Bank has utilized borrowings
as an alternative funding source, with such borrowings consisting of short-term
FHLB advances. Following the conversion, borrowings may be utilized to a greater
degree to facilitate leveraging of the balance sheet and to improve return on
equity ("ROE"). Implementation of a wholesale leveraging strategy would likely
be done on a limited basis, with FHLB advances being the funding source utilized
for the leveraging.
HCSI's earnings base is largely dependent upon net interest income and
operating expense levels. Overall, HCSI's operating strategy has provided for a
relatively strong net interest margin during the past five and three-quarter
fiscal years, which has been supported by diversification into higher yielding
types of lending. Lending diversification has also contributed to an increase in
the Bank's level of operating expenses, particularly with respect to the loans
to finance insurance premiums. The loans to finance insurance premiums are
relatively high costing loans to service, in light of the low balance and high
delinquency rates associated with such loans. The expansion of the branch
network and the formation of a mortgage brokerage subsidiary in 1996 have also
contributed to the increase exhibited in the Bank's level of operating expenses.
Over the past five and three-quarter fiscal years, HCSI's operating
strategy has resulted in positive asset growth, an increasing capital position
and positive earnings. Earnings for the most recent period were depressed by
credit quality related losses, as additional loan provisions were established to
address deterioration in the Bank's credit quality and growth of higher risk
types of loans. Comparatively, the Bank's strategies have been fairly effective
in limiting interest rate exposure, reflecting HCSI's lending emphasis on
originating short-term and adjustable rate loans for portfolio and investing in
short- and intermediate-term securities. Maintenance of a strong capital
position and a relatively high concentration of lower costing transaction and
savings accounts have also served to limit the Bank's exposure to interest rate
fluctuations.
The Bank's business plan is to continue to operate as a community-oriented
bank, serving local customer needs with an array of loan and depository
products, and other financial services. The Bank has sought to assemble a
well-qualified management team and staff to facilitate the ability to fully
realize the business plan objectives.
<PAGE>
RP Financial, LC.
Page 1.5
The Trustees of the Bank have elected to convert to the stock form of
ownership to support the continued expansion of the Bank's strategic focus of
providing competitive community banking services in its local market area. The
additional capital realized from conversion proceeds is expected to increase
liquidity to support loan growth, increase the capital cushion to absorb
unanticipated loss and enhance overall profitability. The additional funds
realized from the conversion stock offering will also serve as an alternative
funding source to facilitate the Bank's ability to offer competitive deposit
rates. The stock form of organization will also facilitate the ability to fund
the Foundation with shares of stock.
HCSI's higher equity-to-assets ratio will also better position the Bank to
take advantage of expansion opportunities as they arise. In light of the Bank's
strong market presence in Columbia County, such expansion would most likely
occur through acquiring branches or other financial institutions in markets that
would provide HCSI with a greater degree of geographic diversification in other
east-central New York markets or in the bordering states of Connecticut and
Massachusetts. At this time, the Bank has no specific plans for physical
expansion of office facilities. The projected use of conversion proceeds are
highlighted below.
Bancorp. Bancorp is expected to retain up to 50 percent of the net
conversion proceeds. At present, the Holding Company funds, net of the loan
to the ESOP, are expected to be primarily invested initially into deposits
at the Bank. Over time, the Holding Company funds are anticipated to be
utilized for various corporate purposes, possibly including acquisitions,
infusing additional equity into the Bank, repurchases of common stock, and
the payment of regular and/or special cash dividends.
HCSI. Approximately 50 percent of the net conversion proceeds will be
infused into the Bank in exchange for all of the Bank's newly issued stock.
The increase in 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 Bank are anticipated to become part of general
operating funds, and are expected to initially be invested in short-term
investments, pending reinvestment into whole loans and the Bank's regular
investment activities.
HCSI anticipates its post-conversion capital ratio will exceed industry
averages in the near term, leading to a below market ROE until such time as the
new capital can be leveraged or deployed in a prudent manner.
<PAGE>
RP Financial, LC.
Page 1.6
Balance Sheet Trends
- --------------------
From March 31, 1993 through December 31, 1997, HCSI exhibited annual asset
growth of positive 5.5 percent (see Table 1.1). During this period, the Bank's
interest-earning asset composition between loans and investments remained fairly
consistent, with loans being maintained at approximately 75 percent of assets.
Investment securities were generally maintained between 17 and 20 percent of
assets. Asset growth has been primarily funded by deposits, and, to a lesser
degree, borrowings and retained earnings. A summary of HCSI's key operating
ratios for the past five and three-quarter fiscal years are presented in Exhibit
I-3.
HCSI's net loans receivable balance increased from $387.8 million at March
31, 1993 to $505.1 million at December 31, 1997, providing for an annual growth
rate of 5.7 percent during that period. Positive loans growth was sustained
through the period; however, the most notable loan growth occurred during fiscal
1997, with net loan growth approximating $40.0 million. Consistent with the
Bank's primary areas of lending emphasis, residential mortgage loans and
consumer loans accounted for most of HCSI's loan growth during fiscal 1997, as
well as over the entire period reviewed in Table 1.1. Loan growth was realized
in all lending areas, except for construction loans, since fiscal year end 1993,
with the overall composition of the loan portfolio shifting towards higher
concentrations of residential mortgages and consumer loans. Residential
mortgages and consumer loans accounted for 49.1 percent and 26.2 percent of
total loans outstanding at December 31, 1997, respectively, versus comparative
measures of 47.5 percent and 23.8 percent at March 31, 1993. The consumer loan
portfolio growth was supported by increases in manufactured home loans and loans
to finance insurance premiums, which accounted for 73.5 percent and 17.5 percent
of the consumer loan portfolio, respectively, at December 31, 1997. The balance
of the loan portfolio consists primarily of commercial real estate and home
equity loans, which have declined slightly as a percent of total loans
outstanding. Commercial real estate and home equity loans equaled 14.5 percent
and 5.4 percent of total loans outstanding, respectively, at December 31, 1997,
versus comparative measures of 15.1 percent and 6.5 percent at fiscal year end
1993. The balance of the loan portfolio consists of commercial business loans
and construction loans, equaling 4.1 percent and 0.8 percent of total loans
outstanding, respectively, at December 31, 1997. Since fiscal year end 1993,
commercial business loans and construction loans have declined as a percent of
total loans outstanding.
The intent of the Bank's investment policy is to provide adequate liquidity
and to generate a favorable return within the context of supporting HCSI's
overall credit and interest
<PAGE>
RP Financial, LC.
Page 1.7
Table 1.1
The Hudson City Savings Institution
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End March 31, Annual
------------------------------------------------------------------------------ At Growth
1993 1994 1995 1996 1997 December 31, 1997 Rate
-------------- -------------- -------------- -------------- -------------- ----------------- ------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Pct
------ --- ------ --- ------ --- ------ --- ------ --- ------ --- ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $515,184 100.0% $553,818 100.0% $576,111 100.0% $623,220 100.0% $651,034 100.0% $665,051 100.0% 5.52%
Investment securities - HTM 89,525 17.4% 78,677 14.2% 89,586 15.6% 83,003 13.3% 79,068 12.1% 71,244 10.7% -4.69%
Investment securities - AFS 0 0.0% 14,337 2.6% 9,863 1.7% 51,428 8.3% 45,623 7.0% 43,282 6.5% NM
FHLB stock 0 0.0% 0 0.0% 2,569 0.4% 2,596 0.4% 2,812 0.4% 2,812 0.4% NM
Loans receivable, net 387,806 75.3% 406,072 73.3% 435,688 75.6% 447,125 71.7% 487,147 74.8% 505,142 76.0% 5.72%
Deposits 465,353 90.3% 498,677 90.0% 514,451 89.3% 555,188 89.1% 564,599 86.7% 586,231 88.1% 4.98%
Borrowings 0 0.0% 0 0.0% 0 0.0% 0 0.0% 12,585 1.9% 2,000 0.3% NM
Total equity 40,177 7.8% 46,350 8.4% 52,138 9.0% 59,606 9.6% 65,129 10.0% 67,395 10.1% 11.51%
Full service branches 7 7 9 11 11 12
</TABLE>
- ----------
(1) Ratios are as a percent of ending assets.
Source: HCSI's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.8
rate risk objectives. HCSI anticipates investing the net proceeds from the stock
offering into investments with short-term maturities, pending deployment into
loans and investments that are consistent with the Bank's current lending and
investment strategies. Over the past five and three-quarter fiscal years, the
Bank's balance of investment securities and FHLB stock has fluctuated from a low
of 16.8 percent of assets at fiscal year end 1994 to a high of 22.0 percent of
assets at fiscal year end 1996. As of December 31, 1997, the investment
securities portfolio, including FHLB stock, totaled $117.3 million, or 17.6
percent, of total assets. U.S. Government and agency securities represent the
primary component of the investment securities portfolio, equaling $56.9 million
at December 31, 1997. Other investments held by the Bank at December 31, 1997
consisted of corporate bonds ($53.1 million), municipal bonds ($10,000),
mortgage-backed securities ($4.5 million) and FHLB stock ($2.8 million). The
Bank maintains investments both as held to maturity and available for sale, with
such balances totaling $71.2 million and $43.3 million, respectively, at
December 31, 1997. In recent years, most new investments have been classified as
available for sale, so as provide the Bank with additional flexibility in
managing the investment portfolio. Exhibit I-4 provides historical detail of the
Bank's investment portfolio. The Bank maintained a net unrealized gain of
approximately $53,000 on the available for sale portfolio, as of December 31,
1997. HCSI has sought to limit the interest rate risk associated with the
investment securities portfolio, through emphasizing investing in short- and
intermediate-term securities which have maturities of generally less than five
and one-half years. In addition to investment securities, HCSI maintained cash
and cash equivalent funds totaling $15.6 million, or 2.3 percent, of assets at
December 31, 1997. As of December 31, 1997, total cash and investments
maintained by the Bank equaled $132.9 million, or 20.0 percent, of total assets,
which is consistent with recent historic levels of cash and investments
maintained by the Bank.
Over the past five and three-quarter fiscal years, HCSI's funding needs
have been substantially met through retail deposits, internal cash flows,
borrowings and retained earnings. From fiscal year end 1993 through December 31,
1997, the Bank's deposits increased at an annual rate of 5.0 percent. Positive
deposit growth was sustained throughout the period covered in Table 1.1. In
recent years, CDs have accounted for most of the Bank's deposit growth,
resulting in the concentration of CDs increasing from 51.3 percent of total
deposits at fiscal year end 1995 to 53.8 percent of total deposits at December
31, 1997. While savings and transaction accounts have declined as percent of
total deposits, the Bank has recorded positive growth in those accounts as well
over the past two and three-quarter fiscal years. Most of the transaction and
savings account growth has been realized in non-interest
<PAGE>
RP Financial, LC.
Page 1.9
bearing checking accounts, which increased from $19.5 million at fiscal year end
1995 to $36.4 million at December 31, 1997. Savings accounts represent the
largest component of the Bank's transaction and savings account balance,
equaling $140.5 million, or 24.0 percent, of total deposits at December 31,
1997, versus comparative measures of $138.6 million, or 26.9 percent, of total
deposits at fiscal year end 1995.
Borrowings for the Bank totaled $2.0 million, or 0.3 percent of assets at
December 31, 1997, versus a comparative balance of $12.6 million at fiscal year
end 1997. From fiscal year end 1993 through fiscal year end 1996, the Bank
maintained a zero balance of borrowings at each of those fiscal year ends.
Borrowings utilized by the Bank consist of short-term FHLB advances to support
control of funding costs. To the extent the Bank implements a wholesale
leveraging strategy following the conversion, borrowings would become a more
significant funding source for HCSI. Such borrowings would likely consist of
FHLB advances.
Positive earnings over the past four and three-quarter fiscal years
translated into an annual capital growth rate of 11.5 percent. Capital growth
outpaced the Bank's asset growth rate, as HCSI's equity-to-assets ratio
increased from 7.8 percent at the end of fiscal 1993 to 10.1 percent at December
31, 1997. The Bank held intangible assets of $610,000 at December 31, 1997,
which reduced the Bank's tangible equity-to assets ratio to 10.0 percent. The
Bank was classified as well capitalized with respect to each of the regulatory
capital requirements, as of December 31, 1997. The addition of conversion
proceeds will serve to further strengthen HCSI's capital position and
competitive posture within its primary market, as well as support expansion into
other nearby markets if favorable growth opportunities are presented. At the
same time, as the result of the Bank's relatively high pro forma capital
position , which will likely approach 25 percent of assets, HCSI's ROE can be
expected to be below industry averages following its conversion.
Income and Expense Trends
- -------------------------
The Bank has reported positive earnings over the past five and
three-quarter fiscal years, ranging from a low of 0.41 percent of average assets
for the twelve months ended December 31, 1997 to a high of 1.18 percent of
average assets in fiscal 1996 (see Table 1.2). Net interest income and operating
expenses represent the major components of the Bank's core earnings, which is
supplemented by non-interest operating income derived from HCSI's retail banking
activities. Loan loss provisions have had a varied negative impact on HCSI's
earnings, most recently negatively impacting the Bank's earnings to a greater
degree than what
<PAGE>
RP Financial, LC.
Page 1.10
Table 1.2
The Hudson City Savings Institution
Historical Income Statements
(Amount and Percent of Avg. Assets)(1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended March 31,
------------------------------------------------------------------------------ For the 12 Months
1993 1994 1995 1996 1997 Ended 12/31/97
-------------- -------------- -------------- -------------- -------------- -----------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $41,152 8.14% $40,649 7.55% $43,059 7.57% $49,082 8.22% $52,881 8.22% $54,961 8.38%
Interest Expense (20,814) -4.12% (18,157) -3.37% (19,309) -3.39% (24,086) -4.03% (25,426) -3.95% (25,875) -3.95%
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Interest Income $20,338 4.02% $22,492 4.18% $23,750 4.18% $24,996 4.19% $27,455 4.27% $29,086 4.44%
Provision for Loan Losses (2,543) -0.50% (1,201) -0.22% (1,169) -0.21% (1,090) -0.18% (3,826) -0.59% (8,376) -1.28%
------- ----- ------- ----- ------- ------ ------- ------ ------- ------ ------- ------
Net Interest Income after
Provisions $17,795 3.52% $21,291 3.95% $22,581 3.97% $23,906 4.00% $23,629 3.67% $20,710 3.16%
Other Income 1,667 0.33% 2,598 0.48% 1,534 0.27% 1,515 0.25% 1,780 0.28% 2,281 0.35%
Operating Expense (12,346) -2.44% (14,011) -2.60% (14,372) -2.53% (13,851) -2.32% (15,895) -2.47% (18,241) -2.78%
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Operating Income $ 7,116 1.41% $ 9,878 1.83% $ 9,743 1.71% $11,570 1.94% $ 9,514 1.48% $ 4,750 0.72%
Non-Operating Income
- --------------------
Net gain(loss) on sale of
loans/sec. $ 1,413 0.28% $923 0.17% $ (2) 0.00% $120 0.02% $ 45 0.01% $ 73 0.01%
OREO and repossessed prop. exp. (365) -0.07% (441) -0.08% (851) -0.15% (348) -0.06% (292) -0.05% (376) -0.06%
Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Non-Operating Income 1,048 0.21% 482 0.09% (853) -0.15% (228) -0.04% (247) -0.04% (303) -0.05%
Net Income Before Tax $ 8,164 1.62% $10,360 1.92% $ 8,890 1.56% $11,342 1.90% $ 9,267 1.44% $ 4,447 0.68%
Income Taxes (3,571) -0.71% (4,169) -0.77% (2,917) -0.51% (4,298) -0.72% (3,607) -0.56% (1,786) -0.27%
Change in Acctg. Principle 815 0.16% -- 0.00% -- 0.00% 0 0.00% -- -- -- --
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Income (Loss) $ 5,408 1.07% $6,191 1.15% $ 5,973 1.05% $ 7,044 1.18% $ 5,660 0.88% $ 2,661 0.41%
Adjusted Earnings
- -----------------
Net Income Before Ext. Items $ 4,593 0.91% $6,191 1.15% $ 5,973 1.05% $ 7,044 1.18% $ 5,660 0.88% $ 2,661 0.41%
Addback: Non-Operating Losses 0 0.00% 0 0.00% 2 0.00% 0 0.00% 0 0.00% 0 0.00%
Deduct: Non-Operating Gains (1,413) -0.28% (923) -0.17% 0 0.00% (120) -0.02% (45) -0.01% (73) -0.01%
Tax Effect Non-Op. Items(2) 565 0.11% 369 0.07% (1) 0.00% 48 0.01% 18 0.00% 29 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Adjusted Net Income $ 3,745 0.74% $5,637 1.05% $ 5,974 1.05% $ 6,972 1.17% $ 5,633 0.88% $ 2,618 0.40%
</TABLE>
- ----------
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 40.0 percent.
Sources: HCSI's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.11
has historically been experienced by HCSI. Gains and losses resulting from the
sale of loans and investment securities typically have not been a prominent
factor in the Bank's earnings, while expenses associated with maintaining and
disposing of other real estate owned ("OREO") and other repossessed assets have
generally had a minor negative impact on HCSI's earnings over the past five and
three-quarter fiscal years.
HCSI has maintained a healthy net interest margin throughout the period
shown in Table 1.2, which has been supported by the Bank's diversification into
higher yielding types of lending. Over the past five and three-quarter fiscal
years, the Bank's net interest income to average assets ratio has increased
steadily to equal 4.44 percent for the twelve months ended December 31, 1997,
versus a comparative ratio of 4.02 percent during fiscal 1993. The increase in
the Bank's net interest margin has been attributable to both an increasing
interest income to average assets ratio, which increased from 8.14 percent
during fiscal 1993 to 8.38 percent during the twelve months ended December 31,
1997, and a declining interest expense ratio, which declined from 4.12 percent
during fiscal 1993 to 3.95 percent during the twelve months ended December 31,
1997. Growth of higher yielding types of loans, most notably the consumer loan
portfolio, supported the positive trend exhibited in HCSI's interest income
ratio. The decline in the interest expense ratio was largely supported by the
Bank's increasing capital position and resulting lower level of interest-bearing
liabilities funding assets, which was somewhat offset by an increase in HCSI's
funding costs during the past two and three-quarter fiscal years. Overall, the
Bank's net interest rate spread has exhibited relatively limited fluctuation,
ranging from a low of 3.89 percent during fiscal year 1996 to a high of 4.05
percent during fiscal year 1995 and for the nine months ended December 31, 1997.
The Bank's historical net interest rate spreads and yields and costs set are set
forth in Exhibits I-3 and I-5.
Non-interest operating income has been a fairly stable and somewhat modest
contributor to HCSI's earnings, reflecting the Bank's limited diversification
into fee oriented activities. Throughout the period shown in Table 1.2,
non-interest operating income ranged from a low of 0.25 percent of average
assets in fiscal 1996 to a high of 0.48 percent of average assets in fiscal
1994. For the twelve months ended December 31, 1997, the Bank's non-interest
operating income to average assets ratio equaled 0.35 percent. Service charges
on deposit accounts, loan servicing income and miscellaneous other sources of
income represent the primary components of the Bank's non-interest operating
income. Non-interest operating income may be enhanced by commissioned income
earned on the sale of mutual funds and annuities, which the Bank will be
offering in its branches beginning the second calendar
<PAGE>
RP Financial, LC.
Page 1.12
quarter of 1998. However, such income is not expected to be significant and,
thus, HCSI's earnings can be expected to remain dependent upon the net interest
margin.
Operating expenses represent the other major component of the Bank's
earnings, ranging from a low of 2.32 percent of average assets in fiscal 1996 to
a high of 2.78 percent of average assets during the twelve months ended December
31, 1997. Factors contributing to the increase in the Bank's operating expense
ratio since fiscal 1996 include growth in types of lending that are more service
intensive, most notably with respect to the increase in staff necessitated by
the Bank's acquisition of the customer list of an unaffiliated premium finance
company, and additional expenses resulting from establishing a new branch in May
1997. Higher operating expenses were also attributable to increases in equipment
expenses due to updating of the Bank's data processing system and increases in
legal and other professional fees. Higher professional and legal fees were the
result of acquisition opportunities considered by the Bank and the hiring of
various consulting firms to assist management in addressing certain strategic
and organization issues as well as operational issues of the Bank. The service
intensive nature of some of the Bank's diversified lending activities,
particularly loans to finance insurance premiums, is indicated by the HCSI's
relatively low assets per employee ratio. Assets per full time equivalent
employee equaled $2.3 million for the Bank, versus a comparative average of $4.3
million for all publicly-traded thrifts. Upward pressure will be placed on the
Bank's operating expense ratio following the stock offering, due to expenses
associated with operating as a publicly-traded company, including expenses
related to the stock benefit plans. At the same time, the increase in capital
realized from the stock offering will increase the Bank's capacity to leverage
operating expenses through pursuing a more aggressive growth strategy. Overall,
the general trends in the Bank's net interest margin and operating expense ratio
since fiscal 1993 has resulted in a slight decline in the Bank's core earnings,
as indicated by a decline in the Bank's expense coverage ratio (net interest
income divided by operating expenses). HCSI's expense coverage ratio equaled
1.65 times during fiscal 1993, versus a comparative ratio of 1.60 times during
the twelve months ended December 31, 1997. Similarly, HCSI's efficiency ratio
(operating expenses, net of amortization of intangibles, as a percent of the sum
of net interest income, other operating income and real estate operations) of
58.4 percent for the twelve months ended December 31, 1997 was slightly less
favorable than the 57.0 percent efficiency ratio maintained during fiscal 1993.
Loan loss provisions have impacted the Bank's earnings to various degrees
over the past five and three-quarter fiscal years, ranging from a low of 0.18
percent of average assets
<PAGE>
RP Financial, LC.
Page 1.13
during fiscal 1996 to a high of 1.28 percent of average assets during the twelve
months ended December 31, 1997. HCSI established higher loan loss provisions
during the most recent twelve month period to address recent deterioration in
credit quality, the growth of the loan portfolio, including growth of higher
risk types of loans. Partially offsetting the relatively high level of loss
provisions established by the Bank were net charge-offs of $4.8 million recorded
during the twelve month period. As of December 31, 1997, the Bank maintained
allowance for loan losses of $6.8 million, equal to 38.7 percent of non-
performing assets and 1.34 percent of net loans receivable. Exhibit I-6 sets
forth the Bank's allowance for loan loss activity during the past five and
three-quarter fiscal years.
Gains and losses resulting from the sale of investment securities typically
have not been a significant factor in the Bank's earnings, ranging from a
nominal loss in fiscal 1995 to a high of 0.28 percent of average assets in
fiscal 1993. Gains realized on the sale of loans supported the higher gains
recorded by the Bank during fiscal years 1993 and 1994. Expenses associated with
maintaining and disposing of OREO and other repossessed assets have been a
fairly consistent factor in the Bank's earnings, ranging from a low of 0.05
percent of average assets during fiscal 1997 to a high of 0.15 percent of
average assets during fiscal 1995. For the twelve months ended December 31,
1997, the Bank's OREO and repossessed property expenses equaled 0.06 percent of
average assets. As of December, 31, 1997, the Bank maintained total foreclosed
assets of $1.1 million, which was at the low end of the range of foreclosed
assets held by HCSI over the past five and three-quarter fiscal years.
In fiscal 1993, a change in accounting principle had a positive one-time
earnings impact on the Bank's earnings. The change in accounting principle
reflects the Bank's adoption of SFAS 109 "Accounting for Income Taxes" and
increased the Bank's after-tax earnings by $815,000 or 0.16 percent of average
assets.
HCSI's effective tax rate ranged from a low of 32.8 percent in fiscal 1995
to a high of 43.74 percent in fiscal 1993. For the twelve months ended December
31, 1997, the Bank's effective tax rate equaled 40.16 percent. Going forward,
the Bank's effective tax is expected to approximate the rate recorded during the
most recent twelve month period.
Interest Rate Risk Management
- -----------------------------
The Bank pursues a number of strategies to manage interest rate risk, which
have been fairly effective in limiting the repricing mismatch between interest
rate sensitive assets and
<PAGE>
RP Financial, LC.
Page 1.14
liabilities. As of December 31, 1997, an analysis of the Bank's interest rate
risk as measured by the estimated changes in the net market value ("NMV") of its
portfolio assets and liabilities indicated that a 2.0 percent instantaneous and
sustained increase in interest rates would result in a 2.5 percent decline in
the Bank's NMV (see Exhibit I-7).
The Bank primarily manages interest rate risk from the asset side of the
balance sheet by emphasizing investment in short- and intermediate-term
investments with maturities of generally less than five and one-half years,
placing an emphasis on originating 1-4 family adjustable rate and shorter-term
fixed rate loans, selling longer term fixed rate 1-4 family loans to the
secondary market, and diversifying into other types of interest rate sensitive
types of lending. As of December 31, 1997, of the total loans due after December
31, 1998, ARM loans comprised 65.6 percent of those loans (see Exhibit I-8). A
portion of the investment portfolio and most new investments are classified as
available for sale, and, thus, could be readily sold if interest rate conditions
warrant such action. On the liability side of the balance sheet, management of
interest rate risk is pursued through offering attractive rates on certain
longer term CDs from time-to-time and maintaining a deposit composition which
includes a relatively high concentration of lower costing and less interest rate
sensitive transaction and savings accounts.
The infusion of stock proceeds will serve to further limit the Bank's
interest rate risk exposure, as most of the net proceeds will be redeployed into
interest-earning assets and the increase to capital will lessen the proportion
of interest rate sensitive liabilities funding assets.
Lending Activities and Strategy
- -------------------------------
HCSI's lending activities have traditionally emphasized 1-4 family
residential mortgage loans and 1-4 family residential mortgage loans continue to
comprise the largest concentration of the loan portfolio (see Exhibits I-9 and
I-10, which reflect loan portfolio composition and lending activity,
respectively). However, in recent years, the Bank has implemented a more
diversified lending strategy, with such diversification primarily emphasizing
consumer and commercial real estate loans. To a lesser extent, lending
diversification by the Bank includes construction and commercial business loans.
Exhibit I-11 provides the contractual maturity of the Bank's loan portfolio by
loan type, as of December 31, 1997.
The majority of the dollar volume of 1-4 family loans are originated
through the Bank's mortgage brokerage subsidiary, Hudson River Mortgage
Corporation ("HRMC"), while the
<PAGE>
RP Financial, LC.
Page 1.15
Bank also originates 1-4 family loans through its branch network. HRMC is based
in Albany, with most of the lending volume for HRMC being generated in Albany
and nearby surrounding markets. The Bank and HRMC offer a variety of 1-4 family
loan products, including 15-, 20- and 30-year fixed rate loans, ARM loans which
reprice every 1 or 3 years, and 1-year ARM loans that can be converted to a
fixed rate loan during a certain window period. Currently, fixed rate loans with
terms of 15 years or less, as well as bi-weekly fixed rate mortgages with
20-year terms, are typically retained for portfolio by the Bank. Longer term
fixed rate loans are sold to the secondary market. Loans sold to FNMA or FHLMC
are sold with servicing retained, while loans sold to private investors are sold
on a servicing released basis. The substantial portion of 1-4 family loan
originations are underwritten to conform to FNMA/FHLMC requirements. As of
December 31, 1997, the Bank's residential mortgage loan portfolio totaled $250.6
million, or 49.1 percent of total loans outstanding.
In the current interest rate environment, fixed rate loans have accounted
for most of the Bank's 1-4 family loan volume. To enhance the attractiveness of
ARM loans, the Bank offers one and three year ARM loan products and initial
rates are discounted from the fully-indexed rate. ARM loans are indexed to the
comparable term U.S. Treasury note rate, with the initial rate of interest being
dependent upon the length of the repricing term (i.e., a higher rate is charged
for loans with longer repricing terms). Most loans are originated with
loan-to-value ("LTV") ratios of 80.0 percent or less, while loans with LTV
ratios above 80.0 percent generally require private mortgage insurance ("PMI").
ARM loans are currently subject to an annual repricing cap of 2.0 percent and a
life time repricing cap of 6.0 percent.
Home equity loans serve as a complement to the Bank's 1-4 family lending
activities, consisting of both fixed rate loans and floating rate lines of
credit. Home equity loans are amortized for terms of up to 20 years and a
maximum LTV ratio of 80.0 percent of the combined balance of the home equity
loan and the first lien. Lines of credit may be accessed during the first five
years of the loan. As of December 31, 1997, HCSI's outstanding balance of home
equity loans totaled $27.4 million, or 5.4 percent of the total loan portfolio.
Construction loans originated by the Bank consist substantially of loans to
finance the construction of 1-4 family residences. As of December 31, 1997, the
Bank's construction loan portfolio totaled $4.0 million, or 0.8 percent, of
total loans outstanding. Most of the Bank's construction lending activities are
for the construction of pre-sold homes, which convert to permanent loans upon
completion of the construction. To a lesser extent, HCSI originates speculative
construction loans. To control the risk associated with speculative construction
<PAGE>
RP Financial, LC.
Page 1.16
lending, the Bank typically limits the builder to one spec loan at a time and
generally confines originations to builders who have maintained a favorable
credit quality history with HCSI. Construction loans require payment of interest
only during the construction period, which is typically 12 months. For
construction loans, the Bank will lend up to a maximum LTV ratio of 80.0
percent. Land loans serve as a complement to the Bank's 1-4 family lending
activities, as such loans are secured by single-family lot loans or land that
will be used for residential development. Terms of land loans offered by the
Bank generally require a LTV ratio of 60.0 percent or less and are typically
amortized over 5 years. Most land loans are extended as 2- or 3-year balloon
loans.
The balance of the mortgage loan portfolio consists of commercial real
estate loans, which are substantially collateralized by properties in the Bank's
normal lending territory. Such loans are typically extended up to a LTV ratio of
75.0 percent, with loan terms providing for up to 25-year amortizations. In
light of the higher credit risk associated with commercial real estate loans,
loan rates offered on those loans are at a premium to the Bank's 1-4 family loan
rates. HCSI's current lending guidelines generally require that the property
generate net cash flows of at least 125 percent of debt service after the
payment of all operating expenses, excluding depreciation. The commercial real
estate loan portfolio includes fixed rate and adjustable rate loans, with most
fixed rate loans having a balloon provision of 5 years. Properties securing the
commercial real estate loan portfolio consist primarily of office buildings,
shopping centers, motels, manufactured home parks, mixed-use properties,
apartments, and nursing homes. As of December 31, 1997, the commercial real
estate loan portfolio totaled $73.9 million, or 14.5 percent of total loans
outstanding. As of December 31, 1997, the Bank's largest commercial real estate
lending relationship consisted of five loans aggregating $4.0 million primarily
secured by a nursing home. The loans were performing in accordance with their
terms, as of December 31, 1997.
Diversification into non-mortgage lending consists primarily of consumer
loans and, to a lesser extent, commercial business loans. Manufactured home
loans, which totaled $98.3 million at December 31, 1997, comprise the largest
component of the consumer loan portfolio. The manufactured home loan portfolio
consists of indirect loans originated primarily through Tammac Corporation of
Wilkes-Barre, Pennsylvania. Manufactured home loans are originated up to a LTV
ratio of 90.0 percent and are generally offered as fixed rate loans with up to
20 year terms. Most of the Bank's manufactured home lending activities are
conducted in the states of New York, New Jersey, Massachusetts and Pennsylvania,
with all loans being underwritten by the Bank.
<PAGE>
RP Financial, LC.
Page 1.17
Loans to finance insurance premiums constitute the second largest component
of the consumer loan portfolio, with such loans totaling $23.4 million at
December 31, 1997. The Bank conducts such financing through a general
partnership known as Premium Payment Plan ("PPP") in which Hudson City
Associates, Inc., a wholly-owned subsidiary of the Bank, holds a 65 percent
interest. The remaining 35 percent interest is held by F.G.O. Corporation, which
is responsible for the marketing of PPP's business. The Bank finances insurance
premiums for both individuals and businesses, with approximately 75 percent of
the current portfolio consisting of premiums financed for non-standard and
substandard personal automobile insurance and the remaining 25 percent
consisting of various commercial lines of insurance. Relatively high rates are
earned on the insurance premium loans to account for the high degree of credit
risk associated with such lending. Most of the insurance premium loans are
extended to residents of New York, New Jersey and Pennsylvania, although PPP is
licensed to provide insurance premium financing in nine states. Further growth
of insurance premium financing is planned, which will serve to leverage
personnel costs associated with servicing the portfolio. To the extent possible,
the Bank plans to change the mix of the insurance premium financing portfolio
towards a higher concentration of commercial lines of insurance, which tend to
be lower risk loans compared to the loans to finance auto insurance premiums.
The balance of the consumer loan portfolio includes a mixture of loans secured
by deposits, direct automobile loans, home improvement loans and miscellaneous
other personal loans. As of December 31, 1997, the consumer loan portfolio
totaled $133.8 million, or 26.2 percent of total loans outstanding.
The balance of the loan portfolio consists of commercial business loans,
which totaled $21.0 million, or 4.1 percent, of total loans outstanding at
December 31, 1997. Commercial business loans held by the Bank include secured
and unsecured loans which are extended to local businesses. Commercial business
loans are extended as both fixed rate loans and floating rate loans tied to the
prime rate. Lines of credit are reviewed on an annual basis and must be paid in
full for at least 30 days every year. Fixed rate loans generally have terms of
five years or less. Included in the commercial business loan balance was the
Bank's largest lending relationship at December 31, 1997, consisting of a
commitment to lend up to $10 million pursuant to a warehouse line of credit
extended to a mortgage broker for residential mortgages. As of December 31,
1997, the outstanding balance of the warehouse line of credit totaled $7.1
million. The line of credit is secured by assignments of the underlying
mortgages.
Exhibit I-10, which shows the Bank's loan originations and repayments over
the past two and three-quarter fiscal years, indicates HCSI's emphasis on
residential and consumer
<PAGE>
RP Financial, LC.
Page 1.18
lending. Consumer loans represented the most active lending area for the Bank,
which was supported by originations of loans to finance insurance premiums.
Financed insurance premiums are short-terms loans (typical term is eight months
for financing of an automobile insurance premium) and, thus, the high volume of
loans originated to finance insurance premiums has not translated into
significant growth of that portfolio. During the past two and three-quarter
fiscal years originations of financed insurance premiums totaled $152.6 million,
which served to increase the outstanding balance of financed insurance premiums
from $8.7 million at March 31, 1995 to $23.4 million at December 31, 1997. Since
fiscal year end 1995, growth of the consumer loan portfolio has been primarily
realized through an increase in the balance of manufactured home loans
outstanding. From March 31, 1995 to December 31, 1997, the manufactured home
loan balance increased from $72.2 million to $98.3 million. Residential real
estate loans, which includes construction and home equity loans, was the only
other area of notable lending growth for the Bank since fiscal year end 1995,
with the balance of residential real estate loans increasing from $259.8 million
at March 31, 1995 to $282.1 million at December 31, 1997. Total originations
have shown an upward trend since fiscal 1995, increasing from $127.0 million in
fiscal 1996 to $196.8 million in fiscal 1997 and $155.8 million for the nine
months ended December 31, 1997. Growth in originations has translated into
positive loan growth over the past two and three-quarter fiscal years, as
originations have exceeded repayments throughout the period. Going forward, the
Bank's lending strategy is expected to be consistent with recent historical
trends, with consumer and residential loans accounting for the major portion of
HCSI's lending activities. Commercial business lending is viewed as a desired
growth area for the Bank, although such growth is expected to be gradual.
Asset Quality
- -------------
The Bank's historical emphasis on originating 1-4 family residential
mortgage loans in local markets has generally served to limit credit risk
exposure; however, in recent years, greater lending diversification into higher
risk types of lending has increased the degree of credit risk associated with
the loan portfolio. Since fiscal 1993, the Bank has experienced an increase in
non-performing assets, most notably in areas of lending diversification that are
viewed as higher risk types of lending. Over the past five and three-quarter
fiscal years, HCSI's non-performing assets-to-assets ratio ranged from a low of
1.50 percent at fiscal year end 1995 to a high of 3.60 percent at fiscal year
end 1997. As of December 31, 1997, the Bank's non- performing assets-to-assets
ratio equaled 2.62 percent. As shown in Exhibit I-12,
<PAGE>
RP Financial, LC.
Page 1.19
deterioration in the Bank's credit quality was largely attributable to increased
delinquencies of commercial real estate, commercial business, manufactured home
and finance insurance premium loans. The decline in the non-performing assets
ratio from fiscal year end 1997 to December 31, 1997 was supported by the
charge-off of non-performing commercial business loans, which declined from $2.6
million at March 31, 1997 to a zero balance at December 31, 1997, and the sale
of an OREO property, which reduced the foreclosed assets balance from $3.4
million at March 31, 1997 to $1.1 million at December 31, 1997. Non-performing
assets held by the Bank at December 31, 1997 consisted of $15.1 million of
non-accruing loans, $1.3 million of accruing loans that are 90 days or more past
due, and $1.1 million of foreclosed assets.
The Bank reviews and classifies assets on a regular basis and establishes
loan loss provisions based on the overall quality, size and composition of the
loan portfolio, as well other factors such as historical loss experience,
industry trends and local real estate market and economic conditions. To address
the increase experienced in non-performing assets, as well as growth of higher
risk types of lending, the Bank established loss reserves above recent historic
levels during the most recent twelve month period. For the near term, the Bank
anticipates that the provision for loan losses will continue at current levels.
The Bank maintained valuation allowances of $6.8 million at December 31, 1997,
equal to 1.34 percent of net loans receivable and 38.7 percent of non-performing
assets.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds and at
December 31, 1997 deposits accounted for 99.7 percent of HCSI's interest-bearing
funding composition. Exhibit I-13 sets forth the Bank's historical deposit
composition and Exhibit I-14 provides the interest rate and maturity composition
of the CD portfolio at December 31, 1997. CDs represent the largest component of
the Bank's deposit composition, with HCSI's current CD composition reflecting a
higher concentration of short-term CDs (maturities of one year or less). As of
December 31, 1997, the CD portfolio totaled $315.3 million, or 53.8 percent, of
total deposits, with 56.6 percent of those CDs having maturities of one year or
less. As of December 31, 1997, jumbo CDs (CD accounts with balances of $100,000
or more) amounted to $42.4 million, or 13.5 percent, of total CDs. The Bank does
not hold any brokered CDs. Deposit rates offered by the Bank are generally in
the middle-to-upper end of the range of rates offered by local competitors.
<PAGE>
RP Financial, LC.
Page 1.20
Lower costing savings and transaction accounts have typically comprised a
fairly notable portion of the Bank's deposit composition, with such deposits
amounting to $271.0 million, or 46.2 percent, of total deposits at December 31,
1997. Over the past three and three-quarter fiscal years, the Bank's
concentration of transaction and savings accounts comprising total deposits has
declined slightly, with such deposits amounting to 48.7 percent of total
deposits at fiscal year end 1995. The decline in the concentration of
transaction and savings accounts comprising total deposits was the result of a
stronger growth rate realized in CDs, as opposed to shrinkage in the balance of
transaction and savings account deposits.
Borrowings have been utilized to a limited degree by the Bank in recent
years, primarily consisting of FHLB advances to support control of funding
costs. The Bank's borrowings totaled $2.0 million at December 31, 1997,
consisting entirely of short- term FHLB advances. To the extent the Bank
implements a leveraging strategy following the conversion transaction,
borrowings would be the primary funding source of the leveraging. Such
borrowings would likely consist of FHLB advances.
Subsidiaries
- ------------
HCSI maintains four wholly-owned subsidiaries, Hudson City Associates Inc.
("HCAI"), Hudson River Mortgage Corporation ("HRMC"), Hudson City Centre Inc.
("HCCI"), and Hudson River Funding Corp. ("HRFC").
HCAI was incorporated in 1984 but remained inactive until 1990. In 1990
HCAI formed a partnership with F.G.O. Corp. to establish Premium Payment Plan
("PPP"), an insurance premium finance company. HCAI is 65 percent owner and the
managing general partner of PPP. PPP provides premium financing for non-
standard and sub-standard personal automobile insurance and certain lines of
commercial insurance. During the fiscal year ended March 31, 1997 and the nine
months ended December 31, 1997, HCAI recorded net income of $918,000 and a net
loss of $15,000, respectively.
HRMC is the Bank's mortgage brokerage subsidiary and was formed in 1996 to
increase the Bank's presence in 1-4 family lending. The substantial portion of
HRMC's lending activities are conducted in the Albany metropolitan area.
Applications are either passed through to the Bank for origination or are
delivered to other financial institutions for origination. During the fiscal
year end March 31, 1997 and the nine months ended December 31, 1997, HRMC
recorded net losses of $75,000 and $8,000, respectively.
<PAGE>
RP Financial, LC.
Page 1.21
HCCI was formed in October 1985 to construct and manage HCSI's main office.
During the fiscal year end March 31, 1997 and the nine months ended December 31,
1997, HCCI recorded a net loss of $18,000 and net income of $12,000,
respectively.
HRFC is a real estate investment trust ("REIT") formed in 1997 to enhance
liquidity, portfolio yields and capital growth. HCSI funded HRFC with
approximately $185 million of interest- earning assets, consisting of 1-4 family
residential mortgage loans, commercial real estate loans, home equity loans,
home improvement loans and debt securities. Interest income earned on the assets
held by HRFC is passed through to HCSI in the form of dividends. HRFC recorded
net income of $3.9 million for the nine months ended December 31, 1997.
Trust Activities
- ----------------
To enhance the Bank's retail services, HCSI established a Trust Department
in 1995. The Trust Department provides trust- related services for a variety of
trust accounts, including personal trusts and estates and employee benefit
trusts. Currently, income generated from the Trust Department is an immaterial
portion of the Bank's total operating income.
Legal Proceedings
- -----------------
The Bank is involved in routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, are believed by management to be
immaterial to the financial condition of the Bank.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
HCSI conducts operations through 12 full service branch offices in the
east-central New York cities of Hudson (3 branches), Chatham, Copake, Valatie,
Nassau, Millerton, Albany, East Greenbush, Rotterdam and Hillsdale. The Bank's
branches serve Albany, Columbia, Dutchess, Rensselaer and Schenectady Counties,
with HCSI's largest market presence being in Columbia County. In addition to its
headquarters office, which includes a full service branch, the Bank maintain six
other full service branches in Columbia County. The bulk of HCSI's activities
are conducted within the five-county market area and surrounding contiguous
markets, although the Bank's lending activities include out-of-market lending
mostly with respect to manufactured home loans and loans to finance insurance
premiums. Exhibit II-1 provides information on the Bank's office facilities.
The Bank's primary market area includes a mixture of rural, suburban and
urban markets, with Columbia County being somewhat rural in nature and the
smallest of the five county market area in terms of population size. HCSI's
market area has a fairly diversified economy, with services, wholesale/retail
trade, government and manufacturing constituting the basis of Columbia County's
economy. The economies of the other four primary market area counties are
similarly diversified, with Albany County serving as the hub of economic
activity in east-central New York. The Bank's competitive environment includes a
large number of thrifts, commercial banks, and other financial services
companies, some of which have a regional or national presence.
Future growth opportunities for HCSI depend in part on national economic
factors, the future growth in the Bank's market area, which has been measured by
indicators such as demographic growth trends, the health and stability of the
regional and local economy, and the nature and intensity of the competitive
environment for financial institutions. These factors have been briefly examined
to help determine the growth potential and opportunities that exist for the
Bank.
Market Area Demographics
- ------------------------
Demographic and economic growth trends, measured by changes in population,
number of households, age distribution and median household income, provide key
insight into the
<PAGE>
RP Financial, LC.
Page 2.2
health of the Bank's market area (see Table 2.1). In the 1990s, the Bank's
market area exhibited mixed growth characteristics as measured by population and
household growth. Albany and Dutchess Counties, which have the largest
populations among the Bank's primary market area counties, posted slightly
positive population growth from 1990 to 1997. Comparatively, Rensselaer and
Schenectady Counties recorded flat and negative population growth rates during
the 1990s, respectively. The nominally positive population growth rate posted
for Columbia County was the result of population growth in the outlying suburbs,
which was largely offset by a loss of population in the City of Hudson. Among
the five primary market area counties, Columbia County's population of 64,000
was the lowest. Projected population growth for the primary market area counties
is not expected to vary materially from recent historical trends, with the
strongest population growth being projected for Albany and Dutchess Counties.
Columbia County's population is projected to increase slightly over the next
five years. Population growth rates for all five of the primary market area
counties, as well as for New York, were notably lower than the comparative
growth rates for the U.S. Growth in households generally paralleled the
population growth rates, with Albany and Dutchess Counties posting the highest
household growth rates among the five primary market area counties.
Opportunities for growth appear to be most favorable in the faster growing
and more populous Dutchess and Albany Counties, although the Bank faces a
notably higher degree of competition in those markets as well. Comparatively,
while the Bank maintains a significant market presence in Columbia County, the
lack of population growth occurring in Columbia County, as well as the smaller
size of the population base, somewhat limits opportunities for loan and deposit
growth.
Median household and per capita income measures for Columbia County were at
the low end of the comparative measures of the other primary market area
counties, which is indicative of Columbia County's somewhat rural nature that
provides for a lower cost of living than the more heavily populated market
areas. Income levels are highest in Dutchess County, with its closer proximity
to New York City and markets in western Connecticut serving to attract white
collar professionals who work in those markets. As can be expected, household
and per capita income growth have generally been the highest in the markets that
have experienced stronger growth in population and households. In contrast to
the projected decline in household income growth for the U.S. and New York, the
household income growth rate for three out of the five primary market area
counties, including Columbia County, is
<PAGE>
RP Financial, LC.
Page 2.3
Table 2.1
The Hudson City Savings Institution
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%
Albany County 293 297 299 0.2% 0.2%
Columbia County 63 64 64 0.1% 0.1%
Dutchess County 259 263 265 0.2% 0.2%
Rensselaer County 154 155 155 0.0% 0.0%
Schenectady County 149 147 145 -0.2% -0.2%
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%
Albany County 116 118 119 0.3% 0.2%
Columbia County 24 24 24 0.1% 0.1%
Dutchess County 90 91 92 0.2% 0.2%
Rensselaer County 58 58 58 0.1% 0.1%
Schenectady County 59 58 58 -0.2% -0.2%
Household Income (000)
- ----------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
New York 31,044 36,341 38,815 2.3% 1.3%
Albany County 31,438 36,326 37,499 2.1% 0.6%
Columbia County 30,528 32,689 36,339 1.0% 2.1%
Dutchess County 40,702 44,993 50,061 1.4% 2.2%
Rensselaer County 32,534 34,896 37,051 1.0% 1.2%
Schenectady County 30,576 34,149 35,051 1.6% 0.5%
Per Capita Income - ($)
- -----------------------
United States $13,179 $18,100 -- 4.6% N/A
New York 14,413 18,504 -- 3.6% N/A
Albany County 15,050 18,262 -- 2.8% N/A
Columbia County 13,608 15,811 -- 2.2% N/A
Dutchess County 13,608 18,909 -- 4.8% N/A
Rensselaer County 13,608 15,409 -- 1.8% N/A
Schenectady County 13,608 16,937 -- 3.2% 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
Albany County 18.6 14.8 31.9 19.9 14.7 35.5
Columbia County 21.1 11.6 28.4 23.1 15.7 37.8
Dutchess County 21.0 13.1 32.7 21.4 11.8 35.3
Rensselaer County 20.7 15.1 31.2 19.8 13.4 34.4
Schenectady County 20.6 12.5 29.7 20.6 16.7 37.0
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
Albany County 17.6 15.0 35.0 26.1 4.4 1.8
Columbia County 20.1 16.4 36.5 21.7 3.5 1.8
Dutchess County 12.3 11.1 32.3 36.6 5.9 1.8
Rensselaer County 18.4 16.1 36.5 25.2 3.2 0.7
Schenectady County 18.3 16.6 35.9 24.3 3.4 1.4
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.4
projected to increase over the next five years. Age and household income
distribution measures further imply growth opportunities for the Bank are less
conducive in Columbia County, as Columbia County's measures reflect an older and
lower earning population compared to the other primary market area counties.
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. In
congressional testimony at the end of February 1997, the Federal Reserve
Chairman indicated that he anticipated recent signs of lower job insecurity
among workers would lead to upward pressure in wages, which could possibly
trigger the Federal Reserve to boost interest rates. Signs of inflation became
more notable during March and April, as many of the first quarter economic
indicators showed signs of a strengthening economy. Most notably, during
February, industrial production increased 0.5 percent, housing starts rose 12.2
percent and the sale of existing homes jumped 9.0 percent. Accelerating economic
growth was further indicated by a decline in the March unemployment rate to 5.2
percent, versus 5.3 percent for February, and a higher than expected rise in the
March "core" producer price index, which posted its largest increase in 18
months. However, inflation measures showed that the "Goldilocks Economy"
remained in effect, based on lower producer prices and a lower than expected
increase in the employment cost index. Some of the reasons cited for the low
inflation were a larger labor force, a measurable increase in productivity, and
an increasingly global economy. First quarter 1997 GDP growth was measured at
5.9 percent, far exceeding analysts' projections.
Second quarter economic data generally reflected a less robust pace of
growth than maintained during the first quarter. Most notably, a lower than
anticipated National Association of Purchasing Managers index in April 1997
indicated a slowdown of expansion in the manufacturing sector. New home sales
also dropped by 7.7 percent in April 1997, the sharpest decline in six months.
Automobile sales for April and May declined from year earlier levels, and
discounting became more common by automakers. A rise in the June unemployment
rate and GDP growth slowing to an annual rate of 2.2 percent in the second
quarter, which was well below the revised 4.9 percent rate recorded in the first
quarter, further signaled that the economy was slowing to a more sustainable
pace.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade
<PAGE>
RP Financial, LC.
Page 2.5
deficit provided indications of a strengthening economy. At the same time, a
modest increase in the July consumer price index and a decline in July wholesale
prices suggested that inflation remained non-threatening. At the end of August,
the second quarter GDP was revised upward to a 3.6 percent annual growth rate
compared to a 2.2 percent original estimate. In early- September, a slight
increase in the August unemployment rate did little to alleviate inflation
concerns, as the employment data indicated that the job market remained tight
and wages continued to rise. Comparatively, only a slight increase in the August
consumer price index provided evidence that inflation remained tame at the end
of the third quarter. September unemployment data served to further calm
inflation fears in early-October, as the unemployment rate was unchanged at 4.9
percent and fewer jobs than expected were added to the economy.
At the beginning of the fourth quarter of 1997, inflation concerns became
more notable following congressional testimony by the Federal Reserve Chairman,
as he indicated that it would be difficult for the U.S. economy to maintain the
current balance between tight labor markets and low inflation. However, economic
data released in October and November provided mixed signals on the strength of
the economy. For example, a decline in the October unemployment rate to a
24-year low of 4.7 percent indicated a rapidly expanding economy, while,
comparatively, a decline in October retail sales suggested that the economy may
be slowing. Economic growth was also viewed as being contained by the upheaval
in Asian markets, based on expectations that international turmoil would result
in a drop in demand for U.S. exports. However, the threat of inflation was
rekindled in early-December on news of the November unemployment rate dropping
to 4.6 percent, and the tight labor market pushed hourly wages higher. Economic
data released in mid-December provided for a more favorable inflation outlook,
as the increase in November retail sales was well below economists expectations
and producer prices declined in November.
Inflation concerns were further eased in early-January 1998 on news that
U.S. manufacturing growth slowed in December and predictions by economists of
slower growth for the U.S. economy in 1998. However, December 1997 employment
data indicated robust economic growth, despite a 0.1 percent increase in the
December unemployment rate to 4.7 percent, as a stronger than expected 370,000
jobs were added to the U.S. economy in December. The growing demand for labor
translated into a higher than expected increase in labor costs during the fourth
quarter of 1997. A 0.5 percent increase in industrial production for December
1997 and a 4.3 percent increase in the GDP for the fourth quarter of 1997
<PAGE>
RP Financial, LC.
Page 2.6
further suggested that the financial troubles in Asia had not diminished demand
for U.S. exports by the end of 1997. At the end of January 1998, inflation
concerns were diminished by the December durable goods orders report, which
showed only a slight increase after excluding the volatile transportation
sector. The January unemployment rate was unchanged at 4.7 percent, while the
number of jobs added to the economy was higher than expected. Other economic
data released in February 1998 generally signaled a stable economic environment.
Retail sales were up 0.1 percent in January 1998 versus 0.3 percent in December
1997, while the consumer price index for January was unchanged from December. At
the end of February fourth quarter GDP was revised downward to 3.9 percent,
signaling a possible slowdown in growth in the early part of 1998.
Consistent with the mixed economic activity, interest rate trends have been
varied as well over the past year. Indications of slowing economic growth and
the Federal Reserve's decision to leave rates unchanged at its early-February
meeting spurred a downward trend in interest rates during the first half of
February 1997. However, interest rates edged higher in late- February, following
renewed concerns by the Federal Reserve Chairman over the sharp rise in the
stock market during the past two years. After stabilizing briefly, the
strengthening economy and growing expectations of a rate increase by the Federal
Reserve propelled interest rates higher in late-March. The Federal Reserve
increased short-term interest rates by 0.25 percent in late-March, which was
followed by a sharp sell-off in the bond market. For the first time in six
months, the rate on the 30-year benchmark bond moved above 7.0 percent in
late-March.
Inflation concerns pushed interest rates higher during the first half of
April 1997, which was followed by a slight decline in interest rates on rumors
of a national budget accord. News of the budget agreement and favorable
inflation data sustained the rally in bond prices through early-May. Interest
rates stabilized in mid-May, as the Federal Reserve opted not to raise interest
rates at its May meeting. The high level of consumer confidence indicated by the
May reading caused the 30-year bond yield to edge above 7.0 percent again in
late-May. However, the increase was short-lived, as signs of slowing economic
growth provided for a lower interest rate environment during June.
The downward trend in interest rates became more pronounced during July
1997, following the Federal Reserve's decision to leave rates unchanged at its
early-July meeting and the release of new economic data that indicated inflation
was under control. Slower economic growth indicated by a second quarter GDP
growth rate of 2.2 percent sustained the rally in
<PAGE>
RP Financial, LC.
Page 2.7
bond prices at the end of July. However, in early-August, the stronger than
expected job growth reflected in the July employment data and a falling U.S.
dollar against the yen and mark caused bond prices to tumble. After recovering
briefly on the favorable inflation readings reflected in the July wholesale and
retail prices, bond prices declined in late-August on news of the narrower than
expected June trade deficit. Bond prices rallied briefly at the end of August
and in early-September, due to technical pressures and economic data that showed
manufacturing growth cooled in August. Interest rates increased slightly in
mid-September, reflecting investor fears that the August economic data would
show a strengthening economy and higher prices. However, the low inflation
reading indicated by the August consumer price report ignited a bond market
rally, with the yield on the 30-year bond posting its second largest decline in
the 1990s on September 16, 1997. Bond prices approached their highest level in
two years in early-October, reflecting the stable inflation environment as
confirmed by the September unemployment data.
In mid-October 1997, renewed inflation fears raised by the tight labor
markets and growing expectations of a rate hike by the Federal Reserve provided
for an easing in bond prices. The sell-off in the global markets at the end of
October served to abbreviate the decline in bond prices, as skittish investors
dumped stocks in favor of bonds. The Federal Reserve's decision to leave
interest rates unchanged at its mid-November meeting, along with signs of
slowing economic growth indicated by a decline in October retail sales, served
to strengthen the advance in bond prices in mid-November as the yield on the
bellwether 30- year U.S. Treasury bond approached 6.0 percent. Renewed interest
in U.S. Treasury bonds by Japanese investors and fading concerns of inflation
provided for a stable bond market in late-November. The rally in bond prices was
not sustained in early-December, as bond prices declined on news of the
surprisingly strong jobs report for November. However, positive inflation news
indicated by the lower than expected increase in November retail sales and the
decline in November producer prices, as well as world market turmoil, served to
push the yield on the 30-year U.S. Treasury bond below 6.0 percent in
mid-December. Bond prices were further boosted in mid-December by the Federal
Reserve's decision to leave interest rates unchanged at its mid-December
meeting, while a flight to quality caused by lingering concerns over the long-
term stability of Asian financial markets sustained the advance in the bond
market in late-December.
Comments by the Federal Reserve Chairman of possible deflationary pressures
served to strengthen the bond market rally at the beginning of 1998. December
1997 economic data
<PAGE>
RP Financial, LC.
Page 2.8
which generally showed a strong pace of economic growth caused bond prices to
retreat slightly in late-January 1998. Bonds rallied briefly at the end of
January, as the Federal Reserve indicated that they would hold rates steady. In
early-February, gains in the stock market translated into a sell-off in bonds.
However, despite the stronger than expected employment report for January, bond
prices edged higher following the release of the employment on the first Friday
in February. The positive trend in bond prices was sustained through
mid-February, which was supported by economic data which showed a slower pace of
growth. Indications by the Federal Reserve Chairman that the Federal Reserve
would not cut rates soon pushed interest rates slightly higher in late-
February. However, the downward revision to fourth quarter GDP boosted bond
prices modestly at the end of February. As of February 27, 1998, one- and
thirty-year U.S. Government bonds were yielding 5.40 percent and 5.92 percent,
respectively, versus comparative year ago rates of 5.53 percent and 6.76
percent, respectively. Exhibit II-2 provides historical interest rate trends
from 1991 through February 27, 1998.
Local Economy
- -------------
The Bank's primary market area has a fairly diversified local economy, with
employment in the services, manufacturing, wholesale/retail trade and government
serving as the basis of the local economy. Service jobs represent the largest
employer in all five of the primary market counties, with jobs in
wholesale/retail trade generally accounting for the second largest employment
sector. Government is the second largest employer sector in Albany County, which
is supported by the presence of the State's capitol. Manufacturing employment,
which tend to be relatively high paying jobs, was most significant in Dutchess
County. However, the number of manufacturing jobs in Dutchess County has
declined significantly in recent years.
Similar to national trends, most of the job growth in the Bank's primary
market area has been realized in service related industries. Job shrinkage has
generally been most notable in the manufacturing sector, although the number of
manufacturing jobs in Columbia County has increased during recent years. Job
growth and shrinkage has been fairly limited in the other employment sectors
throughout the primary market area, which is indicative of the market area's
relatively stable economic environment.
<PAGE>
RP Financial, LC.
Page 2.9
Comparative unemployment rates for the primary market area, as well as for
the U.S. and New York, are shown in Table 2.2. The unemployment data for the
market area serves to highlight the general stability of the primary market
area's economy, as December 1997 unemployment rates for all five of the primary
market area counties were lower than the U.S. unemployment rate of 4.4 percent
and were well below the New York unemployment rate of 5.7 percent. The December
1997 unemployment rates for the five primary market area counties reflected
little change from the comparative year ago rates, providing further indication
of a stable local economy. Among the five primary market area counties,
unemployment was lowest in Albany County (3.2 percent) and was highest in the
counties of Rensselaer and Schenectady (4.1 percent).
Table 2.2
Unemployment Trends(1)
Dec. 1996 Dec. 1997
Region Unemployment Unemployment
------ ------------ ------------
United States 5.0% 4.4%
New York 5.9 5.7
Albany County 3.2 3.2
Columbia County 2.9 3.4
Dutchess County 3.5 3.4
Rensselaer County 4.1 4.1
Schenectady County 3.7 4.1
(1) Unemployment rates have not been seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
Market Area Deposit Characteristics and Competition
- ---------------------------------------------------
Competition among financial institutions in the Bank's market area is
significant, and, as larger institutions compete for market share to achieve
economies of scale, the market environment for the Bank's products and services
is expected to become increasingly competitive in the future. Among the Bank's
competitors are much larger and more diversified institutions, which have
greater resources than maintained by HCSI. Financial institution competitors in
the Bank's primary market area include other locally based thrifts
<PAGE>
RP Financial, LC.
Page 2.10
and banks, as well as the money center banks based in New York City and other
regional and super regional banks.
The Bank's retail deposit base is closely tied to the economic fortunes of
the east-central New York region and, in particular, the areas of the region
that are nearby to one of HCSI's 12 branches. Table 2.3 displays deposit market
trends from June 30, 1994 through June 30, 1996 for the five counties where the
Bank maintained branches during that period. Additional data is also presented
for the State of New York. The data indicates that deposit growth in the Bank's
primary market area was mixed, as indicated by the positive deposit growth
recorded in Dutchess and Rensselaer Counties and the negative deposit growth
recorded in Albany and Schenectady Counties. Total bank and thrift deposits in
Columbia County remained approximately flat during the two year period covered
in Table 2.3. Commercial banks maintained the bulk of deposits in every county
except for Columbia County, where the Bank's dominant market presence provided
savings institutions with a larger market share of deposits. Positive deposit
growth was recorded by commercial banks in every county except for Albany
County, while comparatively, Rensselaer County was the county where positive
deposit growth was recorded by thrifts. The drop in thrift deposits was
attributable to a number of factors, including disintermediation caused by the
low interest rate environment and market share expansion by commercial banks
through acquisition, as reflected by the general decline in the number of thrift
branches maintained in the Bank's primary market area.
HCSI's largest concentration and largest market share of deposits is
maintained in Columbia County, where the Bank is headquartered and currently
maintains 7 of its 12 branch offices. The Bank's $447.2 million of deposits at
the Columbia County branches represented a 59.5 percent market share of thrift
and bank deposits at June 30, 1996, which was down slightly from a 59.8 percent
market share at June 30, 1994. Comparatively, from June 30, 1994 to June 30,
1996, the Bank's deposit market share increased in the other four counties where
branches were maintained, although HCSI's deposit market share was significantly
lower in each of those counties. Beyond Columbia County, the Bank's most notable
market presence for deposits was in Rensselaer County, where the Bank maintained
a 2.7 percent market share of commercial bank and thrift deposits at June 30,
1996.
Future deposit growth may be enhanced by the infusion of the conversion
proceeds, as the additional capital will improve HCSI's competitive position and
leverage capacity. The Bank should also continue to benefit from its favorable
image as a locally-owned and
<PAGE>
RP Financial, LC.
Page 2.11
Table 2.3
The Hudson City Savings Institution
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%
Albany County $ 6,931,364 100.0% 125 $ 6,535,493 100.0% 119 -2.9%
- -------------
Commercial Banks 5,331,174 76.9% 91 5,011,508 76.7% 91 -3.0%
Savings Institutions 1,600,190 23.1% 34 1,523,985 23.3% 28 -2.4%
Hudson City Svgs Inst. (1) 30,564 1.9% 1 44,762 2.9% 1 21.0%
Hudson City Svgs Inst. (2) 0.4% 0.7%
Columbia County $ 749,928 100.0% 20 $ 752,038 100.0% 19 0.1%
- ---------------
Commercial Banks 297,068 39.6% 13 304,856 40.5% 13 1.3%
Savings Institutions 452,860 60.4% 7 447,182 59.5% 6 -0.6%
Hudson City Svgs Inst. (1) 448,276 99.0% 6 447,182 100.0% 6 -0.1%
Hudson City Svgs Inst. (2) 59.8% 59.5%
Dutchess County $ 2,784,381 100.0% 87 $ 2,850,752 100.0% 88 1.2%
- ---------------
Commercial Banks 1,427,707 51.3% 53 1,601,444 56.2% 60 5.9%
Savings Institutions 1,356,674 48.7% 34 1,249,308 43.8% 28 -4.0%
Hudson City Svgs Inst. (1) 0 0.0% 0 19,657 1.6% 1 NA
Hudson City Svgs Inst. (2) 0.0% 0.7%
Rensselaer County $ 1,522,968 100.0% 45 $ 1,543,987 100.0% 45 0.7%
- -----------------
Commercial Banks 885,481 58.1% 35 891,982 57.8% 35 0.4%
Savings Institutions 637,487 41.9% 10 652,005 42.2% 10 1.1%
Hudson City Svgs Inst. (1) 29,253 4.6% 1 41,728 6.4% 2 19.4%
Hudson City Svgs Inst. (2) 1.9% 2.7%
Schenectady County $ 2,235,739 100.0% 48 $ 2,119,352 100.0% 46 -2.6%
- ------------------
Commercial Banks 1,172,289 52.4% 35 1,780,873 84.0% 36 23.3%
Savings Institutions 1,063,450 47.6% 13 338,479 16.0% 10 -43.6%
Hudson City Svgs Inst. (1) 0 0.0% 0 10,623 3.1% 1 NA
Hudson City Svgs Inst. (2) 0.0% 0.5%
</TABLE>
(1) Percent of thrift deposits.
(2) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.12
community-oriented institution, as the trend of consolidation among financial
institutions is expected to provide HCSI with additional opportunities to
acquire customers, facilities and key personnel that become available as the
result of community banks being acquired. However, given the competition faced
by HCSI, it will be difficult for the Bank to realize notable gains in deposit
market share without paying above market rates for deposits or further expanding
HCSI's branch network. At this time, the Bank has no definite plans to acquire
additional branches or other financial institutions.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of HCSI's operations versus a group of
comparable savings institutions (the "Peer Group") selected from the universe of
all publicly-traded savings institutions in a manner consistent with the
regulatory valuation guidelines. The basis of the pro forma market valuation of
HCSI is derived from the pricing ratios of the Peer Group institutions,
incorporating valuation adjustments for key differences in relation to the Peer
Group. Since no Peer Group can be exactly comparable to HCSI, key areas examined
for differences are: financial condition; profitability, growth and viability of
earnings; asset growth; primary market area; dividends; liquidity of the shares;
marketing of the issue; management; and effect of government regulations and
regulatory reform.
Selection of Peer Group
- -----------------------
The Peer Group selection process is governed by the general parameters set
forth in the regulatory valuation guidelines. Accordingly, the Peer Group is
comprised of only those publicly- traded savings institutions whose common stock
is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed,
since the stock trading activity is regularly reported and generally more
frequent than non-publicly traded and closely-held institutions. Non-listed
institutions are inappropriate since the trading activity for thinly-traded or
closely-held stocks is typically highly irregular in terms of frequency and
price and thus may not be a reliable indicator of market value. We have also
excluded from the Peer Group those companies under acquisition or subject to
rumored acquisition, mutual holding companies and recent conversions, since
their pricing ratios are subject to unusual distortion and/or have limited
trading history. A recent listing of the universe of all publicly-traded savings
institutions is included as Exhibit III-1.
Ideally, the Peer Group, which must have at least 10 members to comply with
the regulatory valuation guidelines, should be comprised of locally or
regionally-based institutions with comparable resources, strategies and
financial characteristics. There are approximately 400 publicly-traded
institutions nationally and, thus, it is typically the case that the Peer Group
will be comprised of institutions with relatively comparable characteristics. To
the extent that differences exist between the converting institution and the
Peer Group, valuation adjustments will be applied to account for the
differences.
<PAGE>
RP Financial, LC.
Page 3.2
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of HCSI. In the selection process, we
applied two primary "screens" to the universe of all public companies:
o Screen #1. New York institutions, which operate outside of New York
City, with assets between $150 million and $5.0 billion, and
equity-to-assets ratios of at least 8.0 percent. New York City
institutions were not considered to be appropriate candidates for the
Bank's Peer Group, in light of notable differences in operating
environment for New York City financial institutions compared to the
more rural and suburban primary market area served by HCSI. Seven
companies met the criteria for Screen #1 and five were included for
the Peer Group: AFSALA Bancorp, Inc., ALBANK Financial Corp., Catskill
Financial Corp., Peekskill Financial Corp., and SFS Bancorp. Warwick
Community Bancorp was the one of the companies excluded from the Peer
Group, due to the recency of its conversion. Warwick Community Bancorp
completed its conversion in December 1997. Ambanc Holding Co., Inc.
was the other company excluded from the Peer Group, as the result of
operating at a net loss on a core earning basis for the twelve month
period being analyzed. Due to the negative core earnings, as well as
negative reported earnings, Ambanc's price/earnings multiples are not
meaningful. Exhibit III-2 provides financial and pricing details of
all publicly-traded New York thrifts.
o Screen #2. Institutions based in the central and western portions of
Massachusetts and Connecticut, with assets between $150 million and
$5.0 billion, and equity-to-assets ratios of at least 8.0 percent. No
Massachusetts and five Connecticut institutions met the selection
criteria for Screen #2 and all were included as part of HCSI's Peer
Group: American Bank, Bancorp Connecticut, Dime Financial Corp., MECH
Financial Inc., and Newmil Bancorp, Inc. Exhibit III-3 provides
financial and pricing details of all publicly-traded Massachusetts and
Connecticut thrifts.
Table 3.1 shows the general characteristics of each of the 10 Peer Group
companies and Exhibit III-4 provides summary demographic and deposit market
share data for the primary market areas served by each of the Peer Group
companies. While there are expectedly some differences between the Peer Group
companies and HCSI, we believe that the Peer Group companies, on average,
provide a good basis for valuation subject to valuation adjustments. The
following sections present a comparison of HCSI's financial condition, income
and expense trends, loan composition, interest rate and credit risk versus the
Peer Group as of the most recent publicly available date.
A summary description of the key characteristics of each of the Peer Group
companies, which we believe warranted their inclusion as a comparable
institution to HCSI, is detailed below.
<PAGE>
RP Financial, LC.
Page 3.3
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ------ ------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 4,083 D 108 12-31 04/92 48.63 628
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 958 D 11 12-31 07/86 31.25 161
MECH MECH Financial Inc of CT (3) OTC Hartford CT Thrift 831 S 14 12-31 06/96 26.63 141
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 639 D 14 12-31 12/81 50.25 117
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 443 D 3 12-31 07/86 18.50 94
NMSB Newmil Bancorp, Inc. of CT (3) OTC Western CT Thrift 356 D 15 06-30 02/86 13.38 52
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 295 D 4 09-30 04/96 18.38 85
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 184 D 3 06-30 12/95 17.00 53
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 D 4 12-31 06/95 21.50 26
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 160 S 5 09-30 10/96 19.63 27
</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: 03/02/98
<PAGE>
RP Financial, LC.
Page 3.4
o AFSALA Bancorp, Inc. of NY. Selected due to east-central New York market
area, similar earnings contribution from sources of non-interest operating
income, higher than average level of operating expenses, and relatively
high degree of lending diversification into higher risk types of lending.
o ALBANK Fin. Corp. of Albany NY. Selected due to east-central New York
market area, similar concentration of loans comprising interest-earning
assets, comparable funding composition, strong net interest margin, and
similar earnings contribution from sources of non-interest operating income
o American Bank of Waterbury CT. Selected due to comparable asset size,
similar size of branch network, relatively high degree of lending
diversification into higher risk types of lending, and higher than average
level of non-performing assets.
o Bancorp Connecticut of CT. Selected due to strong net interest margin,
relatively high degree of lending diversification into higher risk types of
lending, and higher than average level of non-performing assets.
o Catskill Fin. Corp. of NY. Selected due to east-central New York market
area, similar funding composition, high level of capital, and strong net
interest margin.
o Dime Financial Corp. of CT. Selected due to comparable size of branch
network, similar funding composition, and similar earnings contribution
from sources of non-interest operating income.
o MECH Financial Inc. of CT. Selected due to comparable asset size, similar
size of branch network, strong net interest margin, higher than average
level of operating expenses, and earnings significantly impacted by credit
quality related losses.
o Newmil Bancorp, Inc. of CT. Selected due to strong net interest margin,
higher than average level of operating expenses, and relatively high degree
of lending diversification into higher risk types of lending.
o Peekskill Fin. Corp. of NY. Selected due to comparable funding composition,
high level of capital, strong net interest margin, and relatively high
level of non-performing loans.
o SFS Bancorp of Schenectady NY. Selected due to east-central New York market
area, similar concentration of loans comprising interest-earning assets,
comparable funding composition, higher than average level of operating
expenses, and similar earnings contribution from sources of non-interest
operating income.
<PAGE>
RP Financial, LC.
Page 3.5
In aggregate, the Peer Group companies are similarly capitalized as the
industry average (13.19 percent of assets versus 13.30 percent for all public
companies), generate higher earnings as a percent of average assets (1.20
percent core ROAA versus 0.94 percent for all public companies), and generate a
higher ROE (10.82 percent core ROE versus 8.34 percent for all public
companies). Overall, the Peer Group's average P/B ratio and core P/E multiple
were below the respective comparable all public averages.
As of February 27, 1998
-----------------------
Peer All
Group Public
----- ------
Equity-to-Assets 14.14% 13.00%
Equity-to-Assets 13.19% 13.30%
Core Return on Assets ("ROA") 1.20 0.94
Core Return on Equity ("ROE") 10.82 8.34
Price-to-Book ratio ("P/B") 160.19% 169.42%
Core Price-to-Earnings multiple ("P/E") 18.47x 20.76x
Price-to-Assets ratio ("P/A") 19.47% 20.70%
Source: Table 4.4 - Chapter IV Valuation Analysis.
Ideally, the Peer Group companies would be comparable to HCSI in terms of
all of the selection criteria, but the universe of publicly-traded thrifts does
not provide for an appropriate number of such companies. However, in general,
the companies selected for the Peer Group were fairly comparable to HCSI, as
will be highlighted in the following comparative analysis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for HCSI and the Peer
Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. The Bank's and the Peer Group's ratios
reflect balances as of December 31, 1997, unless indicated otherwise for the
Peer Group companies. HCSI's net worth base of 10.1 percent was below the Peer
Group's average net worth ratio of 13.1 percent. However, with the consummation
of the conversion and infusion of the net conversion proceeds, the Bank will
maintain a notably higher equity-to-assets ratio than the Peer Group.
Intangibles were a slightly larger factor on the Peer Group's balance sheet, as
the Bank and the Peer Group posted tangible equity-to-assets ratios of 10.0
percent and 12.9 percent, respectively. HCSI's higher pro forma capital position
will be favorable from a risk perspective and in
<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 December 31, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ----- --- -------- -------- ----- ----- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hudson City Savings Inst.
- -------------------------
December 31, 1997 19.3 76.0 0.7 88.1 0.3 0.0 10.1 0.1 10.0 0.0
SAIF-Insured Thrifts 17.6 67.9 10.8 69.6 15.2 0.2 13.1 0.2 12.9 0.0
All Public Companies 18.1 67.0 11.1 70.1 15.1 0.2 12.7 0.3 12.5 0.0
State of NY 19.7 56.0 18.8 72.9 13.2 0.0 12.1 0.9 11.2 0.0
Comparable Group Average 27.7 52.6 16.8 78.5 7.0 0.0 13.1 0.2 12.9 0.0
Mid-Atlantic Companies 22.9 52.3 22.2 79.5 1.7 0.0 16.7 0.4 16.3 0.0
New England Companies 32.4 52.9 11.4 77.4 12.3 0.0 9.5 0.1 9.4 0.0
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1) 43.7 47.3 7.0 84.4 0.9 0.0 12.9 0.0 12.9 0.0
ALBK ALBANK Fin. Corp. of Albany NY 14.1 69.2 11.8 85.3 2.2 0.0 8.8 2.0 6.8 0.0
CATB Catskill Fin. Corp. of NY 24.5 42.5 31.3 68.6 5.6 0.0 24.3 0.0 24.3 0.0
PEEK Peekskill Fin. Corp. of NY 21.2 26.0 51.4 73.2 0.0 0.0 25.2 0.0 25.2 0.0
SFED SFS Bancorp of Schenectady NY 11.2 76.7 9.7 86.3 0.0 0.0 12.3 0.0 12.3 0.0
New England Companies
- ---------------------
BKC American Bank of Waterbury CT 30.1 56.7 10.7 71.9 18.2 0.0 9.0 0.3 8.7 0.0
BKCT Bancorp Connecticut of CT 25.5 57.7 14.8 71.2 17.2 0.0 10.6 0.0 10.6 0.0
DIBK Dime Financial Corp. of CT 55.1 37.7 5.1 85.2 6.1 0.0 8.3 0.2 8.1 0.0
MECH MECH Financial Inc of CT(1) 10.6 66.0 17.1 78.4 10.3 0.0 10.4 0.0 10.4 0.0
NMSB Newmil Bancorp, Inc. of CT 40.7 46.6 9.2 80.3 9.6 0.0 9.3 0.0 9.3 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>
Hudson City Savings Inst.
- -------------------------
December 31, 1997 2.87 -6.39 5.27 5.11 NM 4.64 4.11 10.04 14.12 15.38
SAIF-Insured Thrifts 11.34 5.70 13.15 8.05 12.40 3.95 3.17 11.28 11.39 23.12
All Public Companies 12.28 7.50 13.58 8.38 13.35 4.99 4.18 11.19 11.14 22.49
State of NY 16.28 4.50 18.81 8.51 12.86 4.39 2.88 10.05 9.76 22.22
Comparable Group Average 11.04 11.12 9.08 9.78 5.77 8.12 7.33 15.14 11.41 26.91
Mid-Atlantic Companies 6.35 -2.34 8.13 7.39 0.31 0.01 -2.20 15.14 15.14 38.16
New England Companies 15.73 24.58 10.03 12.17 9.41 16.23 16.87 NM 9.17 18.48
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1) 4.38 4.00 5.01 7.00 -22.03 0.14 0.43 12.48 12.48 29.70
ALBK ALBANK Fin. Corp. of Albany NY 16.46 -2.19 19.57 15.62 22.65 12.69 1.34 NM NM NM
CATB Catskill Fin. Corp. of NY 6.90 -1.19 9.79 4.06 NM -6.71 -6.71 20.65 20.65 61.01
PEEK Peekskill Fin. Corp. of NY -1.77 -2.02 -2.26 3.24 NM -4.97 -4.97 NM NM NM
SFED SFS Bancorp of Schenectady NY 5.79 -10.31 8.54 7.01 NM -1.11 -1.11 12.28 12.28 23.78
New England Companies
- ---------------------
BKC American Bank of Waterbury CT 14.43 43.04 5.53 14.47 7.38 22.13 23.68 NM 7.58 14.40
BKCT Bancorp Connecticut of CT 5.63 -5.08 10.40 1.85 20.86 9.87 9.87 NM 10.02 17.33
DIBK Dime Financial Corp. of CT 27.58 64.89 -0.21 31.63 0.00 26.63 28.28 NM 8.17 21.90
MECH MECH Financial Inc of CT(1) 17.00 11.67 14.55 4.71 NM 21.27 21.27 NM 9.74 NM
NMSB Newmil Bancorp, Inc. of CT 14.00 8.38 19.85 8.21 NM 1.23 1.23 NM 10.35 20.27
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
terms of future earnings potential that could be realized through leverage and
lower funding costs. However, at the same time, HCSI's high pro forma
capitalization will likely result in a relatively low return on equity for an
extended period of time. Both the Bank's and the Peer Group's capital ratios
reflected capital surpluses with respect to the regulatory capital requirements,
with the Peer Group's ratios generally indicating slightly greater capital
surpluses.
The interest-earning asset compositions for the Bank and the Peer Group
were somewhat similar, with loans and mortgage-backed securities constituting
the bulk of interest-earning assets for HCSI and the Peer Group. HCSI's combined
level of loans and mortgage-backed securities was higher than the Peer Group's
ratio (76.7 percent versus 69.4 percent for the Peer Group), with the Bank
maintaining a higher concentration of loans and a lower concentration of
mortgage-backed securities relative to the comparative Peer Group ratios.
Comparatively, the Peer Group's cash and investments-to-assets ratio was higher
than the comparable ratio for the Bank (27.7 percent versus 19.3 percent for the
Bank). Overall, HCSI's interest-earning assets amounted to 96.0 percent of
assets, which was lower than the Peer Group ratio of 97.1 percent. HCSI's
disadvantage partially reflects a greater investment in fixed assets.
HCSI's funding liabilities reflected a funding strategy similar to that of
the Peer Group's funding composition. The Bank's deposits equaled 88.1 percent
of assets, which was above the Peer Group average of 78.5 percent. Borrowings
accounted for a very minor portion of the Bank's interest-bearing funding
composition, while the Peer Group's use of borrowings was slightly more notable
as reflected by a borrowings-to-assets ratio of 7.0 percent. Accordingly, the
Bank was considered to have greater borrowing capacity than the Peer Group,
although both HCSI and the Peer Group were considered to have ample borrowing
capacities. Total interest-bearing liabilities maintained by the Bank and the
Peer Group, as a percent of assets, equaled 88.4 percent and 85.5 percent,
respectively, with the Peer Group's lower ratio being supported by maintenance
of a higher capital position.
A key measure of balance sheet strength for a thrift institution is its
interest-earning assets to interest-bearing liabilities ("IEA/IBL") ratio.
Presently, the Peer Group's IEA/IBL ratio is higher than the Bank's ratio, based
on respective ratios of 113.6 percent and 108.6 percent. The additional capital
realized from stock proceeds should serve to provide HCSI with a higher IEA/IBL
ratio than currently maintained by the Peer Group, as the interest free capital
realized in HCSI's stock offering is expected to be deployed into
interest-earning assets.
<PAGE>
RP Financial, LC.
Page 3.8
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. HCSI's growth rates are based on annualized growth for the
nine months ended December 31, 1997, while the Peer Group's growth rates are
based on annual growth for the twelve months ended September 30, 1997. Asset
growth rates of positive 2.9 percent and positive 11.0 percent were posted by
the Bank and the Peer Group, respectively. HCSI's relatively limited asset
growth resulted from growth in loans, which was in part funded by cash and
investments. Growth in loans and mortgage-backed securities accounted for most
of the Peer Group's asset growth, which was supplemented with a slightly higher
growth rate in the Peer Group's lower balance of cash and investments. Overall,
the Peer Group's asset growth measures would tend to support greater earnings
growth relative to the Bank's measures. However, on a pro forma basis, the Bank
will have greater leverage capacity than the Peer Group.
Deposit growth and retained earnings funded the Bank's asset growth, as
well as the paydown of HCSI's balance of borrowings. The not meaningful ("NM")
borrowings growth rate shown for the Bank was the result of a more than 100
percent decline in the Bank's annualized borrowings growth rate. Asset growth
for the Peer Group was funded by deposits and borrowings, with the borrowings
growth rate shown for the Peer Group average being understated by the Peer Group
companies which recorded borrowing growth rates in excess of 100 percent. For
the period shown in Table 3.2, three out of the five "NM" borrowing growth rates
shown for the Peer Group companies in Table 3.2 were attributable to companies
recording borrowing growth rates in excess of 100 percent. The other two Peer
Group companies with "NM" indicated as borrowings growth rates recorded no
change in their balance of balance of borrowings for the twelve month period.
Capital growth rates posted by the Bank and the Peer Group equaled positive
4.6 percent and positive 8.1 percent, respectively. The Peer Group's higher
capital growth rate was supported by a higher return on average assets ratio,
which was somewhat negated by dividend payments and stock repurchases. The Peer
Group's higher capital position also served to narrow the difference between the
Bank's and the Peer Group's capital growth rates. Following the increase in
capital realized from conversion proceeds, the Bank's capital growth rate can be
expected to fall below the Peer Group's growth rate.
<PAGE>
RP Financial, LC.
Page 3.9
Income and Expense Trends
- -------------------------
HCSI and the Peer Group reported net income to average assets ratios of
0.41 percent and 1.24 percent, respectively (see Table 3.3), based on earnings
for the twelve months ended December 31, 1997, unless indicated otherwise for
the Peer Group companies. Lower operating expenses and lower loss provisions
were the primary factors that accounted for the Peer Group's higher
profitability, which was partially offset by the Bank's higher net interest
margin. Sources of non-interest operating income had a comparable impact on the
Bank's and the Peer Group's earnings, while gains were not a significant factor
in either the Bank's or the Peer Group's earnings. A lower effective tax rate
further contributed to the higher return posted by the Peer Group.
The Bank's stronger net interest margin resulted from a higher interest
income ratio, which was partially offset by the Peer Group's lower interest
expense ratio. As indicated in the yield-cost section of Table 3.3, the Bank's
higher interest income ratio was realized through earning a higher yield on
interest-earning assets (8.78 percent versus 7.39 percent for the Peer Group),
which was partially offset by the higher level of interest-earning assets
maintained by the Peer Group (97.1 of assets versus 96.0 percent for the Bank).
A higher concentration of interest-earning assets maintained in loans and
greater lending diversification into higher yielding types of lending were the
key factors contributing to the Bank's higher yield earned on interest-earning
assets. Likewise, the Peer Group's lower interest expense ratio was supported by
maintaining a lower cost of funds (4.24 percent versus 4.70 percent for HCSI),
even though borrowings were utilized to a greater degree by the Peer Group. The
Peer Group's lower interest expense ratio was also supported by maintenance of a
lower level of interest-bearing liabilities (85.5 percent of assets versus 88.4
percent for the Bank), which will become a comparative advantage for the Bank
following the increase in capital to be realized from the infusion of conversion
proceeds. Overall, HCSI and the Peer Group reported net interest income to
average assets ratios of 4.44 percent and 3.58 percent, respectively.
In another key area of core earnings strength, the Bank maintained a higher
level of operating expenses than the Peer Group. For the period covered in Table
3.3, the Bank and the Peer Group recorded operating expense to average assets
ratios of 2.78 percent and 2.18 percent, respectively. HCSI's higher operating
expense ratio can in part be explained by its maintenance of a higher number of
employees for its asset size, as compared to the Peer Group companies on
average. Assets per full time equivalent employee equaled $2.3 million for the
<PAGE>
RP Financial, LC.
Page 3.10
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 December 31, 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>
Hudson City Savings Inst.
- -------------------------
December 31, 1997 0.41 8.38 3.95 4.44 1.28 3.16 0.07 -0.06 0.28 0.29 2.76 0.02
SAIF-Insured Thrifts 0.94 7.41 4.14 3.28 0.12 3.15 0.11 0.02 0.34 0.46 2.20 0.02
All Public Companies 0.98 7.41 4.08 3.33 0.13 3.19 0.11 0.01 0.34 0.46 2.22 0.02
State of NY 0.84 7.09 3.67 3.42 0.18 3.24 0.06 -0.02 0.27 0.32 2.18 0.04
Comparable Group Average 1.24 7.20 3.62 3.58 0.23 3.35 0.03 0.00 0.33 0.36 2.16 0.02
Mid-Atlantic Companies 1.01 7.14 3.50 3.64 0.10 3.54 0.03 0.00 0.19 0.22 2.16 0.02
New England Companies 1.46 7.26 3.74 3.52 0.36 3.17 0.03 0.00 0.47 0.50 2.16 0.02
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1)(3) 0.84 7.25 3.76 3.49 0.10 3.39 0.00 0.00 0.24 0.24 2.37 0.00
ALBK ALBANK Fin. Corp. of Albany NY 1.18 7.31 3.60 3.71 0.20 3.52 0.05 -0.03 0.31 0.33 2.15 0.11
CATB Catskill Fin. Corp. of NY 1.34 7.23 3.20 4.02 0.10 3.93 0.00 0.03 0.14 0.17 1.92 0.00
PEEK Peekskill Fin. Corp. of NY 1.09 6.69 3.07 3.62 0.03 3.58 0.02 0.00 0.10 0.12 1.80 0.00
SFED SFS Bancorp of Schenectady NY 0.62 7.23 3.87 3.36 0.07 3.29 0.10 0.01 0.15 0.26 2.55 0.00
New England Companies
- ---------------------
BKC American Bank of Waterbury CT 1.32 7.21 4.02 3.19 0.30 2.89 0.00 -0.08 0.57 0.50 1.69 0.04
BKCT Bancorp Connecticut of CT 1.39 7.50 3.81 3.69 0.14 3.55 0.00 -0.01 0.31 0.30 2.03 0.00
DIBK Dime Financial Corp. of CT 1.94 7.29 4.03 3.27 0.02 3.24 0.00 -0.01 0.23 0.23 1.51 0.04
MECH MECH Financial Inc of CT(1) 1.79 7.10 3.38 3.73 1.21 2.52 0.10 -0.02 0.82 0.91 2.83 0.00
NMSB Newmil Bancorp, Inc. of CT 0.85 7.21 3.46 3.75 0.11 3.64 0.03 0.12 0.41 0.56 2.73 0.00
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.10 (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>
Hudson City Savings Inst.
- -------------------------
December 31, 1997 0.01 0.00 8.78 4.70 4.08 2,309 40.16
SAIF-Insured Thrifts 0.07 0.00 7.60 4.81 2.79 4,382 37.17
All Public Companies 0.07 0.00 7.58 4.71 2.87 4,326 37.10
State of NY 0.04 0.00 7.25 4.20 3.05 4,670 40.32
Comparable Group Average 0.06 0.00 7.39 4.24 3.15 4,251 31.78
Mid-Atlantic Companies 0.01 0.00 7.28 4.31 2.96 4,178 37.08
New England Companies 0.10 0.00 7.50 4.16 3.34 4,324 26.48
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AFED AFSALA Bancorp, Inc. of NY(1)(3) 0.00 0.00 7.19 4.26 2.92 3,565 NM
ALBK ALBANK Fin. Corp. of Albany NY 0.01 0.00 7.65 4.12 3.53 2,839 26.92
CATB Catskill Fin. Corp. of NY 0.01 0.00 7.36 4.41 2.96 4,209 39.18
PEEK Peekskill Fin. Corp. of NY 0.00 0.00 6.77 4.26 2.50 7,369 42.89
SFED SFS Bancorp of Schenectady NY 0.03 0.00 7.42 4.52 2.90 2,907 39.32
New England Companies
- ---------------------
BKC American Bank of Waterbury CT 0.27 0.00 7.40 4.42 2.98 4,805 31.30
BKCT Bancorp Connecticut of CT 0.23 0.00 7.67 4.30 3.37 4,028 32.21
DIBK Dime Financial Corp. of CT 0.02 0.00 7.47 4.42 3.05 6,520 0.42
MECH MECH Financial Inc of CT(1) 0.00 0.00 7.46 3.79 3.67 3,612 NM
NMSB Newmil Bancorp, Inc. of CT -0.01 0.00 7.51 3.88 3.63 2,653 42.01
</TABLE>
(1) Financial information is for the quarter ending September 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 3.11
Bank, versus a comparative measure of $4.3 million for the Peer Group. The
Bank's higher staffing requirements can in part be attributed to maintaining a
higher proportion of interest-earning assets in loans, which require a higher
degree of servicing than investments. Staffing needs are particularly high for
loans extended to finance insurance premiums, as the portfolio consists of a
high number of low balance loans which tend to have high delinquency rates. On a
post-offering basis, the Bank's operating expenses can be expected to increase
with the addition of public company reporting expenses and stock benefit plans,
with such expenses already impacting the Peer Group's operating expenses.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest income divided by operating expenses), the
Bank's earnings strength was slightly less favorable than the Peer Group's.
Expense coverage ratios posted by HCSI and the Peer Group equaled 1.60x and
1.64x, respectively. An expense coverage ratio of greater than 1.0x indicates
that an institution is able to sustain pre-tax profitability without having to
rely on non- interest sources of income.
Sources of non-interest operating income were a slightly larger contributor
to the Peer Group's earnings, with such income amounting to 0.36 percent and
0.29 percent of the Peer Group's and HCSI's average assets, respectively. HCSI's
lower level of non-interest operating income was largely attributable to the
more notable impact losses on real estate operations had on the Bank's earnings,
with such losses amounting to 0.06 percent of HCSI's average assets.
Comparatively, on average, real estate operations did not impact the earnings of
the Peer Group companies. Taking non-interest operating income into account in
comparing the Bank's and the Peer Group's earnings, HCSI's efficiency ratio
(operating expenses, net of amortization of intangibles, as a percent of the sum
of non-interest operating income and net interest income) of 58.4 percent was
less favorable than the Peer Group's efficiency ratio of 54.8 percent.
Loss provisions established by the Bank amounted to 1.28 percent of average
assets, which was well above the comparative Peer Group ratio of 0.23 percent.
The Bank established additional loss provisions to address a general upward
trend in non-performing assets, as well overall growth of the loan portfolio
including higher risk types of loans. Going forward, the Bank's annual loan loss
will likely remain above the ratio of loss provisions
<PAGE>
RP Financial, LC.
Page 3.12
established by the Peer Group in light of the Bank's greater diversification
into higher risk types of lending and lower level of loss reserves maintained as
a percent of non- performing assets (see Table 3.6). Net gains realized from the
sale of investments and loans were slightly positive for both the Bank and the
Peer Group, with such gains amounting to 0.01 percent and 0.06 percent of
average assets for HCSI and the Peer Group, respectively. Given the generally
non-recurring nature of gains and losses resulting from the sale of loans and
investments, the net gains reflected in Bank's and the Peer Group's earnings
will be discounted in evaluating the relative strengths and weaknesses of their
respective earnings. Extraordinary items were not a factor in either the Bank's
or the Peer Group's earnings.
A lower effective tax rate further contributed to the Peer Group's earnings
advantage, as the Peer Group and the Bank posted effective tax rates of 31.8
percent and 40.2 percent, respectively. Six of the Peer Group companies recorded
lower effective tax rates than the Bank, with the Peer Group's average effective
tax rate being substantially reduced by the nominal amount of taxes paid by Dime
Financial. The not meaningful ("NM) effective tax exhibited MECH Financial was
the result of a significant tax benefit realized during the twelve month period
analyzed. The Peer Group's earnings advantage resulting from Dime Financial's
nominal tax rate and the tax benefit recorded by MECH Financial will be
substantially discounted in our comparative evaluation of core earnings
strength, given that both of those companies' earnings are currently subject to
more "normalized" effective tax rates.
Loan Composition
- ----------------
Perhaps one of the greatest differences between the Bank and the Peer Group
is loan composition, as the result of the Bank having a more diversified loan
portfolio than the Peer Group (Table 3.4). In comparison to the Bank, the Peer
Group's loan portfolio composition reflected a higher concentration of 1-4
family residential mortgage loans and mortgage-backed securities (79.5 percent
versus 49.5 percent for the Bank). The Peer Group's higher ratio was the result
of maintaining higher concentrations of both 1-4 family residential mortgage
loans and mortgage-backed securities. HCSI's lower concentration of 1-4 family
residential mortgage loans was in a small part attributable to being more active
in selling 1-4 family loan originations to the secondary market, as indicated by
the Bank's higher ratio of loans serviced for others as a percent of assets. The
Bank's portfolio of loans serviced for others represented 7.7 percent of assets
compared to 4.4 percent on average for the Peer Group. Loan servicing
intangibles were not a material balance sheet item for either the Bank or the
Peer Group.
<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 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of December 31, 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>
Hudson City Savings Inst. 0.88 48.64 0.77 14.34 4.07 31.30 71.07 51,207 0
SAIF-Insured Thrifts 14.78 62.97 5.42 11.13 6.18 1.66 52.97 390,440 3,531
All Public Companies 15.02 61.37 4.94 12.75 5.87 1.93 53.39 492,395 4,787
State of NY 27.03 48.49 1.18 16.21 5.66 1.81 46.81 962,388 12,878
Comparable Group Average 19.46 60.01 1.03 10.70 5.97 2.99 47.55 35,944 56
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 14.67 51.43 1.31 3.63 27.48 1.87 42.21 0 0
ALBK ALBANK Fin. Corp. of Albany NY 8.63 68.05 0.83 5.86 8.53 8.42 54.48 260,827 526
BKC American Bank of Waterbury CT 9.17 59.19 4.95 22.54 0.40 3.73 57.45 2,003 0
BKCT Bancorp Connecticut of CT 14.49 56.44 1.20 15.38 3.73 9.09 63.30 6,178 23
CATB Catskill Fin. Corp. of NY 22.04 62.93 0.27 3.19 11.93 0.02 34.00 0 0
DIBK Dime Financial Corp. of CT 10.41 78.28 0.18 8.04 2.49 0.60 38.76 7,411 0
MECH MECH Financial Inc of CT(1) 19.22 54.82 0.81 18.23 2.70 4.28 55.65 50,271 6
NMSB Newmil Bancorp, Inc. of CT 9.97 60.51 0.00 26.07 1.56 1.85 50.71 29,227 0
PEEK Peekskill Fin. Corp. of NY 70.63 28.19 0.49 0.45 0.47 0.00 25.47 0 0
SFED SFS Bancorp of Schenectady NY 15.34 80.21 0.25 3.65 0.42 0.00 53.52 3,525 0
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.14
As indicated by the higher percentage of 1-4 family loans maintained by the
Peer Group, HCSI exhibited a greater degree of lending diversification into
higher risk types of loans. Consumer loans accounted for the most notable area
of the Bank's lending diversification, with manufactured home loans representing
the largest component of the consumer loan portfolio. Consumer loans accounted
for 31.3 percent and 3.0 percent of HCSI's and the Peer Group's loan and MBS
portfolios, respectively. Commercial real estate/multi-family loans represented
the most notable area of lending diversification for the Peer Group, although
the Bank maintained a higher concentration of such loans than the Peer Group
(14.3 percent of loans and MBS versus 10.7 percent for the Peer Group). Other
areas of lending diversification for the Bank and the Peer Group consisted of
commercial business and construction/land loans, with the Peer Group maintaining
higher concentrations of both loan types. HCSI's greater diversification into
higher risk types of lending translated into a higher risk weighted
assets-to-assets ratio than maintained by the Peer Group companies on average,
based on comparative ratios of 71.1 percent and 47.6 percent, respectively.
Overall, the Bank's and the Peer Group's risk weighted assets-to-assets ratios
were above and below the comparative ratio of 53.4 percent for all
publicly-traded thrifts, indicating a potentially higher degree of credit risk
exposure associated with HCSI's asset composition.
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. In terms of
balance sheet composition, HCSI's interest rate risk characteristics were
considered to be less favorable than the Peer Group's. In particular, HCSI's
lower capital position and lower IEA/IBL ratio indicate a greater dependence on
the yield-cost spread to sustain the net interest margin. Likewise, HCSI's
higher level of non-interest earning assets is a negative consideration in terms
of capacity to generate interest income. On a pro forma basis, the infusion of
stock proceeds should serve to provide the Bank with a comparative advantage
over the Peer Group's balance sheet interest rate risk characteristics,
particularly with respect to the Bank's equity-to-assets and IEA/IBL ratios.
To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for HCSI and the Peer Group. In general, the relative fluctuations in both the
Bank's and the Peer Group's net interest income to average assets ratios were
considered to be fairly limited and, thus, based on
<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 3.5
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of December 31, 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 12/31/97 09/30/97 06/30/97 03/31/97 12/31/96 09/30/96
- ----------- ------ ----- --------- -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hudson City Savings Inst. 10.0 108.6 4.0 -23 -1 5 5 24 NA
SAIF-Insured Thrifts 12.9 114.0 3.6 -3 -4 2 1 0 3
All Public Companies 12.5 113.2 3.8 -3 -4 1 1 1 3
State of NY 11.2 110.4 5.5 -3 -4 -5 -1 4 2
Comparable Group Average 12.9 114.3 2.9 -8 -4 -4 -2 2 2
Market Interest Rates
- ---------------------
1 Year Treasury Bill -- -- -- 4 -22 -34 51 20 1
30 Year Treasury Bond -- -- -- -48 -38 -32 46 -28 5
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 12.9 114.9 2.0 NA 1 -6 NA 0 NA
ALBK ALBANK Fin. Corp. of Albany NY 6.8 108.7 4.9 -11 0 -0 11 -1 -9
BKC American Bank of Waterbury CT 8.7 108.2 2.5 -4 -7 -8 -10 9 4
BKCT Bancorp Connecticut of CT 10.6 110.8 2.1 -2 -2 16 -9 -2 13
CATB Catskill Fin. Corp. of NY 24.3 132.3 1.8 -11 -8 -8 10 15 35
DIBK Dime Financial Corp. of CT 8.1 107.3 2.1 -10 -17 -5 -7 -16 -36
MECH MECH Financial Inc of CT(1) 10.4 105.5 6.4 NA -13 -13 -9 12 37
NMSB Newmil Bancorp, Inc. of CT 9.3 107.3 3.5 -14 12 -18 6 -0 -4
PEEK Peekskill Fin. Corp. of NY 25.2 134.8 1.3 -6 -5 4 -17 14 -24
SFED SFS Bancorp of Schenectady NY 12.3 113.2 2.3 -9 -1 -3 3 -9 1
</TABLE>
(1) Financial information is for the quarter ending September 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
the interest rate environment that prevailed during the period covered in Table
3.5, neither HCSI or the Peer Group were viewed as having significant interest
rate risk exposure in their respective net interest margins. The stability of
the Bank's net interest margin should be enhanced by the infusion of stock
proceeds, as interest rate sensitive liabilities will be funding a lower portion
of HCSI's assets.
Credit Risk
- -----------
The Bank's credit risk exposure appears to be somewhat higher than the Peer
Group's, on average, as indicated by lower reserve coverage ratios and higher
non-performing loans and assets ratios. As shown in Table 3.6, the Bank's ratio
of non- performing loans/loans and non-performing assets/assets ratios of 2.99
and 2.62 percent, respectively, were well above the Peer Group's respective
ratios of 1.29 and 0.81 percent. Loss reserve ratios were also stronger for the
Peer Group, as the Peer Group maintained a significantly higher level of loss
reserves as a percent of non-performing assets (164.3 percent versus 38.7
percent for the Bank) and, to a lesser degree, as a percent of loans (1.84
percent versus 1.34 percent for the Bank). HCSI's less favorable credit quality
was further indicated by significantly higher loan charge-offs, with net loan
charge-offs recorded by the Bank and the Peer Group equaling 0.95 percent and
0.07 percent of net loans receivable, respectively.
Summary
- -------
Based on the above analysis and the criteria employed in the selection of
the companies for the Peer Group, RP Financial concluded that the Peer Group
forms a reasonable basis for determining the pro forma market value of HCSI.
Such general characteristics as asset size, capital position, interest-earning
asset composition, funding composition, core earnings measures, loan
composition, credit quality and exposure to interest rate risk all tend to
support the reasonability of the Peer Group from a financial standpoint. Those
areas where differences exist will be addressed in the form of valuation
adjustments to the extent necessary.
<PAGE>
RP Financial, LC.
Page 3.17
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of December 31, 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>
Hudson City Savings Inst. 0.16 2.62 2.99 1.34 44.80 38.73 4,798 0.95
SAIF-Insured Thrifts 0.25 0.74 0.83 0.78 183.11 130.60 326 0.10
All Public Companies 0.24 0.74 0.87 0.88 184.39 136.03 346 0.10
State of NY 0.15 0.84 1.24 1.03 121.95 104.29 421 0.02
Comparable Group Average 0.27 0.81 1.29 1.84 205.64 164.25 225 0.07
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY(1) 0.02 0.30 0.58 1.46 250.44 234.30 16 0.08
ALBK ALBANK Fin. Corp. of Albany NY 0.10 0.88 0.86 1.02 118.60 81.33 1,141 0.16
BKC American Bank of Waterbury CT 0.34 2.11 3.07 1.54 49.97 41.86 189 0.21
BKCT Bancorp Connecticut of CT 0.27 0.91 1.10 2.04 185.46 131.37 47 0.07
CATB Catskill Fin. Corp. of NY 0.08 0.35 0.62 1.49 241.07 184.75 53 0.17
DIBK Dime Financial Corp. of CT 0.05 0.30 0.61 3.30 539.86 433.25 194 -0.12
MECH MECH Financial Inc of CT(1) 1.76 0.58 0.68 2.39 351.65 270.14 556 0.00
NMSB Newmil Bancorp, Inc. of CT 0.06 0.90 1.51 3.24 214.55 172.67 49 0.11
PEEK Peekskill Fin. Corp. of NY 0.00 0.90 2.90 1.34 46.24 39.49 0 0.00
SFED SFS Bancorp of Schenectady NY 0.06 0.84 0.99 0.58 58.58 53.36 4 0.01
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
regulatory valuation guidelines, and valuation adjustments and assumptions used
to determine the estimated pro forma market value of the common stock to be
issued in conjunction with the Bank's conversion transaction.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, adopted in practice by the FDIC and the
Department, and most recently amended in written form in October 1994, specify
the methodology for estimating the pro forma market value of an institution
pursuant to a mutual-to-stock conversion. The valuation methodology provides
for: (1) the selection of a peer group of comparable publicly-traded
institutions, excluding those converted for less than a year, subject to
acquisition or in MHC form; (2) a financial and operational comparison of the
subject company to the selected peer group, identifying key differences and
similarities; and (3) a valuation analysis in which the pro forma market value
of the subject company is determined based on the market pricing of the peer
group as of the date of valuation, incorporating valuation adjustments for key
differences. In addition, the pricing characteristics of recent conversions,
both at conversion and in the aftermarket, must be considered.
RP Financial Approach to the Valuation
- --------------------------------------
RP Financial's valuation analysis complies with the above-referenced
appraisal guidelines. Accordingly, the valuation incorporates a detailed
analysis based on the Peer Group discussed in Chapter III, incorporating
"fundamental analysis" techniques. Additionally, the valuation incorporates a
"technical analysis" of recently completed stock conversions, including closing
pricing and aftermarket trading of such conversions. It should be noted that
such analyses cannot possibly fully account for all the market forces which
impact trading activity and pricing characteristics of a particular stock on a
given day.
The pro forma market value determined herein is a preliminary value for the
to-be-issued stock. Throughout the conversion process, RP Financial will: (1)
review changes in the Bank's operations and financial condition; (2) monitor the
Bank's operations and financial
<PAGE>
RP Financial, LC.
Page 4.2
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
conversion offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including the Bank, or the Bank's value alone. To the extent a change in
factors impacting the Bank's value can be reasonably anticipated and/or
quantified, RP Financial has incorporated the estimated impact into our
analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Bank and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Bank relative to the Peer Group in such key
areas as financial condition, profitability, growth and viability of earnings,
asset growth, primary market area, dividends, liquidity of the issue, marketing
of the issue, management, and the effect of government regulations and/or
regulatory reform. We have also considered the market for thrift stocks, and in
particular new issues, to assess the impact on value of the Bank coming to
market at this time.
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The
<PAGE>
RP Financial, LC.
Page 4.3
similarities and differences in the financial condition of the Bank and the Peer
Group are noted as follows:
o Overall A/L Composition. Loans funded by retail deposits were the
primary components of both HCSI's and the Peer Group's balance sheets.
HCSI's interest- earning asset composition exhibited a higher
concentration of loans, as well as a greater degree of diversification
into higher risk and higher yielding types of loans. HCSI's greater
degree of lending diversification also translated into a higher risk
weighted assets-to-asset ratio than maintained by the Peer Group.
HCSI's funding composition reflected a higher concentration of
deposits and a lower concentration of borrowings than the comparative
Peer Group ratios, indicating slightly greater future borrowing
capacity for the Bank. Overall, as a percent of assets, the Bank
maintained a lower level of interest-earning assets and a higher level
of interest- bearing liabilities, which resulted in a lower IEA/IBL
ratio for the Bank. However, the infusion of stock proceeds should
serve to address the Bank's lower IEA/IBL ratio. Credit quality
measures indicated a greater degree of credit risk exposure for the
Bank, while HCSI and the Peer Group exhibited fairly comparable
interest rate risk exposure measures. For valuation purposes,
primarily on the basis of the Bank's higher credit risk exposure, RP
Financial concluded a slight downward adjustment was warranted for the
Bank's overall asset/liability composition.
o Credit Quality. In general, the Bank's credit quality measures were
less favorable than the Peer Group's. The Peer Group maintained a
lower non-performing assets-to-assets ratio than the Bank and higher
loss reserves as a percent of non-performing assets, non- performing
loans and total loans than the comparative ratios for HCSI. The Bank's
greater diversification into higher risk types of lending translated
into a notably higher risk weighted assets-to-assets ratio than
maintained by the Peer Group. Overall, the Peer Group's measures
tended to reflect more limited credit exposure than maintained by the
Bank. Therefore, RP Financial concluded that a moderate downward
adjustment was warranted for the Bank's credit quality.
o Balance Sheet Liquidity. The Bank operated with a lower balance of
cash and investment securities relative to the Peer Group (19.3
percent of assets versus 27.7 percent for the Peer Group). However,
following the infusion of stock proceeds, the Bank's cash and
investments ratio will increase as the proceeds are anticipated to be
initially deployed into short-term investments. HCSI's future
borrowing capacity was considered to be slightly greater than the Peer
Group's, in light of the higher level of borrowings maintained by the
Peer Group; however, both the Bank and the Peer Group were considered
to have ample borrowing capacities. Overall, balance sheet liquidity
for the Bank and the Peer Group were not viewed as being materially
different and, thus, RP Financial concluded that no adjustment was
warranted for the Bank's balance sheet liquidity.
o Funding Liabilities. Retail deposits served as the primary
interest-bearing source of funds for the Bank and the Peer Group, with
borrowings being utilized to a greater degree by the Peer Group.
Notwithstanding, the Peer Group's greater utilization of borrowings,
HCSI's overall cost of funds was higher than the Peer Group's. The
Bank currently maintains a higher level of interest-bearing
liabilities than the Peer Group (88.4 percent of assets versus
<PAGE>
RP Financial, LC.
Page 4.4
85.5 percent for the Peer Group), which was attributable to HCSI's
lower capital position. Following the stock offering, the increase in
HCSI's capital position should serve to provide the Bank with a lower
level of interest-bearing liabilities than maintained by the Peer
Group. For purposes of this valuation, RP Financial concluded that in
light of the HCSI's higher funding costs, the Bank's funding
composition warranted a slight downward adjustment.
o Capital. The Bank operates with a lower pre-conversion capital ratio
than the Peer Group, 10.1 percent and 13.1 percent of assets,
respectively. However, following the mutual-to-stock conversion,
HCSI's pro forma capital position will be above the Peer Group's
equity-to-assets ratio. The Bank's higher pro forma capital position
will result in greater leverage potential and reduce the level of
interest-bearing liabilities utilized to fund assets. At the same
time, the Bank's more significant capital surplus will likely result
in a depressed ROE. Overall, RP Financial concluded that a slight
upward adjustment was warranted for the Bank's capital position.
On balance, HCSI's high funding costs and greater degree of credit risk
exposure were viewed as negative valuation considerations, while the Bank's
higher pro forma capital position was viewed as being a slightly positive
valuation consideration. Overall, we concluded a slight downward adjustment was
warranted for the Bank's financial strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. The Bank recorded lower earnings on a ROAA basis
(0.41 percent of average assets versus 1.24 percent for the Peer
Group). Lower operating expenses and lower loss provisions largely
accounted for the Peer Group's more favorable reported earnings. To a
lesser degree, the Peer Group's higher earning were attributable to
larger earnings contributions realized from non-interest operating
income and gains on the sale of loans and investments, as well as a
lower effective tax rate. A higher net interest margin represented an
earnings advantage for the Bank. Reinvestment of stock proceeds into
interest-earning assets will serve to increase the Bank's earnings,
with the benefit of reinvesting proceeds expected to be somewhat
offset by higher operating expenses associated with operating as a
stock institution and the implementation of the stock benefit plans.
Loss provisions established by the Bank are expected to remain more
significant going forward, as HCSI's less favorable credit quality
measures and greater degree of lending diversification into higher
risk types of lending indicate that the potential for credit quality
related losses remain greater for the Bank than for the Peer Group.
Overall, the differences between the Bank's and the Peer Group's
reported earnings were considered to be representative of the Peer
Group's superior earnings strength
<PAGE>
RP Financial, LC.
Page 4.5
and, thus, HCSI's lower reported earnings warranted a moderate
downward adjustment for valuation purposes.
o Core Earnings. Both the Bank's and the Peer Group's earnings were
derived largely from recurring sources, including net interest income,
operating expenses, and non-interest operating income. In these
measures, the Bank operated with a higher net interest margin, a
higher operating expense ratio and a lower level of non-interest
operating income. The Bank's higher net interest margin and higher
level of operating expenses translated into a slightly lower expense
coverage ratio (1.60x versus 1.64x for the Peer Group). Likewise, the
Peer Group's higher level of non-interest operating income and lower
level of operating expenses more than offset the Bank's higher net
interest margin, with respect to providing the Peer Group with a
slightly more favorable efficiency ratio (54.8 percent versus 58.4
percent for the Bank). Loss provisions had a notably larger impact on
the Bank's earnings, which was warranted by HCSI's less favorable
credit quality measures and greater degree of lending diversification
involving higher risk types of lending. Overall, these measures, as
well as the expected earnings benefits the Bank should realize from
the redeployment of stock proceeds into interest-earning assets, which
will somewhat be negated by expenses associated with stock benefit
plans and operating as a stock institution, indicate that HCSI's core
earnings were not as strong as the Peer Group's and a moderate
downward adjustment was warranted for valuation purposes.
o Interest Rate Risk. Quarterly changes in the Bank's and the Peer
Group's net interest income to average assets ratios generally
indicated that the interest rate risk exposure associated with the
Bank's and the Peer Group's net interest margins was fairly limited
during the period analyzed. Other measures of interest rate risk, such
as capital ratios, IEA/IBL ratios, and the level of non-interest
earning assets-to-total assets were more favorable for the Peer Group.
On a pro forma basis, the infusion of stock proceeds can be expected
to address the Bank's lower capital position and lower IEA/IBL ratio,
as well as enhance the stability of the Bank's net interest margin
through the reinvestment of stock proceeds into interest-earning
assets. Accordingly, RP Financial concluded that the interest rate
risk associated with the Bank's earnings was comparable to the Peer
Group's, and no adjustment was warranted for valuation purposes.
o Credit Risk. Loan loss provisions were a much more significant factor
in HCSI's earnings. In terms of future exposure to credit quality
related losses, the Bank's and the Peer Group's comparative operating
strategies and credit quality measures indicated a higher degree of
credit risk associated with the Bank's earnings. Lending
diversification into higher risk types of loans was more notable for
the Bank, which translated into a higher risk weighted
assets-to-assets ratio for HCSI. The Peer Group's credit quality
measures were more favorable than HCSI's, based on the Peer Group's
lower non-performing assets/assets ratio and higher reserve coverage
ratios with respect to loans and non-performing assets. Overall, RP
Financial concluded that the credit risk exposure associated with the
Peer Group's earnings was less than HCSI's and a moderate downward
adjustment was warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. First, the Bank's recent
historical growth has been less than the Peer Group's. Second, the
infusion of stock proceeds will increase
<PAGE>
RP Financial, LC.
Page 4.6
the Bank's earnings growth potential with respect to leverage capacity
and providing the Bank with additional liquidity for purposes of
funding loan growth. Third, the higher degree of credit risk exposure
associated with the Bank's earnings implies that loss provisions may
limit the Bank's earnings growth potential relative to the Peer
Group's. Lastly, the markets served by the Bank and the Peer Group do
not appear to be materially different in terms of providing
opportunities for loan growth. Overall, the Bank's earnings growth
potential appears to be less favorable than that of the Peer Group's,
and, thus, we concluded that a slight downward adjustment was
warranted for this factor.
o Return on Equity. The Bank's return on equity will be below the Peer
Group and industry averages, owing to HCSI's notably higher pro forma
capitalization. In view of the lower capital growth rate that will be
imposed by HCSI's higher capital position, RP Financial concluded that
a slight downward adjustment was warranted for the Bank's ROE.
Overall, in light of the Bank's less favorable reported and core earnings
strength, less favorable earnings growth potential, higher degree of credit risk
associated with the Bank's earnings and expected lower return on equity, a
moderate downward valuation adjustment was warranted for profitability, growth
and viability of the Bank's earnings.
3. Asset Growth
------------
HCSI's asset growth was lower than the Peer Group's, during the period
covered in our comparative analysis (positive 2.9 percent versus positive 11.0
percent for the Peer Group). This characteristic would normally be considered as
a negative, but was somewhat offset by the potential asset growth the Bank will
be able to realize following the infusion of stock proceeds. On a pro forma
basis, the Bank's equity-to-assets ratio will be higher than the Peer Group's,
resulting in greater leverage capacity for HCSI. On balance, we believe no
adjustment was warranted for this factor, as the Bank's less favorable
historical growth is viewed as being offset by its greater capacity to leverage
the balance sheet on a pro forma basis.
4. Primary Market Area
-------------------
The general condition of an institution's market area has an impact on
value, as future success is in part dependent upon opportunities for profitable
activities in the local market served. HCSI's primary market area in
east-central New York includes a mixture of rural, suburban, and urban markets,
which in general have stable population bases and fairly diversified economies.
The stability of the regional economy is highlighted by the low level of
unemployment maintained throughout the primary market area. Competition faced by
the
<PAGE>
RP Financial, LC.
Page 4.7
Bank for deposits and loans is significant, which includes other locally based
thrifts, as well as the money center banks in New York City and other regional
and super regional banks.
In general, the Peer Group companies operate in similar markets as the
Bank, with several companies serving markets that overlap with the Bank's
primary market area. Accordingly, the degree of competition faced by the Peer
Group companies and the growth potential of the markets served by the Peer Group
companies were viewed as being comparable to the comparative characteristics of
the Bank's primary market area. Summary demographic and deposit market share
data for the Bank and the Peer Group companies is provided in Exhibit III-4. As
shown in Table 4.1, December 1997 unemployment rates for the markets served by
the Peer Group companies generally did not vary significantly from the December
1997 unemployment rate reflected for Columbia County. On balance, we concluded
that no adjustment was appropriate for the Bank's market area.
Table 4.1
Market Area Unemployment Rates
Hudson City Savings Institution and the Peer Group Companies (1)
December 1997
County Unemployment
------ ------------
Hudson City Savings Institution - NY Columbia 3.4%
The Peer Group
--------------
AFSALA Bancorp, Inc. - NY Montgomery 6.4%
ALBANK Fin. Corp. - NY Albany 3.2
American of Waterbury - CT New Haven 4.4
Bancorp Connecticut - CT Hartford 4.7
Catskill Fin. Corp. - NY Greene 6.6
Dime Financial Corp. - CT New Haven 4.4
MECH Financial Inc. - CT Hartford 4.7
Newmil Bancorp, Inc. - CT Litchfield 3.5
Peekskill Fin. Corp. - NY Westchester 3.2
SFS Bancorp of Schenectady - NY Schenectady 4.1
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
<PAGE>
RP Financial, LC.
Page 4.8
5. Dividends
---------
While the Bank has not indicated its intention to commence payment of a
cash dividend following the conversion, HCSI's pro forma capitalization and
profitability clearly position the Bank to have the capacity to pay cash
dividends. Historically, thrifts 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 fully invest the conversion proceeds before
establishing a dividend policy. However, during the late-1980s and early-1990s,
with negative publicity surrounding the thrift industry, there was a tendency
for more thrifts 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 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.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Nine out of the ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.43 percent to 3.02 percent. The average dividend yield on
the stocks of the Peer Group institutions was 1.80 percent as of February 27,
1998, representing an average earnings payout ratio of 34.70 percent. As of
February 27, 1998, approximately 84 percent of all publicly-traded thrifts had
adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield
of 1.54 percent and an average payout ratio of 30.01 percent (see Table 4.4).
Given the Bank's capacity to pay a dividend comparable to the Peer Group,
based on pro forma capitalization and profitability, and since no apparent
regulatory hurdle exists, we have applied no 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, in which nine of the companies trade on the NASDAQ system
and one company trades on the AMEX. Typically, the number of shares outstanding
and market capitalization
<PAGE>
RP Financial, LC.
Page 4.9
provide an indication of how much liquidity there will be in a particular stock.
The market capitalization of the Peer Group companies ranged from $26 million to
$628 million as of February 27, 1998, with an average market value of $138
million. The shares outstanding of the Peer Group members ranged from 1.2
million to 12.9 million, with average shares outstanding of approximately 4.5
million. The Bank's pro forma market value is expected to be in the upper end of
the comparative market capitalizations of the Peer Group companies, while HCSI's
pro forma shares outstanding should exceed the upper end of shares outstanding
exhibited by the Peer Group companies. Consistent with all but one of the Peer
Group companies, it is anticipated that the Holding Company's stock will be
quoted on the NASDAQ National Market System. Overall, similar to the Peer Group
companies, we anticipate that there will be an active and liquid trading market
for the Holding Company's stock and, therefore, concluded no adjustment was
considered necessary for this factor.
7. Marketing of the Issue
----------------------
Three separate markets exist for thrift stocks: (1) the after-market for
public companies, in which trading activity is regular and investment decisions
are made based upon financial condition, earnings, capital, ROE and dividends;
(2) the new issue market in which converting thrifts are evaluated on the basis
of the same factors but on a pro forma basis without the benefit of a stock
trading history and reporting quarterly operating results as a publicly-held
company; and (3) the thrift acquisition market. All three of these markets were
considered in the valuation of the Bank's to-be-issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and is
tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock market has
generally trended higher over the past year. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February 1997. Following the downturn in late-February, the market
recovered in early-
<PAGE>
RP Financial, LC.
Page 4.10
March. Despite increasing expectations of an interest rate hike by the Federal
Reserve, the DJIA closed to a new record high of 7085.16 on March 11, 1997.
However, an upward revision to the January retail sales figure triggered a one
day sell-off in stocks and bonds on March 13, 1997, as the stronger than
expected growth heightened expectations of an interest rate increase by the
Federal Reserve. Unease over higher interest rates, profitability concerns in
the technology sector and litigation concerns for tobacco stocks pulled the
stock market lower in mid-March. As expected, the Federal Reserve increased the
rate on short-term funds by 0.25 percent at its late-March meeting. Following
the rate increase, the sell- off in the stock market became more severe amid
further signs of an accelerating economy. Stocks bottomed-out on news of a
stronger than expected rise in core producer prices for March, with the DJIA
closing at 6391.69 on April 11, 1997, or 9.8 percent below the all-time high
recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In
late-April, the release of economic data which indicated mild inflationary
pressures furthered the rally in bond and stock prices. News of a budget
agreement and a favorable ruling for tobacco companies sent the stock market
soaring to record highs in early-May. Mixed economic data and the Federal
Reserve's decision to leave its target for the federal funds rate unchanged at
its May meeting sustained a positive trend in the stock market through the end
of May. Profit worries caused a sell-off in technology stocks in early-June,
while declining interest rates served to stabilize the broader market.
Technology stocks rallied the stock market to new highs in mid-July, as a number
of technology companies posted favorable second quarter earnings. Favorable
inflation data, including second quarter GDP growth slowing to an annual rate of
2.2 percent, versus 4.9 percent in the first quarter, and comments by the
Federal Reserve Chairman which indicated that an increase in interest rates was
not imminent, spurred bond and stock prices strongly higher during the second
half of July.
A decline in the July 1997 unemployment rate reversed the positive bond and
stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond yield increasing from 6.32
percent at the end of July to 6.66 percent as of August 8, 1997. The sell-off in
bonds pulled stock prices lower as well. While bond prices firmed in mid-August,
notable volatility was evident in the stock market. The DJIA moved at least 100
points for five consecutive days from August 18, 1997 through August 21,
<PAGE>
RP Financial, LC.
Page 4.11
1997, which set a record for volatility. Profit worries among some of the large
blue chip companies and mixed inflation readings were factors contributing to
the roller-coaster performance of the stock market. Despite strengthening bond
prices, stocks traded lower through the end of August. Bond prices moved higher
on inflation data which showed that prices stayed low during the second quarter,
even though second quarter GDP growth was revised upward to an annual rate of
3.6 percent compared to an original estimate of 2.2 percent.
Volatility returned to the stock market in early- September, with the DJIA
posting a record breaking point increase of 257.36 on September 2, 1997. The
rally was sparked by economic data that indicated manufacturing growth slowed in
August, thereby easing investors' inflation worries. However, the rally was not
sustained, as the DJIA pulled back following the one day rally. The pull back
was largely attributed to profit worries, which more than offset favorable
inflation news indicated by a slight increase in the national unemployment rate
for August (4.9 percent in August versus 4.8 percent in July). Stocks fluctuated
in a narrow trading range in mid-September, in anticipation of third quarter
earnings and August economic data. The low inflation reading indicated by the
August consumer price index sent stock and bond prices sharply higher on
September 16, 1997, with the DJIA posting a 175 point increase and the yield on
the 30-year U.S. Treasury bond posting its second largest decline in the 1990s.
Uncertainty over third quarter earnings provided for a mixed stock market
performance towards the end of September, while generally favorable inflation
readings pushed interest rates to their lowest level in two years. The release
of September employment data on October 3, 1997 caused bond and stock prices to
soar in early trading activity, as the September unemployment rate was unchanged
at 4.9 percent and fewer jobs than expected were added to the economy during
September. However, most of the initial gains were erased by news of rising
tensions between Iraq and Iran.
Congressional testimony by the Federal Reserve Chairman, in which he
indicated that it would be difficult to maintain the current balance between
tight labor markets and low inflation, caused stock and bond prices to skid in
mid-October 1997. Disappointing third quarter earnings in the technology sector
sharpened the sell-off in the stock market, with the Dow Jones Industrial
Average ("DJIA") posting consecutive losses of more than 1.0 percent on October
16 and 17. Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure,
which was led by the decline in the Hong Kong stock market, as the DJIA posted a
two-day loss approximating
<PAGE>
RP Financial, LC.
Page 4.12
320 points on October 23 and 24, 1997. The sell-off in the world financial
markets turned into a rout on the following Monday, with a 5.8 percent decline
in the Hong Kong stock market fueling the largest ever point decline in the
DJIA. On October 24, the DJIA declined 554 points or 7.2 percent. While the
selling was broad based, technology stocks sensitive to Asian demand experienced
some of the sharpest declines. The turmoil in the stock market provided for a
sharp rally in U.S. Treasury bonds, reflecting a flight to quality by skittish
investors. The stock market recovered strongly the day after the record breaking
point decline, as the DJIA surged a record breaking 337 points on October 28.
Comparatively, bond prices declined sharply on October 28, as investors pulled
out of the Treasury market to reinvest into the stock market.
Market conditions remained uneven through the week ended October 31, 1997,
which was followed by a soaring stock market on November 3, 1997. The DJIA
posted a 232 point increase on November 3, which was supported by a resurgence
in the Hong Kong market. Following the one day rally, volatility returned to the
stock market through mid-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. In mid-November, the yield on the 30-year
bellwether Treasury issue approached 6.0 percent, its lowest level since
February 1996. Advances in the bond market provided for a generally positive
stock market environment in the second half of November, with bank and
technology issues being among the strongest performers. Renewed confidence that
the Asian governments would control the region's financial problems furthered
the stock market rally in early-December. Despite a sell-off in the bond market
caused by the November unemployment rate dropping to its lowest level since
October 1973, the DJIA showed surprising strength and closed almost 99 points
higher on December 5, 1997. Stocks declined the following week, as earnings
concerns, particularly in the technology sector, overshadowed a rally in the
bond market. Positive inflation news and world market turmoil caused investors
to dump stocks in favor of bonds, which served to push the yield on the
bellwether 30-year Treasury bond below 6.0 percent in mid-December. Bond prices
were also boosted by the Federal Reserve's decision to leave interest rates
unchanged at its mid-December meeting, which also provided for a modest recovery
in the stock market. In late-December, investors dumped stocks on earnings
concerns, while a flight to quality pushed bond prices higher. The stock market
surged higher at year end, as worries about South Korea's financial crisis
eased.
Led by a rally in the bond market, stocks continued to move higher at the
beginning of 1998. However, turmoil in the Asian markets and the uncertain
outlook for
<PAGE>
RP Financial, LC.
Page 4.13
fourth quarter earnings provided for an uneven stock market through most of
January and into early-February. For example, the Dow Jones Industrial Average
("DJIA") plunged 222 points on January 9, 1998, due to fourth quarter profit
worries and economic turmoil in Southeast Asia. Comparatively, a rally in the
Asian markets propelled the DJIA 201 points higher on February 2, 1998. In
general, a rebound in the Asian markets and favorable fourth quarter earnings
served to the push the stock market higher during the second half of January and
into early-February. In contrast, bond prices edged lower over the same time
period, as the labor market remained tight as indicated by a sharp increase in
labor costs during the fourth quarter of 1997 and a larger than expected
increase in the number of jobs added during December 1997.
Strength primarily in technology stocks pushed the DJIA to a new record for
the first time in six months on February 10, 1998. The rally was sustained
through mid-February, as the DJIA established six consecutive new highs through
February 18, 1998. Strong earnings and expectations that profitability was not
as badly hurt by the Asian crisis as feared served as the basis for the rally in
technology stocks. Stable interest rates and few signs of inflation preserved
the positive market environment through the end of February, with blue-chip
stocks leading the advance. On February 27, 1998, the DJIA closed at a record
high of 8545.72, an increase of 24.3 percent from one year ago.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. 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.
<PAGE>
RP Financial, LC.
Page 4.14
Thrift stocks continued to trend higher through June and early-July 1997,
based on the improved interest rate outlook and an overall positive outlook for
the economy. Generally favorable second quarter earnings and the 30-year U.S.
Treasury bond yield declining below 6.50 percent served to further boost thrift
prices in mid-July, with the declining interest rate environment serving to
sustain the rally in thrift prices through the end of July. Thrift prices
generally declined during the first half of August, due to higher interest rates
and profit taking. From July 31, 1997 to August 15, 1997, the SNL Index declined
by 3.7 percent. Thrift prices recovered modestly during the second half of
August, as the Federal Reserve left short-term interest rates unchanged at its
August meeting. Thrift stocks participated in the one day stock market rally on
September 2, 1997, as evidenced by a 1.95 percent increase in the SNL Index.
News of NationsBank's proposed acquisition of Barnett Banks for more than four
times its book value appears to have further contributed to the one day run-up
in thrift prices. In contrast to the overall stock market, thrift prices
continued to move higher following the one day rally in the DJIA. Stable
interest rates and acquisition news sustained the positive market for thrift
issues. The decline in interest rates following the release of the August
consumer price index in mid-September served to further the rally in thrift
prices. During late- September and early-October, interest rate 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. 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
<PAGE>
RP Financial, LC.
Page 4.15
bank and thrift issues in general. Concern of relatively high valuations
somewhat offset the declining interest rate environment, as thrift issues traded
in a narrow range in mid- December. Thrift prices moved higher at the close of
1997, as interest rates continued to decline.
The positive trend in thrift prices was not sustained at the beginning of
1998, as thrift prices moved sharply lower during early-January trading. From
January 2, 1998 to January 9, 1998, the SNL index for all publicly-traded
thrifts declined from 810.5 to 720.2, or 11.1 percent. The sell-off in thrift
stocks was prompted by concerns that the flattening yield curve would put
pressure on earnings, particularly among institutions which maintained high
concentrations of mortgage loans. Thrift prices recovered somewhat during the
second half of January, with the upward trend becoming more pronounced in
early-February. Fourth quarter earnings, which generally met expectations, and
acquisition news led the recovery in thrift prices. The ongoing trend of
consolidation was highlighted by the proposed merger between First Nationwide
Holdings, San Francisco, California ($30.9 billion in assets) and Golden State
Bancorp, Glendale, California ($16.0 billion in assets), which was announced in
early-February. Stable interest rates and acquisitions provided for a mildly
positive increase in thrift stocks during the balance of February. On February
27, 1998, the SNL Index for all publicly-traded thrifts closed at 818.7, an
increase of 45.4 percent from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new issue
market for converting thrifts is also an important consideration in determining
the Bank's pro forma market value. The new issue market is separate and distinct
from the market for seasoned stock thrifts in that the pricing ratios for
converting issues are computed on a pro forma basis, specifically: (1) the
numerator and denominator are both impacted by the conversion offering amount,
unlike existing stock issues in which price change affects only the numerator;
and (2) the pro forma pricing ratio incorporates assumptions regarding source
and use of proceeds, effective tax rates, stock plan purchases, etc. which
impact pro forma financials, whereas pricing for existing issues are based on
reported financials. The distinction between pricing of converting and existing
issues is perhaps no clearer than in the case of the price/tangible book
("P/TB") ratio in that the P/TB ratio of a converting thrift will typically
always result in a discount to tangible book value whereas in the current market
for existing thrifts the P/TB reflects a premium to tangible book value.
Therefore, it is appropriate to also consider the market for new issues, both at
the time of the conversion and in the aftermarket.
<PAGE>
RP Financial, LC.
Page 4.16
In general, the market environment for converting thrift issues was highly
receptive throughout 1997, with most converting issues being oversubscribed and
trading higher in initial trading activity. To date, the positive market
environment for converting thrift issues has been sustained during 1998. Since
the beginning of December 1997, standard conversion offerings completed and
began trading have exhibited an average price increase of 46.7 percent on the
first day of trading. As shown in Table 4.2, the average one week change in
price for standard conversion offerings completed during the latest three month
period ending February 27, 1998 equaled positive 48.2 percent. The average pro
forma price/tangible book and core price/earnings ratios of the recent
conversions, excluding second step conversions, was 77.3 percent and 19.8 times,
respectively. The standard conversions that have began trading since the
beginning of December 1997 were all closed at the top of the superrange.
In examining the current pricing characteristics of institutions completing
their conversions during the last three months (see Table 4.3), we note there
exists a considerable difference in pricing ratios compared to the universe of
all publicly-traded thrifts. Specifically, the current average P/B ratio of the
conversions completed in the most recent three month period of 130.25 percent
reflects a discount of 23.12 percent from the average P/B ratio of all
publicly-traded thrifts (equal to 169.42 percent), and the average core P/E
ratio of 26.78 times reflects a premium of 29.0 percent from the all public
average core P/E ratio of 20.76 times. The pricing ratios of the higher
capitalized but lower earning recently converted thrifts (with resulting lower
return on equity measures) suggest that the investment community has determined
to discount their stocks on a book basis until the earnings improve through
redeployment and leveraging of the proceeds over the longer term.
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on the Bank's
stock price of recently completed and pending acquisitions of other thrifts
operating in the Bank's market area. As shown in Exhibit IV-4, there were 10
publicly- traded New York thrifts acquired since the beginning of 1996, and 4
acquisitions are currently pending of publicly-traded New York thrifts. The
Bank's relatively high pro forma capital position may tend to lessen acquisition
speculation in the Bank's stock, based on expectations that an acquiror would be
reluctant to pay an acquisition premium for the Bank's "excess" capital. At the
same time, the fairly active acquisition market for New York thrifts may imply a
certain degree of acquisition speculation for the Bank's stock. To the extent
that acquisition speculation may
<PAGE>
RP Financial, LC.
Page 4.17
Table 4.2
Pricing Characteristics and After-Market Trends
Recent Conversions Completed (Last Three Months)
<TABLE>
<CAPTION>
Pre-Conversion Data
------------------------------ Offering Contribution to
Institutional Information Financial Info. Asset Quality Information Charitable Found
- -------------------------------------------------------- --------------- ------------- ------------------ ----------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ % of
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. Form Offering
- ----------- ----- ---------- ------ ------ ------- ------ ---- ----- ---- ----- ---- --------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
Richmond County Fin. Corp NY 02/19/98 RCBK $1,006 10.22% 0.64% 102% $244.7 132% 2.7% Stock 8.00%
Hopfed Bancorp KY 02/09/98 HFBC 202 9.27% 0.12% 94% 40.3 132% 1.9% N.A. N.A.
Timberland Bancorp WA* 01/13/98 TSBK 212 11.65% 3.83% 21% 66.1 132% 1.5% N.A. N.A.
Mystic Financial, Inc. MA* 01/09/98 MYST 158 7.78% 0.22% 302% 27.1 132% 3.4% N.A. N.A.
Wyman Park Bancorp MD 01/07/98 P. Sheet 63 7.50% 0.24% 183% 10.1 132% 4.6% N.A. N.A.
Delaware First Fin. Corp. DE 01/05/98 P. Sheet 107 5.63% 0.81% 53% 11.6 132% 4.8% N.A. N.A.
United Tennessee Bancshares TN* 01/05/98 UTBI 65 10.41% 0.09% 903% 14.5 132% 4.9% N.A. N.A.
Great Pee Dee Bancorp SC 12/31/97 PEDE 60 18.79% 0.18% 312% 21.8 132% 3.5% Stock 0.91%
Coddle Creek Financial NC 12/31/97 P. Sheet 114 12.90% 0.88% 63% 33.7 132% 3.2% N.A. N.A.
Union Community Bancorp IN* 12/29/97 UCBC 86 17.23% 0.16% 165% 30.4 132% 2.6% N.A. N.A.
Warwick Community Bncrp NY 12/23/97 WSBI 291 10.04% 0.56% 93% 64.1 132% 3.4% Stock 3.00%
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 2,145 9.11% 1.15% 58% 515.8 132% 1.7% Stock 5.00%
North Arkansas Bancshares AR 12/19/97 P. Sheet 34 6.77% 0.21% 203% 3.7 132% 10.8% N.A. N.A.
High Country Bancorp CO 12/10/97 HCBC 76 7.81% 0.23% 286% 12.6 132% 4.4% N.A. N.A.
Landmark Financial Corp. NY 12/01/97 P. Sheet 14 6.66% 1.38% 55% 1.5 132% 9.9% N.A. N.A.
Averages -- Standard Conversions: $ 309 10.12% 0.71% 193% $ 73.2 132% 4.2% N.A. N.A.
Medians -- Standard Conversions: $ 107 9.27% 0.24% 102% $ 27.1 132% 3.4% N.A. N.A.
Second-Step Conversions
- -----------------------
Heritage Financial Corp. WA* 01/09/98 HFWA $ 249 11.39% 0.20% 537% $ 66.1 132% 2.1% N.A. N.A.
Guaranty Fed. Bancshares MO* 12/31/97 GFED 212 13.82% 0.64% 244% 43.4 132% 2.1% N.A. N.A.
Community Natl. Corp.(8) TN 12/12/97 CNLK 27 14.83% 0.69% 103% 4.5 132% 7.2% N.A. N.A.
Equality Bancorp, Inc. MO* 12/02/97 EBI 239 5.82% 0.29% 41% 13.2 115% 3.9% N.A. N.A.
Averages -- 2nd Step Conversions: $ 182 11.47 0.46% 231% $ 31.8 128% 3.8% N.A. N.A.
Medians -- 2nd Step Conversions: $ 226 12.61% 0.47% 174% $ 28.3 132% 3.0% N.A. N.A.
Averages -- All Conversions: $ 282 10.40% 0.66% 201% $ 64.5 131% 4.1% N.A. N.A.
Medians -- All Conversions: $ 114 10.04% 0.29% 103% $ 27.1 132% 3.4% N.A. N.A.
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.17 (continued)
Table 4.2 (Continued)
<TABLE>
<CAPTION>
Insider Purchases Pro Forma Data
--------------------- ----------------------------------------
Institutional Information Benefit Plans Pricing Ratios(4) Financial Charac.
- -------------------------------------------------------- ------------- Initial --------------------- -----------------
Conversion Recog. Mgmt. Dividend Core
Institution State Date Ticker ESOP Plans & Dirs. Yield P/TB P/E(5) P/A ROA TE/A ROE
- ----------- ----- ---------- ------ ---- ------ ------- -------- ---- ------ --- --- ---- ---
(%) (%) (%)(3) (%) (%) (x) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
Richmond County Fin. Corp NY 02/19/98 RCBK 8.0% 4.0% 1.2% 0.00% 84.8% 17.8x 21.8% 1.2% 25.6% 4.8%
Hopfed Bancorp KY 02/09/98 HFBC 8.0% 4.0% 16.7% 0.00% 75.4% 17.4 17.0% 1.0% 22.6% 4.4%
Timberland Bancorp WA* 01/13/98 TSBK 8.0% 4.0% 3.8% 0.00% 80.8% 13.3 24.6% 2.0% 30.5% 6.4%
Mystic Financial, Inc. MA* 01/09/98 MYST 8.0% 4.0% 4.6% 0.00% 77.0% 19.2 15.0% 0.8% 19.5% 4.0%
Wyman Park Bancorp MD 01/07/98 P. Sheet 8.0% 4.0% 5.9% 0.00% 76.7% 22.1 14.1% 0.6% 18.4% 3.5%
Delaware First Fin. Corp. DE 01/05/98 P. Sheet 8.0% 4.0% 2.5% 0.00% 73.9% 26.1 9.9% 0.4% 13.4% 2.8%
United Tennessee Bancshares TN* 01/05/98 UTBI 8.0% 4.0% 9.6% 3.00% 77.2% 15.1 18.9% 1.2% 24.5% 4.8%
Great Pee Dee Bancorp SC 12/31/97 PEDE 8.0% 4.0% 8.5% 3.00% 74.0% 18.0 28.0% 1.6% 37.8% 4.1%
Coddle Creek Financial NC 12/31/97 P. Sheet 8.0% 4.0% 8.9% 2.00% 77.8% 28.2 23.6% 0.8% 30.3% 2.8%
Union Community Bancorp IN* 12/29/97 UCBC 8.0% 4.0% 5.8% 3.00% 74.6% 17.2 27.2% 1.6% 36.5% 4.3%
Warwick Community Bncrp NY 12/23/97 WSBI 8.0% 4.0% 3.6% 0.00% 79.4% 18.1 18.9% 1.0% 23.8% 4.4%
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 8.0% 4.0% 1.5% 0.00% 87.2% 18.4 20.9% 1.1% 24.0% 4.7%
North Arkansas Bancshares AR 12/19/97 P. Sheet 8.0% 4.0% 18.6% 0.00% 72.0% N.M. 10.1% -0.2% 14.1% -1.2%
High Country Bancorp CO 12/10/97 HCBC 8.0% 4.0% 11.0% 3.00% 77.8% 26.1 15.1% 0.6% 19.5% 3.0%
Landmark Financial Corp. NY 12/01/97 P. Sheet 8.0% 4.0% 8.2% 0.00% 70.9% N.M. 9.8% 0.7% 13.8% 6.8%
Averages -- Standard Conversions: 8.0% 4.0% 7.4% 0.93% 77.3% 19.8x 18.3% 1.0% 23.6% 4.0%
Medians -- Standard Conversions: 8.0% 4.0% 5.9% 0.00% 77.0% 18.1x 18.9% 1.0% 23.8% 4.3%
Second-Step Conversions
- -----------------------
Heritage Financial Corp. WA* 01/09/98 HFWA 2.0% 1.0% 1.3% 0.00% 107.1% 20.3x 31.3% 1.5% 29.2% 5.3%
Guaranty Fed. Bancshares MO* 12/31/97 GFED 8.0% 4.0% 5.1% 3.00% 93.5% 20.2 25.0% 1.2% 26.7% 4.6%
Community Natl. Corp.(8) TN 12/12/97 CNLK 0.0% 4.0% 17.6% 0.00% 85.9% 17.1 22.9% 1.3% 26.7% 5.0%
Equality Bancorp, Inc. MO* 12/02/97 EBI 9.1% 5.0% 10.6% 1.70% 100.5% 18.8 10.0% 0.5% 9.9% 5.4%
Averages -- 2nd Step Conversions: 4.8% 3.5% 8.7% 1.18% 96.7% 19.1x 22.3% 1.1% 23.1% 5.1%
Medians -- 2nd Step Conversions: 5.0% 4.0% 7.9% 0.85% 97.0% 19.5x 24.0% 1.3% 26.7% 5.1%
Averages -- All Conversions: 7.3% 3.9% 7.6% 0.98% 81.4% 19.6x 19.2% 1.0% 23.5% 4.2%
Medians -- All Conversions: 8.0% 4.0% 5.9% 0.00% 77.8% 18.4x 18.9% 1.0% 24.0% 4.4%
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.17 (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 Change Week(6) Change Month(7) Change
- ----------- ----- ---------- ------ ----- ------- ------ ------- ------ -------- ------
($) ($) (%) ($) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
Richmond County Fin. Corp NY 02/19/98 RCBK $10.00 $16.31 63.1% $16.56 65.6% $16.66 66.6%
Hopfed Bancorp KY 02/09/98 HFBC 10.00 16.81 68.1% 16.00 60.0% 17.31 73.1%
Timberland Bancorp WA* 01/13/98 TSBK 10.00 14.50 45.0% 16.00 60.0% 16.00 60.0%
Mystic Financial, Inc. MA* 01/09/98 MYST 10.00 14.44 44.4% 15.63 56.3% 15.00 50.0%
Wyman Park Bancorp MD 01/07/98 P. Sheet 10.00 13.75 37.5% 13.75 37.5% 14.38 43.8%
Delaware First Fin. Corp. DE 01/05/98 P. Sheet 10.00 12.88 28.8% 12.13 21.3% 12.75 27.5%
United Tennessee Bancshares TN* 01/05/98 UTBI 10.00 14.75 47.5% 13.75 37.5% 14.25 42.5%
Great Pee Dee Bancorp SC 12/31/97 PEDE 10.00 16.13 61.3% 15.50 55.0% 15.00 50.0%
Coddle Creek Financial NC 12/31/97 P. Sheet 50.00 77.00 54.0% 77.63 55.3% 79.25 58.5%
Union Community Bancorp IN* 12/29/97 UCBC 10.00 14.69 46.9% 14.25 42.5% 14.25 42.5%
Warwick Community Bncrp NY 12/23/97 WSBI 10.00 15.63 56.3% 17.00 70.0% 15.63 56.3%
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 12.00 19.06 58.8% 19.44 62.0% 19.19 59.9%
North Arkansas Bancshares AR 12/19/97 P. Sheet 10.00 12.50 25.0% 12.75 27.5% 13.13 31.3%
High Country Bancorp CO 12/10/97 HCBC 10.00 14.44 44.4% 15.25 52.5% 14.44 44.4%
Landmark Financial Corp. NY 12/01/97 P. Sheet 10.00 11.88 18.8% 12.00 20.0% 11.96 19.6%
Averages -- Standard Conversions: $12.80 $18.98 46.7% $19.18 48.2% $19.28 48.4%
Medians -- Standard Conversions: $10.00 $14.69 46.9% $15.50 55.0% $15.00 50.0%
Second-Step Conversions
- -----------------------
Heritage Financial Corp. WA* 01/09/98 HFWA $10.00 $13.25 32.5% $13.25 32.5% $13.25 42.5%
Guaranty Fed. Bancshares MO* 12/31/97 GFED 10.00 12.88 28.8% 12.50 25.0% 12.38 23.8%
Community Natl. Corp.(8) TN 12/12/97 CNLK 10.00 11.56 15.6% 11.50 15.0% 11.13 11.3%
Equality Bancorp, Inc. MO* 12/02/97 EBI 10.00 13.44 34.4% 14.94 49.4% 13.69 36.9%
Averages -- 2nd Step Conversions: $10.00 $12.78 27.8% $13.05 30.5% $12.86 28.6%
Medians -- 2nd Step Conversions: $10.00 $13.07 30.7% $12.88 28.8% $13.03 30.3%
Averages -- All Conversions: $12.21 $17.68 42.7% $17.89 44.5% $17.93 44.2%
Medians -- All Conversions: $10.00 $14.44 44.4% $14.94 49.4% $14.38 30.3%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Simultaneously converted to commercial bank charter.
February 27, 1998
<PAGE>
RP Financial, LC.
Page 4.18
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of February 27, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All Public Companies 24.32 249.64 1.12 14.62 19.71 169.42 20.70 172.60 20.76 0.38 1.54 30.01
Converted Last 3 Mths (no MHC) 15.99 154.22 0.52 12.37 26.89 130.25 33.19 130.59 26.78 0.04 0.26 5.99
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp, Inc. of MO 15.94 39.63 0.10 10.31 NM 154.61 17.28 154.61 NM 0.24 1.51 NM
PEDE Great Pee Dee Bancorp of SC 15.88 34.65 0.56 13.51 28.36 117.54 44.51 117.54 28.36 0.00 0.00 0.00
GFED Guaranty Fed Bancshares of MO 12.56 78.15 0.32 11.18 NM 112.34 33.89 112.34 NM 0.23 1.83 71.88
HFWA Heritage Financial Corp of WA 14.75 143.80 0.49 9.34 NM 157.92 46.17 157.92 NM 0.00 0.00 0.00
HCBC High Country Bancorp of CO 14.75 19.51 0.38 12.86 NM 114.70 22.32 114.70 NM 0.00 0.00 0.00
HFBC HopFed Bancorp of KY 17.31 69.83 0.58 13.26 29.84 130.54 29.49 130.54 29.84 0.00 0.00 0.00
MYST Mystic Financial of MA 17.00 46.09 0.52 13.00 NM 130.77 25.46 130.77 NM 0.00 0.00 0.00
RCBK Richmond County Fin Corp of NY 16.66 407.60 0.56 11.79 29.75 141.31 36.24 141.31 29.75 0.00 0.00 0.00
SIB Staten Island Bancorp of NY 20.50 881.11 0.65 14.19 27.70 144.47 35.73 148.87 NM 0.00 0.00 0.00
TSBK Timberland Bancorp of WA 17.63 116.59 0.75 12.38 23.51 142.41 43.37 142.41 23.51 0.00 0.00 0.00
UCBC Union Community Bancorp of IN 14.63 44.50 0.58 13.40 25.22 109.18 39.83 109.18 25.22 0.00 0.00 0.00
UTBI United Tenn. Bancshares of TN 14.31 20.82 0.66 12.95 21.68 110.50 27.06 110.50 21.68 0.00 0.00 0.00
WSBI Warwick Community Bncrp of NY 16.00 102.62 0.55 12.60 29.09 126.98 30.18 126.98 29.09 0.00 0.00 0.00
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.18 (continued)
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>
All Public Companies 1,493 13.30 0.74 0.99 8.87 0.94 8.34
Converted Last 3 Mths (no MHC) 442 25.81 0.49 1.17 4.89 1.12 4.39
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp, Inc. of MO 229 11.18 NA 0.53 7.30 0.12 1.59
PEDE Great Pee Dee Bancorp of SC 78 37.86 0.45 1.57 4.15 1.57 4.15
GFED Guaranty Fed Bancshares of MO 231 30.17 0.61 1.00 5.76 0.97 5.58
HFWA Heritage Financial Corp of WA 311 29.23 0.10 1.53 5.25 1.53 5.25
HCBC High Country Bancorp of CO 87 19.46 0.23 0.58 2.95 0.58 2.95
HFBC HopFed Bancorp of KY 237 22.59 0.12 0.99 4.37 0.99 4.37
MYST Mystic Financial of MA 181 19.47 0.18 0.78 4.00 0.78 4.00
RCBK Richmond County Fin Corp of NY 1,125 25.65 NA 1.22 4.75 1.22 4.75
SIB Staten Island Bancorp of NY 2,466 24.73 1.15 1.29 5.21 1.13 4.58
TSBK Timberland Bancorp of WA 269 30.46 NA 1.85 6.06 1.85 6.06
UCBC Union Community Bancorp of IN 112 36.48 0.59 1.58 4.33 1.58 4.33
UTBI United Tenn. Bancshares of TN 77 24.48 0.75 1.25 5.10 1.25 5.10
WSBI Warwick Community Bncrp of NY 340 23.76 0.69 1.04 4.37 1.04 4.37
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.19
impact the Bank's offering, we have largely taken this into account in selecting
companies which operate in the same regional market area as the Bank and, thus,
are subject to the same type of acquisition speculation that may influence
HCSI's trading price.
Taking these factors and trends into account, primarily recent trends in
the new issue market, market conditions overall and recent trends in the
acquisition market, RP Financial concluded that no adjustment was appropriate in
the valuation analysis for purposes of marketing of the issue.
8. Management
----------
The Bank's management team appears to have experience and expertise in all
of the key areas of the Bank's operations. Exhibit IV-5 provides summary resumes
of the Bank's Board of Trustees and executive management. The financial
characteristics of the Bank suggest that the Bank is being effectively managed
and there appears to be a well-defined organizational structure. The Bank has no
apparent executive/senior management vacancies.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which also have generally seasoned Boards and management teams.
On balance, we concluded that no valuation adjustment relative to the Peer
Group was appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The Peer Group is comprised of six BIF-insured and four SAIF-insured
institutions. Accordingly, some of the Peer Group companies' deposits were
impacted by the recently enacted SAIF rescue legislation, leading to a special
assessment during 1996 and a reduced deposit insurance premium structure
beginning in 1997. However, currently there are no significant differences
between the Bank and the Peer Group from a regulatory perspective, as a
fully-converted BIF-insured savings institution HCSI will operate in
substantially the same regulatory environment as the Peer Group companies -- all
of whom are adequately capitalized and are operating with no apparent
restriction. Exhibit IV-6 reflects the Bank's pro forma regulatory capital
ratios. On balance, no adjustment to the Bank's value was warranted for this
factor.
<PAGE>
RP Financial, LC.
Page 4.20
Summary of Adjustments
- ----------------------
Overall, we believe the Bank's pro forma market value should be discounted
relative to the Peer Group as follows.
Key Valuation Parameters Valuation Adjustment
------------------------ --------------------
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth No Adjustment
Primary Market Area No Adjustment
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the
regulatory agencies, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing the Bank's to-be-issued stock --
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") -- 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 the Bank's
prospectus for offering expenses, the effective tax rate, stock benefit plans
and contribution to the charitable foundation (summarized in Exhibits IV-7 and
IV-8). A reinvestment rate of 6.74 percent was utilized, equal to the arithmetic
average of the Bank's average yield on interest-earning assets and cost of
deposits for the nine months ended December 31, 1997 (the reinvestment rate
calculation specified by the OTS conversion guidelines). The 6.74 percent
reinvestment rate is believed to be representative of the blended rate
reflecting the Bank's business plan as converted and incorporating the impact of
deposit withdrawals to fund a portion of the stock issued in conversion.
RP Financial's valuation considered each of the valuation approaches
promulgated in the regulatory valuation guidelines, as described more fully
below.
o P/E Approach. The P/E approach is generally regarded as the best
indicator of long-term value for a stock. Given the operating
strategies employed by the Bank and the Peer Group, which provided a
certain degree of financial comparability between the Bank and the
Peer Group, the P/E approach was carefully considered in this
valuation. At the same time, since reported earnings
<PAGE>
RP Financial, LC.
Page 4.21
for both the Bank and the Peer Group included certain unusual items,
we also made adjustments to earnings to arrive at a core earnings
estimate and the resulting price/core earnings ratio.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. RP Financial considered the P/B
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions which often
exhibit P/E multiples that are well above industry averages and since
the P/E multiples do not reflect the actual impact of reinvestment,
leveraging and capital management strategies. We have also modified
the P/B approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"), in that the investment community
frequently makes this adjustment in its evaluation of the stock price
level.
o P/A Approach. P/A ratios are generally a less reliable indicator of
market value. Investors do not place significant weight on simply the
size of total assets as a determinant of market value without making
risk adjustments. Investors generally place significantly greater
weight on book value and earnings, which are more meaningful
indicators of value than total assets. Furthermore, this approach as
set forth in the regulatory valuation guidelines does not take into
account the amount of stock purchases funded by deposit withdrawals,
thus understating the pro forma P/A ratio. At the same time, the P/A
ratio is an indicator of franchise value, and, in the case of highly
capitalized institutions, the high P/A ratios may limit the investment
community's willingness to pay market multiples for earnings or book
value when ROE is expected to be low.
The Bank has adopted Statement of Position ("SOP") 93-6, which will cause
earnings per share computations to be based on shares issued and outstanding
excluding unreleased ESOP shares. For purposes of preparing the pro forma
pricing analyses, we have reflected all shares issued in the offering, including
all ESOP shares, to capture the full dilutive impact, particularly since the
ESOP shares are economically dilutive, receive dividends and can be voted.
However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the price/earnings and price/book approaches, RP Financial
concluded that the pro forma market value of the Bank's conversion stock was
$135.0 million at the midpoint at this time.
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple, derived from the Peer Group's P/E multiple, times the pro forma
earnings base. In applying this technique, we considered both reported earnings
and a recurring earnings base, that is,
<PAGE>
RP Financial, LC.
Page 4.22
earnings adjusted to exclude items which are viewed as be non-recurring and
extraordinary items, plus the estimated after-tax earnings benefit from
reinvestment of net conversion proceeds. The Bank's reported earnings were
$2.661 million for the twelve months ended December 31, 1997. In deriving the
Bank's core earnings, adjustments made to reported earnings consisted of
eliminating gains realized from the sale of loans and investments and reducing
the amount of loan loss provisions. For the twelve months ended December 31,
1997, the Bank recorded pre-tax net gains of $73,000. In adjusting loan loss
provisions, we assumed a lower amount of provisions in light of the higher
amount of loss provisions established by the Bank during the most recent twelve
month period. For purposes of our core earnings analysis, we assumed loan loss
provisions of $6.50 million, which was based on our review of the Bank's
business plan and discussions with the Bank's management. Accordingly, the
adjustment to loan provisions resulted in a $1.9 million pre-tax increase to
core earnings. As shown below, after tax effecting the adjustments at an assumed
effective marginal tax rate of 40.0 percent, HCSI's core earnings were
determined to equal $3.743 million. See Exhibit I-9 for the adjustments applied
to the Peer Group's earnings in the calculation of core earnings.
Amount
------
($000)
Net income $2,661
Elimination of gains(1) (44)
Adjustment for loss provisions(1) 1,126
------
Core earnings estimate $3,743
(1) Tax effected at 40.0 percent.
Based on the Bank's reported and estimated core earnings, and incorporating
the impact of the pro forma assumptions discussed previously, the Bank's pro
forma reported and core P/E multiples at the $135.0 million midpoint value were
22.06 times and 18.75 times, respectively, which provided for premiums of 22.83
percent and 1.52 percent relative to the Peer Group's average reported and core
earnings multiples of 17.96 and 18.47 times, respectively.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio, derived from the Peer Group's P/B ratio, to the Bank's pro forma book
value. In applying the P/B approach, we considered both reported book value and
tangible book value. Based on the
<PAGE>
RP Financial, LC.
Page 4.23
$135.0 million midpoint valuation, the Bank's pro forma P/B and P/TB ratios were
74.47 and 74.72 percent, respectively. In comparison to the average P/B and P/TB
ratios for the Peer Group of 160.19 percent and 166.53 percent, respectively,
the Bank's ratios were discounted by 53.51 percent and 55.13 percent. RP
Financial considered such discounts to be reasonable in light of the previously
referenced valuation adjustments, the nature of the calculation of the pro forma
P/B and P/TB ratios which mathematically results in a discounted ratio to book
value and tangible book value, comparatively lower pro forma core ROE and the
resulting pricing ratios under the earnings and assets approaches.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines market
value by applying a valuation P/A ratio to the Bank's pro forma asset base,
conservatively assuming no deposit withdrawals are made to fund stock purchases.
In all likelihood there will be deposit withdrawals, which results in
understating the pro forma P/A ratio which is computed herein. At the midpoint
of the valuation range, the Bank's value equaled 17.33 percent of pro forma
assets, compared to the Peer Group average P/A ratio of 19.47 percent, which
implies a 10.99 percent discount being applied to the Bank's pro forma P/A
ratio. The Bank's pro forma P/A ratio exceeded the Peer Group's average P/A
ratio at the supermaximum of the range. While generally emphasized less than the
P/E and P/B approaches, the P/A ratio is an indicator of franchise value and,
thus, was considered in the valuation conclusion.
Comparison to Recent Conversions
- --------------------------------
As indicated at the beginning of this chapter, RP Financial's analysis of
recent conversion pricing characteristics at conversion (excluding second step
conversions) and in the aftermarket has been limited to a "technical" analysis
and, thus, the pricing characteristics of recent conversions is not the primary
determinate of value herein. Particular focus was placed on the P/B approach in
this analysis since the P/E multiples do not reflect the actual impact of
reinvestment and the source of the conversion funds (i.e., external funds vs.
deposit withdrawals). The recent conversions on average closed their offerings
at their supermaximum levels given the oversubscribed nature of their offerings
and prevailing market conditions at closing, indicating an average
price/tangible book ratio of 77.3 percent (see Table 4.2). On average, the
prices of recent conversions appreciated by 46.7 percent during the first week
of trading. In comparison, the Bank's P/TB ratio at the appraised midpoint
reflects a discount of 3.3 percent relative to the closing ratios, but a
discount of 42.8 percent to the current
<PAGE>
RP Financial, LC.
Page 4.24
aftermarket P/TB ratio of 130.59 percent (see Table 4.3). The closing and
aftermarket P/TB ratios are not directly comparable in that the closing ratio
reflects the pro forma impact of conversion on equity whereas the aftermarket
ratio reflects only price (with no further impact on equity capital).
Valuation Conclusion
- --------------------
It is our opinion that, as of February 27, 1998, the estimated aggregate
pro forma market value of the shares to be issued immediately following the
conversion was $135.0 million, equal to 13,500,000 shares offered at $10.00 per
share. Pursuant to the conversion guidelines, the 15 percent offering range
includes a minimum of $114,750,000 and a maximum of $155,250,000. Based on the
$10.00 per share offering price, this valuation range equates to an offering of
11,475,000 shares at the minimum to 15,525,000 shares at the maximum. In the
event that the appraised value is subject to an increase, up to 17,853,750
shares may be sold at an issue price of $10.00 per share, for an aggregate
market value of $178,537,500, without a resolicitation.
Based on this valuation range, incorporating the 3.0 percent shares issued
to Foundation following consummation of the offering, the offering range is as
follows: $111,407,770 at the minimum, $131,067,960 at the midpoint, $150,728,150
at the maximum and $173,337,380 at the supermaximum. Based on a $10.00 per share
offering price, the number of offering shares is as follows: 11,140,777 at the
minimum, 13,106,796 at the midpoint, 15,072,815 at the maximum and 17,333,738 at
the supermaximum.
The comparative pro forma valuation ratios relative to the Peer Group are
shown in Table 4.4, and the key valuation assumptions are detailed in Exhibit
IV-7. The pro forma calculations for the range are detailed in Exhibit IV-8.
<PAGE>
RP Financial, LC.
Page 4.25
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Hudson City Savings Inst. and the Comparables
As of February 27, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
-------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hudson City Savings Inst.
- -------------------------
Superrange 10.00 178.54 0.41 12.23 24.63 81.76 21.88 81.98 21.43 0.00 0.00 0.00
Range Maximum 10.00 155.25 0.43 12.79 23.37 78.19 19.50 78.44 20.09 0.00 0.00 0.00
Range Midpoint 10.00 135.00 0.45 13.43 22.06 74.47 17.33 74.72 18.75 0.00 0.00 0.00
Range Minimum 10.00 114.75 0.49 14.30 20.51 69.95 15.07 70.21 17.19 0.00 0.00 0.00
All Public Companies 24.32 249.64 1.12 14.62 19.71 169.42 20.70 172.60 20.76 0.38 1.54 30.01
All Non-MHC State of NY(7)
- --------------------------
Averages 28.67 549.23 1.18 17.08 22.96 165.78 21.02 174.35 23.14 0.42 1.30 29.56
Medians -- -- -- -- 23.09 147.72 17.62 151.76 23.44 -- -- --
Comparable Group Averages
- -------------------------
Averages 26.52 138.41 1.69 16.40 17.96 160.19 19.47 166.53 18.47 0.48 1.80 34.70
Medians -- -- -- -- 17.40 159.87 17.57 159.87 18.27 -- -- --
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 19.63 27.15 0.85 14.32 23.09 137.08 17.62 137.08 23.09 0.28 1.43 32.94
ALBK ALBANK Fin. Corp. of Albany NY 48.63 627.67 3.34 27.86 14.47 174.55 15.37 224.72 14.56 0.72 1.48 21.56
ALBC Albion Banc Corp. of Albion NY 10.75 8.06 0.43 8.09 24.43 132.88 11.39 132.88 25.00 0.11 1.02 25.58
AHCI Ambanc Holding Co., Inc. of NY 18.25 78.58 -0.69 13.98 NM 130.54 14.85 130.54 NM 0.20 1.10 NM
ASFC Astoria Financial Corp. of NY 55.88 1463.94 2.38 32.42 21.83 172.36 13.90 247.70 23.48 0.80 1.43 33.61
CNY Carver Bancorp, Inc. of NY 15.25 35.29 0.03 15.24 NM 100.07 8.49 104.02 NM 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY 18.38 85.10 0.82 15.48 22.41 118.73 28.88 118.73 22.41 0.32 1.74 39.02
DME Dime Bancorp, Inc. of NY 30.50 3548.92 1.05 11.30 29.05 269.91 16.24 329.02 29.05 0.16 0.52 15.24
DIME Dime Community Bancorp of NY 25.13 312.57 0.91 14.97 26.45 167.87 21.00 194.20 27.62 0.32 1.27 35.16
ESBK Elmira Svgs Bank (The) of NY 28.88 21.43 1.03 19.55 22.74 147.72 9.39 151.76 28.04 0.64 2.22 62.14
FIBC Financial Bancorp, Inc. of NY 26.00 44.46 1.63 16.10 16.99 161.49 14.42 162.20 15.95 0.50 1.92 30.67
FFIC Flushing Fin. Corp. of NY 25.50 200.56 1.09 17.35 23.61 146.97 18.43 152.97 23.39 0.32 1.25 29.36
GOSB GSB Financial Corp. of NY 16.50 37.09 0.28 14.52 NM 113.64 31.69 113.64 NM 0.00 0.00 0.00
GPT GreenPoint Fin. Corp. of NY 74.25 3142.26 3.34 29.98 21.71 247.67 24.00 NM 22.23 1.28 1.72 38.32
HAVN Haven Bancorp of Woodhaven NY 24.50 215.23 1.27 12.85 19.44 190.66 10.90 191.26 19.29 0.30 1.22 23.62
JSB JSB Financial, Inc. of NY 53.81 532.61 2.64 35.91 18.12 149.85 34.79 149.85 20.38 1.60 2.97 60.61
LISB Long Island Bancorp, Inc of NY 60.19 1446.31 1.74 23.19 28.53 259.55 23.82 261.92 NM 0.60 1.00 34.48
MBB MSB Bancorp of Middletown NY(7) 34.88 99.20 0.52 22.40 NM 155.71 12.82 336.03 NM 0.60 1.72 NM
NYB New York Bancorp, Inc. of NY(7) 40.50 865.04 2.53 8.34 16.33 NM 26.50 NM 16.01 0.60 1.48 23.72
PEEK Peekskill Fin. Corp. of NY 17.00 53.16 0.67 15.13 25.37 112.36 29.33 112.36 25.37 0.36 2.12 53.73
PKPS Poughkeepsie Fin. Corp. of NY(7)10.63 134.04 0.24 5.76 NM 184.55 15.31 184.55 NM 0.24 2.26 NM
PSBK Progressive Bank, Inc. of NY(7) 37.81 144.89 2.20 20.48 16.80 184.62 16.40 203.61 17.19 0.80 2.12 36.36
QCSB Queens County Bancorp of NY 39.75 600.54 1.45 11.44 27.60 347.47 38.97 347.47 27.41 0.80 2.01 55.17
RELY Reliance Bancorp, Inc. of NY 35.50 342.01 1.97 19.92 18.88 178.21 15.25 261.80 18.02 0.64 1.80 32.49
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.25 (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>
Hudson City Savings Inst.
- -------------------------
Superrange 816 26.76 3.15 0.89 3.32 1.02 3.81
Range Maximum 796 24.94 3.23 0.83 3.35 0.97 3.89
Range Midpoint 779 23.27 3.30 0.79 3.38 0.92 3.97
Range Minimum 762 21.54 3.38 0.73 3.41 0.88 4.07
All Public Companies 1,493 13.30 0.74 0.99 8.87 0.94 8.34
All Non-MHC State of NY(7)
- --------------------------
Averages 2,756 13.74 0.86 0.86 7.04 0.85 6.89
Medians -- -- -- -- -- -- --
Comparable Group Averages
- -------------------------
Averages 808 13.19 0.81 1.24 11.20 1.20 10.82
Medians -- -- -- -- -- -- --
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 154 12.86 0.30 0.79 5.85 0.79 5.85
ALBK ALBANK Fin. Corp. of Albany NY 4,083 8.81 0.88 1.18 12.94 1.17 12.87
ALBC Albion Banc Corp. of Albion NY 71 8.57 0.12 0.50 5.58 0.49 5.45
AHCI Ambanc Holding Co., Inc. of NY 529 11.37 0.73 -0.53 -4.16 -0.60 -4.71
ASFC Astoria Financial Corp. of NY 10,528 8.07 0.56 0.82 10.37 0.76 9.64
CNY Carver Bancorp, Inc. of NY 416 8.48 1.67 -0.11 -1.33 0.02 0.20
CATB Catskill Fin. Corp. of NY 295 24.32 0.35 1.34 5.20 1.34 5.20
DME Dime Bancorp, Inc. of NY 21,849 6.02 1.06 0.62 11.10 0.62 11.10
DIME Dime Community Bancorp of NY 1,488 12.51 0.53 0.89 6.05 0.85 5.80
ESBK Elmira Svgs Bank (The) of NY 228 6.35 0.64 0.42 6.63 0.34 5.38
FIBC Financial Bancorp, Inc. of NY 308 8.93 1.94 0.92 9.85 0.98 10.50
FFIC Flushing Fin. Corp. of NY 1,088 12.54 0.27 0.94 6.35 0.95 6.40
GOSB GSB Financial Corp. of NY 117 27.89 0.10 0.45 2.69 0.46 2.79
GPT GreenPoint Fin. Corp. of NY 13,094 9.69 2.90 1.09 10.41 1.06 10.17
HAVN Haven Bancorp of Woodhaven NY 1,975 5.72 0.66 0.62 10.47 0.63 10.56
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 6,073 9.18 0.89 0.86 9.44 0.71 7.79
MBB MSB Bancorp of Middletown NY(7) 774 8.23 NA 0.17 2.28 0.18 2.42
NYB New York Bancorp, Inc. of NY(7) 3,265 5.46 0.86 1.65 31.75 1.68 32.39
PEEK Peekskill Fin. Corp. of NY 181 26.10 0.90 1.14 4.28 1.14 4.28
PKPS Poughkeepsie Fin. Corp. of NY(7) 876 8.30 4.03 0.27 3.28 0.35 4.15
PSBK Progressive Bank, Inc. of NY(7) 884 8.88 0.74 0.98 11.44 0.96 11.19
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 2,243 8.56 0.56 0.90 10.87 0.94 11.39
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.26
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
Hudson City Savings Inst. and the Comparables
As of February 27, 1998
<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)
- -----------------------
RCBK Richmond County Fin Corp of NY 16.66 407.60 0.56 11.79 29.75 141.31 36.24 141.31 29.75 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY 22.81 995.47 0.93 14.04 NM 162.46 28.65 163.28 24.53 0.32 1.40 34.41
SFED SFS Bancorp of Schenectady NY 21.50 25.97 0.85 17.74 24.43 121.20 14.89 121.20 25.29 0.32 1.49 37.65
SKAN Skaneateles Bancorp Inc of NY 19.13 27.49 1.12 12.30 16.49 155.53 10.73 159.82 17.08 0.28 1.46 25.00
SIB Staten Island Bancorp of NY 20.50 881.11 0.65 14.19 27.70 144.47 35.73 148.87 NM 0.00 0.00 0.00
ROSE T R Financial Corp. of NY 32.97 580.21 1.76 13.69 16.74 240.83 15.10 240.83 18.73 0.68 2.06 38.64
TPNZ Tappan Zee Fin., Inc. of NY 18.75 27.71 0.69 14.46 26.79 129.67 22.24 129.67 27.17 0.28 1.49 40.58
WSBI Warwick Community Bncrp of NY 16.00 102.62 0.55 12.60 29.09 126.98 30.18 126.98 29.09 0.00 0.00 0.00
YFCB Yonkers Fin. Corp. of NY 18.69 56.46 1.01 14.87 18.32 125.69 17.02 125.69 18.50 0.28 1.50 27.72
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY 19.63 27.15 0.85 14.32 23.09 137.08 17.62 137.08 23.09 0.28 1.43 32.94
ALBK ALBANK Fin. Corp. of Albany NY 48.63 627.67 3.34 27.86 14.47 174.55 15.37 224.72 14.56 0.72 1.48 21.56
BKC American Bank of Waterbury CT 50.25 116.63 2.96 24.82 14.69 202.46 18.25 209.29 16.98 1.52 3.02 51.35
BKCT Bancorp Connecticut of CT 18.50 94.20 1.03 9.22 15.95 200.65 21.26 200.65 17.96 0.52 2.81 50.49
CATB Catskill Fin. Corp. of NY 18.38 85.10 0.82 15.48 22.41 118.73 28.88 118.73 22.41 0.32 1.74 39.02
DIBK Dime Financial Corp. of CT 31.25 161.38 3.04 14.53 10.28 215.07 17.51 221.47 10.28 0.48 1.54 15.79
MECH MECH Financial Inc. of CT 26.63 140.95 2.63 16.33 10.09 163.07 16.97 163.07 10.13 0.00 0.00 0.00
NMSB Newmil Bancorp, Inc. of CT 13.38 51.90 0.72 8.54 18.85 156.67 14.60 156.67 18.58 0.32 2.39 44.44
PEEK Peekskill Fin. Corp. of NY 17.00 53.16 0.67 15.13 25.37 112.36 29.33 112.36 25.37 0.36 2.12 53.73
SFED SFS Bancorp of Schenectady NY 21.50 25.97 0.85 17.74 24.43 121.20 14.89 121.20 25.29 0.32 1.49 37.65
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.26 (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)
- -----------------------
RCBK Richmond County Fin Corp of NY 1,125 25.65 NA 1.22 4.75 1.22 4.75
RSLN Roslyn Bancorp, Inc. of NY 3,474 17.64 0.18 0.96 5.10 1.22 6.50
SFED SFS Bancorp of Schenectady NY 174 12.29 0.84 0.62 4.91 0.60 4.74
SKAN Skaneateles Bancorp Inc of NY 256 6.90 1.89 0.67 9.83 0.65 9.49
SIB Staten Island Bancorp of NY 2,466 24.73 1.15 1.29 5.21 1.13 4.58
ROSE T R Financial Corp. of NY 3,843 6.27 0.52 0.98 15.68 0.87 14.01
TPNZ Tappan Zee Fin., Inc. of NY 125 17.16 1.39 0.85 4.86 0.84 4.79
WSBI Warwick Community Bncrp of NY 340 23.76 0.69 1.04 4.37 1.04 4.37
YFCB Yonkers Fin. Corp. of NY 332 13.54 0.49 1.04 7.04 1.03 6.97
Comparable Group
- ----------------
AFED AFSALA Bancorp, Inc. of NY 154 12.86 0.30 0.79 5.85 0.79 5.85
ALBK ALBANK Fin. Corp. of Albany NY 4,083 8.81 0.88 1.18 12.94 1.17 12.87
BKC American Bank of Waterbury CT 639 9.01 2.11 1.32 15.52 1.14 13.44
BKCT Bancorp Connecticut of CT 443 10.60 0.91 1.39 13.29 1.23 11.80
CATB Catskill Fin. Corp. of NY 295 24.32 0.35 1.34 5.20 1.34 5.20
DIBK Dime Financial Corp. of CT 922 8.14 0.30 1.94 23.75 1.94 23.75
MECH MECH Financial Inc. of CT 831 10.40 0.58 1.79 17.75 1.78 17.69
HRBF Harbor Federal Bancorp of MD 356 9.32 0.90 0.85 8.52 0.86 8.64
NMSB Newmil Bancorp, Inc. of CT 181 26.10 0.90 1.14 4.28 1.14 4.28
SFED SFS Bancorp of Schenectady NY 174 12.29 0.84 0.62 4.91 0.60 4.74
</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 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 NMV Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Origination and Repayment Activities
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
II-1 Description of Office Facilities
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Financial Analysis of New York Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
Exhibit
Number Description
- ------- -----------
III-3 Financial Analysis of Connecticut and Massachusetts Institutions
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: As of February 27, 1998
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Trustee and Senior 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
The Hudson City Savings Institution
Map of Office Locations
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT I-2
The Hudson City Savings Institution
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
The Hudson City Savings Institution
Key Operating Ratios
<TABLE>
<CAPTION>
At or For the
Nine Months Ended At or For the Year Ended
December 31, March 31,
----------------- ------------------------------------------
1997(1) 1996(1) 1997 1996 1995 1994 1993
------- ------- ---- ---- ---- ---- ----
Performance Ratios:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets ............................ 0.38% 1.01% 0.88% 1.18% 1.05% 1.15% 1.07%
Return on average equity ............................ 3.71 10.36 8.94 12.52 12.06 14.17 14.45
Net interest rate spread(2) ......................... 4.05 3.90 3.97 3.89 4.05 4.04 3.95
Net interest margin(3) .............................. 4.62 4.41 4.48 4.38 4.40 4.38 4.24
Yield on average earning assets ..................... 8.75 8.56 8.64 8.59 7.98 7.92 8.59
Rate on average interest-bearing
liabilities ....................................... 4.70 4.66 4.67 4.70 3.93 3.88 4.64
Average earning assets to average
interest-bearing liabilities ...................... 113.97 112.33 112.56 111.48 109.72 109.55 106.91
Efficiency ratio(4) ................................. 58.48 53.52 54.34 52.07 56.81 55.13 53.75
Expense ratio(5) .................................... 2.80 2.40 2.48 2.32 2.54 2.60 2.44
Asset Quality Ratios:
Non-performing loans to total loans ................. 3.20 3.10 4.06 2.42 1.67 2.25 2.41
Allowance for loan losses to non-performing loans ... 41.24 28.19 29.37 32.57 43.36 31.67 21.28
Allowance for loan losses to total loans ............ 1.32 0.87 1.19 0.79 0.73 0.71 0.51
Non-performing assets to total assets ............... 2.62 2.85 3.60 2.02 1.50 2.12 2.07
Capital Ratios:
Equity to total assets .............................. 10.13 10.00 10.00 9.56 9.05 8.37 7.80
Average equity to average total assets .............. 10.21 9.78 9.88 9.42 8.74 8.11 7.41
</TABLE>
- ----------
(1) Ratios for the nine month periods are stated on an annualized basis. Such
ratios and results are not necessarily indicative of results that may be
expected for the full year.
(2) Net interest rate spread represents the difference between the yield on
average earning assets and the rate on average interest-bearing
liabilities.
(3) Net interest margin represents net interest income as a percentage of
average earning assets.
(4) Total other operating expense, excluding other real estate owned and
repossessed property expense, as a percentage of net interest income and
total other operating income, excluding net securities transactions.
(5) Total other operating expense, excluding other real estate owned and
repossessed property expense, as a percentage of average total assets.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-4
The Hudson City Savings Institution
Investment Portfolio Composition
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------
December 31, 1997 1997 1996 1995
------------------ ----------------- ------------------ ------------------
Carrying % of Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total Value Total
----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
Securities available for sale, at fair value:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities......... $36,943 85.35% $37,329 81.82% $33,452 65.05% $ 2,937 29.78%
Corporate debt securities..................... 6,339 14.65 8,294 18.18 17,977 34.95 6,926 70.22
------- ------ ------- ------ ------- ------ ------- ------
Total securities available for sale......... $43,282 100.00% $45,623 100.00% $51,429 100.00% $ 9,863 100.00%
======= ====== ======= ====== ======= ====== ======= ======
Investment securities, at amortized cost:
U.S. Government and Agency securities......... $19,974 28.04% $17,960 22.71% $13,957 16.81% $14,937 16.67%
Mortgage-backed securities.................... 4,517 6.34 3,050 3.86 4,221 5.09 2,591 2.89
Corporate debt securities..................... 46,743 65.61 57,648 72.91 63,557 76.57 69,238 77.29
State, county and municipal.................... 10 .01 410 .52 1,268 1.53 2,820 3.15
------- ------ ------- ------ ------- ------ ------- ------
Total investment securities................. $71,244 100.00% $79,068 100.00% $83,003 100.00% $89,586 100.00%
======= ====== ======= ====== ======= ====== ======= ======
Investment securities, at fair value............ $71,608 100.51% $78,753 99.60% $83,122 100.14% $87,608 97.79%
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-5
The Hudson City Savings Institution
Yields and Costs
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------------------------------------------
1997 1996
-------------------------------- --------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1)
------- ---- ------- ------- ---- -------
(Dollars in Thousands)
Earning Assets:
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold ............. $ 4,710 $ 202 5.69% $ 2,121 $ 87 5.44%
Securities available for sale .. 39,703 1,960 6.55 55,729 2,879 6.86
Investment securities .......... 72,208 3,565 6.55 84,428 4,063 6.39
Federal Home Loan Bank of
NY stock ..................... 2,812 151 7.13 2,565 124 6.42
Loans receivable ............... 509,634 35,575 9.27 465,883 32,220 9.18
-------- ------- ---- -------- ------- ----
Total earning assets ........ 629,067 41,453 8.75 610,726 39,373 8.56
------- ---- ------- ----
Cash and due from banks ........ 11,048 7,602
Allowance for loan losses ...... (6,953) (3,656)
Other non-earning assets ....... 26,945 25,342
-------- --------
Total assets .............. 660,107 640,014
======== ========
Interest-Bearing Liabilities:
Savings accounts ............... 137,841 3,584 3.45 132,886 3,388 3.38
N.O.W. and money market accounts 94,247 2,178 3.07 95,046 2,144 2.99
Time deposit accounts .......... 310,499 13,513 5.78 307,259 13,342 5.76
Escrow accounts ................ 5,088 89 2.32 5,198 87 2.22
Other borrowings ............... 4,266 176 5.48 3,303 130 5.22
-------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities ................. 551,941 19,540 4.70 543,692 19,091 4.66
------- ---- ------- ----
Non-interest-bearing deposits ... 35,638 28,270
Other non-interest
bearing liabilities ........... 5,106 5,440
Equity .......................... 67,422 62,612
-------- --------
Total liabilities and equity . $660,107 $640,014
======== ========
Net interest income ............. $21,913 $20,282
======= =======
Net interest rate spread......... 4.05% 3.90%
==== ====
Net interest margin.............. 4.62% 4.41%
==== ====
</TABLE>
<PAGE>
EXHIBIT I-5 (Continued)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------- ------------------------------- -------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold ............. $ 1,638 $ 89 5.43% $ 4,908 $ 271 5.52% $ 7,206 $ 344 4.77%
Securities available for sale... 53,445 3,658 6.84 26,889 1,782 6.63 12,307 917 7.45
Investment securities .......... 83,343 5,385 6.46 92,243 6,062 6.57 94,001 6,503 6.92
Federal Home Loan Bank of
NY stock ..................... 2,575 164 6.37 2,578 187 7.25 2,064 160 7.75
Loans receivable ............... 471,295 43,585 9.25 444,645 40,780 9.17 424,187 35,135 8.28
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total earning assets ........ 612,296 52,881 8.64 571,263 49,082 8.59 539,765 43,059 7.98
------- ---- ------- ---- ------- ----
Cash and due from banks ........ 6,860 6,386 6,740
Allowance for loan losses ...... (3,886) (3,304) (2,931)
Other non-earning assets ....... 25,597 23,090 22,869
-------- -------- --------
Total assets .............. 640,867 597,435 566,443
======== ======== ========
Interest-Bearing Liabilities:
Savings accounts ............... 133,209 4,523 3.40 129,281 4,275 3.31 167,284 5,501 3.29
N.O.W. and money market accounts 93,972 2,831 3.01 93,813 2,932 3.13 97,131 2,769 2.85
Time deposit accounts .......... 307,757 17,727 5.76 283,149 16,713 5.90 219,008 10,796 4.93
Escrow accounts ................ 4,579 106 2.31 5,460 124 2.27 6,360 142 2.23
Other borrowings ............... 4,459 239 5.36 745 42 5.64 2,145 101 4.71
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities ................. 543,976 25,426 4.67 512,448 24,086 4.70 491,928 19,309 3.93
------- ---- ------- ---- ------- ----
Non-interest-bearing deposits ... 27,984 24,096 21,021
Other non-interest
bearing liabilities ........... 5,585 4,630 3,983
Equity .......................... 63,322 56,261 49,511
-------- -------- --------
Total liabilities and equity . $640,867 $597,435 $566,443
======== ======== ========
Net interest income ............. $27,455 $24,996 $23,750
======= ======= =======
Net interest rate spread......... 3.97% 3.89% 4.05%
==== ==== ====
Net interest margin.............. 4.48% 4.38% 4.40%
==== ==== ====
</TABLE>
- ----------
(1) Annualized
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-6
The Hudson City Savings Institution
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended March 31,
December 31, ----------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total loans outstanding (end of period) ................... $511,898 $493,019 $450,671 $438,875 $408,989 $389,805
======== ======== ======== ======== ======== ========
Average total loans outstanding (period to date) .......... 509,634 471,295 444,645 424,187 422,752 376,218
======== ======== ======== ======== ======== ========
Allowance for loan losses at beginning of period .......... 5,872 3,546 3,187 2,917 1,999 1,994
Loan charge-offs:
Residential real estate(1) .............................. (391) (162) (111) (88) (9) (360)
Commercial real estate .................................. (1,233) (454) (95) (36) (41) (943)
Commercial business(2) .................................. (2,309) (127) -- (86) (113) (118)
Manufactured home loans ................................. (331) (216) (372) (288) (95) (10)
Financed insurance premiums ............................. (1,608) (1,070) (573) (711) (97) (939)
Other consumer loans .................................... (81) (41) (46) (54) (31) (323)
-------- -------- -------- -------- -------- --------
Total charge-offs ..................................... (5,953) (2,070) (1,197) (1,263) (386) (2,693)
-------- -------- -------- -------- -------- --------
Loan recoveries:
Residential real estate(1) .............................. 8 3 21 93 -- 8
Commercial real estate .................................. 17 11 16 7 -- 45
Commercial business(2) .................................. 7 74 6 4 1 1
Manufactured home loans ................................. 82 45 70 33 18 15
Financed insurance premiums ............................. 284 386 261 161 -- --
Other consumer loans .................................... 31 51 49 66 84 86
-------- -------- -------- -------- -------- --------
Total recoveries ...................................... 429 570 423 364 103 155
-------- -------- -------- -------- -------- --------
Loan charge-offs, net of recoveries ....................... (5,524) (1,500) (774) (899) (283) (2,538)
Provision charged to operations ........................... 6,408 3,826 1,090 1,169 1,201 2,543
Allowance acquired from acquisition ....................... -- -- 43 -- -- --
-------- -------- -------- -------- -------- --------
Allowance for loan losses at end of period ................ 6,756 5,872 3,546 3,187 2,917 1,999
======== ======== ======== ======== ======== ========
Ratio of net charge-offs during the period to average
loans outstanding during the period ..................... 1.08% 0.32% 0.17% 0.21% 0.07% 0.67%
======== ======== ======== ======== ======== ========
Provision as a percentage of average loans ................ 1.26% 0.81% 0.25% 0.28% 0.28% 0.68%
======== ======== ======== ======== ======== ========
Allowance as a percentage of non-performing loans ......... 41.24% 29.37% 32.57% 43.36% 31.67% 21.28%
======== ======== ======== ======== ======== ========
Allowance as a percentage of total loans (end of period) .. 1.32% 1.19% 0.79% 0.73% 0.71% 0.51%
======== ======== ======== ======== ======== ========
</TABLE>
- ----------
(1) Includes home equity and construction loans.
(2) Includes warehouse lines of credit.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-7
The Hudson City Savings Institution
NMV Analysis
Net Market Value of Assets and Liabilities
----------------------------------------------------------------
Change in
Interest Rates Net
in Basis Points Market
(Rate Shock) Value $ Change % Change
--------------- ------ -------- --------
(Dollars in thousands)
200 89,641 (2,322) (2.52)%
150 90,468 (1,495) (1.63)%
100 91,142 (821) (0.89)%
50 91,636 (327) (0.36)%
0 91,963 0 --
(50) 91,551 (412) (0.45)%
(100) 90,698 (1,265) (1.38)%
(150) 89,938 (2,025) (2.20)%
(200) 89,100 (2,863) (3.11)%
Net Interest Income
----------------------------------------------------------------
Change in
Interest Rates Net
in Basis Points Interest
(Rate Shock) Income $ Change % Change
--------------- -------- -------- --------
(Dollars in thousands)
200 26,651 1,111 4.35%
150 26,406 866 3.39%
100 26,136 596 2.33%
50 25,855 315 1.23%
0 25,540 0 --
(50) 25,032 (508) (1.99)%
(100) 24,569 (971) (3.80)%
(150) 24,105 (1,435) (5.62)%
(200) 23,635 (1,905) (7.46)%
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-8
The Hudson City Savings Institution
Fixed Rate and Adjustable Rate Loans
The following table sets forth the dollar amounts in each loan category at
December 31, 1997 that are contractually due after December 31, 1998, and
whether such loans have fixed interest rates or adjustable interest rates.
Due after December 31, 1998
------------------------------------
Fixed Adjustable Total
----- ---------- -----
(In Thousands)
Residential real estate(1) ........... $ 74,222 $202,142 $276,364
Commercial real estate ............... 23,671 38,388 62,059
Commercial business loans(2) ......... 1,884 6,099 7,983
Manufactured home loans .............. 47,135 50,950 98,085
Other consumer loans ................. 8,966 -- 8,966
-------- -------- --------
Total .............................. $155,878 $297,579 $453,457
======== ======== ========
- ----------
(1) Includes home equity loans.
(2) Includes warehouse lines of credit.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-9
The Hudson City Savings Institution
Loan Portfolio Composition
<TABLE>
<CAPTION>
March 31,
December 31, -----------------------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential mortgage.... $250,649 48.96% $246,462 49.99% $214,226 47.53% $225,437 51.37% $203,819 49.83% $186,874 47.94%
Home equity............. 27,441 5.36 27,630 5.60 26,936 5.98 27,938 6.37 26,620 6.51 25,540 6.55
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total residential
real estate........... 278,090 54.32 274,092 55.59 241,162 53.51 253,375 57.74 230,439 56.34 212,414 54.49
Commercial.............. 73,902 14.44 67,697 13.73 70,854 15.72 70,328 16.02 65,571 16.03 59,268 15.20
Construction............ 3,980 0.78 2,725 0.55 4,317 0.96 6,446 1.47 9,899 2.42 11,159 2.86
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate loans 355,972 69.54 344,514 69.87 316,333 70.19 330,149 75.23 305,909 74.79 282,841 72.55
Consumer loans:
Manufactured home loans. 98,307 19.20 92,651 18.79 80,399 17.84 72,184 16.45 65,285 15.96 78,858 20.23
Financed insurance
premiums(1)............ 23,395 4.57 23,535 4.78 13,503 3.00 8,674 1.98 7,098 1.74 5,248 1.35
Other consumer loans.... 12,140 2.37 11,577 2.35 10,155 2.25 8,448 1.93 7,789 1.90 9,727 2.50
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total consumer loans... 133,842 26.14 127,763 25.92 104,057 23.09 89,306 20.36 80,172 19.60 93,833 24.08
Commercial business
loans.................. 13,907 2.72 16,146 3.27 17,393 3.86 13,821 3.15 12,827 3.14 8,086 2.07
Warehouse lines of
credit................. 7,062 1.38 3,567 0.72 11,797 2.62 4,599 1.05 9,520 2.33 8,901 2.28
Net deferred loan costs
and unearned discount.. 1,115 0.22 1,029 0.22 1,091 0.24 1,000 0.21 561 0.14 (3,856) (.98)
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans............. 511,898 100.00% 493,019 100.00% 450,671 100.00% 438,875 100.00% 408,989 100.00% 389,805 100.00%
====== ====== ====== ====== ====== ======
Less:
Allowance for loan
losses................. (6,756) (5,872) (3,546) (3,187) (2,917) (1,999)
-------- -------- -------- -------- -------- --------
Total loans
receivable, net....... $505,142 $487,147 $447,125 $435,688 $406,072 $387,806
======== ======== ======== ======== ======== ========
</TABLE>
- ----------
(1) Includes personal as well as commercial insurance premiums.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-10
The Hudson City Savings Institution
Loan Originations and Repayment Activities
<TABLE>
<CAPTION>
Net
Deferred
Commercial Loan
Residential Real Commercial Warehouse Financed Other Costs and
Real Estate Estate Business Lines of Manufactured Insurance Consumer Unearned Total
Loans(1) Loans Loans Credit(2) Home Loans Premiums Loans Subtotals Discount Loans
----------- ---------- ---------- --------- ------------ --------- -------- --------- --------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
March 31, 1995 ............ $259,821 $70,328 $13,821 $4,599 $72,184 $ 8,674 $ 8,448 $437,875 $1,000 $438,875
====== ========
Add: loan originations,
other advances and
transfers ................ 27,246 9,145 16,997 7,198 23,402 34,417 8,601 127,006
Less: principal repayments
and other reductions ...... (41,477) (8,524) (13,425) -- (14,815) (29,015) (6,848) (114,104)
Less: charge-offs .......... (111) (95) -- -- (372) (573) (46) (1,197)
-------- ------- ------- ------ ------- ------- ------- --------
Balance as of
March 31, 1996 ............ 245,479 70,854 17,393 11,797 80,399 13,503 10,155 449,580 $1,091 $450,671
====== ========
Add: loan originations,
other advances and
transfers ................ 68,086 14,030 13,201 -- 26,773 63,932 10,749 196,771
Less: principal repayments
and other reductions ...... (36,586) (16,733) (14,321) (8,230) (14,305) (52,830) (9,286) (152,291)
Less: charge-offs .......... (162) (454) (127) -- (216) (1,070) (41) (2,070)
-------- ------- ------- ------ ------- ------- ------- --------
Balance as of
March 31, 1997 ............ 276,817 67,697 16,146 3,567 92,651 23,535 11,577 491,990 $1,029 $493,019
====== ========
Add: loan originations,
other advances and
transfers ................. 49,879 12,160 11,601 3,495 17,222 54,233 7,189 155,779
Less: principal repayments
and other reductions ...... (44,235) (4,722) (11,531) -- (11,235) (52,765) (6,545) (131,033)
Less: charge-offs .......... (391) (1,233) (2,309) -- (331) (1,608) (81) (5,953)
-------- ------- ------- ------ ------- ------- ------- ---------
Balance as of
December 31, 1997 ......... $282,070 $73,902 $13,907 $7,062 $98,307 $23,395 $12,140 $510,783 $1,115 $511,898
======== ======= ======= ====== ======= ======= ======= ======== ====== ========
</TABLE>
- ----------
(1) Includes home equity and construction loans.
(2) Activity represents the net drawdowns and repayments.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-11
The Hudson City Savings Institution
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
--------------------------- -------------------------------------------
Commercial Financed Other
Residential Commercial Business Manufactured Insurance Consumer
Real Estate(1) Real Estate Loans(2) Home Loans Premiums Loans Total
-------------- ----------- ---------- ------------ --------- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
0 months to 1 year............. $ 5,706 $11,843 $12,986 $ 222 $23,395 $ 3,174 $ 57,326
After 1 year:
1 to 2 years................. 1,165 6,217 707 304 -- 1,227 9,620
2 to 3 years................. 998 7,213 2,524 608 -- 2,425 13,768
3 to 5 years................. 6,649 24,280 2,707 2,096 -- 4,287 40,019
5 to 10 years ............... 17,895 13,219 2,045 15,477 -- 811 49,447
10 to 15 years............... 59,037 4,245 -- 42,422 -- 213 105,917
Over 15 years................ 190,620 6,885 -- 37,178 -- 3 234,686
-------- ------- ------- ------- ------- ------- --------
Total due after one year....... 276,364 62,059 7,983 98,085 -- 8,966 453,457
-------- ------- ------- ------- ------- ------- --------
Total amount due............... $282,070 $73,902 $20,969 $98,307 $23,395 $12,140 510,783
======== ======= ======= ======= ======= =======
Net deferred loan costs
and unearned discount........ 1,115
--------
Total loans............... 511,898
Less:
Allowance for loan losses...... (6,756)
--------
Total loans receivable, net.. $505,142
========
</TABLE>
- ----------
(1) Includes home equity and construction loans.
(2) Includes warehouse lines of credit.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-12
The Hudson City Savings Institution
Non-Performing Assets
<TABLE>
<CAPTION>
March 31,
December 31, ------------------------------------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Non-accruing loans:
<S> <C> <C> <C> <C> <C> <C>
Residential real estate(1)......... $4,485 $4,553 $3,496 $1,900 $2,418 $2,198
Commercial real estate............. 4,279 3,239 1,587 1,884 1,805 2,651
Commercial business................ -- 2,318 75 27 125 112
Manufactured home loans............ 3,241 2,260 1,597 1,581 1,363 1,125
Financed insurance premiums........ 3,013 2,867 1,527 819 1,114 1,172
Other consumer loans............... 63 45 4 10 39 96
------ ------ ------ ------ ------ ------
Total............................ 15,081 15,282 8,286 6,221 6,864 7,354
------ ------ ------ ------ ------ ------
Accruing loans contractually
past due 90 days or more:
Residential real estate(1)......... 435 570 1,262 400 125 617
Commercial real estate............. 867 3,874 1,316 591 1,686 1,131
Commercial business................ -- 244 -- -- -- --
Manufactured home loans............ -- -- 22 16 63 54
Financed insurance premiums........ -- -- -- -- -- --
Other consumer loans............... -- 23 -- 122 473 237
------ ------ ------ ------ ------ ------
Total............................ 1,302 4,711 2,600 1,129 2,347 2,039
------ ------ ------ ------ ------ ------
Total non-performing loans........... 16,383 19,993 10,886 7,350 9,211 9,393
====== ====== ====== ====== ====== ======
Foreclosed assets:
Residential real estate............ 59 48 160 49 10 250
Commercial real estate............. 300 2,860 921 726 1,969 569
Repossessed property............... 700 539 635 503 577 468
------ ------ ------ ------ ------ ------
Total............................ 1,059 3,447 1,716 1,278 2,556 1,287
====== ====== ===== ====== ====== ======
Total non-performing assets.......... 17,442 23,440 12,602 8,628 11,767 10,680
====== ====== ====== ====== ====== ======
Allowance for loan losses............ 6,756 5,872 3,546 3,187 2,917 1,999
====== ====== ====== ====== ====== ======
Allowance for loan losses as a
percentage of non-performing loans.. 41.24% 29.37% 32.57% 43.36% 31.67% 21.28%
====== ====== ====== ====== ====== ======
Non-performing loans as a
percentage of total loans........... 3.20% 4.06% 2.42% 1.67% 2.25% 2.41%
==== ==== ==== ==== ==== ====
Non-performing assets as a
percentage of total assets.......... 2.62% 3.60% 2.02% 1.50% 2.12% 2.07%
==== ==== ==== ==== ==== ====
</TABLE>
- ----------
(1) Includes home equity loans.
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-13
The Hudson City Savings Institution
Deposit Composition
<TABLE>
<CAPTION>
Balance as of Balance as of March 31,
December 31, ---------------------------------------------------------------
1997 1997 1996 1995
------------------- ------------------- ------------------- -------------------
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts (3.00% to 3.92%) ... $140,483 23.97% $136,109 24.11% $130,032 23.42% $138,621 26.94%
N.O.W. and money market accounts
(2.00% to 4.88%) .................. 94,046 16.04 92,347 16.36 93,919 16.92 92,511 17.98
Time deposits:
2.00 - 2.99% ........................ 470 0.08 -- -- -- -- -- --
3.00 - 3.99% ........................ 419 0.07 824 0.15 958 0.17 6,625 1.29
4.00 - 4.99% ........................ 3,497 0.60 15,319 2.71 32,165 5.79 44,052 8.56
5.00 - 5.99% ........................ 259,419 44.25 228,732 40.51 149,852 26.99 93,839 18.24
6.00 - 6.99% ........................ 15,659 2.67 27,070 4.79 84,703 15.26 86,972 16.91
7.00 - 7.99% ........................ 35,817 6.11 35,441 6.28 34,516 6.22 31,024 6.03
8.00 - 8.99% ........................ -- -- -- -- 560 0.10 1,328 0.26
-------- ------ -------- ------ -------- ------ -------- ------
Total time deposit accounts ....... 315,281 53.78 307,386 54.44 302,754 54.53 263,840 51.29
-------- ------ -------- ------ -------- ------ -------- ------
Non-interest bearing accounts ....... 36,421 6.21 28,757 5.09 28,483 5.13 19,479 3.79
Total deposits ...................... $586,231 100.00% $564,599 100.00% $555,188 100.00% $514,451 100.00%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
Source: HCSI's prospectus
<PAGE>
EXHIBIT I-14
The Hudson City Savings Institution
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
Amount Due
----------------------------------------------------------------------------------------------
12 month 12 month 12 month 12 month 12 month
period ended period ended period ended period ended period ended
December 31, December 31, December 31, December 31, December 31,
1998 1999 2000 2001 2002 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(In Thousands)
Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C>
2.00 - 2.99% ....... $ 470 $ -- $ -- $ -- $ -- $ -- $ 470
3.00 - 3.99% ....... 419 -- -- -- -- -- 419
4.00 - 4.99% ....... 3,377 120 -- -- -- -- 3,497
5.00 - 5.99% ....... 164,824 69,240 14,155 8,364 2,037 799 259,419
6.00 - 6.99% ....... 7,737 5,609 1,203 902 208 -- 15,659
7.00 - 7.99% ....... 1,533 26,050 2,824 5,410 -- -- 35,817
8.00 - 8.99% ....... -- -- -- -- -- -- --
-------- -------- ------- ------- ------ ---- --------
Total ........... $178,360 $101,019 $18,182 $14,676 $2,245 $799 $315,281
======== ======== ======= ======= ====== ==== ========
</TABLE>
Source: HCSI's prospectus
<PAGE>
EXHIBIT II-1
The Hudson City Savings Institution
Description of Office Facilities
<TABLE>
<CAPTION>
Total
Owned Lease Approximate
Date or Expiration Square Net Book
Location Acquired Leased Date Footage Value
- -------- -------- ------ ---------- ----------- --------
Main Office:
<S> <C> <C> <C> <C> <C>
One Hudson City Centre(1) 1990 Owned -- 64,433 $8,611,213
Corner of State and Green Streets
Hudson, New York 12534
Branch Offices:
Coleman Street 1970 Owned -- 6,330 402,466
Chatham, New York 12037
Route 9 (3) 1994 Owned -- 4,873 1,508,599
Valatie, New York 12184
Church Street 1974 Owned -- 1,798 270,073
Copake, New York 12516
Route 20 and McClellen 1975 Owned -- 3,260 269,316
Nassau, New York 12123
23 Fairview Plaza 1983 Leased April 1998(5) 4,500 48,368
160 Fairview Avene
Hudson, New York 12534
41 State Street 1989 Leased September 1999(5) 3,200 1,038
Albany, New York 12201
Greenport Town Center(2) 1994 Leased June 1999(5) 362 32,148
Fairview Avenue
Hudson, New York 12534
Route 44 East 1994 Owned -- 2,560 269,508
Millerton, New York 12546
622 Columbia Turnpike (4) 1996 Owned/ July 2000(5) 2,996 643,478
East Greenbush, New York 12061 Leased
3-93 Carman Road 1996 Leased December 2000(5) 2,300 137,638
Schenectady, New York 12303
2628 Route 23(2) 1997 Leased May 2002(5) 374 34,807
Hillsdale, New York 12529
</TABLE>
- ----------
(1) On January 5, 1998, the Bank's Warren Street branch was relocated to the
Bank's main office.
(2) Banking operations are located inside of supermarkets at these locations.
(3) Branch relocated to this address in 1994 from previous location.
(4) Bank owns the building and leases the land.
(5) Does not include renewable terms.
Source: HCSI's prospectus
<PAGE>
EXHIBIT II-2
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%
Quarter 4 8.50% 5.34% 5.48% 5.92%
February 27, 1998 8.50% 5.31% 5.40% 5.92%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
California Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,679 D 371 12-31 10/72 62.44 5,817
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,590 D 249 12-31 05/59 89.25 5,093
GSB Golden State Bancorp of CA NYSE California Div. 16,029 D 178 06-30 10/83 35.63 1,818
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 S 85 12-31 01/71 29.25 783
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 4,168 D 37 12-31 / 14.75 286
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,160 D 24 12-31 12/83 40.38 428
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 S 26 12-31 05/86 17.06 448
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,246 D 37 12-31 05/86 34.75 419
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,766 D 23 03-31 03/96 19.38 348
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 S 18 12-31 10/91 42.50 253
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,063 D 19 06-30 06/95 17.88 113
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 1,010 D 14 12-31 04/94 19.81 143
ITLA ITLA Capital Corp of CA (3) OTC Los Angeles CA R.E. 902 S 6 12-31 10/95 20.19 159
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 S 6 12-31 / 19.75 61
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 852 D 8 06-30 12/93 20.00 93
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 724 D 10 06-30 06/96 22.75 107
HBNK Highland Bancorp of CA OTC Los Angeles CA R.E. 550 D 7 12-31 / 35.75 83
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 408 D 7 12-31 02/95 19.75 64
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 408 D 8 06-30 06/95 18.00 42
LFCO Life Financial Corp of CA OTC Southern CA Thrift 294 S 5 12-31 / 16.00 105
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 125 S 3 12-31 01/96 12.75 11
Florida Companies
- -----------------
BKUNA BankUnited Fin. Corp. of FL OTC Miami FL Thrift 3,029 D 16 09-30 12/85 14.69 209
OCN Ocwen Financial Corp. of FL NYSE Southeast FL Div. 2,956 S 1 12-31 / 30.00 1,817
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 S 60 12-31 11/83 13.50 348
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 S 47 09-30 09/93 37.88 191
HARB Harbor FL Bncp MHC of FL (46.1) OTC Eastern FL Thrift 1,129 D 23 09-30 01/94 70.50 351
FFFL Fidelity Bcsh MHC of FL (47.7) OTC Southeast FL Thrift 1,046 S 20 12-31 01/94 32.75 222
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Florida Companies (continued)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 S 20 12-31 10/94 36.50 186
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 400 D 9 12-31 01/94 19.38 73
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 21,849 D 91 12-31 08/86 30.50 3,549
SVRN Sovereign Bancorp, Inc. of PA OTC PA,NJ,DE M.B. 14,336 D 150 12-31 08/86 19.38 1,811
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,084 D 74 12-31 01/94 74.25 3,142
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 10,528 D 61 12-31 11/93 55.88 1,464
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 6,073 D 35 09-30 04/94 60.19 1,446
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 4,083 D 108 12-31 04/92 48.63 628
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,843 D 15 12-31 06/93 32.97 580
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 S 8 12-31 01/97 22.81 995
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,265 D 31 09-30 01/88 40.50 865
SIB Staten Island Bancorp of NY (3) NYSE New York City NY Thrift 2,466 P 16 12-31 12/97 20.50 881
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 S 29 03-31 08/94 31.25 374
CMSB Commonwealth Bancorp Inc of PA OTC Philadelphia PA M.B. 2,269 D 56 12-31 06/96 20.38 331
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,249 D 58 06-30 11/94 15.88 743
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,243 D 30 06-30 03/94 35.50 342
HARS Harris Fin. MHC of PA (24.3) OTC Harrisburg PA M.B. 2,201 D 33 12-31 01/94 20.50 693
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,975 D 33 12-31 09/93 24.50 215
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 S 11 12-31 11/93 39.75 601
JSB JSB Financial, Inc. of NY (3) NYSE New York City NY Thrift 1,531 S 13 12-31 06/90 53.81 533
WSFS WSFS Financial Corp. of DE (3) OTC Wilmington Div. 1,515 D 16 12-31 11/86 20.75 259
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,489 S 10 12-31 07/96 35.25 288
DIME Dime Community Bancorp of NY (3) OTC New York City NY Thrift 1,488 D 15 06-30 06/96 25.13 313
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,476 D 18 06-30 07/94 18.63 180
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,182 D 22 06-30 02/84 25.50 226
MFSL Maryland Fed. Bancorp of MD OTC Southern MD Thrift 1,175 S 27 02-28 06/87 35.94 233
RCBK Richmond County Fin Corp of NY (3) OTC New York City Thrift 1,125 P 0 02/98 16.66 408
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 1,088 D 7 12-31 11/95 25.50 201
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,049 D 17 12-31 07/92 45.75 367
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,019 D 29 06-30 07/87 31.75 162
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 884 D 17 12-31 08/84 37.81 145
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 876 D 15 12-31 11/85 10.63 134
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 S 11 12-31 06/90 19.13 102
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 784 D 13 12-31 03/96 19.63 152
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 774 S 16 12-31 09/92 34.88 99
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 728 D 10 09-30 10/94 17.75 194
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 S 16 12-31 10/95 22.75 104
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 676 D 7 12-31 06/95 18.75 122
TSBS Peoples Bcrp, MHC of NJ (35.9) (3) OTC Central NJ Thrift 640 D 14 12-31 08/95 43.25 391
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 S 4 03-31 08/97 13.25 119
THRD TF Financial Corp. of PA OTC PA, NJ Thrift 597 D 14 12-31 07/94 26.00 83
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 S 20 12-31 12/88 35.00 84
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 539 D 4 09-30 09/86 26.25 81
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 529 S 12 12-31 12/95 18.25 79
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 S 10 12-31 04/87 29.75 81
LVSB Lakeview Financial of NJ OTC Northern NJ Thrift 518 S 8 07-31 12/93 25.88 108
PFNC Progress Financial Corp. of PA OTC Southeastern PA Thrift 493 D 10 12-31 07/83 16.88 69
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 D 7 03-31 10/94 15.25 35
RARB Raritan Bancorp of Raritan NJ (3) OTC Central NJ Thrift 408 D 6 12-31 03/87 26.50 63
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 393 D 8 09-30 06/88 28.88 45
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 379 D 5 09-30 01/95 17.50 42
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 377 D 10 12-31 11/89 26.75 76
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 375 D 4 12-31 04/93 43.50 90
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 367 D 11 12-31 01/95 35.88 85
HARL Harleysville SB of PA OTC Southeastern PA Thrift 348 D 4 09-30 08/87 30.00 50
WSBI Warwick Community Bncrp of NY (3) OTC Southeast NY Thrift 340 P 4 05-31 12/97 16.00 103
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 332 D 4 09-30 04/96 18.69 56
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 326 D 7 06-30 03/87 31.75 69
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 S 6 12-31 01/96 20.00 52
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 322 D 4 09-30 09/93 30.50 37
FIBC Financial Bancorp, Inc. of NY OTC New York City NY Thrift 308 D 5 09-30 08/94 26.00 44
PHFC Pittsburgh Home Fin Corp of PA OTC Pittsburgh PA Thrift 300 D 9 09-30 04/96 17.75 35
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 295 D 4 09-30 04/96 18.38 85
WVFC WVS Financial Corp. of PA OTC Pittsburgh PA Thrift 292 D 5 06-30 11/93 38.00 67
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 291 D 1 06-30 05/94 21.63 112
FBER 1st Bergen Bancorp of NJ OTC Northern NJ Thrift 285 S 4 12-31 04/96 19.75 57
WYNE Wayne Bancorp, Inc. of NJ OTC Northern NJ Thrift 267 S 5 12-31 06/96 24.50 49
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 265 S 5 12-31 / 8.75 38
GDVS Greater DV SB,MHC of PA (19.9) OTC Southeast PA Thrift 260 D 7 12-31 03/95 31.00 101
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 256 D 9 12-31 06/86 19.13 27
IFSB Independence FSB of DC OTC Washington DC Ret. 252 S 2 12-31 06/85 17.00 22
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 234 D 9 03-31 08/94 24.00 41
ESBK Elmira Svgs Bank (The) of NY (3) OTC NY,PA Thrift 228 S 6 12-31 03/85 28.88 21
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 S 5 12-31 11/94 30.50 54
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 213 D 6 06-30 02/87 22.00 48
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 S 9 12-31 07/97 18.00 50
PBHC Pathfinder BC MHC of NY (46.1) (3) OTC Upstate NY Thrift 193 S 5 12-31 11/95 21.50 62
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 184 D 3 06-30 12/95 17.00 53
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 182 D 6 12-31 04/97 18.50 39
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 D 4 12-31 06/95 21.50 26
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 160 S 5 09-30 10/96 19.63 27
SKBO First Carnegie MHC of PA (45.0) OTC Western PA Thrift 147 S 3 03-31 04/97 18.63 43
PRBC Prestige Bancorp of PA OTC Southwestern PA Thrift 143 D 4 12-31 06/96 19.13 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 125 S 1 03-31 10/95 18.75 28
GOSB GSB Financial Corp. of NY (3) OTC Southeast NY Thrift 116 D 2 09-30 07/97 16.50 37
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 112 D 2 03-31 06/96 28.63 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 108 D 2 06-30 01/97 20.00 22
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 101 D 5 09-30 04/96 18.50 26
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh, PA Thrift 88 S 3 12-31 10/97 18.00 15
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 S 2 09-30 07/93 10.75 8
USAB USABancshares, Inc of PA (3) OTC Philadelphia PA Thrift 64 S 1 12-31 / 10.50 8
PWBK Pennwood Bancorp, Inc. of PA OTC Pittsburgh PA Thrift 47 D 3 06-30 07/96 22.00 12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI,NY Div. 19,760 D 221 12-31 01/88 60.59 3,869
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,189 D 108 06-30 12/84 35.38 1,153
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,557 D 52 12-31 05/87 26.50 906
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,460 D 35 03-31 01/92 52.38 681
MAFB MAF Bancorp, Inc. of IL OTC Chicago IL Thrift 3,458 D 21 12-31 01/90 37.25 559
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 S 19 12/31 / 22.63 309
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,941 D 35 03-31 07/92 43.00 389
DNFC D&N Financial Corp. of MI OTC Northern MI Ret. 1,815 D 37 12-31 02/85 26.25 239
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,613 D 26 12-31 08/83 29.25 371
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,598 D 23 09-30 06/93 43.50 228
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,544 D 49 12-31 11/89 31.88 293
ABCL Alliance Bancorp, Inc. of IL OTC Chicago IL M.B. 1,364 D 14 12-31 07/92 27.50 221
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,258 S 32 12-31 04/93 27.00 270
AADV Advantage Bancorp, Inc. of WI OTC WI,IL Thrift 1,027 D 15 09-30 03/92 69.50 225
METF Metropolitan Fin. Corp. of OH OTC Northeast OH Thrift 925 D 15 12-31 / 16.81 119
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 886 D 26 12-31 08/94 29.50 157
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 853 D 17 12-31 06/90 29.50 224
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 750 D 25 06-30 12/89 25.50 206
NASB North American SB, FSB of MO OTC KS,MO M.B. 734 D 7 09-30 09/85 66.50 149
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 709 D 16 06-30 01/88 31.50 161
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 691 D 7 12-31 06/94 29.00 120
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 678 D 14 03-31 01/88 22.00 167
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 668 D 19 12-31 12/83 13.00 115
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 645 D 22 12-31 07/92 13.25 57
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 615 D 10 06-30 06/93 34.25 139
EMLD Emerald Financial Corp. of OH OTC Cleveland OH Thrift 603 S 14 12-31 / 22.13 112
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 581 D 19 06-30 04/92 29.00 86
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 580 D 10 12-31 10/95 15.25 130
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 S 13 12-31 05/96 26.00 127
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 545 D 4 06-30 / 12.00 39
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 542 D 5 12-31 04/95 15.25 51
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 535 D 12 12-31 03/96 18.00 101
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 S 13 03-31 09/93 31.25 121
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 521 D 11 12-31 / 25.38 82
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 490 D 5 09-30 12/93 24.50 69
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 487 D 5 12-31 02/92 37.50 118
FFSX First FSB MHC Sxld of IA (46.1) OTC Western IA Thrift 459 D 13 06-30 07/92 31.13 88
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 438 D 12 12-31 03/92 47.13 60
PERM Permanent Bancorp, Inc. of IN OTC Southwest IN Thrift 420 D 11 03-31 04/94 29.50 62
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 414 D 3 06-30 01/94 16.00 47
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 408 D 10 09-30 06/94 45.63 91
CASH First Midwest Fin., Inc. of OH OTC IA,SD R.E. 408 D 12 09-30 09/93 22.88 62
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 403 D 11 09-30 10/94 20.13 61
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 397 S 10 12-31 07/94 26.75 63
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 396 D 9 06-30 12/92 23.00 61
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 S 8 12-31 03/87 20.50 66
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 392 D 5 06-30 03/94 28.75 54
FMBD First Mutual Bancorp Inc of IL OTC Central IL Thrift 391 D 14 12-31 07/95 20.13 71
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 389 D 6 09-30 04/94 44.19 72
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 388 D 8 06-30 07/87 22.00 91
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 382 D 8 09-30 12/95 32.63 136
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 368 D 6 12-31 06/92 31.00 84
INBI Industrial Bancorp of OH OTC Northern OH Thrift 364 D 10 12-31 08/95 18.50 94
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 353 D 4 12-31 09/96 18.63 128
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 350 D 9 09-30 03/95 32.75 78
KNK Kankakee Bancorp, Inc. of IL AMEX Illinois Thrift 343 D 9 12-31 01/93 33.88 46
HMCI HomeCorp, Inc. of Rockford IL OTC Northern IL Thrift 332 D 9 12-31 06/90 27.56 47
WFI Winton Financial Corp. of OH AMEX Cincinnati OH R.E. 324 S 5 09-30 08/88 26.88 54
WCBI WestCo Bancorp, Inc. of IL OTC Chicago IL Thrift 316 D 1 12-31 06/92 29.00 71
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 305 D 5 06-30 11/90 20.50 47
FSFF First SecurityFed Fin of IL OTC Chicago, IL Thrift 303 P 5 12-31 10/97 15.38 99
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 301 D 5 09-30 10/94 33.38 66
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 294 D 7 09-30 07/87 22.25 75
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 274 D 7 12-31 05/96 20.75 50
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 264 D 5 09-30 03/94 27.00 44
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 256 D 2 06-30 04/87 25.13 27
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAYN Wayne Svgs Bks MHC of OH (47.8) OTC Central OH Thrift 255 D 6 03-31 06/93 29.50 67
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 D 8 06-30 12/93 22.50 43
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 239 D 5 12-31 02/93 36.75 46
HFBC HopFed Bancorp of KY OTC Southwest KY Thrift 237 P 5 09-30 02/98 17.31 70
LARK Landmark Bancshares, Inc of KS OTC Central KS Thrift 234 D 5 09-30 03/94 22.00 37
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 S 7 12-31 01/88 27.00 32
GFED Guaranty Fed Bancshares of MO OTC Southwest MO Thrift 231 D 4 06-30 12/97 12.56 78
EBI Equality Bancorp, Inc. of MO AMEX St Louis Thrift 229 D 3 03-31 12/97 15.94 40
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 D 2 06-30 06/93 28.13 36
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 219 D 3 09-30 10/94 15.88 36
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 216 D 3 06-30 12/96 22.63 57
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 216 D 4 06-30 08/87 9.75 30
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 S 4 12-31 03/96 21.00 69
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 211 D 3 09-30 04/95 20.00 51
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 209 D 6 09-30 07/92 23.00 36
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 28.75 47
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 201 D 8 12-31 04/95 18.88 37
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 S 4 12-31 02/95 28.25 26
HCBB HCB Bancshares of Camden AR OTC Southern AR Thrift 200 S 7 06-30 05/97 14.75 39
MARN Marion Capital Holdings of IN OTC Central IN Thrift 192 D 2 06-30 03/93 27.00 48
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 191 D 4 06-30 04/93 18.50 27
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 S 3 12-31 06/95 22.25 39
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 179 S 5 09-30 05/94 48.75 102
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 177 D 3 12-31 08/96 18.75 44
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 177 D 3 12-31 04/97 18.88 39
EGLB Eagle BancGroup of IL OTC Central IL Thrift 171 D 3 12-31 07/96 20.25 24
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 170 D 3 06-30 03/95 14.88 39
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 168 D 4 12-31 04/95 22.00 42
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 D 7 06-30 08/93 22.00 58
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 S 8 06-30 04/94 22.25 36
FBSI First Bancshares, Inc. of MO OTC Southcentral MO Thrift 162 D 6 06-30 12/93 17.00 37
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 158 S 2 06-30 04/95 27.25 38
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 148 D 4 12-31 11/92 17.00 17
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GTPS Great American Bancorp of IL OTC East Central IL Thrift 142 D 3 12-31 06/95 19.75 33
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 138 S 6 12-31 12/96 19.25 23
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 135 D 7 09-30 10/92 12.63 22
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 134 D 2 12-31 09/96 14.75 42
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 D 3 06-30 07/95 16.25 26
CLAS Classic Bancshares, Inc. of KY OTC Eastern KY Thrift 132 S 3 03-31 12/95 18.88 25
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 123 D 2 12-31 12/93 18.13 26
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 S 4 12-31 12/93 19.00 18
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 119 D 5 09-30 04/95 20.75 21
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 115 D 3 03-31 09/95 18.75 15
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 114 D 2 09-30 10/93 14.75 14
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 113 D 1 06-30 05/95 13.75 23
UCBC Union Community Bancorp of IN OTC W.Central IN Thrift 112 P 1 12-31 12/97 14.63 45
CBES CBES Bancorp, Inc. of MO OTC Western MO Thrift 111 D 2 06-30 09/96 25.50 26
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 D 2 09-30 10/95 16.69 33
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 D 1 09-30 11/96 24.25 47
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 106 D 1 06-30 04/97 17.75 32
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 106 D 4 06-30 07/97 12.75 21
FTNB Fulton Bancorp, Inc. of MO OTC Central MO Thrift 104 S 2 06-30 10/96 21.75 37
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 100 D 4 12-31 04/96 17.13 17
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 100 D 2 09-30 06/95 15.50 23
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 100 D 3 03-31 10/94 22.25 19
CNSB CNS Bancorp, Inc. of MO OTC Central MO Thrift 97 S 5 12-31 06/96 18.50 31
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 95 D 4 06-30 12/94 20.63 19
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 95 D 1 06-30 01/94 17.00 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 S 1 12-31 08/94 20.50 43
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 S 3 06-30 02/95 17.25 16
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 94 S 4 06-30 08/95 23.50 19
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 94 S 3 09-30 10/94 15.00 13
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 92 D 1 06-30 04/96 18.75 27
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 89 D 3 06-30 06/94 14.50 12
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 89 D 2 06-30 01/94 14.25 22
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 88 D 3 06-30 03/95 20.50 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 86 D 2 06-30 08/95 13.88 18
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 D 1 12-31 06/95 16.25 20
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 S 1 12-31 11/96 13.94 30
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 85 D 1 09-30 02/95 23.88 20
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 S 2 12-31 10/93 23.25 10
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 82 D 2 09-30 09/96 16.50 23
MSBF MSB Financial, Inc of MI OTC Southcentral MI Thrift 77 D 2 06-30 02/95 17.25 21
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 S 1 06-30 12/96 18.63 17
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 S 2 06-30 03/95 14.75 8
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 69 D 1 09-30 03/95 18.38 14
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 63 D 1 12-31 01/95 19.50 17
NSLB NS&L Bancorp, Inc of Neosho MO OTC Southwest MO Thrift 60 S 2 09-30 06/95 17.38 12
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 S 1 09-30 06/96 16.50 17
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 57 D 2 09-30 03/97 16.75 22
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 49 S 2 09-30 10/95 13.63 11
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 S 1 06-30 07/96 15.13 14
RELI Reliance Bancshares Inc of WI OTC Milwaukee WI Thrift 45 D 1 06-30 04/96 9.13 23
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 44 D 1 06-30 07/96 9.00 8
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 D 2 09-30 02/95 22.63 7
LONF London Financial Corp. of OH OTC Central OH Thrift 38 D 1 09-30 04/96 14.88 8
JOAC Joachim Bancorp, Inc. of MO OTC Eastern MO Thrift 34 D 1 03-31 12/95 16.63 12
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 8,184 D 111 12-31 07/88 37.56 2,297
WBST Webster Financial Corp. of CT OTC Central CT Thrift 7,020 D 84 12-31 12/86 64.25 877
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,795 D 141 12-31 12/86 46.56 1,291
CFX CFX Corp of Keene NH (3) AMEX NH,MA M.B. 2,874 D 43 12-31 02/87 30.44 733
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,157 D 30 09-30 02/87 52.81 344
SISB SIS Bancorp, Inc. of MA (3) OTC Central MA Div. 1,734 D 25 12-31 02/95 37.63 261
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,323 D 12 12-31 05/86 39.88 206
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,197 D 15 12-31 08/87 23.63 178
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,160 D 13 03-31 01/97 19.88 173
MDBK Medford Bancorp, Inc. of MA (3) OTC Eastern MA Thrift 1,136 D 16 12-31 03/86 43.88 199
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,129 S 12 12-31 10/95 37.38 243
FFES First Fed of E. Hartford CT OTC Central CT Thrift 983 D 12 12-31 06/87 38.50 104
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 975 D 10 12-31 10/95 22.13 122
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 958 D 11 12-31 07/86 31.25 161
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 925 D 15 12-31 05/86 49.38 176
MECH MECH Financial Inc of CT (3) OTC Hartford CT Thrift 831 S 14 12-31 06/96 26.63 141
PBKB People's Bancshares of MA (3) OTC Southeastern MA Thrift 717 S 14 12-31 10/86 22.38 74
NSSY NSS Bancorp of CT (3) OTC Southwest CT Thrift 671 S 8 12-31 06/94 42.75 104
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 639 D 14 12-31 12/81 50.25 117
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 609 D 12 12-31 10/86 7.91 112
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 540 D 5 12-31 07/86 4.81 80
ABBK Abington Bancorp of MA (3) OTC Southeastern MA M.B. 532 D 8 12-31 06/86 21.00 76
SWCB Sandwich Bancorp of MA (3) OTC Southeastern MA Thrift 519 D 11 12-31 07/86 57.50 112
EIRE Emerald Isle Bancorp of MA (3) OTC Eastern MA R.E. 444 S 9 12-31 09/86 33.00 76
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 443 D 3 12-31 07/86 18.50 94
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 371 D 6 12-31 07/86 23.00 88
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 360 D 5 12-31 05/86 16.88 72
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 358 S 8 03-31 10/86 32.00 63
NMSB Newmil Bancorp, Inc. of CT (3) OTC Western CT Thrift 356 D 15 06-30 02/86 13.38 52
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 S 10 12-31 05/86 19.75 41
NBN Northeast Bancorp of ME (3) AMEX Eastern ME Thrift 265 S 11 06-30 08/87 18.06 35
ANE Alliance Bancorp of NE, of CT (3) AMEX Northern CT Thrift 247 D 7 12-31 12/86 19.88 33
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 227 D 6 12-31 05/93 14.25 34
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 223 D 5 12-31 12/88 33.00 43
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 209 D 2 12-31 08/88 26.50 49
MYST Mystic Financial of MA (3) OTC Medford Thrift 181 P 3 06-30 01/98 17.00 46
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 150 S 8 12-31 06/93 19.25 24
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 S 7 12-31 / 14.63 20
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 132 D 4 04-30 12/87 26.88 24
NTMG Nutmeg FS&LA of CT OTC Eastern CT M.B. 105 S 3 12-31 / 10.25 10
FCB Falmouth Bancorp, Inc. of MA (3) AMEX Southeast MA Thrift 98 D 2 09-30 03/96 23.00 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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 63 D 2 03-31 11/89 38.25 9
North-West Companies
- --------------------
WAMU Washington Mutual, Inc. of WA (3) OTC CA,WA,FL,OR,UT Div. 97,069 D 914 12-31 03/83 67.13 17,290
WFSL Washington Federal, Inc. of WA OTC Western US Thrift 5,713 D 104 09-30 11/82 27.63 1,445
IWBK Interwest Bancorp of WA OTC Western WA Div. 1,982 D 39 09-30 / 41.50 334
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,876 D 41 12-31 / 24.13 183
FWWB First Savings Bancorp of WA OTC Central WA Thrift 1,099 S 20 03-31 11/95 25.50 259
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 975 D 33 09-30 10/95 22.50 225
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 533 D 12 03-31 08/86 17.88 133
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 S 8 12-31 12/85 18.38 76
CASB Cascade Financial Corp. of WA OTC Seattle WA Thrift 423 D 11 06-30 09/92 15.50 53
OTFC Oregon Trail Fin. Corp. of OR OTC Baker City Thrift 369 S 7 03-31 10/97 18.13 79
HFWA Heritage Financial Corp of WA OTC NW Washington Thrift 311 P 10 06-30 01/98 14.75 144
TSBK Timberland Bancorp of WA OTC Grays Harbor Thrift 269 P 5 06-30 01/98 17.63 117
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 263 D 9 03-31 10/97 16.44 101
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 183 D 5 03-31 07/97 19.50 39
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 111 S 3 12-31 01/97 17.94 47
South-East Companies
- --------------------
BNKU Bank United Corp. of TX OTC TX,AZ Thrift 12,523 D 71 09-30 08/96 47.13 1,489
FFCH First Fin. Holdings Inc. of SC OTC Charleston SC Div. 1,793 D 34 09-30 11/83 52.50 355
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 S 21 12-31 10/94 35.88 353
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,269 S 31 09-30 12/83 30.13 233
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 934 D 14 03-31 04/86 20.50 117
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 911 D 10 06-30 12/95 13.63 234
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 S 19 12-31 08/92 71.25 118
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 S 14 12-31 11/80 18.00 90
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 580 D 12 12-31 10/94 37.50 172
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CFCP Coastal Fin. Corp. of SC OTC South Carolina Thrift 564 D 9 09-30 09/90 21.75 102
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 495 D 7 06-30 07/97 43.50 193
TSH Teche Holding Company of LA AMEX Southern LA Thrift 409 D 9 09-30 04/95 21.13 73
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 S 12 12-31 07/97 44.00 106
COOP Cooperative Bancshares of NC OTC Eastern NC Thrift 369 D 16 12-31 08/91 20.25 60
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 S 9 03-31 03/86 32.00 88
UFRM United FSB of Rocky Mount NC OTC Eastern NC M.B. 304 D 13 12-31 07/80 18.75 59
SOPN First Svgs Bancorp of NC OTC Central NC Thrift 301 D 5 06-30 01/94 23.63 87
ANA Acadiana Bancshares, Inc of LA AMEX Southern LA Thrift 274 S 5 12-31 07/96 22.13 60
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 257 S 6 09-30 10/93 65.00 98
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 S 4 12-31 12/86 20.63 42
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 234 D 8 12-31 / 73.25 57
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 229 D 2 09-30 03/96 18.69 87
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 228 D 2 09-30 10/96 13.00 61
ESX Essex Bancorp of Norfolk VA AMEX VA,NC M.B. 192 S 4 12-31 07/90 5.19 5
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 S 4 03-31 03/88 30.75 39
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 180 D 5 09-30 07/95 28.25 50
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 180 D 3 09-30 04/96 18.38 79
FFDB FirstFed Bancorp, Inc. of AL OTC Central AL Thrift 179 D 8 03-31 11/91 24.00 28
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 166 D 7 09-30 02/87 10.00 31
HBS Haywood Bancshares, Inc. of NC (3) AMEX Northwest NC Thrift 153 S 4 12-31 12/87 21.88 27
BFSB Bedford Bancshares, Inc. of VA OTC Southern VA Thrift 137 D 3 09-30 08/94 28.50 33
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 S 3 12-31 04/97 20.63 71
PDB Piedmont Bancorp, Inc. of NC AMEX Central NC Thrift 130 D 1 06-30 12/95 10.63 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 115 D 4 06-30 11/96 17.75 33
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 114 D 4 12-31 12/93 24.00 21
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 S 5 12-31 07/95 21.00 19
TWIN Twin City Bancorp, Inc. of TN OTC Northeast TN Thrift 107 S 3 12-31 01/95 14.50 18
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 16.88 21
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 S 2 12-31 04/96 20.44 39
CENB Century Bancorp, Inc. of NC OTC Charlotte NC Thrift 102 D 1 06-30 12/96 93.75 38
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 96 S 2 09-30 02/95 22.25 22
PEDE Great Pee Dee Bancorp of SC OTC Northeast SC Thrift 78 P 1 06-30 12/97 15.88 35
</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
March 2, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UTBI United Tenn. Bancshares of TN OTC Eastern TN Thrift 77 P 2 12-31 01/98 14.31 21
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 71 S 1 09-30 12/96 18.00 20
SSB Scotland Bancorp, Inc. of NC AMEX S. Central NC Thrift 61 D 2 09-30 04/96 10.13 19
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 45 D 3 06-30 07/94 21.50 13
MBSP Mitchell Bancorp, Inc. of NC OTC Western NC Thrift 36 D 1 06-30 07/96 17.00 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 S 37 12-31 / 31.31 157
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 303 D 6 03-31 06/93 20.88 35
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 235 D 6 09-30 04/96 20.50 50
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 120 D 2 09-30 01/95 21.75 22
GUPB GFSB Bancorp, Inc of Gallup NM OTC Northwest NM Thrift 115 D 1 06-30 06/95 20.38 16
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 S 3 12-31 08/86 10.88 13
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of CO OTC Colorado Thrift 1,555 D 27 12-31 01/96 25.25 424
WSTR WesterFed Fin. Corp. of MT OTC Montana Thrift 1,035 D 36 06-30 01/94 26.00 145
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 S 18 12-31 03/84 28.75 196
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 S 4 12-31 09/86 27.00 33
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 90 D 2 12-31 09/93 14.00 16
HCBC High Country Bancorp of CO OTC Salida Thrift 87 P 2 12-31 12/97 14.75 20
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 61 D 1 09-30 03/96 16.50 16
Other Areas
- -----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail
Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 03/02/98
<PAGE>
EXHIBIT III-2
Financial Analysis of New York 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 February 27, 1998
<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 23.79 179.30 1.06 14.71 20.01 164.47 20.70 168.23 21.09 0.37 1.56 30.54
State of NY 28.49 514.99 1.15 16.63 22.95 171.89 21.44 181.82 23.14 0.41 1.29 28.88
Comparable Group
- ----------------
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 19.63 27.15 0.89 14.91 22.06 131.66 16.93 131.66 22.06 0.28 1.43 31.46
ALBK ALBANK Fin. Corp. of Albany NY 48.63 627.67 3.34 27.86 14.47 174.55 15.37 224.72 14.56 0.72 1.48 21.56
ALBC Albion Banc Corp. of Albion NY 10.75 8.06 0.43 8.09 24.43 132.88 11.39 132.88 25.00 0.11 1.02 25.58
AHCI Ambanc Holding Co., Inc. of NY 18.25 78.58 -0.69 13.98 NM 130.54 14.85 130.54 NM 0.20 1.10 NM
ASFC Astoria Financial Corp. of NY 55.88 1463.94 2.38 32.42 21.83 172.36 13.90 247.70 23.48 0.80 1.43 33.61
CNY Carver Bancorp, Inc. of NY 15.25 35.29 0.03 15.24 NM 100.07 8.49 104.02 NM 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY 18.38 85.10 0.82 15.48 22.41 118.73 28.88 118.73 22.41 0.32 1.74 39.02
DME Dime Bancorp, Inc. of NY 30.50 3548.92 1.05 11.30 29.05 269.91 16.24 329.02 29.05 0.16 0.52 15.24
DIME Dime Community Bancorp of NY 25.13 312.57 0.91 14.97 26.45 167.87 21.00 194.20 27.62 0.32 1.27 35.16
ESBK Elmira Svgs Bank (The) of NY 28.88 21.43 1.03 19.55 22.74 147.72 9.39 151.76 28.04 0.64 2.22 62.14
FIBC Financial Bancorp, Inc. of NY 26.00 44.46 1.63 16.10 16.99 161.49 14.42 162.20 15.95 0.50 1.92 30.67
FFIC Flushing Fin. Corp. of NY 25.50 200.56 1.09 17.35 23.61 146.97 18.43 152.97 23.39 0.32 1.25 29.36
GOSB GSB Financial Corp. of NY 16.50 37.09 0.31 14.66 NM 112.55 32.01 112.55 NM 0.00 0.00 0.00
GPT GreenPoint Fin. Corp. of NY 74.25 3142.26 3.37 30.00 21.28 247.50 24.02 NM 22.03 1.28 1.72 37.98
HAVN Haven Bancorp of Woodhaven NY 24.50 215.23 1.27 12.85 19.44 190.66 10.90 191.26 19.29 0.30 1.22 23.62
JSB JSB Financial, Inc. of NY 53.81 532.61 2.64 35.91 18.12 149.85 34.79 149.85 20.38 1.60 2.97 60.61
LISB Long Island Bancorp, Inc of NY 60.19 1446.31 1.74 23.19 28.53 259.55 23.82 261.92 NM 0.60 1.00 34.48
MBB MSB Bancorp of Middletown NY(7) 34.88 99.20 0.52 22.40 NM 155.71 12.82 336.03 NM 0.60 1.72 NM
NYB New York Bancorp, Inc. of NY(7) 40.50 865.04 2.53 8.34 16.33 NM 26.50 NM 16.01 0.60 1.48 23.72
PBHC Pathfinder BC MHC of NY (46.1) 21.50 18.96 0.63 7.97 NM 269.76 32.03 321.38 NM 0.19 0.88 9.25
PEEK Peekskill Fin. Corp. of NY 17.00 53.16 0.64 14.87 26.56 114.32 28.86 114.32 26.56 0.36 2.12 56.25
PKPS Poughkeepsie Fin. Corp. of NY(7) 10.63 134.04 0.24 5.76 NM 184.55 15.31 184.55 NM 0.24 2.26 NM
PSBK Progressive Bank, Inc. of NY(7) 37.81 144.89 2.20 20.48 16.80 184.62 16.40 203.61 17.19 0.80 2.12 36.36
QCSB Queens County Bancorp of NY 39.75 600.54 1.45 11.44 27.60 347.47 38.97 347.47 27.41 0.80 2.01 55.17
RELY Reliance Bancorp, Inc. of NY 35.50 342.01 1.97 19.92 18.88 178.21 15.25 261.80 18.02 0.64 1.80 32.49
RCBK Richmond County Fin Corp of NY 16.66 407.60 0.56 11.79 29.75 141.31 36.24 141.31 29.75 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY 22.81 995.47 0.93 14.04 NM 162.46 28.65 163.28 24.53 0.32 1.40 34.41
SBFL SB Fngr Lakes MHC of NY (33.1) 30.50 18.00 0.51 11.92 NM 255.87 23.88 255.87 NM 0.40 1.31 NM
SFED SFS Bancorp of Schenectady NY 21.50 25.97 0.85 17.74 24.43 121.20 14.89 121.20 25.29 0.32 1.49 37.65
SKAN Skaneateles Bancorp Inc of NY 19.13 27.49 1.12 12.30 16.49 155.53 10.73 159.82 17.08 0.28 1.46 25.00
SIB Staten Island Bancorp of NY 20.50 881.11 0.65 14.19 27.70 144.47 35.73 148.87 NM 0.00 0.00 0.00
ROSE T R Financial Corp. of NY 32.97 580.21 1.76 13.69 16.74 240.83 15.10 240.83 18.73 0.68 2.06 38.64
TPNZ Tappan Zee Fin., Inc. of NY 18.75 27.71 0.69 14.46 26.79 129.67 22.24 129.67 27.17 0.28 1.49 40.58
WSBI Warwick Community Bncrp of NY 16.00 102.62 0.55 12.60 29.09 126.98 30.18 126.98 29.09 0.00 0.00 0.00
YFCB Yonkers Fin. Corp. of NY 18.69 56.46 1.01 14.87 18.32 125.69 17.02 125.69 18.50 0.28 1.50 27.72
</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 1,144 13.60 0.74 0.95 8.29 0.91 7.77
State of NY 2,592 13.52 0.84 0.86 7.04 0.84 6.87
Comparable Group
- ----------------
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 160 12.86 0.30 0.79 5.88 0.79 5.88
ALBK ALBANK Fin. Corp. of Albany NY 4,083 8.81 0.88 1.18 12.94 1.17 12.87
ALBC Albion Banc Corp. of Albion NY 71 8.57 0.12 0.50 5.58 0.49 5.45
AHCI Ambanc Holding Co., Inc. of NY 529 11.37 0.73 -0.53 -4.16 -0.60 -4.71
ASFC Astoria Financial Corp. of NY 10,528 8.07 0.56 0.82 10.37 0.76 9.64
CNY Carver Bancorp, Inc. of NY 416 8.48 1.67 -0.11 -1.33 0.02 0.20
CATB Catskill Fin. Corp. of NY 295 24.32 0.35 1.34 5.20 1.34 5.20
DME Dime Bancorp, Inc. of NY 21,849 6.02 1.06 0.62 11.10 0.62 11.10
DIME Dime Community Bancorp of NY 1,488 12.51 0.53 0.89 6.05 0.85 5.80
ESBK Elmira Svgs Bank (The) of NY 228 6.35 0.64 0.42 6.63 0.34 5.38
FIBC Financial Bancorp, Inc. of NY 308 8.93 1.94 0.92 9.85 0.98 10.50
FFIC Flushing Fin. Corp. of NY 1,088 12.54 0.27 0.94 6.35 0.95 6.40
GOSB GSB Financial Corp. of NY 116 28.44 0.10 0.63 3.39 0.58 3.09
GPT GreenPoint Fin. Corp. of NY 13,084 9.70 2.90 1.12 10.86 1.08 10.48
HAVN Haven Bancorp of Woodhaven NY 1,975 5.72 0.66 0.62 10.47 0.63 10.56
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 6,073 9.18 0.89 0.86 9.44 0.71 7.79
MBB MSB Bancorp of Middletown NY(7) 774 8.23 NA 0.17 2.28 0.18 2.42
NYB New York Bancorp, Inc. of NY(7) 3,265 5.46 0.86 1.65 31.75 1.68 32.39
PBHC Pathfinder BC MHC of NY (46.1) 193 11.87 NA 1.06 9.22 0.95 8.30
PEEK Peekskill Fin. Corp. of NY 184 25.24 0.90 1.09 4.23 1.09 4.23
PKPS Poughkeepsie Fin. Corp. of NY(7) 876 8.30 4.03 0.27 3.28 0.35 4.15
PSBK Progressive Bank, Inc. of NY(7) 884 8.88 0.74 0.98 11.44 0.96 11.19
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 2,243 8.56 0.56 0.90 10.87 0.94 11.39
RCBK Richmond County Fin Corp of NY 1,125 25.65 NA 1.22 4.75 1.22 4.75
RSLN Roslyn Bancorp, Inc. of NY 3,474 17.64 0.18 0.96 5.10 1.22 6.50
SBFL SB Fngr Lakes MHC of NY (33.1) 228 9.33 0.50 0.37 3.83 0.43 4.44
SFED SFS Bancorp of Schenectady NY 174 12.29 0.84 0.62 4.91 0.60 4.74
SKAN Skaneateles Bancorp Inc of NY 256 6.90 1.89 0.67 9.83 0.65 9.49
SIB Staten Island Bancorp of NY 2,466 24.73 1.15 1.29 5.21 1.13 4.58
ROSE T R Financial Corp. of NY 3,843 6.27 0.52 0.98 15.68 0.87 14.01
TPNZ Tappan Zee Fin., Inc. of NY 125 17.16 1.39 0.85 4.86 0.84 4.79
WSBI Warwick Community Bncrp of NY 340 23.76 0.69 1.04 4.37 1.04 4.37
YFCB Yonkers Fin. Corp. of NY 332 13.54 0.49 1.04 7.04 1.03 6.97
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Financial Analysis of Connecticut and Massachusetts Institutions
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Market Pricing Comparatives
Prices As of February 27, 1998
<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) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.79 179.30 1.06 14.71 20.01 164.47 20.70 168.23 21.09 0.37 1.56 30.54
State of CT 32.11 237.39 1.97 16.17 17.05 198.01 16.12 203.35 16.91 0.53 1.70 29.63
Comparable Group
- ----------------
State of CT
- -----------
ANE Alliance Bancorp of NE, of CT 19.88 32.52 0.86 11.49 16.16 173.02 13.16 177.98 23.12 0.20 1.01 23.26
BKC American Bank of Waterbury CT 50.25 116.63 2.96 24.82 14.69 202.46 18.25 209.29 16.98 1.52 3.02 51.35
BKCT Bancorp Connecticut of CT 18.50 94.20 1.03 9.22 15.95 200.65 21.26 200.65 17.96 0.52 2.81 50.49
DIBK Dime Financial Corp. of CT 31.25 161.38 3.22 15.35 9.65 203.58 16.84 209.03 9.70 0.48 1.54 14.91
EGFC Eagle Financial Corp. of CT(7) 52.81 344.00 1.56 23.38 NM 225.88 15.95 278.53 NM 1.00 1.89 64.10
FFES First Fed of E. Hartford CT 38.50 104.18 2.28 24.76 18.69 155.49 10.60 155.49 16.89 0.68 1.77 29.82
MECH MECH Financial Inc of CT 26.63 140.95 2.63 16.33 10.09 163.07 16.97 163.07 10.13 0.00 0.00 0.00
NSSY NSS Bancorp of CT 42.75 103.75 3.13 21.83 15.49 195.83 15.47 201.94 13.66 0.40 0.94 12.78
NMSB Newmil Bancorp, Inc. of CT 13.38 51.90 0.72 8.54 18.85 156.67 14.60 156.67 18.58 0.32 2.39 44.44
NTMG Nutmeg FS&LA of CT 10.25 10.11 0.43 5.88 15.30 174.32 9.61 174.32 23.84 0.20 1.95 46.51
PBCT Peoples Bank, MHC of CT (40.1) 37.56 918.45 0.87 11.61 24.87 323.51 28.07 325.19 NM 0.76 2.02 NM
WBST Webster Financial Corp. of CT 64.25 877.21 3.52 27.99 27.81 229.55 12.50 263.21 18.25 0.80 1.25 22.73
</TABLE>
<PAGE>
Table III-3 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
------------------------------------------------
Reported Core
Total Equity/ NPAs/ ----------- -----------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- ------------------------------------ ------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,144 13.60 0.74 0.95 8.29 0.91 7.77
State of CT 1,858 8.14 0.93 1.10 13.60 1.03 12.75
Comparable Group
- ----------------
State of CT
- -----------
ANE Alliance Bancorp of NE, of CT 247 7.61 1.60 0.84 11.87 0.59 8.30
BKC American Bank of Waterbury CT 639 9.01 2.11 1.32 15.52 1.14 13.44
BKCT Bancorp Connecticut of CT 443 10.60 0.91 1.39 13.29 1.23 11.80
DIBK Dime Financial Corp. of CT 958 8.27 0.30 1.94 23.88 1.92 23.73
EGFC Eagle Financial Corp. of CT(7) 2,157 7.06 0.52 0.42 5.96 0.55 7.88
FFES First Fed of E. Hartford CT 983 6.82 0.30 0.57 8.80 0.63 9.74
MECH MECH Financial Inc of CT 831 10.40 0.58 1.79 17.75 1.78 17.69
NSSY NSS Bancorp of CT 671 7.90 1.31 1.05 13.49 1.19 15.30
NMSB Newmil Bancorp, Inc. of CT 356 9.32 0.90 0.85 8.52 0.86 8.64
NTMG Nutmeg FS&LA of CT 105 5.51 NA 0.68 12.20 0.43 7.83
PBCT Peoples Bank, MHC of CT (40.1) 8,184 8.68 0.68 1.18 13.88 0.68 8.00
WBST Webster Financial Corp. of CT 7,020 5.44 0.65 0.54 10.34 0.82 15.76
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3 (Continued)
Market Pricing Comparatives
Prices As of February 27, 1998
<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 23.79 179.30 1.06 14.71 20.01 164.47 20.70 168.23 21.09 0.37 1.56 30.54
State of MA 26.33 106.86 1.41 14.10 16.70 195.66 18.40 200.96 17.41 0.43 1.50 29.38
Comparable Group
- ----------------
State of MA
- -----------
ABBK Abington Bancorp of MA 21.00 76.38 1.06 9.99 17.50 210.21 14.36 231.02 19.81 0.20 0.95 18.87
AFCB Affiliated Comm BC, Inc of MA(7) 37.38 243.12 1.76 16.94 21.12 220.66 21.54 221.84 21.24 0.60 1.61 34.09
ANDB Andover Bancorp, Inc. of MA 39.88 206.10 2.50 20.72 15.58 192.47 15.58 192.47 15.95 0.76 1.91 30.40
BFD BostonFed Bancorp of MA 22.13 122.16 1.14 14.78 17.29 149.73 12.53 155.41 19.41 0.28 1.27 24.56
CEBK Central Co-Op. Bank of MA 32.00 62.88 1.41 18.05 21.48 177.29 17.54 196.80 22.70 0.32 1.00 22.70
EIRE Emerald Isle Bancorp of MA(7) 33.00 76.36 1.66 13.39 21.15 246.45 17.22 246.45 19.88 0.28 0.85 16.87
FCB Falmouth Bancorp, Inc. of MA 23.00 33.47 0.53 16.05 NM 143.30 34.30 143.30 NM 0.24 1.04 45.28
FESX First Essex Bancorp of MA 23.63 178.08 1.15 12.08 18.32 195.61 14.87 222.50 20.55 0.56 2.37 48.70
FAB FirstFed America Bancorp of MA 19.88 173.10 0.63 14.87 NM 133.69 14.93 133.69 NM 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA 33.00 43.03 2.04 16.39 16.18 201.34 19.33 201.34 16.18 0.48 1.45 23.53
HPBC Home Port Bancorp, Inc. of MA 26.50 48.81 1.75 11.92 14.80 222.32 23.38 222.32 15.14 0.80 3.02 45.71
IPSW Ipswich SB of Ipswich MA 14.25 33.99 0.76 4.96 15.32 287.30 14.96 287.30 18.75 0.16 1.12 21.05
LSBX Lawrence Savings Bank of MA 16.88 72.38 1.87 8.77 8.93 192.47 20.11 192.47 9.03 0.00 0.00 0.00
MASB MassBank Corp. of Reading MA 49.38 176.34 2.63 29.06 17.33 169.92 19.06 172.36 18.78 1.00 2.03 38.02
MFLR Mayflower Co-Op. Bank of MA 26.88 24.17 1.48 14.31 17.23 187.84 18.32 190.64 18.16 0.80 2.98 54.05
MDBK Medford Bancorp, Inc. of MA 43.88 199.26 2.42 22.35 17.48 196.33 17.55 208.56 18.13 0.80 1.82 33.06
MWBX MetroWest Bank of MA 7.91 111.59 0.53 3.17 14.65 249.53 18.33 249.53 14.92 0.12 1.52 22.64
MYST Mystic Financial of MA 17.00 46.09 0.52 13.00 NM 130.77 25.46 130.77 NM 0.00 0.00 0.00
PBKB People's Bancshares of MA 22.38 73.61 0.74 8.94 15.54 250.34 10.26 260.84 NM 0.48 2.14 64.86
SISB SIS Bancorp, Inc. of MA 37.63 261.45 1.87 18.06 27.47 208.36 15.08 208.36 20.12 0.64 1.70 34.22
SWCB Sandwich Bancorp of MA(7) 57.50 111.67 2.44 21.63 23.00 265.83 21.53 275.38 23.57 1.40 2.43 57.38
SOSA Somerset Savings Bank of MA(7) 4.81 80.13 0.35 2.15 13.36 223.72 14.85 223.72 13.74 0.00 0.00 0.00
WRNB Warren Bancorp of Peabody MA 23.00 87.54 1.70 10.52 12.04 218.63 23.59 218.63 13.53 0.52 2.26 30.59
</TABLE>
<PAGE>
Table III-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 1,144 13.60 0.74 0.95 8.29 0.91 7.77
State of MA 656 10.03 0.51 1.10 12.29 1.04 11.53
Comparable Group
- ----------------
State of MA
- -----------
ABBK Abington Bancorp of MA 532 6.83 0.18 0.87 12.53 0.77 11.06
AFCB Affiliated Comm BC, Inc of MA(7) 1,129 9.76 0.39 1.08 11.08 1.08 11.02
ANDB Andover Bancorp, Inc. of MA 1,323 8.10 0.62 1.06 13.09 1.03 12.78
BFD BostonFed Bancorp of MA 975 8.37 0.18 0.76 8.43 0.67 7.50
CEBK Central Co-Op. Bank of MA 358 9.90 0.42 0.87 8.69 0.83 8.22
EIRE Emerald Isle Bancorp of MA(7) 444 6.99 NA 0.87 12.49 0.92 13.29
FCB Falmouth Bancorp, Inc. of MA 98 23.94 NA 0.98 4.06 0.83 3.42
FESX First Essex Bancorp of MA 1,197 7.60 0.54 0.83 11.19 0.74 9.97
FAB FirstFed America Bancorp of MA 1,160 11.17 0.35 0.17 1.58 0.53 4.99
HIFS Hingham Inst. for Sav. of MA 223 9.60 0.77 1.25 13.09 1.25 13.09
HPBC Home Port Bancorp, Inc. of MA 209 10.52 NA 1.67 15.70 1.63 15.35
IPSW Ipswich SB of Ipswich MA 227 5.21 0.95 1.18 20.53 0.96 16.78
LSBX Lawrence Savings Bank of MA 360 10.45 0.52 2.30 25.00 2.28 24.74
MASB MassBank Corp. of Reading MA 925 11.21 0.19 1.12 10.54 1.03 9.73
MFLR Mayflower Co-Op. Bank of MA 132 9.75 0.69 1.11 11.52 1.05 10.93
MDBK Medford Bancorp, Inc. of MA 1,136 8.94 0.16 1.05 11.80 1.02 11.38
MWBX MetroWest Bank of MA 609 7.34 1.03 1.34 18.12 1.32 17.79
MYST Mystic Financial of MA 181 19.47 0.18 0.78 4.00 0.78 4.00
PBKB People's Bancshares of MA 717 4.10 0.57 0.83 15.42 0.43 7.92
SISB SIS Bancorp, Inc. of MA 1,734 7.24 0.47 0.65 8.83 0.88 12.06
SWCB Sandwich Bancorp of MA(7) 519 8.10 0.56 0.98 12.12 0.96 11.83
SOSA Somerset Savings Bank of MA(7) 540 6.64 4.86 1.15 18.37 1.12 17.86
WRNB Warren Bancorp of Peabody MA 371 10.79 0.83 2.00 19.45 1.78 17.31
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-4
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>
AFSALA Bancorp, Inc. of NY Montgomery 52 52 52 -0.4% -0.2% 37.3 12,121 84.1% 28.2%
ALBANK Fin. Corp. of Albany NY Albany 293 297 299 1.4% 0.9% 35.5 18,262 126.7% 37.5%
American Bank of Waterbury CT New Haven 804 793 786 -1.4% -1.0% 36.5 18,751 99.4% 17.6%
Bancorp Connecticut of CT Hartford 852 828 812 -2.8% -1.9% 36.9 19,111 101.3% 1.8%
Catskill Fin. Corp. of NY Greene 45 47 49 5.8% 3.8% 37.2 13,507 93.7% 24.7%
Dime Financial Corp. of CT New Haven 804 793 786 -1.4% -1.0% 36.5 18,751 99.4% 6.4%
MECH Financial Inc. of CT Hartford 852 828 812 -2.8% -1.9% 36.9 19,111 101.3% 3.9%
Newmil Bancorp, Inc. of CT Litchfield 174 181 186 4.1% 2.7% 37.8 20,735 110.0% 6.5%
Peekskill Fin. Corp. of NY Westchester 875 896 910 2.4% 1.6% 37.3 27,713 192.3% 0.7%
SFS Bancorp of Schenectady NY Schenectady 149 147 145 -1.7% -1.2% 37.0 16,937 117.5% 7.1%
--- --- --- ---- ---- ---- ------ ----- ----
Averages: 490 486 484 0.3% 0.2% 36.9 18,500 112.6% 13.4%
Medians: 548 545 542 -0.9% -0.6% 37.0 18,751 101.3% 6.8%
Hudson City Savings Institution Columbia 63 64 64 1.0% 0.7% 37.8 15,811 109.7% 59.5%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits. Excludes credit unions.
Sources: CACI, Inc; FDIC; OTS.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of February 27, 1998
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(306) 23.74 5,829 185.4 25.43 15.78 23.42 1.21 45.15 1.68
NYSE Traded Companies(9) 43.39 43,859 2,219.8 46.44 26.20 42.59 2.26 38.83 1.44
AMEX Traded Companies(20) 19.60 2,932 55.8 21.58 13.73 19.37 1.58 35.90 0.34
NASDAQ Listed OTC Companies(277) 23.51 4,988 138.4 25.14 15.64 23.20 1.16 46.03 1.79
California Companies(20) 28.82 17,486 841.2 31.42 18.44 28.47 1.29 31.46 2.11
Florida Companies(5) 23.09 21,867 527.5 26.21 15.04 22.50 2.24 32.74 -5.84
Mid-Atlantic Companies(58) 24.69 6,605 185.7 26.01 15.63 24.00 2.86 49.55 0.27
Mid-West Companies(147) 22.02 3,910 113.1 23.55 14.78 21.82 0.82 45.54 2.39
New England Companies(9) 30.43 4,841 191.0 32.17 17.38 30.50 -0.34 62.22 1.92
North-West Companies(11) 22.25 10,610 265.6 23.41 16.39 22.05 0.93 44.69 15.28
South-East Companies(43) 26.36 3,791 110.4 28.77 18.29 25.89 1.15 42.38 -1.18
South-West Companies(6) 20.95 2,028 48.9 23.36 14.32 21.05 -0.28 46.04 -6.52
Western Companies (Excl CA)(7) 21.75 4,838 121.4 22.27 14.95 21.97 -0.74 43.20 3.95
Thrift Strategy(253) 22.44 3,837 97.9 24.10 15.31 22.18 1.15 44.25 1.52
Mortgage Banker Strategy(33) 31.16 16,294 687.7 33.20 18.80 30.51 1.45 49.98 0.19
Real Estate Strategy(8) 25.71 6,484 154.1 26.64 15.09 25.60 0.30 51.75 9.64
Diversified Strategy(8) 36.70 29,502 1,132.1 38.64 21.52 35.55 3.00 48.13 5.67
Retail Banking Strategy(4) 19.50 4,568 103.8 21.54 11.98 18.98 2.53 44.57 -2.37
Companies Issuing Dividends(258) 24.47 5,824 196.1 26.23 16.26 24.14 1.20 43.70 0.53
Companies Without Dividends(48) 19.90 5,860 128.6 21.19 13.20 19.66 1.29 52.99 7.76
Equity/Assets less than 6%(24) 27.05 18,205 629.6 28.95 16.05 26.49 1.61 54.24 -0.10
Equity/Assets 6-12%(141) 26.38 6,149 225.4 28.01 16.26 26.01 1.45 52.38 1.88
Equity/Assets greater than 12%(141) 20.91 3,637 81.5 22.62 15.31 20.67 0.94 37.38 1.78
Converted Last 3 Mths (no MHC)(9) 15.31 4,123 63.1 15.69 13.15 14.90 2.61 61.33 26.78
Actively Traded Companies(36) 34.41 19,525 845.5 36.12 20.54 33.88 1.48 55.11 2.51
Market Value Below $20 Million(47) 17.71 872 14.5 19.09 12.79 17.72 0.18 39.47 0.88
Holding Company Structure(278) 23.93 5,746 188.7 25.66 15.98 23.61 1.16 43.71 1.73
Assets Over $1 Billion(59) 33.85 20,432 785.9 35.90 20.97 32.95 2.69 42.34 1.07
Assets $500 Million-$1 Billion(46) 25.23 5,487 122.4 27.13 15.63 25.26 -0.26 50.82 1.14
Assets $250-$500 Million(67) 23.47 3,068 67.5 25.12 15.60 23.03 2.22 52.92 2.99
Assets less than $250 Million(134) 19.47 1,572 28.8 20.97 13.90 19.31 0.69 40.81 1.51
Goodwill Companies(123) 27.71 10,339 345.7 29.41 17.36 27.17 1.87 48.96 1.35
Non-Goodwill Companies(183) 21.25 2,991 84.4 22.93 14.78 21.07 0.80 42.76 1.89
Acquirors of FSLIC Cases(9) 40.21 38,054 2,054.1 43.21 25.41 39.92 0.82 41.64 -1.91
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 27.16 14,635 630.3 28.42 17.03 26.66 1.80 54.93 3.27
NYSE Traded Companies(4) 44.77 52,889 2,026.2 45.38 31.14 44.55 0.54 50.69 2.14
AMEX Traded Companies(7) 26.61 1,720 49.0 27.30 15.61 26.03 1.84 62.68 5.61
NASDAQ Listed OTC Companies(49) 25.62 12,625 569.5 27.00 15.91 25.11 1.90 54.44 3.10
California Companies(1) 20.19 7,871 158.9 21.25 14.00 20.25 -0.30 23.26 4.88
Mid-Atlantic Companies(21) 27.20 19,369 625.4 28.34 18.40 26.61 2.64 52.31 2.49
New England Companies(32) 27.12 4,555 136.0 28.35 15.76 26.54 1.68 61.80 4.37
North-West Companies(3) 34.46 89,713 5,833.0 37.02 22.65 34.58 0.18 38.93 1.76
South-East Companies(3) 19.82 1,551 30.1 20.88 14.88 20.13 -1.20 23.51 -3.40
Thrift Strategy(44) 26.22 6,940 223.9 27.33 16.64 25.59 2.24 55.84 4.50
Mortgage Banker Strategy(7) 25.30 29,028 821.1 27.03 14.43 25.36 -0.19 62.18 -2.85
Real Estate Strategy(4) 21.60 5,839 123.2 22.75 14.50 22.13 -2.23 33.51 2.44
Diversified Strategy(5) 39.14 62,448 3,855.9 41.03 24.28 38.61 2.25 47.50 1.09
Companies Issuing Dividends(48) 29.60 15,830 744.7 30.97 18.06 29.07 1.67 53.18 0.91
Companies Without Dividends(12) 17.84 10,075 193.9 18.67 13.09 17.47 2.29 61.63 12.28
Equity/Assets less than 6%(4) 31.13 68,924 4,414.0 33.78 18.63 31.19 0.55 64.12 -1.58
Equity/Assets 6-12%(41) 28.63 9,448 340.7 29.90 16.89 28.06 1.56 57.89 1.14
Equity/Assets greater than 12%(15) 22.34 12,093 273.4 23.19 16.93 21.87 2.76 44.90 9.97
Converted Last 3 Mths (no MHC)(4) 17.54 19,143 359.4 18.04 16.08 17.08 2.73 66.86 31.64
Actively Traded Companies(17) 35.41 30,643 1,603.8 36.58 21.46 34.91 1.57 54.41 4.17
Market Value Below $20 Million(2) 12.57 1,046 13.8 13.19 7.47 12.32 2.50 60.92 1.66
Holding Company Structure(47) 25.98 14,008 629.4 27.26 16.58 25.55 1.74 54.35 4.17
Assets Over $1 Billion(18) 36.55 38,507 1,816.9 37.66 23.68 35.73 2.95 50.14 5.85
Assets $500 Million-$1 Billion(15) 27.99 5,404 121.0 28.88 16.59 27.45 1.50 57.47 1.26
Assets $250-$500 Million(12) 20.02 3,632 68.9 21.98 12.43 19.97 -0.06 57.31 -2.61
Assets less than $250 Million(15) 20.71 1,547 30.9 21.89 12.91 20.28 2.09 56.88 6.33
Goodwill Companies(33) 30.26 22,152 1,031.0 31.30 18.55 29.64 1.94 56.51 4.18
Non-Goodwill Companies(27) 23.41 5,553 146.3 24.93 15.19 23.06 1.63 53.02 2.17
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 24.79 8,498 59.6 26.89 13.36 24.72 1.08 93.61 1.23
BIF-Insured Thrifts(3) 29.53 32,019 468.7 29.75 13.09 28.57 4.33 131.58 3.17
NASDAQ Listed OTC Companies(22) 25.38 11,438 110.7 27.25 13.33 25.20 1.48 98.36 1.48
Florida Companies(3) 34.63 5,939 97.9 37.57 18.82 35.13 -1.39 79.74 1.97
Mid-Atlantic Companies(11) 21.79 11,208 61.4 23.43 10.49 21.39 2.78 120.56 0.95
Mid-West Companies(6) 25.78 2,275 26.1 28.00 15.54 25.81 0.08 66.49 3.07
New England Companies(1) 37.56 61,162 918.5 38.00 19.00 37.13 1.16 63.30 -1.16
Thrift Strategy(20) 24.86 6,290 48.9 26.94 13.44 24.79 1.05 94.94 1.55
Mortgage Banker Strategy(1) 20.50 33,790 167.5 20.88 6.04 19.00 7.89 181.21 3.12
Diversified Strategy(1) 37.56 61,162 918.5 38.00 19.00 37.13 1.16 63.30 -1.16
Companies Issuing Dividends(22) 25.38 11,438 110.7 27.25 13.33 25.20 1.48 98.36 1.48
Equity/Assets 6-12%(16) 27.28 14,222 139.1 29.24 13.53 27.06 1.82 107.94 2.25
Equity/Assets greater than 12%(6) 19.69 3,086 25.5 21.28 12.71 19.60 0.46 69.60 -0.84
Holding Company Structure(3) 25.50 2,566 25.3 27.25 12.09 25.00 2.92 135.04 4.61
Assets Over $1 Billion(6) 26.67 37,133 354.9 27.66 12.64 26.41 3.50 105.63 3.78
Assets $500 Million-$1 Billion(2) 36.50 5,095 90.2 39.75 19.25 34.88 4.64 84.81 3.17
Assets $250-$500 Million(6) 28.32 3,387 33.3 31.00 15.08 28.69 -1.14 94.27 -0.20
Assets less than $250 Million(8) 21.38 2,262 18.3 23.09 11.87 21.13 1.38 98.47 0.87
Goodwill Companies(9) 26.55 25,707 246.5 27.86 13.08 26.15 3.52 112.78 3.44
Non-Goodwill Companies(13) 24.68 2,877 29.2 26.89 13.48 24.63 0.26 89.70 0.30
MHC Institutions(22) 25.38 11,438 110.7 27.25 13.33 25.20 1.48 98.36 1.48
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 62.44 93,156 5,816.7 66.94 35.25 60.56 3.10 48.67 -6.72
CFB Commercial Federal Corp. of NE 35.38 32,599 1,153.4 36.50 21.42 34.50 2.55 47.91 -0.51
DME Dime Bancorp, Inc. of NY* 30.50 116,358 3,548.9 31.00 14.88 30.63 -0.42 76.81 0.83
DSL Downey Financial Corp. of CA 29.25 26,756 782.6 29.94 18.10 29.63 -1.28 30.00 2.85
FED FirstFed Fin. Corp. of CA 40.38 10,588 427.5 40.38 22.50 39.63 1.89 51.63 4.21
GSB Golden State Bancorp of CA(8) 35.63 51,023 1,817.9 38.00 22.50 36.06 -1.19 30.13 -4.83
GDW Golden West Fin. Corp. of CA 89.25 57,069 5,093.4 97.81 59.88 89.38 -0.15 27.50 -8.75
GPT GreenPoint Fin. Corp. of NY* 74.25 42,320 3,142.3 74.25 51.50 72.44 2.50 19.76 2.33
JSB JSB Financial, Inc. of NY* 53.81 9,898 532.6 55.25 39.38 55.13 -2.39 35.37 7.49
NYB New York Bancorp, Inc. of NY(8) 40.50 21,359 865.0 40.50 20.81 39.63 2.20 61.16 1.96
OCN Ocwen Financial Corp. of FL 30.00 60,566 1,817.0 30.00 13.00 27.44 9.33 75.13 17.92
SIB Staten Island Bancorp of NY* 20.50 42,981 881.1 21.00 18.81 20.00 2.50 70.83 -2.10
WES Westcorp Inc. of Orange CA 17.06 26,279 448.3 23.50 13.25 17.00 0.35 -9.01 1.07
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 22.13 2,697 59.7 24.75 17.25 22.00 0.59 26.46 -5.35
ANE Alliance Bancorp of NE, of CT* 19.88 1,636 32.5 20.38 10.41 19.75 0.66 68.33 20.48
BKC American Bank of Waterbury CT* 50.25 2,321 116.6 50.25 29.75 48.38 3.87 70.34 3.08
BFD BostonFed Bancorp of MA 22.13 5,520 122.2 22.44 14.38 22.38 -1.12 35.10 1.14
CFX CFX Corp of Keene NH(8)* 30.44 24,071 732.7 30.75 15.50 29.75 2.32 79.06 -0.62
CNY Carver Bancorp, Inc. of NY 15.25 2,314 35.3 17.13 9.13 15.25 0.00 54.35 -6.15
CBK Citizens First Fin.Corp. of IL 20.75 2,397 49.7 21.75 14.63 20.94 -0.91 34.92 2.47
EBI Equality Bancorp, Inc. of MO 15.94 2,486 39.6 15.94 12.00 15.25 4.52 59.40 9.93
ESX Essex Bancorp of Norfolk VA(8) 5.19 1,058 5.5 7.94 1.00 5.19 0.00 246.00 31.73
FCB Falmouth Bancorp, Inc. of MA* 23.00 1,455 33.5 23.38 13.25 20.50 12.20 47.15 12.20
FAB FirstFed America Bancorp of MA 19.88 8,707 173.1 22.13 13.63 20.25 -1.83 34.78 -9.14
GAF GA Financial Corp. of PA 19.63 7,718 151.5 19.81 14.88 19.63 0.00 21.70 3.97
HBS Haywood Bancshares, Inc. of NC* 21.88 1,250 27.4 23.00 15.63 22.75 -3.82 30.63 -2.76
KNK Kankakee Bancorp, Inc. of IL 33.88 1,372 46.5 37.75 26.00 34.00 -0.35 21.52 -10.25
KYF Kentucky First Bancorp of KY 13.88 1,298 18.0 15.00 10.56 13.75 0.95 18.13 -7.10
MBB MSB Bancorp of Middletown NY(8)* 34.88 2,844 99.2 37.63 16.38 35.06 -0.51 84.75 -7.31
NBN Northeast Bancorp of ME* 18.06 1,940 35.0 19.50 9.00 18.75 -3.68 96.95 -4.95
PDB Piedmont Bancorp, Inc. of NC 10.63 2,751 29.2 11.63 10.00 11.00 -3.36 2.41 -2.30
SSB Scotland Bancorp, Inc. of NC 10.13 1,914 19.4 19.25 9.88 10.25 -1.17 -34.14 1.91
SZB SouthFirst Bancshares of AL 22.25 976 21.7 22.75 13.75 21.75 2.30 61.82 -2.20
SRN Southern Banc Company of AL 16.88 1,230 20.8 19.13 14.25 16.88 0.00 18.46 -4.90
SSM Stone Street Bancorp of NC 20.44 1,898 38.8 27.25 19.25 20.25 0.94 -24.99 -7.89
TSH Teche Holding Company of LA 21.13 3,438 72.6 23.50 15.00 20.38 3.68 37.39 -7.12
FTF Texarkana Fst. Fin. Corp of AR 28.25 1,760 49.7 28.63 15.63 28.00 0.89 72.47 13.00
THR Three Rivers Fin. Corp. of MI 23.50 825 19.4 23.50 13.75 22.50 4.44 64.91 8.05
WSB Washington SB, FSB of MD 8.75 4,395 38.5 9.50 4.88 7.44 17.61 70.57 -3.42
WFI Winton Financial Corp. of OH 26.88 2,006 53.9 28.25 12.00 26.13 2.87 106.77 31.89
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 25.13 1,090 27.4 29.29 18.41 25.13 0.00 29.74 -14.20
FBER 1st Bergen Bancorp of NJ 19.75 2,865 56.6 20.00 12.88 19.00 3.95 35.00 3.24
AFED AFSALA Bancorp, Inc. of NY 19.63 1,383 27.1 19.75 12.56 19.00 3.32 48.15 1.97
ALBK ALBANK Fin. Corp. of Albany NY 48.63 12,907 627.7 51.44 33.75 48.19 0.91 34.15 -5.46
AMFC AMB Financial Corp. of IN 17.13 964 16.5 17.88 13.13 17.00 0.76 24.58 7.87
ASBP ASB Financial Corp. of OH 13.75 1,653 22.7 14.63 11.50 14.63 -6.02 14.01 3.77
ABBK Abington Bancorp of MA* 21.00 3,637 76.4 22.00 10.19 20.50 2.44 90.91 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AABC Access Anytime Bancorp of NM 10.88 1,217 13.2 11.38 5.15 10.66 2.06 111.26 -1.09
AFBC Advance Fin. Bancorp of WV 20.00 1,084 21.7 20.88 13.50 20.00 0.00 42.86 15.07
AADV Advantage Bancorp, Inc. of WI(8) 69.50 3,236 224.9 70.88 35.50 67.63 2.77 93.06 -1.95
AFCB Affiliated Comm BC, Inc of MA(8) 37.38 6,504 243.1 37.75 19.00 36.25 3.12 85.97 -0.98
ALBC Albion Banc Corp. of Albion NY 10.75 750 8.1 14.17 5.58 10.41 3.27 92.65 -19.35
ABCL Alliance Bancorp, Inc. of IL 27.50 8,022 220.6 28.38 18.50 25.63 7.30 34.15 3.77
ATSB AmTrust Capital Corp. of IN 14.75 510 7.5 14.75 11.50 14.25 3.51 24.16 6.27
AHCI Ambanc Holding Co., Inc. of NY* 18.25 4,306 78.6 19.50 12.69 17.50 4.29 37.74 -2.67
ASBI Ameriana Bancorp of IN 20.50 3,231 66.2 22.00 15.25 20.50 0.00 29.09 3.12
ABCW Anchor Bancorp Wisconsin of WI 43.00 9,052 389.2 43.00 21.00 39.44 9.03 86.96 18.20
ANDB Andover Bancorp, Inc. of MA* 39.88 5,168 206.1 42.00 26.25 40.00 -0.30 36.34 -0.92
ASFC Astoria Financial Corp. of NY 55.88 26,198 1,463.9 58.13 34.75 55.25 1.14 30.32 0.23
AVND Avondale Fin. Corp. of IL 15.25 3,324 50.7 18.88 12.75 15.44 -1.23 -17.03 -6.15
BKCT Bancorp Connecticut of CT* 18.50 5,092 94.2 25.00 10.75 18.50 0.00 59.07 -11.90
BPLS Bank Plus Corp. of CA 14.75 19,367 285.7 14.88 9.63 14.56 1.30 10.24 16.79
BNKU Bank United Corp. of TX 47.13 31,596 1,489.1 49.88 28.25 44.75 5.32 50.19 -3.70
BWFC Bank West Fin. Corp. of MI 14.88 2,623 39.0 17.50 7.50 13.94 6.74 90.04 -7.75
BANC BankAtlantic Bancorp of FL 13.50 25,760 347.8 17.00 12.13 13.81 -2.24 -21.19 -19.40
BKUNA BankUnited Fin. Corp. of FL 14.69 14,209 208.7 15.63 8.50 14.25 3.09 50.67 -4.67
BVCC Bay View Capital Corp. of CA 34.75 12,070 419.4 37.25 22.63 32.50 6.92 21.38 -4.14
FSNJ Bayonne Banchsares of NJ 13.25 8,993 119.2 13.56 7.93 13.25 0.00 65.42 -0.97
BFSB Bedford Bancshares, Inc. of VA 28.50 1,142 32.5 34.75 19.00 29.25 -2.56 47.06 -16.18
BFFC Big Foot Fin. Corp. of IL 22.63 2,513 56.9 23.25 13.75 22.50 0.58 63.04 7.76
BYFC Broadway Fin. Corp. of CA 12.75 831 10.6 13.75 10.38 12.75 0.00 22.83 -3.77
CBES CBES Bancorp, Inc. of MO 25.50 1,022 26.1 25.50 15.88 25.50 0.00 47.31 14.61
CCFH CCF Holding Company of GA 21.00 902 18.9 21.50 14.32 20.88 0.57 42.18 4.32
CENF CENFED Financial Corp. of CA(8) 42.50 5,959 253.3 45.00 26.38 42.75 -0.58 37.01 -5.56
CFSB CFSB Bancorp of Lansing MI 29.50 7,607 224.4 31.13 12.20 30.88 -4.47 134.50 12.38
CKFB CKF Bancorp of Danville KY 19.50 867 16.9 20.50 17.75 19.88 -1.91 9.86 5.41
CNSB CNS Bancorp, Inc. of MO 18.50 1,653 30.6 21.50 15.00 17.88 3.47 8.82 -9.76
CSBF CSB Financial Group Inc of IL 13.63 840 11.4 13.63 10.13 13.13 3.81 34.55 0.96
CBCI Calumet Bancorp of Chicago IL 37.50 3,141 117.8 38.00 22.83 37.75 -0.66 58.16 12.78
CAFI Camco Fin. Corp. of OH 25.38 3,217 81.6 27.00 15.00 25.94 -2.16 69.20 -0.47
CMRN Cameron Fin. Corp. of MO 20.00 2,564 51.3 21.00 15.88 19.50 2.56 21.21 -2.44
CAPS Capital Savings Bancorp of MO(8) 22.50 1,891 42.5 25.25 12.75 22.50 0.00 60.71 -10.89
CFNC Carolina Fincorp of NC* 17.75 1,852 32.9 18.75 14.13 17.50 1.43 16.39 -4.05
CASB Cascade Financial Corp. of WA 15.50 3,395 52.6 16.80 11.60 15.50 0.00 18.32 16.98
CATB Catskill Fin. Corp. of NY* 18.38 4,630 85.1 19.13 13.94 17.75 3.55 15.74 -2.65
CNIT Cenit Bancorp of Norfolk VA 71.25 1,654 117.8 80.00 40.00 72.75 -2.06 58.33 -10.38
CEBK Central Co-Op. Bank of MA* 32.00 1,965 62.9 33.50 15.88 29.75 7.56 75.34 12.28
CENB Century Bancorp, Inc. of NC 93.75 407 38.2 93.75 66.00 85.50 9.65 43.13 10.62
CBSB Charter Financial Inc. of IL(8) 32.63 4,174 136.2 32.75 15.75 26.38 23.69 105.48 29.84
COFI Charter One Financial of OH 60.59 63,849 3,868.6 64.00 40.24 59.63 1.61 33.40 -4.02
CVAL Chester Valley Bancorp of PA 31.75 2,169 68.9 31.75 15.24 30.00 5.83 108.33 8.55
CTZN CitFed Bancorp of Dayton OH(8) 52.38 13,003 681.1 52.88 22.00 52.00 0.73 118.25 34.31
CLAS Classic Bancshares, Inc. of KY 18.88 1,300 24.5 19.13 12.25 19.13 -1.31 36.02 12.72
CBSA Coastal Bancorp of Houston TX 31.31 5,009 156.8 35.50 22.75 31.38 -0.22 15.96 -10.24
CFCP Coastal Fin. Corp. of SC 21.75 4,674 101.7 27.75 16.13 22.25 -2.25 20.83 -11.22
CMSB Commonwealth Bancorp Inc of PA 20.38 16,247 331.1 21.63 13.50 19.56 4.19 30.39 2.52
CMSV Commty. Svgs, MHC of FL (48.5) 36.50 5,095 90.2 39.75 19.25 34.88 4.64 84.81 3.17
CFTP Community Fed. Bancorp of MS 18.69 4,629 86.5 21.00 16.38 18.75 -0.32 -6.55 -7.70
CFFC Community Fin. Corp. of VA 30.75 1,275 39.2 30.75 21.50 27.25 12.84 39.77 11.29
CFBC Community First Bnkg Co. of GA 44.00 2,414 106.2 44.50 31.88 43.13 2.02 120.00 0.00
CIBI Community Inv. Bancorp of OH 17.25 902 15.6 17.50 11.33 16.13 6.94 47.81 6.75
COOP Cooperative Bancshares of NC 20.25 2,984 60.4 25.00 10.25 20.00 1.25 88.37 -17.35
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRZY Crazy Woman Creek Bncorp of WY 16.50 955 15.8 16.50 13.00 16.38 0.73 21.06 10.00
DNFC D&N Financial Corp. of MI 26.25 9,099 238.8 26.75 15.68 25.38 3.43 59.28 -0.94
DCBI Delphos Citizens Bancorp of OH 24.25 1,946 47.2 24.25 12.44 22.25 8.99 73.21 16.87
DIME Dime Community Bancorp of NY* 25.13 12,438 312.6 25.50 16.63 23.50 6.94 37.70 5.81
DIBK Dime Financial Corp. of CT* 31.25 5,164 161.4 32.00 18.00 29.75 5.04 52.44 2.46
EGLB Eagle BancGroup of IL 20.25 1,178 23.9 20.75 14.75 20.13 0.60 29.56 7.26
EBSI Eagle Bancshares of Tucker GA 20.50 5,719 117.2 22.38 15.25 21.25 -3.53 21.45 -6.82
EGFC Eagle Financial Corp. of CT(8) 52.81 6,514 344.0 55.00 26.75 53.00 -0.36 80.55 -3.98
ETFS East Texas Fin. Serv. of TX 21.75 1,026 22.3 23.75 16.88 22.00 -1.14 19.18 -8.42
ESBK Elmira Svgs Bank (The) of NY* 28.88 742 21.4 30.38 17.62 28.63 0.87 55.52 -3.73
EMLD Emerald Financial Corp. of OH 22.13 5,073 112.3 24.75 11.38 21.63 2.31 94.46 0.00
EIRE Emerald Isle Bancorp of MA(8)* 33.00 2,314 76.4 33.00 17.00 32.75 0.76 69.23 2.52
EFBC Empire Federal Bancorp of MT 17.94 2,592 46.5 18.25 12.50 17.38 3.22 30.47 4.73
EFBI Enterprise Fed. Bancorp of OH 33.38 1,986 66.3 35.00 14.75 33.00 1.15 126.31 5.97
EQSB Equitable FSB of Wheaton MD 30.50 1,215 37.1 30.50 15.88 28.50 7.02 84.85 15.09
FCBF FCB Fin. Corp. of Neenah WI 31.25 3,863 120.7 33.31 20.13 31.00 0.81 40.45 5.93
FFDF FFD Financial Corp. of OH 18.75 1,445 27.1 19.50 13.00 18.75 0.00 35.09 4.17
FFLC FFLC Bancorp of Leesburg FL 19.38 3,744 72.6 23.50 15.00 19.25 0.68 20.75 -10.90
FFFC FFVA Financial Corp. of VA(8) 37.50 4,581 171.8 40.00 20.50 38.06 -1.47 53.06 -4.17
FFWC FFW Corporation of Wabash IN 18.50 1,443 26.7 21.50 12.32 19.63 -5.76 46.48 -2.63
FFYF FFY Financial Corp. of OH 34.25 4,070 139.4 35.38 25.00 34.50 -0.72 36.29 3.38
FMCO FMS Financial Corp. of NJ 35.00 2,388 83.6 35.75 18.75 34.00 2.94 77.22 -1.41
FFHH FSF Financial Corp. of MN 20.13 3,015 60.7 21.25 16.38 20.00 0.65 17.51 -3.87
FOBC Fed One Bancorp of Wheeling WV(8) 35.88 2,375 85.2 35.88 17.63 33.75 6.31 95.21 30.47
FBCI Fidelity Bancorp of Chicago IL 24.50 2,814 68.9 26.00 18.50 24.75 -1.01 20.99 -4.41
FSBI Fidelity Bancorp, Inc. of PA 28.88 1,562 45.1 30.00 18.41 30.00 -3.73 36.61 -0.41
FFFL Fidelity Bcsh MHC of FL (47.7) 32.75 6,783 105.6 35.38 18.38 35.38 -7.43 74.67 0.77
FFED Fidelity Fed. Bancorp of IN 9.75 3,128 30.5 10.50 7.50 9.38 3.94 8.33 -5.43
FFOH Fidelity Financial of OH 18.00 5,593 100.7 18.25 12.25 17.50 2.86 45.40 16.13
FIBC Financial Bancorp, Inc. of NY 26.00 1,710 44.5 26.00 14.88 24.38 6.64 41.46 7.75
FBSI First Bancshares, Inc. of MO 17.00 2,186 37.2 17.50 9.50 16.88 0.71 76.53 8.77
FBBC First Bell Bancorp of PA 18.75 6,511 122.1 19.38 14.50 19.00 -1.32 19.05 -1.32
SKBO First Carnegie MHC of PA(45.0) 18.63 2,300 19.3 19.88 11.63 18.63 0.00 86.30 -0.64
FSTC First Citizens Corp of GA 32.00 2,765 88.5 35.50 14.67 32.00 0.00 102.15 -5.88
FCME First Coastal Corp. of ME* 14.63 1,359 19.9 15.75 8.38 14.63 0.00 74.58 -1.68
FFBA First Colorado Bancorp of CO 25.25 16,808 424.4 26.13 16.00 25.00 1.00 47.40 6.32
FDEF First Defiance Fin.Corp. of OH 15.25 8,528 130.1 16.25 12.38 15.44 -1.23 17.85 -4.69
FESX First Essex Bancorp of MA* 23.63 7,536 178.1 23.75 14.50 22.63 4.42 50.03 1.63
FFSX First FSB MHC Sxld of IA(46.1) 31.13 2,834 40.6 35.00 20.75 31.25 -0.38 54.34 -1.95
FFES First Fed of E. Hartford CT 38.50 2,706 104.2 39.00 23.00 37.50 2.67 48.76 3.36
BDJI First Fed. Bancorp. of MN 20.75 998 20.7 22.00 11.83 20.75 0.00 61.73 -5.68
FFBH First Fed. Bancshares of AR 26.00 4,896 127.3 27.00 17.50 26.19 -0.73 30.00 9.47
FTFC First Fed. Capital Corp. of WI 31.88 9,191 293.0 34.00 16.83 32.50 -1.91 62.07 -5.90
FFKY First Fed. Fin. Corp. of KY 22.00 4,144 91.2 23.50 18.25 22.00 0.00 4.76 -3.30
FFBZ First Federal Bancorp of OH 23.00 1,575 36.2 23.00 17.00 23.00 0.00 31.43 8.85
FFCH First Fin. Holdings Inc. of SC 52.50 6,761 355.0 53.50 23.75 49.75 5.53 94.44 -1.19
FFBI First Financial Bancorp of IL 23.25 415 9.6 23.75 15.50 23.75 -2.11 40.91 10.71
FFHS First Franklin Corp. of OH 27.00 1,192 32.2 31.25 16.75 27.00 0.00 66.15 -13.60
FGHC First Georgia Hold. Corp of GA 10.00 3,052 30.5 10.19 6.75 9.25 8.11 53.85 5.26
FSPG First Home Bancorp of NJ(8) 29.75 2,708 80.6 30.50 17.88 29.75 0.00 70.00 -1.26
FFSL First Independence Corp. of KS 14.75 954 14.1 15.63 10.88 14.75 0.00 25.53 5.36
FISB First Indiana Corp. of IN 29.25 12,668 370.5 30.00 14.48 29.50 -0.85 53.30 16.03
FKFS First Keystone Fin. Corp of PA 17.50 2,413 42.2 19.00 10.63 17.25 1.45 62.79 -2.13
FLKY First Lancaster Bncshrs of KY 15.13 951 14.4 16.38 14.63 15.13 0.00 -5.44 -5.08
FLFC First Liberty Fin. Corp. of GA 30.13 7,748 233.4 34.25 21.00 30.00 0.43 40.14 -5.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH First Midwest Fin., Inc. of OH 22.88 2,692 61.6 23.13 15.00 23.13 -1.08 36.60 1.69
FMBD First Mutual Bancorp Inc of IL 20.13 3,507 70.6 25.00 13.75 19.50 3.23 27.81 -19.48
FMSB First Mutual SB of Bellevue WA* 18.38 4,125 75.8 20.17 10.61 18.25 0.71 55.50 -0.65
FNGB First Northern Cap. Corp of WI 13.00 8,846 115.0 14.00 8.63 13.75 -5.45 47.56 -7.14
FFPB First Palm Beach Bancorp of FL 37.88 5,055 191.5 44.94 26.56 37.75 0.34 38.35 -12.17
FSLA First SB SLA MHC of NJ (47.5)(8) 45.75 8,016 155.7 54.50 19.09 43.50 5.17 131.41 -16.06
FWWB First Savings Bancorp of WA 25.50 10,156 259.0 28.56 18.75 25.38 0.47 25.12 -7.27
FSFF First SecurityFed Fin of IL 15.38 6,408 98.6 16.63 14.50 15.13 1.65 53.80 -2.35
SHEN First Shenango Bancorp of PA(8) 43.50 2,069 90.0 43.88 21.75 43.38 0.28 70.59 17.57
SOPN First Svgs Bancorp of NC 23.63 3,700 87.4 26.00 19.38 23.50 0.55 18.86 -7.33
FBNW FirstBank Corp of Clarkston WA 19.50 1,984 38.7 20.25 15.50 20.00 -2.50 95.00 3.28
FFDB FirstFed Bancorp, Inc. of AL 24.00 1,155 27.7 24.00 14.38 23.00 4.35 66.90 10.96
FSPT FirstSpartan Fin. Corp. of SC 43.50 4,430 192.7 43.50 35.00 43.00 1.16 117.50 8.07
FLAG Flag Financial Corp of GA 20.63 2,037 42.0 21.50 11.75 21.00 -1.76 68.41 -4.05
FLGS Flagstar Bancorp, Inc of MI 22.63 13,670 309.4 22.63 13.00 21.81 3.76 N.A. 14.29
FFIC Flushing Fin. Corp. of NY* 25.50 7,865 200.6 25.50 17.88 24.94 2.25 32.47 6.78
FBHC Fort Bend Holding Corp. of TX 20.88 1,668 34.8 24.00 11.63 20.75 0.63 72.14 -4.00
FTSB Fort Thomas Fin. Corp. of KY 15.50 1,474 22.8 15.50 9.25 14.81 4.66 31.91 0.78
FKKY Frankfort First Bancorp of KY 16.25 1,619 26.3 24.50 15.75 16.38 -0.79 -18.75 -7.83
FTNB Fulton Bancorp, Inc. of MO 21.75 1,719 37.4 26.50 17.50 22.00 -1.14 21.64 -1.72
GFSB GFS Bancorp of Grinnell IA(8) 17.00 996 16.9 17.63 10.63 17.00 0.00 52.74 -0.35
GUPB GFSB Bancorp, Inc of Gallup NM 20.38 801 16.3 22.25 16.25 20.88 -2.39 25.42 -3.55
GSLA GS Financial Corp. of LA 20.63 3,439 70.9 21.00 13.38 20.38 1.23 106.30 -1.76
GOSB GSB Financial Corp. of NY* 16.50 2,248 37.1 18.94 14.25 16.00 3.13 65.00 -8.64
GBCI Glacier Bancorp of MT 28.75 6,816 196.0 27.75 15.33 29.50 -2.54 76.06 15.00
GFCO Glenway Financial Corp. of OH 20.50 2,281 46.8 21.00 10.25 20.50 0.00 90.70 9.33
GTPS Great American Bancorp of IL 19.75 1,672 33.0 21.50 15.50 21.13 -6.53 22.44 3.95
PEDE Great Pee Dee Bancorp of SC 15.88 2,182 34.7 16.13 14.75 15.50 2.45 58.80 -1.55
GSBC Great Southern Bancorp of MO 25.50 8,066 205.7 25.88 16.00 25.25 0.99 48.86 4.08
GDVS Greater DV SB,MHC of PA (19.9) 31.00 3,273 20.2 32.50 10.75 32.00 -3.13 181.82 0.00
GSFC Green Street Fin. Corp. of NC 18.38 4,298 79.0 20.75 17.00 18.50 -0.65 -2.65 0.71
GFED Guaranty Fed Bancshares of MO 12.56 6,222 78.1 14.44 6.09 12.56 0.00 100.00 -2.48
HCBB HCB Bancshares of Camden AR 14.75 2,645 39.0 15.25 12.63 14.50 1.72 47.50 1.72
HEMT HF Bancorp of Hemet CA 17.88 6,293 112.5 18.25 12.25 17.25 3.65 33.63 2.17
HFFC HF Financial Corp. of SD 29.00 2,977 86.3 29.75 18.75 29.75 -2.52 43.21 9.43
HFNC HFNC Financial Corp. of NC 13.63 17,193 234.3 22.06 13.25 13.63 0.00 -35.86 -6.00
HMNF HMN Financial, Inc. of MN 29.00 4,144 120.2 32.50 19.00 27.50 5.45 24.73 -10.77
HALL Hallmark Capital Corp. of WI 16.00 2,934 46.9 18.00 8.75 14.88 7.53 72.97 -5.88
HARB Harbor FL Bncp MHC of FL (46.1(8) 70.50 4,979 163.3 72.00 35.00 70.00 0.71 89.26 6.42
HRBF Harbor Federal Bancorp of MD 24.00 1,693 40.6 25.25 15.50 23.00 4.35 40.11 -4.95
HFSA Hardin Bancorp of Hardin MO 18.75 824 15.5 18.75 13.50 18.38 2.01 36.36 2.74
HARL Harleysville SB of PA 30.00 1,666 50.0 30.50 20.25 29.38 2.11 39.53 9.09
HFGI Harrington Fin. Group of IN 12.00 3,246 39.0 13.75 10.25 11.88 1.01 14.29 -7.69
HARS Harris Fin. MHC of PA (24.3) 20.50 33,790 167.5 20.88 6.04 19.00 7.89 181.21 3.12
HFFB Harrodsburg 1st Fin Bcrp of KY 16.69 1,986 33.1 18.00 14.75 16.50 1.15 2.71 -0.36
HHFC Harvest Home Fin. Corp. of OH 15.00 891 13.4 15.75 10.25 15.00 0.00 50.00 -4.76
HAVN Haven Bancorp of Woodhaven NY 24.50 8,785 215.2 24.50 15.25 21.38 14.59 45.14 8.89
HTHR Hawthorne Fin. Corp. of CA 19.75 3,088 61.0 24.00 9.25 20.44 -3.38 75.56 -1.89
HMLK Hemlock Fed. Fin. Corp. of IL 18.88 2,076 39.2 18.88 12.50 18.69 1.02 88.80 10.22
HFWA Heritage Financial Corp of WA 14.75 9,749 143.8 14.81 13.00 14.63 0.82 47.50 47.50
HCBC High Country Bancorp of CO 14.75 1,323 19.5 15.50 14.44 15.00 -1.67 47.50 -4.84
HBNK Highland Bancorp of CA 35.75 2,318 82.9 36.25 20.50 36.00 -0.69 48.96 9.16
HIFS Hingham Inst. for Sav. of MA* 33.00 1,304 43.0 34.50 18.00 31.50 4.76 77.13 14.78
HBEI Home Bancorp of Elgin IL 18.63 6,856 127.7 19.31 14.13 18.13 2.76 24.70 4.19
HBFW Home Bancorp of Fort Wayne IN 32.75 2,385 78.1 32.75 19.25 32.00 2.34 67.95 11.02
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HBBI Home Building Bancorp of IN 22.63 312 7.1 23.75 20.50 22.00 2.86 7.76 6.49
HCFC Home City Fin. Corp. of OH 18.63 905 16.9 19.25 12.75 18.63 0.00 40.60 0.70
HOMF Home Fed Bancorp of Seymour IN 31.50 5,113 161.1 32.75 16.67 31.25 0.80 71.01 21.15
HWEN Home Financial Bancorp of IN 9.00 929 8.4 9.75 7.00 9.00 0.00 23.12 -2.70
HPBC Home Port Bancorp, Inc. of MA* 26.50 1,842 48.8 27.63 16.50 25.50 3.92 45.21 14.57
HMCI HomeCorp, Inc. of Rockford IL(8) 27.56 1,709 47.1 29.25 13.33 28.13 -2.03 109.26 -5.78
HFBC HopFed Bancorp of KY 17.31 4,034 69.8 17.31 16.00 16.63 4.09 73.10 73.10
HZFS Horizon Fin'l. Services of IA 14.50 853 12.4 14.75 8.50 14.75 -1.69 70.59 20.83
HRZB Horizon Financial Corp. of WA* 17.88 7,454 133.3 18.50 11.96 17.75 0.73 37.12 0.73
IBSF IBS Financial Corp. of NJ 17.75 10,944 194.3 18.75 14.25 16.50 7.58 15.79 0.34
ITLA ITLA Capital Corp of CA* 20.19 7,871 158.9 21.25 14.00 20.25 -0.30 23.26 4.88
IFSB Independence FSB of DC 17.00 1,281 21.8 19.00 7.50 16.13 5.39 91.44 0.00
INCB Indiana Comm. Bank, SB of IN(8) 20.63 922 19.0 21.00 15.00 20.50 0.63 26.95 0.63
INBI Industrial Bancorp of OH 18.50 5,103 94.4 19.25 12.00 18.25 1.37 46.48 4.23
IWBK Interwest Bancorp of WA 41.50 8,037 333.5 43.25 27.63 39.50 5.06 16.90 9.93
IPSW Ipswich SB of Ipswich MA* 14.25 2,385 34.0 16.50 6.88 14.00 1.79 83.87 -13.64
JXVL Jacksonville Bancorp of TX 20.50 2,444 50.1 23.25 13.25 20.63 -0.63 32.26 -11.83
JXSB Jcksnville SB,MHC of IL (45.6) 22.00 1,908 12.8 22.00 10.67 21.75 1.15 100.00 10.00
JSBA Jefferson Svgs Bancorp of MO 27.00 10,013 270.4 27.00 13.75 25.25 6.93 86.21 31.71
JOAC Joachim Bancorp, Inc. of MO(8) 16.63 722 12.0 16.63 14.00 16.38 1.53 14.69 3.94
KSAV KS Bancorp of Kenly NC 24.00 885 21.2 25.50 14.81 24.00 0.00 62.05 -3.03
KSBK KSB Bancorp of Kingfield ME* 19.25 1,239 23.9 22.50 9.00 20.75 -7.23 69.90 -14.44
KFBI Klamath First Bancorp of OR 22.50 9,994 224.9 24.25 15.50 22.56 -0.27 43.95 4.65
LSBI LSB Fin. Corp. of Lafayette IN 28.25 916 25.9 29.88 18.57 29.38 -3.85 52.13 -0.88
LVSB Lakeview Financial of NJ 25.88 4,164 107.8 26.00 13.63 25.00 3.52 62.97 1.49
LARK Landmark Bancshares, Inc of KS 22.00 1,689 37.2 27.25 18.50 22.00 0.00 17.33 -11.58
LARL Laurel Capital Group of PA 22.00 2,175 47.9 23.50 13.42 21.75 1.15 53.52 1.52
LSBX Lawrence Savings Bank of MA* 16.88 4,288 72.4 16.88 9.13 16.69 1.14 70.85 3.05
LFED Leeds FSB, MHC of MD (36.3) 21.63 5,182 40.7 23.50 11.83 21.50 0.60 70.72 -0.55
LXMO Lexington B&L Fin. Corp. of MO 16.50 1,059 17.5 17.88 14.13 16.63 -0.78 13.79 -7.04
LIFB Life Bancorp of Norfolk VA(8) 35.88 9,848 353.3 36.63 16.75 35.81 0.20 79.40 -2.05
LFCO Life Financial Corp of CA 16.00 6,546 104.7 21.88 10.75 15.00 6.67 N.A. 26.68
LFBI Little Falls Bancorp of NJ 20.00 2,608 52.2 20.50 12.75 20.25 -1.23 47.49 -2.44
LOGN Logansport Fin. Corp. of IN 16.25 1,261 20.5 18.00 12.50 16.13 0.74 25.00 -9.72
LONF London Financial Corp. of OH 14.88 510 7.6 21.00 14.00 15.13 -1.65 -2.43 -11.16
LISB Long Island Bancorp, Inc of NY 60.19 24,029 1,446.3 60.56 33.00 52.88 13.82 56.83 21.28
MAFB MAF Bancorp, Inc. of IL 37.25 15,013 559.2 38.13 24.83 37.56 -0.83 40.57 5.29
MBLF MBLA Financial Corp. of MO 28.13 1,270 35.7 30.63 20.00 27.25 3.23 39.74 -7.77
MECH MECH Financial Inc of CT* 26.63 5,293 141.0 28.00 16.75 26.56 0.26 56.65 2.19
MFBC MFB Corp. of Mishawaka IN 27.00 1,627 43.9 30.38 18.75 26.63 1.39 42.11 -11.13
MLBC ML Bancorp of Villanova PA(8) 31.25 11,958 373.7 31.50 15.00 31.50 -0.79 79.80 4.17
MSBF MSB Financial, Inc of MI 17.25 1,237 21.3 19.50 10.38 17.25 0.00 58.55 -9.21
MARN Marion Capital Holdings of IN 27.00 1,782 48.1 28.13 21.25 26.25 2.86 27.06 -0.48
MRKF Market Fin. Corp. of OH 16.75 1,336 22.4 17.00 12.25 16.75 0.00 67.50 7.17
MFSL Maryland Fed. Bancorp of MD 35.94 6,476 232.7 35.94 17.19 30.75 16.88 92.91 2.69
MASB MassBank Corp. of Reading MA* 49.38 3,571 176.3 49.38 29.91 49.00 0.78 61.58 3.67
MFLR Mayflower Co-Op. Bank of MA* 26.88 899 24.2 27.00 15.75 25.75 4.39 45.30 0.49
MDBK Medford Bancorp, Inc. of MA* 43.88 4,541 199.3 43.88 24.50 40.75 7.68 51.31 11.80
MERI Meritrust FSB of Thibodaux LA(8) 73.25 774 56.7 74.25 34.00 70.00 4.64 106.34 6.16
MWBX MetroWest Bank of MA* 7.91 14,108 111.6 9.50 4.63 8.00 -1.12 58.20 -12.11
METF Metropolitan Fin. Corp. of OH 16.81 7,051 118.5 18.88 5.38 18.88 -10.96 212.45 8.45
MCBS Mid Continent Bancshares of KS(8) 45.63 1,998 91.2 47.75 25.00 44.44 2.68 80.71 -4.44
MIFC Mid Iowa Financial Corp. of IA 12.63 1,710 21.6 12.63 7.31 12.00 5.25 48.59 9.83
MCBN Mid-Coast Bancorp of ME 38.25 237 9.1 40.75 18.50 40.00 -4.37 101.32 27.50
MWBI Midwest Bancshares, Inc. of IA 17.00 1,021 17.4 19.50 8.92 16.88 0.71 78.95 -6.85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MWFD Midwest Fed. Fin. Corp of WI(8) 28.75 1,628 46.8 29.63 16.75 28.25 1.77 59.72 2.20
MFFC Milton Fed. Fin. Corp. of OH 15.88 2,267 36.0 17.00 13.25 16.06 -1.12 14.41 3.25
MIVI Miss. View Hold. Co. of MN 18.38 740 13.6 19.75 14.00 18.75 -1.97 25.63 -0.65
MBSP Mitchell Bancorp, Inc. of NC 17.00 931 15.8 18.00 15.19 17.13 -0.76 10.53 0.00
MBBC Monterey Bay Bancorp of CA 19.75 3,230 63.8 20.50 15.50 19.63 0.61 14.49 1.28
MONT Montgomery Fin. Corp. of IN 12.75 1,653 21.1 14.00 11.00 12.75 0.00 27.50 -1.01
MSBK Mutual SB, FSB of Bay City MI 13.25 4,282 56.7 14.63 6.50 13.00 1.92 92.59 1.92
MYST Mystic Financial of MA* 17.00 2,711 46.1 17.13 14.44 16.63 2.22 70.00 70.00
NHTB NH Thrift Bancshares of NH 19.75 2,075 41.0 22.75 11.75 19.50 1.28 68.09 -3.66
NSLB NS&L Bancorp, Inc of Neosho MO 17.38 712 12.4 19.50 16.00 17.50 -0.69 7.75 -7.94
NSSY NSS Bancorp of CT* 42.75 2,427 103.8 42.75 23.00 41.00 4.27 68.44 13.25
NMSB Newmil Bancorp, Inc. of CT* 13.38 3,879 51.9 14.50 8.88 13.75 -2.69 40.84 2.92
NASB North American SB, FSB of MO 66.50 2,240 149.0 66.50 36.75 63.94 4.00 69.43 25.16
NBSI North Bancshares of Chicago IL 18.13 1,430 25.9 18.83 12.00 17.88 1.40 47.04 1.40
FFFD North Central Bancshares of IA 21.00 3,266 68.6 21.25 15.00 20.63 1.79 36.54 5.63
NEIB Northeast Indiana Bncrp of IN 22.25 1,763 39.2 22.75 13.25 21.38 4.07 56.14 0.54
NWEQ Northwest Equity Corp. of WI 22.25 839 18.7 22.25 13.50 22.25 0.00 64.81 7.23
NWSB Northwest SB, MHC of PA (30.7) 15.88 46,798 227.9 16.38 7.13 14.13 12.38 103.33 12.38
NTMG Nutmeg FS&LA of CT 10.25 986 10.1 11.25 5.25 10.25 0.00 85.35 -2.38
OHSL OHSL Financial Corp. of OH 36.75 1,241 45.6 36.75 22.00 35.00 5.00 66.06 36.11
OCFC Ocean Fin. Corp. of NJ 35.25 8,176 288.2 38.38 27.63 36.63 -3.77 14.15 -5.37
OTFC Oregon Trail Fin. Corp. of OR 18.13 4,333 78.6 18.38 15.63 18.13 0.00 81.30 4.32
OFCP Ottawa Financial Corp. of MI 29.50 5,313 156.7 34.00 17.50 28.50 3.51 70.82 -13.24
PFFB PFF Bancorp of Pomona CA 19.38 17,956 348.0 21.50 13.63 19.75 -1.87 19.26 -2.52
PSFI PS Financial of Chicago IL 13.94 2,167 30.2 22.38 12.88 14.19 -1.76 1.38 -37.71
PVFC PVF Capital Corp. of OH 23.00 2,659 61.2 23.38 14.89 23.00 0.00 53.33 13.92
PBCI Pamrapo Bancorp, Inc. of NJ 26.75 2,843 76.1 27.50 18.50 25.75 3.88 31.26 -1.83
PFED Park Bancorp of Chicago IL 18.75 2,333 43.7 19.75 14.25 19.00 -1.32 17.19 0.64
PVSA Parkvale Financial Corp of PA 31.75 5,108 162.2 34.25 20.40 32.13 -1.18 58.75 -7.30
PBHC Pathfinder BC MHC of NY (46.1)* 21.50 2,875 19.0 21.50 7.17 20.00 7.50 199.86 7.50
PEEK Peekskill Fin. Corp. of NY 17.00 3,127 53.2 18.25 13.38 16.25 4.62 11.48 1.49
PFSB PennFed Fin. Services of NJ 18.63 9,646 179.7 18.63 11.13 17.38 7.19 49.04 8.76
PWBC PennFirst Bancorp of PA 19.13 5,310 101.6 20.00 12.27 19.38 -1.29 55.91 -0.62
PWBK Pennwood Bancorp, Inc. of PA 22.00 551 12.1 22.00 13.75 22.00 0.00 52.99 11.39
PBKB People's Bancshares of MA* 22.38 3,289 73.6 24.50 11.63 23.25 -3.74 75.53 -1.63
PFDC Peoples Bancorp of Auburn IN 22.25 3,391 75.4 25.00 13.83 22.00 1.14 60.88 1.14
PBCT Peoples Bank, MHC of CT (40.1)* 37.56 61,162 918.5 38.00 19.00 37.13 1.16 63.30 -1.16
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 43.25 9,046 140.4 45.25 15.75 43.38 -0.30 167.14 -4.42
PFFC Peoples Fin. Corp. of OH 16.50 1,417 23.4 19.00 12.75 16.75 -1.49 11.86 9.05
PHBK Peoples Heritage Fin Grp of ME* 46.56 27,737 1,291.4 47.00 27.50 45.06 3.33 48.37 1.22
PSFC Peoples Sidney Fin. Corp of OH 17.75 1,785 31.7 18.63 12.56 18.00 -1.39 77.50 -0.73
PERM Permanent Bancorp, Inc. of IN 29.50 2,103 62.0 32.63 20.75 28.50 3.51 31.11 -5.24
PMFI Perpetual Midwest Fin. of IA(8) 28.75 1,891 54.4 30.50 18.75 28.88 -0.45 41.98 -1.71
PERT Perpetual of SC, MHC (46.8)(8) 65.00 1,509 45.8 66.00 24.13 66.00 -1.52 150.00 7.21
PCBC Perry Co. Fin. Corp. of MO 23.88 828 19.8 25.00 17.25 23.75 0.55 38.43 -1.04
PHFC Pittsburgh Home Fin Corp of PA 17.75 1,969 34.9 20.81 14.00 17.50 1.43 22.41 -1.39
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 44.19 1,632 34.0 45.00 17.75 43.50 1.59 131.85 -0.70
PTRS Potters Financial Corp of OH 19.00 965 18.3 22.25 9.50 18.75 1.33 93.68 -5.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 10.63 12,610 134.0 11.63 5.44 10.88 -2.30 78.96 -8.60
PHSB Ppls Home SB, MHC of PA (45.0) 18.00 2,760 22.4 19.75 13.63 18.00 0.00 80.00 -4.66
PRBC Prestige Bancorp of PA 19.13 915 17.5 20.00 15.00 19.13 0.00 31.93 -4.35
PFNC Progress Financial Corp. of PA 16.88 4,064 68.6 16.88 7.68 16.38 3.05 104.11 2.30
PSBK Progressive Bank, Inc. of NY(8)* 37.81 3,832 144.9 39.25 23.00 37.25 1.50 56.69 -1.15
PROV Provident Fin. Holdings of CA 22.75 4,693 106.8 23.38 14.13 22.38 1.65 42.19 3.98
PULB Pulaski SB, MHC of MO (29.8)(8) 48.75 2,097 30.4 48.75 16.75 42.00 16.07 191.04 55.35
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PLSK Pulaski SB, MHC of NJ (46.0) 18.50 2,108 17.6 24.50 11.50 18.25 1.37 85.00 -3.90
PULS Pulse Bancorp of S. River NJ 26.25 3,088 81.1 29.75 17.88 27.50 -4.55 47.89 0.46
QCFB QCF Bancorp of Virginia MN 27.25 1,382 37.7 29.75 18.75 27.25 0.00 39.74 -8.40
QCBC Quaker City Bancorp of CA 20.00 4,673 93.5 24.56 14.40 20.38 -1.86 31.58 -5.88
QCSB Queens County Bancorp of NY* 39.75 15,108 600.5 40.50 23.33 38.50 3.25 58.30 -1.85
RARB Raritan Bancorp of Raritan NJ* 26.50 2,372 62.9 29.25 15.92 26.50 0.00 63.88 -5.36
REDF RedFed Bancorp of Redlands CA(8) 19.81 7,233 143.3 21.13 12.38 19.81 0.00 36.62 -0.35
RELY Reliance Bancorp, Inc. of NY 35.50 9,634 342.0 36.88 21.88 33.75 5.19 60.42 -3.08
RELI Reliance Bancshares Inc of WI 9.13 2,562 23.4 10.13 7.00 9.25 -1.30 28.05 -3.89
RCBK Richmond County Fin Corp of NY* 16.66 24,466 407.6 16.66 15.69 15.69 6.18 66.60 66.60
RIVR River Valley Bancorp of IN 19.25 1,190 22.9 19.75 13.63 19.25 0.00 26.23 2.67
RVSB Riverview Bancorp of WA 16.44 6,133 100.8 18.00 6.36 16.25 1.17 151.38 -7.38
RSLN Roslyn Bancorp, Inc. of NY* 22.81 43,642 995.5 24.50 15.63 22.00 3.68 43.64 -1.89
SCCB S. Carolina Comm. Bnshrs of SC 21.50 583 12.5 25.25 17.50 22.25 -3.37 10.26 -4.44
SBFL SB Fngr Lakes MHC of NY (33.1) 30.50 1,785 18.0 32.00 14.75 31.00 -1.61 96.77 -4.69
SFED SFS Bancorp of Schenectady NY 21.50 1,208 26.0 27.25 16.00 23.25 -7.53 26.47 -20.01
SGVB SGV Bancorp of W. Covina CA 18.00 2,345 42.2 19.38 11.38 17.13 5.08 34.53 1.41
SHSB SHS Bancorp, Inc. of PA 18.00 820 14.8 18.00 14.75 17.37 3.63 80.00 7.46
SISB SIS Bancorp, Inc. of MA* 37.63 6,948 261.5 40.25 23.38 37.88 -0.66 42.00 -6.37
SWCB Sandwich Bancorp of MA(8)* 57.50 1,942 111.7 58.50 27.25 54.25 5.99 76.92 30.68
SFSL Security First Corp. of OH 22.00 7,571 166.6 22.25 11.83 22.00 0.00 74.88 5.36
SKAN Skaneateles Bancorp Inc of NY* 19.13 1,437 27.5 22.25 12.25 19.75 -3.14 48.52 -13.56
SOBI Sobieski Bancorp of S. Bend IN 20.50 764 15.7 24.25 14.00 21.50 -4.65 46.43 0.59
SOSA Somerset Savings Bank of MA(8)* 4.81 16,659 80.1 5.94 2.25 4.75 1.26 82.89 -3.80
SSFC South Street Fin. Corp. of NC(8)* 13.00 4,676 60.8 20.00 11.75 12.75 1.96 -22.39 -31.58
SCBS Southern Commun. Bncshrs of AL 18.00 1,137 20.5 19.00 13.00 18.00 0.00 33.33 -1.37
SMBC Southern Missouri Bncrp of MO 22.25 1,612 35.9 22.25 15.50 21.38 4.07 30.88 8.54
SWBI Southwest Bancshares of IL(8) 31.00 2,715 84.2 31.00 18.75 29.50 5.08 55.94 4.20
SVRN Sovereign Bancorp, Inc. of PA 19.38 93,444 1,810.9 21.63 11.38 19.50 -0.62 53.44 -6.60
STFR St. Francis Cap. Corp. of WI 43.50 5,251 228.4 50.75 28.75 43.00 1.16 38.10 -13.86
SPBC St. Paul Bancorp, Inc. of IL 26.50 34,205 906.4 28.50 17.46 26.06 1.69 49.97 0.95
SFFC StateFed Financial Corp. of IA 14.25 1,557 22.2 14.75 8.88 14.00 1.79 58.33 -3.39
SFIN Statewide Fin. Corp. of NJ 22.75 4,591 104.4 24.13 14.75 23.00 -1.09 34.77 -5.21
STSA Sterling Financial Corp. of WA 24.13 7,570 182.7 25.00 15.25 24.63 -2.03 39.88 10.94
SFSB SuburbFed Fin. Corp. of IL(8) 47.13 1,266 59.7 50.00 22.25 48.06 -1.94 107.16 -5.74
ROSE T R Financial Corp. of NY* 32.97 17,598 580.2 35.00 16.69 30.81 7.01 85.75 -0.84
THRD TF Financial Corp. of PA 26.00 3,187 82.9 30.00 16.63 26.00 0.00 36.84 -13.33
TPNZ Tappan Zee Fin., Inc. of NY 18.75 1,478 27.7 22.63 14.00 18.88 -0.69 25.00 0.00
TSBK Timberland Bancorp of WA 17.63 6,613 116.6 17.63 14.50 16.13 9.30 76.30 76.30
TRIC Tri-County Bancorp of WY 14.00 1,167 16.3 15.00 9.25 13.88 0.86 51.35 -6.67
TWIN Twin City Bancorp, Inc. of TN 14.50 1,272 18.4 15.50 12.00 14.88 -2.55 17.60 -6.45
USAB USABancshares, Inc of PA* 10.50 732 7.7 10.63 6.56 10.00 5.00 47.27 5.00
UCBC Union Community Bancorp of IN 14.63 3,042 44.5 14.69 13.94 14.38 1.74 46.30 0.00
UFRM United FSB of Rocky Mount NC(8) 18.75 3,169 59.4 21.00 8.13 18.00 4.17 127.27 -4.48
UBMT United Fin. Corp. of MT 27.00 1,223 33.0 28.00 19.00 28.00 -3.57 36.71 5.88
UTBI United Tenn. Bancshares of TN 14.31 1,455 20.8 14.75 13.63 14.00 2.21 43.10 43.10
VABF Va. Beach Fed. Fin. Corp of VA 18.00 4,979 89.6 18.75 9.75 17.63 2.10 60.00 -2.07
WHGB WHG Bancshares of MD 18.50 1,389 25.7 19.00 13.63 18.13 2.04 32.14 -1.33
WSFS WSFS Financial Corp. of DE* 20.75 12,460 258.5 21.75 10.63 19.75 5.06 72.92 3.75
WVFC WVS Financial Corp. of PA 38.00 1,753 66.6 38.00 23.50 36.53 4.02 44.76 7.80
WRNB Warren Bancorp of Peabody MA* 23.00 3,806 87.5 24.25 15.00 24.00 -4.17 43.75 0.00
WSBI Warwick Community Bncrp of NY* 16.00 6,414 102.6 17.38 15.38 16.00 0.00 60.00 -7.94
WFSL Washington Federal, Inc. of WA 27.63 52,286 1,444.7 30.29 20.46 28.75 -3.90 16.88 -3.32
WAMU Washington Mutual, Inc. of WA* 67.13 257,560 17,290.0 72.38 45.38 67.75 -0.92 24.18 5.20
WYNE Wayne Bancorp, Inc. of NJ 24.50 2,014 49.3 27.50 16.00 23.00 6.52 46.27 -8.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAYN Wayne Svgs Bks MHC of OH (47.8 29.50 2,257 31.7 33.00 17.00 30.00 -1.67 70.23 1.72
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.50 2,100 19.5 22.00 13.75 20.25 1.23 41.38 2.50
WBST Webster Financial Corp. of CT 64.25 13,653 877.2 66.88 35.13 63.63 0.97 62.12 -3.38
WEFC Wells Fin. Corp. of Wells MN 18.88 1,959 37.0 19.00 14.00 18.25 3.45 23.80 5.59
WCBI WestCo Bancorp, Inc. of IL 29.00 2,464 71.5 29.25 21.25 28.75 0.87 32.54 6.42
WSTR WesterFed Fin. Corp. of MT 26.00 5,577 145.0 27.00 17.63 26.00 0.00 22.35 1.96
WOFC Western Ohio Fin. Corp. of OH 26.75 2,356 63.0 29.25 21.00 26.13 2.37 24.42 -0.48
WWFC Westwood Fin. Corp. of NJ 28.63 645 18.5 28.75 17.00 28.50 0.46 46.82 1.35
WEHO Westwood Hmstd Fin Corp of OH 14.75 2,843 41.9 18.13 12.50 14.63 0.82 3.51 -13.24
FFWD Wood Bancorp of OH 22.00 2,651 58.3 27.00 8.40 23.50 -6.38 161.90 17.02
YFCB Yonkers Fin. Corp. of NY 18.69 3,021 56.5 22.00 13.25 18.38 1.69 35.93 -2.91
YFED York Financial Corp. of PA 25.50 8,852 225.7 27.25 14.20 24.50 4.08 72.30 -0.97
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(306) 1.13 1.08 14.93 14.50 137.39
NYSE Traded Companies(9) 2.67 2.33 19.78 19.07 316.98
AMEX Traded Companies(20) 0.85 0.82 14.03 13.85 110.09
NASDAQ Listed OTC Companies(277) 1.11 1.07 14.86 14.42 134.45
California Companies(20) 1.69 1.53 16.78 16.18 242.01
Florida Companies(5) 1.13 0.82 11.64 11.09 167.41
Mid-Atlantic Companies(58) 1.23 1.19 14.92 14.13 155.13
Mid-West Companies(147) 1.02 0.97 14.43 14.16 117.27
New England Companies(9) 1.35 1.51 17.48 16.65 244.55
North-West Companies(11) 1.06 0.98 13.20 12.77 111.53
South-East Companies(43) 1.13 1.09 16.37 16.14 119.04
South-West Companies(6) 1.37 1.30 15.42 14.76 201.63
Western Companies (Excl CA)(7) 0.97 0.97 14.31 13.73 93.35
Thrift Strategy(253) 1.05 1.02 14.95 14.58 123.29
Mortgage Banker Strategy(33) 1.69 1.54 15.58 14.69 221.70
Real Estate Strategy(8) 1.60 1.46 13.91 13.52 197.41
Diversified Strategy(8) 1.71 1.56 13.68 13.37 175.80
Retail Banking Strategy(4) -0.37 -0.44 12.95 12.39 186.34
Companies Issuing Dividends(258) 1.20 1.14 15.21 14.74 138.01
Companies Without Dividends(48) 0.81 0.78 13.46 13.25 134.14
Equity/Assets less than 6%(24) 1.52 1.43 12.45 11.49 255.83
Equity/Assets 6-12%(141) 1.33 1.26 14.80 14.14 172.23
Equity/Assets greater than 12%(141) 0.90 0.88 15.42 15.29 88.36
Converted Last 3 Mths (no MHC)(9) 0.53 0.49 12.13 12.13 50.22
Actively Traded Companies(36) 1.85 1.86 16.41 15.77 214.21
Market Value Below $20 Million(47) 0.81 0.77 13.87 13.81 104.21
Holding Company Structure(278) 1.12 1.08 15.15 14.72 137.32
Assets Over $1 Billion(59) 1.72 1.66 16.54 15.16 233.82
Assets $500 Million-$1 Billion(46) 1.30 1.17 13.93 13.48 154.99
Assets $250-$500 Million(67) 1.15 1.10 15.11 14.74 136.55
Assets less than $250 Million(134) 0.84 0.82 14.56 14.49 94.61
Goodwill Companies(123) 1.39 1.32 15.26 14.16 179.67
Non-Goodwill Companies(183) 0.97 0.93 14.72 14.72 110.78
Acquirors of FSLIC Cases(9) 2.59 2.38 19.92 18.89 294.49
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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(60) 1.51 1.46 14.44 13.75 148.46
NYSE Traded Companies(4) 2.06 1.93 22.85 18.83 177.25
AMEX Traded Companies(7) 1.56 1.33 15.84 15.28 150.50
NASDAQ Listed OTC Companies(49) 1.46 1.43 13.52 13.12 145.62
California Companies(1) 1.52 1.52 12.28 12.23 114.54
Mid-Atlantic Companies(21) 1.15 1.09 15.30 14.24 135.34
New England Companies(32) 1.82 1.73 14.00 13.49 158.60
North-West Companies(3) 1.14 1.50 12.99 12.53 185.90
South-East Companies(3) 1.15 1.13 15.70 15.40 92.07
Thrift Strategy(44) 1.52 1.43 14.90 14.25 140.12
Mortgage Banker Strategy(7) 1.30 1.30 12.06 11.49 149.96
Real Estate Strategy(4) 1.72 1.61 11.40 11.38 106.01
Diversified Strategy(5) 1.58 1.86 14.88 13.45 230.38
Companies Issuing Dividends(48) 1.55 1.50 15.16 14.31 164.76
Companies Without Dividends(12) 1.36 1.32 11.69 11.64 86.26
Equity/Assets less than 6%(4) 1.24 1.30 10.25 9.81 202.98
Equity/Assets 6-12%(41) 1.77 1.70 14.33 13.45 168.67
Equity/Assets greater than 12%(15) 0.95 0.92 15.92 15.64 82.38
Converted Last 3 Mths (no MHC)(4) 0.59 0.57 12.90 12.79 55.78
Actively Traded Companies(17) 2.02 1.96 17.21 16.31 193.21
Market Value Below $20 Million(2) 2.42 2.31 9.03 8.98 98.56
Holding Company Structure(47) 1.47 1.42 14.27 13.84 138.46
Assets Over $1 Billion(18) 1.64 1.69 17.18 15.58 180.64
Assets $500 Million-$1 Billion(15) 1.83 1.71 15.19 14.87 169.99
Assets $250-$500 Million(12) 1.22 1.15 11.40 11.09 114.15
Assets less than $250 Million(15) 1.33 1.24 12.91 12.75 119.44
Goodwill Companies(33) 1.60 1.55 15.39 14.14 178.33
Non-Goodwill Companies(27) 1.40 1.35 13.29 13.29 112.38
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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(19) 0.67 0.64 10.30 10.21 93.08
BIF-Insured Thrifts(3) 1.11 0.75 9.79 9.12 100.47
NASDAQ Listed OTC Companies(22) 0.72 0.65 10.24 10.08 94.00
Florida Companies(3) 1.00 0.89 14.22 14.18 146.68
Mid-Atlantic Companies(11) 0.54 0.53 8.78 8.52 74.31
Mid-West Companies(6) 0.79 0.75 11.19 11.16 102.01
New England Companies(1) 1.51 0.87 11.61 11.55 133.81
Thrift Strategy(20) 0.68 0.65 10.49 10.35 93.22
Mortgage Banker Strategy(1) 0.53 0.45 5.29 4.72 65.15
Diversified Strategy(1) 1.51 0.87 11.61 11.55 133.81
Companies Issuing Dividends(22) 0.72 0.65 10.24 10.08 94.00
Equity/Assets 6-12%(16) 0.77 0.68 10.26 10.04 105.34
Equity/Assets greater than 12%(6) 0.56 0.56 10.18 10.18 59.99
Holding Company Structure(3) 0.77 0.71 9.35 8.71 90.09
Assets Over $1 Billion(6) 0.85 0.63 8.50 8.20 100.29
Assets $500 Million-$1 Billion(2) 1.07 0.98 15.79 15.79 139.20
Assets $250-$500 Million(6) 0.83 0.80 10.83 10.80 102.70
Assets less than $250 Million(8) 0.54 0.53 10.10 9.92 78.98
Goodwill Companies(9) 0.88 0.72 9.38 8.95 105.04
Non-Goodwill Companies(13) 0.63 0.61 10.75 10.75 87.38
MHC Institutions(22) 0.72 0.65 10.24 10.08 94.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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 4.08 3.58 20.57 17.56 501.08
CFB Commercial Federal Corp. of NE 2.09 2.05 14.06 12.68 220.54
DME Dime Bancorp, Inc. of NY* 1.05 1.05 11.30 9.27 187.77
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.79
FED FirstFed Fin. Corp. of CA 2.18 2.14 21.04 20.87 392.91
GSB Golden State Bancorp of CA(8) 1.85 2.22 18.96 17.11 314.15
GDW Golden West Fin. Corp. of CA 6.21 6.11 47.28 47.28 693.73
GPT GreenPoint Fin. Corp. of NY* 3.49 3.37 30.00 16.36 309.16
JSB JSB Financial, Inc. of NY* 2.97 2.64 35.91 35.91 154.68
NYB New York Bancorp, Inc. of NY(8) 2.48 2.53 8.34 8.34 152.85
OCN Ocwen Financial Corp. of FL 1.34 0.75 6.90 6.72 48.81
SIB Staten Island Bancorp of NY* 0.74 0.65 14.19 13.77 57.38
WES Westcorp Inc. of Orange CA 1.31 0.28 12.99 12.96 142.98
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 0.97 0.94 17.22 17.22 101.60
ANE Alliance Bancorp of NE, of CT* 1.23 0.86 11.49 11.17 151.06
BKC American Bank of Waterbury CT* 3.42 2.96 24.82 24.01 275.32
BFD BostonFed Bancorp of MA 1.28 1.14 14.78 14.24 176.57
CFX CFX Corp of Keene NH(8)* 0.55 0.89 10.21 9.85 119.39
CNY Carver Bancorp, Inc. of NY -0.20 0.03 15.24 14.66 179.67
CBK Citizens First Fin.Corp. of IL 0.79 0.53 15.84 15.84 114.14
EBI Equality Bancorp, Inc. of MO 0.46 0.10 10.31 10.31 92.23
ESX Essex Bancorp of Norfolk VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Bancorp, Inc. of MA* 0.63 0.53 16.05 16.05 67.05
FAB FirstFed America Bancorp of MA 0.20 0.63 14.87 14.87 133.17
GAF GA Financial Corp. of PA 1.08 1.02 15.05 14.90 101.57
HBS Haywood Bancshares, Inc. of NC* 1.56 1.56 17.34 16.74 122.24
KNK Kankakee Bancorp, Inc. of IL 2.20 2.15 27.57 25.99 250.30
KYF Kentucky First Bancorp of KY 0.77 0.76 11.32 11.32 66.49
MBB MSB Bancorp of Middletown NY(8)* 0.49 0.52 22.40 10.38 272.15
NBN Northeast Bancorp of ME* 0.97 0.76 9.52 8.41 136.83
PDB Piedmont Bancorp, Inc. of NC 0.54 0.54 7.66 7.66 47.32
SSB Scotland Bancorp, Inc. of NC 0.58 0.58 7.73 7.73 32.12
SZB SouthFirst Bancshares of AL 0.51 0.47 13.96 13.96 98.14
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 1.13 1.08 16.09 16.09 118.85
FTF Texarkana Fst. Fin. Corp of AR 1.72 1.68 15.52 15.52 102.42
THR Three Rivers Fin. Corp. of MI 1.00 0.94 15.72 15.67 114.20
WSB Washington SB, FSB of MD 0.52 0.31 5.13 5.13 60.27
WFI Winton Financial Corp. of OH 1.61 1.32 11.60 11.37 161.76
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.81 1.18 21.08 20.71 234.80
FBER 1st Bergen Bancorp of NJ 0.71 0.71 13.57 13.57 99.39
AFED AFSALA Bancorp, Inc. of NY 0.89 0.89 14.91 14.91 115.98
ALBK ALBANK Fin. Corp. of Albany NY 3.36 3.34 27.86 21.64 316.35
AMFC AMB Financial Corp. of IN 1.06 0.67 15.32 15.32 103.74
ASBP ASB Financial Corp. of OH 0.62 0.62 10.59 10.59 68.47
ABBK Abington Bancorp of MA* 1.20 1.06 9.99 9.09 146.27
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.84 0.81 15.17 15.17 99.66
AADV Advantage Bancorp, Inc. of WI(8) 3.57 3.13 31.79 29.74 317.22
AFCB Affiliated Comm BC, Inc of MA(8) 1.77 1.76 16.94 16.85 173.52
ALBC Albion Banc Corp. of Albion NY 0.44 0.43 8.09 8.09 94.41
ABCL Alliance Bancorp, Inc. of IL 1.28 1.42 16.32 16.13 170.01
ATSB AmTrust Capital Corp. of IN 0.56 0.32 14.93 14.78 136.64
AHCI Ambanc Holding Co., Inc. of NY* -0.61 -0.69 13.98 13.98 122.92
ASBI Ameriana Bancorp of IN 1.13 1.03 13.63 13.63 121.64
ABCW Anchor Bancorp Wisconsin of WI 2.20 2.03 14.25 14.02 214.45
ANDB Andover Bancorp, Inc. of MA* 2.56 2.50 20.72 20.72 255.95
ASFC Astoria Financial Corp. of NY 2.56 2.38 32.42 22.56 401.88
AVND Avondale Fin. Corp. of IL -3.76 -3.19 13.83 13.83 163.12
BKCT Bancorp Connecticut of CT* 1.16 1.03 9.22 9.22 87.00
BPLS Bank Plus Corp. of CA 0.65 0.73 9.36 8.53 215.20
BNKU Bank United Corp. of TX 2.52 2.21 19.39 18.89 396.36
BWFC Bank West Fin. Corp. of MI 0.43 0.32 8.83 8.83 64.65
BANC BankAtlantic Bancorp of FL 1.06 0.56 6.08 5.04 110.44
BKUNA BankUnited Fin. Corp. of FL 0.38 0.29 9.13 8.10 213.16
BVCC Bay View Capital Corp. of CA 1.16 1.58 14.39 11.94 268.97
FSNJ Bayonne Banchsares of NJ 0.25 0.35 10.58 10.58 67.73
BFSB Bedford Bancshares, Inc. of VA 1.42 1.41 17.41 17.41 119.88
BFFC Big Foot Fin. Corp. of IL 0.51 0.45 15.09 15.09 86.06
BYFC Broadway Fin. Corp. of CA 0.42 0.48 14.77 14.77 150.11
CBES CBES Bancorp, Inc. of MO 1.09 0.95 17.16 17.16 108.73
CCFH CCF Holding Company of GA 0.15 -0.16 12.92 12.92 121.22
CENF CENFED Financial Corp. of CA(8) 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.40 1.31 8.88 8.88 112.12
CKFB CKF Bancorp of Danville KY 1.29 0.97 15.87 15.87 72.51
CNSB CNS Bancorp, Inc. of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL 0.29 0.25 13.87 13.09 57.78
CBCI Calumet Bancorp of Chicago IL 2.54 2.56 25.98 25.98 154.93
CAFI Camco Fin. Corp. of OH 1.75 1.42 15.22 14.12 161.82
CMRN Cameron Fin. Corp. of MO 0.94 0.93 17.66 17.66 82.39
CAPS Capital Savings Bancorp of MO(8) 1.25 1.20 12.08 12.08 128.08
CFNC Carolina Fincorp of NC* 0.73 0.70 14.06 14.06 61.91
CASB Cascade Financial Corp. of WA 0.74 0.72 8.63 8.63 124.46
CATB Catskill Fin. Corp. of NY* 0.82 0.82 15.48 15.48 63.64
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.49 1.41 18.05 16.26 182.40
CENB Century Bancorp, Inc. of NC 4.00 4.01 75.76 75.76 251.30
CBSB Charter Financial Inc. of IL(8) 1.26 1.39 14.24 12.75 91.61
COFI Charter One Financial of OH 1.97 2.88 21.56 20.15 309.48
CVAL Chester Valley Bancorp of PA 1.45 1.38 13.23 13.23 150.14
CTZN CitFed Bancorp of Dayton OH(8) 2.10 2.10 16.14 14.74 266.12
CLAS Classic Bancshares, Inc. of KY 0.82 0.96 15.13 12.85 101.68
CBSA Coastal Bancorp of Houston TX 2.40 2.46 20.29 17.06 584.86
CFCP Coastal Fin. Corp. of SC 1.31 1.10 7.21 7.21 120.64
CMSB Commonwealth Bancorp Inc of PA 1.01 0.77 13.22 10.44 139.63
CMSV Commty. Svgs, MHC of FL (48.5) 1.07 0.98 15.79 15.79 139.20
CFTP Community Fed. Bancorp of MS 0.61 0.61 13.07 13.07 49.40
CFFC Community Fin. Corp. of VA 1.50 1.51 18.99 18.99 143.75
CFBC Community First Bnkg Co. of GA 0.96 0.96 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.03 1.03 12.29 12.29 104.58
COOP Cooperative Bancshares of NC 0.75 0.74 9.48 9.48 123.70
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
CRZY Crazy Woman Creek Bncorp of WY 0.75 0.76 15.04 15.04 63.64
DNFC D&N Financial Corp. of MI 1.57 1.41 10.78 10.68 199.51
DCBI Delphos Citizens Bancorp of OH 0.93 0.93 14.83 14.83 55.37
DIME Dime Community Bancorp of NY* 0.95 0.91 14.97 12.94 119.64
DIBK Dime Financial Corp. of CT* 3.24 3.22 15.35 14.95 185.61
EGLB Eagle BancGroup of IL 0.43 0.31 17.24 17.24 145.28
EBSI Eagle Bancshares of Tucker GA 0.96 0.97 12.80 12.80 163.40
EGFC Eagle Financial Corp. of CT(8) 1.18 1.56 23.38 18.96 331.16
ETFS East Texas Fin. Serv. of TX 0.71 0.66 20.45 20.45 117.05
ESBK Elmira Svgs Bank (The) of NY* 1.27 1.03 19.55 19.03 307.64
EMLD Emerald Financial Corp. of OH 1.20 1.11 9.28 9.14 118.96
EIRE Emerald Isle Bancorp of MA(8)* 1.56 1.66 13.39 13.39 191.66
EFBC Empire Federal Bancorp of MT 0.62 0.62 15.51 15.51 42.65
EFBI Enterprise Fed. Bancorp of OH 1.11 1.00 16.31 16.30 151.69
EQSB Equitable FSB of Wheaton MD 1.90 1.87 13.77 13.77 264.76
FCBF FCB Fin. Corp. of Neenah WI 1.00 0.68 18.80 18.80 135.38
FFDF FFD Financial Corp. of OH 1.11 0.53 15.38 15.38 63.92
FFLC FFLC Bancorp of Leesburg FL 1.00 0.95 13.74 13.74 106.90
FFFC FFVA Financial Corp. of VA(8) 1.40 1.66 17.33 17.00 126.54
FFWC FFW Corporation of Wabash IN 1.24 1.21 12.69 11.57 132.57
FFYF FFY Financial Corp. of OH 1.91 1.88 20.53 20.53 151.04
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.58 14.58 133.62
FOBC Fed One Bancorp of Wheeling WV(8) 1.37 1.35 17.09 16.37 154.43
FBCI Fidelity Bancorp of Chicago IL 0.38 1.09 18.22 18.19 174.01
FSBI Fidelity Bancorp, Inc. of PA 1.77 1.73 17.21 17.21 251.65
FFFL Fidelity Bcsh MHC of FL (47.7) 0.93 0.79 12.65 12.57 154.16
FFED Fidelity Fed. Bancorp of IN 0.56 0.52 5.02 5.02 69.00
FFOH Fidelity Financial of OH 0.87 0.84 11.49 10.13 95.67
FIBC Financial Bancorp, Inc. of NY 1.53 1.63 16.10 16.03 180.26
FBSI First Bancshares, Inc. of MO 0.86 0.82 10.64 10.64 73.89
FBBC First Bell Bancorp of PA 1.16 1.14 11.21 11.21 103.78
SKBO First Carnegie MHC of PA(45.0) 0.39 0.42 10.61 10.61 63.96
FSTC First Citizens Corp of GA 2.15 1.92 12.34 9.73 121.95
FCME First Coastal Corp. of ME* 4.52 4.34 10.66 10.66 109.32
FFBA First Colorado Bancorp of CO 1.18 1.13 12.45 12.20 92.53
FDEF First Defiance Fin.Corp. of OH 0.63 0.62 12.53 12.53 67.98
FESX First Essex Bancorp of MA* 1.29 1.15 12.08 10.62 158.90
FFSX First FSB MHC Sxld of IA(46.1) 1.19 1.15 14.34 14.23 161.94
FFES First Fed of E. Hartford CT 2.06 2.28 24.76 24.76 363.17
BDJI First Fed. Bancorp. of MN 0.73 0.73 12.12 12.12 119.08
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.89 1.49 11.90 11.25 168.02
FFKY First Fed. Fin. Corp. of KY 1.49 1.47 12.81 12.11 93.71
FFBZ First Federal Bancorp of OH 1.22 1.22 10.09 10.08 132.60
FFCH First Fin. Holdings Inc. of SC 2.16 2.11 17.08 17.08 265.25
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 0.58 0.48 4.53 4.20 54.52
FSPG First Home Bancorp of NJ(8) 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.76 0.76 11.91 11.91 119.15
FISB First Indiana Corp. of IN 1.40 1.13 12.08 11.94 127.36
FKFS First Keystone Fin. Corp of PA 1.12 1.01 10.38 10.38 156.87
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.15 1.23 12.12 10.95 163.80
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
CASH First Midwest Fin., Inc. of OH 1.37 1.28 16.39 14.62 151.41
FMBD First Mutual Bancorp Inc of IL 0.28 0.23 15.45 11.85 111.62
FMSB First Mutual SB of Bellevue WA* 1.06 1.04 7.43 7.43 109.36
FNGB First Northern Cap. Corp of WI 0.68 0.65 8.34 8.34 75.48
FFPB First Palm Beach Bancorp of FL 1.85 1.55 22.36 21.84 357.75
FSLA First SB SLA MHC of NJ (47.5)(8) 1.16 1.22 12.69 11.59 130.90
FWWB First Savings Bancorp of WA 1.25 1.17 14.80 13.67 108.17
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA(8) 2.22 2.21 23.13 23.13 181.23
SOPN First Svgs Bancorp of NC 1.35 1.35 18.51 18.51 81.30
FBNW FirstBank Corp of Clarkston WA 0.48 0.24 14.95 14.95 92.39
FFDB FirstFed Bancorp, Inc. of AL 1.48 1.48 15.00 13.77 154.80
FSPT FirstSpartan Fin. Corp. of SC 1.33 1.33 29.52 29.52 111.81
FLAG Flag Financial Corp of GA 1.01 0.84 10.66 10.66 117.07
FLGS Flagstar Bancorp, Inc of MI 1.66 0.83 8.89 8.54 148.74
FFIC Flushing Fin. Corp. of NY* 1.08 1.09 17.35 16.67 138.39
FBHC Fort Bend Holding Corp. of TX 1.41 1.04 12.29 11.52 181.49
FTSB Fort Thomas Fin. Corp. of KY 0.80 0.80 10.72 10.72 67.76
FKKY Frankfort First Bancorp of KY 0.14 0.59 13.92 13.92 82.03
FTNB Fulton Bancorp, Inc. of MO 0.73 0.63 14.88 14.88 60.33
GFSB GFS Bancorp of Grinnell IA(8) 1.18 1.12 11.23 11.23 94.93
GUPB GFSB Bancorp, Inc of Gallup NM 1.08 1.08 17.90 17.90 143.25
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.11
GOSB GSB Financial Corp. of NY* 0.34 0.31 14.66 14.66 51.55
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 1.05 1.05 12.41 12.28 133.55
GTPS Great American Bancorp of IL 0.52 0.52 16.92 16.92 84.91
PEDE Great Pee Dee Bancorp of SC 0.56 0.56 13.51 13.51 35.68
GSBC Great Southern Bancorp of MO 1.66 1.53 8.13 8.07 93.04
GDVS Greater DV SB,MHC of PA (19.9) 0.62 0.62 8.91 8.91 79.58
GSFC Green Street Fin. Corp. of NC 0.66 0.66 14.73 14.73 41.81
GFED Guaranty Fed Bancshares of MO 0.33 0.32 11.18 11.18 37.06
HCBB HCB Bancshares of Camden AR 0.18 0.18 14.43 13.91 75.59
HEMT HF Bancorp of Hemet CA 0.06 0.35 13.29 11.18 168.96
HFFC HF Financial Corp. of SD 2.05 1.90 18.68 18.68 195.05
HFNC HFNC Financial Corp. of NC 0.63 0.48 9.66 9.66 52.97
HMNF HMN Financial, Inc. of MN 1.35 1.07 20.38 18.92 166.80
HALL Hallmark Capital Corp. of WI 0.94 0.92 10.74 10.74 140.94
HARB Harbor FL Bncp MHC of FL (46.1(8) 2.88 2.77 20.24 19.64 226.74
HRBF Harbor Federal Bancorp of MD 0.96 0.92 17.23 17.23 137.96
HFSA Hardin Bancorp of Hardin MO 0.99 0.90 15.89 15.89 140.09
HARL Harleysville SB of PA 2.06 2.07 14.23 14.23 208.81
HFGI Harrington Fin. Group of IN 0.30 0.32 7.50 7.50 167.80
HARS Harris Fin. MHC of PA (24.3) 0.53 0.45 5.29 4.72 65.15
HFFB Harrodsburg 1st Fin Bcrp of KY 0.74 0.74 14.66 14.66 54.84
HHFC Harvest Home Fin. Corp. of OH 0.80 0.70 11.61 11.61 105.31
HAVN Haven Bancorp of Woodhaven NY 1.26 1.27 12.85 12.81 224.80
HTHR Hawthorne Fin. Corp. of CA 2.96 2.28 14.01 14.01 288.59
HMLK Hemlock Fed. Fin. Corp. of IL 0.45 0.77 14.66 14.66 85.11
HFWA Heritage Financial Corp of WA 0.49 0.49 9.34 9.34 31.95
HCBC High Country Bancorp of CO 0.38 0.38 12.86 12.86 66.07
HBNK Highland Bancorp of CA 2.64 2.03 17.91 17.91 237.12
HIFS Hingham Inst. for Sav. of MA* 2.04 2.04 16.39 16.39 170.69
HBEI Home Bancorp of Elgin IL 0.41 0.41 13.89 13.89 51.43
HBFW Home Bancorp of Fort Wayne IN 1.22 1.21 17.84 17.84 146.77
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
HBBI Home Building Bancorp of IN 1.05 1.01 19.13 19.13 135.99
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.84 1.62 12.21 11.87 138.75
HWEN Home Financial Bancorp of IN 0.36 0.26 7.95 7.95 46.83
HPBC Home Port Bancorp, Inc. of MA* 1.79 1.75 11.92 11.92 113.36
HMCI HomeCorp, Inc. of Rockford IL(8) 0.91 0.71 13.20 13.20 194.19
HFBC HopFed Bancorp of KY 0.58 0.58 13.26 13.26 58.70
HZFS Horizon Fin'l. Services of IA 0.83 0.66 10.58 10.58 104.07
HRZB Horizon Financial Corp. of WA* 1.09 1.08 11.38 11.38 71.47
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.80 11.80 66.54
ITLA ITLA Capital Corp of CA* 1.52 1.52 12.28 12.23 114.54
IFSB Independence FSB of DC 1.09 0.45 14.23 12.67 196.38
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.57 12.57 103.45
INBI Industrial Bancorp of OH 1.00 1.00 11.93 11.93 71.34
IWBK Interwest Bancorp of WA 2.55 2.22 16.60 16.32 246.65
IPSW Ipswich SB of Ipswich MA* 0.93 0.76 4.96 4.96 95.28
JXVL Jacksonville Bancorp of TX 1.38 1.38 14.09 14.09 96.32
JXSB Jcksnville SB,MHC of IL (45.6) 0.51 0.41 9.17 9.17 88.07
JSBA Jefferson Svgs Bancorp of MO 0.97 0.94 11.34 8.89 125.61
JOAC Joachim Bancorp, Inc. of MO(8) 0.37 0.37 13.71 13.71 47.41
KSAV KS Bancorp of Kenly NC 1.38 1.38 16.50 16.50 128.79
KSBK KSB Bancorp of Kingfield ME* 1.22 1.22 8.89 8.45 120.79
KFBI Klamath First Bancorp of OR 0.88 0.88 14.71 13.44 97.58
LSBI LSB Fin. Corp. of Lafayette IN 1.61 1.42 18.88 18.88 218.63
LVSB Lakeview Financial of NJ 1.68 1.04 13.29 11.25 124.39
LARK Landmark Bancshares, Inc of KS 1.46 1.32 19.49 19.49 138.33
LARL Laurel Capital Group of PA 1.34 1.35 10.37 10.37 98.11
LSBX Lawrence Savings Bank of MA* 1.89 1.87 8.77 8.77 83.92
LFED Leeds FSB, MHC of MD (36.3) 0.66 0.66 9.35 9.35 56.23
LXMO Lexington B&L Fin. Corp. of MO 0.70 0.70 14.78 14.78 55.51
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFCO Life Financial Corp of CA 1.38 1.38 7.56 7.56 44.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.98 1.01 13.12 13.12 68.29
LONF London Financial Corp. of OH 0.81 0.75 10.23 10.23 74.35
LISB Long Island Bancorp, Inc of NY 2.11 1.74 23.19 22.98 252.72
MAFB MAF Bancorp, Inc. of IL 2.53 2.49 17.55 15.46 230.31
MBLF MBLA Financial Corp. of MO 1.41 1.43 22.32 22.32 176.03
MECH MECH Financial Inc of CT* 2.64 2.63 16.33 16.33 156.95
MFBC MFB Corp. of Mishawaka IN 1.25 1.24 20.61 20.61 162.32
MLBC ML Bancorp of Villanova PA(8) 1.19 0.85 13.41 12.51 193.66
MSBF MSB Financial, Inc of MI 0.91 0.84 10.56 10.56 62.61
MARN Marion Capital Holdings of IN 1.58 1.58 22.37 21.89 107.66
MRKF Market Fin. Corp. of OH 0.43 0.43 15.13 15.13 42.54
MFSL Maryland Fed. Bancorp of MD 1.14 1.61 15.39 15.22 181.44
MASB MassBank Corp. of Reading MA* 2.85 2.63 29.06 28.65 259.14
MFLR Mayflower Co-Op. Bank of MA* 1.56 1.48 14.31 14.10 146.73
MDBK Medford Bancorp, Inc. of MA* 2.51 2.42 22.35 21.04 250.07
MERI Meritrust FSB of Thibodaux LA(8) 3.51 3.51 25.66 25.66 302.07
MWBX MetroWest Bank of MA* 0.54 0.53 3.17 3.17 43.16
METF Metropolitan Fin. Corp. of OH 0.82 0.77 5.20 4.78 131.18
MCBS Mid Continent Bancshares of KS(8) 1.96 2.14 20.52 20.52 204.01
MIFC Mid Iowa Financial Corp. of IA 0.89 0.98 7.41 7.40 79.15
MCBN Mid-Coast Bancorp of ME 1.92 1.80 22.03 22.03 264.27
MWBI Midwest Bancshares, Inc. of IA 1.24 1.10 10.46 10.46 144.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
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 0.56 0.54 11.43 11.43 96.53
MIVI Miss. View Hold. Co. of MN 1.01 0.99 16.86 16.86 92.73
MBSP Mitchell Bancorp, Inc. of NC 0.56 0.56 15.56 15.56 38.78
MBBC Monterey Bay Bancorp of CA 0.55 0.50 14.84 13.84 126.35
MONT Montgomery Fin. Corp. of IN 0.44 0.44 11.89 11.89 63.93
MSBK Mutual SB, FSB of Bay City MI 0.12 0.01 9.91 9.91 150.57
MYST Mystic Financial of MA* 0.52 0.52 13.00 13.00 66.76
NHTB NH Thrift Bancshares of NH 0.99 0.78 12.04 10.34 153.90
NSLB NS&L Bancorp, Inc of Neosho MO 0.64 0.61 16.61 16.49 84.01
NSSY NSS Bancorp of CT* 2.76 3.13 21.83 21.17 276.37
NMSB Newmil Bancorp, Inc. of CT* 0.71 0.72 8.54 8.54 91.65
NASB North American SB, FSB of MO 5.40 4.39 27.83 27.01 327.72
NBSI North Bancshares of Chicago IL 0.44 0.42 11.60 11.60 86.00
FFFD North Central Bancshares of IA 1.16 1.16 15.10 15.10 65.87
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.22 1.17 13.77 13.77 118.66
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.42 4.44 3.94 48.05
NTMG Nutmeg FS&LA of CT 0.67 0.43 5.88 5.88 106.64
OHSL OHSL Financial Corp. of OH 1.62 1.55 20.98 20.98 192.51
OCFC Ocean Fin. Corp. of NJ 1.68 1.66 27.63 27.63 182.15
OTFC Oregon Trail Fin. Corp. of OR 0.63 0.64 10.64 10.64 85.17
OFCP Ottawa Financial Corp. of MI 1.42 1.35 14.37 11.69 166.73
PFFB PFF Bancorp of Pomona CA 0.79 0.75 14.95 14.80 154.04
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.79 10.85 10.85 149.01
PBCI Pamrapo Bancorp, Inc. of NJ 1.78 1.70 17.07 16.96 132.51
PFED Park Bancorp of Chicago IL 0.66 0.71 16.55 16.55 75.85
PVSA Parkvale Financial Corp of PA 2.07 2.07 15.79 15.70 199.52
PBHC Pathfinder BC MHC of NY (46.1)* 0.70 0.63 7.97 6.69 67.13
PEEK Peekskill Fin. Corp. of NY 0.64 0.64 14.87 14.87 58.91
PFSB PennFed Fin. Services of NJ 1.11 1.10 10.64 9.12 152.97
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood Bancorp, Inc. of PA 0.83 0.96 15.41 15.41 85.68
PBKB People's Bancshares of MA* 1.44 0.74 8.94 8.58 218.14
PFDC Peoples Bancorp of Auburn IN 1.26 1.26 13.25 13.25 86.79
PBCT Peoples Bank, MHC of CT (40.1)* 1.51 0.87 11.61 11.55 133.81
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 0.82 0.61 12.16 10.99 70.80
PFFC Peoples Fin. Corp. of OH 0.56 0.55 10.97 10.97 58.20
PHBK Peoples Heritage Fin Grp of ME* 2.65 2.62 17.13 12.87 244.99
PSFC Peoples Sidney Fin. Corp of OH 0.64 0.64 14.72 14.72 59.52
PERM Permanent Bancorp, Inc. of IN 1.25 1.24 19.96 19.72 199.63
PMFI Perpetual Midwest Fin. of IA(8) 1.02 0.91 18.49 18.49 207.35
PERT Perpetual of SC, MHC (46.8)(8) 1.27 1.40 20.28 20.28 170.31
PCBC Perry Co. Fin. Corp. of MO 1.07 1.07 19.75 19.75 102.69
PHFC Pittsburgh Home Fin Corp of PA 1.07 0.92 12.52 12.37 152.19
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.45 1.43 15.17 15.17 238.61
PTRS Potters Financial Corp of OH 1.20 1.18 11.20 11.20 127.17
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.19 0.24 5.76 5.76 69.43
PHSB Ppls Home SB, MHC of PA (45.0) 0.56 0.54 10.22 10.22 74.79
PRBC Prestige Bancorp of PA 0.86 0.84 17.08 17.08 156.57
PFNC Progress Financial Corp. of PA 0.95 0.72 6.18 5.19 121.41
PSBK Progressive Bank, Inc. of NY(8)* 2.25 2.20 20.48 18.57 230.56
PROV Provident Fin. Holdings of CA 1.04 0.55 17.85 17.85 154.21
PULB Pulaski SB, MHC of MO (29.8)(8) 1.03 0.90 11.38 11.38 85.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
PLSK Pulaski SB, MHC of NJ (46.0) 0.53 0.53 10.29 10.29 86.21
PULS Pulse Bancorp of S. River NJ 1.85 1.87 14.31 14.31 174.65
QCFB QCF Bancorp of Virginia MN 1.81 1.81 18.83 18.83 114.47
QCBC Quaker City Bancorp of CA 1.27 1.22 15.73 15.73 182.36
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp of Raritan NJ* 1.65 1.62 13.02 12.83 172.14
REDF RedFed Bancorp of Redlands CA(8) 1.44 1.48 11.65 11.61 139.60
RELY Reliance Bancorp, Inc. of NY 1.88 1.97 19.92 13.56 232.83
RELI Reliance Bancshares Inc of WI 0.19 0.20 8.71 8.71 17.39
RCBK Richmond County Fin Corp of NY* 0.56 0.56 11.79 11.79 45.97
RIVR River Valley Bancorp of IN 0.91 0.76 14.80 14.59 116.35
RVSB Riverview Bancorp of WA 0.54 0.53 9.75 9.41 42.89
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.79 0.79 16.00 16.00 77.34
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.88 0.85 17.74 17.74 144.39
SGVB SGV Bancorp of W. Covina CA 0.57 0.66 13.13 12.94 173.91
SHSB SHS Bancorp, Inc. of PA 0.72 0.72 14.39 14.39 107.88
SISB SIS Bancorp, Inc. of MA* 1.37 1.87 18.06 18.06 249.51
SWCB Sandwich Bancorp of MA(8)* 2.50 2.44 21.63 20.88 267.09
SFSL Security First Corp. of OH 1.19 1.19 8.38 8.26 89.54
SKAN Skaneateles Bancorp Inc of NY* 1.16 1.12 12.30 11.97 178.22
SOBI Sobieski Bancorp of S. Bend IN 0.65 0.65 16.49 16.49 114.60
SOSA Somerset Savings Bank of MA(8)* 0.36 0.35 2.15 2.15 32.40
SSFC South Street Fin. Corp. of NC(8)* 0.43 0.44 7.28 7.28 48.86
SCBS Southern Commun. Bncshrs of AL 0.70 0.70 12.73 12.73 62.34
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL(8) 1.51 1.52 16.22 16.22 135.65
SVRN Sovereign Bancorp, Inc. of PA 0.61 0.83 7.30 6.06 153.42
STFR St. Francis Cap. Corp. of WI 2.35 2.26 25.17 22.44 304.26
SPBC St. Paul Bancorp, Inc. of IL 1.43 1.44 12.22 12.18 133.24
SFFC StateFed Financial Corp. of IA 0.70 0.70 10.05 10.05 56.91
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.15 1.04 13.59 12.56 247.85
SFSB SuburbFed Fin. Corp. of IL(8) 2.20 1.78 23.31 23.24 346.34
ROSE T R Financial Corp. of NY* 1.97 1.76 13.69 13.69 218.38
THRD TF Financial Corp. of PA 1.53 1.30 15.72 13.12 187.34
TPNZ Tappan Zee Fin., Inc. of NY 0.70 0.69 14.46 14.46 84.29
TSBK Timberland Bancorp of WA 0.75 0.75 12.38 12.38 40.65
TRIC Tri-County Bancorp of WY 0.77 0.79 11.85 11.85 77.12
TWIN Twin City Bancorp, Inc. of TN 0.71 0.60 10.88 10.88 84.07
USAB USABancshares, Inc of PA* 0.32 0.28 7.40 7.29 87.80
UCBC Union Community Bancorp of IN 0.58 0.58 13.40 13.40 36.73
UFRM United FSB of Rocky Mount NC(8) 0.57 0.37 6.94 6.94 95.98
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
UTBI United Tenn. Bancshares of TN 0.66 0.66 12.95 12.95 52.89
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
WHGB WHG Bancshares of MD 0.54 0.55 14.34 14.34 72.95
WSFS WSFS Financial Corp. of DE* 1.32 1.30 6.96 6.92 121.61
WVFC WVS Financial Corp. of PA 2.13 2.15 17.76 17.76 166.58
WRNB Warren Bancorp of Peabody MA* 1.91 1.70 10.52 10.52 97.48
WSBI Warwick Community Bncrp of NY* 0.55 0.55 12.60 12.60 53.02
WFSL Washington Federal, Inc. of WA 2.07 2.04 14.09 13.00 109.27
WAMU Washington Mutual, Inc. of WA* 1.28 2.38 20.15 18.77 376.88
WYNE Wayne Bancorp, Inc. of NJ 1.07 1.07 16.49 16.49 132.71
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 27, 1998
<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>
WAYN Wayne Svgs Bks MHC of OH (47.8 0.84 0.78 10.72 10.72 113.04
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 2.31 3.52 27.99 24.41 514.14
WEFC Wells Fin. Corp. of Wells MN 1.13 1.10 15.13 15.13 102.83
WCBI WestCo Bancorp, Inc. of IL 1.91 1.78 19.72 19.72 128.22
WSTR WesterFed Fin. Corp. of MT 1.30 1.26 19.31 15.69 185.60
WOFC Western Ohio Fin. Corp. of OH 0.61 0.71 23.39 21.83 168.69
WWFC Westwood Fin. Corp. of NJ 1.16 1.25 16.20 14.56 173.18
WEHO Westwood Hmstd Fin Corp of OH 0.31 0.49 10.60 10.60 47.22
FFWD Wood Bancorp of OH 0.89 0.80 8.04 8.04 62.82
YFCB Yonkers Fin. Corp. of NY 1.02 1.01 14.87 14.87 109.83
YFED York Financial Corp. of PA 1.26 1.05 11.84 11.84 133.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(306) 13.68 13.44 0.96 8.35 4.62 0.91 7.82 0.75 129.54 0.79
NYSE Traded Companies(9) 7.57 7.32 1.15 16.24 6.01 0.82 12.52 1.10 90.92 1.31
AMEX Traded Companies(20) 14.32 14.23 0.89 6.34 4.20 0.85 5.80 0.60 172.69 0.76
NASDAQ Listed OTC Companies(277) 13.80 13.55 0.96 8.28 4.61 0.92 7.84 0.75 127.76 0.77
California Companies(20) 8.14 7.88 0.88 11.26 5.59 0.80 10.23 1.73 76.11 1.24
Florida Companies(5) 8.61 8.22 1.20 14.62 4.99 0.79 9.39 0.55 100.20 0.62
Mid-Atlantic Companies(58) 10.65 10.27 0.85 8.70 4.87 0.81 8.35 0.80 95.27 0.90
Mid-West Companies(147) 14.69 14.51 0.96 7.66 4.40 0.92 7.21 0.62 137.79 0.67
New England Companies(9) 7.64 7.34 0.59 8.50 4.61 0.62 8.78 0.57 165.37 1.00
North-West Companies(11) 16.87 16.51 1.17 8.71 4.45 1.11 8.12 0.36 311.37 0.77
South-East Companies(43) 17.53 17.39 1.09 7.74 4.29 1.05 7.30 0.97 111.44 0.82
South-West Companies(6) 10.58 10.42 0.94 11.09 6.88 0.88 10.30 0.66 83.30 0.71
Western Companies (Excl CA)(7) 16.62 16.27 1.13 7.61 4.44 1.13 7.60 0.27 196.77 0.72
Thrift Strategy(253) 14.86 14.64 0.98 7.73 4.61 0.95 7.36 0.71 130.45 0.73
Mortgage Banker Strategy(33) 7.60 7.16 0.79 11.21 5.07 0.71 10.05 1.00 121.96 1.02
Real Estate Strategy(8) 7.56 7.33 0.95 12.53 6.15 0.87 11.57 1.05 105.92 1.28
Diversified Strategy(8) 8.93 8.76 1.35 16.13 5.04 1.08 13.42 0.58 162.94 1.03
Retail Banking Strategy(4) 7.04 6.76 -0.23 -0.09 -4.09 -0.26 -0.99 0.82 142.67 1.24
Companies Issuing Dividends(258) 13.54 13.28 0.98 8.45 4.79 0.93 7.90 0.71 126.89 0.75
Companies Without Dividends(48) 14.43 14.29 0.88 7.83 3.70 0.84 7.36 0.96 143.50 0.96
Equity/Assets less than 6%(24) 5.01 4.66 0.69 13.97 5.71 0.60 12.24 1.26 89.39 0.98
Equity/Assets 6-12%(141) 8.90 8.55 0.82 9.63 4.85 0.77 9.00 0.81 130.69 0.88
Equity/Assets greater than 12%(141) 19.23 19.11 1.12 6.35 4.25 1.09 6.09 0.61 134.74 0.67
Converted Last 3 Mths (no MHC)(9) 26.88 26.88 1.21 5.03 3.46 1.16 4.38 0.41 237.87 0.84
Actively Traded Companies(36) 8.98 8.72 1.01 12.24 5.39 0.99 12.12 0.99 130.30 0.94
Market Value Below $20 Million(47) 15.28 15.22 0.89 6.21 4.68 0.84 5.84 0.76 124.40 0.69
Holding Company Structure(278) 13.90 13.66 0.95 8.10 4.54 0.91 7.66 0.74 126.93 0.78
Assets Over $1 Billion(59) 7.86 7.26 0.87 11.79 5.00 0.80 10.88 0.79 111.32 0.94
Assets $500 Million-$1 Billion(46) 9.95 9.66 0.91 9.91 4.65 0.82 8.97 0.86 159.88 0.92
Assets $250-$500 Million(67) 12.54 12.28 1.00 8.92 4.90 0.96 8.39 0.68 143.68 0.77
Assets less than $250 Million(134) 17.71 17.64 0.99 6.23 4.33 0.96 5.98 0.72 119.41 0.69
Goodwill Companies(123) 9.68 9.07 0.89 10.30 4.94 0.82 9.48 0.81 115.24 0.84
Non-Goodwill Companies(183) 16.20 16.20 1.01 7.12 4.42 0.97 6.77 0.71 138.54 0.75
Acquirors of FSLIC Cases(9) 7.97 7.52 0.96 13.09 6.27 0.88 11.80 0.94 61.00 0.67
</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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 11.57 11.24 1.15 11.94 5.80 1.11 11.46 0.77 165.05 1.37
NYSE Traded Companies(4) 15.92 14.36 1.24 8.94 4.32 1.14 8.45 1.55 42.00 0.98
AMEX Traded Companies(7) 12.34 11.98 1.05 10.75 5.65 0.90 9.02 1.35 70.68 1.23
NASDAQ Listed OTC Companies(49) 11.09 10.87 1.16 12.34 5.95 1.13 12.01 0.62 187.94 1.42
California Companies(1) 10.72 10.68 1.46 13.06 7.53 1.46 13.06 0.00 0.00 1.50
Mid-Atlantic Companies(21) 14.33 13.85 0.93 7.88 3.90 0.90 7.56 0.83 125.27 1.18
New England Companies(32) 9.47 9.21 1.30 14.93 7.17 1.22 13.97 0.78 167.21 1.58
North-West Companies(3) 9.35 9.23 1.03 11.63 4.59 1.16 14.24 0.15 720.77 1.05
South-East Companies(3) 18.45 18.20 1.28 8.43 5.62 1.25 8.33 0.39 218.19 0.57
Thrift Strategy(44) 12.65 12.35 1.19 11.54 5.94 1.12 10.73 0.80 146.42 1.30
Mortgage Banker Strategy(7) 8.79 8.43 0.93 12.01 5.15 0.95 11.90 0.44 302.59 1.26
Real Estate Strategy(4) 10.76 10.73 1.73 16.25 7.92 1.62 15.19 0.83 132.18 1.59
Diversified Strategy(5) 6.58 5.97 0.87 13.30 4.61 0.98 15.25 0.82 169.06 1.94
Companies Issuing Dividends(48) 10.37 9.98 1.07 11.44 5.31 1.02 10.94 0.77 169.70 1.33
Companies Without Dividends(12) 16.14 16.05 1.48 13.83 7.68 1.44 13.44 0.76 145.95 1.51
Equity/Assets less than 6%(4) 5.09 4.95 0.90 16.51 5.31 0.85 15.67 0.97 97.92 1.54
Equity/Assets 6-12%(41) 8.68 8.30 1.18 13.79 6.56 1.13 13.21 0.85 166.63 1.49
Equity/Assets greater than 12%(15) 20.65 20.40 1.15 6.00 4.06 1.12 5.88 0.48 178.76 1.01
Converted Last 3 Mths (no MHC)(4) 23.40 23.22 1.08 4.58 3.37 1.04 4.42 0.67 147.01 1.05
Actively Traded Companies(17) 9.76 9.35 1.27 13.85 6.21 1.22 13.43 0.61 164.01 1.28
Market Value Below $20 Million(2) 9.09 9.03 2.33 27.01 16.97 2.22 25.69 1.11 89.24 1.62
Holding Company Structure(47) 12.57 12.32 1.19 11.69 5.88 1.14 11.22 0.69 164.64 1.38
Assets Over $1 Billion(18) 11.73 11.02 1.05 10.37 4.51 1.07 10.76 0.83 151.42 1.38
Assets $500 Million-$1 Billion(15) 9.37 9.21 1.16 13.29 6.23 1.09 12.27 0.78 169.01 1.53
Assets $250-$500 Million(12) 11.58 11.39 1.21 12.14 6.10 1.15 11.47 0.72 205.43 1.56
Assets less than $250 Million(15) 13.09 12.99 1.23 12.62 6.80 1.14 11.66 0.72 140.02 1.08
Goodwill Companies(33) 9.88 9.28 1.00 11.31 5.37 0.96 10.85 0.86 151.20 1.36
Non-Goodwill Companies(27) 13.61 13.61 1.34 12.69 6.32 1.28 12.20 0.66 181.54 1.38
</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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 12.03 11.88 0.80 7.14 2.69 0.77 6.83 0.54 151.14 0.73
BIF-Insured Thrifts(3) 10.27 9.30 1.12 11.55 3.64 0.82 8.15 0.68 153.86 1.13
NASDAQ Listed OTC Companies(22) 11.81 11.56 0.84 7.69 2.81 0.78 6.99 0.55 151.33 0.78
Florida Companies(3) 9.77 9.75 0.74 7.34 2.89 0.65 6.47 0.41 71.26 0.45
Mid-Atlantic Companies(11) 12.06 11.64 0.81 7.33 2.55 0.79 7.15 0.66 134.46 0.89
Mid-West Companies(6) 13.03 13.02 0.88 7.14 3.03 0.83 6.65 0.41 220.27 0.54
New England Companies(1) 8.68 8.63 1.18 13.88 4.02 0.68 8.00 0.68 153.86 1.57
Thrift Strategy(20) 12.30 12.08 0.81 7.02 2.73 0.78 6.76 0.54 158.48 0.71
Mortgage Banker Strategy(1) 8.12 7.24 0.89 10.88 2.59 0.76 9.24 0.62 63.10 0.94
Diversified Strategy(1) 8.68 8.63 1.18 13.88 4.02 0.68 8.00 0.68 153.86 1.57
Companies Issuing Dividends(22) 11.81 11.56 0.84 7.69 2.81 0.78 6.99 0.55 151.33 0.78
Equity/Assets 6-12%(16) 9.89 9.56 0.79 8.17 2.79 0.70 7.22 0.64 90.90 0.77
Equity/Assets greater than 12%(6) 17.57 17.57 0.99 6.27 2.84 1.00 6.30 0.33 302.41 0.81
Holding Company Structure(3) 10.68 9.72 0.91 8.65 3.05 0.83 7.90 0.45 83.22 0.57
Assets Over $1 Billion(6) 8.56 8.06 0.92 10.51 3.01 0.74 8.40 0.61 88.80 0.91
Assets $500 Million-$1 Billion(2) 11.34 11.34 0.80 7.04 2.93 0.73 6.45 0.41 90.57 0.62
Assets $250-$500 Million(6) 11.54 11.52 0.88 7.81 2.93 0.86 7.59 0.55 192.81 0.56
Assets less than $250 Million(8) 13.88 13.61 0.78 6.11 2.60 0.76 5.92 0.55 180.34 0.87
Goodwill Companies(9) 9.16 8.50 0.91 9.99 3.18 0.77 8.38 0.52 110.21 0.80
Non-Goodwill Companies(13) 13.40 13.40 0.80 6.31 2.58 0.78 6.16 0.57 174.18 0.77
MHC Institutions(22) 11.81 11.56 0.84 7.69 2.81 0.78 6.99 0.55 151.33 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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 4.11 3.50 0.79 19.65 6.53 0.70 17.24 1.73 46.72 1.22
CFB Commercial Federal Corp. of NE 6.38 5.75 0.97 15.98 5.91 0.95 15.67 0.84 80.01 0.90
DME Dime Bancorp, Inc. of NY* 6.02 4.94 0.62 11.10 3.44 0.62 11.10 1.06 45.34 0.71
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.09 0.70 9.56 0.89 61.86 0.60
FED FirstFed Fin. Corp. of CA 5.35 5.31 0.56 11.24 5.40 0.55 11.03 0.96 210.84 2.62
GSB Golden State Bancorp of CA(8) 6.04 5.45 0.60 10.47 5.19 0.72 12.56 1.08 90.12 1.31
GDW Golden West Fin. Corp. of CA 6.82 6.82 0.91 14.14 6.96 0.90 13.91 1.07 55.16 0.70
GPT GreenPoint Fin. Corp. of NY* 9.70 5.29 1.12 10.86 4.70 1.08 10.48 2.90 28.75 1.22
JSB JSB Financial, Inc. of NY* 23.22 23.22 1.93 8.61 5.52 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY(8) 5.46 5.46 1.65 31.75 6.12 1.68 32.39 0.86 66.31 0.91
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.13 4.47 1.74 17.99 NA NA NA
SIB Staten Island Bancorp of NY* 24.73 24.00 1.29 5.21 3.61 1.13 4.58 1.15 58.76 1.38
WES Westcorp Inc. of Orange CA 9.09 9.06 0.99 10.58 7.68 0.21 2.26 NA NA 1.81
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 16.95 16.95 0.98 5.64 4.38 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of NE, of CT* 7.61 7.39 0.84 11.87 6.19 0.59 8.30 1.60 75.91 1.91
BKC American Bank of Waterbury CT* 9.01 8.72 1.32 15.52 6.81 1.14 13.44 2.11 41.86 1.54
BFD BostonFed Bancorp of MA 8.37 8.06 0.76 8.43 5.78 0.67 7.50 0.18 371.41 0.82
CFX CFX Corp of Keene NH(8)* 8.55 8.25 0.61 7.38 1.81 0.99 11.95 0.59 128.94 1.06
CNY Carver Bancorp, Inc. of NY 8.48 8.16 -0.11 -1.33 -1.31 0.02 0.20 1.67 41.11 1.15
CBK Citizens First Fin.Corp. of IL 13.88 13.88 0.70 4.87 3.81 0.47 3.27 0.69 44.35 0.36
EBI Equality Bancorp, Inc. of MO 11.18 11.18 0.53 7.30 2.89 0.12 1.59 NA NA NA
ESX Essex Bancorp of Norfolk VA(8) 0.02 -0.08 0.12 NM 3.85 0.10 NM 2.11 51.58 1.27
FCB Falmouth Bancorp, Inc. of MA* 23.94 23.94 0.98 4.06 2.74 0.83 3.42 NA NA 0.83
FAB FirstFed America Bancorp of MA 11.17 11.17 0.17 1.58 1.01 0.53 4.99 0.35 263.67 1.19
GAF GA Financial Corp. of PA 14.82 14.67 1.14 7.12 5.50 1.08 6.72 0.22 76.28 0.43
HBS Haywood Bancshares, Inc. of NC* 14.19 13.69 1.34 11.63 7.13 1.34 11.63 0.67 71.19 0.64
KNK Kankakee Bancorp, Inc. of IL 11.01 10.38 0.88 8.04 6.49 0.86 7.86 1.27 49.02 0.88
KYF Kentucky First Bancorp of KY 17.03 17.03 1.14 6.80 5.55 1.12 6.71 0.13 348.65 0.77
MBB MSB Bancorp of Middletown NY(8)* 8.23 3.81 0.17 2.28 1.40 0.18 2.42 NA NA 0.63
NBN Northeast Bancorp of ME* 6.96 6.15 0.76 10.64 5.37 0.59 8.33 1.03 93.77 1.22
PDB Piedmont Bancorp, Inc. of NC 16.19 16.19 1.19 7.28 5.08 1.19 7.28 1.29 52.20 0.81
SSB Scotland Bancorp, Inc. of NC 24.07 24.07 1.67 5.26 5.73 1.67 5.26 NA NA 0.57
SZB SouthFirst Bancshares of AL 14.22 14.22 0.53 3.76 2.29 0.49 3.47 NA NA 0.78
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.71 0.50 2.84 NA NA 0.19
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 4.21 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.54 13.54 0.97 7.28 5.35 0.93 6.95 0.38 215.27 0.97
FTF Texarkana Fst. Fin. Corp of AR 15.15 15.15 1.76 11.23 6.09 1.72 10.97 0.17 377.18 0.76
THR Three Rivers Fin. Corp. of MI 13.77 13.72 0.90 6.47 4.26 0.85 6.08 1.08 47.87 0.80
WSB Washington SB, FSB of MD 8.51 8.51 0.88 10.51 5.94 0.52 6.26 NA NA 0.96
WFI Winton Financial Corp. of OH 7.17 7.03 1.05 14.68 5.99 0.86 12.03 0.25 100.24 0.29
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.98 8.82 0.75 8.89 7.20 0.49 5.79 1.48 31.23 0.63
FBER 1st Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.59 0.77 4.97 0.84 127.66 2.47
AFED AFSALA Bancorp, Inc. of NY 12.86 12.86 0.79 5.88 4.53 0.79 5.88 0.30 234.30 1.46
ALBK ALBANK Fin. Corp. of Albany NY 8.81 6.84 1.18 12.94 6.91 1.17 12.87 0.88 81.33 1.02
AMFC AMB Financial Corp. of IN 14.77 14.77 1.07 6.93 6.19 0.68 4.38 NA NA 0.53
ASBP ASB Financial Corp. of OH 15.47 15.47 0.92 5.85 4.51 0.92 5.85 0.91 78.25 1.03
ABBK Abington Bancorp of MA* 6.83 6.21 0.87 12.53 5.71 0.77 11.06 0.18 233.13 0.68
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 11.58 1.34 20.78 1.58 31.35 0.95
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AFBC Advance Fin. Bancorp of WV 15.22 15.22 0.87 5.65 4.20 0.84 5.45 1.10 27.69 0.35
AADV Advantage Bancorp, Inc. of WI(8) 10.02 9.38 1.12 12.13 5.14 0.99 10.64 0.47 121.57 1.05
AFCB Affiliated Comm BC, Inc of MA(8) 9.76 9.71 1.08 11.08 4.74 1.08 11.02 0.39 192.06 1.21
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.58 4.09 0.49 5.45 0.12 321.43 0.53
ABCL Alliance Bancorp, Inc. of IL 9.60 9.49 0.84 9.10 4.65 0.93 10.10 0.27 147.57 0.56
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.88 3.80 0.23 2.22 1.81 40.38 1.04
AHCI Ambanc Holding Co., Inc. of NY* 11.37 11.37 -0.53 -4.16 -3.34 -0.60 -4.71 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.51 0.84 7.61 0.52 53.03 0.37
ABCW Anchor Bancorp Wisconsin of WI 6.64 6.54 1.04 16.41 5.12 0.96 15.14 0.97 117.38 1.42
ANDB Andover Bancorp, Inc. of MA* 8.10 8.10 1.06 13.09 6.42 1.03 12.78 0.62 151.68 1.27
ASFC Astoria Financial Corp. of NY 8.07 5.61 0.82 10.37 4.58 0.76 9.64 0.56 67.77 0.92
AVND Avondale Fin. Corp. of IL 8.48 8.48 -2.10 -23.98 -24.66 -1.78 -20.34 1.35 86.34 2.56
BKCT Bancorp Connecticut of CT* 10.60 10.60 1.39 13.29 6.27 1.23 11.80 0.91 131.37 2.04
BPLS Bank Plus Corp. of CA 4.35 3.96 0.34 7.31 4.41 0.39 8.21 1.66 72.86 1.76
BNKU Bank United Corp. of TX 4.89 4.77 0.69 13.68 5.35 0.60 12.00 0.68 41.06 0.36
BWFC Bank West Fin. Corp. of MI 13.66 13.66 0.72 4.94 2.89 0.54 3.67 0.48 32.03 0.22
BANC BankAtlantic Bancorp of FL 5.51 4.56 1.04 18.21 7.85 0.55 9.62 1.10 84.73 1.35
BKUNA BankUnited Fin. Corp. of FL 4.28 3.80 0.28 6.95 2.59 0.21 5.30 0.37 37.97 0.16
BVCC Bay View Capital Corp. of CA 5.35 4.44 0.44 7.40 3.34 0.60 10.08 0.51 230.25 1.59
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 1.89 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares, Inc. of VA 14.52 14.52 1.21 8.45 4.98 1.20 8.39 0.54 96.46 0.60
BFFC Big Foot Fin. Corp. of IL 17.53 17.53 0.60 3.46 2.25 0.53 3.05 0.09 150.75 0.30
BYFC Broadway Fin. Corp. of CA 9.84 9.84 0.29 2.75 3.29 0.33 3.14 1.62 52.84 1.02
CBES CBES Bancorp, Inc. of MO 15.78 15.78 1.10 6.32 4.27 0.96 5.50 0.54 90.67 0.54
CCFH CCF Holding Company of GA 10.66 10.66 0.15 1.07 0.71 -0.15 -1.14 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA(8) 5.56 5.55 0.64 12.26 5.67 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.92 7.92 1.26 16.41 4.75 1.18 15.36 0.11 526.14 0.62
CKFB CKF Bancorp of Danville KY 21.89 21.89 1.84 7.78 6.62 1.38 5.85 0.47 42.66 0.22
CNSB CNS Bancorp, Inc. of MO 24.33 24.33 0.79 3.21 2.54 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc of IL 24.00 22.65 0.50 2.01 2.13 0.43 1.73 0.69 52.91 0.63
CBCI Calumet Bancorp of Chicago IL 16.77 16.77 1.61 10.01 6.77 1.62 10.09 1.64 76.23 1.58
CAFI Camco Fin. Corp. of OH 9.41 8.73 1.15 11.99 6.90 0.93 9.73 0.48 53.21 0.30
CMRN Cameron Fin. Corp. of MO 21.43 21.43 1.18 5.29 4.70 1.17 5.23 0.98 82.65 0.94
CAPS Capital Savings Bancorp of MO(8) 9.43 9.43 0.98 11.06 5.56 0.95 10.62 0.41 78.85 0.40
CFNC Carolina Fincorp of NC* 22.71 22.71 1.22 5.24 4.11 1.17 5.02 0.10 365.18 0.50
CASB Cascade Financial Corp. of WA 6.93 6.93 0.66 10.21 4.77 0.64 9.93 0.35 274.48 1.13
CATB Catskill Fin. Corp. of NY* 24.32 24.32 1.34 5.20 4.46 1.34 5.20 0.35 184.75 1.49
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 4.76 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.90 8.91 0.87 8.69 4.66 0.83 8.22 0.42 185.68 1.08
CENB Century Bancorp, Inc. of NC 30.15 30.15 1.61 5.35 4.27 1.62 5.37 0.58 93.95 0.84
CBSB Charter Financial Inc. of IL(8) 15.54 13.92 1.36 9.12 3.86 1.50 10.06 0.62 90.95 0.76
COFI Charter One Financial of OH 6.97 6.51 0.81 11.85 3.25 1.19 17.33 0.38 150.61 0.89
CVAL Chester Valley Bancorp of PA 8.81 8.81 1.00 11.61 4.57 0.96 11.05 0.55 170.54 1.15
CTZN CitFed Bancorp of Dayton OH(8) 6.06 5.54 0.87 13.86 4.01 0.87 13.86 0.37 143.60 1.01
CLAS Classic Bancshares, Inc. of KY 14.88 12.64 0.81 5.53 4.34 0.95 6.47 0.42 148.74 0.92
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.42 12.45 7.67 0.43 12.77 NA NA 0.58
CFCP Coastal Fin. Corp. of SC 5.98 5.98 1.22 19.67 6.02 1.03 16.52 0.59 151.67 1.20
CMSB Commonwealth Bancorp Inc of PA 9.47 7.48 0.73 7.51 4.96 0.56 5.72 0.42 94.35 0.69
CMSV Commty. Svgs, MHC of FL (48.5) 11.34 11.34 0.80 7.04 2.93 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.46 26.46 1.32 4.49 3.26 1.32 4.49 0.49 53.05 0.45
CFFC Community Fin. Corp. of VA 13.21 13.21 1.12 8.18 4.88 1.13 8.23 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.59 6.09 2.18 0.59 6.09 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.98 8.35 5.97 0.98 8.35 0.65 82.39 0.62
COOP Cooperative Bancshares of NC 7.66 7.66 0.63 8.32 3.70 0.62 8.21 0.17 142.58 0.30
CRZY Crazy Woman Creek Bncorp of WY 23.63 23.63 1.28 4.92 4.55 1.30 4.99 0.18 237.50 0.92
DNFC D&N Financial Corp. of MI 5.40 5.35 0.87 15.65 5.98 0.78 14.06 0.29 199.00 0.80
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DCBI Delphos Citizens Bancorp of OH 26.78 26.78 1.69 6.10 3.84 1.69 6.10 0.35 29.22 0.13
DIME Dime Community Bancorp of NY* 12.51 10.82 0.89 6.05 3.78 0.85 5.80 0.53 145.69 1.36
DIBK Dime Financial Corp. of CT* 8.27 8.05 1.94 23.88 10.37 1.92 23.73 0.30 433.25 3.30
EGLB Eagle BancGroup of IL 11.87 11.87 0.29 2.43 2.12 0.21 1.75 1.36 40.27 0.76
EBSI Eagle Bancshares of Tucker GA 7.83 7.83 0.66 8.05 4.68 0.67 8.14 1.18 56.90 0.92
EGFC Eagle Financial Corp. of CT(8) 7.06 5.73 0.42 5.96 2.23 0.55 7.88 0.52 87.45 0.86
ETFS East Texas Fin. Serv. of TX 17.47 17.47 0.63 3.48 3.26 0.59 3.24 0.33 68.42 0.45
ESBK Elmira Svgs Bank (The) of NY* 6.35 6.19 0.42 6.63 4.40 0.34 5.38 0.64 103.23 0.86
EMLD Emerald Financial Corp. of OH 7.80 7.68 1.05 13.71 5.42 0.97 12.69 NA NA 0.35
EIRE Emerald Isle Bancorp of MA(8)* 6.99 6.99 0.87 12.49 4.73 0.92 13.29 NA NA 0.93
EFBC Empire Federal Bancorp of MT 36.37 36.37 1.47 3.98 3.46 1.47 3.98 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 10.75 10.75 0.82 6.96 3.33 0.74 6.27 0.01 NA 0.32
EQSB Equitable FSB of Wheaton MD 5.20 5.20 0.76 14.86 6.23 0.74 14.62 0.54 32.66 0.26
FCBF FCB Fin. Corp. of Neenah WI 13.89 13.89 1.04 6.66 3.20 0.71 4.53 0.26 269.82 0.89
FFDF FFD Financial Corp. of OH 24.06 24.06 1.82 7.45 5.92 0.87 3.56 0.05 642.86 0.42
FFLC FFLC Bancorp of Leesburg FL 12.85 12.85 1.00 7.15 5.16 0.95 6.80 0.19 224.83 0.53
FFFC FFVA Financial Corp. of VA(8) 13.70 13.43 1.15 8.57 3.73 1.36 10.16 0.11 530.28 1.02
FFWC FFW Corporation of Wabash IN 9.57 8.73 1.03 10.52 6.70 1.00 10.26 0.31 120.30 0.56
FFYF FFY Financial Corp. of OH 13.59 13.59 1.29 9.32 5.58 1.27 9.17 0.62 74.80 0.61
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 6.69 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 10.91 10.91 0.83 7.18 5.17 0.82 7.11 0.22 102.41 0.32
FOBC Fed One Bancorp of Wheeling WV(8) 11.07 10.60 0.92 8.13 3.82 0.91 8.01 0.36 111.94 0.88
FBCI Fidelity Bancorp of Chicago IL 10.47 10.45 0.22 2.11 1.55 0.63 6.06 NA NA 0.13
FSBI Fidelity Bancorp, Inc. of PA 6.84 6.84 0.77 11.22 6.13 0.76 10.96 0.15 340.07 1.04
FFFL Fidelity Bcsh MHC of FL (47.7) 8.21 8.15 0.67 7.64 2.84 0.57 6.49 0.40 51.95 0.28
FFED Fidelity Fed. Bancorp of IN 7.28 7.28 0.73 12.79 5.74 0.68 11.87 0.35 240.48 1.01
FFOH Fidelity Financial of OH 12.01 10.59 0.94 7.26 4.83 0.90 7.01 0.18 167.81 0.38
FIBC Financial Bancorp, Inc. of NY 8.93 8.89 0.92 9.85 5.88 0.98 10.50 1.94 25.52 0.95
FBSI First Bancshares, Inc. of MO 14.40 14.40 1.17 8.23 5.06 1.11 7.85 0.42 76.11 0.37
FBBC First Bell Bancorp of PA 10.80 10.80 1.10 10.10 6.19 1.08 9.93 0.09 112.78 0.12
SKBO First Carnegie MHC of PA(45.0) 16.59 16.59 0.61 4.82 2.09 0.66 5.19 0.77 48.24 0.85
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.63 6.72 1.75 18.43 1.12 99.21 1.46
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 30.90 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of CO 13.46 13.18 1.30 9.81 4.67 1.25 9.39 0.15 201.71 0.40
FDEF First Defiance Fin.Corp. of OH 18.43 18.43 0.96 4.71 4.13 0.95 4.63 0.33 140.92 0.60
FESX First Essex Bancorp of MA* 7.60 6.68 0.83 11.19 5.46 0.74 9.97 0.54 164.26 1.47
FFSX First FSB MHC Sxld of IA(46.1) 8.86 8.79 0.73 8.67 3.82 0.71 8.38 0.19 195.85 0.49
FFES First Fed of E. Hartford CT 6.82 6.82 0.57 8.80 5.35 0.63 9.74 0.30 88.43 1.33
BDJI First Fed. Bancorp. of MN 10.18 10.18 0.65 6.01 3.52 0.65 6.01 0.19 198.64 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 4.35 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 7.08 6.70 1.12 17.09 5.93 0.89 13.47 0.32 155.81 0.61
FFKY First Fed. Fin. Corp. of KY 13.67 12.92 1.64 11.98 6.77 1.61 11.82 0.47 98.79 0.52
FFBZ First Federal Bancorp of OH 7.61 7.60 0.97 12.68 5.30 0.97 12.68 0.64 149.74 1.10
FFCH First Fin. Holdings Inc. of SC 6.44 6.44 0.87 14.13 4.11 0.85 13.80 1.35 48.83 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.65 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 3.89 0.66 7.33 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.31 7.70 1.13 13.71 5.80 0.94 11.35 4.97 12.42 0.71
FSPG First Home Bancorp of NJ(8) 6.86 6.76 0.93 13.99 5.85 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.00 10.00 0.65 6.26 5.15 0.65 6.26 1.44 40.91 0.81
FISB First Indiana Corp. of IN 9.48 9.38 1.16 12.17 4.79 0.93 9.83 1.38 100.34 1.63
FKFS First Keystone Fin. Corp of PA 6.62 6.62 0.80 11.37 6.40 0.72 10.25 1.15 38.88 0.86
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.50 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.40 6.68 0.73 9.98 3.82 0.78 10.68 1.00 96.64 1.37
CASH First Midwest Fin., Inc. of OH 10.82 9.66 0.96 8.50 5.99 0.89 7.95 0.74 67.97 0.80
FMBD First Mutual Bancorp Inc of IL 13.84 10.62 0.25 1.75 1.39 0.20 1.44 0.40 92.09 0.46
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.03 15.34 5.77 1.01 15.05 0.15 720.77 1.33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FNGB First Northern Cap. Corp of WI 11.05 11.05 0.94 8.35 5.23 0.90 7.99 0.09 535.75 0.53
FFPB First Palm Beach Bancorp of FL 6.25 6.10 0.58 8.67 4.88 0.49 7.26 0.54 53.27 0.45
FSLA First SB SLA MHC of NJ (47.5)(8) 9.69 8.85 0.90 9.58 2.54 0.95 10.07 0.59 98.01 1.03
FWWB First Savings Bancorp of WA 13.68 12.64 1.24 8.47 4.90 1.16 7.93 0.25 263.53 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.97 1.29 4.77 0.78 85.16 0.98
SHEN First Shenango Bancorp of PA(8) 12.76 12.76 1.15 10.18 5.10 1.15 10.14 1.04 83.27 1.25
SOPN First Svgs Bancorp of NC 22.77 22.77 1.75 7.41 5.71 1.75 7.41 0.20 101.34 0.30
FBNW FirstBank Corp of Clarkston WA 16.18 16.18 0.59 4.73 2.46 0.30 2.37 0.64 90.64 0.74
FFDB FirstFed Bancorp, Inc. of AL 9.69 8.90 0.96 9.89 6.17 0.96 9.89 NA NA 0.95
FSPT FirstSpartan Fin. Corp. of SC 26.40 26.40 1.16 6.68 3.06 1.16 6.68 0.47 82.73 0.48
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 4.90 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 28.47 7.34 0.70 14.24 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 12.54 12.05 0.94 6.35 4.24 0.95 6.40 0.27 223.94 1.07
FBHC Fort Bend Holding Corp. of TX 6.77 6.35 0.78 12.28 6.75 0.57 9.06 0.47 114.18 1.02
FTSB Fort Thomas Fin. Corp. of KY 15.82 15.82 1.23 7.55 5.16 1.23 7.55 2.04 23.24 0.52
FKKY Frankfort First Bancorp of KY 16.97 16.97 0.17 0.84 0.86 0.73 3.55 0.10 71.94 0.08
FTNB Fulton Bancorp, Inc. of MO 24.66 24.66 1.25 5.02 3.36 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA(8) 11.83 11.83 1.29 11.12 6.94 1.22 10.56 1.55 44.35 0.81
GUPB GFSB Bancorp, Inc of Gallup NM 12.50 12.50 0.89 6.08 5.30 0.89 6.08 0.24 132.26 0.58
GSLA GS Financial Corp. of LA 43.14 43.14 1.25 3.81 1.99 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY* 28.44 28.44 0.63 3.39 2.06 0.58 3.09 0.10 137.39 0.23
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 4.24 1.53 15.94 0.25 244.11 0.84
GFCO Glenway Financial Corp. of OH 9.29 9.20 0.83 8.74 5.12 0.83 8.74 0.06 542.78 0.38
GTPS Great American Bancorp of IL 19.93 19.93 0.63 2.98 2.63 0.63 2.98 0.28 126.79 0.44
PEDE Great Pee Dee Bancorp of SC 37.86 37.86 1.57 4.15 3.53 1.57 4.15 0.45 97.55 0.57
GSBC Great Southern Bancorp of MO 8.74 8.67 1.89 21.59 6.51 1.75 19.90 1.84 114.98 2.48
GDVS Greater DV SB,MHC of PA (19.9) 11.20 11.20 0.83 7.17 2.00 0.83 7.17 1.52 38.83 1.00
GSFC Green Street Fin. Corp. of NC 35.23 35.23 1.61 4.50 3.59 1.61 4.50 0.07 197.67 0.20
GFED Guaranty Fed Bancshares of MO 30.17 30.17 1.00 5.76 2.63 0.97 5.58 0.61 154.73 1.24
HCBB HCB Bancshares of Camden AR 19.09 18.40 0.25 2.30 1.22 0.25 2.30 NA NA 1.42
HEMT HF Bancorp of Hemet CA 7.87 6.62 0.04 0.46 0.34 0.22 2.69 1.38 27.21 0.67
HFFC HF Financial Corp. of SD 9.58 9.58 1.08 11.49 7.07 1.00 10.65 0.36 241.11 1.14
HFNC HFNC Financial Corp. of NC 18.24 18.24 1.23 6.02 4.62 0.93 4.58 0.79 100.96 0.98
HMNF HMN Financial, Inc. of MN 12.22 11.34 0.95 6.79 4.66 0.76 5.39 0.12 340.52 0.61
HALL Hallmark Capital Corp. of WI 7.62 7.62 0.67 9.29 5.88 0.66 9.09 0.11 471.85 0.71
HARB Harbor FL Bncp MHC of FL (46.1(8) 8.93 8.66 1.29 15.26 4.09 1.24 14.68 0.51 197.92 1.31
HRBF Harbor Federal Bancorp of MD 12.49 12.49 0.74 5.73 4.00 0.70 5.49 0.53 37.43 0.31
HFSA Hardin Bancorp of Hardin MO 11.34 11.34 0.75 6.03 5.28 0.69 5.48 0.19 106.88 0.39
HARL Harleysville SB of PA 6.81 6.81 1.02 15.58 6.87 1.02 15.66 NA NA 0.78
HFGI Harrington Fin. Group of IN 4.47 4.47 0.19 3.96 2.50 0.20 4.22 0.18 21.99 0.19
HARS Harris Fin. MHC of PA (24.3) 8.12 7.24 0.89 10.88 2.59 0.76 9.24 0.62 63.10 0.94
HFFB Harrodsburg 1st Fin Bcrp of KY 26.73 26.73 1.35 5.05 4.43 1.35 5.05 0.45 70.72 0.41
HHFC Harvest Home Fin. Corp. of OH 11.02 11.02 0.83 6.96 5.33 0.73 6.09 0.03 393.33 0.27
HAVN Haven Bancorp of Woodhaven NY 5.72 5.70 0.62 10.47 5.14 0.63 10.56 0.66 96.47 1.09
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 1.07 23.89 14.99 0.82 18.40 8.06 18.44 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 17.22 17.22 0.57 3.47 2.38 0.98 5.93 0.15 301.56 1.01
HFWA Heritage Financial Corp of WA 29.23 29.23 1.53 5.25 3.32 1.53 5.25 0.10 817.44 1.30
HCBC High Country Bancorp of CO 19.46 19.46 0.58 2.95 2.58 0.58 2.95 0.23 345.14 0.95
HBNK Highland Bancorp of CA 7.55 7.55 1.20 16.15 7.38 0.93 12.42 1.94 82.92 2.03
HIFS Hingham Inst. for Sav. of MA* 9.60 9.60 1.25 13.09 6.18 1.25 13.09 0.77 91.33 0.89
HBEI Home Bancorp of Elgin IL 27.01 27.01 0.80 2.90 2.20 0.80 2.90 0.35 NA NA
HBFW Home Bancorp of Fort Wayne IN 12.16 12.16 0.86 6.55 3.73 0.86 6.49 0.09 464.55 0.47
HBBI Home Building Bancorp of IN 14.07 14.07 0.74 5.68 4.64 0.71 5.46 0.67 29.02 0.29
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 4.94 1.26 6.84 0.82 77.27 0.73
HOMF Home Fed Bancorp of Seymour IN 8.80 8.55 1.38 16.20 5.84 1.22 14.26 0.55 101.25 0.67
HWEN Home Financial Bancorp of IN 16.98 16.98 0.81 4.51 4.00 0.59 3.26 1.63 38.73 0.79
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HPBC Home Port Bancorp, Inc. of MA* 10.52 10.52 1.67 15.70 6.75 1.63 15.35 NA NA 1.47
HMCI HomeCorp, Inc. of Rockford IL(8) 6.80 6.80 0.47 7.16 3.30 0.36 5.59 2.11 26.35 0.71
HFBC HopFed Bancorp of KY 22.59 22.59 0.99 4.37 3.35 0.99 4.37 0.12 93.93 0.23
HZFS Horizon Fin'l. Services of IA 10.17 10.17 0.85 8.33 5.72 0.68 6.63 0.96 44.55 0.67
HRZB Horizon Financial Corp. of WA* 15.92 15.92 1.56 10.02 6.10 1.55 9.93 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.73 17.73 0.79 4.51 2.99 0.79 4.51 0.11 130.18 0.49
ITLA ITLA Capital Corp of CA* 10.72 10.68 1.46 13.06 7.53 1.46 13.06 NA NA 1.50
IFSB Independence FSB of DC 7.25 6.45 0.54 8.04 6.41 0.22 3.32 NA NA 0.36
INCB Indiana Comm. Bank, SB of IN(8) 12.15 12.15 0.52 4.28 2.57 0.52 4.28 NA NA 0.94
INBI Industrial Bancorp of OH 16.72 16.72 1.48 8.31 5.41 1.48 8.31 0.31 155.81 0.54
IWBK Interwest Bancorp of WA 6.73 6.62 1.10 16.46 6.14 0.96 14.33 0.69 62.65 0.74
IPSW Ipswich SB of Ipswich MA* 5.21 5.21 1.18 20.53 6.53 0.96 16.78 0.95 77.31 0.96
JXVL Jacksonville Bancorp of TX 14.63 14.63 1.49 9.87 6.73 1.49 9.87 0.70 70.27 0.66
JXSB Jcksnville SB,MHC of IL (45.6) 10.41 10.41 0.61 5.69 2.32 0.49 4.57 0.94 42.01 0.51
JSBA Jefferson Svgs Bancorp of MO 9.03 7.08 0.79 9.68 3.59 0.77 9.38 0.67 101.16 0.89
JOAC Joachim Bancorp, Inc. of MO(8) 28.92 28.92 0.76 2.64 2.22 0.76 2.64 0.25 89.29 0.30
KSAV KS Bancorp of Kenly NC 12.81 12.81 1.15 8.58 5.75 1.15 8.58 0.44 64.74 0.34
KSBK KSB Bancorp of Kingfield ME* 7.36 7.00 1.07 14.93 6.34 1.07 14.93 NA NA 1.12
KFBI Klamath First Bancorp of OR 15.07 13.77 1.09 6.06 3.91 1.09 6.06 0.02 932.65 0.24
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 5.70 0.69 7.65 NA NA 0.82
LVSB Lakeview Financial of NJ 10.68 9.04 1.43 13.49 6.49 0.88 8.35 1.14 59.91 1.49
LARK Landmark Bancshares, Inc of KS 14.09 14.09 1.09 7.61 6.64 0.98 6.88 0.30 151.09 0.62
LARL Laurel Capital Group of PA 10.57 10.57 1.39 13.35 6.09 1.40 13.45 0.42 203.92 1.22
LSBX Lawrence Savings Bank of MA* 10.45 10.45 2.30 25.00 11.20 2.28 24.74 0.52 168.85 1.91
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.20 7.33 3.05 1.20 7.33 0.04 453.33 0.30
LXMO Lexington B&L Fin. Corp. of MO 26.63 26.63 1.23 4.27 4.24 1.23 4.27 0.67 56.09 0.48
LIFB Life Bancorp of Norfolk VA(8) 10.71 10.42 0.92 8.70 3.76 0.85 8.05 0.41 141.46 1.32
LFCO Life Financial Corp of CA 16.83 16.83 4.81 40.35 8.63 4.81 40.35 NA NA 0.80
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.30 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 19.21 19.21 1.50 7.75 6.03 1.55 7.99 0.62 45.62 0.38
LONF London Financial Corp. of OH 13.76 13.76 1.09 5.76 5.44 1.01 5.33 0.20 238.16 0.62
LISB Long Island Bancorp, Inc of NY 9.18 9.09 0.86 9.44 3.51 0.71 7.79 0.89 62.67 0.91
MAFB MAF Bancorp, Inc. of IL 7.62 6.71 1.14 14.72 6.79 1.12 14.49 0.32 138.86 0.57
MBLF MBLA Financial Corp. of MO 12.68 12.68 0.81 6.31 5.01 0.82 6.40 0.48 62.09 0.51
MECH MECH Financial Inc of CT* 10.40 10.40 1.79 17.75 9.91 1.78 17.69 0.58 270.14 2.39
MFBC MFB Corp. of Mishawaka IN 12.70 12.70 0.83 6.00 4.63 0.82 5.96 0.09 162.45 0.18
MLBC ML Bancorp of Villanova PA(8) 6.92 6.46 0.70 9.90 3.81 0.50 7.07 0.47 163.03 1.75
MSBF MSB Financial, Inc of MI 16.87 16.87 1.52 8.83 5.28 1.40 8.15 0.84 51.31 0.46
MARN Marion Capital Holdings of IN 20.78 20.33 1.57 7.09 5.85 1.57 7.09 1.43 74.17 1.30
MRKF Market Fin. Corp. of OH 35.57 35.57 1.06 3.30 2.57 1.06 3.30 0.34 26.94 0.18
MFSL Maryland Fed. Bancorp of MD 8.48 8.39 0.65 7.77 3.17 0.91 10.97 0.60 65.66 0.47
MASB MassBank Corp. of Reading MA* 11.21 11.06 1.12 10.54 5.77 1.03 9.73 0.19 131.79 0.86
MFLR Mayflower Co-Op. Bank of MA* 9.75 9.61 1.11 11.52 5.80 1.05 10.93 0.69 124.95 1.49
MDBK Medford Bancorp, Inc. of MA* 8.94 8.41 1.05 11.80 5.72 1.02 11.38 0.16 379.54 1.17
MERI Meritrust FSB of Thibodaux LA(8) 8.49 8.49 1.18 14.53 4.79 1.18 14.53 0.35 62.38 0.41
MWBX MetroWest Bank of MA* 7.34 7.34 1.34 18.12 6.83 1.32 17.79 1.03 130.81 1.78
METF Metropolitan Fin. Corp. of OH 3.96 3.64 0.69 17.52 4.88 0.65 16.45 0.56 108.45 0.79
MCBS Mid Continent Bancshares of KS(8) 10.06 10.06 1.01 10.07 4.30 1.10 10.99 0.27 71.69 0.29
MIFC Mid Iowa Financial Corp. of IA 9.36 9.35 1.21 12.97 7.05 1.33 14.29 0.21 105.32 0.41
MCBN Mid-Coast Bancorp of ME 8.34 8.34 0.76 8.86 5.02 0.71 8.30 1.09 48.53 0.66
MWBI Midwest Bancshares, Inc. of IA 7.23 7.23 0.88 12.56 7.29 0.78 11.14 0.73 52.45 0.62
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 4.83 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 11.84 11.84 0.65 4.81 3.53 0.62 4.64 0.26 83.77 0.35
MIVI Miss. View Hold. Co. of MN 18.18 18.18 1.08 5.89 5.50 1.06 5.77 0.56 225.65 1.90
MBSP Mitchell Bancorp, Inc. of NC 40.12 40.12 1.52 3.59 3.29 1.52 3.59 1.77 29.42 0.64
MBBC Monterey Bay Bancorp of CA 11.75 10.95 0.43 3.81 2.78 0.39 3.47 0.65 62.58 0.63
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONT Montgomery Fin. Corp. of IN 18.60 18.60 0.72 4.29 3.45 0.72 4.29 0.78 22.34 0.19
MSBK Mutual SB, FSB of Bay City MI 6.58 6.58 0.08 1.25 0.91 0.01 0.10 0.07 434.66 0.62
MYST Mystic Financial of MA* 19.47 19.47 0.78 4.00 3.06 0.78 4.00 0.18 315.24 0.91
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 5.01 0.55 7.30 0.87 105.97 1.14
NSLB NS&L Bancorp, Inc of Neosho MO 19.77 19.63 0.77 3.83 3.68 0.73 3.65 0.14 51.16 0.13
NSSY NSS Bancorp of CT* 7.90 7.66 1.05 13.49 6.46 1.19 15.30 1.31 73.30 1.46
NMSB Newmil Bancorp, Inc. of CT* 9.32 9.32 0.85 8.52 5.31 0.86 8.64 0.90 172.67 3.24
NASB North American SB, FSB of MO 8.49 8.24 1.67 21.16 8.12 1.35 17.20 3.07 27.86 0.99
NBSI North Bancshares of Chicago IL 13.49 13.49 0.52 3.69 2.43 0.50 3.52 NA NA 0.26
FFFD North Central Bancshares of IA 22.92 22.92 1.83 7.49 5.52 1.83 7.49 NA NA 1.11
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.30 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.60 11.60 1.06 9.03 5.48 1.01 8.66 1.35 35.37 0.58
NWSB Northwest SB, MHC of PA (30.7) 9.24 8.20 0.93 9.65 2.58 0.95 9.88 0.72 86.28 0.85
NTMG Nutmeg FS&LA of CT 5.51 5.51 0.68 12.20 6.54 0.43 7.83 NA NA 0.55
OHSL OHSL Financial Corp. of OH 10.90 10.90 0.87 7.88 4.41 0.84 7.54 0.30 73.10 0.31
OCFC Ocean Fin. Corp. of NJ 15.17 15.17 1.01 5.69 4.77 1.00 5.62 0.52 83.85 0.86
OTFC Oregon Trail Fin. Corp. of OR 12.49 12.49 0.93 8.04 3.47 0.94 8.16 0.18 180.70 0.55
OFCP Ottawa Financial Corp. of MI 8.62 7.01 0.87 9.92 4.81 0.83 9.43 0.34 109.69 0.44
PFFB PFF Bancorp of Pomona CA 9.71 9.61 0.54 5.26 4.08 0.52 4.99 1.40 67.00 1.38
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 6.07 5.16 1.99 6.15 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.28 7.28 1.36 19.21 8.26 1.28 18.10 1.06 65.77 0.75
PBCI Pamrapo Bancorp, Inc. of NJ 12.88 12.80 1.37 10.35 6.65 1.31 9.89 2.20 29.81 1.16
PFED Park Bancorp of Chicago IL 21.82 21.82 0.87 3.86 3.52 0.94 4.15 0.23 125.00 0.73
PVSA Parkvale Financial Corp of PA 7.91 7.87 1.07 14.01 6.52 1.07 14.01 0.36 397.79 1.88
PBHC Pathfinder BC MHC of NY (46.1)* 11.87 9.97 1.06 9.22 3.26 0.95 8.30 NA NA 0.68
PEEK Peekskill Fin. Corp. of NY 25.24 25.24 1.09 4.23 3.76 1.09 4.23 0.90 39.49 1.34
PFSB PennFed Fin. Services of NJ 6.96 5.96 0.81 11.02 5.96 0.80 10.92 0.58 33.00 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 4.97 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood Bancorp, Inc. of PA 17.99 17.99 0.95 5.12 3.77 1.10 5.92 1.49 34.66 0.80
PBKB People's Bancshares of MA* 4.10 3.93 0.83 15.42 6.43 0.43 7.92 0.57 98.78 1.04
PFDC Peoples Bancorp of Auburn IN 15.27 15.27 1.49 9.76 5.66 1.49 9.76 0.30 102.04 0.37
PBCT Peoples Bank, MHC of CT (40.1)* 8.68 8.63 1.18 13.88 4.02 0.68 8.00 0.68 153.86 1.57
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 17.18 15.52 1.18 6.97 1.90 0.88 5.18 0.78 68.34 0.85
PFFC Peoples Fin. Corp. of OH 18.85 18.85 0.96 5.10 3.39 0.95 5.01 0.04 480.65 0.25
PHBK Peoples Heritage Fin Grp of ME* 6.99 5.25 1.25 16.39 5.69 1.24 16.20 0.88 114.30 1.40
PSFC Peoples Sidney Fin. Corp of OH 24.73 24.73 1.15 5.90 3.61 1.15 5.90 1.13 34.69 0.45
PERM Permanent Bancorp, Inc. of IN 10.00 9.88 0.62 6.51 4.24 0.61 6.46 0.70 70.95 0.97
PMFI Perpetual Midwest Fin. of IA(8) 8.92 8.92 0.49 5.66 3.55 0.44 5.05 0.39 193.33 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.91 11.91 0.80 6.41 1.95 0.89 7.07 NA NA 1.04
PCBC Perry Co. Fin. Corp. of MO 19.23 19.23 1.08 5.70 4.48 1.08 5.70 0.01 277.78 0.17
PHFC Pittsburgh Home Fin Corp of PA 8.23 8.13 0.82 7.69 6.03 0.70 6.61 1.68 28.88 0.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.36 6.36 0.62 9.84 3.28 0.61 9.71 0.23 194.26 1.02
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.97 6.32 0.95 10.79 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.30 8.30 0.27 3.28 1.79 0.35 4.15 4.03 26.72 1.40
PHSB Ppls Home SB, MHC of PA (45.0) 13.66 13.66 0.73 6.80 3.11 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 10.91 10.91 0.60 5.15 4.50 0.58 5.03 0.43 65.96 0.42
PFNC Progress Financial Corp. of PA 5.09 4.27 0.90 17.37 5.63 0.69 13.16 1.05 63.33 1.00
PSBK Progressive Bank, Inc. of NY(8)* 8.88 8.05 0.98 11.44 5.95 0.96 11.19 0.74 150.14 1.71
PROV Provident Fin. Holdings of CA 11.58 11.58 0.77 5.71 4.57 0.41 3.02 1.49 56.25 0.96
PULB Pulaski SB, MHC of MO (29.8)(8) 13.30 13.30 1.21 9.32 2.11 1.06 8.14 NA NA 0.46
PLSK Pulaski SB, MHC of NJ (46.0) 11.94 11.94 0.63 6.25 2.86 0.63 6.25 NA NA NA
PULS Pulse Bancorp of S. River NJ 8.19 8.19 1.09 13.66 7.05 1.11 13.81 0.98 43.79 1.67
QCFB QCF Bancorp of Virginia MN 16.45 16.45 1.65 9.37 6.64 1.65 9.37 0.39 214.67 1.95
QCBC Quaker City Bancorp of CA 8.63 8.63 0.73 8.41 6.35 0.70 8.08 1.33 70.08 1.18
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 3.62 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp of Raritan NJ* 7.56 7.45 1.01 13.22 6.23 0.99 12.98 0.23 349.74 1.23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REDF RedFed Bancorp of Redlands CA(8) 8.35 8.32 1.11 13.41 7.27 1.14 13.78 1.69 45.34 0.86
RELY Reliance Bancorp, Inc. of NY 8.56 5.82 0.90 10.87 5.30 0.94 11.39 0.56 69.33 0.88
RELI Reliance Bancshares Inc of WI 50.09 50.09 1.06 2.16 2.08 1.11 2.27 NA NA 0.57
RCBK Richmond County Fin Corp of NY* 25.65 25.65 1.22 4.75 3.36 1.22 4.75 NA NA 1.12
RIVR River Valley Bancorp of IN 12.72 12.54 0.84 7.18 4.73 0.70 5.99 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 22.73 21.94 1.35 8.56 3.28 1.33 8.40 0.17 218.00 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.20 1.22 6.50 0.18 362.05 2.42
SCCB S. Carolina Comm. Bnshrs of SC 20.69 20.69 1.00 4.02 3.67 1.00 4.02 1.53 42.40 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.33 9.33 0.37 3.83 1.44 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.29 12.29 0.62 4.91 4.09 0.60 4.74 0.84 53.36 0.58
SGVB SGV Bancorp of W. Covina CA 7.55 7.44 0.33 4.42 3.17 0.39 5.12 1.23 26.58 0.42
SHSB SHS Bancorp, Inc. of PA 13.34 13.34 0.67 5.00 4.00 0.67 5.00 1.43 33.94 0.74
SISB SIS Bancorp, Inc. of MA* 7.24 7.24 0.65 8.83 3.64 0.88 12.06 0.47 279.99 2.67
SWCB Sandwich Bancorp of MA(8)* 8.10 7.82 0.98 12.12 4.35 0.96 11.83 0.56 140.03 1.11
SFSL Security First Corp. of OH 9.36 9.22 1.38 14.76 5.41 1.38 14.76 0.43 176.70 0.84
SKAN Skaneateles Bancorp Inc of NY* 6.90 6.72 0.67 9.83 6.06 0.65 9.49 1.89 52.90 1.19
SOBI Sobieski Bancorp of S. Bend IN 14.39 14.39 0.60 3.91 3.17 0.60 3.91 0.26 87.34 0.29
SOSA Somerset Savings Bank of MA(8)* 6.64 6.64 1.15 18.37 7.48 1.12 17.86 4.86 29.23 1.83
SSFC South Street Fin. Corp. of NC(8)* 14.90 14.90 0.85 3.61 3.31 0.87 3.69 0.16 118.51 0.38
SCBS Southern Commun. Bncshrs of AL 20.42 20.42 1.15 5.98 3.89 1.15 5.98 2.34 48.64 1.73
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.22 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL(8) 11.96 11.96 1.09 9.85 4.87 1.10 9.92 0.18 115.50 0.29
SVRN Sovereign Bancorp, Inc. of PA 4.76 3.95 0.48 11.13 3.15 0.65 15.15 0.67 94.38 0.91
STFR St. Francis Cap. Corp. of WI 8.27 7.38 0.78 9.58 5.40 0.75 9.21 0.30 126.18 0.81
SPBC St. Paul Bancorp, Inc. of IL 9.17 9.14 1.08 12.20 5.40 1.09 12.29 0.24 308.50 1.06
SFFC StateFed Financial Corp. of IA 17.66 17.66 1.27 7.17 4.91 1.27 7.17 1.74 14.72 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.23 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.48 5.07 0.51 10.96 4.77 0.46 9.91 0.73 65.29 0.83
SFSB SuburbFed Fin. Corp. of IL(8) 6.73 6.71 0.66 10.03 4.67 0.53 8.11 0.47 42.37 0.30
ROSE T R Financial Corp. of NY* 6.27 6.27 0.98 15.68 5.98 0.87 14.01 0.52 74.90 0.72
THRD TF Financial Corp. of PA 8.39 7.00 0.77 7.24 5.88 0.66 6.16 0.29 117.08 0.80
TPNZ Tappan Zee Fin., Inc. of NY 17.16 17.16 0.85 4.86 3.73 0.84 4.79 1.39 39.34 1.18
TSBK Timberland Bancorp of WA 30.46 30.46 1.85 6.06 4.25 1.85 6.06 NA NA 0.91
TRIC Tri-County Bancorp of WY 15.37 15.37 1.02 6.67 5.50 1.05 6.85 NA NA 1.01
TWIN Twin City Bancorp, Inc. of TN 12.94 12.94 0.85 6.65 4.90 0.72 5.62 0.16 88.17 0.20
USAB USABancshares, Inc of PA* 8.43 8.30 0.49 5.72 3.05 0.43 5.01 0.57 70.22 0.75
UCBC Union Community Bancorp of IN 36.48 36.48 1.58 4.33 3.96 1.58 4.33 0.59 32.52 0.22
UFRM United FSB of Rocky Mount NC(8) 7.23 7.23 0.65 8.66 3.04 0.42 5.62 1.06 88.10 1.10
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.52 1.40 6.04 0.48 15.21 0.22
UTBI United Tenn. Bancshares of TN 24.48 24.48 1.25 5.10 4.61 1.25 5.10 0.75 123.77 1.27
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.17 0.50 7.31 1.24 59.40 0.95
WHGB WHG Bancshares of MD 19.66 19.66 0.76 3.59 2.92 0.77 3.65 0.95 19.59 0.24
WSFS WSFS Financial Corp. of DE* 5.72 5.69 1.12 20.56 6.36 1.10 20.25 1.39 117.68 3.15
WVFC WVS Financial Corp. of PA 10.66 10.66 1.31 11.07 5.61 1.32 11.17 0.20 312.48 1.14
WRNB Warren Bancorp of Peabody MA* 10.79 10.79 2.00 19.45 8.30 1.78 17.31 0.83 132.18 1.68
WSBI Warwick Community Bncrp of NY* 23.76 23.76 1.04 4.37 3.44 1.04 4.37 0.69 67.04 0.80
WFSL Washington Federal, Inc. of WA 12.89 11.90 1.88 15.54 7.49 1.85 15.32 0.60 69.21 0.56
WAMU Washington Mutual, Inc. of WA* 5.35 4.98 0.50 9.55 1.91 0.92 17.75 NA NA 0.99
WYNE Wayne Bancorp, Inc. of NJ 12.43 12.43 0.86 6.10 4.37 0.86 6.10 0.89 88.41 1.18
WAYN Wayne Svgs Bks MHC of OH (47.8 9.48 9.48 0.75 8.07 2.85 0.70 7.49 0.45 83.22 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.38 23.38 1.43 6.14 3.12 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.44 4.75 0.54 10.34 3.60 0.82 15.76 0.65 114.22 1.34
WEFC Wells Fin. Corp. of Wells MN 14.71 14.71 1.09 7.67 5.99 1.07 7.46 NA NA NA
WCBI WestCo Bancorp, Inc. of IL 15.38 15.38 1.51 9.79 6.59 1.41 9.13 0.19 147.79 0.37
WSTR WesterFed Fin. Corp. of MT 10.40 8.45 0.81 7.25 5.00 0.78 7.03 0.35 136.97 0.73
WOFC Western Ohio Fin. Corp. of OH 13.87 12.94 0.37 2.65 2.28 0.43 3.09 0.44 115.19 0.66
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WWFC Westwood Fin. Corp. of NJ 9.35 8.41 0.68 7.39 4.05 0.74 7.97 0.15 148.48 0.60
WEHO Westwood Hmstd Fin Corp of OH 22.45 22.45 0.67 2.33 2.10 1.05 3.68 0.12 171.61 0.23
FFWD Wood Bancorp of OH 12.80 12.80 1.44 11.41 4.05 1.29 10.26 0.39 93.94 0.44
YFCB Yonkers Fin. Corp. of NY 13.54 13.54 1.04 7.04 5.46 1.03 6.97 0.49 71.78 0.82
YFED York Financial Corp. of PA 8.86 8.86 0.96 11.17 4.94 0.80 9.31 2.24 29.20 0.75
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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(306) 19.98 161.53 20.28 165.42 21.06 0.36 1.55 30.43
NYSE Traded Companies(9) 17.17 209.10 19.77 196.54 17.73 0.33 0.86 13.17
AMEX Traded Companies(20) 19.36 142.57 19.86 143.88 20.55 0.34 1.80 36.41
NASDAQ Listed OTC Companies(277) 20.12 161.83 20.33 166.44 21.18 0.36 1.55 30.54
California Companies(20) 17.50 166.44 13.03 164.59 19.04 0.17 0.52 11.13
Florida Companies(5) 18.74 173.35 21.86 190.93 22.98 0.24 0.93 17.22
Mid-Atlantic Companies(58) 19.77 167.20 16.81 177.53 20.85 0.38 1.55 30.80
Mid-West Companies(147) 20.08 156.84 20.99 159.08 21.10 0.34 1.60 30.49
New England Companies(9) 19.83 168.63 12.50 178.11 20.83 0.44 1.52 29.58
North-West Companies(11) 22.08 167.76 25.90 173.58 22.79 0.28 1.08 24.90
South-East Companies(43) 21.29 166.66 25.56 170.86 22.41 0.50 1.99 42.96
South-West Companies(6) 14.04 139.13 13.91 145.89 15.17 0.33 1.46 24.97
Western Companies (Excl CA)(7) 21.21 165.04 24.84 141.44 21.29 0.47 2.08 37.60
Thrift Strategy(253) 20.35 153.29 21.09 157.05 21.21 0.37 1.63 32.54
Mortgage Banker Strategy(33) 18.60 201.76 14.93 213.74 21.11 0.33 1.06 20.30
Real Estate Strategy(8) 16.81 190.26 14.36 195.55 17.83 0.16 0.68 11.62
Diversified Strategy(8) 19.68 254.74 26.23 242.31 21.20 0.55 1.50 30.82
Retail Banking Strategy(4) 16.16 157.75 10.39 163.41 18.62 0.39 2.19 11.46
Companies Issuing Dividends(258) 19.90 163.91 20.25 168.79 21.06 0.43 1.84 36.35
Companies Without Dividends(48) 20.47 148.64 20.49 146.90 21.08 0.00 0.00 0.00
Equity/Assets less than 6%(24) 17.91 220.52 11.09 228.45 20.03 0.23 0.78 15.29
Equity/Assets 6-12%(141) 18.66 180.00 15.71 187.27 20.18 0.38 1.47 27.29
Equity/Assets greater than 12%(141) 21.64 135.93 25.74 137.28 22.17 0.37 1.74 36.06
Converted Last 3 Mths (no MHC)(9) 25.72 127.75 33.77 127.75 25.72 0.05 0.37 13.54
Actively Traded Companies(36) 18.73 216.64 18.32 223.40 19.51 0.49 1.49 27.72
Market Value Below $20 Million(47) 20.39 128.92 18.94 129.57 21.53 0.31 1.74 34.08
Holding Company Structure(278) 20.28 160.51 20.49 164.08 21.25 0.37 1.57 31.19
Assets Over $1 Billion(59) 19.50 205.57 16.36 222.38 20.66 0.41 1.17 23.20
Assets $500 Million-$1 Billion(46) 18.43 187.34 17.72 186.36 20.07 0.37 1.43 28.37
Assets $250-$500 Million(67) 18.77 160.60 19.36 165.78 20.15 0.37 1.51 26.45
Assets less than $250 Million(134) 21.33 136.57 23.09 137.41 22.03 0.34 1.75 36.15
Goodwill Companies(123) 19.04 184.99 17.05 195.97 20.43 0.41 1.48 26.57
Non-Goodwill Companies(183) 20.60 146.91 22.32 146.91 21.49 0.33 1.60 32.89
Acquirors of FSLIC Cases(9) 16.19 199.61 15.08 192.45 17.20 0.63 2.26 26.71
</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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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(60) 18.13 191.57 20.07 191.46 19.12 0.43 1.40 25.67
NYSE Traded Companies(4) 24.04 202.93 27.69 209.25 23.82 0.76 1.31 26.45
AMEX Traded Companies(7) 15.87 166.93 19.36 175.20 19.47 0.55 1.80 31.78
NASDAQ Listed OTC Companies(49) 17.75 193.34 19.45 192.12 18.72 0.38 1.36 24.86
California Companies(1) 13.28 164.41 17.63 165.09 13.28 0.00 0.00 0.00
Mid-Atlantic Companies(21) 22.85 181.80 23.14 184.37 23.46 0.40 1.16 25.16
New England Companies(32) 15.61 198.02 17.86 201.02 16.50 0.45 1.52 25.91
North-West Companies(3) 16.87 245.88 19.88 202.25 20.81 0.60 1.76 29.62
South-East Companies(3) 19.17 126.21 23.28 128.47 19.69 0.42 2.05 35.67
Thrift Strategy(44) 18.13 179.11 20.77 181.21 19.01 0.43 1.44 26.31
Mortgage Banker Strategy(7) 19.05 216.49 17.93 231.83 20.46 0.29 1.07 22.08
Real Estate Strategy(4) 12.66 191.52 20.61 191.86 13.41 0.26 1.13 13.61
Diversified Strategy(5) 19.77 261.41 16.77 243.57 20.52 0.65 1.54 30.83
Companies Issuing Dividends(48) 18.32 200.00 19.21 200.27 19.72 0.54 1.76 32.72
Companies Without Dividends(12) 17.23 159.39 23.34 160.20 15.80 0.00 0.00 0.00
Equity/Assets less than 6%(4) 15.53 292.23 15.02 282.66 20.97 0.45 1.25 16.85
Equity/Assets 6-12%(41) 16.84 200.85 17.32 203.88 17.68 0.47 1.51 26.72
Equity/Assets greater than 12%(15) 23.19 139.63 28.38 142.63 23.31 0.31 1.16 24.99
Converted Last 3 Mths (no MHC)(4) 28.85 135.88 31.90 136.98 29.42 0.00 0.00 0.00
Actively Traded Companies(17) 16.69 211.99 19.17 208.54 18.32 0.64 1.74 28.79
Market Value Below $20 Million(2) 3.24 139.57 12.67 140.64 3.37 0.00 0.00 0.00
Holding Company Structure(47) 17.75 184.45 20.92 182.98 18.87 0.40 1.36 24.64
Assets Over $1 Billion(18) 22.16 218.50 22.71 214.25 22.47 0.60 1.45 30.49
Assets $500 Million-$1 Billion(15) 14.46 190.64 17.00 195.44 14.87 0.44 1.43 22.14
Assets $250-$500 Million(12) 17.93 180.69 19.30 185.40 18.93 0.30 1.47 25.33
Assets less than $250 Million(15) 15.98 168.16 19.87 170.28 17.79 0.30 1.25 22.93
Goodwill Companies(33) 18.81 196.26 18.00 196.58 20.32 0.47 1.38 24.81
Non-Goodwill Companies(27) 17.26 185.91 22.57 185.91 17.56 0.38 1.42 26.71
</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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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(19) 26.16 231.98 28.84 232.26 27.07 0.47 1.85 51.38
BIF-Insured Thrifts(3) 24.87 296.64 30.05 323.28 0.00 0.48 1.45 38.74
NASDAQ Listed OTC Companies(22) 25.52 241.22 28.99 245.26 27.07 0.47 1.80 48.85
Florida Companies(3) 0.00 245.03 23.73 245.85 0.00 0.90 2.61 0.00
Mid-Atlantic Companies(11) 0.00 233.77 30.28 241.14 0.00 0.30 1.40 44.20
Mid-West Companies(6) 26.16 231.76 28.97 232.18 27.07 0.55 2.23 57.66
New England Companies(1) 24.87 323.51 28.07 325.19 0.00 0.76 2.02 50.33
Thrift Strategy(20) 26.16 234.88 28.88 239.11 27.07 0.47 1.83 49.58
Mortgage Banker Strategy(1) 0.00 0.00 31.47 0.00 0.00 0.22 1.07 41.51
Diversified Strategy(1) 24.87 323.51 28.07 325.19 0.00 0.76 2.02 50.33
Companies Issuing Dividends(22) 25.52 241.22 28.99 245.26 27.07 0.47 1.80 48.85
Equity/Assets 6-12%(16) 25.52 259.91 27.22 265.57 27.07 0.47 1.61 49.52
Equity/Assets greater than 12%(6) 0.00 194.48 34.31 194.48 0.00 0.48 2.36 42.86
Holding Company Structure(3) 0.00 272.47 29.06 298.28 0.00 0.41 1.49 50.48
Assets Over $1 Billion(6) 24.87 291.20 28.46 292.87 0.00 0.51 1.71 43.62
Assets $500 Million-$1 Billion(2) 0.00 231.16 26.22 231.16 0.00 0.90 2.47 0.00
Assets $250-$500 Million(6) 26.16 267.88 30.69 268.30 27.07 0.51 1.85 57.40
Assets less than $250 Million(8) 0.00 213.13 28.73 220.50 0.00 0.36 1.72 46.36
Goodwill Companies(9) 25.52 267.31 27.51 281.47 27.07 0.45 1.55 39.67
Non-Goodwill Companies(13) 0.00 230.78 29.88 230.78 0.00 0.48 1.95 58.03
MHC Institutions(22) 25.52 241.22 28.99 245.26 27.07 0.47 1.80 48.85
</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-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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 15.30 303.55 12.46 NM 17.44 0.88 1.41 21.57
CFB Commercial Federal Corp. of NE 16.93 251.64 16.04 279.02 17.26 0.22 0.62 10.53
DME Dime Bancorp, Inc. of NY* 29.05 269.91 16.24 329.02 29.05 0.16 0.52 15.24
DSL Downey Financial Corp. of CA 19.63 187.38 13.37 189.81 20.45 0.32 1.09 21.48
FED FirstFed Fin. Corp. of CA 18.52 191.92 10.28 193.48 18.87 0.00 0.00 0.00
GSB Golden State Bancorp of CA(8) 19.26 187.92 11.34 208.24 16.05 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 14.37 188.77 12.87 188.77 14.61 0.50 0.56 8.05
GPT GreenPoint Fin. Corp. of NY* 21.28 247.50 24.02 NM 22.03 1.28 1.72 36.68
JSB JSB Financial, Inc. of NY* 18.12 149.85 34.79 149.85 20.38 1.60 2.97 53.87
NYB New York Bancorp, Inc. of NY(8) 16.33 NM 26.50 NM 16.01 0.60 1.48 24.19
OCN Ocwen Financial Corp. of FL 22.39 NM 61.46 NM NM 0.00 0.00 0.00
SIB Staten Island Bancorp of NY* 27.70 144.47 35.73 148.87 NM 0.00 0.00 0.00
WES Westcorp Inc. of Orange CA 13.02 131.33 11.93 131.64 NM 0.40 2.34 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 22.81 128.51 21.78 128.51 23.54 0.44 1.99 45.36
ANE Alliance Bancorp of NE, of CT* 16.16 173.02 13.16 177.98 23.12 0.20 1.01 16.26
BKC American Bank of Waterbury CT* 14.69 202.46 18.25 209.29 16.98 1.52 3.02 44.44
BFD BostonFed Bancorp of MA 17.29 149.73 12.53 155.41 19.41 0.28 1.27 21.88
CFX CFX Corp of Keene NH(8)* NM 298.14 25.50 309.04 NM 0.88 2.89 NM
CNY Carver Bancorp, Inc. of NY NM 100.07 8.49 104.02 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 26.27 131.00 18.18 131.00 NM 0.00 0.00 0.00
EBI Equality Bancorp, Inc. of MO NM 154.61 17.28 154.61 NM 0.24 1.51 52.17
ESX Essex Bancorp of Norfolk VA(8) 25.95 NM 2.86 NM 28.83 0.00 0.00 0.00
FCB Falmouth Bancorp, Inc. of MA* NM 143.30 34.30 143.30 NM 0.24 1.04 38.10
FAB FirstFed America Bancorp of MA NM 133.69 14.93 133.69 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 18.18 130.43 19.33 131.74 19.25 0.48 2.45 44.44
HBS Haywood Bancshares, Inc. of NC* 14.03 126.18 17.90 130.70 14.03 0.60 2.74 38.46
KNK Kankakee Bancorp, Inc. of IL 15.40 122.89 13.54 130.36 15.76 0.48 1.42 21.82
KYF Kentucky First Bancorp of KY 18.03 122.61 20.88 122.61 18.26 0.50 3.60 64.94
MBB MSB Bancorp of Middletown NY(8)* NM 155.71 12.82 336.03 NM 0.60 1.72 NM
NBN Northeast Bancorp of ME* 18.62 189.71 13.20 214.74 23.76 0.21 1.16 21.65
PDB Piedmont Bancorp, Inc. of NC 19.69 138.77 22.46 138.77 19.69 0.40 3.76 74.07
SSB Scotland Bancorp, Inc. of NC 17.47 131.05 31.54 131.05 17.47 0.20 1.97 34.48
SZB SouthFirst Bancshares of AL NM 159.38 22.67 159.38 NM 0.60 2.70 NM
SRN Southern Banc Company of AL NM 115.78 19.69 116.98 NM 0.35 2.07 NM
SSM Stone Street Bancorp of NC 23.77 125.25 37.03 125.25 23.77 0.45 2.20 52.33
TSH Teche Holding Company of LA 18.70 131.32 17.78 131.32 19.56 0.50 2.37 44.25
FTF Texarkana Fst. Fin. Corp of AR 16.42 182.02 27.58 182.02 16.82 0.56 1.98 32.56
THR Three Rivers Fin. Corp. of MI 23.50 149.49 20.58 149.97 25.00 0.44 1.87 44.00
WSB Washington SB, FSB of MD 16.83 170.57 14.52 170.57 28.23 0.10 1.14 19.23
WFI Winton Financial Corp. of OH 16.70 231.72 16.62 236.41 20.36 0.50 1.86 31.06
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 13.88 119.21 10.70 121.34 21.30 0.27 1.07 14.92
FBER 1st Bergen Bancorp of NJ 27.82 145.54 19.87 145.54 27.82 0.20 1.01 28.17
AFED AFSALA Bancorp, Inc. of NY 22.06 131.66 16.93 131.66 22.06 0.28 1.43 31.46
ALBK ALBANK Fin. Corp. of Albany NY 14.47 174.55 15.37 224.72 14.56 0.72 1.48 21.43
AMFC AMB Financial Corp. of IN 16.16 111.81 16.51 111.81 25.57 0.28 1.63 26.42
ASBP ASB Financial Corp. of OH 22.18 129.84 20.08 129.84 22.18 0.40 2.91 64.52
ABBK Abington Bancorp of MA* 17.50 210.21 14.36 231.02 19.81 0.20 0.95 16.67
AABC Access Anytime Bancorp of NM 8.63 144.87 12.53 144.87 9.30 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
AFBC Advance Fin. Bancorp of WV 23.81 131.84 20.07 131.84 24.69 0.32 1.60 38.10
AADV Advantage Bancorp, Inc. of WI(8) 19.47 218.62 21.91 233.69 22.20 0.40 0.58 11.20
AFCB Affiliated Comm BC, Inc of MA(8) 21.12 220.66 21.54 221.84 21.24 0.60 1.61 33.90
ALBC Albion Banc Corp. of Albion NY 24.43 132.88 11.39 132.88 25.00 0.11 1.02 25.00
ABCL Alliance Bancorp, Inc. of IL 21.48 168.50 16.18 170.49 19.37 0.44 1.60 34.38
ATSB AmTrust Capital Corp. of IN 26.34 98.79 10.79 99.80 NM 0.20 1.36 35.71
AHCI Ambanc Holding Co., Inc. of NY* NM 130.54 14.85 130.54 NM 0.20 1.10 NM
ASBI Ameriana Bancorp of IN 18.14 150.40 16.85 150.40 19.90 0.64 3.12 56.64
ABCW Anchor Bancorp Wisconsin of WI 19.55 301.75 20.05 306.70 21.18 0.32 0.74 14.55
ANDB Andover Bancorp, Inc. of MA* 15.58 192.47 15.58 192.47 15.95 0.76 1.91 29.69
ASFC Astoria Financial Corp. of NY 21.83 172.36 13.90 247.70 23.48 0.80 1.43 31.25
AVND Avondale Fin. Corp. of IL NM 110.27 9.35 110.27 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 15.95 200.65 21.26 200.65 17.96 0.52 2.81 44.83
BPLS Bank Plus Corp. of CA 22.69 157.59 6.85 172.92 20.21 0.00 0.00 0.00
BNKU Bank United Corp. of TX 18.70 243.06 11.89 249.50 21.33 0.64 1.36 25.40
BWFC Bank West Fin. Corp. of MI NM 168.52 23.02 168.52 NM 0.24 1.61 55.81
BANC BankAtlantic Bancorp of FL 12.74 222.04 12.22 267.86 24.11 0.13 0.96 12.26
BKUNA BankUnited Fin. Corp. of FL NM 160.90 6.89 181.36 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 29.96 241.49 12.92 291.04 21.99 0.40 1.15 34.48
FSNJ Bayonne Banchsares of NJ NM 125.24 19.56 125.24 NM 0.17 1.28 68.00
BFSB Bedford Bancshares, Inc. of VA 20.07 163.70 23.77 163.70 20.21 0.56 1.96 39.44
BFFC Big Foot Fin. Corp. of IL NM 149.97 26.30 149.97 NM 0.00 0.00 0.00
BYFC Broadway Fin. Corp. of CA NM 86.32 8.49 86.32 26.56 0.20 1.57 47.62
CBES CBES Bancorp, Inc. of MO 23.39 148.60 23.45 148.60 26.84 0.40 1.57 36.70
CCFH CCF Holding Company of GA NM 162.54 17.32 162.54 NM 0.55 2.62 NM
CENF CENFED Financial Corp. of CA(8) 17.63 197.58 10.99 197.86 19.59 0.36 0.85 14.94
CFSB CFSB Bancorp of Lansing MI 21.07 332.21 26.31 332.21 22.52 0.48 1.63 34.29
CKFB CKF Bancorp of Danville KY 15.12 122.87 26.89 122.87 20.10 0.50 2.56 38.76
CNSB CNS Bancorp, Inc. of MO NM 129.01 31.39 129.01 NM 0.24 1.30 51.06
CSBF CSB Financial Group Inc of IL NM 98.27 23.59 104.13 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.76 144.34 24.20 144.34 14.65 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 14.50 166.75 15.68 179.75 17.87 0.54 2.13 30.86
CMRN Cameron Fin. Corp. of MO 21.28 113.25 24.27 113.25 21.51 0.28 1.40 29.79
CAPS Capital Savings Bancorp of MO(8) 18.00 186.26 17.57 186.26 18.75 0.24 1.07 19.20
CFNC Carolina Fincorp of NC* 24.32 126.24 28.67 126.24 25.36 0.24 1.35 32.88
CASB Cascade Financial Corp. of WA 20.95 179.61 12.45 179.61 21.53 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 22.41 118.73 28.88 118.73 22.41 0.32 1.74 39.02
CNIT Cenit Bancorp of Norfolk VA 21.02 241.77 16.79 263.99 22.62 1.20 1.68 35.40
CEBK Central Co-Op. Bank of MA* 21.48 177.29 17.54 196.80 22.70 0.32 1.00 21.48
CENB Century Bancorp, Inc. of NC 23.44 123.75 37.31 123.75 23.38 2.00 2.13 50.00
CBSB Charter Financial Inc. of IL(8) 25.90 229.14 35.62 255.92 23.47 0.32 0.98 25.40
COFI Charter One Financial of OH NM 281.03 19.58 300.69 21.04 1.00 1.65 50.76
CVAL Chester Valley Bancorp of PA 21.90 239.98 21.15 239.98 23.01 0.44 1.39 30.34
CTZN CitFed Bancorp of Dayton OH(8) 24.94 324.54 19.68 NM 24.94 0.36 0.69 17.14
CLAS Classic Bancshares, Inc. of KY 23.02 124.79 18.57 146.93 19.67 0.28 1.48 34.15
CBSA Coastal Bancorp of Houston TX 13.05 154.31 5.35 183.53 12.73 0.48 1.53 20.00
CFCP Coastal Fin. Corp. of SC 16.60 301.66 18.03 301.66 19.77 0.36 1.66 27.48
CMSB Commonwealth Bancorp Inc of PA 20.18 154.16 14.60 195.21 26.47 0.28 1.37 27.72
CMSV Commty. Svgs, MHC of FL (48.5) NM 231.16 26.22 231.16 NM 0.90 2.47 NM
CFTP Community Fed. Bancorp of MS NM 143.00 37.83 143.00 NM 0.32 1.71 52.46
CFFC Community Fin. Corp. of VA 20.50 161.93 21.39 161.93 20.36 0.56 1.82 37.33
CFBC Community First Bnkg Co. of GA NM 151.20 26.92 153.26 NM 0.60 1.36 62.50
CIBI Community Inv. Bancorp of OH 16.75 140.36 16.49 140.36 16.75 0.32 1.86 31.07
COOP Cooperative Bancshares of NC 27.00 213.61 16.37 213.61 27.36 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 22.00 109.71 25.93 109.71 21.71 0.40 2.42 53.33
DNFC D&N Financial Corp. of MI 16.72 243.51 13.16 245.79 18.62 0.18 0.69 11.46
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
DCBI Delphos Citizens Bancorp of OH 26.08 163.52 43.80 163.52 26.08 0.24 0.99 25.81
DIME Dime Community Bancorp of NY* 26.45 167.87 21.00 194.20 27.62 0.32 1.27 33.68
DIBK Dime Financial Corp. of CT* 9.65 203.58 16.84 209.03 9.70 0.48 1.54 14.81
EGLB Eagle BancGroup of IL NM 117.46 13.94 117.46 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 21.35 160.16 12.55 160.16 21.13 0.60 2.93 62.50
EGFC Eagle Financial Corp. of CT(8) NM 225.88 15.95 278.53 NM 1.00 1.89 NM
ETFS East Texas Fin. Serv. of TX NM 106.36 18.58 106.36 NM 0.20 0.92 28.17
ESBK Elmira Svgs Bank (The) of NY* 22.74 147.72 9.39 151.76 28.04 0.64 2.22 50.39
EMLD Emerald Financial Corp. of OH 18.44 238.47 18.60 242.12 19.94 0.28 1.27 23.33
EIRE Emerald Isle Bancorp of MA(8)* 21.15 246.45 17.22 246.45 19.88 0.28 0.85 17.95
EFBC Empire Federal Bancorp of MT 28.94 115.67 42.06 115.67 28.94 0.30 1.67 48.39
EFBI Enterprise Fed. Bancorp of OH NM 204.66 22.01 204.79 NM 1.00 3.00 NM
EQSB Equitable FSB of Wheaton MD 16.05 221.50 11.52 221.50 16.31 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 166.22 23.08 166.22 NM 0.80 2.56 NM
FFDF FFD Financial Corp. of OH 16.89 121.91 29.33 121.91 NM 0.30 1.60 27.03
FFLC FFLC Bancorp of Leesburg FL 19.38 141.05 18.13 141.05 20.40 0.36 1.86 36.00
FFFC FFVA Financial Corp. of VA(8) 26.79 216.39 29.63 220.59 22.59 0.60 1.60 42.86
FFWC FFW Corporation of Wabash IN 14.92 145.78 13.95 159.90 15.29 0.36 1.95 29.03
FFYF FFY Financial Corp. of OH 17.93 166.83 22.68 166.83 18.22 0.80 2.34 41.88
FMCO FMS Financial Corp. of NJ 14.96 221.52 14.37 224.79 15.09 0.28 0.80 11.97
FFHH FSF Financial Corp. of MN 19.36 138.07 15.07 138.07 19.54 0.50 2.48 48.08
FOBC Fed One Bancorp of Wheeling WV(8) 26.19 209.95 23.23 219.18 26.58 0.62 1.73 45.26
FBCI Fidelity Bancorp of Chicago IL NM 134.47 14.08 134.69 22.48 0.40 1.63 NM
FSBI Fidelity Bancorp, Inc. of PA 16.32 167.81 11.48 167.81 16.69 0.36 1.25 20.34
FFFL Fidelity Bcsh MHC of FL (47.7) NM 258.89 21.24 260.54 NM 0.90 2.75 NM
FFED Fidelity Fed. Bancorp of IN 17.41 194.22 14.13 194.22 18.75 0.40 4.10 71.43
FFOH Fidelity Financial of OH 20.69 156.66 18.81 177.69 21.43 0.28 1.56 32.18
FIBC Financial Bancorp, Inc. of NY 16.99 161.49 14.42 162.20 15.95 0.50 1.92 32.68
FBSI First Bancshares, Inc. of MO 19.77 159.77 23.01 159.77 20.73 0.10 0.59 11.63
FBBC First Bell Bancorp of PA 16.16 167.26 18.07 167.26 16.45 0.40 2.13 34.48
SKBO First Carnegie MHC of PA(45.0) NM 175.59 29.13 175.59 NM 0.30 1.61 NM
FSTC First Citizens Corp of GA 14.88 259.32 26.24 328.88 16.67 0.32 1.00 14.88
FCME First Coastal Corp. of ME* 3.24 137.24 13.38 137.24 3.37 0.00 0.00 0.00
FFBA First Colorado Bancorp of CO 21.40 202.81 27.29 206.97 22.35 0.52 2.06 44.07
FDEF First Defiance Fin.Corp. of OH 24.21 121.71 22.43 121.71 24.60 0.36 2.36 57.14
FESX First Essex Bancorp of MA* 18.32 195.61 14.87 222.50 20.55 0.56 2.37 43.41
FFSX First FSB MHC Sxld of IA(46.1) 26.16 217.09 19.22 218.76 27.07 0.48 1.54 40.34
FFES First Fed of E. Hartford CT 18.69 155.49 10.60 155.49 16.89 0.68 1.77 33.01
BDJI First Fed. Bancorp. of MN 28.42 171.20 17.43 171.20 28.42 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 23.01 156.25 23.27 156.25 24.07 0.28 1.08 24.78
FTFC First Fed. Capital Corp. of WI 16.87 267.90 18.97 283.38 21.40 0.48 1.51 25.40
FFKY First Fed. Fin. Corp. of KY 14.77 171.74 23.48 181.67 14.97 0.56 2.55 37.58
FFBZ First Federal Bancorp of OH 18.85 227.95 17.35 228.17 18.85 0.28 1.22 22.95
FFCH First Fin. Holdings Inc. of SC 24.31 307.38 19.79 307.38 24.88 0.84 1.60 38.89
FFBI First Financial Bancorp of IL NM 128.45 11.45 128.45 24.73 0.00 0.00 NM
FFHS First Franklin Corp. of OH 25.71 154.37 13.92 155.26 21.77 0.40 1.48 38.10
FGHC First Georgia Hold. Corp of GA 17.24 220.75 18.34 238.10 20.83 0.40 4.00 68.97
FSPG First Home Bancorp of NJ(8) 17.10 223.52 15.34 226.93 17.50 0.40 1.34 22.99
FFSL First Independence Corp. of KS 19.41 123.85 12.38 123.85 19.41 0.30 2.03 39.47
FISB First Indiana Corp. of IN 20.89 242.14 22.97 244.97 25.88 0.48 1.64 34.29
FKFS First Keystone Fin. Corp of PA 15.63 168.59 11.16 168.59 17.33 0.20 1.14 17.86
FLKY First Lancaster Bncshrs of KY 28.55 103.49 30.49 103.49 28.55 0.50 3.30 NM
FLFC First Liberty Fin. Corp. of GA 26.20 248.60 18.39 275.16 24.50 0.44 1.46 38.26
CASH First Midwest Fin., Inc. of OH 16.70 139.60 15.11 156.50 17.88 0.48 2.10 35.04
FMBD First Mutual Bancorp Inc of IL NM 130.29 18.03 169.87 NM 0.32 1.59 NM
FMSB First Mutual SB of Bellevue WA* 17.34 247.38 16.81 247.38 17.67 0.20 1.09 18.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
FNGB First Northern Cap. Corp of WI 19.12 155.88 17.22 155.88 20.00 0.36 2.77 52.94
FFPB First Palm Beach Bancorp of FL 20.48 169.41 10.59 173.44 24.44 0.70 1.85 37.84
FSLA First SB SLA MHC of NJ (47.5)(8) NM NM 34.95 NM NM 0.48 1.05 41.38
FWWB First Savings Bancorp of WA 20.40 172.30 23.57 186.54 21.79 0.36 1.41 28.80
FSFF First SecurityFed Fin of IL 25.21 120.16 32.48 120.16 25.21 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA(8) 19.59 188.07 24.00 188.07 19.68 0.60 1.38 27.03
SOPN First Svgs Bancorp of NC 17.50 127.66 29.07 127.66 17.50 0.88 3.72 65.19
FBNW FirstBank Corp of Clarkston WA NM 130.43 21.11 130.43 NM 0.28 1.44 58.33
FFDB FirstFed Bancorp, Inc. of AL 16.22 160.00 15.50 174.29 16.22 0.50 2.08 33.78
FSPT FirstSpartan Fin. Corp. of SC NM 147.36 38.91 147.36 NM 0.60 1.38 45.11
FLAG Flag Financial Corp of GA 20.43 193.53 17.62 193.53 24.56 0.34 1.65 33.66
FLGS Flagstar Bancorp, Inc of MI 13.63 254.56 15.21 264.99 27.27 0.24 1.06 14.46
FFIC Flushing Fin. Corp. of NY* 23.61 146.97 18.43 152.97 23.39 0.32 1.25 29.63
FBHC Fort Bend Holding Corp. of TX 14.81 169.89 11.50 181.25 20.08 0.40 1.92 28.37
FTSB Fort Thomas Fin. Corp. of KY 19.38 144.59 22.87 144.59 19.38 0.25 1.61 31.25
FKKY Frankfort First Bancorp of KY NM 116.74 19.81 116.74 27.54 0.80 4.92 NM
FTNB Fulton Bancorp, Inc. of MO 29.79 146.17 36.05 146.17 NM 0.20 0.92 27.40
GFSB GFS Bancorp of Grinnell IA(8) 14.41 151.38 17.91 151.38 15.18 0.26 1.53 22.03
GUPB GFSB Bancorp, Inc of Gallup NM 18.87 113.85 14.23 113.85 18.87 0.40 1.96 37.04
GSLA GS Financial Corp. of LA NM 125.49 54.13 125.49 NM 0.28 1.36 68.29
GOSB GSB Financial Corp. of NY* NM 112.55 32.01 112.55 NM 0.00 0.00 0.00
GBCI Glacier Bancorp of MT 23.57 341.85 34.14 NM 23.00 0.48 1.67 39.34
GFCO Glenway Financial Corp. of OH 19.52 165.19 15.35 166.94 19.52 0.40 1.95 38.10
GTPS Great American Bancorp of IL NM 116.73 23.26 116.73 NM 0.40 2.03 NM
PEDE Great Pee Dee Bancorp of SC 28.36 117.54 44.51 117.54 28.36 0.00 0.00 0.00
GSBC Great Southern Bancorp of MO 15.36 313.65 27.41 315.99 16.67 0.44 1.73 26.51
GDVS Greater DV SB,MHC of PA (19.9) NM 347.92 38.95 347.92 NM 0.36 1.16 58.06
GSFC Green Street Fin. Corp. of NC 27.85 124.78 43.96 124.78 27.85 0.44 2.39 66.67
GFED Guaranty Fed Bancshares of MO NM 112.34 33.89 112.34 NM 0.23 1.83 69.70
HCBB HCB Bancshares of Camden AR NM 102.22 19.51 106.04 NM 0.20 1.36 NM
HEMT HF Bancorp of Hemet CA NM 134.54 10.58 159.93 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 14.15 155.25 14.87 155.25 15.26 0.42 1.45 20.49
HFNC HFNC Financial Corp. of NC 21.63 141.10 25.73 141.10 28.40 0.32 2.35 50.79
HMNF HMN Financial, Inc. of MN 21.48 142.30 17.39 153.28 27.10 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 17.02 148.98 11.35 148.98 17.39 0.00 0.00 0.00
HARB Harbor FL Bncp MHC of FL (46.1(8) 24.48 348.32 31.09 NM 25.45 1.40 1.99 48.61
HRBF Harbor Federal Bancorp of MD 25.00 139.29 17.40 139.29 26.09 0.48 2.00 50.00
HFSA Hardin Bancorp of Hardin MO 18.94 118.00 13.38 118.00 20.83 0.48 2.56 48.48
HARL Harleysville SB of PA 14.56 210.82 14.37 210.82 14.49 0.44 1.47 21.36
HFGI Harrington Fin. Group of IN NM 160.00 7.15 160.00 NM 0.12 1.00 40.00
HARS Harris Fin. MHC of PA (24.3) NM NM 31.47 NM NM 0.22 1.07 41.51
HFFB Harrodsburg 1st Fin Bcrp of KY 22.55 113.85 30.43 113.85 22.55 0.40 2.40 54.05
HHFC Harvest Home Fin. Corp. of OH 18.75 129.20 14.24 129.20 21.43 0.44 2.93 55.00
HAVN Haven Bancorp of Woodhaven NY 19.44 190.66 10.90 191.26 19.29 0.30 1.22 23.81
HTHR Hawthorne Fin. Corp. of CA 6.67 140.97 6.84 140.97 8.66 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 128.79 22.18 128.79 24.52 0.28 1.48 62.22
HFWA Heritage Financial Corp of WA NM 157.92 46.17 157.92 NM 0.00 0.00 0.00
HCBC High Country Bancorp of CO NM 114.70 22.32 114.70 NM 0.00 0.00 0.00
HBNK Highland Bancorp of CA 13.54 199.61 15.08 199.61 17.61 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 16.18 201.34 19.33 201.34 16.18 0.48 1.45 23.53
HBEI Home Bancorp of Elgin IL NM 134.13 36.22 134.13 NM 0.40 2.15 NM
HBFW Home Bancorp of Fort Wayne IN 26.84 183.58 22.31 183.58 27.07 0.20 0.61 16.39
HBBI Home Building Bancorp of IN 21.55 118.30 16.64 118.30 22.41 0.30 1.33 28.57
HCFC Home City Fin. Corp. of OH 20.25 122.65 24.05 122.65 20.03 0.36 1.93 39.13
HOMF Home Fed Bancorp of Seymour IN 17.12 257.99 22.70 265.37 19.44 0.40 1.27 21.74
HWEN Home Financial Bancorp of IN 25.00 113.21 19.22 113.21 NM 0.10 1.11 27.78
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
HPBC Home Port Bancorp, Inc. of MA* 14.80 222.32 23.38 222.32 15.14 0.80 3.02 44.69
HMCI HomeCorp, Inc. of Rockford IL(8) NM 208.79 14.19 208.79 NM 0.00 0.00 0.00
HFBC HopFed Bancorp of KY 29.84 130.54 29.49 130.54 29.84 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 17.47 137.05 13.93 137.05 21.97 0.18 1.24 21.69
HRZB Horizon Financial Corp. of WA* 16.40 157.12 25.02 157.12 16.56 0.44 2.46 40.37
IBSF IBS Financial Corp. of NJ NM 150.42 26.68 150.42 NM 0.40 2.25 NM
ITLA ITLA Capital Corp of CA* 13.28 164.41 17.63 165.09 13.28 0.00 0.00 0.00
IFSB Independence FSB of DC 15.60 119.47 8.66 134.18 NM 1.00 5.88 NM
INCB Indiana Comm. Bank, SB of IN(8) NM 164.12 19.94 164.12 NM 0.36 1.75 67.92
INBI Industrial Bancorp of OH 18.50 155.07 25.93 155.07 18.50 0.56 3.03 56.00
IWBK Interwest Bancorp of WA 16.27 250.00 16.83 254.29 18.69 0.72 1.73 28.24
IPSW Ipswich SB of Ipswich MA* 15.32 287.30 14.96 287.30 18.75 0.16 1.12 17.20
JXVL Jacksonville Bancorp of TX 14.86 145.49 21.28 145.49 14.86 0.50 2.44 36.23
JXSB Jcksnville SB,MHC of IL (45.6) NM 239.91 24.98 239.91 NM 0.30 1.36 58.82
JSBA Jefferson Svgs Bancorp of MO 27.84 238.10 21.50 303.71 28.72 0.28 1.04 28.87
JOAC Joachim Bancorp, Inc. of MO(8) NM 121.30 35.08 121.30 NM 0.50 3.01 NM
KSAV KS Bancorp of Kenly NC 17.39 145.45 18.63 145.45 17.39 0.80 3.33 57.97
KSBK KSB Bancorp of Kingfield ME* 15.78 216.54 15.94 227.81 15.78 0.10 0.52 8.20
KFBI Klamath First Bancorp of OR 25.57 152.96 23.06 167.41 25.57 0.32 1.42 36.36
LSBI LSB Fin. Corp. of Lafayette IN 17.55 149.63 12.92 149.63 19.89 0.40 1.42 24.84
LVSB Lakeview Financial of NJ 15.40 194.73 20.81 230.04 24.88 0.13 0.50 7.74
LARK Landmark Bancshares, Inc of KS 15.07 112.88 15.90 112.88 16.67 0.40 1.82 27.40
LARL Laurel Capital Group of PA 16.42 212.15 22.42 212.15 16.30 0.35 1.59 26.12
LSBX Lawrence Savings Bank of MA* 8.93 192.47 20.11 192.47 9.03 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 231.34 38.47 231.34 NM 0.56 2.59 NM
LXMO Lexington B&L Fin. Corp. of MO 23.57 111.64 29.72 111.64 23.57 0.30 1.82 42.86
LIFB Life Bancorp of Norfolk VA(8) 26.58 221.89 23.77 228.10 28.70 0.48 1.34 35.56
LFCO Life Financial Corp of CA 11.59 211.64 35.61 211.64 11.59 0.00 0.00 0.00
LFBI Little Falls Bancorp of NJ NM 137.65 16.08 149.25 NM 0.20 1.00 30.30
LOGN Logansport Fin. Corp. of IN 16.58 123.86 23.80 123.86 16.09 0.40 2.46 40.82
LONF London Financial Corp. of OH 18.37 145.45 20.01 145.45 19.84 0.24 1.61 29.63
LISB Long Island Bancorp, Inc of NY 28.53 259.55 23.82 261.92 NM 0.60 1.00 28.44
MAFB MAF Bancorp, Inc. of IL 14.72 212.25 16.17 240.94 14.96 0.28 0.75 11.07
MBLF MBLA Financial Corp. of MO 19.95 126.03 15.98 126.03 19.67 0.40 1.42 28.37
MECH MECH Financial Inc of CT* 10.09 163.07 16.97 163.07 10.13 0.00 0.00 0.00
MFBC MFB Corp. of Mishawaka IN 21.60 131.00 16.63 131.00 21.77 0.34 1.26 27.20
MLBC ML Bancorp of Villanova PA(8) 26.26 233.04 16.14 249.80 NM 0.13 0.42 10.92
MSBF MSB Financial, Inc of MI 18.96 163.35 27.55 163.35 20.54 0.30 1.74 32.97
MARN Marion Capital Holdings of IN 17.09 120.70 25.08 123.34 17.09 0.88 3.26 55.70
MRKF Market Fin. Corp. of OH NM 110.71 39.37 110.71 NM 0.28 1.67 65.12
MFSL Maryland Fed. Bancorp of MD NM 233.53 19.81 236.14 22.32 0.45 1.25 39.47
MASB MassBank Corp. of Reading MA* 17.33 169.92 19.06 172.36 18.78 1.00 2.03 35.09
MFLR Mayflower Co-Op. Bank of MA* 17.23 187.84 18.32 190.64 18.16 0.80 2.98 51.28
MDBK Medford Bancorp, Inc. of MA* 17.48 196.33 17.55 208.56 18.13 0.80 1.82 31.87
MERI Meritrust FSB of Thibodaux LA(8) 20.87 285.46 24.25 285.46 20.87 0.70 0.96 19.94
MWBX MetroWest Bank of MA* 14.65 249.53 18.33 249.53 14.92 0.12 1.52 22.22
METF Metropolitan Fin. Corp. of OH 20.50 323.27 12.81 NM 21.83 0.00 0.00 0.00
MCBS Mid Continent Bancshares of KS(8) 23.28 222.37 22.37 222.37 21.32 0.40 0.88 20.41
MIFC Mid Iowa Financial Corp. of IA 14.19 170.45 15.96 170.68 12.89 0.08 0.63 8.99
MCBN Mid-Coast Bancorp of ME 19.92 173.63 14.47 173.63 21.25 0.52 1.36 27.08
MWBI Midwest Bancshares, Inc. of IA 13.71 162.52 11.75 162.52 15.45 0.24 1.41 19.35
MWFD Midwest Fed. Fin. Corp of WI(8) 20.68 256.47 22.61 265.96 20.99 0.34 1.18 24.46
MFFC Milton Fed. Fin. Corp. of OH 28.36 138.93 16.45 138.93 29.41 0.60 3.78 NM
MIVI Miss. View Hold. Co. of MN 18.20 109.02 19.82 109.02 18.57 0.32 1.74 31.68
MBSP Mitchell Bancorp, Inc. of NC NM 109.25 43.84 109.25 NM 0.40 2.35 71.43
MBBC Monterey Bay Bancorp of CA NM 133.09 15.63 142.70 NM 0.14 0.71 25.45
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
MONT Montgomery Fin. Corp. of IN 28.98 107.23 19.94 107.23 28.98 0.22 1.73 50.00
MSBK Mutual SB, FSB of Bay City MI NM 133.70 8.80 133.70 NM 0.00 0.00 0.00
MYST Mystic Financial of MA* NM 130.77 25.46 130.77 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 19.95 164.04 12.83 191.01 25.32 0.60 3.04 60.61
NSLB NS&L Bancorp, Inc of Neosho MO 27.16 104.64 20.69 105.40 28.49 0.50 2.88 NM
NSSY NSS Bancorp of CT* 15.49 195.83 15.47 201.94 13.66 0.40 0.94 14.49
NMSB Newmil Bancorp, Inc. of CT* 18.85 156.67 14.60 156.67 18.58 0.32 2.39 45.07
NASB North American SB, FSB of MO 12.31 238.95 20.29 246.21 15.15 1.00 1.50 18.52
NBSI North Bancshares of Chicago IL NM 156.29 21.08 156.29 NM 0.40 2.21 NM
FFFD North Central Bancshares of IA 18.10 139.07 31.88 139.07 18.10 0.32 1.52 27.59
NEIB Northeast Indiana Bncrp of IN 18.86 143.46 20.61 143.46 18.86 0.34 1.53 28.81
NWEQ Northwest Equity Corp. of WI 18.24 161.58 18.75 161.58 19.02 0.60 2.70 49.18
NWSB Northwest SB, MHC of PA (30.7) NM NM 33.05 NM NM 0.16 1.01 39.02
NTMG Nutmeg FS&LA of CT 15.30 174.32 9.61 174.32 23.84 0.20 1.95 29.85
OHSL OHSL Financial Corp. of OH 22.69 175.17 19.09 175.17 23.71 0.88 2.39 54.32
OCFC Ocean Fin. Corp. of NJ 20.98 127.58 19.35 127.58 21.23 0.80 2.27 47.62
OTFC Oregon Trail Fin. Corp. of OR 28.78 170.39 21.29 170.39 28.33 0.20 1.10 31.75
OFCP Ottawa Financial Corp. of MI 20.77 205.29 17.69 252.35 21.85 0.40 1.36 28.17
PFFB PFF Bancorp of Pomona CA 24.53 129.63 12.58 130.95 25.84 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 19.36 94.44 35.25 94.44 19.10 0.48 3.44 66.67
PVFC PVF Capital Corp. of OH 12.11 211.98 15.44 211.98 12.85 0.00 0.00 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 15.03 156.71 20.19 157.72 15.74 1.12 4.19 62.92
PFED Park Bancorp of Chicago IL 28.41 113.29 24.72 113.29 26.41 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 15.34 201.08 15.91 202.23 15.34 0.52 1.64 25.12
PBHC Pathfinder BC MHC of NY (46.1)* NM 269.76 32.03 321.38 NM 0.19 0.88 27.14
PEEK Peekskill Fin. Corp. of NY 26.56 114.32 28.86 114.32 26.56 0.36 2.12 56.25
PFSB PennFed Fin. Services of NJ 16.78 175.09 12.18 204.28 16.94 0.14 0.75 12.61
PWBC PennFirst Bancorp of PA 20.14 147.61 12.35 165.92 20.14 0.36 1.88 37.89
PWBK Pennwood Bancorp, Inc. of PA 26.51 142.76 25.68 142.76 22.92 0.36 1.64 43.37
PBKB People's Bancshares of MA* 15.54 250.34 10.26 260.84 NM 0.48 2.14 33.33
PFDC Peoples Bancorp of Auburn IN 17.66 167.92 25.64 167.92 17.66 0.44 1.98 34.92
PBCT Peoples Bank, MHC of CT (40.1)* 24.87 323.51 28.07 325.19 NM 0.76 2.02 50.33
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* NM NM 61.09 NM NM 0.35 0.81 42.68
PFFC Peoples Fin. Corp. of OH 29.46 150.41 28.35 150.41 30.00 0.50 3.03 NM
PHBK Peoples Heritage Fin Grp of ME* 17.57 271.80 19.00 NM 17.77 0.88 1.89 33.21
PSFC Peoples Sidney Fin. Corp of OH 27.73 120.58 29.82 120.58 27.73 0.28 1.58 43.75
PERM Permanent Bancorp, Inc. of IN 23.60 147.80 14.78 149.59 23.79 0.44 1.49 35.20
PMFI Perpetual Midwest Fin. of IA(8) 28.19 155.49 13.87 155.49 NM 0.30 1.04 29.41
PERT Perpetual of SC, MHC (46.8)(8) NM 320.51 38.17 320.51 NM 1.40 2.15 NM
PCBC Perry Co. Fin. Corp. of MO 22.32 120.91 23.25 120.91 22.32 0.40 1.68 37.38
PHFC Pittsburgh Home Fin Corp of PA 16.59 141.77 11.66 143.49 19.29 0.24 1.35 22.43
PFSL Pocahnts Fed, MHC of AR (47.0)(8) NM 291.30 18.52 291.30 NM 0.90 2.04 62.07
PTRS Potters Financial Corp of OH 15.83 169.64 14.94 169.64 16.10 0.20 1.05 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) NM 184.55 15.31 184.55 NM 0.24 2.26 NM
PHSB Ppls Home SB, MHC of PA (45.0) NM 176.13 24.07 176.13 NM 0.24 1.33 42.86
PRBC Prestige Bancorp of PA 22.24 112.00 12.22 112.00 22.77 0.20 1.05 23.26
PFNC Progress Financial Corp. of PA 17.77 273.14 13.90 325.24 23.44 0.12 0.71 12.63
PSBK Progressive Bank, Inc. of NY(8)* 16.80 184.62 16.40 203.61 17.19 0.80 2.12 35.56
PROV Provident Fin. Holdings of CA 21.88 127.45 14.75 127.45 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8)(8) NM NM 56.98 NM NM 1.10 2.26 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 179.79 21.46 179.79 NM 0.30 1.62 56.60
PULS Pulse Bancorp of S. River NJ 14.19 183.44 15.03 183.44 14.04 0.80 3.05 43.24
QCFB QCF Bancorp of Virginia MN 15.06 144.72 23.81 144.72 15.06 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 15.75 127.15 10.97 127.15 16.39 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 27.60 347.47 38.97 347.47 27.41 0.80 2.01 55.56
RARB Raritan Bancorp of Raritan NJ* 16.06 203.53 15.39 206.55 16.36 0.60 2.26 36.36
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
REDF RedFed Bancorp of Redlands CA(8) 13.76 170.04 14.19 170.63 13.39 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 18.88 178.21 15.25 261.80 18.02 0.64 1.80 34.04
RELI Reliance Bancshares Inc of WI NM 104.82 52.50 104.82 NM 0.00 0.00 0.00
RCBK Richmond County Fin Corp of NY* 29.75 141.31 36.24 141.31 29.75 0.00 0.00 0.00
RIVR River Valley Bancorp of IN 21.15 130.07 16.54 131.94 25.33 0.20 1.04 21.98
RVSB Riverview Bancorp of WA NM 168.62 38.33 174.71 NM 0.12 0.73 22.22
RSLN Roslyn Bancorp, Inc. of NY* NM 162.46 28.65 163.28 24.53 0.32 1.40 43.84
SCCB S. Carolina Comm. Bnshrs of SC 27.22 134.38 27.80 134.38 27.22 0.64 2.98 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 255.87 23.88 255.87 NM 0.40 1.31 NM
SFED SFS Bancorp of Schenectady NY 24.43 121.20 14.89 121.20 25.29 0.32 1.49 36.36
SGVB SGV Bancorp of W. Covina CA NM 137.09 10.35 139.10 27.27 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 25.00 125.09 16.69 125.09 25.00 0.00 0.00 0.00
SISB SIS Bancorp, Inc. of MA* 27.47 208.36 15.08 208.36 20.12 0.64 1.70 46.72
SWCB Sandwich Bancorp of MA(8)* 23.00 265.83 21.53 275.38 23.57 1.40 2.43 56.00
SFSL Security First Corp. of OH 18.49 262.53 24.57 266.34 18.49 0.32 1.45 26.89
SKAN Skaneateles Bancorp Inc of NY* 16.49 155.53 10.73 159.82 17.08 0.28 1.46 24.14
SOBI Sobieski Bancorp of S. Bend IN NM 124.32 17.89 124.32 NM 0.32 1.56 49.23
SOSA Somerset Savings Bank of MA(8)* 13.36 223.72 14.85 223.72 13.74 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC(8)* NM 178.57 26.61 178.57 29.55 0.40 3.08 NM
SCBS Southern Commun. Bncshrs of AL 25.71 141.40 28.87 141.40 25.71 0.30 1.67 42.86
SMBC Southern Missouri Bncrp of MO 23.67 136.00 21.96 136.00 24.72 0.50 2.25 53.19
SWBI Southwest Bancshares of IL(8) 20.53 191.12 22.85 191.12 20.39 0.80 2.58 52.98
SVRN Sovereign Bancorp, Inc. of PA NM 265.48 12.63 319.80 23.35 0.08 0.41 13.11
STFR St. Francis Cap. Corp. of WI 18.51 172.82 14.30 193.85 19.25 0.56 1.29 23.83
SPBC St. Paul Bancorp, Inc. of IL 18.53 216.86 19.89 217.57 18.40 0.40 1.51 27.97
SFFC StateFed Financial Corp. of IA 20.36 141.79 25.04 141.79 20.36 0.20 1.40 28.57
SFIN Statewide Fin. Corp. of NJ 19.12 158.65 14.85 158.98 19.12 0.44 1.93 36.97
STSA Sterling Financial Corp. of WA 20.98 177.56 9.74 192.12 23.20 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 21.42 202.19 13.61 202.80 26.48 0.32 0.68 14.55
ROSE T R Financial Corp. of NY* 16.74 240.83 15.10 240.83 18.73 0.68 2.06 34.52
THRD TF Financial Corp. of PA 16.99 165.39 13.88 198.17 20.00 0.48 1.85 31.37
TPNZ Tappan Zee Fin., Inc. of NY 26.79 129.67 22.24 129.67 27.17 0.28 1.49 40.00
TSBK Timberland Bancorp of WA 23.51 142.41 43.37 142.41 23.51 0.00 0.00 0.00
TRIC Tri-County Bancorp of WY 18.18 118.14 18.15 118.14 17.72 0.40 2.86 51.95
TWIN Twin City Bancorp, Inc. of TN 20.42 133.27 17.25 133.27 24.17 0.40 2.76 56.34
USAB USABancshares, Inc of PA* NM 141.89 11.96 144.03 NM 0.00 0.00 0.00
UCBC Union Community Bancorp of IN 25.22 109.18 39.83 109.18 25.22 0.00 0.00 0.00
UFRM United FSB of Rocky Mount NC(8) NM 270.17 19.54 270.17 NM 0.24 1.28 42.11
UBMT United Fin. Corp. of MT 22.13 133.40 32.03 133.40 22.31 1.00 3.70 NM
UTBI United Tenn. Bancshares of TN 21.68 110.50 27.06 110.50 21.68 0.00 0.00 0.00
VABF Va. Beach Fed. Fin. Corp of VA 24.00 206.90 14.80 206.90 29.51 0.24 1.33 32.00
WHGB WHG Bancshares of MD NM 129.01 25.36 129.01 NM 0.32 1.73 59.26
WSFS WSFS Financial Corp. of DE* 15.72 298.13 17.06 299.86 15.96 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA 17.84 213.96 22.81 213.96 17.67 1.20 3.16 56.34
WRNB Warren Bancorp of Peabody MA* 12.04 218.63 23.59 218.63 13.53 0.52 2.26 27.23
WSBI Warwick Community Bncrp of NY* 29.09 126.98 30.18 126.98 29.09 0.00 0.00 0.00
WFSL Washington Federal, Inc. of WA 13.35 196.10 25.29 212.54 13.54 0.87 3.15 42.03
WAMU Washington Mutual, Inc. of WA* NM 333.15 17.81 NM 28.21 1.16 1.73 NM
WYNE Wayne Bancorp, Inc. of NJ 22.90 148.57 18.46 148.57 22.90 0.20 0.82 18.69
WAYN Wayne Svgs Bks MHC of OH (47.8 NM 275.19 26.10 275.19 NM 0.62 2.10 73.81
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 194.87 45.57 194.87 NM 0.80 3.90 NM
WBST Webster Financial Corp. of CT 27.81 229.55 12.50 263.21 18.25 0.80 1.25 34.63
WEFC Wells Fin. Corp. of Wells MN 16.71 124.79 18.36 124.79 17.16 0.48 2.54 42.48
WCBI WestCo Bancorp, Inc. of IL 15.18 147.06 22.62 147.06 16.29 0.68 2.34 35.60
WSTR WesterFed Fin. Corp. of MT 20.00 134.65 14.01 165.71 20.63 0.48 1.85 36.92
WOFC Western Ohio Fin. Corp. of OH NM 114.37 15.86 122.54 NM 1.00 3.74 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 27, 1998
<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>
WWFC Westwood Fin. Corp. of NJ 24.68 176.73 16.53 196.63 22.90 0.20 0.70 17.24
WEHO Westwood Hmstd Fin Corp of OH NM 139.15 31.24 139.15 NM 0.36 2.44 NM
FFWD Wood Bancorp of OH 24.72 273.63 35.02 273.63 27.50 0.34 1.55 38.20
YFCB Yonkers Fin. Corp. of NY 18.32 125.69 17.02 125.69 18.50 0.28 1.50 27.45
YFED York Financial Corp. of PA 20.24 215.37 19.09 215.37 24.29 0.52 2.04 41.27
</TABLE>
<PAGE>
EXHIBIT IV-2
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 1043.5 362.3 195.3
Quarter 4 5117.1 615.9 1052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1101.4 382.1 225.1
Quarter 2 5654.6 670.6 1185.0 387.2 224.7
Quarter 3 5882.2 687.3 1226.9 429.3 249.2
Quarter 4 6442.5 737.0 1280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1221.7 527.7 292.5
Quarter 2 7672.8 885.1 1442.1 624.5 333.3
Quarter 3 7945.3 947.3 1685.7 737.5 381.7
Quarter 4 7908.3 970.4 1570.4 814.1 414.9
February 27, 1998 8545.7 1049.3 1770.5 818.7 429.4
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
Index Values
Index Values Percent Change Since
----------------------------------- --------------------
01/30/98 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------
All Pub. Traded Thrifts 768.3 814.1 814.1 520.1 -5.62 -5.62 47.74
MHC Index 1,110.1 1,179.9 1,179.9 585.7 -5.91 -5.91 89.55
Insurance Indices
- --------------------------------------------------------------------------------
SAIF Thrifts 711.2 764.4 764.4 460.1 -6.97 -6.97 54.56
BIF Thrifts 952.7 984.4 984.4 700.0 -3.22 -3.22 36.10
Stock Exchange Indices
- --------------------------------------------------------------------------------
AMEX Thrifts 242.6 255.4 255.4 165.2 -5.01 -5.01 46.87
NYSE Thrifts 473.0 521.3 521.3 296.7 -9.26 -9.26 59.42
OTC Thrifts 873.5 911.5 911.5 609.5 -4.17 -4.17 43.31
Geographic Indices
- --------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,620.6 1,735.2 1,735.2 1,029.5 -6.60 -6.60 57.42
Midwestern Thrifts 1,770.0 1,832.9 1,832.9 1,192.9 -3.43 -3.43 48.38
New England Thrifts 724.7 778.3 778.3 463.8 -6.89 -6.89 56.25
Southeastern Thrifts 748.8 776.0 776.0 462.5 -3.51 -3.51 61.90
Southwestern Thrifts 477.4 533.5 533.5 325.9 -10.52 -10.52 46.50
Western Thrifts 734.3 778.8 778.8 527.6 -5.71 -5.71 39.18
Asset Size Indices
- --------------------------------------------------------------------------------
Less than $250M 850.0 869.9 869.9 607.3 -2.29 -2.29 39.97
$250M to $500M 1,266.7 1,312.3 1,312.3 832.2 -3.48 -3.48 52.22
$500M to $1B 824.0 846.8 846.8 540.4 -2.69 -2.69 52.50
$1B to $5B 909.6 956.8 956.8 565.7 -4.94 -4.94 60.77
Over $5B 477.1 512.3 512.3 335.5 -6.87 -6.87 42.22
Comparative Indices
- --------------------------------------------------------------------------------
Dow Jones Industrials 7,906.5 7,908.3 7,908.3 6,823.9 -0.02 -0.02 15.87
S&P 500 980.3 970.4 970.4 784.2 1.02 1.02 25.01
All SNL indices are market-value weighted; i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR;
Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT;
Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV;
Southwest: CO, LA, NM, OK, TX, UT;
West: AZ, AK, CA, HI, ID, MT NV, 0R, WA, WY
Source: SNL Securities
FEBRUARY 1998
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
Table IV-4
New York Thrift Merger and Acquisition Activity
1996 to Present
<TABLE>
<CAPTION>
Seller Financials at Announcement
--------------------------------------------
Total Total YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Equity ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/16/97 Pending HUBCO, Inc NJ MSB Bancorp NY 773,991 6.23 0.54 6.02 NA NA
12/16/97 Pending Hudson Chartered Bnp NY Progressive Bank NY 884,617 7.93 0.98 11.66 0.92 125.50
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Finl NY 880,196 8.37 0.54 6.43 3.82 35.46
10/07/97 Pending North Fork Bancorp NY New York Bancorp NY 3,283,653 5.08 1.61 30.99 1.09 58.08
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 4,032,365 7.66 0.96 12.26 0.66 132.02
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 82,249 9.28 1.32 3.59 1.14 117.28
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 2,541,888 8.25 0.72 9.20 7.84 9.20
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 643,180 7.81 1.58 20.12 1.04 94.15
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 7,348,042 5.35 0.75 13.91 0.72 105.64
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 1,580,435 7.67 1.29 17.19 0.51 121.82
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 485,132 15.93 0.64 3.84 0.19 19.25
09/24/95 02/29/96 Republic New York NY Brooklyn Bancorp NY 4,139,215 8.79 1.00 11.83 13.63 18.75
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 611,933 10.90 1.11 10.07 0.50 65.45
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 587,904 17.42 1.60 9.42 3.87 64.35
Average 1,991,057 9.05 1.05 11.90 2.76 74.38
Median 882,407 8.09 0.99 10.87 1.04 65.45
</TABLE>
Table IV-4 (Continued)
<TABLE>
<CAPTION>
Deal Terms and Pricing at Announcement
--------------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp Value Pr/Shr Consid. Pr/Bk Tg Bk 4-Qtr Assets CoreDp
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%) EPS (x) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/16/97 Pending HUBCO, Inc NJ MSB Bancorp NY 105.0 36.02 Stock 160.80 301.68 32.16 13.57 9.33
12/16/97 Pending Hudson Chartered Bnp NY Progressive Bank NY 158.7 39.59 Stock NA NA NA NA NA
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 647.5 42.31 Stock 198.10 203.24 17.06 16.06 16.09
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 13.0 272.50 Cash 169.14 170.51 13.13 15.81 10.44
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 344.6 18.94 Mixture 167.44 167.44 24.59 13.56 8.48
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 91.8 52.00 Cash 169.38 169.38 9.94 14.27 10.34
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 652.0 NA Cash 163.00 165.06 12.82 8.87 6.14
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 216.3 42.79 Stock 168.46 170.07 11.76 13.69 7.98
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 105.1 21.25 Cash 122.34 122.34 25.91 21.66 7.75
09/24/95 02/29/96 Republic New York NY Brooklyn Bancorp NY 529.6 41.50 Cash 140.68 140.68 14.46 12.79 4.78
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 112.8 32.00 Cash 159.05 159.05 15.24 18.43 10.37
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 131.4 22.00 Cash 127.83 127.83 13.33 22.35 7.32
Average 291.6 51.43 185.21 196.83 19.89 16.36 12.02
Median 151.1 37.11 167.44 169.38 15.24 15.81 9.33
</TABLE>
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
The Hudson City Savings Institution
Trustee and Senior Management Summary Resumes
<PAGE>
The Hudson City Savings Institution
Trustee and Senior Management Summary Resumes
The business experience of each trustee for at least the past five years is
set forth below.
Carl A. Florio, CPA. Mr. Florio has served as President and Chief Executive
Officer of the Bank since 1996. From 1993 until his appointment as President and
Chief Executive Officer, Mr. Florio served as Chief Financial Officer of the
Bank. Prior to his becoming the Bank's Chief Financial Officer, Mr. Florio was a
partner in the accounting firm of Pattison, Koskey, Rath & Florio. Mr. Florio
serves on the Executive Committee, Trust Committee and as a director of Hudson
City Associates, Inc.
Earl Schram, Jr. Mr. Schram is currently Chairman of the Board of Trustees
of the Bank, a position he has held since 1995. Mr. Schram is an attorney and
President of the law firm of Connor, Curran & Schram, P.C. in Hudson, New York.
He is also Vice President and Director of Taconic Farms, Inc. Mr. Schram serves
on the Charitable Contributions Committee, Executive Committee and Trust
Committee.
Stanley Bardwell, M.D. Dr. Bardwell is a retired physician in Craryville,
New York. From 1958 until 1988, Dr. Bardwell specialized in internal medicine
and cardiology. He has served as Chief of Medicine in Columbia Memorial Hospital
and Greene County Hospital, served on the Board of Health and was President of
the Potts Memorial Foundation as well as other various charitable groups. Dr.
Bardwell serves on the Executive Committee, Examining Committee and Charitable
Contributions Committee.
William E. Collins. Mr. Collins served as President and Chief Executive
Officer of the Bank from 1983 until his retirement in 1990. Prior to becoming
President and Chief Executive Officer, Mr. Collins served as Executive Vice
President of the Bank from March 1982 to December 1982. From 1991 to 1996, Mr.
Collins served as a director of Hudson City Associates, Inc., a wholly owned
subsidiary of the Bank and general partner of Premium Payment Plan. See
"Business of the Bank--Lending Activities-Consumer Lending," and"--Subsidiaries
and Other Activities." Mr. Collins serves on the Executive Committee and the
Examining Committee.
John E. Kelly. Since 1992, Mr. Kelly has owned and operated Berkshire
Telephone Corp. Kinderhook, New York. Mr. Kelly is Chairman of the Board of
Berkshire Telephone Corp. He has been with Berkshire Telephone Company since
1946 in various capacities. Berkshire Telephone Corp. provides long distance,
internet, cellular, paging and TV cable services. Mr. Kelly serves on the
Executive Committee and Compensation Committee.
Joseph W. Phelan. Since 1983, Mr. Phelan has served as President of Taconic
Farms, Inc. Germantown, New York, a provider of laboratory animals for research.
He is also Treasurer of the Reformed Church in Germantown, New York. Mr Phelan
serves on the Executive Committee, Trust Committee and Compensation Committee.
<PAGE>
The Hudson City Savings Institution
Trustee and Senior Management Summary Resumes (continued)
William H. (Tony) Jones. Since 1986, Mr. Jones has owned and served as
President and Publisher of Roe Jan Independent Publishing Co., Inc., Hillsdale,
New York, a publisher of community newspapers and similar publications. Mr.
Jones serves on the Executive Committee, Charitable Contributions Committee,
Examining Committee and as a director of Hudson City Associates, Inc.
Marilyn A. Herrington. Ms. Herrington is the Vice President and Secretary
of Herrington- Yaffe Auto Center, an auto repair facility, Secretary of Richmond
Telephone Company, a provider of long distance telephone service and involved in
real estate investments. Ms. Herrington serves on the Executive Committee,
Charitable Contributions Committee and Compensation Committee.
Marcia M. Race. Ms. Race was employed by the Bank from 1962 until her
retirement in 1997. Ms. Race served as Assistant Secretary of the Bank from 1972
to 1978, Corporate Secretary from 1978 to 1989 and Assistant to the President
from 1989 to 1997. She is also Trustee of the Nativity/St. Mary's Parish
Community Church. Ms. Race serves on the Executive Committee.
The business experience of the executive officers who are not also trustees
is set forth below.
Timothy E. Blow, CPA. Mr. Blow, age 31, became Chief Financial Officer of
the Bank in May 1997. Prior to his appointment as Chief Financial Officer, Mr.
Blow was a senior manager at the accounting firm of KPMG Peat Marwick LLP. Mr.
Blow also serves as a director of Hudson City Associates, Inc. and as Secretary
and Treasurer of Hudson River Funding Corp., wholly owned subsidiaries of the
Bank. See "Business of the Bank--Subsidiary and Other Activities."
Pamela M. Wood. Ms. Wood, age 50, has been employed by the Bank since 1969
and has served as Senior Vice President and Corporate Secretary since 1993. She
also serves as Secretary of Hudson River Mortgage Corporation, Hudson City
Center, Inc. and Hudson City Associates, Inc. From 1990 to 1993, she served as
Vice President and Corporate Secretary. From 1984 to 1990 she served as
Assistant Vice President. From 1969 to 1984 she served as Administrative
Assistant and Executive Secretary.
Sidney D. Richter. Mr. Richter, age 57, has served as the Bank's Senior
Vice President of Lending since 1993. From 1990 to 1993, Mr. Richter served as
the Bank's Vice President for Commercial Lending. Mr. Richter also serves as a
director of each of the Bank's wholly owned subsidiaries. See
"Business--Subsidiary and Other Activities."
Source: HCSI's prospectus.
<PAGE>
EXHIBIT IV-6
The Hudson City Savings Institution
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV-6
The Hudson City Savings Institution
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
Pro Forma at December 31, 1997
----------------------------------------------------------------------------------
11,140,777 Shares 13,106,796 Shares 15,072,815 Shares 17,333,738 Shares
Historical Sold at Minimum Sold at Midpoint Sold at Maximum Sold at 15% Above Max
----------------- ------------------ ----------------- ----------------- ---------------------
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(1).............. $67,395 10.13% $108,166 15.32% $115,458 16.19% $122,750 17.04% $131,135 17.99%
======= ====== ======== ====== ======== ====== ======== ====== ======== ======
Leverage Capital(2):
Capital level(3)........... $66,753 10.08% $107,524 15.29% $114,816 16.16% $122,108 17.01% $130,493 17.97%
Requirement(4)............. 26,495 4.00% 28,126 4.00% 28,417 4.00% 28,709 4.00% 29,044 4.00%
------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Excess..................... $40,258 6.08% $ 79,398 11.29% $ 86,399 12.16% $ 93,399 13.01% $101,449 13.97%
======= ====== ======== ====== ======== ====== ======== ====== ======== ======
Risk-Based Capital(2):
Capital level(3)(5)........ $72,672 15.38% $113,443 23.01% $120,735 24.31% $128,027 25.59% $136,412 27.04%
Requirement(4)............. 37,812 8.00% 39,443 8.00% 39,735 8.00% 40,027 8.00% 40,362 8.00%
------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Excess..................... $34,860 7.38% $ 74,000 15.01% $ 81,000 16.31% $ 88,000 17.59% $ 96,050 19.04%
======= ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- ----------
(1) Total equity as calculated under generally accepted accounting principles
("GAAP") expressed as a percent of total assets under GAAP.
(2) Leverage capital levels are shown as a percentage of "total assets," and
risk-based capital levels are calculated on the basis of a percentage of
"risk-weighted assets," each as defined in the FDIC regulations.
(3) Pro forma capital levels assume receipt by the Bank of 50% of the net
proceeds from the shares of Common Stock sold at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. These
levels assume funding by the Bank of the RRP equal to 4% of the Common
Stock issued, including shares issued to the Foundation, and repayment of
the Holding Company's loan to the ESOP to enable the ESOP to purchase 8% of
the Common Stock issued, including shares issued to the Foundation, valued
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range.
(4) The current leverage capital requirement is 3% of total adjusted assets for
savings banks that receive the highest supervisory ratings for safety and
soundness and that are not experiencing or anticipating significant growth.
The current leverage capital ratio applicable to all other savings banks is
4% to 5%. See "Regulation--Capital Requirements."
(5) Assumes the net proceeds are invested in assets that carry a risk-weighting
of 50%.
Source: HCSI's prospectus.
<PAGE>
EXHIBIT IV-7
The Hudson City Savings Institution
Pro Forma Analysis Sheet
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
The Hudson City Savings Institution
Prices as of February 27, 1998
<TABLE>
<CAPTION>
Peer Group New York Companies All Savings Institutions
---------------- ------------------ ------------------------
Price Multiple Symbol Subject(1) Mean Median Mean Median Mean Median
- -------------- ------ ---------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-core earnings ratio P/Core 18.75x 18.47x 18.27x 23.14x 23.44x 20.76x -- x
Price-tangible book ratio = P/TB 74.72% 166.53% 159.87% 174.35% 151.76% 172.60% -- %
Price-assets ratio = P/A 17.33% 19.47% 17.57% 21.02% 17.62% 20.70% -- %
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $2,661,000 ESOP Stock Purchases (E) 8.00 (5)
Pre Conversion Core Earnings $3,743,000 Cost of ESOP Borrowings (S) 0.00 (4)
Pre-Conversion Book Value (B) $67,395,000 ESOP Amortization (T) 15.00 years
Pre-Conv. Tang. Book Value (B) $66,785,000 RRP Amount (M) 4.00%
Pre-Conversion Assets (A) $665,051,000 RRP Vesting (N) 5.00 years (5)
Reinvestment Rate (2)(R) 4.04% Foundation (F) 3.00%
Est. Conversion Expenses (3)(X) 1.94% Tax Benefit (Z) 1,572,816
Tax rate (TAX) 40.00% Percentage Sold (PCT) 100.00%
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V= P/E * (Y) V= $135,000,002
-----------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * (B+Z) V= $135,000,002
---------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $135,000,000
---------------------------
1 - P/A * PCT * (1-X-E-M-F)
<TABLE>
<CAPTION>
Shares Aggregate
Shares Sold Price Per Gross Offering Issued To Total Shares Market Value
Conclusion to Public Share Proceeds Foundation Issued of Stock Issued
- ---------- ----------- --------- -------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 11,140,777 10.00 $111,407,770 334,223 11,475,000 114,750,000
Midpoint 13,106,796 10.00 131,067,960 393,204 13,500,000 135,000,000
Maximum 15,072,815 10.00 150,728,150 452,185 15,525,000 155,250,000
Supermaximum 17,333,738 10.00 173,337,380 520,012 17,853,750 178,537,500
</TABLE>
- ----------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 6.74 percent, and a tax rate of
40.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 15 years and 5 years, respectively; amortization
expenses tax effected at 40.00 percent.
<PAGE>
EXHIBIT IV-8
The Hudson City Savings Institution
Pro Forma Effect of Conversion Proceeds
<PAGE>
EXHIBIT IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
The Hudson City Savings Institution
At the Minimum
1. Offering Proceeds ..................................... $111,407,770
Less: Estimated Offering Expenses ..................... 2,326,917
------------
Net Conversion Proceeds ............................... $109,080,853
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $109,080,853
Less: Proceeds Invested in Non-Earning Fixed Assets ... 0
Less: Non-Cash Stock Purchases(1) ..................... 13,770,000
------------
Net Proceeds Reinvested ............................... $ 95,310,853
Estimated net incremental rate of return .............. 4.04%
------------
Earnings Increase ..................................... $ 3,850,558
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 367,200
Less: Recognition Plan Vesting(4) ................... 550,800
------------
Net Earnings Increase ................................. $ 2,932,558
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) ...... $2,661,000 $2,932,558 $5,593,558
12 Months ended December 31, 1997 (core) .......... $3,743,000 $2,932,558 $6,675,558
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $67,395,000 $95,310,853 $1,336,893 $164,042,746
December 31, 1997 (Tangible) ... $66,785,000 $95,310,853 $1,336,893 $163,432,746
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $665,051,000 $95,310,853 $1,336,893 $761,698,746
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
The Hudson City Savings Institution
At the Midpoint
1. Offering Proceeds ..................................... $131,067,960
Less: Estimated Offering Expenses ..................... 2,543,180
------------
Net Conversion Proceeds ............................... $128,524,780
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $128,524,780
Less: Proceeds Invested in Non-Earning Fixed Assets ... 0
Less: Non-Cash Stock Purchases(1) ..................... 16,200,000
------------
Net Proceeds Reinvested ............................... $112,324,780
Estimated net incremental rate of return .............. 4.04%
------------
Earnings Increase ..................................... $ 4,537,921
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 432,000
Less: Recognition Plan Vesting(4) ................... 648,000
------------
Net Earnings Increase ................................. $ 3,457,921
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) ...... $2,661,000 $3,457,921 $6,118,921
12 Months ended December 31, 1997 (core) .......... $3,743,000 $3,457,921 $7,200,921
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $67,395,000 $112,324,780 $1,572,816 $181,292,596
December 31, 1997 (Tangible) ... $66,785,000 $112,324,780 $1,572,816 $180,682,596
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $665,051,000 $112,324,780 $1,572,816 $778,948,596
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
The Hudson City Savings Institution
At the Maximum
1. Offering Proceeds ..................................... $150,728,150
Less: Estimated Offering Expenses ..................... 2,759,442
------------
Net Conversion Proceeds ............................... $147,968,708
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $147,968,708
Less: Proceeds Invested in Non-Earning Fixed Assets ... 0
Less: Non-Cash Stock Purchases(1) ..................... 18,630,000
------------
Net Proceeds Reinvested ............................... $129,338,708
Estimated net incremental rate of return .............. 4.04%
------------
Earnings Increase ..................................... $ 5,225,284
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 496,800
Less: Recognition Plan Vesting(4) ................... 745,200
------------
Net Earnings Increase ................................. $ 3,983,284
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) ...... $2,661,000 $3,983,284 $6,644,284
12 Months ended December 31, 1997 (core) .......... $3,743,000 $3,983,284 $7,726,284
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $67,395,000 $129,338,708 $1,808,738 $198,542,446
December 31, 1997 (Tangible) ... $66,785,000 $129,338,708 $1,808,738 $197,932,446
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $665,051,000 $129,338,708 $1,808,738 $796,198,446
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
The Hudson City Savings Institution
At the Supermaximum Value
1. Offering Proceeds ..................................... $173,337,380
Less: Estimated Offering Expenses ..................... 3,008,143
------------
Net Conversion Proceeds ............................... $170,329,237
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $170,329,237
Less: Proceeds Invested in Non-Earning Fixed Assets ... 0
Less: Non-Cash Stock Purchases(1) ..................... 21,424,500
------------
Net Proceeds Reinvested ............................... $148,904,737
Estimated net incremental rate of return .............. 4.04%
------------
Earnings Increase ..................................... $ 6,015,751
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 571,320
Less: Recognition Plan Vesting(4) ................... 856,980
------------
Net Earnings Increase ................................. $ 4,587,451
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) ...... $2,661,000 $4,587,451 $7,248,451
12 Months ended December 31, 1997 (core) .......... $3,743,000 $4,587,451 $8,330,451
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $67,395,000 $148,904,737 $2,080,049 $218,379,785
December 31, 1997 (Tangible) ... $66,785,000 $148,904,737 $2,080,049 $217,769,785
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit(5) After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 .............. $665,051,000 $148,904,737 $2,080,049 $816,035,785
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains (Loss) @ 34% Items to Common Shares Core EPS
---------- ------------ ---------- ---------- ----------- ------ ---------
($000) ($000) ($000) ($000) ($000) ($000) ($)
Comparable Group
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
AFED AFSALA Bancorp, Inc. of NY(1)(3) 920 0 0 0 920 1,383 0.89
ALBK ALBANK Fin. Corp. of Albany NY 43,424 -467 159 0 43,116 12,907 3.34
BKC American Bank of Waterbury CT 7,940 -1,628 554 0 6,866 2,321 2.96
BKCT Bancorp Connecticut of CT 5,897 -983 334 0 5,248 5,092 1.03
CATB Catskill Fin. Corp. of NY 3,799 -22 7 0 3,784 4,630 0.82
DIBK Dime Financial Corp. of CT 16,748 -195 66 0 16,619 5,164 3.22
MECH MECH Financial Inc of CT(1) 13,958 -31 11 0 13,938 5,293 2.63
NMSB Newmil Bancorp, Inc. of CT 2,758 26 -9 0 2,775 3,879 0.72
PEEK Peekskill Fin. Corp. of NY 1,993 0 0 0 1,993 3,127 0.64
SFED SFS Bancorp of Schenectady NY 1,068 -56 19 0 1,031 1,208 0.85
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
(3) Figures are for three quarters of financial data, EPS figures are
annualized.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT 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'sconsulting services are aided by
its in-house data base resources for commercial banks and savings institutions
and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (18)
William E. Pommerening, Managing Director (14)
Gregory E. Dunn, Senior Vice President (16)
James P. Hennessey, Senior Vice President (13)
James J. Oren, Vice President (11)
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Monroe Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
Exhibit 99.2
GIFT INSTRUMENT
CHARITABLE GIFT TO HUDSON RIVER BANK & TRUST COMPANY FOUNDATION
Hudson River Bancorp, Inc., One Hudson City Centre, Hudson, New York 12534
(the "Company"), desires to make a gift of its common stock, par value $.01 per
share to Hudson River Bank & Trust Company Foundation (the "Foundation"), a
nonprofit corporation organized under the laws of the State of Delaware. The
purpose of the donation is to establish a bond between Hudson River Bancorp,
Inc. and the community in which it and its affiliates operate to enable the
community to share in the potential growth and success of the Company and its
affiliates over the long term. To that end, Hudson River Bancorp, Inc. now
gives, transfers, and delivers to the Foundation ________ shares of its common
stock, par value $.01 per share, or total consideration of $_______, subject to
the following conditions:
1. The Foundation shall use the donation solely for charitable purposes,
including community development, in the communities in which the Company and its
affiliates operate in accordance with the provisions of the Foundation's
Certificate of Incorporation; and
2. Consistent with the Company's intent to form a long-term bond between
the Company and the community, the amount of Common Stock that may be sold by
the Foundation in any one year shall not exceed 5% of the market value of the
assets held by the Foundation, except that this restriction shall not prohibit
the board of directors of the Foundation from selling a greater amount of Common
Stock in any one year if the board of directors of the Foundation determines
that the failure to sell a greater amount of the Common Stock held by the
Foundation would: (a) result in a long-term reduction of the value of the
Foundation's assets relative to their then current value that would jeopardize
the Foundation's capacity to carry out its charitable purposes; or (b) otherwise
jeopardize the Foundation's tax-exempt status.
Dated: ____________ __, 199_ Hudson River Bancorp, Inc.
By:
-----------------------------
Carl A. Florio, President and
Chief Executive Officer
EXHIBIT 99.3
[DRAFT 4/28/98]
THE HUDSON CITY SAVINGS INSTITUTION
PROPOSED LETTERS/QUESTION & ANSWER BROCHURE
INDEX
1. Dear Depositor Letter *
2. Dear Depositor Letter for Non Eligible States
3. Dear Friend Letter - Non Voting Depositors *
4. Dear Potential Investor Letter *
5. Dear Customer Letter - Used as a Cover Letter for States Requiring "Agent"
Mailing *
6. Proxy Request
7. Proxy and Stock Question & Answer Brochure *
8. Mailing Insert/Lobby Poster
9. Invitation Letter - Informational Meetings
10. Dear Subscriber/Acknowledgment Letter - Initial Response to Stock Order
Received
11. Dear Charter Shareholder - Confirmation Letter
12. Dear Interested Investor - No Shares Available Letter
13. Welcome Shareholder Letter - For Initial Certificate Mailing
14. Dear Interested Subscriber Letter - Subscription Rejection
15. Letter for Sandler O'Neill Mailing to Clients *
* Accompanied by a Prospectus
Note: Items 1 through 8 are produced by the Financial Printer and Items 9
through 15 are produced by the Conversion Center.
<PAGE>
[HUDSON RIVER BANCORP, INC.]
Dear Depositor:
The Board of Trustees of The Hudson City Savings Institution has voted
unanimously in favor of a plan to convert from a state chartered mutual savings
bank to a state chartered stock savings bank. As part of this plan, we have
formed a holding company, Hudson River Bancorp, Inc., which will become the
parent company of The Hudson City Savings Institution (which is to be renamed
Hudson River Bank & Trust Company). We are converting so that The Hudson City
Savings Institution will be structured in the form of ownership used by a
growing number of savings institutions and to allow our Bank to become even
stronger.
In addition, as part of the Conversion and in furtherance of its long-standing
commitment to its community, the Bank intends to establish a charitable
foundation to be known as the Hudson River Bank & Trust Company Foundation. The
Foundation will be dedicated to charitable purposes within the Bank's community,
including but not limited to providing grants and donations for community
development activities.
To accomplish the Conversion, your participation is extremely important. On
behalf of the Board, I ask that you help us meet our goal by reading the
enclosed materials and then casting your vote in favor of the Plan of Conversion
and mailing your signed proxy card immediately in the [COLOR] postage-paid
envelope marked "PROXY RETURN". Should you choose to attend the Special Meeting
of Voting Depositors and wish to vote in person, you may do so by revoking any
previously executed proxy. If you have an IRA or other Qualified Plan account
for which the Bank acts as trustee and we do not receive a proxy from you, the
Bank intends, as trustee for such account, to vote in favor of the Plan of
Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
o Deposit accounts will continue to be federally insured to the same
extent they are today.
o Existing deposit accounts and loans will not undergo any change as a
result of the Conversion.
o Voting for approval will not obligate you to buy any shares of Common
Stock.
As a qualifying account holder, you may also take advantage of your
nontransferable rights to subscribe for shares of Hudson River Bancorp, Inc.
Common Stock on a priority basis, before the stock is offered to the general
public. The enclosed Proxy Statement and Prospectus describes the stock offering
and the operations of the Bank. If you wish to purchase stock, please complete
the stock order and certification form and mail it to the Bank in the enclosed
[COLOR] postage-paid envelope marked "STOCK ORDER RETURN", or return it to any
branch office of the Bank. Your order must be physically received no later than
12:00 noon Eastern time on Day, Month X, 199X. Please read the Prospectus
carefully before making an investment decision.
If you wish to use funds in your IRA or Qualified Plan at The Hudson City
Savings Institution to subscribe for Common Stock, please be aware that
applicable law requires that such funds first be transferred to a self-directed
retirement account with a trustee other than The Hudson City Savings
Institution. The transfer of such funds to a new trustee takes time, so please
make arrangements as soon as possible.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the hours of
10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be closed
for Bank holidays.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#1
<PAGE>
[HUDSON RIVER BANCORP, INC.]
Dear Depositor:
The Board of Trustees of The Hudson City Savings Institution has voted
unanimously in favor of a plan to convert from a state chartered mutual savings
bank to a state chartered stock savings bank. As part of this plan, we have
formed a holding company, Hudson River Bancorp, Inc., which will become the
parent company of The Hudson City Savings Institution (which is to be renamed
Hudson River Bank & Trust Company). We are converting so that The Hudson City
Savings Institution will be structured in the form of ownership used by a
growing number of savings institutions and to allow our Bank to become even
stronger.
In addition, as part of the Conversion and in furtherance of its long-standing
commitment to its community, the Bank intends to establish a charitable
foundation to be known as the Hudson River Bank & Trust Company Foundation. The
Foundation will be dedicated to charitable purposes within the Bank's community,
including but not limited to providing grants and donations for community
development activities.
To accomplish the Conversion, your participation is extremely important. On
behalf of the Board, I ask that you help us meet our goal by reading the
enclosed materials and then casting your vote in favor of the Plan of Conversion
and mailing your signed proxy card immediately in the [COLOR] postage-paid
envelope marked "PROXY RETURN". Should you choose to attend the Special Meeting
of Voting Depositors and wish to vote in person, you may do so by revoking any
previously executed proxy. If you have an IRA or other Qualified Plan account
for which the Bank acts as trustee and we do not receive a proxy from you, the
Bank intends, as trustee for such account, to vote in favor of the Plan of
Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
o Deposit accounts will continue to be federally insured to the same
extent they are today.
o Existing deposit accounts and loans will not undergo any change as a
result of the Conversion.
We regret that we are unable to offer you Common Stock in the Subscription
Offering, because the laws of your state or jurisdiction require us to register
either (1) the to-be-issued Common Stock of Hudson River Bancorp, Inc., or (2)
an agent of The Hudson City Savings Institution to solicit the sale of such
stock, and the number of eligible subscribers in your state or jurisdiction does
not justify the expense of such registration.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the hours of
10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be closed
for Bank holidays.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#2
<PAGE>
[HUDSON RIVER BANCORP, INC.]
Dear Friend of The Hudson City Savings Institution:
The Hudson City Savings Institution is in the process of converting from a state
chartered mutual savings bank to a state chartered stock savings bank. As part
of this plan, we have formed a holding company, Hudson River Bancorp, Inc.,
which will become the parent company of the Bank (which is to be renamed Hudson
River Bank & Trust Company). We are converting so that the Bank will be
structured in the form of ownership used by a growing number of savings
institutions and to allow our Bank to become even stronger. The Conversion will
in no way affect the insurance of deposit accounts or other services offered by
the Bank.
In addition, as part of the Conversion and in furtherance of its long-standing
commitment to its community, the Bank intends to establish a charitable
foundation to be known as the Hudson River Bank and Trust Company Foundation.
The Foundation will be dedicated to charitable purposes within the Bank's
community, including but not limited to providing grants and donations for
community development activities.
As a qualifying account holder, you may take advantage of your nontransferable
rights to subscribe for shares of Hudson River Bancorp, Inc.'s Common Stock on a
priority basis, before the stock is offered to the general public. The enclosed
Prospectus describes the stock offering and the operations of the Bank. If you
wish to purchase stock, please complete the stock order and certification form
and mail it to the Bank in the enclosed [COLOR] postage-paid envelope marked
"STOCK ORDER RETURN", or return it to any branch office. Your order must be
physically received no later than 12:00 noon Eastern time on Day, Month X, 199X.
Please read the Prospectus carefully before making an investment decision.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX- XXXX0, Monday through Friday, between the hours
of 10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be closed
for Bank holidays.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#3
<PAGE>
[HUDSON RIVER BANCORP, INC.]
Dear Potential Investor:
We are pleased to provide you with the enclosed material regarding the
conversion of The Hudson City Savings Institution from a state chartered mutual
savings bank to a state chartered stock savings bank.
This information packet includes the following:
PROSPECTUS: This document provides detailed information about The Hudson
City Savings Institution's operations, the proposed stock offering by
Hudson River Bancorp, Inc., a holding company formed by the Bank to become
its parent company upon completion of the Conversion, and the establishment
of a charitable foundation as part of the Conversion. Please read it
carefully prior to making an investment decision.
QUESTION AND ANSWER BROCHURE: This answers commonly asked questions about
the stock offering and establishment of the charitable foundation.
STOCK ORDER AND CERTIFICATION FORMS: Use these forms to subscribe for stock
and return them together with your payment in the postage-paid envelope
provided. The deadline to subscribe for stock is 12:00 noon, Eastern time
on Day, Month X, 199X.
We are pleased to offer you this opportunity to become one of our charter
shareholders. If you have any questions regarding the Conversion or the
Prospectus, please call our Conversion Center at (XXX) XXX-XXXX, Monday through
Friday, between the hours of 10:00 a.m. to 4:00 p.m. Please note that the
Conversion Center will be closed for Bank holidays.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#4
<PAGE>
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
Dear Customer of The Hudson City Savings Institution:
At the request of The Hudson City Savings Institution and Hudson River Bancorp,
Inc. a holding company formed by the Bank to become its parent company, we have
enclosed material regarding the offering of Common Stock in connection with the
Conversion of the Bank from a state chartered mutual savings bank to a state
chartered stock savings bank. These materials include a Prospectus, stock order
and certification forms which offer you the opportunity to subscribe for shares
of Common Stock of Hudson River Bancorp, Inc.
We recommend that you study this material carefully. If you decide to subscribe
for shares, you must return the properly completed stock order form and signed
certification form, along with full payment for the shares (or appropriate
instructions authorizing withdrawal from a deposit account at the Bank), no
later than 12:00 noon, Eastern time on Day, Month X, 199X in the accompanying
[COLOR] postage-paid envelope marked "STOCK ORDER RETURN". If you have any
questions after reading the enclosed material, please call the Conversion Center
at (XXX) XXX-XXXX, Monday through Friday, between the hours of 10:00 a.m. and
4:00 p.m., and ask for a Sandler O'Neill representative. Please note that the
Conversion Center will be closed for Bank holidays.
We have been asked to forward these documents to you in view of certain
requirements of the securities laws of your jurisdiction. We should not be
understood as recommending or soliciting in any way any action by you with
regard to the enclosed materials.
Sincerely,
SANDLER O'NEILL & PARTNERS, L.P.
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Enclosure
#5
<PAGE>
[THE HUDSON CITY SAVINGS INSTITUTION]
P R O X Y R E Q U E S T
WE NEED YOUR VOTE!
DEAR CUSTOMER OF THE HUDSON CITY SAVINGS INSTITUTION:
YOUR VOTE ON OUR PLAN OF CONVERSION HAS NOT YET BEEN RECEIVED. YOUR VOTE IS VERY
IMPORTANT TO US. PLEASE VOTE AND MAIL THE ENCLOSED PROXY TODAY. IF YOU HAVE MORE
THAN ONE ACCOUNT YOU MAY RECEIVE MORE THAN ONE PROXY.
REMEMBER: VOTING FOR THE PLAN OF CONVERSION DOES NOT OBLIGATE YOU TO BUY
STOCK. THE BOARD OF TRUSTEES OF THE HUDSON CITY SAVINGS INSTITUTION HAS
UNANIMOUSLY APPROVED THE PLAN OF CONVERSION, INCLUDING THE ESTABLISHMENT OF
THE CHARITABLE FOUNDATION, AND URGE YOU TO VOTE IN FAVOR OF THE PLAN OF
CONVERSION. YOUR HUDSON CITY SAVINGS DEPOSIT ACCOUNTS OR LOANS WILL NOT BE
AFFECTED IN ANY WAY. DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY
INSURED.
A POSTAGE-PAID ENVELOPE IS ENCLOSED WITH THE PROXY FORM. IF YOU HAVE ANY
QUESTIONS, PLEASE CALL OUR CONVERSION CENTER AT (XXX) XXX-XXXX.
PLEASE VOTE TODAY BY RETURNING ALL PROXY FORMS RECEIVED.
SINCERELY,
THE HUDSON CITY SAVINGS INSTITUTION
#6
<PAGE>
QUESTIONS AND
ANSWERS
About the Conversion
The Board of Trustees of The Hudson City Savings Institution has unanimously
adopted the Plan of Conversion whereby the Bank will convert from a New York
State chartered mutual savings bank to a New York State chartered stock savings
bank (to be known as Hudson River Bank & Trust Company) and at the same time
become a wholly-owned subsidiary of Hudson River Bancorp, Inc., a Delaware
corporation formed by The Hudson City Savings Institution to acquire all the
outstanding stock of the Bank. As part of the Conversion, Hudson River Bancorp,
Inc. will be offering its Common Stock for sale pursuant to the terms of the
Plan of Conversion.
The Hudson City Savings Institution is converting to be structured in the form
of ownership used by a growing number of savings institutions and to allow The
Hudson City Savings Institution to allow The Hudson City Savings Institution to
become even stronger. In addition, as part of the Conversion, the Bank intends
to establish The Hudson River Bank and Trust Company Foundation which will be
dedicated to charitable purposes within the Bank's local communities.
It is necessary for the Bank to receive the approval of: 1) at least 75% of the
votes cast by Voting Depositors in person or by proxy at the Special Meeting;
and 2) at least a majority of the votes eligible to be cast at the Special
Meeting, so YOUR VOTE IS VERY IMPORTANT. Please return your proxy in the
enclosed [COLOR] postage-paid envelope marked "PROXY RETURN". YOUR BOARD OF
TRUSTEES URGES YOU TO VOTE "FOR" THE CONVERSION AND TO RETURN YOUR PROXY TODAY.
Effect on Deposits and Loans
Q. Will the Conversion affect any of my deposit accounts or loans?
A. No. The Conversion will have no effect on the balance or terms of any
deposit account or loan. Your deposits will continue to be federally
insured to the fullest extent permissible.
7-1
<PAGE>
About Voting
Q. Who is eligible to vote on the Conversion?
A. Only depositors with accounts totalling $100 or more on [MONTH] [DAY], 1998
("Voting Record Date") are eligible to vote.
Q. How do I vote?
A. You may vote by mailing your signed proxy card(s) in the [COLOR]
postage-paid envelope marked "PROXY RETURN". Should you choose to attend
the Special Meeting of Depositors and decide to change your vote, you may
do so by revoking any previously executed proxy.
Q. Am I required to vote?
A. No. Voting Depositors are not required to vote. However, because the
Conversion will produce a fundamental change in The Hudson City Savings
Institution's corporate structure, the Board of Trustees encourages all
Voting Depositors to vote.
Q. Why did I receive several proxies?
A. If you have more than one account you may have received more than one proxy
depending upon the ownership structure of your accounts. Please vote, sign
and return all proxy cards that you received.
Q. Does my vote for Conversion mean that I must buy Common Stock of Hudson
River Bancorp, Inc.?
A. No. Voting for the Plan of Conversion does not obligate you to buy shares
of Common Stock of Hudson River Bancorp, Inc.
Q. I have a joint savings account. Must both parties sign the proxy card?
A. Only one signature is required, but both parties should sign if possible.
7-2
<PAGE>
Q. Who must sign for trust or custodian accounts?
A. The trustee or custodian must sign such accounts, not the beneficiary.
Q. I am the executor (administrator) for a deceased depositor. Can I sign the
proxy card?
A. Yes. Please indicate on the card the capacity in which you are signing the
card.
About The Foundation
Q. What is the Hudson River Bank and Trust Company Foundation and why is it
being established?
A. In keeping with the Bank's long standing commitment to its community, the
Bank's Plan of Conversion provides for the establishment of a charitable
foundation to be known as the Hudson River Bank and Trust Company
Foundation. The Foundation will be dedicated to charitable purposes within
the Bank's community, including community development.
Q. How will the Foundation be funded?
A. The Company will fund the Foundation with shares of its Common Stock.
Immediately following the Conversion a number of shares of authorized but
unissued Common Stock equal to 3% of the Common Stock sold in the
Offerings, or 334,200, 339,200 and 452,200 shares at the minimum, midpoint
and maximum of the Estimated Price Range, respectively, will be contributed
to the Foundation.
Q. What is the impact of the Foundation on the Company's stockholders' equity
and earnings?
A. The funding of the Foundation will impact the Company's stockholders'
equity and will have an adverse effect on the Company's earnings in the
period in which the Foundation is funded, which is expected to be the first
fiscal quarter of 1999.
The establishment of the Foundation, however, was considered in the
independent appraisal of the aggregate pro forma market value of the
Company's Common Stock. In addition, there are certain tax effects,
regulatory considerations and other matters with respect to the Foundation.
A prospective stockholder should carefully review "Risk Factors --Risks
associated with the Establishment of the Charitable Foundation," and "The
Conversion --Establishment of The Hudson River Bank and Trust Company
Foundation" in the Prospectus.
7-3
<PAGE>
Q. If I purchase shares of Common Stock in the Conversion, will my interest in
the Company be diluted as a result of the establishment of the Foundation?
A. Yes. Upon completion of the Conversion and the establishment of the
Foundation, the Foundation will receive an amount of Common Stock equal to
3% of the Company's Common Stock sold in the Offerings. As a result,
persons purchasing shares in the Conversion will have their ownership and
voting interests in the Company diluted by 2.9 % upon funding of the
Foundation.
About The Stock
Investment in Common Stock involves certain risks. For a discussion of these
risks and other factors, investors are urged to read the accompanying
Prospectus.
Q. What are the priorities of purchasing the Common Stock?
A. The Common Stock of Hudson River Bancorp, Inc. will be offered in the
Subscription Offering in the following order of priority:
o The Hudson City Savings Institution's Eligible Account Holders
(depositors with accounts totaling $100 or more as of September 30,
1996).
o The Bank's Employee Plans.
o The Bank's Supplemental Eligible Account Holders (depositors with
accounts totaling $100 or more as of March 31, 1998).
Upon completion of the Subscription Offering, Common Stock that is not sold
in the Subscription Offering will be offered to certain members of the
general public in a Community Offering and then to the general public in a
Syndicated Community Offering.
7-4
<PAGE>
Q. Will any account I hold with the Bank be converted into stock?
A. No. All accounts remain as they were prior to the Conversion. As an
Eligible Account Holder or Supplemental Eligible Account Holder, you
receive priority over the general public in exercising your right to
subscribe for shares of Common Stock.
Q. Will I receive a discount on the price of the stock?
A. No. Conversion regulations require that the offering price of the stock be
the same for everyone: customers, trustees, officers, employees of the Bank
and the general public.
Q. How many shares of stock are being offered, and at what price?
A. Hudson River Bancorp, Inc. is offering for sale up to 15,072,815 shares of
Common Stock at a subscription price of $10 per share. Under certain
circumstances, Hudson River Bancorp, Inc. may sell up to 17,333,730 shares
(not including any shares contributed to the Foundation).
Q. How much stock can I purchase?
A. The minimum purchase is 25 shares; the maximum purchase by any person in
the Subscription Offering is $250,000 (25,000 shares); in the Community
Offering and Syndicated Community Offering, if either is held, the maximum
purchase by any person, including purchases by associates of such person or
entity, is $250,000 (25,000 shares); and the maximum purchase by any
person, including purchases by associates of such person or entity in the
Subscription and Community Offerings is 1.0% of the shares offered, or
173,337 shares.
Q. How do I order stock?
A. You may subscribe for shares of Common Stock by completing and returning
the stock order form and certification form, together with your payment,
either in person to any branch office of The Hudson City Savings
Institution or by mail in the YELLOW postage-paid envelope marked "STOCK
ORDER RETURN." Stock order forms may not be delivered to a walk up or drive
through window located at any of the Bank's branch offices.
7-5
<PAGE>
Q. How can I pay for my shares of stock?
A. You can pay for the Common Stock by check, cash, money order or withdrawal
from your deposit account at the Bank. If you choose to pay by cash, you
must deliver the stock order form and payment in person to any branch
office of the Bank and it will be converted to a bank check or a money
order. PLEASE DO NOT SEND CASH IN THE MAIL.
Q. When is the deadline to subscribe for stock?
A. An executed order form and certification form with the required full
payment must be physically received by 12:00 noon Eastern time, on Day,
Month Date, 199X.
Q. Can I subscribe for shares using funds in my IRA/Qualified Plan at the
Bank?
A. Applicable regulations do not permit the purchase of Common Stock with your
existing IRA or Qualified Plan at the Bank. To use such funds to subscribe
for Common Stock, you need to establish a "self-directed" trust account
with an outside trustee. Please call our Conversion Center if you require
additional information. TRANSFER OF SUCH FUNDS TAKES TIME, SO PLEASE MAKE
ARRANGEMENTS AS SOON AS POSSIBLE.
Q. Can I subscribe for shares and add someone else who is not on my account to
my stock registration?
A. No. Applicable regulations prohibit the transfer of subscription rights.
Adding the names of other persons who are not owners of your qualifying
account(s) will result in your order becoming null and void.
7-6
<PAGE>
Q. Will payments for Common Stock earn interest until the Conversion closes?
A. Yes. Any payments made by cash, check or money order will earn interest at
the Bank's passbook rate from the date of receipt to the completion or
termination of the Conversion. Withdrawals from a deposit account or a
certificate of deposit at the Bank may be made without penalty to buy
Common Stock. Depositors who elect to pay for their Common Stock by
withdrawal will receive interest at the contract rate on the account until
the completion or termination of the Conversion.
Q. Will dividends be paid on the stock?
A. No dividends are expected to be paid initially. Following the Conversion,
however, the Board of Directors of Hudson River Bancorp, Inc. may consider
a policy of paying cash dividends on the Common Stock.
Q. Will my stock be covered by deposit insurance?
A. No. The Common Stock cannot be insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC or any other government
agency nor is it insured or guaranteed by the Bank or its holding company.
Q. Where will the stock be traded?
A. Upon completion of the Conversion, Hudson River Bancorp, Inc. expects the
stock to be traded over-the-counter and to be quoted on the Nasdaq National
Market under the symbol " ".
Q. Can I change my mind after I place an order to subscribe for stock?
A. No. After receipt, your order may not be modified or withdrawn.
7-7
<PAGE>
Additional Information
Q. What if I have additional questions or require more information?
A. The Bank's Proxy Statement and Prospectus describes the Conversion and the
Foundation in detail. Please read the Proxy Statement and Prospectus
carefully before voting. If you have any questions after reading the
enclosed material you may call our Conversion Center at (XXX) XXX- XXXX,
Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m. Please
note that the Conversion Center will be closed for Bank holidays.
Additional materials may only be obtained from the Conversion Center. The
Conversion Center will be closed during Bank holidays. To ensure that each
purchaser receives a Prospectus at least 48 hours prior to the Expiration
Date of ____________, 1998 in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended, 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.
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency nor is the Common Stock insured or
guaranteed by The Hudson City Savings Institution or Hudson River Bancorp, Inc.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
7-8
#7
<PAGE>
-------
L O G O
-------
The Hudson City Savings Institution
Please Support Us
Vote Your
Proxy Card Today
- --------------------------------------------------------------------------------
If you have more than one account, you may have received more than one Proxy
depending upon the ownership structure of your accounts. Please vote, sign and
return all Proxy Cards that you received.
- --------------------------------------------------------------------------------
#8
<PAGE>
[HUDSON RIVER BANCORP, INC.]
____________________, 1998
Mr. John Smith
00-00 00 Drive
City, State 00000
Dear Mr. Smith:
We are pleased to announce that the Board of Trustees of The Hudson City Savings
Institution has adopted a plan to convert from a state chartered mutual savings
bank to a state chartered stock savings bank. As part of this plan, we have
formed a holding company, to become the parent company of the Bank which will be
renamed Hudson River Bank & Trust Company upon completion of the Conversion. We
are converting so that the Bank will be structured in the form of ownership used
by a growing number of savings institutions and to allow our Bank to become
stronger.
You are cordially invited to join members of our senior management team at an
informational meeting to be held on at 7:30 P.M. to learn more about the
Conversion and the stock offering.
A member of our staff will be calling to confirm your interest in attending the
meeting.
If you would like additional information regarding the meeting or our
Conversion, please call our Conversion Center number at (XXX) XXX-XXXX, Monday
through Friday between the hours of 10:00 a.m. to 4:00 p.m.
Please note that the Conversion Center will be closed for Bank holidays.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
(Printed by Conversion Center)
#9
<PAGE>
[HUDSON RIVER BANCORP, INC.]
____________________, 1998
Dear Subscriber:
We hereby acknowledge receipt of your order for shares of Common Stock in Hudson
River Bancorp, Inc.
At this time, we cannot confirm the number of shares of Hudson River Bancorp,
Inc. Common Stock that will be issued to you. Such allocation will be made in
accordance with the Plan of Conversion following completion of the stock
offering.
If you have any questions, please call our Conversion Center at (XXX) XXX-XXXX.
Please note that the Conversion Center will be closed for Bank holidays.
Sincerely,
HUDSON RIVER BANCORP, INC.
CONVERSION CENTER
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#10
<PAGE>
[HUDSON RIVER BANCORP, INC.]
___________________, 1998
Dear Charter Shareholder:
We appreciate your interest in the stock offering of Hudson River Bancorp, Inc.
Due to the excellent response from our Eligible Account Holders, we are unable
to fill all orders in full. Consequently, in accordance with the provisions of
the Plan of Conversion, you were allocated ______ shares at a price of $10.00
per share. If your subscription was paid for by check, a refund of any balance
due you with interest will be mailed to you promptly.
The purchase date and closing of the transaction occurred on [MONTH] [DATE],
1998. Trading will commence on the Nasdaq National Market under the symbol " "
on [DAY] [DATE] 1998. Your stock certificate will be mailed to you shortly.
We thank you for your interest in Hudson River Bancorp, Inc., and welcome you as
a charter shareholder.
Sincerely,
HUDSON RIVER BANCORP, INC.
Conversion Center
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#11
<PAGE>
[HUDSON RIVER BANCORP, INC.]
____________________, 1998
Dear Interested Investor:
We recently completed our Subscription and Community Offerings. Unfortunately,
due to the excellent response from our Eligible Account Holders, stock was not
available for our Supplemental Eligible Account Holders or community friends. If
your subscription was paid for by check, a refund of any balance due you with
interest will be mailed to you promptly.
We appreciate your interest in Hudson River Bancorp, Inc. and hope you become an
owner of our stock in the future. The stock trades on the Nasdaq National Market
under the symbol "HRBT".
Sincerely,
HUDSON RIVER BANCORP, INC.
Conversion Center
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#12
<PAGE>
[HUDSON RIVER BANCORP, INC.]
____________________, 1998
Welcome Shareholder:
We are pleased to enclose the stock certificate that represents your share of
ownership in Hudson River Bancorp, Inc., the parent company of Hudson River Bank
& Trust Company, formerly known as The Hudson City Savings Institution.
Please examine your stock certificate to be certain that it is properly
registered. If you have any questions about your certificate, you should contact
the Transfer Agent immediately at the following address:
Transfer Agent
Address
Telephone Number
Also, please remember that your certificate is a negotiable security which
should be stored in a secure place, such as a safe deposit box or on deposit
with your stockbroker.
On behalf of the Board of Directors of Hudson River Bancorp, Inc. and the
employees of the Bank, I would like to thank you for supporting our offering.
Sincerely,
Signature
Title
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#13
<PAGE>
[HUDSON RIVER BANCORP, INC.]
____________________, 1998
Dear Interested Subscriber:
We regret to inform you that The Hudson City Savings Institution and Hudson
River Bancorp Inc., the parent company for the Bank, have decided not to accept
your order for shares of Hudson River Bancorp, Inc. Common Stock in our
Community Offering. This action is in accordance with our Plan of Conversion
which gives the Bank and the Holding Company the absolute right to reject the
subscription of any Community Member, in whole or in part, in the Community
Offering.
Enclosed, therefore, is a check representing your subscription and interest
earned thereon.
If you have any questions, call the Conversion Center at ______________________.
Sincerely,
Hudson River Bancorp, Inc.
Conversion Center
(Printed by Conversion Center)
#14
<PAGE>
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
____________________, 1998
To Our Friends:
We are enclosing the offering material for The Hudson City Savings Institution,
which is now in the process of converting to stock form and forming a holding
company called Hudson River Bancorp, Inc.
Sandler O'Neill & Partners, L.P. is managing the Subscription Offering, which
will conclude at 12:00 noon, _____________ time on , 1998 Sandler O'Neill is
also providing conversion agent and proxy solicitation services. In the event
that all the stock is not subscribed for in the Subscription Offering (and
Community Offering, if held), Sandler O'Neill will form and manage a syndicate
of broker/dealers to sell the remaining stock.
Members of the general public, other than residents of , are eligible to
participate. If you have any questions about this transaction, please do not
hesitate to call or write.
Sincerely,
SANDLER O'NEILL & PARTNERS, L.P.
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Sandler O'Neill)
#15
LOGO: Hudson River Bancorp, Inc.
Subscription Offering Stock Order Form
- --------------------------------------------------------------------------------
BANK USE
- --------------------------------------------------------------------------------
IMPORTANT -- PLEASE NOTE: A properly completed original stock order form must be
used to subscribe for Common Stock. Copies of this form are not required to be
accepted. Please read the Stock Ownership Guide and Stock Order Form
instructions as you complete this form.
- --------------------------------------------------------------------------------
Hudson City Savings Institution
Conversion Center
One Hudson City Centre
Hudson, NY 12534
(XXX) XXX-XXXX
-------------------------------
Expiration Date
for Stock Order Forms:
________, _____ __, 1998
12 Noon, Eastern Time
- --------------------------------------------------------------------------------
(1) Number of Shares Subscription Price (2) Total Payment Due
-------------------- ---------------------
X $10.00 =
-------------------- ---------------------
The minimum purchase is 25 shares. The maximum purchase limitations are (i) in
the Subscription Offering -- for any eligible subscriber is $250,000 (25,000
shares), and (ii) in the Community Offering (if held) -- for any person,
together with associates or persons acting in concert is $250,000 (25,000
shares). In addition, no person, together with Associates and persons acting in
concert with such person, may purchase in the aggregate more than 1.0% of the
shares offered (150,728 shares, based on the offering of 15,072,815 shares).
- --------------------------------------------------------------------------------
[ ] (3) Employee/Officer/Trustee Information
Check here if you are an employee, officer or trustee of The Hudson City
Savings Institution or a member of such person's immediate family living
in the same household.
- --------------------------------------------------------------------------------
(4) Method of Payment/Check ----------------------
Enclosed is a check, bank draft or money Check Amount
order made payable to The Hudson City
Savings Institution in the amount indicated
in this box. ----------------------
- --------------------------------------------------------------------------------
(5) Method of Payment/Withdrawal
The undersigned authorizes withdrawal from the following account(s) at
The Hudson City Savings Institution. Individual Retirement Accounts
maintained at The Hudson City Savings Institution cannot be used. There
is no penalty for early withdrawal used for this payment.
------------------------------------------------------------------
Account Number(s) Withdrawal Amount(s) Bank Use
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Total Withdrawal Amount
------------------------------------------------------------------
- --------------------------------------------------------------------------------
(6) Purchaser Information
a. [ ] Check here if you are an Eligible Account Holder with a deposit
account(s) totalling $100.00 or more on September 30, 1996. List
account(s) below.
b. [ ] Check here if you are a Supplemental Eligible Account Holder with a
deposit account(s) totalling $100.00 or more on March 31, 1998. List
account(s) below.
------------------------------------------------------------------
Account Title (Names on Accounts) Account Number(s) Bank Use
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN THE LOSS OF PART OR
ALL OF YOUR SUBSCRIPTION RIGHTS. IF ADDITIONAL SPACE IS NEEDED, PLEASE UTILIZE
THE BACK OF THIS STOCK ORDER FORM.
- --------------------------------------------------------------------------------
<PAGE>
(7) Stock Registration/Form of Stock Ownership
[ ] Individual [ ] Joint Tenants
[ ] Tenants in Common [ ] Fiduciary (i.e. trust, estate, etc.)
[ ] Company/Corp/Partnership [ ] Uniform Transfer to Minors Act
[ ] IRA or other Qualified Plan --- --- --- --- --- --- --- --- ---
-- Beneficial Owners SS # - -
--- --- --- --- --- --- --- --- ---
(8) Name(s) in which stock is to be registered (PLEASE PRINT CLEARLY) -- ADDING
THE NAMES OF OTHER QUALIFYING ACCOUNT HOLDERS WHO ARE NOT OWNERS OF YOUR
QUALIFYING ACCOUNT(S) WILL RESULT IN YOUR ORDER BECOMING NULL AND VOID.
----------------------------------------------------------------------------
Name(s) Social Security # or Tax ID
----------------------------------------------------------------------------
Name(s) continued Social Security # or Tax ID
----------------------------------------------------------------------------
Street Address County of Residence
----------------------------------------------------------------------------
City State Zip Code
----------------------------------------------------------------------------
(9) Telephone -- Daytime ( ) Evening ( )
- --------------------------------------------------------------------------------
[ ] (10) NASD Affiliation--Check here if you are a member of the National
Association of Securities Dealers, Inc. ("NASD"), a person associated with
an NASD member, a member of the immediate family of any such person to whose
support such person contributes, directly or indirectly, or the holder of an
account in which an NASD member or person associated with an NASD member has
a beneficial interest. To comply with conditions under which an exemption
from the NASD's Interpretation With Respect to Free-Riding and Withholding
is available, you agree, if you have checked the NASD Affiliation box: (i)
not to sell, transfer or hypothecate the stock for a period of three months
following issuance and (ii) to report this subscription in writing to the
applicable NASD member within one day of the payment therefor.
- --------------------------------------------------------------------------------
[ ] (11) Associates Acting in Concert--Check here, and complete the reverse side
of this form, if you or any associates (as defined on the reverse side of
this form) or persons acting in concert with you have submitted other orders
for shares in the Subscription and/or Community Offerings.
- --------------------------------------------------------------------------------
(12) Acknowledgment--To be effective, this Stock Order Form and accompanying
Certification Form must be properly completed and physically received by The
Hudson City Savings Institution no later than 12:00 Noon, Eastern time, on
________, _____ __, 1998, unless extended; otherwise this Stock Order Form
and all subscription rights will be void. The undersigned agrees that after
receipt by The Hudson City Savings Institution, this Stock Order Form may
not be modified, withdrawn or canceled without the Bank's consent and if
authorization to withdraw from deposit accounts at the Bank has been given
as payment for shares; the amount authorized for withdrawal shall not
otherwise be available for withdrawal by the undersigned. Under penalty of
perjury, I hereby certify that the Social Security or Tax ID Number and the
information provided on this Stock Order Form is true, correct and complete,
that I am not subject to back-up withholding, and that I am purchasing
solely for my own account and that there is no agreement or understanding
regarding the sale or transfer of such shares, or my right to subscribe for
shares herewith. 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 of the Bank described in the accompanying Prospectus.
The undersigned hereby acknowledges receipt of the Prospectus at least 48
hours prior to delivery of this Stock Order Form to the Bank.
Applicable regulations prohibit any person from transferring, or entering
into any agreement, directly or indirectly, to transfer the legal or
beneficial ownership of subscription rights or the underlying securities to
the account of another. The Hudson City Savings Institution and Hudson River
Bancorp, Inc. will pursue any and all legal and equitable remedies in the
event they become aware of the transfer of subscription rights and will not
honor orders known by them to involve such transfer.
- -------------------------------------- --------------------------------------
Signature Date Signature Date
- -------------------------------------- --------------------------------------
A SIGNED CERTIFICATION FORM MUST ACCOMPANY
ALL STOCK ORDER FORMS (SEE REVERSE SIDE)
- --------------------------------------------------------------------------------
BANK USE ONLY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
- --------------------------------------------------------------------------------
<PAGE>
[Logo] Hudson River Bancorp, Inc.
- --------------------------------------------------------------------------------
Stock Ownership Guide
Individual
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights
such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
- --------------------------------------------------------------------------------
Joint Tenants
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
- --------------------------------------------------------------------------------
Tenants in Common
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
- --------------------------------------------------------------------------------
Uniform Gift to Minors Act ("UTMA")
Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minors Act of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for Custodian
is "CUST", while the Uniform Transfers to Minors Act is "UTMA". Standard U.S.
Postal Service state abbreviations should be used to describe the appropriate
state. For example, stock held by John Doe as custodian for Susan Doe under the
New York Uniform Transfers to Minors Act will be abbreviated John Doe, CUST
Susan Doe UTMA NY (use minor's social security number).
- --------------------------------------------------------------------------------
Fiduciaries
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
o The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
o The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
o A description of the document governing the fiduciary relationship, such as
a trust agreement or court order. Documentation establishing a fiduciary
relationship may be required to register your stock in a fiduciary
capacity.
o The date of the document governing the relationship, except that the date
of a trust created by a will need not be included in the description.
o The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee Under Agreement Dated 10-1-87 for Susan Doe.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Stock Order Form Instructions
Items 1 and 2 --
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price of $10.00 per share. The minimum purchase in the Subscription
Offering is 25 shares. In the Subscription Offering, The maximum purchase by
each Eligible Account Holder, Supplemental Eligible Account Holder is $250,000
(25,000 shares), and the maximum purchase in the Community Offering (if held) by
any person, together with associates or persons acting in concert, is $250,000
(25,000 shares). However, no person, together with associates and persons acting
in concert with such person, may purchase in the aggregate more than 1.0% of the
shares offered. Based on the offering of 15,072,815 shares 1.0% amounts to
150,728 shares.
- --------------------------------------------------------------------------------
Item 3 --
Please check this box to indicate whether you are an employee, officer or
trustee of The Hudson City Savings Institution or a member of such person's
immediate family living in the same household.
- --------------------------------------------------------------------------------
Item 4 --
Payment for shares may be made in cash (only if delivered by you in person to a
branch office of The Hudson City Savings Institution) or by check, bank draft or
money order made payable to The Hudson City Savings Institution. Your funds will
earn interest at the Bank's passbook rate of interest until the Conversion is
completed. DO NOT MAIL CASH TO PURCHASE STOCK! Please insert the total check(s)
amount in this box if your method of payment is by check, bank draft or money
order.
- --------------------------------------------------------------------------------
Item 5 --
If you pay for your stock by a withdrawal from a deposit account at The Hudson
City Savings Institution, insert the account number(s) and the amount of your
withdrawal authorization for each account. The total amount withdrawn should
equal the amount of your stock purchase. There will be no penalty assessed for
early withdrawals from certificate accounts used for stock purchases. This form
of payment may not be used if your account is an Individual Retirement Account
or Qualified Plan.
- --------------------------------------------------------------------------------
Item 6 --
a. Please check this box if you are an Eligible Account Holder with a deposit
account(s) totalling $100.00 or more on September 30, 1996.
b. Please check this box if you are a Supplemental Eligible Account Holder with
a deposit account(s) totalling $100.00 or more on March 31, 1998.
Please list all names on the account(s) and all account number(s) of accounts
you had at these dates in order to insure proper identification of your purchase
rights. Please note: Failure to list all your accounts may result in the loss of
part or all of your subscription rights.
- --------------------------------------------------------------------------------
Items 7, 8 and 9 --
The stock transfer industry has developed a uniform system of shareholder
registrations that we will be used in the issuance of your Hudson River Bancorp,
Inc. Common Stock. Please complete items 7, 8 and 9 as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening telephone number(s). We may need to call you if we
cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Stock ownership
must be registered in one of the ways described above under "Stock Ownership
Guide".
- --------------------------------------------------------------------------------
Item 10 --
Please check this box if you are a member of the NASD or if this item otherwise
applies to you.
- --------------------------------------------------------------------------------
Item 11 --
Please check this box if you or any associate (as defined on the reverse side of
the Stock Order Form) or person acting in concert with you has submitted another
order for shares and complete the reverse side of the Stock Order Form.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Item 12 --
Please sign and date the Stock Order Form and Certificate Form where indicated.
Before you sign, review the Stock Order Form, including the acknowledgement, and
the Certification Form. Normally, one signature is required. An additional
signature is required only when payment is to be made by withdrawal from a
deposit account that requires multiple signatures to withdraw funds.
- --------------------------------------------------------------------------------
You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to any branch office of The Hudson City Savings Institution.
Your Stock Order Form and Certification Form, properly completed, and payment in
full (or withdrawal authorization) at the subscription price must be physically
received by The Hudson City Savings Institution no later than 12:00 noon,
Eastern time, on ________, _____ __, 1998 or it will become void. If you have
any remaining questions, or if you would like assistance in completing your
Stock Order Form and Certification Form, you may call our Conversion Center
Monday through Friday from 10:00 a.m. to 4:00 p.m. The Conversion Center will be
closed for bank holidays.
- --------------------------------------------------------------------------------
Item (6) a, b -- (continued)
------------------------------------------------------------------
Account Title (Names on Accounts) Account Number(s)
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Account Title (Names on Accounts) Account Number(s)
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Item (11) -- (continued)
List below all other orders submitted by you or Associates (as defined) or by
persons acting in concert with you.
------------------------------------------------------------------
Number of Shares
Name(s) listed on other Stock Order Forms Ordered
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
"Associate" is defined as: (i) any corporation or organization (other than
Hudson River Bancorp, Inc. (the "Company") or the Hudson City Savings
Institution (the "Bank" or a majority-owned subsidiary of the Bank) of which
such person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities; (ii) any
trust or other estate in which such person has a substantial beneficial interest
or as to which such person serves as trustee or in a similar fiduciary capacity;
provided, however, that such term shall not include Richmond County Financial
Corp.'s or Richmond County Savings Bank's employee benefit plans in which such
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and (iii) any relative or spouse of such person, or
any relative of such spouse, who either has the same home as such person or who
is a director or officer of the Company or the Bank or any subsidiaries thereof.
Trustees, directors and officers of the Company or the Bank are not treated as
Associates solely because of their Board memberships.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
CERTIFICATION FORM
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
AND IS NOT INSURED OR GUARANTEED BY THE HUDSON CITY SAVINGS INSTITUTION, THE
FEDERAL GOVERNMENT OR BY ANY GOVERNMENT AGENCY. THE ENTIRE AMOUNT OF AN
INVESTOR'S PRINCIPAL IS SUBJECT TO LOSS.
I further certify that, before purchasing the Common Stock of Hudson River
Bancorp, Inc. (the "Company"), the proposed holding company for The Hudson
Savings Institution, I received a Prospectus of the Company dated _____ __,
1998 relating to such offer of Common Stock.
The Prospectus that I received contains disclosure concerning the nature of the
Common Stock being offered by the Company and describes in the "Risk Factors"
section of the Prospectus the risks involved in the investment in this Common
Stock, including but not limited to the:
1. Interest Rate Exposure (page )
2. Risks Associated with the Establishment of the
Charitable Foundation (page )
3. Source of Manufactured Home Loan Applications (page )
4. Risks Associated with Non-Residential Lending Activity (page )
5. Competition (page )
6. Takeover Defensive Provisions (page )
7. Post Conversion Overhead Expense (page )
8. Absence of Active Market for the Common Stock (page )
THIS CERTIFICATION MUST BE SIGNED IN ORDER TO PURCHASE STOCK
- -------------------------------------- --------------------------------------
Signature Date Signature Date
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Name (Please Print) Name (Please Print)
- -------------------------------------- --------------------------------------
- --------------------------------------------------------------------------------
