<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CNY FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 6035 REQUESTED
(State or Other (Primary Standard (I.R.S.
Jurisdiction Industry Employer
of Incorporation or Classification Code Identification
Organization) Number) No.)
</TABLE>
1 NORTH MAIN STREET, CORTLAND, NEW YORK 13045
TEL. NO. (607) 756-5643
(Address, Including Zip Code, and Telephone Number, Including
Area Code, or Registrant's Principal Executive Offices)
WESLEY D. STISSER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CORTLAND SAVINGS BANK
1 NORTH MAIN STREET, CORTLAND, NEW YORK 13045
(607) 756-5643
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
--------------------------
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
JAY L. HACK, ESQ.
CLIFFORD S. WEBER, ESQ.
Serchuk & Zelermyer, LLP
81 Main Street, White Plains, New York 10601
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 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(cc)
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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED BE REGISTERED OFFERING PRICE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 Par Value......... 8,262,318 $10.00 $82,623,180 $25,035
</TABLE>
(1) Estimated to calculate the registration fee. Includes shares to be donated
to a charitable foundation as described herein.
--------------------------
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.
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<PAGE>
Cross Reference Sheet Showing Location in the Prospectus Required by Items of
Form S-1:
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<CAPTION>
REGISTRATION STATEMENT ITEM AND CAPTION PROSPECTUS HEADINGS
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<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... The Conversion-Stock Pricing and Number of Shares to
be Issued
6. Dilution............................................. [Not Applicable]
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Front Cover Page; The Conversion--
Subscription Offering; --Community Offering;
--Syndicated Community Offering
9. Description of Securities to be Registered........... The Conversion--Restrictions on Transferability of
Subscription Rights and Common Stock; Restrictions
on Acquisition of the Company and the Bank;
Description of Capital Stock of the Company
10. Interests of Named Experts and Counsel............... Not Applicable
11. Information with Respect to the Registrant........... Front Cover Page; The Bank and the Company--CNY
Financial Corporation; -- Cortland Savings Bank;
Regulatory Capital Compliance; Dividend Policy;
Cortland Savings Bank Statements of Income;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business of
the Bank; Regulation; Management of the Company;
Management of the Bank; The Conversion; Description
of Capital Stock of the Company; Financial
Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Not Applicable
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT
CNY FINANCIAL CORPORATION
CORTLAND SAVINGS BANK
PARTICIPATION INTERESTS
THE CORTLAND SAVINGS BANK
401(K) SAVINGS PLAN
This Prospectus Supplement relates to the offer and sale to participants
(the "Participants") in the Cortland Savings Bank 401(k) Savings Plan (the
"Plan") of participation interests and shares of common stock, par value $.01
per share of CNY Financial Corporation (the "Common Stock"), as described below.
In connection with the proposed conversion of Cortland Savings Bank (the
"Bank") from a mutual savings bank to a stock savings bank (the "Conversion"),
the Plan has been amended to permit the investment of plan assets in Common
Stock of CNY Financial Corporation (the "Company"). The amendment allows each
Participant to direct the trustee of the Plan (the "Trustee") to purchase Common
Stock with amounts in the Plan attributable to that Participant. Based on the
value of the Plan assets ($2,327,263.70) at June 4, 1998, 232,726 shares of
Common Stock could be purchased with Plan assets (assuming a purchase price of
$10.00 per share). This Prospectus Supplement relates to the initial election of
a Participant to direct that all or a portion of his or her account be invested
in Common Stock in connection with the Conversion and also to elections by
Participants to direct that all or a portion of their accounts be invested in
Common Stock after the Conversion.
IMPORTANT NOTICE TO PARTICIPANTS: IF YOU INVEST A PORTION OF YOUR 401(K)
PLAN ASSETS IN COMMON STOCK OF CNY FINANCIAL CORPORATION, YOU WILL NOT BE
PERMITTED TO MAKE THE INVESTMENT AND THEN IMMEDIATELY RECEIVE A DISTRIBUTION OF
THE STOCK FROM THE 401(K) PLAN. THE TIMING OF DISTRIBUTIONS TO YOU FROM THE PLAN
WILL BE THE SAME AS FOR ALL OTHER INVESTMENTS IN THE PLAN.
The Prospectus dated , 1998 of the Company (the "Prospectus"),
which is attached to this Prospectus Supplement, includes information about the
Conversion, the Common Stock and the financial condition, results of operations
and business of the Bank. This Prospectus Supplement, which provides information
about the Plan, should be read only together with the Prospectus.
For a discussion of certain factors that should be considered by each
Participant before deciding to direct the Trustee to use Plan assets to purchase
any Common Stock, see "Risk Factors."
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 DEPARTMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR
ANY OTHER STATE OR FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS
SUCH COMMISSION OR OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMPANY'S COMMON STOCK IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT
FEDERALLY INSURED OR GUARANTEED. THE COMMON STOCK IS NOT GUARANTEED BY THE
COMPANY OR THE BANK. THE ENTIRE AMOUNT OF A PURCHASER'S INVESTMENT MAY BE LOST.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Bank or the Plan. This
Prospectus Supplement does not constitute an offer to sell or solicitation of an
offer to buy any securities in any jurisdiction 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 of Common
Stock shall under any circumstances create any implication that there has been
no change in the affairs of the Bank or the Plan since the date of this
Prospectus Supplement, or that the information contained in this Prospectus
Supplement is correct after the date of this Prospectus Supplement. This
Prospectus Supplement should be read only with the attached Prospectus and
should be retained for future reference.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE OFFERING.......................................................................... S-3
Securities Offered.................................................................... S-3
Election to Purchase Common Stock in the Conversion................................... S-3
Value of Participation Interests...................................................... S-3
Method of Directing Transfer.......................................................... S-3
Deadline for Directing Transfer....................................................... S-4
Transfer Direction Cannot be Revoked.................................................. S-4
Directions to Purchase Common Stock After the Conversion.............................. S-4
Purchase Price of Common Stock........................................................ S-4
Nature of a Participant's Interest in the Common Stock................................ S-4
Voting and Tender Rights.............................................................. S-4
DESCRIPTION OF THE PLAN............................................................... S-5
Introduction.......................................................................... S-5
Employee Retirement Income Security Act............................................... S-5
Reference to Full Text of Plan........................................................ S-5
Contributions Under the Plan.......................................................... S-5
Eligibility and Participation......................................................... S-6
Plan Contributions.................................................................... S-6
Bank Contributions.................................................................... S-6
Limitations on Contributions.......................................................... S-6
Investment of Contributions........................................................... S-8
Benefits Under the Plan............................................................... S-10
Withdrawals and Distributions......................................................... S-10
Administration of the Plan............................................................ S-11
Reports to Plan Participants.......................................................... S-11
Amendment and Termination............................................................. S-11
Merger, Consolidation or Transfer..................................................... S-11
Federal Income Tax Consequences....................................................... S-11
Restrictions on Resale................................................................ S-13
SEC Reporting and Short-Swing Profit Liability........................................ S-13
LEGAL OPINION......................................................................... S-14
INVESTMENT FORM....................................................................... S-15
</TABLE>
S-2
<PAGE>
THE OFFERING
SECURITIES OFFERED
The securities offered by this Prospectus Supplement are participation
interests in the Plan and up to 232,726 shares (assuming the actual purchase
price is $10.00 per share) of Common Stock which may be acquired by the Plan for
the accounts of employees participating in the Plan. The Company is the issuer
of the Common Stock. Only employees of the Bank may participate in the Plan. The
Common Stock will not be issued unless the Conversion occurs. A Participant's
ability to purchase Common Stock in the Conversion is limited by the
subscription priorities described in the Prospectus.
This Prospectus Supplement contains information about the Plan. The
Prospectus contains information about the Conversion, certain risk factors, the
financial condition, results of operations and business of the Bank and the
Company. The principal executive office of the Bank and the Company are located
at 1 North Main Street, Cortland, New York 13045. Their telephone number is
(607) 756-5643.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION
The Plan has been amended to allow each Participant to direct that all or
part of his or her portion of the assets of the Plan may be transferred to a
fund that will invest in Common Stock (the "Employer Stock Fund") and used to
purchase Common Stock issued in the Conversion. The Trustee of the Plan will
follow the Participants' directions. The ability of a Participant to use his or
her share of the assets of the Plan to purchase Common Stock in the Conversion
will depend upon the amount of Common Stock available and whether the
Participant is entitled to priority subscription rights because the Participant
had a deposit with the Bank with a balance of at least $100 on December 31, 1996
(first priority) or June 30, 1998 (third priority). The second priority goes to
the Employee Stock Ownership Plan of the Bank and the Company. For example, if a
Participant has only third priority subscription rights and all Common Stock
available is purchased by persons with higher priorities, none of the
Participant's funds will be transferred to the Employer Stock Fund to purchase
Common Stock.
Funds not transferred to the Employer Stock Fund will remain in the other
investment funds of the Plan as directed by the Participant. The transfer of
funds into the Employer Stock Fund will occur on or about the day the
Subscription Offering ends. If any funds transferred into the Employer Stock
fund are not used to purchase Common Stock because there is insufficient Common
Stock available or for any other reason, including inadvertent error, those
funds will be reinvested in the other funds of the Plan based upon the
Participant's prior directions.
VALUE OF PARTICIPATION INTERESTS
The assets of the Plan were valued as of June 4, 1998, at $2,327,263.70.
Each participant was last informed of the value of his or her interest in the
Plan as of , 1998. This value represented the market value of past
contributions to the Plan by the Bank and the Participants, adjusted for any
earnings, losses and withdrawals.
METHOD OF DIRECTING TRANSFER
At the end of this Prospectus Supplement there is a form to direct a
transfer to the Employer Stock Fund (the "Investment Form"). If a Participant
wants to transfer all or part of his or her interest in the assets of the Plan
to subscribe for Common Stock to be sold in the Conversion, he or she should
indicate that decision in Section 2 of the Investment Form. If a Participant
does not wish to make such an election, he or she does not need to take any
action.
S-3
<PAGE>
DEADLINE FOR DIRECTING TRANSFERS
Investment Forms must be received by the Human Resources Department of the
Bank no later than p.m. on , 1998 in order to be valid. WARNING:
This date is before the end of the subscription period in order to allow the
Trustee to submit an order form on behalf of the Plan.
TRANSFER DIRECTIONS CANNOT BE REVOKED.
A Participant may not revoke a direction to transfer amounts to the Employer
Stock Fund to purchase shares of Common Stock in the Conversion. Participants,
however, will be able to change their investment decisions from time to time, as
they have been able to do in the past, as explained below.
DIRECTIONS TO PURCHASE COMMON STOCK AFTER THE CONVERSION.
After the Conversion, a Participant may direct that part of his or her
interest in the Plan which is invested in other investment alternatives
available under the Plan be transferred to the Employer Stock Fund and invested
in Common Stock. A Participant may also direct that part of his or her interest
in the Employer Stock Fund be invested instead in other investment alternatives
available under the Plan. Participants may also direct that future contributions
to the Plan by or on their behalf be invested in Common Stock. After the initial
election, the allocation of a Participant's interest in the Employer Stock Fund
may be changed four times in any plan year by filing a written notice with the
plan administrator at least ten days before the effective date of the change.
Special restrictions apply to transfers by Participants who are officers,
directors and principal shareholders of the Company who are subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
as discussed below.
PURCHASE PRICE OF COMMON STOCK
The purchase price for shares of Common Stock purchased by the Trustee will
be the same price as is paid by all other persons who purchase Common Stock in
the Conversion.
Common Stock purchased by the Trustee after the Conversion will be acquired
in open market transactions. The prices paid by the Trustee for those shares
will not exceed "adequate consideration" as defined in Section 3(18) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Transaction fees resulting from the purchase, sale or transfer of Common Stock
by the Employer Stock und will be paid by the Employer Stock Fund.
NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK
The Common Stock will be held in the name of the Trustee for the Plan, as
trustee. Each Participant has an interest in the investments of the Plan but not
in any particular assets of the Plan. Accordingly, a specific number of shares
of Common Stock will not be directly attributable to the account of any
Participant. Earnings, E.G., gains and losses, are allocated to the account of a
Participant based on the investment designations of that Participant. Therefore,
earnings for a Participant's Account should not be affected by the investment
decisions of other Participants. However, in the Conversion, the investment
decisions of other Participants may affect the amount of Common Stock available
to satisfy the directions of each Participant.
VOTING AND TENDER RIGHTS
The Trustee generally will exercise voting and tender rights as directed by
Participants with interests in the Employer Stock Fund. For each matter on which
stockholders of the Company have a right to vote, each Participant will have
voting instruction rights based on that Participant's share of the Employer
Stock Fund. The vote cast by the Trustee on each matter will be proportionate to
the voting instructions received from Participants with interests in the
Employer Stock Fund. If there is a tender offer for Common Stock,
S-4
<PAGE>
each Participant will have tender instruction rights reflecting that
Participant's share in the Employer Stock Fund. The Trustee will then tender
shares of Common Stock in the Employer Stock Fund in the same as the percentage
as the tender instructions in favor of tendering. The remaining shares of Common
Stock held in the Employer Stock Fund will not be tendered. Participants may
exercise their voting and tender instruction rights confidentially.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Plan was effective on June 1, 1986, and was amended and restated
effective January 1, 1987. The Plan has since been amended seven times. The
amendments have generally addressed changes in ERISA. The Plan is established in
accordance with the requirements under Section 401(a) and Section 401(k) of the
Internal Revenue Code of 1986 (referred to in this Prospectus Supplement as the
"Code"). The amendment of the Plan permitting the creation of the Employer Stock
Fund will be submitted to the IRS in a timely manner for a determination that
the Plan, as amended, is qualified under Section 401(a) of the Code, and that
its related trust is qualified under Section 501(a) of the Code.
The Bank intends that the Plan will comply with the requirements under
Section 401(a) and Section 401(k) of the Code. The Bank will adopt any
amendments to the Plan that may be necessary to ensure the qualified status of
the Plan under the Code and applicable Treasury Regulations.
EMPLOYEE RETIREMENT INCOME SECURITY ACT
The Plan is an "individual account plan" other than a "money purchase
pension plan" within the meaning of ERISA. As such, the Plan is subject to all
of the provisions of Title I (Protection of Employee Benefit Rights) and Title
II (Amendments to the Internal Revenue Code Relating to Retirement Plans) of
ERISA, except the funding requirements contained in Part 3 of Title I of ERISA
which by their terms do not apply to this type of individual account plan. The
Plan is not subject to Title IV (Plan Termination Insurance) of ERISA.
THE PLAN IMPOSES SUBSTANTIAL RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT
TO WITHDRAW AMOUNTS HELD FOR HIS OR HER BENEFIT UNDER THE PLAN BEFORE THE
PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH THE BANK. A SUBSTANTIAL FEDERAL TAX
PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS MADE BEFORE THE PARTICIPANT REACHES
AGE 59-1/2, REGARDLESS OF WHETHER THE WITHDRAWAL OCCURS DURING EMPLOYMENT WITH
THE BANK OR AFTER TERMINATION.
REFERENCE TO FULL TEXT OF PLAN
The following statements are summaries of certain provisions of the Plan.
They are not complete and are qualified in their entirety by the full text of
the Plan. Copies of the Plan are available to all employees by filing a request
with the Plan Administrator, Wesley D. Stisser, Jr., at One North Main Street,
Cortland, New York 13045. The Plan Administrator's telephone number is (607)
756-5643. Each employee is urged to read carefully the full text of the Plan,
the Summary Plan Description for the Plan, and the summaries of all material
modifications that have been made to the Plan.
ELIGIBILITY AND PARTICIPATION
Any salaried employee of the Bank who has reached age 21 is eligible to
participate in the Plan on the first day of any calendar month following
completion of one year of service with the Bank Employer. Employees compensated
on an hourly basis and employees compensated on a daily, fee or retainer basis,
leased employees (within the meaning of Section 414(n) of the Code) and
employees covered by a
S-5
<PAGE>
collective bargaining agreement which does not expressly provide for their
coverage under the Plan, are not eligible to participate in the Plan.
As of June 11, 1998, there were approximately 75 employees eligible to
participate in the Plan, and 70 employees had elected to participate in the
Plan. There were an additional 10 former employees who have not yet received
full distribution of their Plan accounts and they will also have the right,
subject to the priority rules applicable to all subscribers
PLAN CONTRIBUTIONS
Each Participant in the Plan may elect to have from 2% to 10% of his or her
Compensation (as defined below) contributed to the Plan. Those amounts are
credited to the Participant's "Basic Contribution Account." For purposes of the
Plan, "Compensation" means a Participant's compensation from the Bank for the
year, before any reduction for amounts contributed to the Plan. Compensation
includes salary, wages and wage continuation to an employee who is absent due to
an illness or disability of a short-term nature and commissions paid on loan
originations. "Compensation" does not include expense allowances, commissions
other than those paid on the origination of loans, severance pay, fees, bonuses,
incentive payments, contributions other than Basic Contributions made to the
Plan and contributions made by the Bank to any other pension, insurance welfare
or other employee benefit plan. The annual compensation of each Participant
taken into account under the Plan is limited to $160,000 (adjusted for increases
in the cost of living as permitted by the Code). Generally, a Participant may
elect to modify the amount contributed to the Plan on his or her behalf not more
often than four times in any plan year by providing notice to the Plan
Administrator at least 10 days before commencement of the first day of the
payroll period for which the modification is to become effective. However,
special restrictions apply to persons subject to Section 16 of the Securities
Exchange Act of 1934. Basic Contributions are transferred by the Bank to the
Trustee of the Plan.
A Participant who receives a hardship distribution from the Plan may not
make Basic Contributions for twelve months after receiving the hardship
distribution.
BANK CONTRIBUTIONS
The Bank contributes to the Plan for each Plan Year 75% of the Participant's
Basic Contributions, up to 4.5% of the Participant's Compensation for the Plan
Year. The Bank's contributions are credited to the Participant's "Matching
Contribution Account." After the Conversion, at the discretion of the Bank, the
Bank's contributions made with respect to Participants who are Bank employees
will be credited to the Participant's Account in The CNY Financial Corporation
Employee Stock Ownership Plan. At its discretion, the Bank may make an
additional contribution to the Plan as of the end of the Plan Year in an amount
determined by the Bank for the purpose of ensuring that the Plan complies with
Section 401(k) of the Code. Such amounts are credited to Participants' "Special
Contribution Accounts" based on each Participant's compensation. Special
Contributions may be made only to the accounts of non-highly compensated
employees.
LIMITATIONS ON CONTRIBUTIONS
LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS. Contributions and forfeitures
allocated to each Participant's Basic Contribution Account and Matching
Contribution Account during any Plan Year may not exceed the lesser of 25% of
the Participant's Compensation for the Plan Year (as defined under Section 415
of the Code) or $30,000 (adjusted for increases in the cost of living as
permitted by the Code). A Participant's Section 415 Compensation is
Compensation, excluding any contribution by the Bank to the Plan or to any other
plan of deferred compensation or any distributions from a plan of deferred
compensation. In addition, annual contributions and forfeitures are limited to
the extent necessary to prevent the limitations set forth in the Code for all of
the qualified defined benefit plans and defined
S-6
<PAGE>
contribution plans maintained by the Bank from being exceeded. If these
limitations would be exceeded by any contributions or forfeitures with respect
to a Participant:
(i) Any excess amount in the Participant's Account will be used to reduce
the Bank's contributions for such Participant in future years;
(ii) If an excess amount still exists, and the Participant is not covered by
the Plan, the excess will be held in a suspense account and used to
reduce future Bank contributions for all remaining Participants;
(iii) Suspense accounts will not participate in investment gains and losses.
LIMITATION ON 401(K) PLAN CONTRIBUTIONS. A Participant may not make a Basic
Contribution in excess of $10,000 in 1998, which amount is adjusted annually for
inflation. Excess contributions will be included in the Participant's gross
income for federal income tax purposes in the year they are made. Excess
contributions will again be subject to federal income tax when distributed by
the Plan to the Participant, unless the excess (together with any income
allocable to the excess) is distributed to the Participant by April 15th after
the close of the taxable year in which the excess deferral is made. Any income
on the excess deferral that is distributed not later than that date shall be
treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.
LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES. Under
the Code, the contributions made by or on behalf of Highly Compensated Employees
(defined below) are limited when compared to the amounts contributed by or on
behalf of all other employees eligible to participate in the Plan. Participation
in the Plan is voluntary and no employee is required to defer salary under the
Plan. If Highly Compensated Employees participate in greater numbers, or defer a
greater percentage of their salary, than other employees, then the Plan might
provide benefits to Highly Compensated Employees which are so disproportionate
when compared to other employees that limits set in the Code may be violated. In
general, a Highly Compensated Employee includes any employee who, during the
Plan Year or the preceding Plan Year, (1) at any time directly or indirectly
owned 5% of the Bank, or (2) received compensation from the Bank in excess of
$80,000. The amounts are adjusted annually to reflect increases in the cost of
living. In addition, the compensation of an employee who is a family member of a
5% owner, or one of the ten most highly compensated employees during the
relevant period, is aggregated with that of the Highly Compensated Employee. All
such family members are treated as a single employee when calculating limits on
Highly Compensated Employees.
If the Code limits are violated, excess contributions by Highly Compensated
Employees and related income are distributed to such Highly Compensated
Employees. The Bank must pay a 10% excise tax unless the excess contributions,
together with any related income, either are recharacterized or are distributed
no later than 2-1/2 months after the Plan Year to which the excess contributions
relate.
TOP-HEAVY PLAN REQUIREMENTS. If for any Plan Year the Plan is a Top-Heavy
Plan (as defined below), then (i) the Bank may be required to make certain
minimum contributions to the Plan on behalf of non-key employees (as defined
below), and (ii) certain additional restrictions would apply with respect to the
combination of annual additions to the Plan and projected annual benefits under
any defined benefit plan maintained by the Bank. In general, the Plan will be
regarded as a "Top-Heavy Plan" for any Plan Year if, as of the last day of the
preceding Plan Year, the aggregate balance of the Accounts of Participants who
are Key Employees exceeds 60% of the aggregate balance of the Accounts of all
Participants. Key Employees generally include any employee who, at any time
during the Plan Year or any of the four preceding Plan Years, is (1) an officer
of the Bank having annual compensation in excess of $45,000 who is in an
administrative or policy-making capacity; (2) one of the ten employees having
annual compensation in excess of $30,000 and owning, directly or indirectly, the
largest interests in the Bank (but excluding any employee with an ownership
interest of less than 0.5%); (3) a 5% owner of the Bank; or (4) a 1% owner of
the Bank having annual compensation in excess of $150,000.
S-7
<PAGE>
INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participants' Accounts under the Plan are held in
the Plan Trust (the "Trust") which is administered by the Trustee appointed by
the Bank's Board of Trustees. Plan assets may be invested in the following
funds:
a. Core Equity Fund;
b. Emerging Growth Equity Fund;
c. Value Equity Fund;
d. Intermediate--Term Bond Fund;
e. Actively Managed Bond Fund; and
f. Short-Term Investment Fund.
g. International Equity Fund.
In addition, as a result of the amendment of the Plan, a Participant may
also direct that all or a portion of his or her interest in the Trust be
invested in the Employer Stock Fund.
Once in each calendar quarter, a Participant may elect (in increments of
1%), to have both past and future contributions and additions to their Accounts
invested either in the Employer Stock Fund or among such other Funds. These
elections will be effective on the effective date of the Participant's written
notice to the plan administrator, provided such notice is filed with the
administrator at least 10 days before it is to become effective. Any amounts
credited to a Participant's Accounts for which investment directions are not
given will be invested in accordance with the terms of the Plan. Because
investment allocations only are required to be made in increments of 1%, lack of
diversification with respect to the investment of a Participant's Account should
not be a significant risk given the investment options available to Participants
and the ability of Participants to make investment designations four times each
year.
A Participant who receives a loan from the Plan has a separate account
established under the Plan. The balance of a Participant's loan account
represents the unpaid principal and interest (if any) of such participant's loan
from the Plan. Repayments of principal and payments of interest on loans are
invested by the Trustee as directed by the Participant or, if no investment
directions are given, in accordance with the terms of the Plan.
The net gain (or loss) of the Funds from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) will be determined at least monthly during the
Plan Year. For purposes of allocations of investments among the Funds, all
assets of the Trust are valued at their fair market value.
A. Existing Funds.
The annual percentage return on the funds available for investment prior to
the most recent amendment of the Plan for the prior three years -was:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
a. Core Equity Fund.................................................. 25.32% 21.53% 40.17%
b. Emerging Growth Equity Fund....................................... 8.25% 27.09% 42.83%
c. Value Equity Fund................................................. 31.70% 25.90% 33.96%
d. Intermediate-Term Bond Fund....................................... 7.07% 27.09% 42.83%
e. Actively Managed Bond Fund........................................ 9.70% 3.15% 17.70%
f. Short-Term Investment Fund........................................ 4.93% 4.70% 5.39%
g. International Equity Fund......................................... 0.92% 10.86% 12.46%
</TABLE>
B. The Employer Stock Fund.
The Employer Stock Fund will consist of investments in Common Stock made on
and after the effective date of the Conversion. Cash dividends, if any, paid on
Common Stock held in the Employer
S-8
<PAGE>
Stock Fund will be credited to a cash dividend subaccount for each Participant
investing in the Employer Stock Fund. The Board of Directors of the Company may
consider a policy of paying cash dividends on the Common Stock in the future;
however, no decision as to the amount or timing of cash dividends, if any, has
been made. The Trustee will, to the extent practicable, use all amounts held by
it in the Employer Stock Fund (except the amounts credited to cash dividend
subaccounts) to purchase shares of Common Stock of the Company. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances, the Trustee may be required to limit the daily volume of shares
purchased. Pending investment in Common Stock, assets held in the Employer Stock
Fund will be placed in bank deposits and other short-term investments.
When Common 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.
Participants' Accounts will also be adjusted for any brokerage commissions,
transfer fees and other expenses incurred in the sale and purchase of Common
Stock for the Employer Stock Fund. A Participant's Account will be adjusted to
reflect changes in the value of shares of Common Stock resulting from stock
dividends, stock splits and similar changes.
As of the date of this Prospectus Supplement, no Common Stock has been
issued and there is no established market for the Common Stock. Accordingly,
there is no record of the historical performance of the Employer Stock Fund.
Performance will depend on a number of factors, including the financial
condition and profitability of the Company and the Bank and market conditions
generally.
INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN SPECIAL RISKS.
FOR A DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" IN THE PROSPECTUS.
BENEFITS UNDER THE PLAN
VESTING. A Participant has a fully vested, nonforfeitable interest in his
or her Basic Contribution Account and all related earnings. A Participant vests
in his or her Matching Contribution Account under the Plan according to the
following schedule:
<TABLE>
<CAPTION>
PERIOD OF SERVICE VESTED PERCENTAGE
- ---------------------------------------------------------------------------- -------------------
<S> <C>
less than 1 year 0%
1 years 20%
2 years 40%
3 years 60%
4 years 80%
5 or more years 100%
</TABLE>
WITHDRAWALS AND DISTRIBUTIONS
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT. A Participant may make a
withdrawal from his or her Basic Contribution Account subject to the hardship
distribution rules under the Plan. These requirements insure that Participants
have a true financial need before a withdrawal may be made. However, such
withdrawals may not be made more often than two times during any Plan Year. A
Participant may make a withdrawal from his or her Basic Contribution Account or
Rollover Contribution Account after he or she turns 59 1/2.
DISTRIBUTION UPON RETIREMENT, DISABILITY OR TERMINATION OF
EMPLOYMENT. Payment of benefits to a Participant who retires, incurs a
disability, or otherwise terminates employment generally shall be made in a lump
sum cash payment as soon as administratively feasible after such termination of
employment if the vested value of the Participant's Account is $5,000 or less.
If the vested portion of the Participant's Account balance is greater than
$5,000, the Participant may request a distribution (subject to the minimum
distribution rules) in a lump sum payment: (a) as soon as administratively
possible after termination, (b) as of any Valuation Date up to 13 months after
termination or (c) as of the date the Participant attains
S-9
<PAGE>
normal retirement age. At the request of the Participant, the distribution may
include an in kind distribution of Common Stock of the Company credited to the
Participant's Account. Benefit payments ordinarily shall be paid not later than
60 days following the end of the Plan Year in which occurs the latest of the
Participant's: (i) termination of employment; (ii) the attainment of age 65 or
(iii) 10th anniversary of commencement of participation in the Plan; but in no
event later than the April 1 following the calendar year in which the
Participant attains age 70 1/2. However, if the vested portion of the
Participant's Account balances exceeds $5,000, no distribution shall be made
from the Plan prior to the Participant's attaining age 65 unless the Participant
elects to receive to an earlier distribution.
DISTRIBUTION UPON DEATH. A Participant who dies before the payment of
benefits commences and who has a surviving spouse shall have his or her benefits
paid to the surviving spouse in a lump sum as soon as administratively possible
after death, unless the Participant elected prior to his or her death or the
beneficiary so elects within 90 days of the Participant's death, to receive such
distribution in a lump sum payment as of any Valuation Date which occurs within
one year of the Participant's death. An unmarried Participant, and a married
Participant with spousal consent, may have payments made to a designated
beneficiary in a lump-sum payment in cash or in Common Stock in the same manner
described in the preceding sentence.
TRANSFER OF BENEFITS PROHIBITED. Except for federal income tax withholding
and as allowed in qualified domestic relations orders (as defined in the Code),
benefits payable under the Plan may not be sold, transferred, assigned, pledged,
encumbered, garnished, levied on, or otherwise disposed of, either voluntary or
involuntary. Any attempt to do so shall be void.
ADMINISTRATION OF THE PLAN
THE TRUSTEE. The Trustee with respect to the Plan is the named fiduciary of
the Plan for purposes of Section 402 of ERISA. The Trustee is appointed by the
Board of Directors of the Bank to serve at its pleasure. The current Trustee of
the Plan is the RSI Retirement Trust, 317 Madison Avenue, New York, New York
10017. However, an additional Trustee is being appointed to hold funds invested
in the Employer Stock Fund. The Trustee receives, holds and invests the
contributions to the Plan in trust and distributes them to Participants and
beneficiaries in accordance with the terms of the Plan and the directions of the
Plan Administrator. The Trustee is responsible for investment of the assets of
the Trust.
THE PLAN ADMINISTRATOR. The Plan is administered by one or more persons who
are appointed by and who serve at the pleasure of the Bank (the
"Administrator"). Currently, the Administrator is Wesley D. Stisser, Jr.,
President. The address and telephone number of the Administrator is c/o Cortland
Savings Bank, One North Main Street, Cortland, New York 13045, (607) 756-5643.
The Administrator administers the Plan, interprets its provisions, sets
procedures for filing applications for benefits, prepares and distributes
information explaining the Plan, maintains Plan records, books of account and
all other data necessary for the proper administration of the Plan, and prepares
and files 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 all disclosures
required to be made to Participants, Beneficiaries and others under ERISA.
REPORTS TO PARTICIPANTS.
The Administrator will give each Participant a statement at least quarterly
showing (i) the balance in the Participant's Account as of the end of that
period, (ii) the amount of contributions allocated to that Participant's Account
for that period, and (iii) the adjustments to such that Participant's Account to
reflect earnings or losses (if any).
S-10
<PAGE>
AMENDMENT AND TERMINATION
The Bank intends to continue the Plan indefinitely, but the Bank may
terminate the Plan at any time. If the Bank terminated the Plan in whole or in
part, then each Participant will have a fully vested interest in his or her
Accounts. The Bank may amend the Plan. The amendments may 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 the Bank
may make any amendment it determines necessary or desirable, with or without
retroactive effect, to comply with ERISA.
MERGER, CONSOLIDATION OR TRANSFER
If the Plan is merged or consolidated with another plan, or the assets of
the Trust are transferred to another plan, each Participant would (if either the
Plan or the other plan then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he or she would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated).
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of some of the federal income tax aspects
of the Plan 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. Moreover, tax laws and their interpretations may
change, and their application may vary in individual circumstances. Finally, the
effects of state and local income tax laws may not be the same as under the
federal income tax laws.
S-11
<PAGE>
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS
WITH RESPECT TO ANY TRANSACTIONS INVOLVING THE PLAN.
The Plan, as amended, will be submitted to the IRS in a timely manner for a
determination that it is qualified under Section 401(a) and 401(k) of the Code,
and that the related Trust is exempt from tax under Section 501(a) of the Code.
A plan that is "qualified" has special tax benefits which include: (1) The
sponsoring employer is allowed an immediate tax deduction for the amount
contributed to the Plan each year; (2) Participants pay no current income tax on
amounts contributed by the employer on their behalf; and (3) earnings of the
plan are tax-exempt, allowing the tax-free accumulation of income and gains on
investments. The Plan will be administered to comply in operation with the
requirements of the Code as of the applicable effective date of any change in
the law. The Bank expects to timely adopt any amendments to the Plan that may be
necessary to maintain the qualified status of the Plan under the Code. Following
such an amendment, the Bank will submit the Plan to the IRS for a determination
that the Plan, as amended, continues to qualify under Sections 401(a) and 501(a)
of the Code and that it continues to satisfy the requirements for a qualified
cash or deferred arrangement under Section 401(k) of the Code. If the Plan
receives an adverse determination letter from the IRS regarding its tax exempt
status, all Participants would generally have taxable income equal to their
vested interest in the Plan; the Participants would not be permitted to transfer
amounts distributed from the Plan to an IRA or to another qualified retirement
plan, and the Bank may be denied certain deductions taken with respect to the
Plan.
LUMP SUM DISTRIBUTION. A distribution from the Plan to a Participant or the
beneficiary of a Participant will qualify as a Lump Sum Distribution if it is
made: (i) within one taxable year of the Participant or beneficiary; (ii) on
account of the Participant's death, disability or separation from service, or
after the Participant attains age 59 1/2; and (iii) consists of the balance to
the credit of the Participant under this Plan and all other profit sharing
plans, if any, maintained by the Bank. The portion of any Lump Sum Distribution
that is required to be included in the Participant's or beneficiary's taxable
income for federal income tax purposes (the "total taxable amount") consists of
the entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Participant to any other profit sharing plans
maintained by the Bank which is included in such distribution.
AVERAGING RULES. The portion of the total taxable amount of a Lump Sum
Distribution that is attributable to participation after 1973 in the Plan or in
any other profit-sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes. However, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in this Plan or any other profit-sharing plan maintained by the Employers), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. Under a special grandfather rule, individuals who
turned 50 by 1986 may elect to have their Lump Sum Distribution taxed under
either the five-year averaging rule or under the prior law ten-year averaging
rule. Such individuals also may elect to have that portion of the Lump Sum
Distribution attributable to the participant's pre-1974 participation in the
Plan taxed at a flat 20% rate as gain from the sale of a capital asset.
COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION. If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain
S-12
<PAGE>
or loss on its subsequent sale will be the value of the Common Stock at the time
of distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock. The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations to be issued by the IRS.
ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN OR TO AN
IRA. Virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an IRA. Participants may elect to have the Trustee transfer
all or any portion of an "eligible rollover distribution" directly to another
plan qualified under Section 401(a) of the Code or to an IRA. If the Participant
does not elect to have an "eligible rollover distribution" transferred directly
to another qualified plan or to an IRA, the distribution will be subject to a
mandatory federal withholding tax equal to 20% of the taxable distribution. An
"eligible rollover distribution" means any amount distributed from the Plan
except: (1) a distribution that is (a) one of a series of substantially equal
periodic payments made (not less frequently than annually) over the
Participant's life or the joint life of the Participant and the Participant's
designated beneficiary, or (b) for a specified period of ten years or more; (2)
any amount that is required to be distributed under the minimum distribution
rules; and (3) any other distributions excepted under applicable federal law.
RESTRICTIONS ON RESALES
Any person receiving shares of Common Stock under the Plan who is an
"affiliate" of the Company as the term "affiliate" is used in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act") may reoffer or resell
such shares only if either there is a registration statement for the securities
under the Securities Act of 1933 or, 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 the Company should consult with counsel
before transferring any Common Stock owned by him. Persons who are not
"affiliates" of the Company may resell any shares of Common Stock distributed to
them under the Plan, either publicly or privately, without satisfying the
standards applicable to affiliates.
An affiliate will not be permitted to use this Prospectus in connection with
any resale of Common Stock. In general, under Rule 144, an Affiliate may sell,
in any three-month period, not more than the greater of one percent of the
Company's Common Stock then outstanding or the average weekly trading volume of
the Common Stock during the four calendar weeks prior to the sale. Such sales
may be made only through brokers without solicitation and only at a time when
the Company is current in filing the reports required of it under the Securities
Exchange Act of 1934.
SEC REPORTING AND SHORT SWING PROFIT LIABILITY
Section 16 of the Securities Exchange Act of 1934 imposes reporting and
liability requirements on executive officers, directors and persons beneficially
owning more than ten percent of public companies such as the Company. Section
16(a) requires that such persons file reports of beneficial ownership. Within
ten days after becoming subject to the reporting requirements of Section 16(a),
a person must file a statement of initial beneficial ownership with the
Securities and Exchange Commission. Certain changes in beneficial ownership,
such as purchases, sales, gifts and participation in savings and retirement
plans must be reported periodically, either on a Form 4 within ten days after
the end of the month in which a change occurs, or annually on a Form 5 within 45
days after the close of the Company's fiscal year. Participation in the Employer
Stock Fund of the Plan by executive officers, directors and persons beneficially
owning more than ten percent of Common Stock of the Company must be reported to
the SEC annually on a Form 5 by
S-13
<PAGE>
such individuals. At March 31, 1998, 14.5% of the Plan assets were allocated to
persons who are now executive officers and directors of the Bank.
Section 16(b) provides for the recovery by the Company of profits realized
by any executive officer, director or any person beneficially owning more than
ten percent of the Company's Common Stock ("Section 16(b) Persons") resulting
from the purchase and sale or sale and purchase of the Company's Common Stock
within any six-month period.
The SEC has adopted rules that provide exemption from the profit recovery
provisions of Section 16(b) for participant-directed employer security
transactions within an employee benefit plan, such as the Plan, if certain
requirements are met. These requirements generally involve restrictions upon the
timing of elections to acquire or dispose of employer securities for the
accounts of Section 16(b) Persons.
Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, persons subject to Section 16(b) must hold shares of Common Stock
distributed from the Plan for six months following such distribution.
LEGAL OPINION
The validity of the issuance of the Common Stock will be passed upon by
Serchuk & Zelermyer, LLP, White Plains, New York, which firm acted as special
counsel for the Bank and the Company in connection with the Bank's Conversion
from a mutual savings bank to a stock savings bank.
S-14
<PAGE>
CORTLAND SAVINGS BANK
401(K) SAVINGS PLAN
INVESTMENT FORM
Name of Plan Participant: _______________ Social Security Number: ______________
1. INSTRUCTIONS. In connection with the proposed Conversion of Cortland
Savings Bank from a mutual avings bank to a stock savings bank (the
"Conversion"), The Cortland Savings Bank 401(k) Savings Plan ("Plan") has been
amended to permit participants to direct their current account balances for
their Basic Contribution Account, Company Contribution Account, Rollover Account
and Special Contribution Account into a new fund: the Employer Stock Fund. The
percentage of a participant's account transferred at the direction of the
participant into the Employer Stock Fund will be used to purchase shares of
common stock of CNY Financial Corporation (the "Common Stock"). To direct a
transfer of all or a part of the funds credited to your accounts to the Employer
Stock Fund, you should complete and file this form with , no later
than , 1998. A representative for the Plan Administrator will retain
a copy of this form and return a copy to you. If you need any assistance in
completing this form, please contact the Stock Center at (607) - . If you
do not complete and return this form to the Plan Administrator by ,
the funds credited to your accounts under the Plan will continue to be invested
in accordance with your prior investment direction, or in accordance with the
terms of the Plan if no investment direction has been provided.
2. INVESTMENT DIRECTIONS. I hereby direct the Plan Administrator to invest
the following percentage (in multiples of not less than 5%) of my Basic
Contribution Account, Company Contribution Account, Rollover Account and Special
Contribution Account in the:
<TABLE>
<S> <C>
Core Equity Fund....................................................%
Emerging Growth Fund................................................%
Value Equity Fund...................................................%
Intermediate--Term Investment Fund..................................%
Actively Managed Bond Fund..........................................%
Short-Term Investment Fund..........................................%
International Equity Fund...........................................%
Employer Stock Fund.................................................%
</TABLE>
NOTE: The total percentage of directed investments, above, may not exceed
100%.
ACKNOWLEDGMENT OF PARTICIPANT. I understand that this Investment Form shall
be subject to all of the terms and conditions of the Plan. I acknowledge that I
have received a copy of the Prospectus and the Prospectus Supplement.
<TABLE>
<S> <C>
Signature of Participant Date:
</TABLE>
ACKNOWLEDGMENT OF RECEIPT BY ADMINISTRATOR. This Investment Form was
received by the Plan Administrator on the date noted below.
Wesley D. Stisser, Jr., Plan Administrator, by his duly authorized
representative: ________________________________________________________________
Date ___________________________________________________________
S-15
<PAGE>
CNY FINANCIAL CORPORATION
(PROPOSED HOLDING COMPANY FOR CORTLAND SAVINGS BANK)
7,043,750 SHARES OF COMMON STOCK--$10.00 PER SHARE
THERE IS A GLOSSARY ON PAGE WHICH EXPLAINS SOME OF THE CAPITALIZED TERMS USED
IN THIS PROSPECTUS.
CNY Financial Corporation, also referred to as the Company, is offering up
to 7,043,750 shares of its common stock, par value $.01 per share, for $10.00
per share as part of the conversion of Cortland Savings Bank, also referred to
as the Bank, into a stock savings bank. The Company may increase the amount of
Common Stock offered to 8,100,312 shares. See footnote 4 to the table below.
(CONTINUED ON NEXT PAGE)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR COMMON STOCK, CALL (607) .
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE .
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE NEW YORK STATE BANKING DEPARTMENT OR ANY OTHER
FEDERAL OR STATE AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, DEPARTMENT OR OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ESTIMATED UNDERWRITING FEES ESTIMATED NET
PURCHASE PRICE(1) AND OTHER EXPENSES(2) CONVERSION PROCEEDS(3)
<S> <C> <C> <C>
Per Share........................... $10.00 $0.35 $9.65
Minimum Total....................... $52,062,500 $1,750,000 $50,312,500
Midpoint Total...................... $61,250,000 $1,750,000 $59,500,000
Maximum Total....................... $70,437,500 $1,750,000 $68,687,500
Maximum Total, as adjusted(4)....... $81,003,120 $1,837,000 $79,166,120
</TABLE>
(1) Based on an independent appraisal by RP Financial, LC., dated as of June 5,
1998. The appraisal is based upon estimates and projections that may change.
The appraisal is not a recommendation to purchase Common Stock nor an
assurance that a purchaser will be able to sell Common Stock at or above the
$10.00 per share initial purchase price. See "The Conversion--Stock Pricing
and Number of Shares to be Issued."
(2) Consists of estimated costs of the Conversion, including marketing fees to
be paid to CIBC Oppenheimer Corp. and Trident Securities, Inc. See "Pro
Forma Data" for a description of the assumptions used in these estimates.
Actual fees and expenses may vary from the estimates.
(3) Actual net proceeds may be substantially different from estimated amounts.
Net proceeds include the proceeds from the purchase of Common Stock by the
CNY Financial Corporation ESOP, which the Company intends to fund with a
loan. See "Use of Proceeds" and "Pro Forma Data." This excludes shares of
Common Stock to be contributed to the charitable foundation to be created as
part of the Conversion. See "The Conversion--Establishment of the
Foundation."
(4) This row shows the effect of selling 15% more shares of Common Stock. The
additional Common Stock may be sold, without re-solicitation of subscribers
or any right of cancellation, due to regulatory or market considerations and
general financial and economic conditions. See "Pro Forma Data" and "The
Conversion--Stock Pricing and Number of Shares to Be Issued."
THE SHARES OF COMMON STOCK OF THE COMPANY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENT
AGENCY.
CIBC OPPENHEIMER TRIDENT SECURITIES, INC.
The date of this Prospectus is August , 1998.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The conversion of the Bank from mutual to stock ownership, and the sale of
the Common Stock offered by this Prospectus, known as the "Conversion," will not
occur unless, among other things, (i) the depositors of the Bank approve the
Bank's Plan of Conversion by a majority of the votes eligible to be cast and by
75% of the dollar amount of deposits present, (ii) all required federal and
state approvals are received, and (iii) the Company is able to sell at least
$52,062,500 of Common Stock. See "The Conversion--Conditions and Termination."
The non-transferable right to subscribe for the Common Stock has been
granted, in the following order of priority, to:
FIRST PRIORITY--Depositors of the Bank with balances of at least $100 on
December 31, 1996.
SECOND PRIORITY--Tax-qualified employee benefit plans of the Bank or the
Company.
THIRD PRIORITY--Depositors of the Bank with balances of at least $100 on
June 30, 1998.
IT IS ILLEGAL FOR ANY DEPOSITOR TO TRANSFER SUBSCRIPTION RIGHTS. PERSONS
VIOLATING THIS PROHIBITION MAY LOSE THEIR RIGHT TO SUBSCRIBE FOR COMMON STOCK
AND MAY SUFFER OTHER PENALTIES. The offer of Common Stock by the Company to the
three priority groups is referred to as the "Subscription Offering." The Company
anticipates that any shares remaining unsold after the Subscription Offering
will be sold in a direct community offering by the Company or, if any shares
remain unsold after such direct community offering, in a syndicated community
offering through a syndicate of broker-dealers organized by CIBC Oppenheimer
Corp. and Trident Securities, Inc. See "The Conversion--Community Offering" and
"--Syndicated Community Offering."
The Company anticipates that at the completion of the Conversion it will
contribute to a new charitable foundation an amount of Common Stock equal to 2%
of the Common Stock sold in the Conversion and may contribute up to $100,000 in
cash for start up expenses and initial operations. See "The
Conversion--Establishment of the Foundation."
The Company's ESOP will subscribe for 8% of the shares of Common Stock
issued in the Conversion, including the shares to be contributed to the
Foundation. If all the shares are sold to the persons with first priority
rights, the ESOP may purchase some or all of its shares in the open market after
the Conversion. Shares purchased by the ESOP are anticipated to be funded by a
loan from the Company to be repaid over a period of up to fifteen years.
Except for the ESOP, no person, individually or together with associates or
other persons acting together, may purchase more than $150,000 of Common Stock
in the Conversion. This limit may be increased in the sole discretion of the
Bank or the Company. The minimum purchase is 25 shares. See "The
Conversion--Purchase Limitations."
CIBC Oppenheimer Corp. and Trident Securities, Inc. will consult with and
advise the Company and the Bank regarding the sale of Common Stock and they have
agreed to use their reasonable best efforts to assist the Company in soliciting
subscriptions. However, they are not obligated to take or purchase any Common
Stock. The Company and the Bank have agreed to indemnify them against certain
liabilities arising under the Securities Act of 1933. See "The
Conversion--Marketing Arrangements."
The Subscription Offering will terminate at 12:00 noon, New York time, on
, 1998 unless extended by the Bank and the Company, with the
approval of the Superintendent and the FDIC, if necessary. The Company must
receive executed original order forms with payment in full at $10.00 per share
(or appropriate instructions authorizing withdrawal from a deposit account) by
that date for the order forms to be valid in the Subscription Offering. See "The
Conversion--Subscription Offering" and "--Purchasing Common Stock."
The Company has received conditional approval from The Nasdaq Stock Market,
Inc. to have the Common Stock quoted on the Nasdaq National Market under the
symbol "CNYF" upon completion of the Conversion.
2
<PAGE>
MAP OF CORTLAND COUNTY
NEW YORK SHOWING BANK BRANCHES
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Glossary................................................................................................... 5
Summary.................................................................................................... 7
Selected Financial Information............................................................................. 13
Risk Factors............................................................................................... 15
Forward-Looking Statements................................................................................. 22
The Bank and the Company................................................................................... 23
Regulatory Capital Compliance.............................................................................. 24
Use of Proceeds............................................................................................ 25
Dividend Policy............................................................................................ 26
Market for the Common Stock................................................................................ 26
Capitalization............................................................................................. 27
Pro Forma Data............................................................................................. 28
Comparison of Valuation and Pro Forma Information With and Without Foundation.............................. 34
Participation by the Board and Senior Management........................................................... 35
The Conversion............................................................................................. 35
Cortland Savings Bank Consolidated Statements of Income.................................................... 51
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 52
Business of the Company.................................................................................... 67
Business of the Bank....................................................................................... 68
Regulation................................................................................................. 89
Taxation................................................................................................... 96
Management of the Company.................................................................................. 97
Management of the Bank..................................................................................... 100
Restrictions on Acquisition of the Company and the Bank.................................................... 110
Description of Capital Stock of the Company................................................................ 115
Transfer Agent and Registrar............................................................................... 116
Experts.................................................................................................... 116
Legal and Tax Opinions..................................................................................... 116
Additional Information..................................................................................... 116
Index to Financial Statements.............................................................................. F-1
</TABLE>
4
<PAGE>
GLOSSARY
This Glossary explains some of the important capitalized terms used in this
Prospectus. At the end of the Glossary is a section entitled "Navigating Around
This Prospectus" which provides some helpful hints in reading this Prospectus.
"BANK" means Cortland Savings Bank.
"BANKING DEPARTMENT" means The New York State Banking Department.
"BANKING LAW" means the New York State Banking Law.
"COMMUNITY OFFERING" means the offer and sale of Common Stock to the general
public of shares not subscribed for in the Subscription Offering, with
preference given to natural persons residing in Cortland County, New York.
"COMMON STOCK" means the common stock, par value of $.01 per share, of CNY
Financial Corporation offered in connection with the Conversion.
"COMPANY" means CNY Financial Corporation, the holding company for Cortland
Savings Bank, and the issuer of the Common Stock being offered by this
Prospectus.
"CONVERSION" means the conversion of the Bank from the mutual to the stock
form of organization, the organization of the Company, the issuance of all of
the Bank's common stock to the Company, and the sale of the Company's Common
Stock as described in this Prospectus.
"CONVERSION REGULATIONS" means Part 86 of the General Regulations of the New
York State Banking Board, which are the principal regulations which govern the
Conversion.
"DIRECTORS" means, as to the Bank, the trustees of the Bank before the
Conversion and the directors of the Bank after the Conversion.
"ELIGIBLE ACCOUNT HOLDERS" means persons with deposit accounts of at least
$100 at December 31, 1996. Eligible Account Holders have the first priority to
subscribe for Common Stock.
"ESOP" means the Employee Stock Ownership Plan of the Company.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL RESERVE" means the Board of Governors of the Federal Reserve
System.
"FHLBNY" means the Federal Home Loan Bank of New York.
"FOUNDATION" means the Cortland Savings Foundation to be established by the
Bank and the Company. The Company will contribute 2% of the Common Stock sold in
the Conversion to the Foundation and may contribute up to an additional
$100,000.
"401(K) PLAN" means the Savings and Profit Sharing Plan of the Bank.
"NASD" means the National Association of Securities Dealers, Inc.
"PLAN OF CONVERSION" means the plan of conversion adopted by the Board of
Directors of the Bank which allows for the Conversion and sets forth the
procedures for the Conversion to be accomplished.
"PERSONNEL RECOGNITION AND RETENTION PROGRAM" or "PRRP" means the plan
expected to be submitted to the Company's stockholders for approval no earlier
than six months after the Conversion. The PRRP is expected to allow for grants
of stock in an aggregate amount equal to 4% of the Common Stock issued in the
Conversion, including Common Stock contributed to the Foundation.
"SEC" means the Securities and Exchange Commission.
5
<PAGE>
"STOCK OPTION PLAN" means the plan expected to be submitted to the Company's
stockholders for approval no earlier than six months after the Conversion. The
Company expects that the plan will allow for the grant of options to purchase
stock in an aggregate amount equal to 10% of the Common Stock issued in the
Conversion, including Common Stock contributed to the Foundation.
"SUBSCRIPTION EXPIRATION DATE" means 12:00 noon, New York Time, on ,
1998.
"SUBSCRIPTION OFFERING" means the offer and sale of Common Stock to certain
depositors of the Bank and the ESOP.
"SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS" means persons who are not Eligible
Account Holders and who had deposit accounts of at least $100 on June 30, 1998.
Supplemental Eligible Account Holders have the third priority to subscribe for
Common Stock.
"SUPERINTENDENT" means the Superintendent of Banks of the State of New York.
"VALUATION RANGE" means the estimate by RP Financial, LC. of what the total
pro forma market value of the Common Stock of the Company will be on the day the
Conversion is completed, excluding shares contributed to the Foundation. The
Valuation Range is from $52,062,500 (known as the minimum) to $70,437,500 (known
as the maximum), with a midpoint of $61,250,000.
NAVIGATING AROUND THIS PROSPECTUS
This Prospectus is divided into sections. Each section has a title, which
appears centered in the middle of a line in bold all capital letters at the
beginning of the section. The titles of the sections, and the page where each
begins, are shown in the table of contents appearing just before this Glossary.
Sections are divided with minor headings that appear before groups of related
paragraphs, printed in bold letters at the left margin. Within some of the minor
headings, there are sub-headings. The sub-headings are typed in italics and
appear at the beginning of a paragraph.
Often in a Prospectus there are cross-references, which means that in one
discussion there is a reference to another related discussion elsewhere in the
Prospectus. These are accomplished by using the word "See" followed by the title
of the section where the related information is found. If the information is
included in only a minor heading within a section, or perhaps only within a
sub-heading, then the names of the minor headings and sub-headings are also
given. However, instead of always repeating the names of the major headings, if
there is a cross reference to two minor headings in the same section, then the
name of the section is mentioned only once. For example, a reference which
reads: See "Management of the Bank--Benefits--Employee Stock Ownership Plan" and
"--Personnel Recognition and Retention Program" means that there are two
sub-headings with related information, one called "Employee Stock Ownership
Plan" and one called "Personnel Recognition and Retention Program." They both
appear in the major heading "Management of the Bank" and they both appear in the
minor heading "Benefits."
Sometimes, a cross reference does not include the name of the section, but
instead starts with a dash. That means that the related information is included
in another minor heading within the same section. For example, in the section
"Business of the Bank--General" there might be a reference like this: See "--
Lending Activities." That means that the related information is included in the
"Business of the Bank" section under the minor heading "Lending Activities."
6
<PAGE>
SUMMARY
The following questions and answers summarize some of the important
information in this Prospectus. Please read the questions and answers carefully,
and also read the rest of the Prospectus before deciding whether to purchase
Common Stock.
WHAT IS CNY FINANCIAL CORPORATION?
CNY Financial Corporation is a new corporation formed under Delaware law.
After the Conversion, the Company will own all the stock of the Bank. The stock
of the Company, which is the Common Stock that is being offered by this
Prospectus, will then be owned by the public, the ESOP, the 401(k) Plan,
Directors, officers and employees of the Company and the Bank and the
Foundation. See "CNY Financial Corporation."
WHAT IS CORTLAND SAVINGS BANK?
The Bank is a mutual savings bank, which means that it has no stockholders.
It has three banking offices, all in Cortland County in central New York State.
On March 31, 1998, the Bank had total assets of $232.4 million, loans of $154.2
million, and deposits of $198.2 million. For the three months ended March 31,
1998, the Bank had net income of $493,000 compared to net income of $411,000 for
the three months ended March 31, 1997.
The Bank was chartered in 1866. It obtains deposits, mainly from local
depositors, and invests those deposits, and other available funds, principally
in loans, a majority of which are secured by property located in Cortland
County, New York. It also buys securities, such as treasury bills issued by the
United States and securities which are backed by groups of mortgages. The Bank's
income primarily comes from the difference between the rate of interest it pays
on its deposits and the rate of interest earned on its loans and other
investments. In addition to the cost of its deposits, the Bank also has expenses
for salaries and employee benefits, maintaining its banking offices and
equipment, computer data processing, insurance and other expenses.
WHAT IS THE CONVERSION?
The Conversion is a change in the Bank's form of organization so the Bank
can issue its stock to the Company, and the Company can sell its stock to
certain of its depositors, the ESOP and, if available, to other members of the
public. After the Conversion, the stockholders of the Company will indirectly
own the Bank. See "The Conversion--General."
WHY IS THE BANK CONVERTING?
The Bank is converting because, among other reasons, the Conversion will:
- Allow the Bank's customers to obtain an ownership interest in the Bank,
fostering customer loyalty and encouraging them to promote the Bank to
others in the community.
- Increase the Bank's capital, which will support the Bank's expansion
plans.
- Provide the Company with the capital and ownership structure to engage in
acquisitions and mergers through the use of cash or stock as payment for
the institution being acquired.
- Allow acquired institutions to continue to operate on a semi-autonomous
basis as subsidiaries of the Company if necessary or appropriate in order
to realize the benefits of an acquisition.
- Permit the Bank and the Company to offer stock incentives to directors,
officers and employees in order to attract and retain high quality
personnel.
7
<PAGE>
- Allow the Bank to create the Cortland Savings Foundation, a charitable
foundation, to further foster a close and mutually beneficial relationship
between the Bank and the communities it serves.
See "The Conversion--Reasons for the Conversion."
WHAT IS THE BANK'S AND THE COMPANY'S POST-CONVERSION STRATEGY?
After the Conversion, the Bank and the Company intend to implement a
business strategy to seek increased strength, growth and profitability. The
foundations of that strategy include the following:
- STRENGTHEN THE BANK'S POSITION AS A DOMINANT COMMUNITY-ORIENTED FINANCIAL
INSTITUTION. The Bank currently has the largest deposit market share in
Cortland County with 42.1% of FDIC-insured deposits. Of the Bank's $198
million in deposits at March 31, 1998, approximately 81.5% were held by
persons and companies located in Cortland County. As industry
consolidation continues in the Northeast, the Bank believes it can build
its depositor base and fortify its position within the surrounding
communities by continuing to provide new and existing customers with a
higher level of service and convenience than its competitors.
- PURSUE EXPANSION OPPORTUNITIES IN CENTRAL NEW YORK. Management believes
that its operating strategy can be extended profitably into adjoining
counties with customers who share the same needs and interests as the
Bank's existing home community. To achieve this goal, management intends
to seek out opportunities for further expansion through acquisitions,
branch purchases or the opening of new offices. As evidence of this, the
Bank has recently opened a loan production office in Ithaca, the county
seat of adjoining Tompkins County.
- MAINTAIN PRE-EMINENCE IN RESIDENTIAL MORTGAGE LENDING. The Bank is, and
has been for many years, the largest residential mortgage lender in
Cortland County, with a market share that substantially exceeds any other
local bank in terms of dollar volume or number of loans. The Bank has
hired a new senior loan officer and upgraded its loan department staffing.
As the Bank expands into other central New York communities, it intends to
offer an even broader range of residential loan products. In furtherance
of this goal, the Bank plans to implement a secondary mortgage market
operation.
- DIVERSIFICATION AND GROWTH OF LOAN PORTFOLIO. Although residential
mortgage loans are expected to remain the primary component of the Bank's
loan portfolio, other types of loans have provided the Bank with
opportunities for asset growth in the past. To complement its residential
mortgage lending operations, the Bank currently offers commercial mortgage
loans, commercial loans, and a variety of consumer loans. Automobile loans
are an important growth category, increasing by $2.7 million, or 42%, over
fifteen months from $6.4 million at December 31, 1996 to $9.1 million at
March 31, 1998. The Bank plans to maintain its position as the leading
residential mortgage lender in Cortland County while building upon its
position as an independent community bank to increase its market share of
higher yielding commercial and consumer loans.
- IMPROVE EFFICIENCY. Recent changes in the Bank's staffing and
infrastructure have enabled it to serve more customers with increased
deposit and loan volumes, thus allowing its current operating expenses to
be spread over a larger asset base. In addition, the Bank anticipates that
in the future it will be required to incorporate technological
developments into its product delivery system. Future growth and expansion
will allow the Bank to spread the cost of these technological innovations
over a larger asset base.
HOW MUCH COMMON STOCK WILL BE SOLD?
Based on the independent appraisal of RP Financial, LC., the pro forma
market value of the Common Stock of the Company after completion of the
Conversion, and thus the dollar amount of Common Stock expected to be sold, will
be from $52,062,500 to $70,437,500, not including the Common Stock contributed
8
<PAGE>
to the Foundation as described below. This is known as the "Valuation Range."
The Company is offering from 5,206,250 to 7,043,750 shares of Common Stock, at
$10 per share. The actual amount of Common Stock sold will depend on a number of
things, including the number of orders received and the appraiser's updated
estimate of the market value of the Common Stock. The Company may increase the
amount of Common Stock sold by an additional 15%, to $81,003,120, based upon the
number of orders received, the updated appraisal, economic conditions when the
Conversion is being completed and other factors. See "The Conversion--Stock
Pricing and Number of Shares to be Issued."
WHO CAN BUY COMMON STOCK OF THE COMPANY IN THE CONVERSION?
Persons who had deposits of at least $100 on December 31, 1996 will have the
first priority to buy Common Stock. The second priority goes to the ESOP and the
third priority goes to persons who had deposits of at least $100 on June 30,
1998. Depositors who have the right to purchase Common Stock may not sell or
transfer that right to anyone else. See "The Conversion--Subscription Offering."
If all of the Common Stock is not purchased by persons with subscription rights,
then other people may be offered the opportunity to purchase Common Stock.
CAN I BUY COMMON STOCK FOR SOMEONE ELSE WITH MY SUBSCRIPTION RIGHTS?
No. If you exercise your subscriptions rights, you may do so only for
yourself, and not for anyone else. It is illegal to transfer your subscription
rights or the benefits of your subscription rights to anyone else.
IF I HAVE SUBSCRIPTION RIGHTS, HOW DO I ORDER COMMON STOCK AND HOW DO I PAY FOR
IT?
To order Common Stock, you must submit an original order form to the Bank no
later than September , 1998 with payment in full. Copies of order forms
will not be accepted. You may pay for Common Stock by check, money order or, if
delivered directly to the Bank, cash. You may also pay for your Common Stock by
including, in your order form, an authorization to withdraw the purchase price
from an account you have at the Bank. The account does not have to be the same
account that gives you a right to subscribe. If you pay by check, cash or money
order, your payment will earn interest at 2.75% until the Conversion is
completed or your money is refunded. If you pay by authorizing a withdrawal from
a deposit at the Bank, your deposit will continue to earn interest at the
regular rate for your deposit until it is used to purchase Common Stock when the
Conversion is completed. However, you may not use that part of your deposit for
any other purpose from the time you submit your order form until the Conversion
is completed or , 1998. See "The Conversion--Purchasing Common Stock."
WHAT IS THE MAXIMUM AND MINIMUM AMOUNT OF COMMON STOCK THAT CAN BE PURCHASED?
No person, related persons or persons acting together may order or purchase
more than $150,000 of Common Stock. If more than one person is named as a
depositor on any account or accounts, such as a joint account, all named
depositors on those accounts will be considered to be acting together for the
purpose of the limit so that they may not purchase, in total including their
individual orders and orders by the group, more than $150,000 of Common Stock.
The minimum purchase is 25 shares. See "The Conversion--Purchase Limitations."
WHAT HAPPENS IF THERE IS NOT ENOUGH COMMON STOCK TO FILL ALL ORDERS?
If there is not enough Common Stock to fill all orders, shares will be
allocated based on the priorities described above. See "The
Conversion--Subscription Offering."
WHAT ARE SOME OF THE RISKS I SHOULD CONSIDER WHEN I DECIDE WHETHER TO PURCHASE
COMMON STOCK?
There is a section in this Prospectus titled "Risk Factors" beginning on
page which describes some of the risks that you should consider before
deciding whether to purchase Common Stock. Please
9
<PAGE>
read that section carefully. Remember that Common Stock is not a deposit
account. It is not insured by the FDIC or any other government agency and may
not pay dividends. The market value of the Common Stock may go up or down after
the Conversion, and you could lose your investment. The appraisal by RP
Financial, LC. is no assurance that the Common Stock will be worth the estimated
amount and you should not treat the appraisal as a recommendation that you
purchase any Common Stock. See "Risk Factors."
HOW WILL THE PROCEEDS FROM THE CONVERSION BE USED?
The Company will use half of the net proceeds from the sale of the Common
Stock, after paying expenses, to buy all the common stock to be issued by the
Bank. The Company will use a part of the remaining net proceeds to make a loan
to the ESOP so the ESOP can buy 8% of the Common Stock issued in the Conversion,
including Common Stock issued to the Foundation. The net proceeds will be
available to support future expansion of the Bank's business and assist the Bank
and the Company in implementing their post-Conversion business plans as outlined
above. The Company may also use the proceeds to repurchase its Common Stock in
the future.
Initially, the Company and the Bank both expect that they will use the net
proceeds to make short-term investments, primarily in securities. See "Use of
Proceeds."
WILL THE COMPANY PAY DIVIDENDS TO STOCKHOLDERS?
The Board of Directors of the Company will decide whether, when and how much
to pay in dividends with respect to the Common Stock. No assurance is given to
investors that dividends will be paid or, if they are paid, when they will start
and how much they will be. The Board of Directors does not expect that it will
pay dividends on the Company's Common Stock immediately after the Conversion.
See "Dividend Policy."
WHAT BENEFITS WILL THE BANK'S DIRECTORS, OFFICERS AND EMPLOYEES GET FROM THE
CONVERSION?
The Company will form the ESOP as part of the Conversion and the ESOP is
expected to purchase up to 8% of the Common Stock issued in the Conversion,
including the Common Stock contributed to the Foundation. The ESOP will purchase
the Common Stock using a loan from the Company. All officers and other employees
of the Bank and the Company will be eligible to be participants in the ESOP
after satisfying certain age and length of service requirements, but directors
of the Company and the Bank who are not employees will not be eligible to
participate. As the ESOP gradually repays its loan, the Common Stock owned by
the ESOP will be gradually divided among accounts for officers and other
employees. The division of shares is generally based upon salary. See
"Management of the Bank--Benefits--Employee Stock Ownership Plan."
In addition, the Company expects to adopt the Stock Option Plan and the
Personnel Recognition and Retention Program, or PRRP, after the Conversion is
completed. The Company intends to implement the Stock Option Plan and the PRRP
within one year after the Conversion. Therefore, the Conversion Regulations
require that they must first be approved by the Company's stockholders no
earlier than six months after the Conversion. The Company expects that the Stock
Option Plan will permit the award, in the aggregate, of options for up to 10% of
the Common Stock issued in the Conversion and the PRRP will permit the award, in
the aggregate, of shares of Common Stock equal to 4% of the Common Stock issued
in the Conversion, in both cases including Common Stock contributed to the
Foundation. Directors, officers and other employees will be eligible to
participate in these plans. Directors who are not employees, as a group, may not
receive awards of more than 30% of the shares covered by each plan. No
individual director who is not an employee may receive an award of more than 5%
of the shares covered by each plan. No officer or employee may receive an award
of more than 25% of the Common Stock covered by either plan. See "Management of
the Bank--Benefits--Stock Option Plan" and "--Personnel Recognition and
Retention Program." Furthermore, in the future, the Company may consider the
adoption of other
10
<PAGE>
stock benefit plans, such as employee discount stock purchase plans and
stock-based directors' fee plans, which could result in additional stock
benefits for, and an increase in voting control by, employees, officers and
directors of the Bank and the Company.
The Bank has entered into employment contracts with four executive officers:
Mr. Stisser, the Bank's President, Mr. Stapleton, the Bank's Executive Vice
President and Chief Operating Officer, Mr. Covert, the Bank's Executive Vice
President and Chief Financial Officer, and Mr. Meeker, the Bank's Senior Vice
President and Senior Loan Officer, in connection with the Conversion. Mr.
Stisser's contract and Mr. Stapleton's contract have three-year terms, while Mr.
Covert's contract and Mr. Meeker's contract have two-year terms. If Mr.
Stisser's employment ends under certain circumstances, he will be paid benefits
so that he is in the same position as if he had continued to be employed until
the end of the contract. The contract will provide for other benefits such as an
initial salary of $175,000 per year and a guaranty that the salary will not
decline. Mr. Stisser did not previously have an employment contract with the
Bank. The employment contracts for the other three executive officers provide
for salary continuation or severance payments if employment ends under certain
circumstances. All contracts provide for severance payments if employment is
terminated in connection with a change in control of the Bank or the Company,
subject to certain conditions.
In addition, the Bank has amended its 401(k) Plan to allow employees to
invest their accounts in a fund consisting of Common Stock of the Company by
using subscription rights that they may have as depositors of the Bank. In the
Conversion, each employee who has priority subscription rights because of his or
her deposits with the Bank may exercise those subscription rights using money in
his or her 401(k) Plan account, including matching contributions from the Bank.
The Bank has also adopted an Employee Severance Plan which provides for
severance payments to an employee of the Bank if his or her employment is
terminated under certain circumstances in connection with or after a change in
control. See "Management of the Bank--Employment Contracts" and "--Benefits."
WHY IS THE BANK FORMING A CHARITABLE FOUNDATION AND WHAT EFFECT WILL IT HAVE?
The Bank has a strong commitment to the well-being of its local community. A
charitable foundation will be created in connection with the Conversion to
further that commitment. The Company will contribute Common Stock to the
Foundation equal to 2% of the shares sold in the Conversion and may also
contribute up to $100,000 to the Foundation to cover initial start-up expenses
and initial grants. The Bank and the Company believe that the Foundation will
enhance the bond between the Bank and its community. A majority of the
Foundation's directors will be officers or directors of the Bank or the Company.
The Foundation must vote all Common Stock owned by it in the same ratio as all
other shares of the Company's Common Stock are voted, unless that would cause
the Foundation to lose its tax-exempt status and the Superintendent and the FDIC
agree to a change in the voting procedure.
The Company's contribution to the Foundation will dilute the ownership
interests of other stockholders by approximately 1.96%. When the Foundation is
established, the Company's net income will be reduced by the fair market value
of the contribution, net of the related tax benefit. See "The Conversion--
Establishment of the Foundation." RP Financial, LC. has estimated that the
establishment of the Foundation has reduced the estimated pro forma market value
of the Company's Common Stock upon completion of the Conversion by approximately
2.8%. See "See Comparison of Valuation and Pro Forma Information With and
Without Foundation."
WHAT LIMITS ARE THERE ON THE ABILITY OF SOMEONE TO TAKE CONTROL OF THE COMPANY
OR THE BANK?
The Restated Organization Certificate of the Bank provides, as permitted
under the Conversion Regulations, that no person may acquire control of the
Bank, directly or indirectly, for three years after the Conversion. Furthermore,
both federal and state law require regulatory approval before any person can
acquire control of the Bank or the Company.
11
<PAGE>
In addition, the Company's Certificate of Incorporation and Bylaws contain
provisions which could discourage a person from seeking to acquire control of
the Company. For example, in general, a person who beneficially owns more than
10% of the Company's Common Stock cannot vote the shares in excess of the 10%
limit. The Board of Directors of the Company is divided into three classes, so
only one-third of the directors are up for election each year. Stockholders
cannot cumulate their votes, so, for example, if there are three vacancies on
the board which are being filled by stockholder vote, a stockholder who owns
1,000 shares may cast 3,000 total votes, but cannot cast more than 1,000 votes
for any one person. Special meetings of stockholders may only be called by the
Board of Directors. These and other provisions could discourage someone from
trying to take over the Company.
Furthermore, the four employment contracts with executive officers of the
Bank, the voting of Common Stock owned by the ESOP, and the other stock
compensation plans described above could make it more difficult, and more
costly, for any person to acquire control of the Company. The Company has also
adopted an Employee Severance Plan which pays benefits to an employee, other
than an executive officer covered by a separate agreement, if the employee's
employment is terminated under certain circumstances in connection with or after
a change in control based on their years of service. In addition, the Common
Stock contributed to the Foundation may be freed of its voting restrictions,
which could put that stock under the effective control of the Company.
See "Restrictions on Acquisition of the Company and the Bank" for more
information on this issue.
12
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected data presented below under the captions "Selected Balance Sheet
Data" and "Selected Operations Data" for, and as of the end of, each of the
years in the five-year period ended December 31, 1997, are derived from the
audited consolidated financial statements of Cortland Savings Bank and
subsidiary. The consolidated financial statements as of December 31, 1997 and
1996 and for each of the years in the three-year period ended December 31, 1997
are included elsewhere in this Prospectus. The selected data presented below as
of and for the three-month periods ended March 31, 1998 and 1997 are derived
from the unaudited consolidated financial statements of Cortland Savings Bank
and subsidiary included elsewhere in this Prospectus. Results for the three
month period ended March 31, 1998 do not necessarily indicate the results that
may be expected for the year ended December 31, 1998.
SELECTED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, ----------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total assets................................... $ 232,388 $ 233,729 $ 238,100 $ 235,681 $ 230,339 $ 233,750
Loans receivable, net(1)....................... 154,200 155,422 158,611 158,507 152,476 142,600
Allowance for loan losses...................... 2,230 2,143 1,952 2,002 1,752 1,620
Loans held-for-sale............................ -- 2,541 -- -- -- --
Securities available-for-sale(2)............... 45,475 44,140 45,594 41,777 2,519 6,441
Securities held-to-maturity(2)................. 12,479 12,550 11,757 11,188 61,716 63,857
Cash and cash equivalents...................... 9,813 8,079 12,536 14,176 4,912 13,183
Real estate owned.............................. 760 964 563 374 572 75
Deposits....................................... 198,234 199,770 204,640 203,110 200,310 205,855
Total net worth................................ $ 31,394 $ 30,740 $ 30,345 $ 29,030 $ 26,876 $ 24,780
</TABLE>
SELECTED OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income................................... $ 4,311 $ 4,417 $ 17,667 $ 17,787 $ 17,811 $ 16,855 $ 17,451
Interest expense.................................. 2,010 2,064 8,328 8,758 8,613 7,915 8,580
--------- --------- --------- --------- --------- --------- ---------
Net interest income............................. 2,301 2,353 9,339 9,029 9,198 8,940 8,871
Provision for loan losses......................... 75 225 3,300 1,380 600 300 550
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan
losses........................................ 2,226 2,128 6,039 7,649 8,598 8,640 8,321
Non-interest income............................... 245 219 889 770 671 478 573
Non-interest expenses............................. 1,645 1,625 6,872 6,201 5,945 5,586 5,644
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and cumulative effect
of changes in accounting principles............. 826 722 56 2,218 3,324 3,532 3,250
Income tax expense (benefit)...................... 333 311 (16) 853 1,400 1,361 1,144
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of changes in
accounting principles........................... 493 411 72 1,365 1,924 2,171 2,106
Cumulative effect of changes in accounting
principles(3)................................... -- -- -- -- -- -- (103)
--------- --------- --------- --------- --------- --------- ---------
Net income........................................ $ 493 $ 411 $ 72 $ 1,365 $ 1,924 $ 2,171 $ 2,003
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
NOTES APPEAR ON FOLLOWING PAGE.
13
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA(4):
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED MARCH 31,
AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------
1998 1997 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income to average total
assets)..................................................... 0.86% 0.71% 0.03% 0.58% 0.82% 0.92%
Return on average net worth (net income to average net
worth)...................................................... 6.54% 5.53% 0.23% 4.64% 6.85% 8.41%
Average interest-earning assets to average interest-bearing
liabilities................................................. 115.34% 114.97% 115.80% 113.90% 112.17% 111.39%
Net interest rate spread(5)................................... 3.70% 3.71% 3.58% 3.48% 3.70% 3.62%
Net interest margin(6)........................................ 4.27% 4.27% 4.17% 4.02% 4.18% 4.03%
Net interest income after provision for loan losses to total
other expenses.............................................. 1.35x 1.31x 0.88x 1.23x 1.45x 1.55x
NET WORTH AND ASSET QUALITY RATIOS:
Average net worth to average total assets..................... 13.16% 12.78% 13.04% 12.40% 12.00% 10.96%
Total net worth to assets end of period....................... 13.51% 12.96% 13.15% 12.74% 12.32% 11.67%
Non-performing assets to total assets......................... 0.96% 2.13% 2.04% 1.78% 1.00% 1.32%
Non-performing loans to total loans........................... 0.94% 2.84% 2.37% 2.28% 1.24% 1.60%
Allowance for loan losses to total loans...................... 1.43% 1.30% 1.34% 1.22% 1.25% 1.14%
Allowance for loan losses to non-performing loans............. 151.91% 45.73% 56.48% 53.23% 100.40% 71.13%
OTHER DATA:
Number of real estate loans outstanding....................... 2,953 3,033 3,029 3,104 3,169 2,936
Number of deposit accounts.................................... 33,548 34,031 34,069 34,213 34,710 NA
Full service offices.......................................... 3 3 3 3 3 3
<CAPTION>
1993
---------
<S> <C>
PERFORMANCE RATIOS:
Return on average assets (net income to average total
assets)..................................................... 1.03%
Return on average net worth (net income to average net
worth)...................................................... 10.16%
Average interest-earning assets to average interest-bearing
liabilities................................................. 109.31%
Net interest rate spread(5)................................... 4.41%
Net interest margin(6)........................................ 4.84%
Net interest income after provision for loan losses to total
other expenses.............................................. 1.47x
NET WORTH AND ASSET QUALITY RATIOS:
Average net worth to average total assets..................... 10.15%
Total net worth to assets end of period....................... 10.60%
Non-performing assets to total assets......................... 1.69%
Non-performing loans to total loans........................... 2.69%
Allowance for loan losses to total loans...................... 1.12%
Allowance for loan losses to non-performing loans............. 41.69%
OTHER DATA:
Number of real estate loans outstanding....................... 2,882
Number of deposit accounts.................................... NA
Full service offices.......................................... 2
</TABLE>
- ------------------------------
(1) Shown net of deferred fees and the allowance for loan losses.
(2) In December 1995, the Bank transferred securities classified as
held-to-maturity with a fair value of $31.2 million to available-for-sale.
(3) Includes the cumulative effect of changes in accounting for post-retirement
benefits other than pensions and changes in accounting for income taxes.
(4) Asset quality and net worth ratios are at end of period. All average
balances are daily average balances except for 1995 and prior, for which
monthly average balances are used because daily average balances are
unavailable. Ratios for the three-month periods have been annualized where
appropriate.
(5) The net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(6) The net interest margin, also known as the net yield on average
interest-earning assets, represents net interest income as a percentage of
average interest-earning assets.
NA--The information is not available.
14
<PAGE>
RISK FACTORS
PLEASE REVIEW THE FOLLOWING RISK FACTORS BEFORE DECIDING WHETHER TO PURCHASE
COMMON STOCK.
INTEREST RATE RISK
The Bank's principal source of income is the difference between the interest
income it earns on interest-earning assets, such as loans and securities, and
its cost of funds, principally interest paid on deposits. The rate of interest
earned on assets or paid on liabilities changes from time to time, depending
upon a number of factors, including general market interest rates. However, the
speed of the changes varies among different types of assets and liabilities.
Interest rates on some assets and liabilities change more quickly than on
others. For example, for a thirty year loan with a fixed rate of interest, the
Bank can adjust the interest rate earned on its investment in the loan only when
principal payments on the loan are received, which could be over a period of as
long as thirty years. In contrast, the rate of interest paid on a thirty-day
certificate of deposit can be expected to adjust every thirty days, based upon
changes in market interest rates. If market interest rates change, then
differences in how fast assets and liabilities adjust to market rates can have a
direct effect on net interest income.
At March 31, 1998, $109.5 million, or 69.9%, of the Bank's total loans were
fixed-rate loans. The Bank generally accepts savings deposits for much shorter
terms than its fixed-rate loans. In addition, although at March 31, 1998, the
Bank had $47.1 million of adjustable-rate loans, most of these loans are
residential mortgage loans with interest rates that adjust only annually or once
every three years and with periodic and lifetime limits on interest rate
adjustments. As a result, increases in market interest rates could reduce the
Bank's net interest income because the Bank's cost of deposits would be expected
to increase faster than the yields on its loan and securities investments.
Management uses strategies to limit interest rate risk, such as making loans
with short terms to maturity and investing in adjustable-rate securities.
However, customer demand may make it difficult to implement these strategies
because when interest rates are low, customers tend to prefer fixed-rate
mortgage loans to lock in the lower rates and when interest rates are high,
customers tend to prefer adjustable-rate loans that they expect to adjust
downward as market interest rates decline. Therefore, the Bank's efforts to
reduce the risk of interest rate fluctuations are likely to be limited by the
difficulty of originating sufficient adjustable-rate loans. Furthermore, during
periods of low or declining interest rates, loan prepayment rates tend to
increase as customers seek to refinance existing higher rate loans. This
increases the volume of funds that the Bank must reinvest at a time when
investment alternatives have lower yields resulting in a decline in net interest
margin. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Management of Interest Rate Risk."
GEOGRAPHIC CONCENTRATION OF LOANS
Most of the Bank's loans are mortgage loans on property located in the
Bank's market area. At March 31, 1998, more than 70% of the Bank's mortgage
loans were secured, in whole or in part, by property located in Cortland County.
Cortland County has not, in recent years, benefited from the economic recovery
and growth which much of the rest of the country has experienced. Some major
employers have closed facilities in Cortland County. An economic slow-down or
decline in Cortland County could have a substantial adverse effect on the
ability of the Bank's borrowers to repay their loans. If housing values decline
at the same time, reductions in the value of collateral could make it more
difficult to recover the full amount due on loans in default. Furthermore,
economic difficulties can also increase deposit outflows as customers must use
savings to pay bills. This can increase the Bank's cost of funds because of the
need to replace the deposit outflow. All of these factors can combine to reduce
significantly the Bank's net income.
15
<PAGE>
LENDING RISKS
The Bank has historically employed an operating strategy that emphasized the
origination of one- to four-family residential mortgage loans. The Bank also
originates commercial mortgage, commercial, automobile and other consumer loans,
primarily in its market area. These loans are generally considered to involve a
higher degree of credit risk than one- to four-family residential mortgage
loans. This greater risk is attributable to several factors, including the
higher concentration of principal in a limited number of loans and borrowers,
the effects of general economic conditions on income-producing properties and
the increased difficulty of evaluating and monitoring these types of loans.
Commercial mortgage and other commercial loans, which comprised 23.7% of the
Bank's loan portfolio at March 31, 1998, carry greater credit risks than
residential mortgage loans because their repayment is more dependent on (i) the
underlying financial condition of the borrower and the value of, or the cash
flow from, any property securing the loan or the business being financed and
(ii) general and local economic conditions. Furthermore, the repayment of loans
secured by commercial real estate is typically dependent upon sufficient cash
flow from the related real estate project to cover operating expenses and debt
service. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed), the borrower's ability to repay the loan may be
impaired.
Furthermore, although residential mortgage loans are generally considered to
have involve less credit risk than commercial and other loans, residential
mortgage lending also presents potentially significant default risks. Changes in
local, regional or national economic conditions, the relocation or closing of a
major local employer, and other factors could cause increases in delinquency and
default rates on residential mortgage loans. In at least some cases, the events
which cause an increase in default rates may also cause adverse conditions in
local real estate markets, resulting in a decline in property values and an
increase in potential losses as collateral for loans becomes less valuable
See "Business of the Bank--Lending Activities."
COMPETITION
The Bank faces intense and increasing competition both in making loans and
in attracting deposits. The Bank had 42.1% of the total FDIC-insured deposits in
Cortland County at June 30, 1997 according to FDIC statistics and had the
largest volume of mortgage loan originations in the county in 1996 and 1997.
However, the Bank's market area and surrounding communities include branches of
many large regional and nationwide banks with the economic ability to compete
aggressively. In addition, non-bank alternatives, such as money market funds,
other mutual funds and insurance annuities, compete for deposits and mortgage
brokers, mortgage bankers, insurance companies and other finance companies
compete to originate loans. The consolidation of the banking industry, the
expansion of the powers of banks and other major financial companies, and the
lifting of interstate banking and branching restrictions may make it more
difficult for smaller institutions, such as the Bank, to compete effectively
with large national and regional banking institutions, insurance companies and
securities brokerage firms.
REDUCTION IN RETURN ON EQUITY; INVESTMENT OF PROCEEDS
After the Conversion, the Company will have substantially more total equity
than the Bank had prior to the Conversion. The Company does not expect that loan
demand will increase as quickly as its increase in capital. The Company
initially intends to invest the net proceeds from the Conversion primarily in
short-term investments which generally have lower yields than loans.
Furthermore, although the increased capital will support additional expansion in
total assets, the Company is not expected to be able to leverage the new capital
immediately. The Company may not be able to increase net income in future
periods as fast as equity has increased in the Conversion. Therefore, after the
Conversion, return on equity (net income divided by average equity) is expected
to be lower than the annualized return on equity of 6.54%
16
<PAGE>
for the three months ended March 31, 1998 and is expected to be lower than the
average return on equity for publicly traded savings institutions and their
holding companies.
In addition, the initial investment of the net proceeds in debt securities
will substantially increase the percentage of the Bank's assets invested in
securities. Although much of the Bank's investment securities portfolio consists
of U.S. government and agency securities with negligible default rates, the Bank
also invests in corporate debt securities and mortgage-backed securities with
higher risks of default than government securities. To manage these risks, the
Bank limits its corporate debt securities to those rated in the three highest
grades by a nationally recognized rating organization and substantially all of
the mortgage-backed securities which it purchases are either issued, insured or
guaranteed by the Federal National Mortgage Association (Fannie Mae), the
Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National
Mortgage Association (Ginnie Mae). See "Use of Proceeds" and "Pro Forma Data."
INCREASED COMPENSATION AND OTHER EXPENSES AFTER THE CONVERSION
After the Conversion, the compensation expense recorded by the Company will
be substantially greater than the compensation expense of the Bank prior to the
Conversion as a result of expenses related to the ESOP and other plans expected
to be implemented by the Company. The ESOP is expected to acquire 8% of the
Common Stock issued in the Conversion, including Common Stock contributed to the
Foundation. Therefore, the amount of the Common Stock expected to be acquired by
the ESOP will have a total purchase price of up to $6,609,854, if the ESOP
purchases the Common Stock in the Subscription Offering, which will be funded
with a loan from the Company. If the ESOP is unable to obtain sufficient Common
Stock in the Subscription Offering, then it will purchase Common Stock after the
Conversion in open market or privately negotiated transactions. This could
increase the purchase price that the ESOP pays for the Common Stock and
correspondingly increase the amount of the loan from the Company. The Common
Stock that the ESOP purchases will be pledged as collateral for the loan. It is
expected that the loan will be repaid over fifteen years using funds that the
Bank contributes to the ESOP.
As the ESOP repays the loan, the shares of Common Stock will be released as
collateral and the Company will record compensation expense based upon the
released shares. If the price of the Common Stock remains at $10.00 per share,
then the amount of additional compensation expense on account of the ESOP is
expected to be approximately $440,000 per year. However, under accounting rules
applicable to the ESOP, the Company must record compensation expense based on
the fair market price of the released stock. Therefore, if the market price of
the Common Stock increases, the amount of compensation expense attributable to
the ESOP will be higher.
In addition, if, as is presently intended, the Company implements the PRRP
permitting awards of Common Stock to directors, officers and employees, the
Company will record additional compensation expense. The PRRP is expected to
permit stock awards for up to approximately 330,492 shares, in the aggregate
representing 4% of the Common Stock issued in the Conversion, including Common
Stock contributed to the Foundation. If these shares are first acquired by the
Company or a trustee for the PRRP in open market purchases and then awarded to
recipients, to vest over five years, then the Company will record compensation
expense equal to one-fifth of the amount paid for the repurchased stock each
year for five years. If the stock is purchased at $10.00 per share, the annual
additional compensation expense will be approximately $661,000.
The Company also anticipates that, as a publicly traded stock corporation,
it will incur additional expenses not previously incurred by the Bank, such as
the expenses of preparing and filing periodic reports with the SEC, the cost of
holding annual and special stockholders' meetings, annual fees to maintain the
listing of the Company's Common Stock on the Nasdaq Stock Market, and other
stock-related expenses.
See "Pro Forma Data" and "Management of the Bank--Benefits."
17
<PAGE>
ESTABLISHMENT OF CHARITABLE FOUNDATION.
The Company intends to establish the Foundation simultaneously with the
completion of the Conversion. The establishment of the Foundation may be
challenged even though the Boards of Directors of the Company and the Bank have
carefully considered the factors involved in establishing the Foundation. If
challenges to the Foundation are raised, such challenges might delay the
Conversion and the Company and the Bank might be unsuccessful in defending
against such challenges.
DILUTION OF STOCKHOLDERS' INTERESTS. The Company proposes to fund the
Foundation with authorized but unissued Common Stock equal to 2% of the Common
Stock sold in the Conversion. Therefore, the contribution to the Foundation is
expected to range from 104,125 to 162,006 shares of Common Stock. The Foundation
would own 1.96% of the Common Stock of the Company then outstanding. Therefore,
persons purchasing Common Stock in the Conversion would have their ownership and
voting interests in the Company diluted by 1.96%. See "Pro Forma Data."
IMPACT ON EARNINGS. The contribution to the Foundation will reduce the
Company's earnings in the quarter and year in which the contribution is made.
The Company will recognize an expense for the entire amount of the contribution
in the quarter in which it occurs, which is expected to be the fourth quarter of
1998. This expense will be partially reduced by a related tax benefit because
the contribution is expected to be tax deductible. Assuming a contribution of
$1.62 million of Common Stock, the Company estimates a net after tax expense of
$988,000 (based upon a 39% tax rate and without regard to the 10% annual limit
on charitable deductions discussed below).
TAX CONSIDERATIONS. The Company may not deduct for federal income tax
purposes charitable contributions in any year which exceed 10% of the Company's
annual taxable income before deducting charitable contributions. The Company may
carry forward any unused portion of the deduction for five years, with use in
any year subject to the 10% of taxable income limitation. Therefore, whether the
Company can obtain the full tax benefit of the contribution will depend upon the
level of future income. The Company's aggregate tax deduction from the
contribution to the Foundation would be $1.6 million, assuming that the Common
Stock donated is valued at $10.00 per share. Assuming the Company makes no other
tax-deductible contributions, the Company would have to have pre-tax net income
averaging at least $2.7 million per year, before deducting the contribution, for
the next six years in order to obtain the full benefit of the tax deduction. For
the quarter ended March 31, 1998, the Bank had pre-tax net income of $826,000,
or an annualized amount of $3.3 million. If pre-tax net income does not decline,
the Company believes it will be able to obtain the tax benefit of the
contribution over the allowable six years. However, if the contribution is
valued at more than $10.00 per share because the price of the Common Stock
increases above $10.00 when trading in the Common Stock commences, or if the
Company's pre-tax net income declines, then the Company may not be able to
obtain the full tax benefit of the contribution.
Although the Company and the Bank have received the opinion of their
independent tax advisor that the Company will be entitled to the deduction for
the charitable contribution, the IRS may not recognize the Foundation as a tax
exempt organization or may disallow the deduction. If the deduction is not
permitted, the Company's tax benefit for the contribution, which will be
recognized as a deferred tax asset for financial statement purposes, will be
fully expensed, resulting in a further reduction in earnings in the year in
which the IRS makes such a determination.
POTENTIAL ANTI-TAKEOVER EFFECT. After the Conversion, the Foundation will
own 1.96% of the Company's outstanding Common Stock. The FDIC and the
Superintendent have required that the shares of Common Stock owned by the
Foundation must be voted in the same proportion as all other shares of Common
Stock on all proposals considered by stockholders of the Company. With this
voting restriction, the Company does not believe the Foundation will materially
reduce the likelihood of a takeover of the Company. However, if the voting
restriction affects the ability of the Foundation to remain tax exempt, the
Company expects to request the FDIC and the Superintendent of Banks to waive the
restriction. The
18
<PAGE>
restriction may be waived for other reasons, such as a change in the policy of
the Superintendent or the FDIC. If the restriction is eliminated, the
Foundation's Board of Directors would have the power to vote the shares owned by
the Foundation in the Board's discretion. A majority of the Foundation's Board
of Directors will be comprised of individuals who are officers or directors of
the Bank or the Company. Therefore, if the restriction is waived, the voting
control of incumbent directors and officers of the Company and the Bank would be
expected to increase.
See "The Conversion--Establishment of the Foundation."
ANTI-TAKEOVER PROVISIONS
PROVISIONS IN THE COMPANY'S AND THE BANK'S GOVERNING INSTRUMENTS. The
Company's Certificate of Incorporation and Bylaws, and the Bank's Restated
Organization Certificate and Bylaws, will assist the Company in remaining an
independent publicly owned corporation. For example, the Company's Certificate
of Incorporation requires an 80% vote to approve certain actions, such as
certain mergers; only one-third of the Board of Directors will be elected each
year; special meetings of stockholders generally may be called only by the Board
of Directors; and under certain circumstances a merger or other business
combination is permitted only if a uniform price is paid for the Company's
Common Stock. Furthermore, any person owning more than 10% of the Company's
outstanding voting stock may not cast any votes for the shares in excess of the
10% limit. See "Restrictions on Acquisition of the Company and --the Bank--
Restrictions in the Company's Certificate of Incorporation and Bylaws." The
Bank's Restated Organization Certificate also prohibits, for three years, any
person (other than the Company, the ESOP and certain related entities) from
acquiring or offering to acquire, directly or indirectly, beneficial ownership
of more than 10% of the Bank's equity securities. These provisions may
discourage potential proxy contests and other potential takeover attempts,
particularly those which have not been negotiated with the Company's Board of
Directors. Therefore, they may preserve the control of current management and
have an adverse effect on the market price of the Common Stock.
VOTING CONTROL OF OFFICERS AND DIRECTORS. Directors and executive officers
of the Bank and the Company expect to purchase from approximately 1.92.1% to
3.0% of the Common Stock issued in the Conversion, including shares contributed
to the Foundation, depending on the number of shares issued. In addition, the
ESOP intends to purchase 8% of the Common Stock issued in the Conversion,
including shares contributed to the Foundation. If the Company adopts and
stockholders approve the Stock Option Plan and the PRRP, those two plans could
cover 14% of the Company's outstanding Common Stock if the plans are funded with
stock acquired in open market purchases. If all options under the Stock Option
Plan are awarded and exercised, and if all shares covered by the PRRP are
awarded, then directors, executive officers and employees could have, in total,
the power to vote from approximately 24.1% to 25.2% of the Company's outstanding
Common Stock. This voting power could further increase if the Company
repurchases stock from other stockholders. Furthermore, the Company may, in the
future, implement other stock based benefit programs, such as employee discount
stock purchase plans or plans to pay directors fees with stock rather than cash.
Directors, executive officers and employees might thus be able to prevent or
hinder corporate actions requiring more than a majority vote of stockholders,
such as certain mergers and charter amendments. This voting control may stop
takeover attempts that other stockholders believe are in their best interest and
may perpetuate existing management.
PROVISIONS IN MANAGEMENT EMPLOYMENT CONTRACTS AND BENEFIT PLANS. The four
employment contracts with executive officers of the Bank, the ESOP, and the
employee severance plan providing benefits in the event of a change in control
provide actual or potential cash payments or the vesting of benefits upon a
change of control of the Company or the Bank. This may make it less likely, or
more costly, for a person to seek to acquire the Company and stockholders might
receive less for their stock than otherwise might be paid if the Company is
acquired. See "Management of the Bank--Employment Contracts," and "Management of
the Bank--Benefits--Employee Stock Ownership Plan," "--Employee Severance Plan,"
"--Stock Option Plan" and "--Personnel Recognition and Retention Program."
19
<PAGE>
ABSENCE OF MARKET FOR COMMON STOCK
There is no established market for the Common Stock of the Company at this
time. The Company has received conditional approval from the Nasdaq Stock Market
to have its common stock quoted on the Nasdaq National Market under the symbol
"CNYF" upon completion of the Conversion. For the listing to continue, there
must be at least three market makers for the Common Stock Market makers are
securities broker/dealers who make a market in a stock by announcing prices at
which they are willing to buy and sell the stock and who are willing to
regularly purchase and sell the stock. The Company will seek to maintain at
least three market makers to satisfy Nasdaq requirements. CIBC Oppenheimer Corp.
and Trident Securities, Inc. will assist the Company in that effort and expect
to be market makers in the Common Stock. The Company anticipates that there will
be other market makers for the Common Stock, but the Company can provide no
assurance that sufficient market makers will be available to maintain the Nasdaq
Stock Market listing.
Furthermore, an active and liquid market for the Company's Common Stock
depends upon whether there are other willing buyers and sellers. This is not in
the control of the Company or any market maker. An active and liquid trading
market for the Common Stock may not develop or continue. The absence of an
active and liquid market may reduce the price of the Company's Common Stock and,
if a market for the Common Stock does not develop, it may be difficult for
investors to sell their shares. See "Market for the Common Stock."
POSSIBLE INCREASE IN THE VALUATION RANGE AND NUMBER OF SHARES TO BE ISSUED
The number of shares to be sold in the Conversion may be increased by an
additional 15% based upon the number of orders received, the updated appraisal,
and market, financial and economic conditions when the Conversion is being
completed. If this occurs, the Company will sell 8,100,312 shares of Common
Stock in the Conversion and contribute 162,006 shares to the Foundation. An
increase in the number of shares sold can be expected to decrease net income per
share and stockholders' equity per share but can be expected to increase the
Company's consolidated stockholders' equity and net income. See "The
Conversion--Stock Pricing and Number of Shares to be Issued."
RECENTLY HIRED EXECUTIVE OFFICERS
The Bank has four executive officers. Although Wesley D. Stisser, Jr., the
President and Chief Executive Officer, has 45 years' experience with the Bank,
the Chief Operating Officer and the Chief Financial Officer have both been with
the Bank only since June of this year, and the Senior Loan Officer first joined
the Bank in October of 1996. All three of the new executive officers have
substantial prior experience in the banking industry in central New York. The
Board of Directors believes that the addition of these three officers helps to
position the Bank to implement its plans for the future. However, the successful
implementation of these plans ultimately depends, in part, on the ability of the
management team to function effectively as a collective unit. See "Management of
the Bank--Biographical Information."
POSSIBLE DILUTION FROM STOCK OPTIONS AND THE PERSONNEL RECOGNITION AND RETENTION
PROGRAM
If the Stock Option Plan is implemented after the Conversion, which is
expected, it will cover 10% of the Common Stock issued in the Conversion,
including Common Stock contributed to the Foundation. If options under the plan
are exercised and satisfied using Common Stock never previously issued, instead
of Common Stock repurchased by the Company, the ownership interests of other
stockholders would be diluted (reduced) by approximately 9.1%. Similarly, if the
PRRP is implemented for 4% of the Common Stock issued in the Conversion,
including Common Stock contributed to the Foundation, and awards under the plan
are satisfied with Common Stock never previously issued, the interests of
existing stockholders would be diluted by approximately 3.8%. If the plans are
funded with Common Stock never
20
<PAGE>
previously issued, existing stockholders will not have preemptive (first
priority) rights to buy those shares. A dilution of the interests of existing
stockholders could be expected to have an adverse effect on the market price of
the Common Stock. See "Management of the Bank--Benefits--Stock Option Plan" and
"--Personnel Recognition and Retention Program."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
The Internal Revenue Service could take the position that the subscription
rights granted to certain depositors of the Bank have an ascertainable value and
that the value represents taxable income to those depositors. The Company has
received a letter from RP Financial, LC. that the subscription rights have no
ascertainable value, but that conclusion is not binding upon the IRS. If the
subscription rights are deemed to have value, depositors with subscription
rights could be taxed upon the receipt or exercise of the subscription rights in
an amount equal to that value. The Bank might then have taxable income on the
distribution of the subscription rights. Although the IRS is not known to have
taken the position that subscription rights represent taxable income in similar
mutual to stock conversions, the IRS may change its position in the future. See
"The Conversion--Effects of Conversion on Depositors and Borrowers."
REGULATION OF FINANCIAL INSTITUTIONS
Federal and state banking laws and regulations exert substantial control on
the operations of the Bank and the Company. Federal and state regulatory
authorities have extensive discretion in connection with their supervision of
the Bank, such as the right to impose restrictions on operations and the
insistence that an institution increase its allowance for loan losses.
Furthermore, federal laws affecting banks are constantly being revised, often
imposing new restrictions or increasing competitive pressures through de-
regulation. Any change in the regulatory structure or statutes or regulations
applicable to banks or their competitors, whether by the Banking Department, the
FDIC, the New York State legislature or the Congress, could have a material
impact on the Company, the Bank and their operations. See "Regulation."
Regulatory authorities can also impose operating restrictions and penalties
on financial institutions. In 1995, as a result of weaknesses in the
administration of part of its loan origination function, the Bank entered into a
memorandum of understanding with the FDIC requiring the Bank to upgrade its
compliance procedures regarding consumer loans and to rectify certain past
problems. The memorandum of understanding, which remains in effect requires the
Bank to take remedial action, increase employee training, upgrade future
compliance, and provide periodic reports to the FDIC. The Bank believes that it
has improved its compliance procedures and complied with the memorandum of
understanding and expects that it will be terminated in connection with the next
FDIC consumer compliance examination of the Bank, but there is no assurance that
the FDIC will agree to the termination.
DEFALCATION BY FORMER SENIOR LOAN OFFICER
During the fourth quarter of 1996, the Bank discovered that its then senior
loan officer had been involved in various schemes to defraud the Bank, which
schemes resulted in substantial losses which are the subject of a pending
insurance bond claim by the Bank. Since that time, the Bank has upgraded its
internal audit programs and adopted procedures designed to prevent any
recurrence of such problems. However, no assurance can be provided to investors
that the Bank will not suffer future losses from other fraud or embezzlement
schemes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Special Matters Affecting Results of Operations."
YEAR 2000 COMPLIANCE
Accurate computer record keeping and data processing is essential for the
efficient operation of the Bank. In many cases, computer software and hardware,
as well as computer chips in other equipment, have been designed so that they
will not accurately reflect dates beyond December 31, 1999. The Bank is
21
<PAGE>
actively involved in reviewing all of its computer-related functions to assure
that the Bank will be able to continue to operate successfully at the beginning
of the next millennium without significant interruption. The Bank may be
required to replace existing software and hardware in order to do so. The Bank
does not believe that the cost of such replacement will have a material adverse
effect on the Bank's financial condition or results of operations, but the
evaluation of the costs is not yet complete. The Bank expects that its Year 2000
upgrading will be completed on a timely basis. However, there can be no
assurance that the systems of other companies on which the Bank relies will also
be Year 2000 compliant in a timely fashion or that any such failure by another
company would not have an adverse affect on the Bank. Furthermore, computer
problems experienced by the Bank's commercial borrowers could have an adverse
effect on their business operations and their ability to repay their loans when
due. In addition, technological advances in general may require the Bank to make
substantial capital investments in the future so it can continue to compete with
its many competitors.
FORWARD-LOOKING STATEMENTS
In this Prospectus, the Company, when discussing the future, may use words
like "will probably result," "are expected to," "may cause," "is anticipated,"
"estimate," "project," or similar words. These words represent forward-looking
statements. In addition, certain disclosures and information in this Prospectus,
such as an analysis of the adequacy of the allowance for loan losses or an
analysis of the interest rate sensitivity of the Company's assets and
liabilities, are based upon attempts to predict future events and circumstances
and also represent forward-looking statements.
Many factors could cause the Company's actual future results and future
experience to be different from what is described in the Company's
forward-looking statements. Future profitability, interest rate sensitivity, and
the adequacy of the allowance for loan losses can be affected by, for example,
(i) deterioration in local, regional, national or global economic conditions
which could cause an increase in loan delinquencies, a decrease in property
values, or a change in the housing turnover rate; (ii) changes in market
interest rates or changes in the speed at which market interest rates change;
(iii) changes in laws and regulations affecting the financial service industry;
(iv) changes in competition; and (v) changes in consumer preferences.
Please do not place unjustified or excessive reliance on any forward-looking
statements. They speak only as of the date made and should not be considered to
be guarantees, promises or assurances of what will happen in the future.
Remember that various factors, including those described above, could affect the
Company's financial performance and could cause the Company's actual results or
circumstances for future periods to be materially different from what has been
anticipated or projected.
22
<PAGE>
THE BANK AND THE COMPANY
CNY FINANCIAL CORPORATION
CNY Financial Corporation was recently organized by the Bank to acquire all
of the capital stock of the Bank to be issued in the Conversion. The Federal
Reserve has approved the Company as a bank holding company and, when the
Conversion is completed, it will be subject to Federal Reserve regulation. See
"Regulation--Holding Company Regulation." When the Conversion is complete, the
Company's significant assets will include the capital stock of the Bank acquired
in the Conversion, the loan that it makes to the ESOP so the ESOP can purchase
8% of the Common Stock issued in the Conversion, and 50% of the net proceeds of
the Conversion minus the amount of those proceeds used to fund the ESOP loan.
See "Use of Proceeds." The Company will initially have no significant
liabilities. The initial directors and executive officers of the Company are all
currently directors or executive officers of the Bank. See "Management of the
Company." At the present time, the Company does not intend to employ any other
persons, but will use the support staff of the Bank from time to time.
Additional employees will be hired as needed in the future.
The Company's executive office is located at the administrative offices of
the Bank, 1 North Main Street, Cortland, New York 13045. Its telephone number is
(607) 756-5643.
CORTLAND SAVINGS BANK
The Bank is a New York State chartered mutual savings bank. Its deposits are
insured to the maximum allowable amount by the FDIC. The Bank's market area
consists of the County of Cortland, New York. The Bank services its customers
from its main office in the city of Cortland, a nearby drive-up facility,
branches in the adjoining communities of Homer and Cortlandville, and a
representative office in Ithaca for loan originations. At March 31, 1998, the
Bank had total assets of $232.4 million, total deposits of $198.2 million and
total net worth of $31.4 million.
The Bank is a community-oriented savings bank whose business primarily
consists of accepting deposits from local customers and investing those funds in
residential mortgage loans in Cortland County. The Bank had $103.3 million of
residential one- to four-family mortgage loans at March 31, 1998, representing
66.0% of total loans and 44.5% of total assets. Based upon data as of June 30,
1997 published by the FDIC, the Bank's share of total FDIC-insured deposits
within Cortland County was approximately 42.1%, the largest share of any bank in
Cortland County. The Bank is the highest volume residential mortgage lender in
Cortland County, measured by number and dollar amount of mortgage loans. The
Bank also makes residential multi-family loans, commercial mortgage loans,
credit card loans, commercial business loans and consumer loans. At March 31,
1998, the Bank's loan portfolio, net, totaled $154.2 million, or 66.4% of total
assets. The Bank's loan origination and related loan servicing activities are
conducted primarily by Bank personnel, but from time to time the Bank obtains
commercial mortgage loan opportunities and, to a lesser extent, residential
mortgage loan applications, through loan brokers or other referral sources. The
Bank also obtains automobile loan referrals from automobile dealers.
In addition to loans, the Bank's largest investment categories are
investment and mortgage-backed securities. The Bank's investment activities
primarily consist of investing in debt securities issued by the United States
government and its agencies, corporate debt securities, mortgage-backed
securities and certain equity securities. At March 31, 1998, the Bank had $35.8
million in carrying value of U.S. Government, agency, municipal and corporate
debt securities, representing 15.4% of total assets. At March 31, 1998, the Bank
had $2.4 million in fair value of corporate equity securities, which are
included as part of securities available-for-sale at fair value.
The Bank's executive office is located at 1 North Main Street, Cortland, New
York 13045. Its telephone number is (607) 756-5643.
23
<PAGE>
REGULATORY CAPITAL COMPLIANCE
The table below shows the Bank's capital ratios at March 31, 1998 and the
related FDIC minimum capital requirements. The table also shows approximately
what the capital ratios of the Bank would have been if the Conversion had taken
place on March 31, 1998 (referred to as pro forma ratios), assuming that the
indicated number of shares of Common Stock were sold and assuming that 50% of
the net proceeds were paid to the Bank. The expected loan to the ESOP and the
cost of shares expected to be acquired by the PRRP are deducted from pro forma
regulatory capital. See "Pro Forma Data". Risk-based capital ratios are shown as
a percentage of risk weighted assets and the leverage ratio is shown as a
percentage of adjusted total assets.
<TABLE>
<CAPTION>
PRO FORMA BASED UPON NET PROCEEDS AT MARCH 31, 1998 (1)
-------------------------------------------------------------------
7,043,750
SHARES
SOLD
(MAXIMUM OF
VALUATION
5,206,250 SHARES 6,125,000 SHARES
HISTORICAL AT SOLD (MINIMUM OF SOLD (MIDPOINT OF
MARCH 31, 1998 VALUATION RANGE) VALUATION RANGE) RANGE)
-------------------------- -------------------------- -------------------------- -----------
PERCENT PERCENT PERCENT
OF OF OF
APPLICABLE APPLICABLE APPLICABLE
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT
----------- ------------- ----------- ------------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital (2)............... $ 31,394 13.51% $ 50,584 19.77% $ 54,125 20.81% $ 57,666
----------- ----- ----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- ----------- ----- -----------
Tier I Leverage:
Capital level.................. $ 30,662 13.26% $ 49,853 19.58% $ 53,393 20.62% $ 56,934
Requirement (3)................ 9,246 4.00% 10,184 4.00% 10,355 4.00% 10,527
----------- ----- ----------- ----- ----------- ----- -----------
Excess......................... $ 21,416 9.26% $ 39,669 15.58% $ 43,038 16.62% $ 46,407
----------- ----- ----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- ----------- ----- -----------
Tier I Risk-based:
Capital Level (4).............. $ 30,662 21.94% $ 49,853 34.51% $ 53,393 36.74% $ 56,934
Requirement (3)................ 5,590 4.00% 5,778 4.00% 5,812 4.00% $ 5,847
----------- ----- ----------- ----- ----------- ----- -----------
Excess......................... $ 25,072 17.94% $ 44,075 30.51% $ 47,581 32.74% $ 51,087
----------- ----- ----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- ----------- ----- -----------
Total Risk-based:
Capital Level (4).............. $ 32,408 23.19% $ 51,659 35.76% $ 55,209 37.99% $ 58,761
Requirement (3)................ 11,181 8.00% 11,556 8.00% 11,625 8.00% 11,693
----------- ----- ----------- ----- ----------- ----- -----------
Excess......................... $ 21,227 15.19% $ 40,103 27.76% $ 43,584 29.99% $ 47,068
----------- ----- ----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- ----------- ----- -----------
<CAPTION>
8,100,312 SHARES SOLD
(15% ABOVE MAXIMUM
OF VALUATION RANGE)
--------------------------
PERCENT PERCENT
OF OF
APPLICABLE APPLICABLE
ASSETS AMOUNT ASSETS
------------- ----------- -------------
<S> <C> <C> <C>
GAAP Capital (2)............... 21.81% $ 61,694 22.91%
----- ----------- -----
----- ----------- -----
Tier I Leverage:
Capital level.................. 21.63% $ 60,962 22.74%
Requirement (3)................ 4.00% 10,722 4.00%
----- ----------- -----
Excess......................... 17.63% $ 50,240 18.74%
----- ----------- -----
----- ----------- -----
Tier I Risk-based:
Capital Level (4).............. 38.95% $ 60,962 41.43%
Requirement (3)................ 4.00% 5,886 4.00%
----- ----------- -----
Excess......................... 34.95% $ 55,076 37.43%
----- ----------- -----
----- ----------- -----
Total Risk-based:
Capital Level (4).............. 40.20% $ 62,801 42.68%
Requirement (3)................ 8.00% 11,772 8.00%
----- ----------- -----
Excess......................... 32.20% $ 51,029 34.68%
----- ----------- -----
----- ----------- -----
</TABLE>
- ------------------------
(1) Pro forma capital levels assume that one-half of the net proceeds from the
sale of the Common Stock is contributed by the Company to the Bank in
exchange for the capital stock of the Bank, but only after deducting from
the amount contributed to the Bank (i) the full amount of Common Stock
expected to be purchased by the ESOP and (ii) an additional amount
representing 4% of the Common Stock to be issued in the Conversion,
including Common Stock contributed to the Foundation, on account of the
anticipated PRRP.
(2) Capital under generally accepted accounting principles (GAAP) includes the
net unrealized gain/loss, if any, on available-for-sale securities, which is
not recognized as capital under the FDIC capital ratio rules. See
"Regulation--Banking Regulation--Capital Requirements."
(3) In order to be classified as "well-capitalized," the Bank must, in addition
to other requirements, have a Tier I risk-based capital ratio of at least
6.00%, a total risk-based capital ratio of at least 10.00% and a Tier I
leverage ratio of at least 5.00%. See "Regulation--Banking
Regulation--Capital Requirements" and "--Enforcement."
(4) Total risk-based capital includes the allowance for loan losses. Pro forma
risk-based capital data assumes the net proceeds are invested in assets that
carry a risk-weighting equal to 20%, based on the assumption that the net
proceeds will initially be invested in government and corporate debt
securities.
24
<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed, the net proceeds are expected to
range from $50,312,500 to $79,166,120. See "Pro Forma Data" and "The
Conversion--Stock Pricing and Number of Shares to be Issued" for a discussion of
the assumptions used to estimate those amounts. The proceeds will not be
available unless and until the Conversion is completed.
The Company will use 50% of the net proceeds from the sale of the Common
Stock to purchase the capital stock of the Bank. Therefore, it is estimated that
the amount paid by the Company to the Bank, before non-cash accounting
adjustments, will range from $25,156,250 to $39,583,060. The Bank intends to
invest its share of the net proceeds in short-and medium-term, investment-grade
debt securities. The amount received will become part of the Bank's general
funds, which the Bank currently intends to gradually deploy to increase its
levels of one- to four-family real estate lending and, to a lesser extent, other
lending, depending on market conditions as suitable opportunities arise. The
Company expects that initially it will use the net proceeds remaining in its
hands, after funding the loan to the ESOP, to make investments in short and
intermediate term investment-grade debt securities. The Company may also use the
proceeds it retains to purchase stock to fund the PRRP or to satisfy the
exercise of options issued under the Stock Option Plan. Those purchases would
generally not occur for at least six months after the Conversion and generally
not until after stockholders approve the two plans. The Company may also
contribute all or a portion of the net proceeds retained by it to the Bank as
additional capital. See "Management of the Bank--Benefits--Stock Option Plan"
and "--Benefits--Personnel Recognition and Retention Program."
If depositors with first priority subscription rights purchase all the
Common Stock available in the Conversion, the ESOP will purchase its Common
Stock of the Company in the open market after the Conversion is completed. If
the ESOP purchases 8% of the Common Stock issued in the Conversion, including
Common Stock contributed to the Foundation, at a price of $10.00 per share, the
ESOP loan will be from $4,248,300 to $6,609,854, depending upon the number of
shares sold in the Conversion. If the ESOP must purchase its Common Stock on the
open market when the price of the Company's Common Stock is more than $10.00 per
share, the amount of the ESOP loan will be more than if the ESOP is able to
purchase its Common Stock in the Subscription Offering. The Company estimates
that the term of the ESOP loan will be fifteen years. The Company and Bank may
choose to fund the ESOP's stock purchases with a loan by a third party financial
institution. See "Management of the Bank--Benefits--Employee Stock Ownership
Plan."
The Bank and the Company may also use the net proceeds from the Conversion
to support future expansion through, for example, purchasing branches,
establishing new branches, acquiring other financial institutions, or expanding
into other businesses. The Company and the Bank have no current arrangements,
understandings or agreements for any such expansion. The Company, after the
Conversion, will be a bank holding company which, under existing law, may engage
in only limited types of businesses which are closely related to and a proper
incident to banking. See "Regulation--Holding Company Regulation."
After the Conversion, the Board of directors of the Company may approve
stock repurchase plans, subject to statutory and regulatory requirements, and
use a portion of the net proceeds to implement the repurchase plans. Unless
approved by the Superintendent, the Company may not repurchase any Common Stock
in the first year after the Conversion and, during the next two years, may only
repurchase up to 5% of its outstanding capital stock each year. Further, the
Company may not repurchase any of its Common Stock if the repurchase would cause
the Bank to become "undercapitalized." See "Regulation--Banking
Regulation--Enforcement." The Board of Directors may authorize the use of a
portion of the net proceeds to repurchase stock depending upon facts and
circumstances in the future. Such facts and circumstances may include, for
example: (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives,
25
<PAGE>
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and the opportunity to improve the Company's
return on equity; (ii) avoiding dilution by not having to issue additional
shares to cover the exercise of stock options or to fund employee stock benefit
plans; and (iii) capital needs of the Company and the Bank in light of the level
of non-performing loans, current and projected results of operations, the
economic environment and other considerations. If the Company repurchases stock
for more than book value per share, the book value per share for remaining
shares would be reduced. The Company will not repurchase any stock if the
repurchase would cause the Company or the Bank not to satisfy any minimum
regulatory capital ratio requirements.
DIVIDEND POLICY
After the Conversion, the Board of Directors of the Company may declare cash
or stock dividends, subject to statutory and regulatory requirements. However,
the Board has not decided the amount or timing of dividends, if any. Dividends
will depend upon a number of factors, such as profitability, available
investment opportunities, capital needs in connection with potential expansion
or acquisitions, regulatory limits, financial condition, tax considerations,
general economic conditions, industry standards and other factors. The Company
cannot assure any potential purchaser that dividends will be paid, when they
might be paid or, if paid, whether the payment of dividends will continue.
The Company is not generally subject to regulatory restrictions on the
payment of dividends to its stockholders, although the ability of the Company to
pay dividends may, depending upon its use of the portion of the net proceeds it
retains, depend, in part, on dividends from the Bank. Delaware law generally
limits the dividends which the Company may pay to the excess of its net assets
(the amount by which total assets exceed total liabilities) over its statutory
capital (number of shares outstanding multiplied by par value per share), or if
there is no excess, to its net profits for the current and/or immediately
preceding fiscal year. The Company has also agreed with the FDIC that it will
not pay an extraordinary dividend to its stockholders which constitutes a
tax-free return of capital for one year after the Conversion without the FDIC's
consent.
One source of funds for the Company to pay dividends is dividends from the
Bank to the Company. The Bank may not pay dividends or repurchase its common
stock if that would cause its stockholders' equity to be less than the
liquidation account required to be created for the benefit of certain
depositors. See "The Conversion--Effects of Conversion on Depositors and
Borrowers--Liquidation Rights." Under New York law, the Bank may pay dividends
to the Company, without regulatory approval, equal to its net profits for the
year in which the payment is made, plus retained net profits for the two
previous years, subject to certain limits not generally relevant. Restrictions
on the ability of the Bank to pay dividends to the Company are not expected to
have a material effect on the operations of the Company or its ability to pay
dividends in the foreseeable future.
MARKET FOR THE COMMON STOCK
The Company was recently formed and has never issued stock. Therefore, there
is currently no market for the Company's Common Stock. The Company has received
preliminary approval for listing the Common Stock on the NASDAQ National Market
under the symbol "CNYF" subject to the completion of the Conversion and
compliance with certain conditions. There must be at least three market makers
to have and maintain the listing. The Company will seek to have at least three
market makers for its Common Stock. Making a market involves maintaining bid and
ask quotations and being able, as principal, to purchase and sell stock in
reasonable quantities at those quoted prices. The Company can provide no
assurance that arrangements can be made for there to be three market makers for
the Company's Common Stock. Furthermore, the Company cannot control whether
there will be enough willing buyers and sellers for an active and liquid trading
market. Without an active and liquid trading market, it may be difficult for
stockholders to obtain full value for their shares. See "Risk Factors--Absence
of Market for Common Stock."
26
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization (capital
accounts, deposits and borrowings) of the Bank at March 31, 1998 and the
estimated capitalization of the Company (consolidated with the Bank) as though
the Conversion had been completed on that date. The table is based on the same
assumptions described above under "Pro Forma Data." The number of shares shown
includes shares to be sold in the Conversion and shares intended to be
contributed to the Foundation.
<TABLE>
<CAPTION>
15% ABOVE
MINIMUM MIDPOINT MAXIMUM MAXIMUM
CORTLAND 5,310,350 6,247,500 7,184,650 8,262,312
SAVINGS SHARES AT SHARES AT SHARES AT SHARES AT
HISTORICAL $10 PER SHARE $10 PER SHARE $10 PER SHARE $10 PER SHARE
----------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (1)............................. $ 198,234 $ 198,234 $ 198,234 $ 198,234 $ 198,234
Borrowings............................... -- -- -- -- --
----------- ------------- ------------- ------------- -------------
Total deposits and borrowings............ 198,234 198,234 198,234 198,234 198,234
----------- ------------- ------------- ------------- -------------
----------- ------------- ------------- ------------- -------------
Stockholders' equity:
Preferred Stock:, $0.01 par value
2,000,000 shares authorized (none
outstanding)............................. -- -- -- -- --
Common Stock, $0.01 par value(2)
18,000,000 shares authorized; shares
outstanding as shown..................... -- 53 62 72 83
Additional paid-in capital............... -- 51,301 60,663 70,025 80,703
Retained earnings--substantially
restricted (3)........................... 30,662 30,662 30,662 30,662 30,662
Plus:
Accumulated other comprehensive income... 732 732 732 732 732
Less:
Expense of Foundation contribution,
net...................................... -- (635) (747) (860) (988)
Common Stock acquired by ESOP(4)......... -- (4,248) (4,998) (5,748) (6,610)
Common Stock acquired by PRRP(5)......... -- (2,124) (2,499) (2,874) (3,305)
----------- ------------- ------------- ------------- -------------
Total stockholders' equity............... 31,394 75,741 83,875 92,009 101,277
----------- ------------- ------------- ------------- -------------
Total capitalization..................... $ 229,628 $ 273,975 $ 282,109 $ 290,243 $ 299,511
----------- ------------- ------------- ------------- -------------
----------- ------------- ------------- ------------- -------------
</TABLE>
- ------------------------
(1) Does not reflect withdrawals from deposit accounts to purchase Common Stock.
(2) The effect of issuing additional Common Stock to satisfy the exercise of
options under the intended Stock Option Plan is not shown. See "Management
of the Bank--Benefits--Stock Option Plan."
(3) The retained earnings of the Bank will be restricted after the Conversion.
See "The Conversion--Effects of Conversion on Depositors and
Borrowers--Liquidation Rights."
(4) The Common Stock acquired by the ESOP (8% of the Common Stock to be issued
including the contribution to the Foundation) is shown as a reduction of
stockholders' equity because it is assumed to be purchased with the proceeds
of a loan from the Bank. See "Management of the Bank--Benefits--Employee
Stock Ownership Plan."
(5) Assumes that the Company repurchases 4% of the shares issued in the
Conversion to fund the PRRP at $10.00 per share. The purchase price is shown
as a reduction of stockholders' equity. See "Risk Factors--Possible Dilution
from Stock Options and the Personnel Recognition and Retention Program,"
"Pro Forma Data" and "Management of the Bank--Benefits--Personnel
Recognition and Retention Program."
27
<PAGE>
PRO FORMA DATA
The tables in this section show estimated information as though the
Conversion had occurred in the past. Each table shows estimated stockholders'
equity at the end of the period as though the Conversion had occurred at the end
of the period and estimated net income for the entire period as though the
Conversion had occurred at the beginning of the period. The amounts shown in the
tables, except for historical data, are based upon assumptions and estimates,
the most significant of which are described below.
It is assumed that the ESOP will purchase 8% of the Common Stock issued in
the Conversion (including Common Stock contributed to the Foundation). The
remaining shares are assumed to be sold for $10.00 per share with CIBC
Oppenheimer Corp. and Trident Securities, Inc. receiving a fee of 1.15% of the
purchase price of those shares, except that no fee will be paid on Common Stock
purchased by the ESOP and purchases estimated at $1.7 million by officers,
employees, and directors of the Bank and Company and members of their immediate
families. CIBC Oppenheimer Corp. and Trident Securities, Inc. will receive a
minimum fee of $750,000. It is also assumed that the Company contributes Common
Stock to the Foundation equal to 2% of the Common Stock sold in the Conversion.
Other Conversion expenses are estimated to be approximately $1.0 million. Actual
expenses may vary from these estimates. Stockholders' equity has not been
reduced by the liquidation account that must be created in connection with the
Conversion for the benefit of certain depositors.
The tables assume that the net proceeds were invested at 5.39% (the one-year
U.S. Treasury constant maturity index for the week which included March 31,
1998). This rate has been used because it is believed to be a reasonable
estimate of the rate that would be obtained on an investment of net proceeds.
The after-tax yield is assumed to be 3.29% (based on an estimated tax rate of
39%). The tables do not take into account possible withdrawals of deposits to
pay for Common Stock purchases. Per share amounts have been calculated by
dividing applicable amounts by the number of shares shown, as adjusted for
estimated ESOP allocations. The calculation of pro forma stockholders' equity
does not include assumed earnings on the net proceeds during the period shown.
For the purpose of calculating the pro forma data, the Company assumes that
it will implement the PRRP and repurchase 4% of the Common Stock sold in the
Conversion at $10.00 per share to fund the program. The Company also assumes
that all the repurchased stock is awarded under the program in awards that vest
gradually over five years. See "Management of the Bank--Benefits--Personnel
Recognition and Retention Program." No adjustments have been made to estimate
the effect of the Stock Option Plan which the Company expects to implement. The
ESOP is assumed to be funded with a loan from the Company that is repaid in
substantially equal principal payments over a period of fifteen years. See
"Management of the Bank--Benefits--Employee Stock Ownership Plan."
The following information is not intended to predict the future and does not
show or predict the financial effects of the Conversion when it occurs in the
future. The information should not be taken as an indication of future
profitability. The pro forma stockholders' equity does not represent the fair
market value of the Common Stock and may be more than would be distributed to
stockholders in the unlikely event of a liquidation. The pro forma data should
not be used to project the future market price of the Common Stock.
28
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------------
8,262,318
5,310,375 6,247,500 7,184,625 SHARES (15%
SHARES (MINIMUM) SHARES (MIDPOINT) SHARES (MAXIMUM) ABOVE MAXIMUM)
AT $10.00 PER AT $10.00 PER AT $10.00 PER AT $10.00 PER
SHARE SHARE SHARE SHARE
----------------- ----------------- ------------------ ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds............................. $ 52,063 $ 61,250 $ 70,438 $ 81,003
Plus shares issued to the Foundation..... 1,041 1,225 1,409 1,620
----------------- ----------------- ------------------ ----------------
Pro forma market capitalization............ $ 53,104 $ 62,475 $ 71,847 $ 82,623
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Gross proceeds............................. $ 52,063 $ 61,250 $ 70,438 $ 81,003
Less offering expenses and commissions..... (1,750) (1,750) (1,750) (1,837)
----------------- ----------------- ------------------ ----------------
Estimated net conversion proceeds........ 50,313 59,500 68,688 79,166
Less ESOP and PRRP funding................. (6,372) (7,497) (8,622) (9,915)
----------------- ----------------- ------------------ ----------------
Estimated proceeds available for
investment(1).......................... $ 43,941 $ 52,003 $ 60,066 $ 69,251
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
NET INCOME:
Historical............................... $ 493 $ 493 $ 493 $ 493
Pro forma adjustments:
Net earnings from proceeds............... 361 427 494 569
ESOP expense(2).......................... (43) (51) (58) (67)
PRRP expense(3).......................... (65) (76) (88) (101)
----------------- ----------------- ------------------ ----------------
Pro forma net income................... $ 746 $ 793 $ 841 $ 894
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
NET INCOME PER SHARE:
Historical............................... $ 0.10 $ 0.09 $ 0.07 $ 0.06
Pro forma adjustments:
Net earnings from proceeds............... 0.07 0.07 0.08 0.08
ESOP expense(2).......................... (0.01) (0.01) (0.01) (0.01)
PRRP expense(3).......................... (0.01) (0.01) (0.01) (0.01)
----------------- ----------------- ------------------ ----------------
Pro forma net income per share......... $ 0.15 $ 0.14 $ 0.13 $ 0.12
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Weighted average shares used in
calculation............................ 4,889,085 5,751,865 6,614,645 7,606,841
STOCKHOLDERS' EQUITY (BOOK VALUE)(4)(5):
Historical............................... $ 31,394 $ 31,394 $ 31,394 $ 31,394
Pro forma adjustments:
Estimated net conversion proceeds...... 50,313 59,500 68,688 79,166
Net effect of contribution to
Foundation........................... 406 478 549 632
Less Common Stock acquired by:
ESOP(2).............................. (4,248) (4,998) (5,748) (6,610)
PRRP(3).............................. (2,124) (2,499) (2,874) (3,305)
----------------- ----------------- ------------------ ----------------
Pro forma book value............... $ 75,741 $ 83,875 $ 92,009 $ 101,277
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------------
8,262,318
5,310,375 6,247,500 7,184,625 SHARES (15%
SHARES (MINIMUM) SHARES (MIDPOINT) SHARES (MAXIMUM) ABOVE MAXIMUM)
AT $10.00 PER AT $10.00 PER AT $10.00 PER AT $10.00 PER
SHARE SHARE SHARE SHARE
----------------- ----------------- ------------------ ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY (BOOK VALUE) PER
SHARE:
Historical............................... $ 5.91 $ 5.03 $ 4.37 $ 3.80
Pro forma per share adjustments:
Estimated net conversion proceeds...... 9.47 9.52 9.56 9.58
Net effect of contribution to
Foundation........................... 0.08 0.08 0.08 0.08
Less Common Stock acquired by:
ESOP(2).............................. (0.80) (0.80) (0.80) (0.80)
PRRP(3).............................. (0.40) (0.40) (0.40) (0.40)
----------------- ----------------- ------------------ ----------------
Pro forma book value per share..... $ 14.26 $ 13.43 $ 12.81 $ 12.26
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Shares used in calculation......... 5,310,375 6,247,500 7,184,625 8,262,318
RATIO OF OFFERING PRICE TO PRO FORMA NET
INCOME PER SHARE....................... 16.67x 17.86x 19.23x 20.83x
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
OFFERING PRICE PER SHARE AS A PERCENTAGE OF
PRO FORMA BOOK VALUE PER SHARE........... 70.13% 74.46% 78.06% 81.57%
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
</TABLE>
NOTES APPEAR AFTER FOLLOWING PAGE.
30
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------
8,262,318
5,310,375 6,247,500 7,184,625 SHARES (15%
SHARES (MINIMUM) SHARES (MIDPOINT) SHARES (MAXIMUM) ABOVE MAXIMUM)
AT $10.00 PER AT $10.00 PER AT $10.00 PER AT $10.00 PER
SHARE SHARE SHARE SHARE
----------------- ----------------- ------------------ ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds............................. $ 52,063 $ 61,250 $ 70,438 $ 81,003
Plus shares issued to the Foundation..... 1,041 1,225 1,409 1,620
----------------- ----------------- ------------------ ----------------
Pro forma market capitalization............ $ 53,104 $ 62,475 $ 71,847 $ 82,623
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Gross Proceeds............................. $ 52,063 $ 61,250 $ 70,438 $ 81,003
Less offering expenses and commissions..... (1,750) (1,750) (1,750) (1,837)
----------------- ----------------- ------------------ ----------------
Estimated net conversion proceeds........ 50,313 59,500 68,688 79,166
Less ESOP and PRRP funding................. (6,372) (7,497) (8,622) (9,915)
----------------- ----------------- ------------------ ----------------
Estimated proceeds available for
investment(1).......................... $ 43,941 $ 52,003 $ 60,066 $ 69,251
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
NET INCOME:
Historical............................... $ 72 $ 72 $ 72 $ 72
Pro forma adjustments:
Net earnings from proceeds............... 1,445 1,710 1,975 2,277
ESOP expense(2).......................... (173) (203) (234) (269)
PRRP expense(3).......................... (259) (305) (351) (403)
----------------- ----------------- ------------------ ----------------
Pro forma net income................... $ 1,085 $ 1,274 $ 1,462 $ 1,677
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
NET INCOME PER SHARE:
Historical............................... $ 0.01 $ 0.01 $ 0.01 $ 0.01
Pro forma adjustments:
Net earnings from proceeds............... 0.30 0.30 0.30 0.30
ESOP expense(2).......................... (0.04) (0.04) (0.04) (0.04)
PRRP expense(3).......................... (0.05) (0.05) (0.05) (0.05)
----------------- ----------------- ------------------ ----------------
Pro forma net income per share......... $ 0.22 $ 0.22 $ 0.22 $ 0.22
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Weighted average shares used in
calculation............................ 4,899,707 5,764,360 6,629,014 7,623,366
STOCKHOLDERS' EQUITY (BOOK VALUE)(4)(5):
Historical............................... $ 30,740 $ 30,740 $ 30,740 $ 30,740
Pro forma adjustments:
Estimated net conversion proceeds...... 50,313 59,500 68,688 79,166
Net effect of contribution to
Foundation........................... 406 478 549 632
Less Common Stock acquired by:
ESOP(2).............................. (4,248) (4,998) (5,748) (6,610)
PRRP(3).............................. (2,124) (2,499) (2,874) (3,305)
----------------- ----------------- ------------------ ----------------
Pro forma book value............... $ 75,087 $ 83,221 $ 91,355 $ 100,623
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
</TABLE>
NOTES APPEAR ON FOLLOWING PAGE.
31
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------
8,262,318
5,310,375 6,247,500 7,184,625 SHARES (15%
SHARES (MINIMUM) SHARES (MIDPOINT) SHARES (MAXIMUM) ABOVE MAXIMUM)
AT $10.00 PER AT $10.00 PER AT $10.00 PER AT $10.00 PER
SHARE SHARE SHARE SHARE
----------------- ----------------- ------------------ ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY (BOOK VALUE) PER
SHARE:
Historical............................... $ 5.79 $ 4.92 $ 4.28 $ 3.72
Pro forma per share adjustments:
Estimated net conversion proceeds...... 9.47 9.52 9.56 9.58
Net effect of contribution to
Foundation........................... 0.08 0.08 0.08 0.08
Less Common Stock acquired by:
ESOP(2).............................. (0.80) (0.80) (0.80) (0.80)
PRRP(3).............................. (0.40) (0.40) (0.40) (0.40)
----------------- ----------------- ------------------ ----------------
Pro forma book value per share..... $ 14.14 $ 13.32 $ 12.72 $ 12.18
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
Shares used in calculation......... 5,310,375 6,247,500 7,184,625 8,262,318
RATIO OF OFFERING PRICE TO PRO FORMA NET
INCOME PER SHARE....................... 45.45x 45.45x 45.45x 45.45x
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
OFFERING PRICE PER SHARE AS A PERCENTAGE OF
PRO FORMA BOOK VALUE PER SHARE........... 70.72% 75.07% 78.625% 82.10%
----------------- ----------------- ------------------ ----------------
----------------- ----------------- ------------------ ----------------
</TABLE>
- ------------------------
(1) Estimated net proceeds available for investment consist of estimated net
Conversion proceeds minus (i) the proceeds attributable to the purchase of
Common Stock by the ESOP; and (ii) the cost of the shares covered by the
PRRP, which, subject to receipt of stockholder approval, are assumed to be
purchased at a price of $10.00 per share.
(2) The amount estimated to be borrowed by the ESOP from the Company is shown as
a reduction of stockholders' equity. Estimated principal payments on the
ESOP loan are shown as an expense, reducing net income, but interest payable
is assumed to be eliminated in the consolidation of the financial results of
the Bank and the Company. The principal payments, which are assumed to be
made using contributions from the Bank, are treated as made at the end of
the periods shown. In calculating per share net income for the year ended
December 31, 1997, one-fifteenth of the shares owned by the ESOP are assumed
to be released from the ESOP loan during the year and one-half are included
as shares outstanding, based upon the fifteen year assumed loan repayment.
Likewise, one-sixtieth of the shares owned by the ESOP are assumed to be
released and one-half of those are assumed to be outstanding for the three
months ended March 31, 1998. ESOP expense as shown in the table is based
upon generally accepted accounting principles as described in accounting
Statement of Position 93-6. Generally accepted accounting principles require
that as and when shares pledged as security for an ESOP loan are committed
to be released from the loan (i.e., as the loan is repaid), ESOP expense is
recorded based upon the fair value of the shares at that time. Only the ESOP
shares committed to be released are considered outstanding for purposes of
the net earnings per share calculations. See "Management of the
Bank--Benefits--Employee Stock Ownership Plan."
(3) The shares purchased by the Company to fund the anticipated PRRP are assumed
to be purchased at the beginning of the periods shown at $10.00 per share
and immediately awarded to directors, officers and employees. Because the
shares are assumed to vest gradually over five years, 20% of the purchase
price is treated as an expense for the year ended December 31, 1997 and 5%
for the quarter ended March 31, 1998. If the Company uses authorized but
unissued shares to fund the plan, the interests of existing stockholders
would be diluted by approximately 3.85%. In such event, pro forma net
earnings per share would be $0.21, $0.21, $0.21 and $0.21, and pro forma
stockholders' equity per share would be $13.98, $13.19, $12.61 and $12.09 at
the minimum, midpoint, maximum and 15% above the maximum of the Valuation
Range, respectively, for the year ended December 31, 1997. Pro forma net
earnings per share would be $0.15, $0.14, $0.13 and $0.12, and pro forma
stockholders' equity per
32
<PAGE>
share would be $14.10, $13.29, $12.70 and $12.17 at the minimum, midpoint,
maximum and 15% above the maximum of the Valuation Range, respectively, for
the three months ended March 31, 1998. If the per share price paid to
repurchase stock to fund the plan is greater than $10.00 per share, then net
income per share and stockholders equity per share would be lower. See
"Management of the Bank--Benefits--Personnel Recognition and Retention
Program."
(4) If the Stock Option Plan covering up to 10% of the Common Stock issued in
the Conversion is implemented as planned and funded with newly issued Common
Stock, the estimated net income and book value per share for all of the
alternatives shown on the preceding tables would be reduced because of the
additional shares that would be outstanding. The effect of the
implementation of the Stock Option Plan can not be reasonably estimated
because the number of options that may be awarded cannot be determined; the
exercise price of the options will depend upon the market price on the date
the options are awarded; the options will vest gradually over five years;
and the exercise of options is at the discretion of the director, officer or
employee holding the option. See "Management of the Bank--Benefits--Stock
Option Plan."
(5) The retained earnings of the Bank will be restricted after the Conversion.
See "Dividend Policy," and "The Conversion--Effects of Conversion on
Depositors and Borrowers--Liquidation Rights."
33
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION
WITH AND WITHOUT FOUNDATION
RP Financial, LC. has estimated that, if the Foundation was not being
established, the aggregate market value of the Common Stock of the Company would
be approximately $1.8 million higher at the midpoint of the Valuation Range,
which would result in a $3.0 million increase in the amount of Common Stock
offered in the Conversion at the midpoint. For comparative purposes only, set
forth below are certain estimated pricing ratios and financial information,
assuming that the Foundation was not established and assuming the Conversion was
completed at March 31, 1998. However, these are just estimates and there is no
assurance that if the Foundation were not funded by the Company, an appraiser at
that time would conclude that the market value of the Company's Common Stock
would be the same as estimated by RP Financial, LC.
<TABLE>
<CAPTION>
MINIMUM MIDPOINT
------------------------ ------------------------
WITH WITH NO WITH WITH NO
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Estimated offering amount...................................... $ 52,063 $ 54,613 $ 61,250 $ 64,250
Pro forma market capitalization................................ 53,104 54,613 62,475 63,250
Total assets............................................... 276,734 278,697 284,869 287,178
Total liabilities.......................................... 200,994 200,994 200,994 200,994
Pro forma stockholders' equity................................. 75,740 77,703 83,875 86,184
Pro forma net income........................................... 746 763 793 813
Pro forma stockholders' equity per share....................... 14.26 14.23 13.43 13.42
Pro forma net income per share................................. $ 0.15 $ 0.15 $ 0.14 $ 0.14
Pro forma pricing ratios (annualized)
Price/stockholders' equity..................................... 70.13% 70.27% 74.46% 74.52%
Price/net income............................................... 16.67x 16.67x 17.86x 17.86x
Price/assets................................................... 19.19% 19.60% 21.93% 22.37%
Pro forma financial ratios (annualized)
Return on assets............................................... 1.08% 1.10% 1.11% 1.13%
Return on stockholders' equity................................. 3.94% 3.93% 3.78% 3.77%
Stockholders' equity/assets.................................... 27.37% 27.88% 29.44% 30.01%
</TABLE>
<TABLE>
<CAPTION>
MAXIMUM 15% ABOVE MAXIMUM
------------------------ ------------------------
WITH WITH NO WITH WITH NO
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Estimated offering amount...................................... $ 70,438 $ 73,888 $ 81,003 $ 84,971
Pro forma market capitalization................................ 71,846 73,888 82,623 84,971
Total assets............................................... 293,003 295,647 302,271 305,283
Total liabilities.......................................... 200,994 200,994 200,994 200,994
Pro forma stockholders' equity................................. 92,009 94,653 101,277 104,289
Pro forma net income........................................... 841 863 894 919
Pro forma stockholders' equity per share....................... 12.81 12.81 12.26 12.27
Pro forma net income per share................................. $ 0.13 $ 0.13 $ 0.12 $ 0.12
Pro forma pricing ratios (annualized)
Price/stockholders' equity..................................... 78.06% 78.06% 81.57% 81.50%
Price/net income............................................... 19.23x 19.23x 20.83x 20.83x
Price/assets................................................... 24.52% 24.99% 27.33% 27.83%
Pro forma financial ratios (annualized)
Return on assets............................................... 1.15% 1.17% 1.18% 1.20%
Return on stockholders' equity................................. 3.66% 3.65% 3.53% 3.52%
Stockholders' equity/assets.................................... 31.40% 32.02% 33.51% 34.16%
</TABLE>
34
<PAGE>
PARTICIPATION BY THE BOARD AND SENIOR MANAGEMENT
The following table sets forth certain information as to the intended
purchases of Common Stock by each director and executive officer of the Bank and
their associates and by all directors and executive officers as a group. This
table excludes shares to be purchased by the ESOP which may be allocated to
executive officers and excludes options or shares which may be granted pursuant
to the Stock Option Plan or the PRRP. For purposes of the following table, it
has been assumed that 6,125,000 shares (the midpoint of the Valuation Range) of
Common Stock will be sold at $10.00 per share and that sufficient shares will be
available to satisfy subscriptions in all categories. The percentages assume a
contribution of 122,500 shares of Common Stock to the Foundation.
<TABLE>
<CAPTION>
AGGREGATE
NUMBER PURCHASE PERCENT
NAME POSITION OF SHARES PRICE OF SHARES
- --------------------------- ----------------------------------------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Wesley D. Stisser, Jr. President & Chief Executive
Officer, Director 15,000 $ 150,000 0.24 %
Joseph H. Compagni Director 15,000 150,000 0.24 %
Roland Fragnoli Director 15,000 150,000 0.24 %
Edward E. Hatter Director 15,000 150,000 0.24 %
Patrick J. Hayes, M.D. Director 15,000 150,000 0.24 %
Robert S. Kashdin, CPA Director 15,000 150,000 0.24 %
Harvey Kaufman Director 15,000 150,000 0.24 %
Donald P. Reed Director 15,000 150,000 0.24 %
Judith F. Riehlman Director 1,000 10,000 0.02 %
Terrance D. Stalder Director 10,000 100,000 0.16 %
F. Michael Stapleton Executive Vice President
& Chief Operating Officer 15,000 150,000 0.24 %
Steven A. Covert Executive Vice President 5,000 50,000 0.08 %
& Chief Financial Officer
Kerry D. Meeker Senior Vice President
& Senior Loan Officer 8,000 80,000 0.13 %
----------- ------------- ---
All Directors and Executive
Officers as a group 159,000 $ 1,590,000 2.55 %
----------- ------------- ---
----------- ------------- ---
</TABLE>
In addition to the above purchases, three recently retired directors
(Harwood Spaulding, Edward G. Burgess and Peter A. Potter) have indicated an
intention to subscribe for 25,000 shares of Common Stock, representing 0.40% of
the stock to be issued in the Conversion at the midpoint of the Valuation Range,
including the shares contributed to the Foundation. See "Management of the
Bank--Directors."
THE CONVERSION
THE BOARD OF DIRECTORS OF THE BANK AND THE SUPERINTENDENT HAVE APPROVED THE
PLAN OF CONVERSION. BANKING DEPARTMENT APPROVAL DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION. CERTAIN TERMS USED IN
THE FOLLOWING SUMMARY OF THE PERTINENT ASPECTS OF THE CONVERSION ARE DEFINED IN
THE PLAN OF CONVERSION, A COPY OF WHICH MAY BE OBTAINED FROM THE BANK.
GENERAL
On March 23, 1998 the Board of Directors of the Bank adopted a Plan of
Conversion which provides that the Bank will convert from a mutual savings bank
to a stock savings bank. All of the capital stock of the Bank will be owned by
the Company. The Company plans to keep 50% of the net proceeds from the sale of
the Common Stock and to use the remaining 50% to purchase all of the stock of
the Bank to be
35
<PAGE>
issued as part of the Conversion. The Superintendent has approved the Plan
subject to its approval by the depositors of the Bank entitled to vote at the
Special Meeting to be held on September , 1998 and subject to the
satisfaction of certain other conditions imposed by the Superintendent in such
approval.
To accomplish the Conversion, the Bank will amend its Organization
Certificate to authorize it to issue stock. The Conversion will be accounted for
as a pooling of interests, which generally means that the financial statement
entries of the Bank that existed before the Conversion will continue without
change after the Conversion. As part of the Conversion, the Company is
conducting a Subscription Offering to sell its Common Stock. Many depositors and
the Company's ESOP will have priority rights to subscribe for the Common Stock
being sold in the Conversion. Shares not subscribed for in the Subscription
Offering may be offered in a Community Offering to certain members of the
general public, with preference given to natural persons residing in Cortland
County, New York, The Company and the Bank anticipate that all shares not
subscribed for in the Subscription or Community Offering will be offered for
sale by the Company to the general public in a Syndicated Community Offering.
See "--Community Offering" and "--Syndicated Community Offering." The Conversion
must be completed within 24 months after the date of the approval of the Plan of
Conversion by the Superintendent. See "Effect of Delay in Consummating the
Conversion."
REASONS FOR THE CONVERSION
The Bank has several business purposes for the Conversion. The sale of the
Company's Common Stock will provide the Bank with additional equity capital to
support its existing operations and to provide capital for expansion
opportunities. At March 31, 1998, the Bank had capital equal to 13.26% of
applicable assets and total risk-based capital equal to 23.19% of risk-weighted
assets. See "Regulatory Capital Compliance" for discussion of the effects of the
Conversion on the Bank's capital ratios. In addition, investment of the net
proceeds from the Conversion is expected to provide additional operating income
to further increase the Bank's capital on a continuing basis.
The Conversion will structure the Bank in the stock form used in the United
States by all commercial banks, most major business corporations and many
savings institutions. The Conversion will give many of the Bank's depositors the
opportunity to become stockholders of the Company, allowing them to own stock in
the financial organization in which they maintain deposit accounts. Such
ownership may encourage depositors who become stockholders to promote the Bank
to others, thereby further contributing to the Bank's earnings potential. The
Bank also expects that the ESOP, the Stock Option Plan and the PRRP will assist
it in attracting and retaining qualified personnel and successfully competing
with other financial institutions in its principal market area.
The Board of Directors of the Bank believes that the holding company
structure will facilitate the diversification of the Bank's business activities
and the acquisition of other banks as well as other companies. The holding
company structure could enable an acquired bank to operate on a more autonomous
basis as a wholly-owned subsidiary of the Company, rather than as a division of
the Bank. For example, the acquired bank could retain its own directors,
officers and corporate name as well as have representation on the Board of
Directors of the Company. As of the date of this Prospectus, the Company has no
understandings or agreements to acquire any other institution or engage in any
activities other than holding the Bank's stock.
ESTABLISHMENT OF THE FOUNDATION
GENERAL. As part of the Bank's commitment to its local community, the Plan
of Conversion provides that a charitable foundation will be established in
connection with the Conversion. The Bank and the Company will incorporate the
Foundation under Delaware law as a non-stock corporation, and will fund the
Foundation with a contribution of Common Stock of the Company equal to 2% of the
Common Stock
36
<PAGE>
sold in the Conversion. The Company may also contribute or lend up to $100,000
to the Foundation for initial start up expenses and to cover initial grants by
the Foundation.
The Company and the Bank believe that the Foundation will help maintain a
bond between the Bank and its community. The community will share in the
potential growth and success of the Company over the long term. By enhancing the
Bank's visibility and reputation, the Bank believes that the Foundation will
improve goodwill and enhance the long-term value of the Bank. 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
funds 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 Foundation is
being formed to add to the Bank's existing community activities. However, the
Foundation is expected to replace some of the Bank's existing charitable giving.
The Bank intends to continue to emphasize lending and development activities
within its market area, but the Foundation may have even greater flexibility to
foster community activities and the promotion of charitable causes because it
will not be subject to limits placed on the Bank by most banking laws and
regulations. In this regard, the Board of Directors believes that establishing a
charitable foundation is consistent with the Bank's commitment to community
service.
Although the Bank and the Company have considered the above factors, the
establishment of a charitable foundation in connection with a conversion is a
relatively new concept that has only been implemented by several 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 will be 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
Internal Revenue Code. No part of the net earnings of the Foundation will
benefit, or be distributed to, its directors, officers or members. A majority of
the directors of the Foundation will be officers or directors of the Bank, and
the remaining directors will consist of civic and community leaders within the
Bank's local community. Once the initial Board of Directors of the Foundation is
appointed by the Bank and the Company, future directors will be elected by the
existing board of the Foundation. Only persons serving as directors of the
Foundation will have the authority to vote to elect new directors of the
Foundation.
The Board of Directors of the Foundation will control the Foundation's
affairs. That Board will establish the Foundation's policies in making grants or
contributions, consistent with the Foundation's purpose. As directors of a
non-profit corporation, directors of the Foundation will have a 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 of the
Foundation. The directors of the Foundation will also direct the activities of
the Foundation, including the management of the Common Stock of the Company held
by the Foundation. However, the FDIC and the Superintendent have required that
the Foundation agree that all shares of Common Stock held by the Foundation will
be voted in the same ratio as all other shares of the Company's Stock on all
proposals considered by stockholders of the Company. The FDIC and the
Superintendent have agreed to 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 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.
37
<PAGE>
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
Company or the Foundation that are satisfactory to the FDIC and the
Superintendent. If the FDIC and the Superintendent waive such voting
requirement, the directors of the Foundation would control the voting of the
Common Stock owned by the Foundation.
The Foundation's place of business will be located at the Bank's
administrative offices and initially the Foundation is expected to have no
employees but will utilize the staff of the 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. The Bank has agreed with the FDIC that
the Bank will comply with all applicable 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 Company intends to capitalize the Foundation with Common Stock of the
Company in an amount equal to 2% of the Common Stock to be sold in connection
with the Conversion and may donate or lend up to an additional $100,000 to the
Foundation. Therefore, without resoliciting subscribers, the contribution to the
Foundation could vary from 104,125 shares to 162,006 shares. The Company and the
Bank decided to fund the Foundation primarily with Common Stock rather than cash
to create a link between the future success of the Company and the benefits to
the community, and so the community can share in the potential growth and
success of the Company and the Bank over the long term. The use of Common Stock
provides a potentially larger endowment than if cash is used because the
Foundation will share in future stock price appreciation. As such, the
contribution of Common Stock may provide a self-sustaining funding, so the
Company can reduce, if not eliminate, future cash contributions to the
Foundation.
The Foundation will receive working capital from any dividends that may be
paid on the Common Stock, from loans secured by the Common Stock, or from the
proceeds of the sale of any of the Common Stock. The Foundation must distribute
annually in grants or contributions, at least 5% of the average fair market
value of its net investment assets. As a condition of its gift, the Company has
required that the Foundation not sell stock of the Company in any one year in
excess of 5% of the average market value of the assets held by the Foundation
unless the Board of Directors determines that the failure to sell more stock
would result in a long-term reduction of the value of the Foundation's assets
and thus jeopardize the Foundation's ability to carry out its purposes.
The contribution of the Common Stock to the Foundation will reduce (dilute)
the interests of the other stockholders of the Company because the contribution
will increase the number of shares outstanding. The voting and ownership
interests of the other stockholders will be diluted by 1.96%, compared to their
interests in the Company if the Foundation were not established. For additional
discussion of dilution, see "Pro Forma Data."
TAX CONSIDERATIONS. The Company and the Bank have been advised by their
independent tax advisors, that an organization created for the purposes
described above would qualify as a tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code, and would likely be classified as a
private foundation. The Foundation will submit an application to the IRS to be
recognized as a tax-exempt organization. If the Foundation files the application
within 15 months after it is organized, 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. The
independent tax advisors, however, have not rendered any advice on whether the
restriction on voting of the Common Stock held by the Foundation will affect the
ability of the Foundation to qualify as a tax-exempt organization. However, as
discussed above, the FDIC and the Superintendent have agreed to waive the voting
restriction under certain circumstances.
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The Company is entitled to a federal income tax deduction for charitable
contributions up to 10% of its taxable income (computed before deducting the
contributions) for the year of the contribution. Any contributions in excess of
the deductible amount may be carried forward and deducted in the Company's next
five taxable years, subject, in each such year, to the 10% of taxable income
limitation. The Company's contribution to the Foundation is likely to exceed the
10% limit for the year in which it is made. Based on the policy considerations
discussed above, the Company and Bank believe that a contribution in excess of
the 10% annual limitation is justified because of the Bank's capital position
and its earnings, the additional capital being raised in the Conversion and the
potential benefits of the Foundation to the Bank's community. See "Regulatory
Capital Compliance," "Capitalization," and "Comparison of Valuation and Pro
Forma Information With and Without Foundation." Taking into account the amount
of the contribution and its effect on the capital ratios of the Bank, the Bank
will still exceed the capital levels necessary to be classified as "well
capitalized" under federal regulations, which is the best capital category.
Thus, the amount of the contribution will not adversely impact the financial
condition of the Company and the Bank. The Company and the Bank therefore
believe that the contribution is reasonable.
The Company and the Bank have received the opinion of their independent tax
advisors that the Company's contribution of its own Common Stock would not
constitute self-dealing, and that the Company will be entitled to a deduction in
the amount of the fair market value of the Common Stock at the time of
contribution, less the $0.01 per share par value which the Foundation is
required to pay to the Company for the Common Stock contributed, subject to the
annual limit based upon 10% of taxable income. As discussed above, the Company
may deduct any portion of the contribution in excess of the 10% limit for the
following five years. For the purpose of calculating the amount of the tax
deduction, the fair market value of the Common Stock will be equal to the
average of the high and low prices on the day the Company makes the
contribution, which is expected to be the first day the Common Stock opens for
trading. If the contribution is made in 1998 as expected, the amount that the
Company may deduct for tax purposes will depend upon net income in 1998. The
maximum permitted deduction in future years will likewise depend upon net income
in those years, and there is no assurance that the Company will have sufficient
income in future years to reap the entire tax benefit from the contribution.
Neither the Company nor the Bank expect to make any further contributions to the
Foundation during the first five tax years after the initial contribution. After
that time, the Company and the Bank may consider future contributions to the
Foundation.
The opinion of the independent tax advisors is not binding on the IRS. The
IRS may refuse to recognize the Foundation as a tax-exempt organization under
Section 501(c)(3) of the Internal Revenue Code or may refuse to permit the
deduction. If the IRS so refuses and is successful, the anticipated tax benefit
from the contribution would be charged as an expense, reducing the Company's net
income in the year in which the IRS does so. See "Risk Factors--Establishment of
Charitable Foundation." Furthermore, the statute pursuant to which the
Foundation will be permitted to deduct the fair market value of a contribution
of its own Common Stock has, in the past, been written so that it periodically
expires, and is then renewed. If the statute were to expire and not be renewed,
the Company might lose the right to deduct any remaining unused portion of its
contribution.
In general, a private foundation is exempt from federal and state income
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 various filings with the IRS to maintain its tax-exempt status
and publish related notices regarding the availability of certain information to
the public. 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. The FDIC and the
Superintendent have required that the Foundation agree to the following
conditions: (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
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adopted by its Board of Directors, including a conflict of interest policy; and
(iv) any shares of Common Stock of the Company held by the Foundation must be
voted in the same ratio as all other outstanding shares of Common Stock of the
Company on all proposals considered by stockholders of the Company. The voting
restriction will be waived by the FDIC and the Superintendent under certain
conditions, as described above. The voting restriction will terminate for any
shares sold by the Foundation.
EFFECTS OF CONVERSION ON DEPOSITORS AND BORROWERS
VOTING RIGHTS. Except for the right to vote on the Conversion, the Bank's
depositors currently have no voting rights in the Bank. After the Conversion,
the Bank's depositors will have no voting rights in the Bank and will not be
able to elect directors or to otherwise participate in the conduct of the
affairs of the Bank or the Company unless they own Common Stock. The Bank will
be a wholly-owned subsidiary of the Company, which will hold all voting rights
in the Bank. The Company's stockholders will have exclusive voting rights in the
Company. Stockholders may vote on any matter to be considered by the
stockholders of the Company and will generally have one vote for each share of
Common Stock owned. See "Restrictions on Acquisition of the Company and the
Bank--Restrictions in the Company's Certificate of Incorporation and
Bylaws--Limitations on Voting Rights" for a discussion of limits on to the
voting rights of the Company's stockholders.
DEPOSIT ACCOUNTS AND LOANS. The terms and conditions of each depositor's
accounts with the Bank, the account balance and the existing FDIC insurance
coverage of deposit accounts will not change due to the Conversion, except to
the extent the depositor withdraws funds to purchase Common Stock. The
Conversion will not change the terms and conditions of outstanding loans, the
balances owed, or the obligations of the borrowers under their loans from the
Bank.
TAX EFFECTS. The Bank has received an opinion from its counsel, Serchuk &
Zelermyer, LLP, stating that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Internal Revenue Code. Among
other things, the opinion, which is an exhibit to the registration statement
that the Company filed with the SEC, provides that: (i) the Conversion will
qualify as a reorganization under Section 368(a)(1)(F), and the Bank will not
recognize any gain or loss in either its mutual form or its stock form, nor will
the Company, due to Conversion; (ii) the Bank will not recognize any gain or
loss upon the receipt of money from the Company for stock of the Bank, and the
Company will not recognize any gain or loss upon the receipt of money for the
Common Stock; (iii) the assets of the Bank in either its mutual or its stock
form will have the same tax basis before and after the Conversion; (iv) the
holding period of the assets of the Bank will include the pre-Conversion holding
period; (v) the Eligible Account Holders and Supplemental Eligible Account
Holders will not recognize any gain or loss when they receive deposit accounts
after the Conversion equal to their existing accounts in the Bank, plus an
interest in the liquidation account of the Bank after the Conversion; (vi) the
non-transferable subscription rights given to certain depositors in the
Subscription Offering are taxable to the recipient to the extent the
subscription rights have value; (vii) the tax basis of each account holder's
accounts in the Bank after the Conversion will be the same as the tax basis
before Conversion minus the fair market value of the non-transferable
subscription rights received and increased by the amount, if any, of gain
recognized on the exchange; (viii) the tax basis of each depositor's interest in
the liquidation account will be zero; (ix) the holding period of the Common
Stock acquired through the exercise of subscription rights shall begin when the
subscription rights are exercised; (x) the Bank in its stock form will succeed
to and take into account the earnings and profits or deficit in earnings and
profits of the Bank, in its mutual form, as of the date of Conversion; (xi) the
Bank, immediately after Conversion, will succeed to the bad debt reserve
accounts of the Bank, in its mutual form, and the bad debt reserves will have
the same character in the hands of the Bank after Conversion as if no
distribution or transfer had occurred; and (xii) the creation of the liquidation
account will have no effect on the Bank's taxable income, deductions, or
addition to reserve for bad debts either in its mutual or stock form.
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The opinion of Serchuk & Zelermyer, LLP is based in part on the assumption
that the exercise price of the subscription rights to purchase Common Stock will
be approximately equal to the fair market value of that Common Stock at the time
of the completion of the Conversion. With respect to the subscription rights,
the Bank has received a letter from RP Financial, LC., which, based on certain
assumptions, concludes that the subscription rights have no economic value when
distributed or exercised, whether or not a Community Offering or other purchase
arrangement takes place. That conclusion is based on the fact that such rights
are: (i) acquired by the recipients without payment, (ii) non-transferable,
(iii) of short duration, and (iv) afford the recipients the right only to
purchase Common Stock at a price equal to its estimated fair market value, which
will be the same price at which shares of Common Stock for which no subscription
right is received in the Subscription Offering may be offered in the Community
Offering or Syndicated Community Offering. If the subscription rights are deemed
to have an ascertainable value, receipt of such rights would likely be taxable
only to those persons who exercise the subscription rights in an amount equal to
such value (either as a capital gain or ordinary income), and the Bank could
recognize gain on the distribution of subscription rights.
The Bank is subject to New York taxation and has received the opinion of
Serchuk & Zelermyer, LLP that the Conversion will be treated for New York state
tax purposes similar to the Conversion's treatment for federal tax purposes.
Unlike a private letter ruling, the opinion of Serchuk & Zelermyer, LLP and
the conclusion of RP Financial, LC. have no binding effect or official status,
and no assurance can be given that the conclusions reached in any of those
opinions would be sustained by a court if contested by the IRS or the New York
tax authorities. DEPOSITORS WITH SUBSCRIPTION RIGHTS ARE ENCOURAGED TO CONSULT
WITH THEIR OWN TAX ADVISERS AS TO THE TAX CONSEQUENCES IF THE SUBSCRIPTION
RIGHTS ARE DEEMED TO HAVE AN ASCERTAINABLE VALUE.
LIQUIDATION RIGHTS. The Bank has no plans to liquidate. However, if there
is ever a complete liquidation of the Bank, either before or after the
Conversion, deposit account holders will receive the protection of FDIC
insurance up to applicable limits. Additional liquidation rights before and
after the Conversion are described below.
No savings bank chartered under New York law has ever, to the Bank's
knowledge, liquidated and, after paying all its deposits and other debts,
distributed any remaining assets to depositors. However, it can be argued that
depositors of a mutual form savings bank would receive a share of any assets of
that Bank remaining after payment of claims of all creditors, including the
claims of all depositors for the withdrawal value of their accounts.
After the Conversion, each depositor, in the event of a complete
liquidation, would have a claim of the same general priority as the claims of
all other general creditors of the Bank. Therefore, except for the liquidation
account described below, the depositor's claim would be solely for the balance
in his or her deposit account plus accrued interest. The depositor would have no
interest in the value of the Bank above that amount.
The Plan provides that the Bank shall establish, upon the completion of the
Conversion, a "liquidation account" for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders in an amount equal to the net worth of
the Bank as of the latest practicable date prior to the Conversion. Each
Eligible Account Holder and Supplemental Eligible Account Holder will have an
initial interest in such liquidation account for each deposit account held in
the Bank on the applicable record date. An Eligible Account Holder's and
Supplemental Eligible Account Holder's interest as to each deposit account will
be in the same proportion to the total liquidation account as the balance in his
or her account on the Eligibility Record Date (December 31, 1996) and the
Supplemental Eligibility Record Date (June 30, 1998), respectively, was to the
aggregate balance in all deposit accounts of Eligible Account Holders and
Supplemental Eligible Account Holders on such date. However, if the amount in
any Eligible Account Holder's or Supplemental Eligible Account Holder's deposit
account at the close of business on any annual closing date of the Bank is less
than the lowest amount in such account on the Eligibility Record Date
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and/or the Supplemental Eligibility Record Date, as the case may be or at the
close of business on any previous annual closing date after the Eligibility
Record Date and/or the Supplemental Eligibility Record Date, then the account
holder's interest in the liquidation account will be reduced by an amount
proportionate to any such reduction. The interest of an account holder in the
liquidation account will never increase despite any increase in the balance of
the account holder's related accounts after the Conversion. The account holder's
interest will cease to exist if such deposit account is closed. Savings
certificates will be deemed closed when they mature.
Any assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Bank.
No merger, consolidation, purchase of bulk assets with assumption of deposit
accounts and other liabilities, or similar transaction, whether the Bank, as
converted, or another insured savings institution is the surviving institution,
is deemed to be a complete liquidation for purposes of distribution of the
liquidation account and, in any such transaction, the liquidation account would
be assumed to the full extent required by regulations of the Banking Department
as then in effect.
SUBSCRIPTION OFFERING.
In accordance with Banking Department regulations and FDIC policy,
non-transferable Subscription Rights have been granted under the Plan to the
following persons and entities in the following order of priority:
FIRST PRIORITY: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder
(depositors of the Bank on December 31, 1996 with balances of at least $100)
will receive non-transferable subscription rights on a priority basis to
purchase up to 15,000 shares ($150,000) of Common Stock. If Eligible Account
Holders exercise subscription rights for more shares than the total number
available, shares shall be allocated first to permit each subscriber, to the
extent possible, to purchase 100 shares or the total amount of his or her
subscription, whichever is less. Remaining shares shall be allocated to each
Eligible Account Holder based on the proportion that his or her qualifying
deposits bear to the total qualifying deposits of all subscribing Eligible
Account Holders. Excess shares shall be reallocated (one or more times as
necessary) among those Eligible Account Holders whose subscriptions are still
not fully satisfied on the same principle until all available shares have been
allocated or all subscriptions satisfied. Subscription rights received by
officers and directors in this category based on their increased deposits in the
Bank in the year preceding December 31, 1996, are subordinated to the
subscription rights of other Eligible Account Holders.
SECOND PRIORITY: EMPLOYEE PLANS. Tax-qualified employee benefit plans of the
Bank or the Company have been granted subscription rights to purchase up to 10%
of the total shares issued in the Conversion. The ESOP, as such a plan, intends
to purchase up to 8% of the Common Stock issued in the Conversion, including
Common Stock contributed to the Foundation. No other employee plan will purchase
any Common Stock in the Conversion, except that employees of the Bank may
exercise their subscription rights, if they were depositors of the Bank at the
applicable dates, through the Bank's 401(k) Plan, which will then subscribe for
stock using funds allocated to those employees under the 401(k) Plan.
The right of the ESOP to purchase the Common Stock is subordinate to the
subscription rights of the Eligible Account Holders. If all the Common Stock
sold in the Conversion is purchased by subscribing Eligible Account Holders,
then the ESOP expects to purchase 8% of the Common Stock issued in the
Conversion on the open market or through privately negotiated transactions after
the Conversion.
THIRD PRIORITY: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each Supplemental
Eligible Account Holder (depositors of the Bank on June 30, 1998 with balances
of at least $100 who are not Eligible Account Holders) will receive
non-transferable subscription rights to purchase 15,000 shares ($150,000) of
Common Stock. If Supplemental Eligible Account Holders exercise subscription
rights for more shares than the total
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number of shares remaining after satisfying higher priority subscription rights,
shares shall be allocated in the same manner as described above regarding
Eligible Account Holders.
The subscription rights of Supplemental Eligible Account Holders are
subordinate to the rights of the Eligible Account Holders and the ESOP to
subscribe for Common Stock.
SUBSCRIPTION OFFERING EXPIRATION DATE. THE SUBSCRIPTION OFFERING WILL EXPIRE
AT 12:00 NOON, EASTERN TIME, ON SEPTEMBER , 1998, UNLESS THE SUBSCRIPTION
OFFERING IS EXTENDED, AT THE DISCRETION OF THE BOARD OF DIRECTORS, UP TO AN
ADDITIONAL 45 DAYS WITH THE APPROVAL OF THE SUPERINTENDENT, IF NECESSARY, BUT
WITHOUT ADDITIONAL NOTICE TO SUBSCRIBERS (THE "SUBSCRIPTION OFFERING EXPIRATION
DATE"). SUBSCRIPTION RIGHTS WILL BECOME VOID IF NOT EXERCISED ON OR PRIOR TO THE
SUBSCRIPTION OFFERING EXPIRATION DATE.
SEE "--PURCHASING COMMON STOCK" FOR A DESCRIPTION OF HOW TO SUBSCRIBE FOR COMMON
STOCK.
COMMUNITY OFFERING
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered for sale in a Community Offering to the general public with a
preference to natural persons residing in Cortland County. The Community
Offering, if any, shall be for a period of not more than 45 days unless extended
by the Company and the Bank, and shall commence at the same time as, during or
promptly after the Subscription Offering. The Community Offering, if any, can be
terminated at any time without notice. The Common Stock will be offered and sold
in the Community Offering to achieve a wide distribution of the Common Stock. No
person, by himself or herself, or with an associate or group of persons acting
in concert, may subscribe for or purchase more than $150,000 of Common Stock
offered in the Community Offering. Further, the Company may limit total
subscriptions so as to assure that the number of shares available for the public
offering may be up to a specified percentage of the number of shares of Common
Stock. Finally, the Company may reserve shares offered in the Community Offering
for sales to institutional investors.
The term "residing in Cortland County" shall mean occupying a dwelling as a
primary residence within Cortland County, having an intent to remain within the
Cortland County for a period of time, and manifesting the genuineness of that
intent by establishing an ongoing physical presence together with an indication
that such presence is not transitory. The Bank may use deposit or loan records
or other evidence provided to it to make a determination as to whether a person
is residing in Cortland County. In all cases, the determination shall be in the
sole discretion of the Bank.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person.
SYNDICATED COMMUNITY OFFERING.
Any shares of Common Stock not sold in the Subscription Offering or directly
by the Bank in the Community Offering, if any, may be offered for sale to the
general public by a selling group of broker-dealers in a Syndicated Community
Offering, subject to terms, conditions and procedures as may be determined by
the Bank and the Company in a manner that is intended to achieve a wide
distribution of the Common Stock subject to the rights of the Company to accept
or reject in whole or in part all order in the Syndicated Community Offering. If
held, it is expected that the Syndicated Community Offering will commence as
soon as practicable after termination of the Subscription Offering and the
direct Community Offering, if any. The Syndicated Community Offering shall be
completed within 45 days after the termination of the Subscription Offering,
unless such period is extended with the approval of the Superintendent and the
FDIC.
If for any reason a Syndicated Community Offering of unsubscribed shares of
Common Stock cannot be effected and any shares remain unsold after the
Subscription Offering and the direct Community Offering, if any, the Boards of
Directors of the Company and the Bank will seek to make other
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arrangements for the sale of the remaining shares. Such other arrangements will
be subject to the approval of the Banking Department and the FDIC and to
compliance with applicable state and federal securities laws.
PURCHASE LIMITATIONS
Each purchaser must purchase at least 25 shares. No person, together with
any associate or group of persons acting together, may subscribe for or purchase
more than 15,000 shares ($150,000) of Common Stock, except that the ESOP may
purchase 8% including shares contributed to the Foundation. If more than one
person is named as a depositor on any account or accounts, such as a joint
account, all named depositors on those accounts will be considered to be acting
together for the purpose of the limit so that they may not purchase, in total
including their individual orders and orders by the group, more than $150,000 of
Common Stock. The Board of Directors, in its sole discretion, may increase or
decrease the purchase limitation without the approval of the depositors of the
Bank and without resoliciting subscribers except as described below, provided
that the maximum purchase limitation may not be increased to a percentage in
excess of 5%. The maximum purchase limitation can be further increased to 9.99%
if the amount by which individual subscriptions exceed 5% does not, in the
aggregate, exceed 10%. If the maximum purchase limit is increased, subscribers
who submit orders for $150,000 of Common Stock will be resolicited and given an
opportunity to increase their orders and other subscribers may also be
resolicited.
The officers and directors of the Bank or their associates may not purchase
more than 25% of the shares of the Common Stock sold in the Conversion. The
directors and officers of the Bank and the Company are not deemed to be acting
in concert solely by reason of their being directors and officers of the Bank or
the Company.
The term "associate" of a person means (i) any corporation or organization
(other than the Bank, the Company or a majority-owned subsidiary of the Bank) of
which such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (ii) any
trust or other estate in which such person has a substantial beneficial interest
or as to which such person serves as trustee or in a similar fiduciary capacity
(except that the ESOP and, in some cases, other benefit plans of the Bank or the
Company are generally not associates), 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 Bank or the Company, or any of its parents
or subsidiaries. For example, a corporation of which a person serves as an
officer would be an associate of such person, and therefore, all shares
purchased by such corporation would be included with the number of shares which
such person individually could purchase under the above limitations.
Each person purchasing Common Stock in the Conversion will be deemed to
confirm that such purchase does not conflict with the maximum purchase limit. If
the purchase limit is violated by any person (including any associate or group
of persons affiliated or otherwise acting in concert with such persons), the
Company will have the right to repurchase at $10.00 per share all shares
acquired in excess of the purchase limit or, if such excess shares have been
sold, to receive the difference between the $10.00 per share and the price at
which such excess shares were sold. This right will be assignable by the
Company.
Common Stock purchased in the Conversion will be freely transferable, except
for shares purchased by directors and officers of the Bank. For certain
restrictions on the Common Stock purchased by directors and officers, see
"--Restrictions on Transferability of Subscription Rights and Stock." In
addition, members of the National Association of Securities Dealers and their
associates are subject to certain restrictions on the transfer of securities
purchased by using subscription rights and to certain reporting requirements
upon purchase of such securities.
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RESTRICTIONS ON TRANSFERABILITY OF SUBSCRIPTION RIGHTS AND COMMON STOCK
DEPOSITORS WITH SUBSCRIPTION RIGHTS MAY NOT TRANSFER OR ENTER INTO ANY
AGREEMENT OR UNDERSTANDING TO TRANSFER THE LEGAL OR BENEFICIAL OWNERSHIP OF THE
SUBSCRIPTION RIGHTS THAT THEY RECEIVE IN THE SUBSCRIPTION OFFERING OR THE SHARES
OF COMMON STOCK TO BE ISSUED UPON THE EXERCISE OF THOSE RIGHTS. SUBSCRIPTION
RIGHTS MAY BE EXERCISED ONLY BY THE PERSON TO WHOM THEY ARE GRANTED AND ONLY FOR
HIS OR HER ACCOUNT. EACH PERSON SUBSCRIBING FOR SHARES WILL BE REQUIRED TO
CERTIFY THAT HE OR SHE IS PURCHASING SHARES SOLELY FOR HIS OR HER OWN ACCOUNT
AND THAT HE OR SHE HAS NO AGREEMENT OR UNDERSTANDING REGARDING THE SALE OR
TRANSFER OF SUCH SHARES. THE CONVERSION REGULATIONS ALSO PROHIBIT ANY PERSON
FROM OFFERING OR MAKING AN ANNOUNCEMENT OF AN OFFER OR INTENT TO MAKE AN OFFER
TO PURCHASE SUCH SUBSCRIPTION RIGHTS OR SHARES OF COMMON STOCK PRIOR TO THE
COMPLETION OF THE CONVERSION.
THE BANK AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES IF THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL
NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
Shares of Common Stock purchased in the Subscription Offering by directors
and officers of the Company and the Bank may not be sold for one year after the
Conversion, except for a disposition of shares in the event of the death of the
stockholder. Common Stock issued by the Company to directors and officers in the
Conversion will bear a legend giving appropriate notice of the restriction, and,
in addition, the Company will give appropriate instructions to the transfer
agent for the Common Stock with respect to the restriction. Any shares issued to
directors and officers as a stock dividend, stock split, or otherwise with
respect to restricted stock shall be subject to the same restrictions.
For three years after the Conversion, no director or officer of the Bank,
the Company or their associates may, without the prior approval of the
Superintendent, purchase any shares of Common Stock other than from or through a
registered broker or dealer. This restriction does not apply however to the
purchase of Common Stock pursuant to the Stock Option Plan or the PRRP to be
established after the Conversion.
PURCHASING COMMON STOCK
Subscribers in the Subscription Offering must deliver to the Bank, on or
before the Subscription Offering Expiration Date, (i) an original Subscription
Offering stock order form (a "Subscription Order Form") fully completed and
signed, (ii) a certification form properly signed, and (iii) payment in full.
PHOTOCOPIES OR OTHER NON-ORIGINAL SUBSCRIPTION ORDER FORMS AND FAXED
SUBSCRIPTION ORDER FORMS WILL NOT BE ACCEPTED. The ESOP will not be required to
pay for its shares until the Conversion is completed. All subscription rights
will expire on , 1998, whether or not the Bank has been able to locate
each person entitled to such subscription rights. ONCE SUBMITTED, SUBSCRIPTION
ORDERS CANNOT BE REVOKED WITHOUT THE CONSENT OF THE BANK AND THE COMPANY UNLESS
THE CONVERSION IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION OFFERING
EXPIRATION DATE.
If an Order Form (i) is not delivered to the addressee by the United States
Postal Service or the Bank is otherwise unable to locate the addressee; (ii) is
not received by the Bank or is received after the Subscription Offering
Expiration Date; (iii) is defectively completed or executed; (iv) is not
accompanied by the full required payment (including balances in deposit accounts
covered by withdrawal authorizations which are insufficient to pay the required
payment); or (v) is not mailed pursuant to a "no mail" order placed in effect by
the account holder, then in any such event the related subscription rights will
lapse as though the person holding such rights failed to return the completed
Subscription Order Form within the time period specified. The Company may, but
will not be required to, waive any irregularity on any Order Form or require the
submission of corrected Order Forms or the remittance of full payment for
subscribed shares by such date as the Company may otherwise specify. The waiver
of an irregularity on an Order Form in no way obligates the Company to waive any
other irregularity on any other Order Form. Waivers will be considered on a case
by case basis. The interpretation by the Bank or Company of the terms and
conditions
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of the Plan and of the acceptability of the Order Forms will be final, subject
to the authority of the Banking Department and the FDIC.
To ensure that each purchaser receives a Prospectus at least 48 hours before
the applicable offering expires as required by Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended, no Prospectus will be mailed any later than
five days prior to expiration or hand delivered any later than two days prior to
expiration. Execution of an Order Form will confirm receipt or delivery
satisfying Rule 15c2-8. Order Forms will only be distributed with a Prospectus.
Payment for shares of Common Stock at $10.00 per share may be made (i) in
cash, if delivered in person, (ii) by check or money order, or (iii) for shares
of Common Stock subscribed for in the Subscription Offering, by authorization of
withdrawal from savings accounts (including savings certificates) maintained
with the Bank. Payment by wire transfer or payment from private third parties
will not be accepted. For orders or subscriptions of $25,000 or more, payments
must be made by bank check, money order or withdrawal authorization, if
applicable, from an account with sufficient collected funds. Payments made in
cash or by check or money order will be placed in a segregated account and
interest will be paid by the Bank at 2.75% per annum from the date payment is
received until the Conversion is completed or terminated. If the Conversion is
not consummated for any reason, all funds submitted to purchase Common Stock
will be refunded promptly with interest as described above.
The Order Form provides the method for subscribers to authorize withdrawals
from deposit accounts. Once a subscriber authorizes a withdrawal to purchase
Common Stock, the withdrawal amount may not be used for any other purpose until
the Conversion has been completed or terminated. However, all sums authorized
for withdrawal will continue to earn interest at the regular rate for the
account until the Conversion has been completed or terminated. Interest
penalties for early withdrawal applicable to savings certificates will not apply
to withdrawals authorized for the purchase of shares. If a partial withdrawal
results in a certificate of deposit with a balance less than the applicable
minimum balance requirement, the certificate shall be canceled at the time of
withdrawal, without penalty, and the remaining balance will earn interest at the
passbook savings account rate after the withdrawal.
Owners of self-directed IRAs may use the assets of their IRAs to purchase
Common Stock, but only if the IRAs are not maintained at the Bank. Persons with
IRAs at the Bank must transfer their accounts to an unaffiliated institution or
broker to purchase Common Stock. Instructions on how to transfer IRAs at the
Bank can be obtained from the Stock Center located at the Bank's main office.
Depositors who want to use their IRAs at Cortland Savings Bank to purchase
Common Stock should contact the Stock Center no later than .
IT IS UNLAWFUL FOR THE BANK TO LEND FUNDS OR EXTEND CREDIT TO ANY PERSON TO
PURCHASE COMMON STOCK IN THE CONVERSION.
DELIVERY OF STOCK CERTIFICATES. Certificates representing Common Stock
issued in the Conversion will be mailed to the persons entitled to them at the
address noted on the Order Form as soon as practicable after the Conversion. Any
certificates returned as undeliverable will be held until claimed by persons
legally entitled to them or otherwise disposed of in accordance with applicable
law. Until certificates for the Common Stock are available and delivered to
subscribers, subscribers may not be able to sell their shares of Common Stock.
MARKETING ARRANGEMENTS
To assist in the marketing of the Common Stock, the Bank has retained CIBC
Oppenheimer Corp. and Trident Securities, Inc., both of which are broker-dealers
registered with the NASD. CIBC Oppenheimer Corp. and Trident Securities, Inc.
will assist the Bank as follows: (i) in training and educating the Bank's
employees regarding the mechanics and regulatory requirements of the sale of
Common Stock; (ii) in conducting informational meetings for employees, customers
and the general public; (iii) in
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<PAGE>
coordinating the selling efforts in the Bank's local communities; and (iv) in
soliciting orders for Common Stock. For these services, CIBC Oppenheimer Corp.
and Trident Securities, Inc. will receive a fee of 1.15% of the dollar amount of
the Common Stock sold in the Subscription Offering and the Community Offering,
excluding shares sold to (i) the Bank's and the Company's directors and
officers, and members of their immediate families and any Individual Retirement
Account or employee benefit plan for the benefit of such persons and (ii) any
employee benefit plan of the Bank or the Company; provided, however, that the
minimum fee payable to CIBC Oppenheimer Corp. and Trident Securities, Inc. is
$750,000. If there is a Syndicated Community Offering through a syndicate of
broker-dealers, the aggregate fee shall not exceed 4.5% of the Common Stock sold
by CIBC Oppenheimer Corp. and Trident Securities, Inc. and other broker-dealers
under selected broker-dealer agreements.
The Bank also will reimburse CIBC Oppenheimer Corp. and Trident Securities,
Inc. for their reasonable out-of-pocket expenses associated with their marketing
effort not to exceed $25,000, excluding agreed upon disbursements, and the Bank
will pay the fees of their attorneys not to exceed $75,000 plus out-of-pocket
expenses and disbursements. The Bank has made an advance payment of $10,000 to
each of CIBC Oppenheimer Corp. and Trident Securities, Inc. The Bank will
indemnify CIBC Oppenheimer Corp. and Trident Securities, Inc. against
liabilities and expenses (including legal fees) incurred in connection with
certain claims or litigation arising out of the services to be provided by CIBC
Oppenheimer Corp. and Trident Securities, Inc. pursuant to their engagement by
the Bank and the Company as their financial advisor in connection with the
Conversion, including liabilities under the Securities Act of 1933. See "Pro
Forma Data" for further information regarding amounts payable to CIBC
Oppenheimer Corp. and Trident Securities, Inc.
The Common Stock will be offered principally by the distribution of this
Prospectus and through activities conducted at a Stock Center located at the
Bank's main office, in an area that is not publicly accessible. The Stock Center
is expected to operate during normal business hours. It is expected that a
registered representative employed by CIBC Oppenheimer Corp. or Trident
Securities, Inc. will be working at, and supervising the operation of, the Stock
Center. CIBC Oppenheimer Corp. and Trident Securities, Inc. will be responsible
for overseeing the mailing of materials relating to the sale of Common Stock,
responding to questions regarding the Conversion and processing Order Forms. It
is expected that Bank and Company personnel will be present in the Stock Center
to assist with clerical matters and to answer questions related solely to the
business of the Bank.
Directors and executive officers of the Company may participate in the
solicitation of offers to purchase Common Stock in jurisdictions where such
participation is not prohibited. Other employees of the Company and the Bank may
participate in the sale of Common Stock in ministerial capacities or providing
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. Questions of prospective purchasers will
be directed to executive officers of the Company or registered representatives
of CIBC Oppenheimer Corp. or Trident Securities, Inc. The Company will rely on
Rule 3a4-1 of the Securities Exchange Act of 1934, as amended, and sales of
Stock will be conducted in accordance with Rule 3a4-1, so as to permit officers,
directors, and employees to participate in the sale of Common Stock. No officer,
director, or employee of the Company or the Bank will be compensated in
connection with such person's solicitations or other participation in the sale
of Common Stock by the payment of commissions or other remuneration based either
directly or indirectly on transactions in the Stock.
The Company will make reasonable efforts to comply with the securities laws
of all states in the United States in which persons entitled to subscribe for
the Common Stock pursuant to the Plan reside. However, no person will be offered
or allowed to purchase any Common Stock under the Plan if he or she resides (a)
in a foreign country or (b) in a state of the United States with respect to
which any of the following apply: (i) a small number of persons with
subscription rights reside in such state; (ii) the granting of subscription
rights or offer or sale of shares of Common Stock to such persons would require
the Bank,
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<PAGE>
the Company, or its employees to register, under the securities laws of such
state, as a broker or dealer or to register or otherwise qualify its securities
for sale in such state; or (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise. No payments will be made in lieu
of the granting of subscription rights to any such person.
EFFECT OF DELAY IN CONSUMMATING THE CONVERSION
The completion of the Conversion will depend, in part, upon the Bank's
operating results, stock market conditions and general economic conditions. The
Bank and the Company anticipate completing the Conversion within 45 days after
the special meeting of depositors held to approve the Conversion. However, if
the Boards of Directors of the Bank and the Company are of the opinion that
economic conditions generally or the market for publicly traded thrift
institution stocks make it undesirable to sell the Common Stock necessary to
complete the Conversion, then the sale may be delayed until conditions improve.
A material delay in the completion of the sale of Common Stock may result in
a significant increase in the costs of completing the Conversion. Significant
changes in the Bank's operations and financial condition, the aggregate market
value of the Common Stock to be issued in the Conversion and general market
conditions may occur during such material delay. If the Conversion is not
completed within 24 months after the approval of the Plan of Conversion by the
Superintendent, the Bank would charge Conversion costs as operating expenses at
that time.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
RP Financial, LC., a financial consulting and appraisal firm that is
experienced in the evaluation and appraisal of business entities, including
converting thrift institutions, was retained by the Bank to prepare an appraisal
of the estimated pro forma market value, as of the completion of the Conversion,
of the Common Stock to be sold in the Conversion. RP Financial, LC. will receive
a fee of $20,000 for its appraisal and to assist in the preparation of related
material. In addition, RP Financial, LC. will receive a fee of $7,500 for its
assistance with the preparation of a business plan for the Bank and will receive
reimbursement for out-of-pocket expenses up to $5,000. The Bank has agreed to
indemnify RP Financial, LC. under certain circumstances against liabilities and
expenses (including certain legal fees) arising out of or based on any
misstatement or untrue statement of a material fact contained in the information
supplied by the Bank to RP Financial, LC., except where RP Financial, LC. is
determined to have been negligent or failed to exercise due diligence in the
preparation of its appraisal. RP Financial, LC. is independent of the Company
and the Bank.
The appraisal contains an analysis of a number of factors including, but not
limited to, the Bank's financial condition and operating trends, the competitive
environment within which the Bank operates, operating trends of certain thrift
institutions and their holding companies, relevant economic conditions, both
nationally and in the State of New York which affect the operations of thrift
institutions, and stock market values of certain institutions. In addition, RP
Financial, LC. has advised the Bank that it has considered and will consider
both the effect of the additional capital raised by the sale of the Common Stock
and the effect of the contribution of Common Stock to the Foundation on the
estimated market value of the Common Stock. The Board of Directors has reviewed
the appraisal, including the stated methodology of RP Financial, LC. and the
assumptions used in the preparation of the appraisal. The Board of Directors is
relying upon the expertise, experience and independence of RP Financial, LC. and
is not qualified to determine the appropriateness of the assumptions or the
methodology. The appraisal has been filed as an exhibit to the registration
statement filed with the SEC in connection with the Conversion. See "Additional
Information."
On the basis of the above, RP Financial, LC. has determined, in its opinion,
that as of , 1998, the estimated aggregate pro forma market value of the
Common Stock to be issued in the Conversion was
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<PAGE>
within a range of from $52,062,500 to $70,437,500 with a midpoint of
$61,250,000. The Company has determined to offer the shares in the Conversion at
a price of $10.00 per share. Therefore, the Company expects to issue, and is
offering, from 5,206,250 to 7,043,750 shares of Common Stock, subject to
increase to up to 8,100,312 shares of Common Stock as described below.
RP Financial, LC. will update its appraisal prior to consummation of the
Conversion. If the final estimated aggregate pro forma market value of the
Common Stock to be issued in the Conversion is between $70,437,500 (the maximum
of the Valuation Range) and $81,003,120 (15% above the maximum of the Valuation
Range), the total number of shares to be sold may be increased without
resolicitation of subscribers and without a new vote of Bank's depositors,
unless required by the Banking Department and the FDIC. Any such increase would
be subject to review. If the final estimated value is less than $52,062,500 or
more than $81,003,120, then subscribers will be resolicited and, unless the
Banking Department and the FDIC permit otherwise, a new vote of the Bank's
depositors to approve the Conversion will be required. No sale of the shares
will take place unless RP Financial, LC. first confirms to the Banking
Department and the FDIC that, to the best of RP Financial, LC.'s knowledge and
judgment, nothing of a material nature has occurred which would cause it to
conclude that the aggregate purchase price of all shares to be sold in the
Conversion is incompatible with its estimate of the aggregate pro forma market
value of the Common Stock at the time of the sale.
THE APPRAISAL BY RP FINANCIAL, LC. IS NOT INTENDED, AND MUST NOT BE
CONSTRUED, AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING
THE COMMON STOCK. IN PREPARING THE APPRAISAL, RP FINANCIAL, LC. HAS RELIED UPON
AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND STATISTICAL
INFORMATION PROVIDED BY THE BANK. RP FINANCIAL, LC. DID NOT INDEPENDENTLY VERIFY
THE FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED BY THE BANK, NOR DID RP
FINANCIAL, LC. VALUE INDEPENDENTLY THE ASSETS AND LIABILITIES OF THE BANK. THE
APPRAISAL CONSIDERS THE BANK ONLY AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF THE BANK. MOREOVER,
BECAUSE THE APPRAISAL 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 THE COMMON STOCK WILL BE ABLE TO
SELL SUCH SHARES AT PRICES AT OR ABOVE THE $10.00 PURCHASE PRICE.
An increase in the total number of shares to be issued in the Conversion
would decrease both a subscriber's ownership interest and the estimated pro
forma equity and net income on a per share basis while increasing the estimated
pro forma equity and net income on an aggregate basis. In the event of a
material reduction in the valuation, the Bank may decrease the number of shares
to reflect the reduced valuation. A decrease in the number of shares to be
issued in the Conversion would increase both a subscriber's ownership interest
and the estimated pro forma equity and net income on a per share basis while
decreasing estimated equity and net income on an aggregate basis.
RESTRICTIONS ON REPURCHASE OF COMMON STOCK
Generally, unless the Superintendent consents, within one year after the
Conversion, the Company may not repurchase Common Stock, and in the second and
third year following the Conversion, the Company may only repurchase Common
Stock as part of an open-market stock repurchase program in an amount up to 5%
of the outstanding stock during each of those two years, provided the repurchase
does not cause the Bank to become undercapitalized. Similarly, the FDIC does not
permit repurchases during the first year after the Conversion, except that not
more than 5% of the outstanding Common Stock may be repurchased during the first
year upon a showing of a compelling and valid business reason. In addition, SEC
rules also restrict the method, time, price, and number of shares of Common
Stock that may be repurchased by the Company and affiliated purchasers. If, in
the future, the rules and regulations regarding the repurchase of Common Stock
are liberalized, the Company may utilize the rules and regulations then in
effect.
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INTERPRETATION AND AMENDMENT OF THE PLAN
To the extent permitted by law, all interpretations of the Plan of
Conversion by the Board of Directors of the Bank will be final; however, such
interpretations shall have no binding effect on the Superintendent and the FDIC.
If deemed necessary or desirable by the Board of Directors, the Plan of
Conversion may be substantively amended by the Board of Directors with the
concurrence of the Superintendent and the FDIC, except that if Regulations are
liberalized after the approval of the Plan of Conversion by the Banking
Department, the FDIC and the Bank's depositors, the Board of Directors may amend
the Plan to conform to the Conversion Regulations without further depositor
approval to the extent permitted by law. An amendment to the Plan of Conversion
that would result in a material adverse change in the terms of the Conversion
would require a resolicitation of subscribers.
CONDITIONS AND TERMINATION
Completion of the Conversion requires the approval of the Plan of Conversion
by the affirmative vote of not less than a majority of the total number of votes
of the depositors of the Bank eligible to be cast and by the affirmative vote of
at least 75% in amount of deposit liabilities of the depositors represented in
person or by proxy and the sale of all shares of Common Stock within 24 months
after the Superintendent approves the Plan of Conversion. If these conditions
are not satisfied, the Conversion will not occur and the Bank will continue its
business in the mutual form of organization. The Plan of Conversion may be
terminated by the Board of Directors at any time prior to the meeting of
depositors to approve the Conversion and after such meeting with the approval of
the Superintendent.
OTHER
ALL STATEMENTS MADE IN THIS PROSPECTUS ARE QUALIFIED BY THE CONTENTS OF THE
PLAN OF CONVERSION, THE MATERIAL TERMS OF WHICH ARE SET FORTH IN THIS
PROSPECTUS. THE PLAN OF CONVERSION (WITHOUT EXHIBITS) IS ATTACHED TO THE PROXY
STATEMENT DISTRIBUTED IN CONNECTION WITH THE MEETING OF DEPOSITORS TO APPROVE
THE CONVERSION. COPIES OF THE PLAN OF CONVERSION ARE ALSO AVAILABLE FROM THE
BANK AND IT SHOULD BE CONSULTED FOR FURTHER INFORMATION.
APPROVAL OF THE PLAN OF CONVERSION BY THE BANK'S DEPOSITORS AUTHORIZES THE
BOARD OF DIRECTORS TO AMEND OR TERMINATE IT.
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CORTLAND SAVINGS BANK--CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of the Bank for each of the
years in the three-year period ended December 31, 1997 are a part of the audited
consolidated financial statements which appear beginning on page F-1 of this
Prospectus. All information contained in this Prospectus for the three months
ended March 31, 1997 and 1998 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of those interim periods have been
included and are of a normal recurring nature. Results for the three month
period ended March 31, 1998 do not necessarily indicate the results that may be
expected for the year ended December 31, 1998. These Statements of Income should
be read with the Consolidated Financial Statements and Notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans....................................................... $ 3,377 $ 3,433 $ 13,582 $ 13,805 $ 14,012
Securities.................................................. 848 898 3,769 3,620 3,404
Other short-term investments................................ 86 86 316 362 395
--------- --------- --------- --------- ---------
Total interest income..................................... 4,311 4,417 17,667 17,787 17,811
Interest expense:
Deposits.................................................... 2,010 2,064 8,328 8,758 8,562
Other....................................................... -- -- -- -- 51
--------- --------- --------- --------- ---------
Total interest expense.................................... 2,010 2,064 8,328 8,758 8,613
--------- --------- --------- --------- ---------
Net interest income....................................... 2,301 2,353 9,339 9,029 9,198
Provision for loan losses..................................... 75 225 3,300 1,380 600
--------- --------- --------- --------- ---------
Net interest income after provision for loan losses......... 2,226 2,128 6,039 7,649 8,598
Non-interest income:
Service charges............................................. 184 152 636 662 651
Net gain on sale of securities.............................. 6 7 46 15 16
Nationar recovery (provision)............................... -- -- 45 -- (100)
Other....................................................... 55 60 162 93 104
--------- --------- --------- --------- ---------
Total non-interest income................................. 245 219 889 770 671
Non-interest expenses:
Salaries and employee benefits.............................. 812 804 2,928 2,862 2,789
Building, occupancy and equipment........................... 214 277 981 990 939
Postage and supplies........................................ 96 91 323 306 333
Professional fees........................................... 64 32 268 251 83
Advertising................................................. 33 22 116 103 118
Deposit insurance premium................................... 6 7 26 2 239
Real estate owned........................................... 92 21 500 260 207
Other....................................................... 328 371 1,730 1,427 1,237
--------- --------- --------- --------- ---------
Total non-interest expenses............................... 1,645 1,625 6,872 6,201 5,945
--------- --------- --------- --------- ---------
Income before income tax expense (benefit)................ 826 722 56 2,218 3,324
Income tax expense (benefit).................................. 333 311 (16) 853 1,400
--------- --------- --------- --------- ---------
Net Income.................................................. $ 493 $ 411 $ 72 $ 1,365 $ 1,924
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company has only recently been formed and, therefore, has no results of
operations. The Bank's results of operations depend principally on its net
interest income, which is the difference between the income earned on its loans
and securities and its cost of funds, principally interest paid on deposits.
Results of operations are also affected by the provision for loan losses, the
level of non-interest income, and non-interest expenses.
Sources of non-interest income include categories such as deposit account
fees and other service charges, gains on the sale of securities and fees for
banking services such as safe deposit boxes. The largest category of
non-interest expense is compensation and benefits expense. Other principal
categories of non-interest expense are occupancy expense and real estate owned
expense, which represents expenses in connection with real estate acquired in
foreclosure or in satisfaction of a debt owed to the Bank. Through the year
ended December 31, 1995, FDIC deposit insurance premiums represented a
significant category of non-interest expense, but have not been significant
since the insurance premiums were reduced in the quarter ended September 30,
1995. See "Regulation--Banking Regulation--Insurance of Accounts."
SPECIAL MATTERS AFFECTING RESULTS OF OPERATIONS
Since late 1996, two interrelated problems have had a substantial direct
effect on the Bank's results of operations. Management has worked aggressively
to identify the scope of these problems, resolve them and recognize their
financial consequences, so that management could focus its attention on future
operations and the implementation of its strategy for the future. The two
problems are as follows.
OFFICER DEFALCATION. During the fourth quarter of 1996, the Bank discovered
that its then senior loan officer had been involved in various schemes to
defraud the Bank. These schemes included, among other things, the making of
false entries in the Bank's books, the creation of loans to borrowers who either
did not exist or were unaware of the loans and the diversion of Bank funds for
personal purposes. Upon the discovery of these matters, the officer was
dismissed and he was subsequently convicted of criminal charges as a result of
his actions. Immediately after the discovery of this matter, the Bank undertook
an investigation of transactions in which the officer was involved in order to
identify uncollectable assets resulting from his activities. As a result of this
investigation, the Bank charged off $607,000 of loans during the fourth quarter
of 1996 which the Bank believed either did not exist or were otherwise
uncollectable. In addition, the Bank identified approximately $349,000 of
improper expenses and other losses attributable to the actions of the officer
which, because they had already been recognized for financial statement
purposes, did not require any additional expense.
The Bank has made a claim against its fidelity bond carrier in the amount of
approximately $1.0 million as a result of this matter. The claim is currently
under discussion with the carrier and the amount recoverable on the claim is in
dispute. No asset is recorded on the books of the Bank reflecting the value of
the claim, and if the claim is denied and subsequently determined to be
unrecoverable, no additional charge-off will result.
In addition to the direct losses caused by the officer defalcation, the Bank
has incurred expenses in connection with the investigation and resolution of the
matter. These include, in addition to time expended by directors, officers and
employees of the Bank, professional fees which would not otherwise have been
incurred totaling approximately $128,000 during the eighteen months ended March
31, 1998. Furthermore, as discussed below, poor supervision while the officer in
question was in charge of lending operations is believed to have contributed to
the large volume of non-performing loans which were designated for sale during
the fourth quarter of 1997 as described in the following discussion.
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<PAGE>
SALE OF PROBLEM LOANS. During the fourth quarter of 1997, the Bank decided
that its non-performing loans were creating too great a strain on management
resources and the work necessary to collect those assets was diverting
management from its core goal of running the Bank in a profitable manner.
Therefore, in order to improve overall asset quality and free management from
less productive tasks associated with the resolution of problem loans, the Bank
decided to seek to sell a substantial portion of its non-performing loans to a
single purchaser. During December of 1997, the Bank identified $4.3 million of
loans as candidates for such a sale. These loans were all either non-performing
or were performing but had been identified by management as potential problem
loans. Approximately half of the loans were commercial mortgage loans and
approximately half were residential mortgage loans.
When these loans were designated for prompt disposition, the Bank charged
off $1.7 million against its allowance for loan losses to reflect the fair value
of the loans. This charge-off represented the difference between the carrying
value of the loans and the amount which the Bank believed, after consultation
with loan brokers, could be realized upon a bulk sale of the loans. The Bank had
already charged off $331,000 of such loans during 1997 as a result of its
regular evaluation of loans in its portfolio.
During the first quarter of 1998, while identifying a purchaser for the loan
package and negotiating the terms of the sale, the Bank designated $661,000 of
additional loans to include in the package being sold. The Bank consummated the
sale during the first quarter of 1998 with the proceeds approximating the
carrying value of the loans sold. Four of the loans originally designated as
held for sale were not sold; three because the Bank believed that it could
obtain full recovery without undue effort and one because the purchaser refused
to accept it but which was subsequently paid in full.
ANALYSIS OF NET INTEREST INCOME
Net interest income, the Bank's primary income source, depends principally
upon (i) the amount of interest-earning assets that the Bank can maintain based
upon its funding sources; (ii) the relative amounts of interest-earning assets
versus interest-bearing liabilities; and (iii) the difference between the yields
earned on those assets and the rates paid on those liabilities. Non-performing
loans adversely affect net interest income because they must still be funded by
interest-bearing liabilities, but they do not provide interest income.
Furthermore, when the Bank designates an asset as non-performing, all interest
which has been accrued but not actually received is deducted from current period
income, further reducing net interest income.
MANAGEMENT OF INTEREST RATE RISK
The principal objective of the Bank's interest rate risk policy is to avoid
taking undue interest rate risk while continuing to satisfy customer demand for
loans and deposits. In order to manage interest rate risk, management seeks to
(i) evaluate the exposure of the Bank's principal asset and liability categories
to interest rate changes, (ii) determine the level of interest rate risk
appropriate based on the Bank's business focus, operating environment, capital
level and performance objectives, and (iii) pursue strategies to invest in
assets or generate liabilities which have interest rate risk profiles that fit
the Bank's requirements. The Bank seeks to reduce the vulnerability of its
operating results to changes in interest rates by managing the ratio of assets
to liabilities which mature or have interest rate adjustments during specified
time periods. However, future changes in market interest rates remain an
uncertainty that could have a negative impact on the earnings of the Bank.
Management seeks to limit, but not eliminate, interest rate risk by offering
adjustable-rate loans and short term commercial and consumer loans. During
periods of low interest rates as in recent years, residential mortgage loan
customers prefer fixed-rate loans. The Bank will make such loans, which can
often be made at interest rates higher than those which must then be offered to
attract borrowers willing to accept adjustable-rate loans. Although the Bank has
not sold such loans in the past, the Bank intends to begin selling a portion of
its fixed-rate loans in the latter part of 1998 to reduce the interest rate risk
which
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<PAGE>
accompanies the making of such loans, while retaining the servicing of those
loans to provide a source of non-interest income.
The Board's Asset and Liability Committee meets quarterly for a detailed
review of interest rate risk matters based upon periodic reports prepared by
Fleet Investment Advisors, an independent consulting firm. The consultant has
been retained by the Bank to prepare a quarterly report including an estimate of
the interest rate sensitivity of the Bank's assets and liabilities and to
recommend strategies to implement the Bank's asset and liability management
goals. Interest rate pricing and interest rate risk strategy objectives are
implemented by a committee of four executive officers of the Bank. The committee
meets weekly to review the pricing of the Bank's loan and deposit products. The
Board of Directors of the Bank receives and reviews a report on the Bank's
estimated interest rate sensitivity every month. The Bank seeks to cushion its
results of operations against the effect of interest rate fluctuations by
preserving a loyal customer base with core deposits that are less prone to
gravitate to high rate deposit products as interest rates rise.
GAP ANALYSIS. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest
sensitive" and by monitoring the Bank's estimated interest sensitivity "gap." An
asset or liability is said to be interest sensitive within a specific time
period if it will mature or its interest rate will adjust (reprice) within that
time period. The interest sensitivity gap for any period of time is defined as
the difference between the amount of interest-earning assets estimated to mature
or reprice within that period and the amount of interest-bearing liabilities
estimated to mature or reprice within that same period. On a quarterly basis, an
independent, nationally-recognized consulting firm provides the Bank with an
analysis of the Bank's estimated interest rate sensitivity gap, based upon
assumptions developed by that firm. At March 31, 1998, the firm estimated that
the Bank's one-year gap, the difference between the estimated amount of
interest-earning assets versus interest-bearing liabilities maturing or
repricing within one year, as a percentage of total assets, was negative 10.51%,
as shown on the table below.
A gap is considered positive for any period when the amount of
interest-sensitive assets exceeds the amount of interest sensitive liabilities
estimated to reprice within such period. A gap is considered negative when the
amount of interest sensitive liabilities exceeds the amount of interest
sensitive assets estimated to reprice within a given period. Accordingly, during
a period of rising interest rates, an institution with a positive gap for that
period would expect its net interest income to increase as the cost of its
interest-bearing liabilities rises more slowly than the yield on its
interest-earning assets. The institution would expect net interest income to
decline during such period if interest rates fall. An institution with a
negative gap would expect its net interest income to be affected in the opposite
way. However, the repricing of most assets and liabilities is discretionary and
subject to customer preference. Thus, for example, during periods of rising
interest rates, loan customers may delay the sales of their homes, resulting in
reduced loan turnover. At the same time, deposit customers with low-rate
savings, demand and NOW accounts may accelerate the migration of deposits into
higher rate savings certificates as the rates on savings certificates become
more attractive.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 1998, which are estimated
by the Bank, based upon the assumptions developed by its independent consultant,
to reprice or mature in each of the future time periods shown. The Bank believes
that the assumptions used by the consultant, discussed in detail below, are
reasonable. However, ultimately they may not be borne out.
The assumptions used in the preparation of the table and the calculation of
the Bank's estimated gap are as follows. Loans and mortgage-backed securities
with adjustable rates are included during the earlier of scheduled payment or
repricing. The aggregate principal outstanding on fixed-rate loans is assumed,
based upon an analysis of the difference between the Bank's average loan yield
and the federal funds interest rate, to be repaid evenly over 83 months.
Fixed-rate mortgage-backed securities are included in the
54
<PAGE>
table based on commonly used independent market models for estimating
mortgage-backed security repayments. Federal funds sold and other short term
investments are assumed to be immediately interest sensitive. Of the Bank's
savings accounts and NOW accounts, 62% are assumed to be core deposits and
therefore are assumed to reprice beyond three years. The remainder of such
deposits are assumed to reprice 6% in three months, 8% in six months, 10% in one
year, 8% in two years and 6% in three years. Money Market accounts are assumed
to reprice approximately 50% within six months and the remainder within one
year. Savings certificates are included based upon their contractual maturities.
Estimates of loan prepayment rates and deposit turnover rates can have a
significant impact on the Bank's estimated gap. While the Bank believes the
assumptions used to prepare the following table are reasonable, there can be no
assurance that such estimates will approximate actual future loan repayment and
deposit withdrawal activity. See "Business of the Bank--Lending Activities,"
"--Investment Activities" and "--Sources of Funds."
<TABLE>
<CAPTION>
AMOUNTS ESTIMATED TO MATURE OR REPRICE WITHIN:
--------------------------------------------------------------------
LESS THAN
THREE 3-6 6 MONTHS TO 1-2 2-3 OVER 3
MONTHS MONTHS 1 YEAR YEARS YEARS YEARS TOTAL
----------- --------- ----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities........................ $ 7,687 $ 4,068 $ 11,280 $ 17,393 $ 9,267 $ 8,341 $ 58,036
Loans............................. 14,556 7,072 14,143 31,418 31,417 55,594 154,200
Other short-term investments...... 6,791 -- -- -- -- -- 6,791
----------- --------- ----------- --------- --------- --------- ---------
Total interest-earning assets... 29,034 11,140 25,423 48,811 40,684 63,935 219,027
----------- --------- ----------- --------- --------- --------- ---------
Interest-bearing liabilities:
Passbook, statement savings and
club accounts................... 3,870 5,160 6,450 5,160 3,870 39,853 64,363
Money market accounts............. 2,744 2,744 2,826 -- -- -- 8,314
NOW accounts...................... 556 742 928 742 557 5,755 9,280
Savings certificates.............. 15,969 20,337 27,704 17,843 14,481 11,520 107,854
----------- --------- ----------- --------- --------- --------- ---------
Total interest-bearing
liabilities................... 23,139 28,983 37,908 23,745 18,908 57,128 189,811
----------- --------- ----------- --------- --------- --------- ---------
Interest sensitivity gap............ $ 5,895 $ (17,843) $ (12,485) $ 25,066 $ 21,776 $ 6,807 $ 29,216
----------- --------- ----------- --------- --------- --------- ---------
----------- --------- ----------- --------- --------- --------- ---------
Cumulative interest sensitivity
gap............................... $ 5,895 $ (11,948) $ (24,433) $ 633 $ 22,409 $ 29,216
----------- --------- ----------- --------- --------- ---------
----------- --------- ----------- --------- --------- ---------
Ratio of cumulative gap to total
interest-earning assets........... 2.69% (5.45)% (11.16)% 0.29% 10.23% 13.34%
----------- --------- ----------- --------- --------- ---------
----------- --------- ----------- --------- --------- ---------
Ratio of cumulative gap to total
assets............................ 2.54% (5.14)% (10.51)% 0.27% 9.64% 12.57%
----------- --------- ----------- --------- --------- ---------
----------- --------- ----------- --------- --------- ---------
Ratio of interest-earning assets to
interest-bearing liabilities...... 125.48% 38.44% 67.06% 205.56% 215.17% 111.92% 115.39%
----------- --------- ----------- --------- --------- --------- ---------
----------- --------- ----------- --------- --------- --------- ---------
</TABLE>
When the Conversion is completed, the Company will initially experience an
increase in investable assets approximately equal to the net proceeds from the
sale of Common Stock in the Conversion minus the loan to the ESOP. The
investment of these net proceeds can be expected initially to increase positive
gaps and reduce negative gaps because such investment will add assets estimated
to mature or reprice within each period shown while there will be no immediate
corresponding increase in liabilities estimated to mature or reprice during the
same period.
55
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS
The following tables present, for the periods indicated, the average
interest-earning assets and average interest-bearing liabilities by principal
categories, the interest income or expense for each category, and the resultant
average yields earned or rates paid. No tax equivalent adjustments were made.
All average balances are daily average balances, except for 1995, in which
monthly average balances are used because daily average balances are
unavailable. Non-interest-bearing checking accounts are included in the tables
as a component of non-interest-bearing liabilities.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------
1998(6) 1997(6)
--------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
--------- ----------- --------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans(1).......................................... $ 157,134 $ 3,377 8.72% $ 158,434 $ 3,433 8.79%
Securities(2)..................................... 54,852 848 6.27 58,393 898 6.24
Other short-term investments...................... 6,645 86 5.25 6,769 86 5.15
--------- ----------- --------- -----------
Total interest-earning assets................... 218,631 4,311 8.00 223,596 4,417 8.01
Non-interest-earning assets....................... 13,553 11,740
--------- ---------
Total assets.................................... $ 232,184 $ 235,336
--------- ---------
--------- ---------
LIABILITIES:
Passbook, statement savings and club accounts(3).. 63,748 474 3.02 63,621 467 2.98
Savings certificates.............................. 108,067 1,439 5.40 112,578 1,494 5.38
Money market accounts............................. 8,385 57 2.76 8,985 63 2.84
NOW accounts...................................... 9,357 40 1.73 9,298 40 1.74
--------- ----------- --------- -----------
Total interest-bearing liabilities.............. 189,557 2,010 4.30 194,482 2,064 4.30
Non-interest-bearing liabilities.................. 12,076 10,772
--------- ---------
Total liabilities............................... 201,633 205,254
Net worth......................................... 30,551 30,082
--------- ---------
Total liabilities and net worth................. $ 232,184 $ 235,336
--------- ---------
--------- ---------
Net interest income/spread(4)..................... $ 2,301 3.70% $ 2,353 3.71%
----------- --------- ----------- ---
----------- --------- ----------- ---
Net earning assets/net interest margin(5)......... $ 29,074 4.27% $ 29,114 4.27%
--------- --------- --------- ---
--------- --------- --------- ---
Ratio of average interest-earning assets to
average interest-bearing liabilities............ 1.15x 1.15x
----------- -----------
----------- -----------
</TABLE>
NOTES APPEAR ON FOLLOWING PAGE.
56
<PAGE>
AVERAGE BALANCES, INTEREST RATES AND YIELDS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------- ----------------------------------- ----------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST
--------- ----------- --------- --------- ----------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans(1)...................... $ 157,713 $ 13,582 8.61% $ 158,779 $ 13,805 8.69% $ 157,317 $ 14,012
Securities(2)................. 60,226 3,769 6.26 58,557 3,620 6.18 56,235 3,404
Other short-term
investments................. 6,019 316 5.25 7,300 362 4.96 6,580 395
--------- ----------- --------- ----------- --------- -----------
Total interest-earning
assets.................... 223,958 17,667 7.89 224,636 17,787 7.92 220,132 17,811
----------- ----------- -----------
Non-interest-earning assets... 12,254 12,442 14,077
--------- --------- ---------
Total assets................ $ 236,212 $ 237,078 $ 234,209
--------- --------- ---------
--------- --------- ---------
LIABILITIES:
Passbook, statement savings
and club accounts(3)........ 64,576 1,936 3.00 64,405 1,922 2.98 66,384 1,991
Savings certificates.......... 110,728 5,983 5.40 113,890 6,354 5.58 108,614 6,005
Money market accounts......... 8,643 243 2.81 9,635 288 2.99 11,242 339
NOW accounts.................. 9,457 166 1.76 9,295 194 2.09 9,134 227
Other borrowings.............. -- -- -- -- -- -- 875 51
--------- ----------- --------- ----------- --------- -----------
Total interest-bearing
liabilities............... 193,404 8,328 4.31 197,225 8,758 4.44 196,249 8,613
Non-interest-bearing
liabilities................. 12,003 10,464 9,864
--------- --------- ---------
Total liabilities........... 205,407 207,689 206,113
Net worth..................... 30,806 29,389 28,095
--------- --------- ---------
Total liabilities and net
worth..................... $ 236,213 $ 237,078 $ 234,208
--------- --------- ---------
--------- --------- ---------
Net interest
income/spread(4)............ $ 9,339 3.58% $ 9,029 3.48% $ 9,198
----------- --------- ----------- --- -----------
----------- --------- ----------- --- -----------
Net earning assets/net
interest margin(5).......... $ 30,554 4.17% $ 27,411 4.02% $ 23,883
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
Ratio of average
interest-earning assets to
average interest-bearing
liabilities................. 1.16x 1.14x 1.12x
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
AVERAGE
YIELD/
COST
-----------
<S> <C>
ASSETS:
Loans(1)...................... 8.91%
Securities(2)................. 6.05
Other short-term
investments................. 6.00
Total interest-earning
assets.................... 8.09
Non-interest-earning assets...
Total assets................
LIABILITIES:
Passbook, statement savings
and club accounts(3)........ 3.00
Savings certificates.......... 5.53
Money market accounts......... 3.02
NOW accounts.................. 2.49
Other borrowings.............. 5.83
Total interest-bearing
liabilities............... 4.39
Non-interest-bearing
liabilities.................
Total liabilities...........
Net worth.....................
Total liabilities and net
worth.....................
Net interest
income/spread(4)............ 3.70%
---
---
Net earning assets/net
interest margin(5).......... 4.18%
---
---
Ratio of average
interest-earning assets to
average interest-bearing
liabilities.................
</TABLE>
- ------------------------
(1) Average balances include loans held for sale and non-accrual loans, net of
the allowance for loan losses. Interest is recognized on non-accrual loans
only as and when received.
(2) Securities are included at amortized cost, with net unrealized gains or
losses on securities available-for-sale included as a component of
non-earning assets. Securities include FHLBNY stock.
(3) Includes advance payments by borrowers for taxes and insurance (mortgage
escrow deposits).
(4) The spread represents the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing
liabilities.
(5) The net interest margin, also known as the net yield on average
interest-earning assets, represents net interest income as a percentage of
average interest-earning assets.
(6) Yields and related ratios for the three-month periods have been annualized
when appropriate.
57
<PAGE>
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
One method of analyzing net interest income is to consider how changes in
average balances and average rates from one period to the next affect net
interest income. The following table shows changes in the dollar amount of
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It shows the amount of the change in
interest incomes or expense caused by either changes in outstanding balances
(volume) or changes in interest rates. The effect of a change in volume is
measured by applying the average rate during the first period to the volume
change between the two periods. The effect of changes in rate is measured by
applying the change in rate between the two periods to the average volume during
the first period. Changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------------------------
MARCH 31, 1996 VS.
--------------------------------------- 1995
-----------
1998 VS. 1997 1997 VS. 1996
--------------------------------------- ------------------------------------- INCREASE
(DECREASE)
INCREASE (DECREASE) DUE TO: INCREASE (DECREASE) DUE TO: DUE TO:
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME
----------- ------------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans................................ $ (29) $ (27) $ (56) $ (94) $ (129) $ (223) $ 132
Securities........................... (54) 4 (50) 102 47 149 142
Other short-term investments......... (2) 2 -- (66) 20 (46) 40
--- --- --- --- ----- ----- -----
Total interest-earning assets........ (85) (21) (106) (58) (62) (120) 314
--- --- --- --- ----- ----- -----
--- --- --- --- ----- ----- -----
INTEREST-BEARING LIABILITIES:
Passbook, statement savings and club
accounts........................... 1 6 7 4 10 14 (57)
Savings certificates................. (61) 6 (55) (171) (200) (371) 295
Money market accounts................ (4) (2) (6) (29) (16) (45) (48)
NOW accounts......................... -- -- -- 3 (31) (28) 4
Other borrowing...................... -- -- -- -- -- -- (51)
--- --- --- --- ----- ----- -----
Total interest-bearing liabilities... (64) 10 (54) (193) (237) (430) 143
--- --- --- --- ----- ----- -----
--- --- --- --- ----- ----- -----
Net change in net interest income.... $ (21) $ (31) $ (52) $ 135 $ 175 $ 310 $ 171
--- --- --- --- ----- ----- -----
--- --- --- --- ----- ----- -----
<CAPTION>
RATE TOTAL
----------- -----------
<S> <C> <C>
INTEREST-EARNING ASSETS:
Loans................................ $ (339) $ (207)
Securities........................... 74 216
Other short-term investments......... (73) $ (33)
----- -----
Total interest-earning assets........ (338) (24)
----- -----
----- -----
INTEREST-BEARING LIABILITIES:
Passbook, statement savings and club
accounts........................... (12) (69)
Savings certificates................. 54 349
Money market accounts................ (3) (51)
NOW accounts......................... (37) (33)
Other borrowing...................... -- (51)
----- -----
Total interest-bearing liabilities... 2 145
----- -----
----- -----
Net change in net interest income.... $ (340) $ (169)
----- -----
----- -----
</TABLE>
58
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND DECEMBER 31, 1997.
Total assets at March 31, 1998 were $232.4 million, a decrease of $1.3
million, or 0.6%, from total assets of $233.7 million at December 31, 1997. The
primary cause of the decline was a $1.5 million decline in deposits as the Bank
continued to experience competitive pressures from other investment
alternatives.
Net loans declined by $1.2 million during the quarter. Principal payments on
loans exceeded new loans originated by $527,000 because normal principal
amortization, which occurs evenly throughout the year, exceeded loan
originations, which tend to be at low levels during winter months. Furthermore,
the Bank believes it did not recapture all loans refinanced by its customers
during the period due to increased competition from out-of-area secondary
mortgage market lenders. The Bank also designated an additional $661,000 of
loans for sale during the quarter. When the Bank completed its loan sale,
$101,000 of the loans designated for sale were not sold and were transferred
back to loans held-to-maturity.
Real estate owned declined by $204,000 during the quarter as the Bank sold
more real estate than it acquired through foreclosure. Real estate owned
consists of properties acquired through foreclosure or otherwise in full or
partial satisfaction of a debt, but does not include real estate used by the
Bank for its operations, such as its main office and branches. During the three
months ended March 31, 1998, the Bank decreased the level of real estate owned
by sales of properties with a carrying value of $199,000 and by $50,000 of
write-downs of property owned. Partially offsetting these declines were $45,000
of real estate acquired during the quarter upon the foreclosure of loans.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND DECEMBER 31, 1996
Total assets at December 31, 1997 were $233.7 million compared to $238.1
million at December 31, 1996. The primary cause of the $4.4 million decline in
total assets was a decline of $4.4 million in savings certificates. Management
believes the decline in savings certificates resulted from competitive pressures
as customers sought higher returns through alternative investments during a
period when the equity markets were at all time highs. The decline in deposits
as a funding source caused the Bank to reduce cash and due from banks by $5.1
million.
Contributing to the changes in the Bank's financial condition was the
designation of the group of loans for sale at year end 1997, as discussed above.
The designation did not directly affect the Bank's total assets, because the
charge-off which accompanied the designation was charged against the existing
allowance for loan losses. However, the Bank increased its provision for loan
losses to bring the allowance back to a level considered adequate by management,
which had the effect of substantially eliminating net income for the year.
Therefore, retained earnings as a funding source did not increase materially
from year end 1996 to year end 1997.
Deferred tax assets increased by $663,000 from year end 1996 to year end
1997 because for financial statement purposes the Bank recorded the charge-off
associated with the designation of loans as held for sale in 1997 but could not
deduct the charge-off for income tax purposes until the loans were sold in 1998.
Real estate owned also increased by $401,000 during 1997. This increase
represented the net effect of the acquisition of properties with a carrying
value of $1.1 million as a result of foreclosures, partially offset by the sale
of properties with a carrying value of $329,000 and write-downs in the book
value of properties owned by $365,000 to reflect the fair value of the
properties.
Net unrealized gains in securities available-for-sale, as a component of net
worth, increased by $323,000 during 1997, corresponding to a pre-tax increase of
$529,000 in the excess of fair value over amortized cost for securities
available-for-sale. The increase was caused by the improvement in market values
for equity securities coupled with lower interest rates which increased the
value of debt securities available-for-sale.
59
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
MARCH 31, 1997.
GENERAL. Net income for the three months ended March 31, 1998 was $493,000,
an increase of $82,000, or 20.0%, from net income of $411,000 during the three
months ended March 31, 1997. The primary reason for the improvement was a
decrease in the provision for loan losses of $150,000 as the Bank realized upon
its efforts in 1997 and the first quarter of 1998 to reduce the carrying value
and then sell a substantial portion of its non-accrual and potential problem
loans. A $63,000 decline in building, occupancy and equipment expense also
positively affected net income. These two factors offset a $52,000 decline in
net interest income.
NET INTEREST INCOME. Net interest income declined by $52,000, or 2.2%, when
comparing the first quarter of 1998 to the first quarter of 1997. This decline
reflects the combined effect of a decline in interest income and a smaller
decline in interest expense. The Bank's reported spread declined by one basis
point from 3.71% to 3.70% and the Bank's net interest margin remained constant
at 4.27%. However, average non-accruing loans during the quarter ended March 31,
1997 were significantly higher than during the quarter ended March 31, 1998.
Non-accruing loans have the effect of reducing reported spread because they are
a component of interest-earning assets but do not provide interest income. The
Bank estimates that if the level of non-accruing loans had remained constant,
reported spread would have declined by approximately 14 basis points and
reported net interest margin would have declined by approximately 12 basis
points from the 1997 quarter to the 1998 quarter because the average yields on
accruing loans declined due to lower market interest rates and the downward
adjustment of yields on adjustable-rate loans.
INTEREST INCOME. Interest income declined by $106,000 from the first
quarter of 1997 to the first quarter of 1998. The principal reasons for the
decline were a $3.5 million decline in the average balance of securities and a
decline in the average yield earned on performing loans. The decline in the
average balance of securities resulted from the need to fund a $4.9 million
decline in the average balance of interest-bearing deposits.
The Bank estimates that the average yield earned on accruing loans declined
by approximately 25 basis points from the first quarter of 1997 to the first
quarter of 1998, compared to the 7 basis point reported decline shown on the
Average Balances, Interest Rates and Yields table. The decline in average yield
on accruing loans resulted principally from lower market interest rates on new
residential mortgage loans and downward adjustments of rates on adjustable
mortgage loans as market interest rates declined. Due to increased competition
and generally lower market interest rates, the Bank's new residential mortgage
loans had average yields lower than either loans in the portfolio or loans being
refinanced. The 25 basis point estimated decline in yield the first quarter of
1997 to the first quarter of 1998 is greater than the 7 basis point reported
decline because of a reduction in the average level of non-accruing loans,
principally due to charge-offs. As loans were charged off, they ceased to be
outstanding for the purpose of calculating the average loan yield, without a
corresponding reduction in interest income. Therefore, the loans charged off
ceased to exert downward pressure on reported yields.
INTEREST EXPENSE. Interest expense declined by $54,000 from the first
quarter of 1997 to the first quarter of 1998. Substantially all of the decline
resulted from a $4.5 million decline in the average balance of savings
certificates from $112.6 million to $108.1 million. The decline was caused by a
conscious decision of the Bank not to pursue aggressively additional savings
certificate accounts, the Bank's highest cost funding source. The Bank offered
competitive, but not necessarily the highest, savings certificate rates in its
market area. Savings certificates, which represented 57.9% of the average
balance of interest-bearing liabilities during the quarter ended March 31, 1997,
declined to 57.0% of average interest-bearing liabilities during the quarter
ending March 31, 1998. The Bank's pricing decisions were based upon a desire not
to increase its cost of funds at a time when the cost of savings certificates
was only slightly below the yield earned on investment securities, and in some
cases was higher than the yield earned on other short term investments. The
decline in savings certificates was funded by a decline in the Bank's securities
60
<PAGE>
portfolio and a $1.3 million increase in the average balance of
non-interest-bearing liabilities, principally represented by an increase in the
average balance of non-interest bearing demand deposits as the Bank marketed its
demand deposit programs more aggressively to commercial customers.
PROVISION FOR LOAN LOSSES. The provision for loan losses results from
management's analysis of the adequacy of the Bank's allowance for loan losses.
If management determines that an increase in the allowance is warranted, then
the increase is accomplished through a provision for loan losses which is
charged as an expense on the Bank's income statement. The provision for loan
losses was $75,000 for the three months ended March 31, 1998, compared to
$225,000 for the three months ended March 31, 1997. The decrease in the
provision resulted from a lower level of non-performing loans caused by the
resolution of problem loans through substantial charge-offs during 1997 and the
loan sale during the first quarter of 1998. During the three months ended March
31, 1998, the Bank had charge-offs of $39,000 and recoveries of $51,000, for a
net recovery of $12,000. Therefore, the allowance increased by $87,000 during
the quarter, as the combined effect of the $75,000 provision and the $12,000 net
recovery. This compares with charge-offs of $202,000 and recoveries of $105,000
during the quarter ended March 31, 1997, generating net charge-offs of $97,000
and a $128,000 increase in the allowance after the $225,000 provision for loan
losses during that quarter. See "Business of the Bank--Asset Quality--Allowance
for Loan Losses."
NON-INTEREST INCOME. The Bank's primary source of non-interest income is
service charges, principally on deposit accounts. The $26,000 increase in
non-interest income between the periods was caused principally by a $32,000
increase in service charges. Service charge income increased because of an
increase in loan-related fees.
NON-INTEREST EXPENSE. Non-interest expense increased by $20,000 from the
first quarter of 1997 to the first quarter of 1998. Other than normal
fluctuations in expenses, the only categories of non-interest expenses which
experienced significant percentage changes were building, occupancy and
equipment expense, which decreased by $63,000, or 22.7%, expenses of real estate
owned, which increased from $21,000 to $92,000 and professional fees, which
doubled from $32,000 to $64,000. Building, occupancy and equipment expense
declined because of a reduction in depreciation expense and a high level of
building repairs and maintenance during the 1997 quarter. The expense of real
estate owned increased because during 1997 the Bank's level of real estate owned
increased as a number of foreclosures were completed and the Bank acquired title
to the mortgaged property. At the beginning of the quarter ended March 31, 1998,
the Bank had $964,000 of real estate owned, compared to $563,000 at the
beginning of the March 31, 1997 quarter. During the first quarter of 1998, the
$92,000 expense was comprised of $50,000 in write-downs in the value of real
estate owned and $42,000 of expenses of holding the properties, such as
insurance and real estate taxes. During the 1997 quarter, expenses of $21,000
were represented entirely by the expenses of holding the properties in the
portfolio. Professional fees increased because of additional costs incurred in
connection with the loan sale and the resolution of other problem loans.
INCOME TAXES. Income tax expense increased by $22,000 from $311,000 for the
three months ended March 31, 1997 to $333,000 for the three months ended March
31, 1998. The increase corresponded to the increase in net income between the
periods.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
DECEMBER 31, 1996.
GENERAL. Net income for 1997 was $72,000 compared to net income of $1.4
million in 1996. The primary reason for the decline was a substantial increase
in expenses related to the resolution of the Bank's problem assets, including a
$1.9 million increase in the provision for loan losses and a $240,000 increase
in the expense of real estate owned. These factors more than offset an increase
in net interest income of $310,000.
NET INTEREST INCOME. Net interest income increased by $310,000, or 3.4%,
from 1996 to 1997. The increase reflects a decline in interest expense which was
only partially offset by a smaller decline in interest
61
<PAGE>
income. Due principally to the decline in the average cost of savings
certificates, the Bank's spread increased by 10 basis points from 3.48% to 3.58%
and the Bank's net interest margin increased by 15 basis points from 4.02% to
4.17%. Changes in the level of non-accruing loans between 1996 and 1997 had a
less significant effect on spread than when comparing the quarters ended March
31, 1998 and 1997. Interest income not recognized during the years on
non-accruing loans was $402,000 during 1997 and $307,000 during 1996.
INTEREST INCOME. Interest income declined by $120,000 from 1996 to 1997.
The decline resulted from a decline in the average balance of loans, the Bank's
highest yielding asset category, and a decline in the average yield on loans.
During the early part of 1997, the Bank's loan department focused on resolving
problem loans, solving problems arising from the defalcation by the former
senior loan officer, and restructuring and strengthening loan department
operations. In addition, during early 1997, one loan officer retired and another
resigned. Therefore, efforts to originate new loans were temporarily reduced.
During the latter part of 1997, the Bank increased its loan originations,
particularly residential mortgage loans, by hiring additional loan officers and
aggressively seeking new loans in Cortland County and nearby communities. By
year end, the Bank had originated more loans in 1997 than had been paid off, but
the increased originations during the latter part of the year had only a limited
effect on average balances.
The average yield on loans declined by eight basis points due to lower
residential mortgage loan rates which affected refinances and new loan
originations. Borrowers were motivated by low market interest rates to refinance
their higher fixed-rate mortgages while borrowers with adjustable-rate loans
also refinanced to lock in lower rates.
The decline in the average balance of loans was offset by an increase in the
average balance of securities. Management invested available funds which might
otherwise have been used to make loans in securities investments. Other short
term investments declined in order to fund a reduction in the level of
interest-bearing liabilities. In addition, the Bank experienced an eight basis
point increase in the average yield on its securities investments because
maturing securities were replaced with securities having slightly higher yields
as the Bank continued to lengthen the maturities of its debt securities, a
process which began in 1996.
INTEREST EXPENSE. Interest expense declined by $430,000 from 1996 to 1997.
The decline resulted from the combined effect of a $3.8 million decline in the
average balance of interest-bearing liabilities and a 13 basis point decline in
the average cost of funds. Most of the activity was in the savings certificate
category, with the average balance declining by $3.2 million and the average
cost declining by 18 basis points. These declines were due to the combined
effect of competitive pressures from non-deposit investment sources which
offered customers the potential for high yields, coupled with a decision by
management to offer rates on deposits which, although competitive, were not the
highest in the local market.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $3.3 million
during 1997, compared to $1.4 million in 1996. During 1997, the Bank charged off
$3.3 million of loans, compared to recoveries of $170,000. Approximately $2.0
million of the charge-offs were taken on the loan package which was ultimately
sold during the first quarter of 1998 while the remainder of the charge-offs
resulted from an aggressive review of the Bank's entire loan portfolio in light
of the credit administration problems discovered in connection with the officer
defalcation discussed above. Based on local economic conditions and the status
of the Bank's loan portfolio, during 1997 management revised the Bank's method
of calculating its allowance to increase the percentages used to determine
appropriate allowance for certain performing loans for which no problems had
been identified. Taking these factors into account, the Bank determined to
provide $3.3 million for loan losses during 1997 to bring the allowance to its
year-end level of $2.1 million.
NON-INTEREST INCOME. Non-interest income increased by $119,000 from 1996 to
1997. The principal component of the increase was a $45,000 recovery of an
investment in Nationar, a former correspondent
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bank which was closed by the New York Superintendent of Banks in 1995. The Bank
had created a $100,000 reserve when Nationar was closed because of the
uncertainties associated with its investment in a Nationar debenture. During
1997, the Superintendent of Banks made a liquidating distribution to the Bank of
$45,000 more than the carrying value of the investment in Nationar, net of the
reserve. Other non-interest income increased by $69,000 because during 1997 the
Bank recovered certain expenses which had been incurred in 1996 in connection
with the collection of past due loans.
NON-INTEREST EXPENSE. Non-interest expense increased by $671,000 from 1996
to 1997. The principal causes of the increase were a $240,000 increase in the
expense of real estate owned and a $303,000 increase in other operating
expenses. The increase in the expense of real estate owned resulted principally
from the adoption by the Bank of a more conservative approach to the valuation
of real estate owned. Real estate owned is required to be carried on the Bank's
books at the lower of cost or fair value, representing market value less
estimated costs of sale. During 1997, the Bank decided that difficulties in
disposing of real estate owned and expected costs of holding and selling
properties justified carrying the properties at 65% of appraised value. The Bank
had previously been carrying real estate owned at a higher percentage of
appraised value. Principally as a result of this change, the Bank reduced the
carrying value of its real estate owned by charging $365,000 to the expense of
real estate owned. Other operating expenses increased principally because of
increases in the cost of collecting past due loans and increases in other
loan-related expenses.
INCOME TAXES. Income tax expense declined by $869,000 from an expense of
$853,000 in 1996 to a tax benefit of $16,000 in 1997. The decline was caused by
the decline in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1995.
GENERAL. Net income for 1996 was $1.4 million compared to net income of
$1.9 million in 1995. The primary reason for the decline was an increase in the
provision for loan losses to replenish the Bank's allowance for loan losses
after charge-offs of $607,000 caused by the officer defalcation. Also
contributing to the decline in net income was an increase in professional fees
incurred in the investigation of the defalcation and a decline in net interest
income principally caused by a decline in the yield on the Bank's loan
portfolio. Partially offsetting these factors was a virtual elimination of
deposit insurance premiums.
NET INTEREST INCOME. Net interest income declined 169,000, or 1.8%, from
1996 to 1997. The decline reflects the combined effect of an increase in
non-accruing loans, a decline in the average yield on loans and other short term
investments, an increase in the average cost of savings certificates and a shift
in the mix of the Bank's liabilities towards higher-cost savings deposits. As a
result of these factors, the Bank's spread decreased by 22 basis points from
3.70% to 3.48% and the Bank's net interest margin decreased by 16 basis points
from 4.18% to 4.02%. The net interest margin declined less rapidly than the
spread because the retention of earnings increased capital as a no-cost funding
source. The increase in the level of non-accruing loans between 1995 and 1996 is
estimated to have caused approximately 14 basis points out of the 22 basis point
decline in the reported yield on loans.
INTEREST INCOME. Interest income declined by $24,000 from 1995 to 1996
despite an increase in the average balance of interest-earning assets by $4.5
million from $220.1 million to $224.6 million. Market interest rates began to
decline in early 1995, and the decline continued through most of 1996. As a
result, new loans originated by the Bank during that period generally had lower
interest rates than the loans in the Bank's portfolio which were being repaid.
The decline in market rates also accelerated the rate of repayment of existing
loans as borrowers refinanced those loans at lower rates. Furthermore, the
Bank's non-accruing loans increased dramatically from 1995 to 1996, with $2.0
million of non-accruing loans at December 31, 1995 increasing to $3.6 million by
December 31, 1996. Interest income not recognized on non-accruing loans
increased substantially to $307,000 in 1996 from $107,000 in 1995. The combined
effect of these factors was to reduce the average yield on loans by 22 basis
points, from 8.91% in 1995 to 8.69% in 1996.
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At the same time, the yield on the Bank's short-term investments,
principally federal funds sold, which are generally immediately sensitive to
interest rate fluctuations, declined rapidly from an average yield of 6.00% in
1995 to an average yield of 4.96% in 1996. In contrast, the average yield on
securities investments increased from 6.05% to 6.18% despite declining market
interest rates because the Bank began to increase the average maturities of its
investment debt securities to improve yields. This increase in average
maturities was partially offset by a shift in mix away from corporate debt
securities and towards U.S. government and agency securities. The Bank shifted
the mix of securities because the decline in market interest rates reduced the
yield spread between traditionally lower yielding treasury securities and higher
yielding corporate bonds.
The decline in the rate earned on loans was partially offset by an increase
in the average balance of both loans and securities. As interest rates declined
and homeowners refinanced their mortgages, the Bank sought to satisfy the
desires of its existing customers to refinance their loans and to capture
refinance business away from other lenders because low loan yields remained
higher than the yields on securities investments. As a result, residential
mortgage loans increased by $2.9 million during 1995 and by $243,000 during
1996, representing a significant component of the $1.5 million increase in the
average balance of loans from 1995 to 1996. The Bank was also able to increase
the average balance of investment securities by $2.3 million from 1995 to 1996
and the average balance of other short term investments increased by $720,000
between the periods. These increases were funded by a combination of an increase
of $1.0 million in the average balance of interest-bearing deposits, an increase
of $1.3 million in average net worth due to net income retained, and an increase
of $328,000 in the average level of non-interest-bearing demand deposits.
INTEREST EXPENSE. Interest expense increased by $145,000 from 1995 to 1996.
A shift in the mix of the Bank's liabilities away from lower cost traditional
savings accounts and money market accounts in favor of savings certificate
accounts with higher yields was the primary cause of the increase in interest
expense. The average balance of savings certificates, the Bank's highest cost
deposits with an average cost of 5.58% during 1996, increased by $5.3 million
from $108.6 million during 1995 to $113.9 million during 1996. In contrast,
lower cost traditional savings accounts, with an average cost of 2.98% during
1996, declined by $2.0 million and money market accounts, with an average cost
of 2.99% during 1996, declined by $1.6 million. Management believes that a shift
in depositor preference, resulting in the shift in mix, occurred from early 1995
through 1996 as depositors sought higher yields to compete with the yields
available in the stock market and from other investment alternatives. Publicity
regarding available investment alternatives made customers more cognizant of the
rates on their accounts and more sophisticated regarding maximizing the yields
on their bank deposits. The average rate paid on savings certificates also
increased slightly, from 5.53% in 1995 to 5.58% in 1996, principally due to
increased competition from other investment alternatives.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $1.4 million
during 1996, compared to $600,000 in 1995. During 1996, the Bank charged off
$1.7 million of loans, compared to $605,000 in 1995. The 1996 charge-offs
included $607,000 of non-existent loans, delinquent loans whose delinquencies
had been concealed, and other uncollectable loans arising out of the defalcation
by the former senior loan officer discussed above. In order to replenish the
allowance for loan losses after these unexpected charge-offs, the Bank was
required to increase its provision for loan losses.
NON-INTEREST INCOME. Non-interest income increased by $99,000 from 1995 to
1996. The increase occurred because in 1995 the Bank had provided $100,000,
recorded as a reduction of non-interest income, to create a reserve against the
Bank's investment in a Nationar debenture. Due to uncertainties regarding the
recoverability of the Nationar investment, management made the provision to
address the possibility that the final liquidation of Nationar would not
generate sufficient funds to repay the Bank. In 1997, $45,000 of the provision
was recovered.
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NON-INTEREST EXPENSE. Non-interest expense increased by $256,000 from 1995
to 1996. The principal causes of the increase were a $168,000 increase in
professional fees for compliance matters, temporary outsourcing of the internal
audit function and the investigation of the officer defalcation. In addition,
miscellaneous other operating expenses increased by $190,000 principally because
of a $94,000 increase in costs associated with collecting past due loans as the
level of non-accrual loans increased from $2.0 million at year end 1995 to $3.6
million at year end 1996. In addition, the Bank had $53,000 of investment
advisory expense in 1996 as the Bank retained an outside investment advisor.
INCOME TAXES. Income tax expense declined by $547,000 from $1.4 million in
1995 to $853,000 in 1996. The decline was caused by the decline in pre-tax
income.
LIQUIDITY AND CAPITAL
The Bank's primary sources of funds are deposits, proceeds from the
principal and interest payments on loans, mortgage-backed and debt securities,
and, during the quarter ended March 31, 1998, proceeds from the sale of loans.
While maturities and scheduled principal payments on loans and securities are
predictable sources of funds, deposit outflows and loan prepayments are greatly
influenced by general interest rates, economic conditions and competition.
The primary investing activity of the Bank is the origination of residential
one- to four-family mortgage loans and the purchase of mortgage-backed and debt
securities. During the three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995, the Bank's loan originations totaled $7.8
million, $32.9 million, $31.7 million and $33.6 million, respectively. However,
loans, net, after payments and charge-offs, decreased by $1.2 million during the
three months ended March 31, 1998 and decreased by $3.1 million during 1997.
Loans increased by only $8,000 during 1996 and by $6.3 million during 1995.
Investment and mortgage-backed securities, excluding the effect of unrealized
gains and losses, increased by $4.5 million during 1996, declined by $1.2
million during 1997 and increased by $987,000 during the first quarter of 1998.
The sale of problem loans provided $3.1 million of additional liquidity during
the quarter ended March 31, 1998. Loan sales did not provide material funds
during other periods.
Deposits increased by $2.9 million in 1995 and $1.5 million in 1996. In
1997, deposits declined by $4.9 million and the Bank experienced an additional
$1.5 million decline in deposits during the first quarter of 1998. Deposit flows
are affected by the level of interest rates, the availability of alternate
investment opportunities, general economic conditions, and other factors.
The Bank monitors its liquidity position on a regular basis. Excess
short-term liquidity is invested in overnight federal funds sold. If the Bank
requires funds beyond its ability to generate them internally, the Bank can
borrow needed funds. At March 31, 1998, the Bank had available lines of credit
with the Federal Home Loan Bank of New York of $26.1 million. The Bank has not
needed to use borrowings as a source of liquidity to fund either deposit
outflows or new loan opportunities. In 1995, the Bank temporarily borrowed funds
for a short time when the Bank's deposits at Nationar, one of its correspondent
banks, were temporarily frozen.
At March 31, 1998, the Bank had $3.8 million of outstanding commitments to
make first lien mortgage loans, $3.7 million of unused home equity lines of
credit, $2.0 million of unused commercial lines of credit, $1.1 million of
consumer overdraft checking lines of credit and an insignificant amount of
outstanding commitments to make automobile and other small consumer loans.
Management anticipates that the Bank will have sufficient funds to meet its
current loan commitments and to fund any draw downs on outstanding lines of
credit. Savings certificates which are scheduled to mature in one year or less
from March 31, 1998 totaled $64.0 million. The Bank may elect to allow some of
those deposits to leave the Bank if it can reduce its cost of funds by doing so
without adversely affecting liquidity. However, management anticipates that the
Bank will be able to retain substantially all of such deposits if the Bank needs
to do so to fund loans and other investments.
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At March 31, 1998, the Bank exceeded all regulatory capital requirements of
the FDIC applicable to it, with Tier I capital of $30.7 million, or 13.26% of
average assets and 21.94% of risk-weighted assets and with total risk-based
capital of $32.4 million, or 23.19% of risk-weighted assets. The Bank was
classified as "well capitalized" at March 31, 1998 under FDIC regulations. See
"Regulatory Capital Compliance" and "Regulation--Banking Regulation-Capital
Requirements" for further information regarding FDIC capital requirements.
The Bank is not subject to any mandatory liquidity ratio requirements under
the regulations of the FDIC or the Banking Department. At March 31, 1998, the
Bank's liquid assets totaled 28.24% of deposits.
IMPACT OF INFLATION AND CHANGING PRICES
The financial information in this Prospectus has been prepared according to
Generally Accepted Accounting Principles, which require the measurement of
financial condition and operating results in terms of historical dollar amounts
without considering the changes in the relative purchasing power of money over
time due to inflation. Inflation can increase operating costs and affect the
value of collateral for loans in general, and real estate collateral in
particular. Unlike industrial companies, nearly all of the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a greater impact on the Bank's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services. However, interest rates
generally increase during periods when the rate of inflation is increasing and
decrease during periods of decreasing inflation. Periods of high inflation are
ordinarily accompanied by high interest rates, which could have a negative
effect on the Bank's net income. Inflation can also increase the cost of the
Bank's operations. See "--Management of Interest Rate Risk" for a discussion of
the effect of changing interest rates on the Bank.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share". SFAS 128 requires the disclosure of basic and diluted earnings per
share. It establishes rules for calculating diluted earnings per share based
upon the effect of agreements by publicly traded companies to issue additional
stock. SFAS 128 is now effective and will require the Company, after the
Conversion, to report in addition to basic earnings per share, fully diluted
earnings per share which would show, for example, the effect on earnings per
share of the exercise of outstanding stock options, if any.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income,"
which requires that comprehensive income and its effect on equity must be
disclosed prominently in the notes to the financial statements. Comprehensive
income includes net income as adjusted for items that are recorded as direct
entries to equity. Only the impact of unrealized gains or losses on securities
available-for-sale is disclosed as an additional component of the Bank's income
under the requirements of SFAS 130. SFAS 130 imposes disclosure requirements
only and does not affect the Company's financial condition or results of
operations. Comprehensive income for the three months ended March 31, 1998 was
$654,000 and was $395,000 for 1997, $1.3 million for 1996 and $2.2 million for
1995.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," which changes the way public companies
report information about segments of their business on their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to stockholders. The Company anticipates that, in the
near future, the Company's business will comprise only one segment and hence
SFAS 131 will not have a material effect on its financial disclosures. However,
if the Company engages in material non-banking business in the future, separate
segment disclosure may be required.
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In February 1998, the FASB issued SFAS 132, which amends existing disclosure
rules regarding pension and other post-retirement benefits to standardize the
disclosure formats effective for fiscal years beginning after September 15,
1997. Disclosures regarding pensions and other non-pension post-retirement
benefits have been combined. SFAS 132 addresses disclosure issues only and does
not require any substantive change in accounting treatment for the benefits
covered by it. Hence, the implementation of SFAS 132 will have no effect on the
Company's financial condition or results of operations.
BUSINESS OF THE COMPANY
GENERAL
The Company was organized as a Delaware corporation in June, 1998 in order
to acquire all the stock of the Bank to be issued in the Conversion. Upon
completion of the Conversion, the Company will become a bank holding company
subject to regulation by the Federal Reserve. See "Regulation--Holding Company
Regulation."
BUSINESS
The Company is not an operating company. After the Conversion, the Company
expects that it will invest one-half of the net proceeds from the sale of the
Common Stock, after contributing one-half to the Bank, primarily in federal
funds, mortgage-backed securities, other debt securities, or deposits in or
loans to the Bank. The Company also intends to lend the ESOP the funds needed to
purchase 8% of the Common Stock issued in the Conversion, including Common Stock
contributed to the Foundation. In the future, the Company may purchase or
organize other operating subsidiaries, including other financial institutions,
or it may merge with other financial institutions and financial services related
companies. There are no current arrangements, understandings or agreements for
any such expansion. See "Use of Proceeds." Initially, the Company will not own
or lease any property but will instead use the premises, equipment and furniture
of the Bank. The Company does not presently intend to have any employees except
for certain officers of the Bank who will not be separately paid by the Company.
The Company may use the support staff of the Bank from time to time, if needed.
Additional employees may be hired if appropriate.
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BUSINESS OF THE BANK
GENERAL
The Bank's principal business consists of gathering deposits from the
general public within its market area and investing those deposits primarily in
loans, debt obligations issued by the U.S. Government, its agencies, and
business corporations, and mortgage-backed securities. The Bank's principal loan
types are residential and commercial mortgage loans, automobile loans,
commercial loans and other consumer loans. The Bank's revenues come principally
from interest on loans and securities. The Bank's primary sources of funds are
deposits and proceeds from principal and interest payments on loans and
investment securities.
STRATEGY FOR THE FUTURE
Management recognizes that to succeed in the next millennium, the Bank and
the Company must build upon the existing strengths of the Bank while expanding
geographically and diversifying product offerings. Management has therefore
developed a strategy for success based upon the following principles:
- STRENGTHEN THE BANK'S POSITION AS A DOMINANT COMMUNITY-ORIENTED FINANCIAL
INSTITUTION. Cortland Savings Bank has been a community-oriented savings
bank for more than 125 years. Of the Bank's $198.2 million of deposits at
March 31, 1998, approximately 81.5% were held by persons and companies
located in Cortland County. Many of the remaining deposits come from
surrounding counties, and approximately 96% come from within New York
State. Deposits from out-of-state residents are concentrated in common
retirement destinations, such as Florida, and are believed to have
originated from customers who maintain their loyalty to the Bank even
after they move, for all or part of the year, to distant locations.
Likewise, the Bank's loans also come predominantly from its local
community. More than 70% of the Bank's mortgage loans are secured by
properties located in Cortland County, with most of the remainder being
located elsewhere in central New York. The largest component of the Bank's
loans are residential mortgage loans in Cortland County, which foster
long-term customer relationships and provide funds to support local
community needs. The Bank's strength comes from its ability to deliver
services within its community. As industry consolidation continues, the
Bank believes it can build its depositor base and fortify its position
within the surrounding communities by continuing to provide new and
existing customers with a higher level of service and convenience than its
competitors. The Bank's commitment to its neighbors, as evidenced by its
local focus and furthered by its establishment of the Foundation, will
continue into the future.
- PURSUE EXPANSION OPPORTUNITIES IN CENTRAL NEW YORK. Until the 1970's, the
New York State banking landscape, especially in the center of the state,
was populated by many small, locally-oriented banking institutions. When
state law was amended to broaden the geographic scope of permitted
branches, larger institutions began to spread. Throughout the state, areas
which had once been served only by local banks whose directors and
officers were members of the local communities were penetrated by larger
institutions which processed loan applications, established deposit
pricing, and made employment decisions in distant major cities. This was
followed by a period, which still continues, of consolidation in the
banking industry.
As a result, the local focus of the banking industry faded. In the name of
efficiency, branches were closed, personal service was abandoned and small
loans were removed from the product line. Cortland Savings Bank believes
there is a need for community financial institutions and seeks to maintain
good relations with its customers by providing the services they need. The
Bank's customers know their officers and directors as well as their
tellers and loan processors. The Bank believes that this approach to
banking can be extended profitably into adjoining counties that share the
same needs and interests as the Bank's existing home community. In
furtherance of this
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approach, the Bank has recently opened a loan production office in Ithaca,
the county seat of adjoining Tompkins County. In the future, the Bank and
the Company intend to seek out opportunities for further expansion through
acquisitions, branch purchases or the opening of new offices, in order to
develop additional business throughout central New York. Although the Bank
and the Company cannot assure its future stockholders that it will be able
to consummate any such transactions, the Board of Directors intends to
aggressively pursue them.
- MAINTAIN PRE-EMINENCE IN RESIDENTIAL MORTGAGE LENDING IN THE COMMUNITIES
IT SERVES. Cortland Savings Bank is, and has been for many years, the
largest residential mortgage lender in Cortland County, with a market
share that substantially exceeds any other institution when measured by
dollar volume or number of loans originated. As the Bank expands into
other communities in central New York, it intends to offer residential
mortgage loan products in those communities with the same vigor that has
allowed it to reach its current leadership position. In furtherance of
this goal, and in order to be able to offer an even broader range of
residential mortgage loan products to satisfy the diversity of customer
demand, the Bank is developing the systems and structures for a mortgage
secondary market operation, which the Bank hopes to launch before year
end. A secondary market operation will allow the Bank to offer loan
products which might not otherwise satisfy the Bank's portfolio needs or
its underwriting standards. Local customers will still be able to deal
with a local bank and in many cases the loan servicing will remain on the
local level. The Bank can thus work to build a loan servicing portfolio
which provides non-interest income while maintaining customer loyalty and
the opportunity to cross-sell other products to those same patrons.
- OFFER OTHER LOAN PRODUCTS TO CREATE LOAN PORTFOLIO GROWTH. Residential
mortgage loans are, and in the foreseeable future are expected to remain,
the primary component of the Bank's loan portfolio. However, other types
of loans have provided the Bank with opportunities for asset growth in the
past, and it is expected that they will continue to provide growth in the
future. The Bank offers commercial mortgage loans, commercial loans and a
variety of different types of consumer loans. Automobile loans are an
important growth category, increasing by $2.7 million, or 42.1%, over
fifteen months from $6.4 million at December 31, 1996 to $9.1 million at
March 31, 1998. Within the past eighteen months, the Bank has taken steps
to strengthen its loan origination staff to build up its non-residential
loan portfolios. The Bank's loan department staff has recently spent
substantial time resolving problems loans and dealing with the aftermath
of a defalcation by its former senior loan officer. However, the sale of a
package of problem loans during the first quarter of 1998 has allowed the
staff to concentrate on new loan originations. As the Bank expands its
market area in central New York, the Bank will offer a full range of loans
to its new customer base to complement its offering of those loans to its
current customers. Non-residential loans provide product diversification,
opportunities to improve interest rate sensitivity because of the normally
shorter term to maturity of such loans, and higher yields than residential
mortgage loans. The Bank plans to maintain its position as a leading
residential mortgage lender while building upon its position as an
independent community bank to increase its market share of these higher
yield loans.
- IMPROVE EFFICIENCY BY SPREADING COSTS OVER A LARGER ASSET BASE. The Bank's
staffing and infrastructure are currently able to serve more customers and
handle increased deposit and loan volumes. The Bank has recently hired a
new chief operating officer and a new chief financial officer in addition
to upgrading its loan department staffing. As a result, deposit growth and
loan growth can be accomplished without comparable increases in staff,
allowing the Bank to spread its operating expenses over a larger asset
base. In addition, technological advances are constantly changing the face
of the banking industry. In order to remain competitive and continue to
provide the services its customers need and expect, the Bank anticipates
that in the future it will be required to incorporate technological
developments into its product delivery system. Those technological
developments, some of which are not yet conceived, can be expected to
require potentially significant start-up
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costs. Asset growth will allow the Bank to spread the cost of these
technological innovations over a larger base of interest income.
OPERATING PLAN
The Bank's operating plan concentrates on investing available funds in
mortgage loans on properties located in Cortland County. The largest component
of the Bank's mortgage loans, and the Bank's primary focus, are loans secured by
one- to four-family homes, which totaled $103.3 million, or 66.0% of total
loans, at March 31, 1998. These loans consisted of approximately $94.8 million
of loans secured by first mortgages and approximately $8.5 million of loans
secured by junior mortgages. In order to increase yields, improve the interest
rate sensitivity of its assets and diversify its portfolio, management has
invested a portion of the Bank's assets in commercial mortgage loans and other
types of loans, such as commercial loans, automobile loans, home equity loans
and other consumer loans. In recent years, the Bank has sought to increase its
portfolio of automobile loans as a source of higher yielding investments during
periods of low mortgage loan rates. The Bank also provides certain loan
products, such as credit cards, in order to satisfy customer demand and maintain
customer relationships, but which do not materially contribute to net income.
In addition, to provide liquidity and improve interest rate sensitivity,
management has invested a portion of the Bank's assets in securities and short
term liquid investments such as overnight federal funds sales. More than 97% of
the Bank's securities portfolio, other than mortgage-backed securities, had a
maturity of five years or less at March 31, 1998.
The Bank has maintained a ratio of loans to total assets of approximately
66% since year end 1994. It is management's goal to increase this ratio in the
future because loans represent the highest yielding asset category for the Bank.
However, after the Conversion, this ratio will decrease, at least in the short
term, because the increase in capital can not be immediately invested in loans.
Furthermore, the availability of acceptable lending opportunities is
substantially outside the control of the Bank, being driven primarily by
economic conditions and competitive pressures. Therefore, the Bank may be unable
to achieve its goal of increasing its loans to total assets ratio.
Paralleling the Bank's strategy of concentrating on mortgage loans in its
local community, the Bank's primary source of funds for investment is deposits
from its local community and the Bank's capital. The Bank estimates that at
December 31, 1997, approximately 81.5% of its deposits were held by persons who
resided in Cortland County and approximately 96% by persons residing in New York
State. The Bank does not seek deposits from outside its market area, does not
utilize brokered deposits, and has not utilized borrowings as a material funding
source in recent years. However, after the Conversion, the Bank may use
borrowings as a tool to provide additional funding to assist in the leveraging
of the additional capital obtained in the Conversion.
MARKET AREA
The Bank's primary market area is Cortland County, New York. The Bank's main
office has been located in the City of Cortland since it was chartered in 1866.
The Bank has nearby full service branches in Homer, opened in 1988 and
Cortlandville, opened in 1994. The Bank is, and has been for many years, the
largest mortgage lender by dollar volume and number of loans originated in
Cortland County based upon reported data from the Cortland County Clerk and has
the largest share of bank deposits within the County. In addition to Cortland
County, the Bank also considers adjoining townships in the counties surrounding
Cortland (Tompkins, Cayuga and Onondaga) to represent a secondary market area,
especially for mortgage loans. This year, the Bank opened a representative
office in Ithaca, the home of Cornell University and Ithaca College and the
county seat of nearby Tompkins County, to originate mortgage loans.
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Cortland County, with a population of 48,963 according to the 1990 census,
is predominantly rural with many small towns. Approximately 80% of the County's
workforce works within the county, while others work in nearby areas such as
Syracuse to the north and Ithaca to the southwest, commuting by automobile.
Principal sources of employment for county residents include retail trades,
educational services, manufacturing, health care and other professional
services, and construction. The largest employers in Cortland County are
Buckbee-Mears Company, a manufacturer of television screen components, the State
University of New York at Cortland, and Cortland Memorial Hospital. The parent
corporation of Buckbee-Mears Company has recently announced layoffs due to a
decline in business, at least partially related to adverse economic and
financial conditions in Asia. At this time, the scope and duration of the
layoffs has not been announced and the Bank is unable to assess the effect of
the situation on the Bank's business. However, the Bank notes that although
Buckbee-Mears Company is the largest employer in the County with slightly in
excess of 1,000 employees, there are four additional employers with more than
600 employees each, and a broad diversity of smaller mid-range companies which
the Bank believes may soften the impact of the layoffs.
COMPETITION
The Bank's principal competitors for deposits are other savings banks,
savings and loan associations, commercial banks and credit unions in the Bank's
market area, as well as money market mutual funds, insurance companies and
securities brokerage firms, many of which are substantially larger in size than
the Bank. The Bank's competition for loans comes principally from savings banks,
savings and loan associations, commercial banks, mortgage bankers, finance
companies and other institutional lenders. Some of the institutions which
compete with the Bank have much greater financial and marketing resources than
the Bank. The Bank's principal methods of competition include loan and deposit
pricing, maintaining close ties with its local community, advertising and
marketing programs and the types of services provided.
LENDING ACTIVITIES
LOAN PORTFOLIO COMPOSITION. The Bank's loans consist primarily of mortgage
loans secured by one- to four-family residences. At March 31, 1998, the Bank had
total loans of $156.6 million, of which $94.8 million, or 60.5%, were one- to
four-family first lien residential mortgage loans. The Bank had an additional
$8.5 million of home equity loans and home equity lines of credit outstanding,
or 5.4% of total loans, secured by subordinate liens on one- to four-family
residences. The Bank also had $30.6 million of commercial mortgage loans, or
19.5% of total loans; $9.1 million of automobile loans, or 5.8% of total loans;
$6.5 million of commercial loans, or 4.2% of total loans. The remainder include
different types of consumer loans offered to satisfy customer demand. The Bank's
ratio of loans to total assets has been approximately 66% for more than three
years, fluctuating by less than one percentage point since year end 1994.
Interest rates on loans are affected by the demand for loans, the supply of
money available for lending, credit risks, the rates offered by competitors and
other conditions. These factors are in turn affected by, among other things,
economic conditions, monetary policies of the federal government, and
legislative tax policies.
71
<PAGE>
LOAN PORTFOLIO COMPOSITION
The following table sets forth the composition of the Bank's mortgage and
other loan portfolios in dollar amounts and in percentages at the dates
indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------- AT DECEMBER 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------------------- -------------------- -------------------- ---------------------- ---------
PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential.................. $ 97,167 62.03% $ 97,303 61.66% $ 96,097 59.73% $ 95,854 59.57% $ 92,942
Construction................. 264 0.17 316 0.20 528 0.33 155 0.10 1,065
Home equity.................. 6,139 3.92 5,924 3.75 5,882 3.66 6,344 3.94 7,085
Commercial mortgages......... 30,560 19.51 30,867 19.56 35,119 21.83 35,165 21.86 32,756
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total real estate loans.... 134,130 85.63 134,410 85.17 137,626 85.55 137,518 85.47 133,848
Other loans:
Guaranteed student loans..... 1,708 1.09 1,507 0.96 1,552 0.96 1,747 1.09 1,960
Property improvement loans... 828 0.53 907 0.57 1,031 0.64 916 0.57 822
Automobile loans............. 9,050 5.78 8,902 5.64 6,378 3.96 5,510 3.42 4,617
Other consumer loans......... 4,391 2.80 5,031 3.19 6,289 3.91 6,174 3.84 5,993
Commercial loans............. 6,528 4.17 7,049 4.47 8,020 4.98 9,023 5.61 7,366
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total other loans.......... 22,505 14.37 23,396 14.83 23,270 14.45 23,370 14.53 20,758
Total loans.............. 156,635 100.00% 157,806 100.00% 160,896 100.00% 160,888 100.00% 154,606
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- -----------
Less:
Deferred loan fees, net...... 205 241 333 379 378
Allowance for loan losses.... 2,230 2,143 1,952 2,002 1,752
--------- --------- --------- --------- ---------
Total loans, net........... $ 154,200 $ 155,422 $ 158,611 $ 158,507 $ 152,476
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
1993
----------------------
PERCENT PERCENT
OF TOTAL AMOUNT OF TOTAL
----------- --------- -----------
<S> <C> <C> <C>
Real estate loans:
Residential.................. 60.12% $ 88,042 60.89%
Construction................. 0.69 534 0.37
Home equity.................. 4.58 7,141 4.94
Commercial mortgages......... 21.19 29,995 20.75
----------- --------- -----------
Total real estate loans.... 86.58 125,712 86.95
Other loans:
Guaranteed student loans..... 1.27 1,621 1.12
Property improvement loans... 0.53 824 0.57
Automobile loans............. 2.99 3,775 2.61
Other consumer loans......... 3.88 5,784 4.00
Commercial loans............. 4.75 6,867 4.75
----------- --------- -----------
Total other loans.......... 13.42 18,871 13.05
Total loans.............. 100.00% 144,583 100.00%
----------- --------- -----------
----------- -----------
Less:
Deferred loan fees, net...... 363
Allowance for loan losses.... 1,620
---------
Total loans, net........... $ 142,600
---------
---------
</TABLE>
72
<PAGE>
The following table presents the Bank's loan portfolio by fixed and
adjustable rates at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------- AT DECEMBER 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------------------- -------------------- -------------------- ---------------------- ---------
PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED-RATE LOANS:
Real estate loans:
Residential................ $ 62,475 39.89% $ 59,048 37.42% $ 49,879 31.00% $ 48,292 30.01% $ 47,433
Construction............... 264 0.17 316 0.20 528 0.33 155 0.10 1,065
Commercial mortgages....... 27,681 17.67 28,077 17.79 31,281 19.44 31,177 19.38 28,370
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total real estate
loans.................. 90,420 57.73 87,441 55.41 81,688 50.77 79,624 49.49 76,868
Other loans.................. 19,107 12.20 19,167 12.15 17,716 11.01 16,627 10.33 14,719
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total fixed-rate loans... 109,527 69.92 106,608 67.56 99,404 61.78 96,251 59.82 91,587
ADJUSTABLE-RATE LOANS:
Real estate loans:
Residential................ 34,692 22.15 38,255 24.24 46,218 28.73 47,562 29.56 45,509
Home equity................ 6,139 3.92 5,924 3.75 5,882 3.65 6,344 3.94 7,085
Commercial mortgages....... 2,879 1.83 2,790 1.77 3,838 2.39 3,988 2.48 4,386
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total real estate
loans.................. 43,710 27.91 46,969 29.76 55,938 34.77 57,894 35.98 56,980
Other loans.................. 3,398 2.17 4,229 2.68 5,554 3.45 6,743 4.20 6,039
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total adjustable-rate
loans.................... 47,108 30.08 51,198 32.44 61,492 38.22 64,637 40.18 63,019
Total loans.............. 156,635 100.00% 157,806 100.00% 160,896 100.00% 160,888 100.00% 154,606
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- -----------
Less:
Deferred loan fees, net...... 205 241 333 379 378
Allowance for loan losses.... 2,230 2,143 1,952 2,002 1,752
--------- --------- --------- --------- ---------
Total loans, net....... $ 154,200 $ 155,422 $ 158,611 $ 158,507 $ 152,476
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
1993
PERCENT PERCENT
OF TOTAL AMOUNT OF TOTAL
----------- --------- -----------
<S> <C> <C> <C>
FIXED-RATE LOANS:
Real estate loans:
Residential................ 30.68% $ 43,281 29.93%
Construction............... 0.69 534 0.37
Commercial mortgages....... 18.35 25,403 17.57
----------- --------- -----------
Total real estate
loans.................. 49.72 69,218 47.87
Other loans.................. 9.52 12,749 8.82
----------- --------- -----------
Total fixed-rate loans... 59.24 81,967 56.69
ADJUSTABLE-RATE LOANS:
Real estate loans:
Residential................ 29.44 44,761 30.96
Home equity................ 4.57 7,141 4.94
Commercial mortgages....... 2.84 4,592 3.18
----------- --------- -----------
Total real estate
loans.................. 36.85 56,494 39.08
Other loans.................. 3.91 6,122 4.23
----------- --------- -----------
Total adjustable-rate
loans.................... 40.76 62,616 43.31
Total loans.............. 100.00% 144,583 100.00%
----------- --------- -----------
----------- -----------
Less:
Deferred loan fees, net...... 363
Allowance for loan losses.... 1,620
---------
Total loans, net....... $ 142,600
---------
---------
</TABLE>
73
<PAGE>
RESIDENTIAL MORTGAGE LOANS. The Bank offers both adjustable-rate and
fixed-rate mortgage loans. The relative proportions of fixed versus adjustable
mortgage loans originated by the Bank depends principally upon customer
preferences, which are generally driven by general economic and interest rate
conditions and the pricing offered by the Bank's competitors. In recent years,
with relatively low mortgage interest rates, customer preference has favored
fixed-rate mortgage loans. As a result, from December 31, 1993 to March 31,
1998, fixed-rate residential mortgage loans increased from 29.9% to 39.9% of the
loan portfolio while adjustable-rate residential mortgage loans declined from
31.0% to 22.2% of the loan portfolio. The adjustable-rate loans generally carry
annual or triennial caps and life-of-the-loan ceilings which limit interest rate
adjustments.
Generally, credit risks on adjustable-rate loans are somewhat greater than
on fixed-rate loans primarily because, as interest rates rise, so do borrowers'
payments, increasing the potential for default. The Bank offers teaser rate
loans with low initial interest rates that are not based upon the index plus the
margin for determining future rate adjustments; however, the Bank judges the
borrower's ability to repay based on the payment due at an interest rate 2%
higher than the initial rate.
In addition to verifying income and assets of borrowers, the Bank obtains
independent appraisals on all residential first mortgage loans and attorneys'
opinions of title are required at closing. The Bank generally uses title
opinions rather than title insurance on residential mortgage loans, but has not
experienced losses due to its reliance on title opinions instead of title
insurance. As the Bank seeks to position itself to be able to sell mortgage
loans on the secondary market towards the end of 1998, it will begin to require
title insurance on first lien residential mortgage loans. Private mortgage
insurance is required on most loans with a loan to value ratio in excess of 80%.
The Bank has $7.5 million of residential mortgage loans with loan to value
ratios of from 80% to 90% without private mortgage insurance. The Bank
originated these loans as part of a special first time home buyer program begun
in 1990. The Bank has not experienced delinquencies on those loans greater than
on other residential mortgage loans. Real estate tax escrows are generally
required on residential mortgage loans with loan to value ratios in excess of
80%.
In the past, the Bank's residential mortgage loans have not been originated
using standards, procedures and documentation customary on the secondary market.
Hence, the loans are generally not salable to regular secondary market
purchasers. The Bank anticipates that by the end of 1998, most of its new
residential mortgage loan originations will meet secondary market standards.
Adjustable-rate mortgage loans originated in recent years have interest
rates that adjust annually or every three years based on the one or three year
treasury bill index, plus 3%. Interest rate adjustments are generally limited to
2% per year for one year adjustable loans and 3% per adjustment for three year
adjustable loans. There is normally a lifetime maximum interest rate adjustment,
measured from the initial interest rate, of 6%.
Fixed-rate residential mortgage loans generally have terms of 10 to 30
years. Although fixed-rate mortgage loans may adversely affect the Bank's net
interest income in periods of rising interest rates, the Bank originates such
loans to satisfy customer demand. Such loans are generally originated at initial
interest rates which exceed the fully indexed rate on adjustable-rate mortgage
loans offered at the same time. Therefore, during periods of level interest
rates, they tend to provide higher yields than adjustable loans. Fixed-rate
residential mortgage loans originated by the Bank generally include due-on-sale
clauses which permit the Bank to demand payment in full if the borrower sells
the property without the Bank's consent. Due-on-sale clauses are an important
means of adjusting the rates of the Bank's fixed-rate mortgage loan portfolio,
and the Bank has generally exercised its rights under these clauses.
After the Conversion, management intends to continue to emphasize the
origination of mortgage loans secured by one- to four-family residences.
74
<PAGE>
HOME EQUITY LOANS. The Bank offers a home equity line of credit secured by
a residential one- to four-family mortgage, usually a second lien. These loans
have adjustable rates of interest and provide for an initial advance period of
ten years, during which the borrower pays interest only and can borrow, repay,
and reborrow the principal balance. Some of the Bank's older line of credit
mortgage loans provide for minimum monthly payments which may include principal
reductions. This is followed by a repayment period, generally fifteen years,
during which the balance of the loan is repaid in principal and interest
installments. The Bank also offers home equity loans which are fully advanced at
closing and repayable in monthly principal and interest installments over a
period not to exceed 10 years. The maximum loan to value ratio, including prior
liens, is 80% for lines of credit and 85% for regular amortizing home equity
loans. At March 31, 1998, the Bank had $6.1 million in outstanding advances on
home equity lines of credit, $3.7 million of unused home equity lines of credit
and $2.4 million in regular amortizing home equity loans.
COMMERCIAL MORTGAGE LOANS. The Bank originates commercial mortgage loans
secured by office buildings, retail establishments, multi-family residential
real estate and other types of commercial property. Substantially all of the
properties are located in the Bank's market area or in nearby areas of central
New York State. At March 31, 1998, the Bank's commercial mortgage loan portfolio
was $30.6 million, or 19.5% of total loans. At March 31, 1998, the Bank's
largest such loan was a $962,000, or 50%, participation in a $1.9 million loan
to a non-profit organization secured by a light manufacturing facility in
Cortland County for developmentally disabled workers. The other participant is
another local bank. A number of directors of the Bank now serve, or have served,
as volunteer directors of the non-profit borrower. The loan is current and has
never been designated as non-accrual or otherwise classified.
The Bank makes commercial mortgage loans with loan to value ratios up to
75%, terms up to five years, and amortization periods up to 20 years. At March
31, 1998, $2.9 million of the Bank's commercial mortgage loans had adjustable
rates and $27.7 million had fixed rates. However, most of the Bank's recent
fixed-rate commercial mortgage loans mature after five years, which allows the
Bank to adjust the interest rate after five years if appropriate.
For commercial mortgage loans, the Bank generally requires a debt service
coverage ratio of at least 110% and the personal guarantee of the principals of
the borrower. The Bank also requires an appraisal by an independent appraiser.
Title insurance is required for loans in excess of $500,000, a threshold which
was recently increased from $200,000. Attorneys' opinions of title are used
instead of title insurance for smaller commercial loans, but the Bank has not
experienced losses as a result of not having title insurance.
Loans secured by commercial properties generally involve a greater degree of
risk than one- to four-family residential mortgage loans. Because payments on
such loans are often dependent on successful operation or management of the
properties, repayment may be subject, to a greater extent, to adverse conditions
in the real estate market or the economy. The Bank seeks to minimize these risks
through its underwriting policies. The Bank evaluates the qualifications and
financial condition of the borrower, including credit history, profitability and
expertise, as well as the value and condition of the underlying property. The
factors considered by the Bank include net operating income; the debt coverage
ratio (the ratio of cash net income to debt service); and the loan to value
ratio. When evaluating the borrower, the Bank considers the financial resources
and income level of the borrower, the borrower's experience in owning or
managing similar property and the Bank's lending experience with the borrower.
The Bank's policy requires borrowers to present evidence of the ability to repay
the loan without having to resort to the sale of the mortgaged property.
CONSTRUCTION LOANS. The Bank offers residential single family construction
loans to persons who intend to occupy the property upon completion of
construction and who are pre-qualified by the Bank for a permanent mortgage loan
on the property once construction is complete. Construction loans are generally
not made until construction is already 40% complete. Upon completion of
construction, these loans are automatically converted into permanent residential
mortgage loans and classified as such. The
75
<PAGE>
proceeds of the construction loan are advanced in stages on a percentage of
completion basis as construction progresses. The loans generally provide for a
construction period of not more than three months during which the borrower pays
interest only. In recognition of the risks involved in such loans, the Bank
carefully monitors construction through regular inspections and the borrower
must qualify for the permanent mortgage loan before the construction loan is
made. At March 31, 1998, the Bank had four such construction loans with an
aggregate outstanding principal balance of $264,000. Construction loan levels
tend to increase during the summer because of the seasonal nature of residential
construction, but even during the summer these loans generally do not represent
more than 1% of the Bank's loan portfolio. The Bank's delinquency experience
with its construction loans has been favorable. At March 31, 1998, the Bank had
no non-performing construction loans.
AUTOMOBILE LOANS. In recent years, the Bank has exerted efforts to increase
its level of automobile loans in order to provide improved yields, increase the
interest rate sensitivity of its assets and expand its customer base. Automobile
loans are originated both through direct contact between the Bank and the
borrower and through automobile dealers who refer the borrowers to the Bank. The
Bank conducts its own analysis of the creditworthiness of borrowers referred to
it by dealers before approving any automobile loan. The dealer loans are
represented by installment sales contracts between the dealer and the purchaser
which are immediately assigned to the Bank. Dealers receive fees from the Bank
for the referrals.
The Bank offers automobile loans for both new and used cars. The loans have
fixed rates with maturities not more than five years. At March 31, 1998, the
Bank had $9.1 million of automobile loans. Loan amounts generally equal 85% of
the purchase price of the car. Therefore, the Bank evaluates the credit and
repayment ability of the borrower as well as the value of the collateral in
determining whether to approve a loan.
OTHER CONSUMER LOANS. The Bank also makes short-term fixed-rate consumer
loans either unsecured or secured by savings accounts or other consumer assets,
as well as adjustable-rate revolving credit card loans and overdraft checking
loans. These loans totaled $4.4 million, or 2.8% of total loans, at March 31,
1998. The fixed-rate loans generally have a term of not more than five years and
have interest rates higher than mortgage loans. The shorter terms to maturity or
adjustable rates are helpful in managing the Bank's interest rate risk.
Applications for these loans are evaluated based upon the borrower's ability to
repay and, if applicable, the value of the collateral. Collateral value, except
for loans secured by bank deposits or marketable securities, is a secondary
consideration because personal property collateral generally rapidly depreciates
in value, is difficult to repossess, and rarely generates close to full value at
a forced sale.
COMMERCIAL LOANS. The Bank makes commercial loans to businesses for
automobile dealer floor plan financing, working capital, machinery and equipment
purchases, expansion, and other business purposes. These loans generally have
higher yields than mortgages loans, with maturities that generally are not more
than seven years. Working capital lines of credit tend to provide for one year
terms with annual reviews. The Bank had $6.5 million of such loans at March 31,
1998, of which 51.6% had fixed rates and 48.4% had adjustable rates.
Commercial loans tend to present greater risks than mortgage loans because
the collateral, if any, tends to be rapidly depreciable, difficult to sell at
full value and easier to conceal. In order to limit these risks, the Bank
evaluates these loans based upon the borrower's ability to repay the loan from
ongoing operations. The Bank considers the business history of the borrower and
perceived stability of the business as important factors when considering
applications for such loans. Occasionally, the borrower provides commercial or
residential real estate collateral for such loans, in which case the value of
the collateral may be a significant factor in the loan approval process.
ORIGINATION OF LOANS. Loan originations come from a number of sources.
Residential loan originations can be attributed to depositors, retail customers,
telephone inquiries, advertising, the efforts of the Bank's loan officers, and
referrals from other borrowers, real estate brokers and builders. The Bank
76
<PAGE>
originates loans primarily through its own efforts. The Bank has worked with
independent commercial brokers and residential loan servicers to obtain loan
applications for consideration, but the Bank's present policy requires that it
conduct its own independent credit evaluation before approving any loan. The
Bank also uses referrals from automobile dealers in the origination of
automobile loans but evaluates each loan application itself in advance of
committing to any loan.
All of the Bank's lending is subject to its written, nondiscriminatory
underwriting standards and to loan origination procedures prescribed by the
Bank's Board of Directors. Officers of the Bank have the authority to approve
loans at differing levels established by the Board of Directors based upon the
position and expertise of the officer. All loans in excess of $200,000 and any
loan which, when added to existing loans to a borrower causes that loan
relationship to exceed $200,000 must be approved by the Board's Loan Committee.
The Bank is not subject to general state or federal regulations limiting the
aggregate amount of loans it is permitted to make to one borrower or an
affiliated group of borrowers, notably including mortgage loans, but is subject
to maximum loan to one borrower limits on certain types of loans, such as
commercial loans. The Bank's largest single loan is the $962,000 mortgage loan
to a non-profit organization described above. The Bank has six different loan
relationships in which the aggregate amount outstanding to all related borrowers
exceeds $1.0 million. The largest such relationship had an aggregate outstanding
balance owed of $1.2 million at March 31, 1998, represented by five loans
secured by mortgages on commercial properties in central New York. None of the
loans in any of the six relationships are designated as non-accrual or otherwise
identified as problem loans.
The following table sets forth the Bank's loan originations, loan sales and
principal repayments for the periods indicated. All loans sold were whole loans.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
THREE MONTHS ENDED
MARCH 31, 1998 1997 1996 1995
------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C>
Total loans, beginning of period........................ $ 157,806 $ 160,896 $ 160,888 $ 154,606
-------- ---------- ---------- ----------
Loans originated:
Residential mortgages................................. 3,600 14,732 12,382 10,789
Commercial mortgages.................................. 496 1,260 2,987 5,436
Commercial loans...................................... 1,335 3,940 5,072 5,987
Other loans........................................... 2,358 12,982 11,227 11,430
-------- ---------- ---------- ----------
Total loans originated.............................. 7,789 32,914 31,668 33,642
Principal repayments.................................... (8,316) (29,089) (29,236) (26,110)
Loans transferred to held-for-sale...................... (661) (2,541) -- --
Loans transferred from held-for-sale.................... 101 -- -- --
Loans transferred to real estate owned.................. (45) (1,095) (711) (645)
Total charge-offs....................................... (39) (3,279) (1,713) (605)
-------- ---------- ---------- ----------
Net loan activity....................................... (1,171) (3,090) 8 6,282
-------- ---------- ---------- ----------
Total loans, end of period.......................... $ 156,635 $ 157,806 $ 160,896 $ 160,888
-------- ---------- ---------- ----------
-------- ---------- ---------- ----------
</TABLE>
The Bank generally does not sell loans except for the sale of problem loans
during the first quarter of 1998 and the sale of student loans when the student
leaves school and the repayment of the loan begins. The Bank does not service
loans for other investors and the Bank has never purchased loan servicing
rights. However, the Bank intends to begin selling a portion of its new
fixed-rate residential mortgage loans on the secondary market by the end of
1998, with the Bank retaining the servicing of those loans.
From time to time, the Bank accepts loan applications through loan servicers
and other sources of loan applications. The Bank has had a relationship for more
than 10 years with a loan servicer who has
77
<PAGE>
referred loan applications, principally for commercial mortgage loans, to the
Bank for consideration. In most cases, the Bank pays no fee for a loan referral
from that company but when and if the loan is closed, the company services the
loan for the Bank. At March 31, 1998, the Bank had $9.6 million of loans
serviced by that company, of which 28 loans, or $7.0 million, were commercial
mortgage loans and 43 loans, or $2.6 million, were residential mortgage loans.
The Bank had an additional $7.4 million of its loans serviced by other loan
servicers, some of which are participation loans in which the servicer is the
lead participant.
LOAN MATURITY. The following table shows the contractual maturity of the
Bank's loan portfolio at March 31, 1998. Loans are shown as due based on their
contractual terms to maturity. Loans which have adjustable interest rates are
shown as maturing when the final loan payment is due without regard to rate
adjustments. The table does not show the effects of loan amortization, possible
prepayments or enforcement of due-on-sale clauses. Non-performing loans are
shown as being due based upon their contractual maturity without regard to
acceleration due to default.
<TABLE>
<CAPTION>
RESIDENTIAL HOME COMMERCIAL
MORTGAGE(1) EQUITY MORTGAGE COMMERCIAL OTHER LOANS TOTAL
----------- --------- ----------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Amounts due:
Within 3 months............................. $ 18 $ -- $ 923 $ 1,490 $ 167 $ 2,598
3 months to one year........................ 194 -- 3,050 1,678 1,339 6,261
1 to 3 years................................ 762 -- 9,720 1,007 5,143 16,632
3 to 5 years................................ 3,402 -- 4,998 640 6,706 15,746
5 to 10 years............................... 14,868 -- 5,071 1,665 367 21,971
10 to 20 years.............................. 43,366 2,285 5,828 -- 1,674 53,153
Over 20 years............................... 34,821 3,854 970 48 581 40,274
----------- --------- ----------- ----------- ------------ ----------
Total loans................................. $ 97,431 $ 6,139 $ 30,560 $ 6,528 $ 15,977 $ 156,635
----------- --------- ----------- ----------- ------------ ----------
----------- --------- ----------- ----------- ------------ ----------
</TABLE>
- ------------------------
(1) Includes construction loans on residential property.
The following table shows, as of March 31, 1998, the amount of loans due
after March 31, 1999, and whether they have fixed interest rates or adjustable
interest rates.
<TABLE>
<CAPTION>
FLOATING OR
FIXED ADJUSTABLE
RATES RATES TOTAL
---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Residential mortgage......................................................... $ 62,527 $ 34,692 $ 97,219
Home equity.................................................................. -- 6,139 6,139
Commercial mortgage.......................................................... 23,784 2,803 26,587
Commercial................................................................... 3,284 76 3,360
Other loans.................................................................. 4,430 41 14,471
---------- ----------- ----------
Total........................................................................ $ 104,025 $ 43,751 $ 147,776
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
ASSET QUALITY
DELINQUENCY PROCEDURES. When a borrower fails to make a required payment on
a loan, the Bank attempts to cause the deficiency to be cured by contacting the
borrower. Late notices are sent when a payment is more than 15 days past due and
a late charge is generally assessed at that time. The Bank attempts to contact
personally any borrower who is more than 20 days past due. All loans past due 90
days or more are added to a watch list and an employee of the Bank contacts the
borrower on a regular basis to seek to cure the delinquency. If a mortgage loan
becomes past due from 90 to 120 days, the Bank refers the matter to an attorney,
who first seeks to obtain payment without litigation and, if unsuccessful,
generally
78
<PAGE>
commences a foreclosure action or other appropriate legal action to collect the
loan. A foreclosure action, if the default is not cured, generally leads to a
judicial sale of the mortgaged real estate. The judicial sale is delayed if the
borrower files a bankruptcy petition because the foreclosure action cannot be
continued unless the Bank first obtains relief from the automatic stay provided
by the Bankruptcy Code.
If the Bank acquires the mortgaged property at foreclosure sale or accepts a
voluntary deed in lieu of foreclosure, the acquired property is then classified
as real estate owned. At March 31, 1998, the Bank had $760,000 of real estate
owned, represented by six single family residences, one car dealership, one
bowling alley, one ice cream parlor, one commercial retail facility and one
parcel of vacant land. At March 31, 1998, the Bank had contracts to sell three
of those properties with an aggregate carrying value of $337,000. When real
estate is acquired in full or partial satisfaction of a loan, it is recorded at
the lower of the principal balance of the loan or fair value less costs of sale.
Any shortfall between that amount and the carrying value of the loan is then
charged to the allowance for loan losses. Subsequent changes in the value of the
property are charged to the expense of real estate operations. The Bank is
permitted to finance sales of real estate owned by "loans to facilitate," which
may involve a lower down payment or a longer repayment term or other more
favorable features than generally would be granted under the Bank's underwriting
guidelines. At March 31, 1998, the Bank had no "loans to facilitate."
If an automobile loan becomes 60 days past due, the Bank seeks to repossess
the collateral. If the default is not cured, then upon repossession the Bank
sells the automobile as soon as practicable through a local automobile auction.
When other types of non-mortgage loans become past due, the Bank takes measures
to cure defaults through contacts with the borrower and takes appropriate
action, depending upon the nature of the borrower and the collateral, to obtain
repayment of the loan.
The following table sets forth the Bank's loan delinquencies by type, by
amount and by percentage of type at March 31, 1998.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR:
------------------------------------------------------------------------------------
60-89 DAYS 90 DAYS OR MORE(1)
----------------------------------------- -----------------------------------------
PERCENT PERCENT
OF LOAN OF LOAN
NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY
------------- ----------- ------------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans.......... 12 $ 623 0.60% 27 $ 893 0.86%
Commercial mortgage loans........... -- -- 0.00 5 363 1.19
Commercial loans.................... -- -- 0.00 5 115 1.76
Other loans......................... 13 34 0.21 30 97 0.54
-- --
----- -----------
Total............................... 25 $ 657 0.42% 67 $ 1,468 0.93%
-- --
-- --
----- --- ----------- ---
----- --- ----------- ---
<CAPTION>
TOTAL DELINQUENT LOANS
-----------------------------------------
PERCENT
OF LOAN
NUMBER AMOUNT CATEGORY
------------- ----------- -------------
<S> <C> <C> <C>
Residential mortgage loans.......... 39 $ 1,516 1.46%
Commercial mortgage loans........... 5 363 1.19
Commercial loans.................... 5 115 1.76
Other loans......................... 43 131 0.82
--
-----------
Total............................... 92 $ 2,125 1.35%
--
--
----------- ---
----------- ---
</TABLE>
- ------------------------
(1) Includes seven "Other" loans with a balance of $10,000 at March 31, 1998 for
which the Bank was still accruing interest, representing 0.06% of total
other loans and 0.01% of total loans.
The following table sets forth information with respect to the Bank's
non-performing assets (which generally includes loans that are delinquent for 90
days or more and real estate owned) at the dates indicated. At March 31, 1998,
there were no loans other than those included in the table below with regard
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<PAGE>
to which management had information about possible credit problems of the
borrower that caused management to seriously doubt the ability of the borrower
to comply with present loan repayment terms.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, -----------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:(1)
Residential mortgages..................................... $ 893 $ 2,010 $ 1,069 $ 772 $ -- $ 299
Commercial mortgages...................................... 363 1,235 1,416 421 1,295 896
------ --------- --------- --------- --------- ---------
Total real estate loans................................. 1,256 3,245 2,485 1,193 1,295 1,195
Commercial loans.......................................... 115 331 790 739 51 243
Other loans............................................... 87 209 358 62 -- --
------ --------- --------- --------- --------- ---------
Total non-accrual loans................................. 1,458 3,785 3,633 1,994 1,346 1,438
Accruing loans past due 90 days or more:
Residential mortgages..................................... -- 2 1 -- 747 1,141
Commercial mortgages...................................... -- -- -- -- 310 1,132
------ --------- --------- --------- --------- ---------
Total real estate loans................................. -- 2 1 -- 1,057 2,273
Commercial loans.......................................... -- -- -- -- 13 67
Other loans............................................... 10 7 33 -- 47 108
------ --------- --------- --------- --------- ---------
Total loans past due 90 days or more and still
accruing.............................................. 10 9 34 -- 1,117 2,448
------ --------- --------- --------- --------- ---------
Total non-performing loans.................................. 1,468 3,794 3,667 1,994 2,463 3,886
Real estate owned........................................... 760 964 563 374 572 75
------ --------- --------- --------- --------- ---------
Total non-performing assets................................. $ 2,228 $ 4,758 $ 4,230 $ 2,368 $ 3,035 $ 3,961
------ --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- ---------
Non-performing loans as a percent of total loans............ 0.94% 2.37% 2.28% 1.24% 1.60% 2.69%
Non-performing assets as a percent of total assets.......... 0.96% 2.04% 1.78% 1.00% 1.32% 1.69%
</TABLE>
- ------------------------
(1) Non-accrual loans at December 31, 1997 include $2.3 million of non-accrual
loans held for sale.
It is the Bank's policy to discontinue accruing interest on a loan when its
fourth monthly payment is due and unpaid, unless the Bank determines that the
nature of the delinquency and the collateral are such that collection of the
principal and interest on the loan in full is reasonably assured. When the
accrual of interest is discontinued, all accrued but unpaid interest is charged
against current period income. For mortgage loans, once the accrual of interest
is discontinued, the Bank records interest as and when received until the loan
is restored to accruing status. For non-mortgage loans designated as
non-accrual, amounts received are recorded as a reduction of principal until the
loan is returned to accruing status. Commercial mortgage and commercial loans
are not restored to accruing status until timely payments are made for at least
six months while residential mortgage or consumer loans are returned to accruing
status when sufficient payments are made so that they no longer meet the
standard for being initially designated as non-accrual.
The amount of additional interest income that would have been recorded on
non-accrual loans had those loans been performing in accordance with their terms
was $37,000 for the three months ended March 31, 1998, $402,000 for 1997,
$307,000 for 1996 and $107,000 for 1995.
CLASSIFIED ASSETS. FDIC regulations require that the Bank classify its
assets on a regular basis and establish prudent valuation allowances based on
such classifications. In addition, in connection with examinations, FDIC and
Banking Department examiners have the authority to identify problem assets and,
if appropriate, require that they be classified. There are three adverse
classifications for problem assets: Substandard, Doubtful and Loss. Substandard
assets have one or more defined weaknesses and are
80
<PAGE>
characterized by the distinct possibility that the Bank will sustain some loss
if the deficiencies are not corrected. Doubtful assets have the weaknesses of
Substandard assets, with the additional characteristics that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high probability of loss. An
asset classified Loss is considered uncollectable and of such little value that
its continuance as an asset of the Bank is not warranted.
Assets classified as Substandard or Doubtful require the Bank to establish
prudent valuation allowances. If an asset or portion thereof is classified as
Loss, the Bank must either establish a specific allowance for loss equal to 100%
of the portion of the asset classified as Loss or charge off such amount. If the
Bank does not agree with an examiner's classification of an asset, it may appeal
this determination. On the basis of management's review of its loans at March
31, 1998, the Bank had $2.1 million of assets classified as Substandard, $49,000
classified as Doubtful, and none classified as Loss. All classified loans are
non-performing and shown in the above table of non-performing loans.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the
risks inherent in the Bank's loan portfolio and the general economy. The
allowance for loan losses is maintained at an amount management considers
adequate to cover loan losses which are deemed probable and can be estimated.
The allowance is based upon a number of factors, including asset
classifications, economic trends, industry experience and trends, industry and
geographic concentrations, estimated collateral values, management's assessment
of the credit risk inherent in the portfolio, historical loan loss experience
and the Bank's underwriting policies. The Bank evaluates, on a monthly basis,
all loans identified as problem loans, including all non-accrual loans and other
loans where management has reason to doubt collection in full in accordance with
original payment terms. The Bank considers whether the allowance should be
adjusted to protect against risks associated with such loans. In addition, the
Bank applies fixed percentages for each category of performing loans not
designated as problem loans to determine an additional component of the
allowance to protect against unascertainable risks inherent in any portfolio of
performing loans. Finally, the Bank includes an unallocated component in its
allowance to address general factors and general uncertainties such as changes
in economic conditions and the inherent inaccuracy of any attempt to predict
future default rates and property values based upon past experience.
The analysis of the adequacy of the allowance is reported to and reviewed by
the Loan Committee of the Board of Directors monthly. Management believes it
uses a reasonable and prudent methodology to project potential future losses in
the loan portfolio, and hence assess the adequacy of the allowance for loan
losses. However, any such assessment is speculative and future adjustments may
be necessary if economic conditions or the Bank's actual experience differ
substantially from the assumptions upon which the evaluation of the allowance
was based. Furthermore, state and federal regulators, in reviewing the Bank's
loan portfolio as part of a future regulatory examination, may request the Bank
to increase its allowance for loan losses, thereby negatively affecting the
Bank's financial condition and earnings at that time. Moreover, future additions
to the allowance may be necessary based on changes in economic and real estate
market conditions, new information regarding existing loans, identification of
additional problem loans and other factors, both within and outside of
management's control.
81
<PAGE>
The following table summarizes the activity in the Bank's allowance for loan
losses during the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning
of period............................................ $ 2,143 $ 1,952 $ 2,002 $ 1,752 $ 1,620 $ 1,223
Provision for loan losses.............................. 75 3,300 1,380 600 300 550
--------- --------- --------- --------- --------- ---------
Charge-offs:
Real estate.......................................... -- 2,484 264 478 110 25
Commercial........................................... 23 395 898 31 21 48
Other................................................ 16 400 551 96 137 205
--------- --------- --------- --------- --------- ---------
Total charge-offs.................................. 39 3,279 1,713 605 268 278
Recoveries:
Real estate.......................................... 23 9 24 161 -- --
Commercial........................................... 9 61 190 -- -- --
Other................................................ 19 100 69 94 100 125
--------- --------- --------- --------- --------- ---------
Total recoveries................................... 51 170 283 255 100 125
Net charge-offs (recoveries)........................... (12) 3,109 1,430 350 168 153
--------- --------- --------- --------- --------- ---------
Allowance for loan losses, end
of period............................................ $ 2,230 $ 2,143 $ 1,952 $ 2,002 $ 1,752 $ 1,620
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Allowance for loan losses as a
percent of total loans............................... 1.43% 1.34% 1.22% 1.25% 1.14% 1.12%
Allowance for loan losses as a
percent of non-performing loans...................... 151.91% 56.48% 53.23% 100.40% 71.13% 41.69%
Ratio of net charge-offs(recoveries)
to average loans outstanding......................... (0.01%) 1.97% 0.90% 0.22% 0.12% 0.13%
</TABLE>
82
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. The allocation of the allowance
to each category is not necessarily indicative of future losses and does not
restrict the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------
AT MARCH 31, 1998 1997 1996
-------------------- ---------------------- ----------------------
PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
--------- --------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES ALLOCATED TO:
Residential mortgages............................... $ 844 66.12% $ 661 65.61% $ 389 63.72%
Commercial mortgages................................ 650 19.51 638 19.56 818 21.83
Commercial loans.................................... 137 4.17 183 4.47 478 4.98
Other loans......................................... 218 10.20 192 10.36 267 9.47
Unallocated......................................... 381 N/A 469 N/A -- --
--------- --------- --------- ----------- --------- -----------
Total allowance................................... $ 2,230 100.00% $ 2,143 100.00% $ 1,952 100.00%
--------- --------- --------- ----------- --------- -----------
--------- --------- --------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ----------------------
PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
--------- ----------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES ALLOCATED TO:
Residential mortgages.............................. $ 112 63.61% $ 746 65.39% $ 324 66.20%
Commercial mortgages............................... 753 21.86 341 21.19 205 20.75
Commercial loans................................... 961 5.61 331 4.75 329 4.75
Other loans........................................ 176 8.92 334 8.67 762 8.30
Unallocated........................................ -- N/A -- -- -- --
--------- ----------- --------- ----------- --------- -----------
Total allowance.................................. $ 2,230 100.00% $ 1,752 100.00% $ 1,620 100.00%
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
</TABLE>
ENVIRONMENTAL ISSUES
The Bank encounters certain environmental risks in its lending activities.
Under federal and state environmental laws, lenders may become liable for costs
of cleaning up hazardous materials found on property securing their loans. In
addition, the presence of hazardous materials may have a substantial adverse
effect on the value of such property as collateral and may cause economic
difficulties for the borrower, causing the loan to go into default. Although
environmental risks are usually associated with loans secured by commercial real
estate, risks also may exist for loans secured by residential real estate if,
for example, there is nearby commercial contamination or if the residence was
constructed on property formerly used for commercial purposes. The Bank attempts
to control its risk by requiring a phase one environmental assessment by a
Bank-approved engineer as part of its underwriting review for all mortgage loans
other than those secured by one- to four-family residences. Prior to completing
a foreclosure or acquiring title to property instead of foreclosure, the Bank
undertakes an environmental review, the nature of which depends on the nature of
the mortgaged property.
The Bank believes its procedures regarding the assessment of environmental
risk are adequate and, as of March 31, 1998, the Bank was unaware of any
environmental issues with respect to any of its mortgage
83
<PAGE>
loans which would subject it to any material liability at this time. Hidden or
future environmental contamination could adversely affect the values of
properties securing loans in the Bank's portfolio.
INVESTMENT ACTIVITIES
GENERAL. The investment policy of the Bank, which is approved by the Board
of Directors, is based upon its asset/liability management goals and is designed
primarily to provide satisfactory yields while maintaining adequate liquidity, a
balance of high quality, diversified investments, and minimal risk. The
investment policy is implemented by the President and the Chief Financial
Officer. The Bank is assisted in its investment decisions by an independent
nationally-recognized investment advisory firm. All securities purchases and
sales must be approved by at least two executive officers and the purchases are
reported to the Board of Directors each month.
As required by SFAS 115, securities are classified into three categories:
trading, held-to-maturity and available-for-sale. Securities that are bought and
held principally for the purpose of selling them in the near term are classified
as trading securities and are reported at fair value with unrealized gains and
losses included in trading account activities in the statement of income.
Securities that the Bank has the positive intent and ability to hold to maturity
are classified as held-to-maturity and reported at amortized cost. All other
securities are classified as available-for-sale. Available-for-sale securities
are reported at fair value with unrealized gains and losses included, on an
after-tax basis, as a separate component of net worth. The Bank does not have a
trading securities portfolio and has no current plans to maintain such a
portfolio in the future. At March 31, 1998, the Bank's securities portfolio
included securities with a fair value of $45.5 million which were classified as
available-for-sale and securities with amortized cost of $12.5 million which
were classified as held-to-maturity. The Bank classifies each security between
the available-for-sale and held-to-maturity categories when the security is
purchased. The Bank seeks to maintain a target ratio of approximately 80% of its
portfolio as available-for-sale and approximately 20% as held-to-maturity.
Accounting rules allowed institutions to transfer securities from
held-to-maturity to available-for-sale at the end of 1995 without any adverse
consequences. In December 1995, the Bank transferred securities held-to-maturity
with a fair value of approximately $31.2 million to the available-for-sale
classification.
INVESTMENT DEBT SECURITIES. The Bank's investment debt securities totaled
$35.8 million at March 31, 1998. It is the policy of the Bank to invest in debt
securities issued by the United States Government, its agencies, municipalities
and corporations. The Bank purchases only investment grade debt securities for
its investment portfolio and at March 31, 1998, none of its investment debt
securities were in default or otherwise classified. The Bank seeks to balance
its investment debt securities purchases between higher yielding U.S. government
and related securities which are virtually risk-free but which have lower yields
and corporate debt securities which offer higher yields. Corporate debt
securities present greater risks than U.S. Government securities because of the
increased possibility that the corporate obligor, compared to the U.S.
Government, will default. To control risks, the Bank limits its investment in
corporate debt securities to those rated in the three highest grades by a
nationally recognized rating organization.
Debt securities are generally purchased with a remaining term to maturity of
two to three years. However, recently, the Bank has begun to purchase certain
callable debt securities with terms up to five to seven years in order to
increase yields. At March 31, 1998, more than 97% of the carrying value of the
Bank's investment debt securities had remaining terms to maturity of five years
or less.
EQUITY SECURITIES. The Bank invests a limited amount of its assets in
corporate equity securities. Under New York law, a savings bank is permitted to
invest in corporate equity securities provided certain conditions are met,
including requirements that the security must be listed on a national securities
exchange and must have paid dividends at least quarterly for ten consecutive
years. These investments are made to diversify the Bank's investments and
provide opportunities for capital appreciation as well as dividend income. All
equity securities are classified as available-for-sale. The Bank does not
regularly trade such securities and does not purchase them for the purpose of
near term sale. Equity securities had a fair
84
<PAGE>
value of $2.4 million at March 31, 1998. The Bank intends to invest
approximately an additional $50,000 per month in equity securities.
FEDERAL HOME LOAN BANK STOCK. At March 31, 1998, the Bank held $1.3 million
in stock of the FHLBNY, which was necessary to be a member of the FHLBNY.
Membership requires the purchase of stock equal to 1% of the Bank's residential
mortgage loans. If the Bank borrows from the FHLBNY, the Bank must own stock at
least equal to 5% of its borrowings. The yield on this stock was 7.4%
(annualized) for the three months ended March 31, 1998.
MORTGAGE-BACKED SECURITIES. The Bank invests in mortgage-backed securities
to supplement the yields on its loan portfolio. At March 31, 1998, the Bank's
mortgage-backed securities portfolio included $12.0 million in fair value
classified as available-for-sale and $7.8 million in amortized cost classified
as held-to-maturity. At March 31, 1998, more than 95% of the Bank's
mortgage-backed securities were issued or guaranteed by Fannie Mae, Freddie Mac
or Ginnie Mae. The Bank's mortgage-backed securities portfolio had a weighted
average yield of 6.49% at March 31, 1998.
Mortgage-backed securities generally have higher yields than other debt
securities because of the longer terms and the uncertainties associated with the
timing of mortgage repayments. In addition, mortgage-backed securities are more
liquid than individual mortgage loans and may be used to collateralize
borrowings of the Bank. However, these securities generally yield less than the
loans that underlie them because of the cost of payment guarantees or credit
enhancements that reduce credit risk. Mortgage-backed securities of the type
held by the Bank are generally weighted at 20%, rather than the 50% weighting
for performing residential one- to four-family mortgage loans, in determining
risk-based capital ratios.
While investment and mortgage-backed securities carry a reduced credit risk
as compared to loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect both the prepayment speed,
and value, of such securities. See "Risk Factors--Interest Rate Risk."
The following table sets forth certain information regarding the amortized
cost and fair value of the Bank's available-for-sale and held-to-maturity
securities portfolios at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
1998 1997 1996 1995
---------------------- ---------------------- ---------------------- -----------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED
COST VALUE COST VALUE COST VALUE COST
----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
SECURITIES AVAILABLE-FOR-SALE:
U.S. Treasury securities................. $ 12,048 $ 12,137 $ 15,045 $ 15,141 $ 14,497 $ 14,550 $ 3,053
U.S. Government agencies................. 4,495 4,485 996 1,005 4,988 4,993 5,502
Corporate debt obligations............... 14,485 14,512 13,819 13,861 13,233 13,252 24,545
Mortgage-backed securities............... 11,886 11,981 12,144 12,211 11,833 11,722 7,764
----------- --------- ----------- --------- ----------- --------- -----------
Total debt securities.................. 42,914 43,115 42,004 42,218 44,551 44,517 40,864
Equity securities........................ 1,340 2,360 1,192 1,922 628 1,077 418
----------- --------- ----------- --------- ----------- --------- -----------
Total Available-for-sale............... 44,254 45,475 43,196 44,140 45,179 45,594 41,282
----------- --------- ----------- --------- ----------- --------- -----------
SECURITIES HELD-TO-MATURITY:
U.S. Government agencies................. 2,001 1,997 1,992 1,995 -- -- --
Corporate debt obligations............... 2,359 2,376 1,854 1,870 -- -- --
State and municipal sub-divisions........ 284 288 425 430 858 867 1,472
Mortgage-backed securities............... 7,835 7,828 8,279 8,274 10,899 10,766 9,716
----------- --------- ----------- --------- ----------- --------- -----------
Total held-to-maturity................. 12,479 12,489 12,550 12,569 11,757 11,633 11,188
----------- --------- ----------- --------- ----------- --------- -----------
TOTAL SECURITIES....................... $ 56,733 $ 57,964 $ 55,746 $ 56,709 $ 56,936 $ 57,227 $ 52,470
----------- --------- ----------- --------- ----------- --------- -----------
----------- --------- ----------- --------- ----------- --------- -----------
<CAPTION>
FAIR
VALUE
---------
<S> <C>
SECURITIES AVAILABLE-FOR-SALE:
U.S. Treasury securities................. $ 3,068
U.S. Government agencies................. 5,542
Corporate debt obligations............... 24,679
Mortgage-backed securities............... 7,752
---------
Total debt securities.................. 41,041
Equity securities........................ 736
---------
Total Available-for-sale............... 41,777
---------
SECURITIES HELD-TO-MATURITY:
U.S. Government agencies................. --
Corporate debt obligations............... --
State and municipal sub-divisions........ 1,501
Mortgage-backed securities............... 9,794
---------
Total held-to-maturity................. 11,295
---------
TOTAL SECURITIES....................... $ 53,072
---------
---------
</TABLE>
85
<PAGE>
The table below sets forth certain information regarding the carrying value,
weighted average yields and stated maturity of the Bank's securities at March
31, 1998. There were no securities (exclusive of obligations of the U.S.
Government and any federal agencies) issued by any one entity with a total
carrying value in excess of 10% of the Bank's equity at that date.
<TABLE>
<CAPTION>
ONE TO FIVE YEARS MORE THAN TEN YEARS
ONE YEAR OR LESS FIVE TO TEN YEARS
------------------------ ------------------------ ------------------------ ------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities............ $ 5,501 6.10% $ 6,636 6.31% $ -- -- % $ -- -- %
U.S. Government
agencies.............. 500 6.53 4,996 6.21 990 6.06 -- --
Corporate debt
obligations........... 1,751 6.33 15,120 6.20 -- -- -- --
State and municipal..... -- -- 284 4.65 -- -- -- --
Mortgage-backed
securities............ -- -- 4,948 6.46 1,194 7.50 13,674 6.41%
----------- --- ----------- --- ----------- --- ----------- ---
Total................. $ 7,752 6.18% $ 31,984 6.25% $ 2,184 6.85% $ 13,674 6.41%
----------- --- ----------- --- ----------- --- ----------- ---
----------- --- ----------- --- ----------- --- ----------- ---
<CAPTION>
TOTAL DEBT SECURITIES
-----------------------------------
CARRYING AVERAGE MARKET
VALUE YIELD VALUE
----------- ----------- ---------
<S> <C> <C> <C>
U.S. Treasury
securities............ $ 12,137 6.21% $ 12,137
U.S. Government
agencies.............. 6,486 6.21 6,482
Corporate debt
obligations........... 16,871 6.21 16,888
State and municipal..... 284 4.65 288
Mortgage-backed
securities............ 19,816 6.49 19,809
----------- ----- ---------
Total................. $ 55,594 6.30% $ 55,604
----------- ----- ---------
----------- ----- ---------
</TABLE>
SOURCES OF FUNDS
GENERAL. The Bank's primary source of funds is deposits. In addition, the
Bank derives funds for loans and investments from loan and security repayments
and prepayments and revenues from operations. Scheduled payments on loans and
mortgage-backed and investment securities are a relatively stable source of
funds, while savings inflows and outflows and loan and mortgage-backed and
investment securities prepayments are significantly influenced by general
interest rates and money market conditions.
DEPOSITS. The Bank offers several types of deposit programs to its
customers, including passbook and statement savings accounts, NOW accounts,
money market deposit accounts, checking accounts and savings certificates.
Deposit account terms vary according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. The Bank's deposits are obtained predominantly from its Cortland County
market area. The Bank relies primarily on customer service and long-standing
relationships with customers to attract and retain these savings deposits;
however, market interest rates and rates offered by competing financial
institutions significantly affect the Bank's ability to attract and retain
savings deposits. The Bank does not use brokers to obtain deposits and has no
brokered deposits. At March 31, 1998, the Bank had $198.2 million of deposits.
The Bank prices its deposit offerings based upon market and competitive
conditions in its market area. Pricing determinations are made weekly by a
committee of senior officers. The Bank seeks to price its deposit offerings to
be competitive with other institutions in its market area. Due to declining
market interest rates, savings certificates with rates of 6.00% or more totaled
$7.6 million, or 3.8%, of total deposits at March 31, 1998 compared to $44.6
million, or 22.0%, at December 31, 1995.
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<PAGE>
The following table sets forth the distribution of the Bank's deposit
accounts at the dates indicated. Interest rates shown for non-time accounts are
the rates in effect at March 31, 1998.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
1997 1996 1995
---------------------- ---------------------- ---------------------- ---------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT
--------- ----------- --------- ----------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NON-TIME ACCOUNTS:
Passbook, statement savings and club accounts
(2.75-3.0%)................................. $ 63,658 32.11% $ 62,769 31.42% $ 63,003 30.79% $ 62,138
NOW accounts (1.76%).......................... 9,280 4.69% 9,704 4.86% 10,089 4.93% 9,638
Demand accounts............................... 9,128 4.60% 10,604 5.31% 9,563 4.67% 8,158
Money market accounts (2.76%)................. 8,314 4.19% 8,435 4.22% 9,343 4.57% 10,054
--------- ----- --------- ----- --------- ----- ---------
Total non-time accounts..................... $ 90,380 45.59% $ 91,512 45.81% $ 91,998 44.96% $ 89,988
--------- ----- --------- ----- --------- ----- ---------
--------- ----- --------- ----- --------- ----- ---------
TIME ACCOUNTS:
3.00--3.99%................................... $ 370 0.19% $ 164 0.08% $ 381 0.19% $ 923
4.00--4.99%................................... 7,004 3.53% 8,066 4.04% 20,750 10.14% 8,518
5.00--5.99%................................... 92,917 46.87% 90,507 45.30% 70,609 34.50% 59,073
6.00--6.99%................................... 7,155 3.62% 9,120 4.57% 20,375 9.96% 37,399
7.00--7.99%................................... 406 0.20% 399 0.20% 525 0.25% 7,207
8.00--8.99%................................... 2 -- % 2 -- % 2 -- % 2
--------- ----- --------- ----- --------- ----- ---------
Total time accounts......................... $ 107,854 54.41% $ 108,258 54.19% $ 112,642 55.04% $ 113,122
--------- ----- --------- ----- --------- ----- ---------
--------- ----- --------- ----- --------- ----- ---------
<CAPTION>
PERCENT
OF TOTAL
-----------
<S> <C>
NON-TIME ACCOUNTS:
Passbook, statement savings and club accounts
(2.75-3.0%)................................. 30.59%
NOW accounts (1.76%).......................... 4.75%
Demand accounts............................... 4.02%
Money market accounts (2.76%)................. 4.95%
-----
Total non-time accounts..................... 44.31%
-----
-----
TIME ACCOUNTS:
3.00--3.99%................................... 0.45%
4.00--4.99%................................... 4.20%
5.00--5.99%................................... 29.08%
6.00--6.99%................................... 18.41%
7.00--7.99%................................... 3.55%
8.00--8.99%................................... -- %
-----
Total time accounts......................... 55.69%
-----
-----
</TABLE>
The following table sets forth the deposit flows at the Bank during the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------
MARCH 31, 1998 1997 1996 1995
------------------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net withdrawals............................................. $ (3,557) $ (13,191) $ (7,231) $ (5,737)
Interest credited........................................... 2,021 8,321 8,761 8,588
------- ---------- --------- ---------
Net increase (decrease) in deposits......................... $ (1,536) $ (4,870) $ 1,530 $ 2,851
------- ---------- --------- ---------
------- ---------- --------- ---------
</TABLE>
The following table sets forth the amount of savings certificates
outstanding and the remaining period to maturity of such deposits at March 31,
1998.
<TABLE>
<CAPTION>
AMOUNT DUE DURING THE
TWELVE MONTHS ENDED MARCH 31, DUE AFTER
------------------------------- MARCH 31,
INTEREST RATE 1999 2000 2001 2001 TOTAL
- --------------------------------------------------------- --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
3.00 - 3.99%............................................. $ 370 $ -- $ -- $ -- $ 370
4.00 - 4.99%............................................. 7,004 -- -- -- 7,004
5.00 - 5.99%............................................. 54,754 13,827 13,200 11,136 92,917
6.00 - 6.99%............................................. 1,882 3,608 1,281 384 7,155
7.00 - 7.99%............................................. -- 406 -- -- 406
8.00 - 8.99%............................................. -- 2 -- -- 2
--------- --------- --------- ----------- ----------
Total.................................................... $ 64,010 $ 17,843 $ 14,481 $ 11,520 $ 107,854
--------- --------- --------- ----------- ----------
--------- --------- --------- ----------- ----------
</TABLE>
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<PAGE>
At March 31, 1998, the Bank had $13.7 million in savings certificates with
balances of $100,000 or more ("jumbo deposits"), representing 6.93% of all
deposits. The following table sets forth information regarding those deposits,
all of which had $100,000 minimum balance requirements. The interest rates shown
are rates offered on March 31, 1998 for deposits of the stated maturity with
balances of at least $100,000 and do not represent the rates payable on the
deposits outstanding. Rates offered for jumbo deposits in Individual Retirement
Accounts at certain maturities were slightly higher
<TABLE>
<CAPTION>
INTEREST PERCENTAGE OF PERCENTAGE OF
ORIGINAL TERM RATE BALANCE TOTAL DEPOSITS TOTAL JUMBO DEPOSITS
- ---------------------------------------------------- ---------- --------- ----------------- ---------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
1-3 Months.......................................... 3.94% $ 2,434 1.23 % 17.71 %
4-6 Months.......................................... 4.74% 2,492 1.26 % 18.14 %
7-12 Months......................................... 5.12% 2,900 1.46 % 21.10 %
Over Twelve Months.................................. 5.16-5.83 % 5,917 2.98 % 43.05 %
--------- --- ------
Totals.............................................. $ 13,743 6.93 % 100.00 %
--------- --- ------
--------- --- ------
</TABLE>
BORROWINGS. The Bank maintains an available line of credit with the Federal
Home Loan Bank of New York for use in the event of unanticipated funding needs
which cannot be satisfied from other sources. The Bank has not borrowed funds in
recent years except for a brief period after the closure of Nationar, the Bank's
correspondent bank, when demand deposits that the Bank maintained at Nationar
were temporarily frozen. After the Conversion, the Company or the Bank may used
borrowed funds to assist in the process of leveraging the capital raised in the
Conversion. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital."
SUBSIDIARY ACTIVITIES
The Bank is permitted under New York and federal law to own subsidiaries for
certain limited purposes, generally to engage in activities which are
permissible for a subsidiary of a national bank. The Bank has one subsidiary,
which was incorporated in New York in 1986 but which has been inactive for many
years and does not engage in any business at this time.
PROPERTIES
The Bank conducts its business through its headquarters in the City of
Cortland, a nearby drive-up facility, and two branches in adjacent communities
in Cortland County. The Bank also has a representative office in Ithaca for the
origination of mortgage loans. The Bank believes that these properties are
adequate for current needs. The following table sets forth certain information
regarding the Bank's deposit-taking offices at March 31, 1998.
<TABLE>
<CAPTION>
DATE OWNED/ NET BOOK
LOCATION ACQUIRED LEASED VALUE
- ----------------------------------------------------------------------------- --------- --------- ---------------
<S> <C> <C> <C>
(IN THOUSANDS)
One North Main Street, Cortland, NY 13045
and nearby drive through facility at 29-31 North Main Street............... Various Owned $ 887
12 South Main Street, Homer, NY 13077........................................ Various Owned 983
860 Route 13, Cortlandville, NY 13045........................................ Various Owned 497
200 East Buffalo Street, Ithaca, NY 14850.................................... 1998 Leased None
</TABLE>
PERSONNEL
At March 31, 1998, the Bank employed 95 full-time equivalent employees. The
employees are not represented by a collective bargaining unit, and the Bank
considers its relationship with its employees to be
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<PAGE>
good. See "Management of the Bank--Benefits" for a description of certain
compensation and benefit programs offered to the Bank's employees.
LEGAL PROCEEDINGS
In the ordinary course of its operations, the Bank is a party to routine
litigation involving claims incidental to the savings bank business. Management
believes that no current litigation, threatened or pending, to which the Bank or
its assets is or may become a party, poses a substantial likelihood of potential
loss or exposure which would have a material adverse effect on the financial
condition or results of operations of the Bank or the Company.
REGULATION
Set forth below is a brief summary of certain laws which relate to the
regulation and supervision of the Bank.
GENERAL
The Bank is subject to extensive regulation, examination, and supervision by
the Banking Department and the FDIC. The Bank's deposit accounts are insured up
to applicable limits by the Bank Insurance Fund of the FDIC. The Bank must file
reports with the Banking Department and the FDIC concerning its activities and
financial condition, and it must get regulatory approvals before entering into
certain transactions, such as mergers with other banks. The Banking Department
and the FDIC conduct periodic examinations of the Bank to determine whether the
Bank is complying with regulatory requirements. The Company, as a bank holding
company, will be regulated by the Federal Reserve. The Company will be required
to file reports with the Federal Reserve and the SEC under the federal
securities laws.
The laws and regulations which govern the Bank and the Company are under
regular review and revision. It is not possible to predict what changes may
occur in the future, nor is it possible to predict what effects any changes may
have on the Bank or the Company. A change by the Banking Department, the FDIC,
the Federal Reserve, Congress or the New York State legislature could have a
material adverse impact on the Company, the Bank and the operations of both.
The following discussion is intended to be a summary of the material
statutes and regulations applicable to savings banks and their holding
companies, and is not a comprehensive description of all statutes and
regulations which govern the Bank and the Company.
BANKING REGULATION
BUSINESS ACTIVITIES. The Bank derives its lending, investment and other
authority primarily from the Banking Law and the regulations of the
Superintendent and the New York State Banking Board, as limited by FDIC
regulations and other federal laws and regulations. The Bank may make
investments and engage in activities only as permitted under specific laws and
regulations which grant powers to the Bank. The Bank may 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 government agencies, certain types of corporate equity securities and
certain other assets. The Bank may 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 Bank's
assets, except as set forth below. In order to qualify for investment by the
Bank, the equity securities must meet certain tests of financial performance.
The Bank may also make investments not otherwise permitted under the Banking
Law. This authority permits investments in otherwise impermissible investments
of up to 1% of the 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, instead of investing in securities as specifically
permitted in the Banking Law, the Bank may elect to invest
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<PAGE>
under a prudent person standard in a wider range of debt and equity securities.
The Bank has not exercised the right to invest under this prudent person
standard. If the Bank elects to utilize the "prudent person" standard, it will
be unable to use the other provisions of the Banking Law and regulations which
permit specific investments. New York State chartered savings banks may also
exercise trust powers upon approval of the Banking Department. The Bank has not
sought such approval.
The Bank may invest in service corporation subsidiaries that engage in
activities in which savings banks may engage directly, plus any additional
activities which may be authorized by the Banking Department. Investment in the
stock, capital notes and debentures of all 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 Bank's assets. The Bank does
not have any operating service corporation subsidiaries.
The exercise of these state-authorized powers is limited by FDIC regulations
and other federal laws and regulations. In particular, FDIC regulations limit
the investment activities of state-chartered FDIC-insured savings banks such as
the Bank.
Under FDIC regulations, the Bank generally may not directly or indirectly
acquire or retain any equity investment that is not permissible for a national
bank. In addition, the 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 applicable FDIC insurance fund and the Bank is in compliance with applicable
regulatory capital requirements.
Savings bank life insurance activities are permitted if (i) the FDIC does
not decide that such activities pose a significant risk to the applicable
insurance fund, (ii) the insurance underwriting is conducted through a division
of the Bank that meets the definition of a separate department under FDIC
regulations and (iii) the Bank discloses to purchasers of life insurance
policies and other products that they are not insured by the FDIC, among other
things.
Also excluded from the prohibition on making investments not permitted for
national banks are certain investments in common and preferred stock listed on a
national securities exchange and in shares of an investment company registered
under the Investment Company Act of 1940, as amended. The Bank's total
investment in such securities may not exceed 100% of the Tier I capital as
calculated under FDIC regulations. The Bank qualifies for this exclusion and has
used its authority to invest in corporate equity securities, which had a fair
value of $2.4 million at March 31, 1998, or 7.8% of Tier I capital and 1.0% of
total assets. The authority to continue these investments may terminate if the
FDIC determines that the investments pose a safety and soundness risk to the
Bank or if the Bank converts its charter (other than a mutual to stock
conversion) or undergoes a change in control.
LOANS TO ONE BORROWER. The Bank, as a New York State chartered savings
bank, may make mortgage loans to any borrower or group of borrowers without
regard to mandatory maximum loan amount limits based upon capital or any other
measure imposed by law, except for general concepts of prudence and safety and
soundness. However, with certain exceptions, the Bank may not make non-mortgage
loans for commercial, corporate or business purposes (including lease financing)
to a single borrower, in an aggregate amount in excess of 15% of the Bank's net
worth, plus an additional 10% of the Bank's net worth if such amount is secured
by certain types of readily marketable collateral. Similar limits apply to most
other types of non-mortgage loans. The Bank currently complies with these
limits.
CAPITAL REQUIREMENTS. The FDIC regulates the capital adequacy of the Bank.
The FDIC's regulations divide capital into two tiers. The first tier ("Tier I")
includes common equity, retained earnings, certain non-cumulative perpetual
preferred stock (excluding auction rate issues) and minority interests in equity
accounts of consolidated subsidiaries, minus goodwill and other intangible
assets (except mortgage servicing rights and purchased credit card relationships
subject to certain limitations). Supplementary ("Tier II") capital includes,
among other items, cumulative perpetual and long-term limited-life preferred
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<PAGE>
stock, mandatory convertible securities, certain hybrid capital instruments,
term subordinated debt and the allowance for loan and lease losses, subject to
certain limitations, less required deductions.
The FDIC requires that the highest rated banks maintain a Tier I leverage
ratio (Tier I capital to adjusted total assets) of at least 3.0%. All other
banks subject to FDIC capital requirements must maintain a Tier I leverage
ration of 4.0% to 5.0% or more. As of March 31, 1998, the Bank's Tier I leverage
capital ratio was 13.26%.
The Bank must also meet a risk-based capital standard. The risk-based
standard requires the Bank to maintain total capital (defined as Tier I and Tier
II capital) to risk-weighted assets of at least 8% of which at least 4% must be
Tier I capital. 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. As
of March 31, 1998, the Bank maintained a 21.94% Tier I risk-based capital ratio
and a 23.19% total risk-based capital ratio.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. Under the Banking Law, a stock form
savings bank may pay dividends out of its net profits, unless there is an
impairment of capital. A savings bank may not declare dividends in any year
which exceed the total net profits of that year combined with the bank's
retained net profits of the preceding two years, subject to certain adjustments,
without the Superintendent's approval. After the Conversion, the Bank may not
declare a dividend which would cause it to fail to meet its capital requirements
and may not declare a dividend that would cause its capital to decline below the
liquidation account created in the Conversion.
The FDIC may prohibit a savings bank from paying dividends if, in its
opinion, the payment of dividends would constitute an unsafe or unsound
practice.
BRANCHING. The Bank may establish branches within or outside New York State
upon written approval of the Superintendent. In general, the Bank must comply
with the laws and regulations of a host state before being permitted to
establish a branch in another state. As of June 1, 1997, the Interstate Banking
Act permits federal banking agencies to approve merger transactions between
banks located in different states, regardless of whether the merger would be
prohibited under state law. The Bank has no present plans to open branches
outside the state, but the ease of interstate branching has the effect of
increasing the number of potential competitors of the Bank.
COMMUNITY REINVESTMENT. Under the Community Reinvestment Act, the Bank
must, consistent with its safe and sound operation, help meet the credit needs
of its entire community, including low and moderate income neighborhoods. There
are no specific lending requirements or programs nor does the law limit the
Bank's discretion to develop products and services that it believes are best
suited to its particular community. The FDIC periodically assesses the Bank's
record of meeting the credit needs of its community and must take such record
into account in its evaluation of certain applications made by the Bank.
FDIC regulations provide that the Bank's performance under the Community
Reinvestment Act is evaluated based on its actual performance in meeting
community needs. In particular, the rating system focuses on three tests: (a) a
lending test, to evaluate the Bank's record of making loans in its assessment
areas; (b) an investment test, to evaluate the Bank's record of investing in
community development projects, affordable housing, and programs benefiting low
or moderate income individuals and businesses; and (c) a service test, to
evaluate the Bank's delivery of banking services. The Bank received a
satisfactory rating from the FDIC at its last examination under the Community
Reinvestment Act.
The Banking Law imposes similar community reinvestment obligations on the
Bank. The Banking Department makes an annual written assessment of the Bank's
compliance. The Banking Department considers the Bank's state community
reinvestment rating when reviewing an application to engage in certain
transactions, including mergers, asset purchases and the establishment of branch
offices or
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<PAGE>
automated teller machines. The Bank received a satisfactory rating from the
Banking Department at its last state community reinvestment examination.
TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with its "affiliates" is limited by Sections 23A and 23B of the
Federal Reserve Act. In general, an affiliate of the Bank is any company that
controls the Bank or any other company that is controlled by a company that
controls the Bank, excluding the Bank's subsidiaries other than any that are
insured depository institutions. Section 23A limits the aggregate amount of
transactions with any individual affiliate to 10% of the capital and surplus of
the Bank and also limits the aggregate amount of transactions with all
affiliates to 20% of the Bank's capital and surplus. Extensions of credit to
affiliates must be secured by certain specified collateral, and the purchase of
low quality assets from affiliates is generally prohibited. Section 23B provides
that certain transactions with affiliates, including loans and asset purchases,
must be on terms and under circumstances, including credit standards, that are
at least as favorable to the Bank as those prevailing at the time for comparable
transactions with non-affiliated companies. In the absence of comparable
transactions, such transactions may only occur under terms and circumstances,
including credit standards, that in good faith would be offered to or would
apply to non-affiliated companies.
The Bank's authority to extend credit to its directors, executive officers,
and 10% stockholders, as well as to entities controlled by such persons, is
currently governed by the requirements of Sections 22(g) and 22(h) of the
Federal Reserve Act and Regulation O of the Federal Reserve. Among other things,
these provisions require that extensions of credit to insiders (a) be made on
terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features and (b) not
exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the Bank's capital. In addition, extensions of credit in excess of
certain limits must be approved by the Bank's Board of Directors. However,
recent legislation permits the Bank to make loans to executive officers,
directors and principal stockholders on preferential terms, provided the
extension of credit is made pursuant to a benefit or compensation program of the
Bank that is widely available to employees of the Bank or its affiliates and
does not give preference to any insider over other employees of the Bank or
affiliate. The Bank has no such benefit or compensation programs.
ENFORCEMENT. The FDIC and the Banking Department have enforcement authority
over the Bank. The Superintendent may order the Bank to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. If any director or officer of the Bank
has violated any law, or has continued unauthorized or unsafe practices in
conducting the business of the Bank after having been notified by the
Superintendent to discontinue such practices, the New York Banking Board may
remove the individual from office after notice and an opportunity to be heard.
The Superintendent also may take over control of the Bank under specified
statutory criteria.
The FDIC's enforcement authority includes, among other things, the ability
to assess civil money penalties, to issue cease and desist orders and to remove
directors and officers. Under federal law, the FDIC is required to take prompt
action to correct deficiencies in undercapitalized banks. A bank is categorized
as "well capitalized" or "adequately capitalized" if its ratio of total capital
to risk-weighted assets is at least 10.0% or 8.0%, respectively, its ratio of
Tier I core capital to risk-weighted assets is at least 6.0% or 4.0%,
respectively, its ratio of Tier I capital to total assets is at least 5.0% or
4.0% (3.0% if the institution has the best supervisory rating), respectively,
and it is not subject to any order or directive by the FDIC to meet a specific
capital level. Banks that do not meet these standards are classified as
"undercapitalized." A bank with a total risk-based capital ratio of less than
6.0% or a ratio of Tier I capital ratio to risk-weighted assets or total assets
of less than 3.0% is considered to be "significantly undercapitalized." A Bank
with a tangible capital to assets ratio of 2% or less is deemed to be
"critically undercapitalized."
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<PAGE>
Dividends, other capital distributions or the payment of management fees to
any controlling person are prohibited if, following such distribution or
payment, a bank would be undercapitalized. An undercapitalized bank must file a
plan to restore its capital within 45 days after being notified that it is
undercapitalized. Undercapitalized, significantly undercapitalized and
critically undercapitalized institutions are subject to increasing prohibitions
on permitted activities, and increasing levels of regulatory supervision, based
upon the severity of their capital problems. The FDIC is required to monitor
closely the condition of an undercapitalized bank. Enforcement action taken by
the FDIC can escalate to the appointment of a conservator or receiver of a
critically undercapitalized bank.
Based upon its existing capital ratios and regulatory classification, the
Bank qualifies as "well capitalized" and the FDIC prompt corrective action
regulations are not expected to have a material effect on the Bank or the
Company.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDIC, together with the other
federal bank regulatory agencies, has prescribed guidelines which establish
minimum general standards relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines also cover asset quality and earnings evaluation and monitoring as
well. The guidelines prohibit excessive compensation as an unsafe and unsound
practice and describe compensation as excessive when the amounts paid are
unreasonable or disproportionate to the services performed by an executive
officer, employee, director or principal stockholder. In addition, the FDIC may
order an institution that has been given notice by the FDIC that it is not
satisfying any of such safety and soundness standards to submit a compliance
plan. If an institution then fails to submit an acceptable plan or fails in any
material respect to implement an accepted compliance plan, the FDIC must issue
an order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized bank is
subject under the "prompt corrective action" requirements described below. If an
institution fails to comply with such an order, the FDIC may seek enforcement in
judicial proceedings and civil money penalties.
INSURANCE OF ACCOUNTS. Deposit insurance premiums payable to the FDIC are
based upon a system which categorizes insured institutions based upon their
perceived risks to the FDIC insurance fund. The FDIC assigns an institution to
one of three capital categories: (a) well capitalized, (b) adequately
capitalized or (c) undercapitalized. The FDIC also assigns an institution to one
of three supervisory categories based on an evaluation by the institution's
primary federal regulator and information that the FDIC considers relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds. Deposit insurance premiums depend on an institution's capital
and supervisory categories. At present, the Bank pays no deposit insurance
premium based upon its risk-based categorization.
However, as of January 1, 1997, the Bank is required to pay a share of the
cost of the bonds issued in the late 1980s to recapitalize the now defunct
Federal Savings and Loan Insurance Corporation. The Bank must pay an annual
assessment for this purpose, which was at an annual rate of 0.0126% of its
insured deposits for the three months ended March 31, 1998. This assessment is
recorded as a deposit insurance premium expense for financial statement
purposes.
FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLBNY, which is
one of the regional Federal Home Loan Banks composing the Federal Home Loan Bank
System. Each Federal Home Loan Bank provides facilities which allow its members
to borrow funds. The Bank has not used the borrowing facilities of the FHLBNY.
The Bank must own stock in the FHLBNY at least equal to the greater of 1% of the
principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year or 5% of its advances from the FHLBNY.
At March 31, 1998, the Bank held $1.3 in fair value of capital stock of the
FHLBNY, which satisfied this requirement. The annualized yield on FHLBNY stock
for the quarter ended March 31, 1998 was 7.4% If the Bank materially increases
its
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<PAGE>
residential mortgage loans, or obtains significant advances from the FHLBNY, the
Bank would be required to increase its investment in FHLBNY capital stock.
Advances from the FHLBNY must be secured by specified types of collateral, and
long-term advances may be obtained only for the purpose of providing funds for
residential housing finance.
The Federal Home Loan Banks are required to provide funds for the resolution
of insolvent thrifts and to contribute funds for affordable housing programs.
These requirements could reduce the amount of earnings that the FHLBNY can pay
as dividends to its members and could also result in the FHLBNY imposing a
higher rate of interest on advances. Further, there can be no assurance that the
impact of current or future federal laws on the FHLBNY will not also cause a
decrease in the value of FHLBNY capital stock.
THE FEDERAL RESERVE SYSTEM. The Bank is required, under the regulations of
the Federal Reserve, to maintain non-interest-earning reserves against its
transaction accounts (primarily NOW and regular checking accounts). The Bank is
generally able to satisfy the reserve requirements with cash on hand and other
non-interest bearing deposits which it maintains for other purposes, so the
reserve requirements do not impose a material financial burden on the Bank.
HOLDING COMPANY REGULATION
FEDERAL HOLDING COMPANY REGULATIONS. Upon consummation of the Conversion,
the Company will become a bank holding company. Bank holding companies are
subject to regulation and examination by the Federal Reserve under the Bank
Holding Company Act. The Federal Reserve has enforcement authority over bank
holding companies, including, among other things, the ability to assess civil
money penalties, to issue cease and desist or removal orders and to require a
bank holding company to divest subsidiaries (including bank subsidiaries). A
bank holding company must serve as a source of strength for its subsidiary bank.
The Federal Reserve may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank. The status of the Company as a
registered bank holding company does not exempt it from federal and state laws
and regulations applicable to corporations generally, including, without
limitation, certain provisions of the federal securities laws.
The Company will be subject to capital adequacy guidelines for bank holding
companies (on a consolidated basis) which are substantially similar to the FDIC
mandated capital adequacy guidelines applicable to the Bank. On a pro forma
consolidated basis after the Conversion, the Company's capital will exceed these
requirements.
As a bank holding company, the Company must obtain Federal Reserve approval
before: (i) acquiring, directly or indirectly, ownership or control of any
voting shares of another bank or bank holding company if, after the acquisition,
it would own or control more than 5% of such shares (unless it already owns or
controls the majority of such shares); (ii) acquiring all or substantially all
of the assets of another bank or bank holding company; or (iii) merging or
consolidating with another bank holding company.
Federal law generally prohibits a bank holding company from engaging in, or
acquiring control of any company engaged in, non-banking activities. One of the
principal exceptions to this prohibition is activities found by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident to banking activities. Some of the activities that have
been found to be closely related to banking are: operating a savings
association, mortgage company, finance company, credit card company or factoring
company; performing certain data processing services; providing investment and
financial advice; underwriting and acting as an insurance agent for certain
types of credit-related insurance; leasing property on a full-payout,
non-operating basis; selling money orders, travelers' checks and United States
Savings Bonds; real estate and personal property appraising; providing tax
planning and preparation services; and, subject to certain limitations,
providing brokerage services.
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The Federal Reserve has issued a policy statement stating that a bank
holding company should pay cash dividends only to the extent that the holding
company's net income for the past year is sufficient to cover both the cash
dividends and a rate of earnings retention that is consistent with the holding
company's capital needs and overall financial condition. The Federal Reserve has
indicated that it would be inappropriate for a company experiencing financial
problems to borrow funds to pay dividends. The Federal Reserve may prohibit a
bank holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the Federal Reserve prior notice
of any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, equals 10% or more of their consolidated net worth. This notification
requirement does not apply to any company that meets the well-capitalized
standard for commercial banks, has a safety and soundness examination rating of
at least a "2" and is not subject to any unresolved supervisory issues. It is
currently anticipated that the Company will qualify for this exemption from the
notice requirement.
A notice must be submitted to the Federal Reserve if any person, company, or
group acting in concert, seeks to acquire 10% or more of the Company's
outstanding Common Stock, unless the Federal Reserve has found that the
acquisition will not result in a change in control of the Company. The Federal
Reserve has 60 days within which to act on the notice, taking into account such
factors as the financial and managerial resources of the acquiror, the
convenience and needs of the communities served by the Company and the Bank, and
the anti-trust effects of the acquisition. Furthermore, any company that seeks
to obtain control of the Company must obtain the approval of the Federal
Reserve. For this purpose, control is generally defined as the ownership or
power to vote 25% or more of any class of the Company's voting stock or the
ability to control in any manner the election of a majority of the directors of
the Company.
NEW YORK STATE BANK HOLDING COMPANY REGULATION. In general, under New York
law, a company owning only one banking institution will not be deemed to be a
bank holding company. However, the Banking Law requires the prior approval of
the New York Banking Board before any action is taken that causes any company
(broadly defined) to acquire direct or indirect control of a banking institution
organized in the State of New York, such as the Bank. Control, for this purpose,
is generally defined to mean the power to direct or cause the direction of the
management and policies of the banking institution and is presumed to exist if
the company owns, controls or holds with the power to vote 10% or more of the
voting stock of the banking institution.
Furthermore, if the Company were to acquire ownership, control or the power
to vote 10% or more of the voting stock of another bank or bank holding company
it would become a bank holding company under state law. Under the Banking Law,
the prior approval of the Banking Department is required before; (1) any action
is taken that causes any company to become a bank holding company; (2) any
action is taken that causes any banking institution to become or be merged or
consolidated with a subsidiary of a bank holding company; (3) any bank holding
company acquires direct or indirect ownership or control of more than 5% of the
voting stock of a banking institution; (4) any bank holding company or any of
its subsidiaries 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 with another bank holding company.
FEDERAL SECURITIES LAWS
Upon completion of the Conversion, the Company's Common Stock will be
registered with the SEC. The Company will then be subject to the information,
proxy solicitation, insider trading restrictions and other requirements under
the Securities Exchange Act of 1934. Therefore, the Company will be required,
among other things, to prepare and file quarterly and annual reports of its
financial condition and results of operations.
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Shares of Common Stock purchased by an affiliate of the Company will be
subject to the resale restrictions of SEC Rule 144. If the Company satisfies its
obligation to file certain information with the SEC, each affiliate of the
Company who complies with the other conditions of Rule 144 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 (a) 1% of the outstanding shares of the
Company or (b) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act of 1933 under certain circumstances.
TAXATION
GENERAL
The following is a discussion of material tax matters and does not purport
to be a comprehensive description of the Federal, New York State and Delaware
income tax rules applicable to the Bank or the Company. For a discussion of the
tax consequences of the Conversion, see "The Conversion--Effects of Conversion
on Depositors and Borrowers--Tax Effects."
FEDERAL TAXATION
GENERAL. The Bank is taxed for Federal income tax purposes in accordance
with the Internal Revenue Code of 1986, as amended, in substantially the same
manner as all other business corporations, subject to certain special provisions
applicable to financial institutions. The Bank files its Federal income tax
returns on a calendar year basis. The Bank has not been audited by the Internal
Revenue Service during the last five years. For Federal income tax purposes,
after the Conversion, the Company and the Bank will file consolidated income tax
returns and report their income on a calendar year basis using the accrual
method of accounting and will be subject to Federal income taxation in the same
manner as other corporations, but generally subject, as to the Bank, to the same
special provisions applicable to financial institutions filing tax returns on an
unconsolidated basis.
BAD DEBT DEDUCTION. In 1996, the Internal Revenue Code was amended,
effective for tax years beginning in 1996, to change the method by which the
Bank may take tax deductions for bad debts. The Bank is now required, for
Federal income tax purposes, to use the experience method in determining its tax
bad debt deduction, which generally permits tax deductions for bad debts based
upon a six year moving average of actual loan loss experience. Furthermore,
institutions which had previously used a more advantageous method must recapture
(i.e., treat as taxable income) a part of the institution's existing tax bad
debt reserve. For the Bank, the amount required to be recaptured was $378,000,
representing the excess of its tax bad debt reserve at December 31, 1995 over
the level of the reserve at December 31, 1987, referred to as the "excess
reserve." This amount is being recaptured over a period of six years beginning
in 1996. In accordance with generally accepted accounting principles, the Bank
had already established a deferred tax liability representing the tax effect of
the recapture of its excess reserve. The Bank will continue to repay the Federal
income taxes related to this recapture through tax year 2001.
DISTRIBUTIONS. If the Bank makes certain types of distributions
("non-dividend distributions") to the Company which are not in the nature of
dividends, such distributions will be considered to have been made first from
the Bank's unrecaptured tax bad debt reserves (including the balance of its
reserves as of December 31, 1987 which are not part of excess reserves). An
amount based on the non-dividend distribution will be included in the Bank's
income for tax purposes. Non-dividend distributions subject to this rule include
distributions in excess of the Bank's current and accumulated earnings and
profits, as calculated for Federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete liquidation.
Dividends paid out of the Bank's current or accumulated earnings and profits are
not subject to this rule.
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The amount of additional taxable income caused by a non-dividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, if after the
Conversion, the Bank makes a non-dividend distribution to the Company,
approximately one and one-half times the amount of such non-dividend
distribution would be includable in income for Federal income tax purposes,
assuming a 34% Federal corporate income tax rate. The Company and the Bank do
not anticipate that the Bank will pay any non-dividend distributions to the
Company after the Conversion. See "Regulation" and "Dividend Policy" for limits
on the payment of dividends by the Bank. The Bank does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserves.
CORPORATE ALTERNATIVE MINIMUM TAX. The Internal Revenue Code imposes a tax
on alternative minimum taxable income at a rate of 20%. In general, the
alternative minimum tax is imposed if, because of high levels of certain
deductions and tax-exempt income, there is a substantial difference between a
corporation's gross income and its taxable income. 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 to future years.
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. A 70% dividends received deduction generally applies with respect
to dividends received from domestic corporations that are not members of such
affiliated group, except that an 80% dividends received deduction applies if the
Company and the Bank own more than 20% of the stock of a corporation paying a
dividend. Under pending legislative proposals, the 70% dividends received
deduction would be reduced to 50% with respect to dividends paid after enactment
of such legislation.
NEW YORK STATE TAXATION
GENERAL. The Bank and the Company will report income on a combined calendar
year basis to New York State. New York State franchise tax on banking
corporations is imposed in an amount equal to the greater of (i) 9% of the
Bank's "entire net income" allocable to New York State during the taxable year
or (ii) the applicable alternative minimum tax. The alternative minimum tax is
generally the greatest of (a) .01% of the value of the Bank's assets allocable
to New York State with certain modifications, (b) 3% of the Bank's "alternative
entire net income" allocable to New York State or (c) $250. Entire net income is
based on Federal taxable income, subject to certain modifications and
alternative entire net income is equal to entire net income without certain
deductions.
BAD DEBT DEDUCTION. The Bank is currently using a six year moving average
experience method, similar to the Federal method, to calculate the New York bad
debt deduction.
The Bank's New York State income tax returns have been audited by the New
York State Department of Finance through tax year 1996.
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
minimum tax is generally equal to $5,000 for each 1,000,000 shares of authorized
capital stock, regardless of whether such stock has been issued.
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Company currently consists of seven members,
each of whom is also a director of the Bank. The seven directors are Joseph H.
Compagni, Patrick J. Hayes, M.D., Robert S.
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Kashdin, CPA, Harvey Kaufman, Donald P. Reed, Terrance D. Stalder and Wesley D.
Stisser, Jr. Each of them has served as a director since the Company's
incorporation in June 1998. The Board of Directors of the Company is divided
into three classes, each of which contains approximately one-third of the Board.
The initial terms of office of the directors of the Company have been staggered
so that the terms of office of directors Compagni and Hayes expire at the first
annual meeting of stockholders of the Company after the Conversion, the terms of
directors Kashdin and Kaufman expire at the second annual meeting after the
Conversion and the terms of directors Reed, Stalder and Stisser expire at the
third annual meeting after the Conversion. Thereafter, directors will be elected
by the stockholders of the Company for staggered three-year terms, or until
their successors are elected and qualified.
The executive officers of the Company are Wesley D. Stisser, Jr., President
and Chief Executive Officer and Steven A. Covert, Executive Vice President and
Chief Financial Officer. See "Management of the Bank--Executive Officers." The
executive officers of the Company are elected annually and hold office until
their respective successors have been elected and qualified or until death,
resignation or removal by the Board of Directors.
Information concerning the directors and officers of the Company, principal
occupations, employment and compensation of the directors and officers of the
Company during the past five years is set forth under "Management of the
Bank--Biographical Information."
COMMITTEES OF THE COMPANY
The Company has established or plans to establish the following committees
of its Board of Directors.
THE HUMAN RESOURCES COMMITTEE. The Human Resources Committee, not yet
appointed, will function on compensation matters for the Company. The committee
will also be responsible for administering and making grants or awards under the
Stock Option Plan and the PRRP when and if approved by the stockholders, and
will oversee the Company's activities related to the ESOP.
THE AUDIT COMMITTEE. The Audit Committee, consisting of directors Compagni,
Kashdin and Stalder will function on matters related to the accounting,
bookkeeping and auditing functions of the Company and will meet periodically
with the Company's independent certified public accountants to arrange for the
Company's annual financial statement audit and to review and evaluate
recommendations made during the annual audit. The Audit Committee will also
review and approve the internal auditing procedures of the Company.
THE INVESTMENT COMMITTEE. The Investment Committee, consisting of directors
Hayes, Kashdin, Stalder amd Stisser, will make decisions regarding the
securities investments of the Company and recommend related policies and
procedures to the Board.
The Bylaws of the Company provide that the Company may establish a
nominating committee to nominate persons for election to the Board of Directors.
The Board has not yet decided whether to establish a nominating committee and no
procedures have been established for submitting stockholder suggestions for
nominations to the committee or the Board of Directors. The Bylaws of the
Company provide that a stockholder may nominate a person for election as a
director only if advance notice of intent to nominate the person is provided to
the Company and certain procedural and notice provisions are followed. For the
first annual meeting of stockholders, advance notice must be given to the
Secretary of the Company not later than ten days after notice of the meeting is
sent to stockholders or the date of the meeting is publicly announced, whichever
is earlier. See "Restrictions on Acquisition of the Company and the
Bank--Restrictions in the Company's Certificate of Incorporation and
Bylaws--Certain Bylaw Provisions."
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DIRECTORS' COMPENSATION
It is anticipated that directors of the Company who are not employees of the
Company or the Bank or any of their subsidiaries shall receive an attendance fee
of $500 for each Board of Directors meeting and $400 for each committee meeting.
The chair of each committee will be entitled to an additional fee of $100 per
meeting. The Chairman of the Board, currently Mr. Kaufman, will receive an
annual retainer of $3,000 in addition to per meeting fees. Directors will also
be eligible for participation in the Stock Option Plan and the PRRP expected to
be implemented by the Company. See "Management of the Bank--Benefits-- Stock
Option Plan" and "--Personnel Recognition and Retention Program."
EXECUTIVE COMPENSATION
Since the formation of the Company, none of the officers of the Company have
received remuneration from the Company. It is currently expected that, unless
and until the Company becomes actively involved in business activities separate
from those conducted by the Bank, no separate compensation will be paid to the
officers of the Company. However, the Bank has entered into employment contracts
with four of its executive officers, including the two executive officers of the
Company. See "Management of the Bank--Employment Contracts." Decisions regarding
the Company's executive compensation will be made by the Company's Board of
Directors, acting upon the recommendations of the Human Resources Committee.
Executive Officers of the Company who are directors will not vote on their own
compensation.
INDEMNIFICATION AND LIABILITY OF DIRECTORS
The Certificate of Incorporation of the Company provides that a director,
officer, employee or agent of the Company shall be indemnified by the Company to
the fullest extent authorized by the General Corporation Law of the State of
Delaware against all expenses, liability and loss reasonably incurred or
suffered by such person in connection with his or her activities as a director
or officer of the Company or as a director or officer of another company, if the
director or officer held such position at the request of the Company. Delaware
law requires that such director, officer, employee or agent, in order to be
indemnified, must have acted in good faith and in a manner reasonably believed
to be not opposed to the best interest of the Company and, with respect to any
criminal action or proceeding, did not have reasonable cause to believe his or
her conduct was unlawful.
The Certificate of Incorporation of the Company and Delaware law also
provide that the indemnification provisions of such certificate and the Delaware
General Corporation Law are not exclusive of any other right which a person
seeking indemnification may have or later acquire under any statute, provision
of the Certificate of Incorporation or Bylaws of the Company, agreement, vote of
stockholders or disinterested directors, or otherwise. The Certificate of
Incorporation of the Company also provides that a director shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director except for breaches of the duty of
loyalty, acts or omissions in bad faith or involving intentional misconduct or
violation of law, liability for the unlawful payment of dividends or unlawful
stock purchases or redemptions or transactions where the director derives
improper personal benefit.
These provisions may have the effect of deterring stockholder derivative
actions, since the Company may ultimately be responsible for expenses for both
parties to the action.
In addition, the Certificate of Incorporation of the Company and Delaware
law also provide that the Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Company has the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law. The Company intends to obtain such insurance.
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MANAGEMENT OF THE BANK
DIRECTORS
There are currently eleven directors of the Bank, all of whom serve for one
year terms, and seven of whom are directors of the Company. The following table
sets forth certain information regarding the Board of Directors of the Bank.
Ages are as of August 13, 1998.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) HELD WITH THE BANK SINCE
- -------------------------------------------- --- ---------------------------------------------------- -----------
<S> <C> <C> <C>
Wesley D. Stisser, Jr....................... 62 President, Chief Executive Officer and Director 1983
Edward E. Hatter............................ 60 Director 1977
Judith F. Riehlman.......................... 57 Director 1987
Terrance D. Stalder......................... 56 Director 1987
Harvey Kaufman.............................. 63 Director and Chairman of the Board 1989
Joseph H. Compagni.......................... 55 Director 1990
Donald P. Reed.............................. 57 Director 1991
Roland Fragnoli............................. 68 Director 1992
Patrick J. Hayes, M.D....................... 49 Director 1994
Robert S. Kashdin, CPA...................... 55 Director 1995
</TABLE>
Three directors of the Bank retired effective June 30, 1998. Among them,
they had approximately 97 years of service with the Bank. In recognition of
their years of service with the Bank and the goodwill that their continued
affiliation with the Bank will engender in the community, the Bank has agreed to
provide them with a retirement benefit and consulting arrangement in the amount
of $50,000 per director, payable in monthly installments over a period of three
years. The full amount payable was accrued as an expense by the Bank during the
quarter ended June 30, 1998. In addition, the former Comptroller of the Bank
also retired in June 1998. The Bank agreed to pay him one year's salary as a
severance benefit. The full amount of the payment was accrued as an expense by
the Bank during the quarter ended June 30, 1998.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Bank. Ages are as of August 13, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH THE BANK
- ------------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Wesley D. Stisser, Jr.... 62 President, Chief Executive Officer and Director
F. Michael Stapleton..... 59 Executive Vice President and Chief Operating Officer
Steven A. Covert......... 36 Executive Vice President and Chief Financial Officer
Kerry D. Meeker.......... 45 Senior Vice President and Senior Loan Officer
</TABLE>
Each of the executive officers of the Bank is expected to retain his and her
office after the Conversion until the next annual meeting of the Board of
Directors of the Bank and their successors are elected and qualified or until
they are removed or replaced. Officers are re-elected by the Board of Directors
annually and serve at the pleasure of the Board.
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BIOGRAPHICAL INFORMATION
The following biographical information is provided for the directors and
executive officers of the Bank. Professional background and employment history
are provided for at least the past five years.
DIRECTORS
WESLEY D. STISSER, JR. serves as President and Chief Executive Officer of
the Bank, a position he has held since 1983. Mr. Stisser has been with the Bank
for 45 years. He is a graduate of the Graduate School of Savings Banking at
Brown University and the School for Executive Development sponsored by the
Community Bankers Association. An eagle scout and recipient of the Silver Beaver
Award B.S.A., Mr. Stisser is an active member of numerous professional, civic
and community service organizations. He is presently a member of the New York
Savings Bank Life Insurance Fund's Board of Directors and is Chairman of the
Cortland City Police Commission. He is a former member of the Board of Directors
for Cortland Memorial Hospital, serving as its Chairman, and is a member of the
SUNY Cortland College Foundation.
EDWARD E. HATTER, JR was a principal of Hatter Fuel Co., from which he
retired in 1987. Mr. Hatter was active in several community organizations,
serving as Chairman of the Easter Seals drive and holding various offices in the
New York State Jaycees, the Rotary Club and the University Club. He is currently
active in the March of Dimes drive, the Town and River Cruise Club and the Royal
Palm Yacht Club. He was district chairman of the Tioughnioga-Baden Powell
Council, B.S.A. Mr. Hatter resides part time in Florida. Mr. Hatter established
Briarwood Estates, a development of upscale homes and continues to control
remaining unsold lots.
JUDITH F. RIEHLMAN is the Cortland County Clerk. Mrs. Riehlman and her
husband own and operate a family run farm and Birchlawn Structures, a furniture
retailer. Active in numerous community organizations, Mrs. Riehlman currently
serves as Chairperson of the Cortland County Republican Committee, President of
the American Agricultural Foundation, Inc. and as a Director of Family
Counseling Services.
TERRANCE D. STALDER is the Associate Vice President for Finance and
Management at SUNY Cortland. Mr. Stalder is a member of various community
organizations and serves on the Village of Homer Planning Board, the Board of
Trustees of the Cortland YMCA and is a member of the Cortland Rotary Club.
HARVEY KAUFMAN retired as Superintendent of the Cortland City Schools
District in 1992 and currently provides administrative consulting services in
the field of education. He was elected Chairman of the Board of Directors of the
Bank in June of 1997. He is a former Cortland City Police Commissioner, past
president of the Cortland County Chamber of Commerce, past president of the New
York State Association of Small City School Districts, and was a member of the
New York State Assembly Task Force on the Regents Action Plan. Mr. Kaufman is
also currently the Chairman of the J.M. Murray Center and Cortland Memorial
Hospital Services, a for profit affiliate of Cortland Memorial Hospital.
JOSEPH H. COMPAGNI is President of Economy Paving Co., Inc., which
constructs highways and bridges in New York State. He is currently a director of
the New York State Associated General Contractors and has been a director of the
Cortland Memorial Hospital, J.M. Murray Center, Cortland Family Health Network,
Cortland Rotary Club and Cortland YMCA.
DONALD P. REED is the principal of Reed's Seeds, a business which sells crop
seeds, farm seeds, farm chemicals and fertilizer. He is also Chairman of the
Board of Dryden Mutual Insurance Company. Mr. Reed is a former director of Key
Bank of Central New York, formerly the Homer National Bank.
ROLAND FRAGNOLI is the President of the Homer Men & Boys clothing stores, a
local retailer with which he has been associated for 50 years. He is a member of
various service and community clubs and serves on the Tompkins Cortland
Community College Foundation Board. Mr. Fragnoli is a former director of Key
Bank of Central New York, formerly the Homer National Bank.
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PATRICK J. HAYES, M.D. is a practicing physician in Cortland. He is a past
president of the Cortland Memorial Hospital Medical Staff and currently serves
as Chief of Staff of Cortland Health Center. Dr. Hayes is a member of the Board
of the American Lung Association of Central New York, Inc.
ROBERT S. KASHDIN, C.P.A. has been a practicing certified public accountant
for over 30 years and is the present managing partner of the CPA firm of Port,
Kashdin and McSherry located in Cortland. Mr. Kashdin is a member in numerous
community and professional organizations including past chairman of the New York
State Society of CPA's Agri Business Committee and District Treasurer of Rotary
District 7170. He is a former Board member of the Jewish Homes of Central New
York and the United Way of Cortland County.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
F. MICHAEL STAPLETON joined the Bank in June 1998. From February 1986
through April 1998, Mr. Stapleton was with OnBank and Trust Co., rising to the
position of Regional President. He then continued with Manufacturers and Traders
Trust Company after it acquired OnBank. He is the Chairman of the Loretto
Foundation, which provides care for the elderly, and is a director of Meals on
Wheels of Syracuse and the Mercy Health and Rehabilitation Center. Mr. Stapleton
is also the Chairman of the Cayuga County Economic Development Council, a
director of the Industrial Development Foundation of Auburn and Cayuga County,
and a member of the Auburn Industrial Development Authority, all of which are
involved in fostering economic development in central New York.
STEVEN A. COVERT joined the Bank in June 1998. From August 1995 to June
1998, he was Executive Vice President and Chief Financial Officer of Success
Bancshares, Inc., a bank holding company in Chicago, Illinois. He was Senior
Vice President and Chief Financial Officer of Ithaca Bancorp, Inc., a savings
and loan holding company in Ithaca, New York, from July 1993 to December 1994
and was Vice President and Chief Financial Officer of Skaneateles Bancorp, Inc.,
a bank holding company in Skaneateles, New York, from January 1991 to July 1993.
Mr. Covert is a certified public accountant and prior to joining the banking
industry, he was employed by KPMG Peat Marwick LLP as an auditor. Mr. Covert has
been a member of various community organizations including the United Way and an
organization that provides food for the homeless.
KERRY D. MEEKER joined the Bank in 1996 as Senior Vice President and Senior
Loan Officer. Prior to joining the Bank, he held the position of Vice President
and Chief Loan Officer of Oneida Savings Bank since 1989. He previously served
as a Vice President and Commercial Loan Officer of Marine Midland Bank and as a
Senior Financial Analyst at Bankers Trust Company. He is a member of the Rotary
Club of Cortland; has served as President of the Greater Oneida Chamber of
Commerce, Inc.; Treasurer of the Oneida Improvement Committee, Inc.; President
of the Oneidas Club; President of the Sherrill-- Kenwood Community Chest, Inc.;
and is a past member of the Rotary Club of Oneida.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF THE BANK
The Board of Directors of the Bank meets on a monthly basis and may have
additional special meetings from time to time. During 1997, the Board of
Directors met 14 times. No current director attended fewer than 75% of the total
number of Board meetings and meetings of committees of which such director was a
member during 1997.
The Bank has established the following committees of its Board of Directors:
THE EXECUTIVE COMMITTEE consists of directors Compagni, Hayes, Kaufman,
Reed, Riehlman, Stalder and Stisser. The committee meets quarterly and functions
on matters of general policy and strategy. The committee has the power of the
Board of Directors with respect to most matters. The committee met 5 times
during 1997.
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THE AUDIT COMMITTEE consists of directors Stalder, Compagni and Reed. The
committee meets periodically with the Bank's independent certified public
accountants to arrange for the Bank's annual financial statement audit and to
review and evaluate recommendations made during the annual audit. The committee
also reviews the regulatory reports of examination and reviews and approves the
Bank's internal auditing procedures. The committee met 6 times during 1997.
THE HUMAN RESOURCES COMMITTEE consists of directors Hayes, Compagni and
Fragnoli. The committee reviews and makes recommendations to the Board regarding
compensation of the executive officers and employees of the Bank. The committee
also functions on matters related to the pension and other compensation plans of
the Bank. The committee met 6 times during 1997.
THE LOAN COMMITTEE consists of directors Kashdin, Kaufman, Reed, Riehlman
and Stisser. The committee reviews the allowance for loan losses and approves
periodic additions to the allowance. The committee also evaluates the Bank's
problem loans and functions on matters related to the Community Reinvestment
Act. The committee must also approve all loans which, individually or with other
existing loans to the same borrower or related borrowers, exceed $200,000. The
committee met 11 times during 1997.
THE ASSET/LIABILITY COMMITTEE consists of directors Fragnoli, Hatter and
Stisser. The committee reviews the Bank's interest rate sensitivity position on
a quarterly basis. The committee reviews internally prepared data as well as
reports prepared by an outside firm analyzing the interest rate sensitivity of
the Bank's assets and liabilities. The committee met 4 times during 1997.
In addition, the Board has an Operations, Systems and Security Committee and
a Marketing and Community Affairs Committee. From time to time, the Board of
Directors may appoint other special committees to address specific matters which
the Board determines should be considered at the committee level. The Chairman
of the Board is an ex officio member of all committees except for those to which
he is specifically appointed and the President is an ex officio member of all
committees except for the Human Resources Committee and the Examining Committee.
DIRECTORS' COMPENSATION
The Board of Directors of the Bank has established a revised fee structure
for directors to be implemented after the Conversion. Each director of the Bank
who is not an employee of the Company or the Bank or any of their subsidiaries
will receive an annual retainer of $3,000 plus an attendance fee of $250 for
each Board of Directors meeting and $400 for each committee meeting attended.
The Chairman of the Board will receive a $12,000 annual retainer plus attendance
fees, except that no attendance fees will be paid to the Chairman of the Board
for attendance at a committee meeting in an ex officio capacity. The chair of
each committee will be receive an additional $100 per committee meeting. It is
anticipated that directors will also receive benefits under the Stock Option
Plan and the PRRP expected to be implemented by the Company upon receipt of
stockholder approval. See "--Benefits--Stock Option Plan" and "--Personnel
Recognition and Retention Program."
Directors may defer the receipt of their fees by making annual elections.
The deferred amounts are paid by the Bank to a trust which invests the funds
among investment options selected by each director. However, the funds
contributed to the trust are subject to the claims of creditors of the Bank and
are not taxable to the director until received. The Bank expenses the amount of
the deferred fees upon payment to the trust. The director may receive the
deferred fees, together with income earned thereon, in either a lump sum or in
an annuity upon retirement or reaching age 72 1/2.
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EXECUTIVE COMPENSATION
Decisions regarding the Bank's executive compensation are made by the Bank's
Board of Directors, upon the recommendations made by the Human Resources
Committee. The President and Chief Executive Officer, who is a director, does
not vote on his own compensation.
The following table sets forth the cash compensation paid by the Bank for
services rendered in all capacities during 1997 to the President and Chief
Executive Officer and all executive officers of the Bank who received
compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
--------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION (2)
- ---------------------------------------------- --------- ---------- ----------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Wesley D. Stisser, Jr., President and Chief
Executive Officer........................... 1997 $ 167,890 $ -- $ -- $ 7,336
</TABLE>
- ------------------------
(1) In accordance with SEC policy, summary compensation information is excluded
for 1996 and 1995 because neither the Bank nor the Company were public
companies during such years. For 1997 there were no: (a) perquisites with an
aggregate value in excess of the lesser of $50,000 or 10% of the total of
the individual's salary and bonus for the year; (b) payments of above-market
preferential earnings on deferred compensation; (c) payments of earnings
with respect to long-term incentive plans prior to settlement or maturation;
or (d) preferential discounts on stock. For 1997, the Bank had no restricted
stock or stock related plans in existence.
(2) All other compensation includes life insurance premiums of $211 and matching
contributions under the Bank's 401(k) Plan of $7,125.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The directors and executive officers of the Bank maintain normal deposit
account relationships with the Bank on terms and conditions no more favorable
than those available to the general public. The Bank does not make loans to
directors. In the ordinary course of business, the Bank makes loans to
non-director officers and employees, as well as other related parties. All such
loans to executive officers and their related parties are on substantially the
same terms, including interest rate and collateral, as those prevailing at the
same time for comparable loans to other customers and do not involve more than
the normal risk of collectibility or present other unfavorable features.
Director Kaufman and former director Peter A. Potter are uncompensated
volunteer members of the Board of Directors of the J.M. Murray Center, a
not-for-profit corporation providing services to the developmentally disabled.
The J.M. Murray Center has a loan in which the Bank is a 50% participant with
another local bank. The loan is secured by a mortgage on a light manufacturing
facility operated by the borrower as a source of employment for the
developmentally disabled.
REPORT OF INDEPENDENT EXECUTIVE COMPENSATION EXPERT
Pursuant to the Conversion Regulations, the Bank has obtained the opinion of
William M. Mercer, Incorporated, an independent executive compensation expert
regarding the total compensation for the executive officers and directors of the
Bank. The opinion states that the total cash compensation for executive officers
and total remuneration for directors of the Bank, viewed as a whole and on an
individual basis, is reasonable and proper in comparison to the compensation
provided to officers and directors of similarly situated publicly-traded
financial institutions. The opinion further states that the amount of shares of
Common Stock to be purchased by the ESOP, and expected to be covered by the PRRP
and the
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Stock Option Plan, as a whole, are reasonable in comparison to similar
publicly-traded financial institutions. These opinions are based upon published
professional survey data of similarly situated publicly-traded financial
institutions.
EMPLOYMENT CONTRACTS
The Bank has recently entered into employment contracts with Mr. Stisser,
Mr. Stapleton, Mr. Covert and Mr. Meeker. The contracts with Mr. Stisser and Mr.
Stapleton provide for three-year terms and the contracts with Mr. Covert and Mr.
Meeker provide for two-year terms. The annual salaries under the four contracts
are $175,000 for Mr. Stisser, $110,000 for Mr. Stapleton, $110,000 for Mr.
Covert and $80,000 for Mr. Meeker, subject to such bonuses or increases as may
be approved by the Board of Directors. The contracts also provide that each
officer will be entitled to participate in all other retirement and fringe
benefit plans provided by the Bank to employees generally, except that they are
not entitled to participate in the Employee Severance Plan because the contracts
separately address the issues covered by that plan. Mr. Covert also received an
additional up front payment of $35,000 which is refundable if he is terminated
for cause, or resigns other than after certain changes in employment conditions,
within the first six months after his employment commences.
If the Bank terminates the executive officer's employment other than for
cause, he will be entitled to a lump sum payment. For Mr. Stisser, Mr. Stapleton
and Mr. Covert, the payment is generally equal to the greater of one year's
salary or salary for the unexpired term of the contract. For Mr. Meeker, the
payment is generally equal to the lesser of one year's salary or his salary for
the remainder of the term of the contract. All the contracts provide that the
payment will also be made if the officer resigns after material breach by the
Bank or after certain adverse changes in the terms and conditions of employment.
The contracts for the executive officers further provide that, subject to
certain conditions, if employment is terminated within six months after a change
in control of the Bank or the Company, or if the executive officer resigns after
certain adverse changes in terms and conditions of employment, the officer will
be entitled to receive a lump sum payment generally equal to 299% of the annual
salary payable to the officer prior to such termination, but in no event more
than the maximum amount permitted to be paid without the imposition of an excise
tax under Section 280G of the Internal Revenue Code. Under certain
circumstances, the amount of the payment to be made to some of the executive
officers may be less. For purposes of the contracts, a "change in control" will
generally be deemed to occur when a person or group of persons acting in concert
acquires beneficial ownership of 25% or more of any class of equity security of
the Company or the Bank, upon stockholder approval of a merger or consolidation
unless certain conditions are met, upon a change of the majority of the Board of
Directors of the Company or the Bank or upon liquidation or sale of
substantially all the assets of the Company or the Bank. Under certain
circumstances, severance benefits payable under the contracts are reduced by the
value of Stock Option Plan and PRRP awards, if any, which the officer receives.
The aggregate amount payable on account of these change in control provisions
cannot be determined at this time because the amount of the payments depend upon
future salary levels, average past compensation as of the date of the payment
which determines the scope of the excise tax cap on payments, and other factors.
However, if the employment of the four executive officers of the Bank were
terminated under circumstances in which they would be entitled to receive the
entire change in control payments under their contracts at their current salary
rates without reduction based upon the application of Section 280G of the
Internal Revenue Code or any other contract provision, the aggregate amount
payable to them as a result of such provisions would be approximately $1.4
million.
BENEFITS
PENSION PLAN. The Bank maintains a non-contributory, tax-qualified defined
benefit pension plan for eligible employees. All employees and officers with
more than 1,000 hours of service per year who have attained age 21 and completed
one year of service are eligible to participate in the pension plan. The
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pension plan provides a benefit for each participant. The annual benefit is
equal to 2% of the participant's average annual compensation multiplied by the
participant's number of years of service, with an offset for social security. A
participant is entitled to a maximum of 30 years of service under the pension
plan.
Average annual compensation is the average annual compensation for the
highest three years during the last ten years prior to retirement. A participant
is fully vested in his or her pension after five years of service. The pension
plan is funded by the Bank on an actuarial basis, and all assets are held in
trust by the pension plan trustee. The following table illustrates the annual
benefit payable upon normal retirement at age 65 in the normal form of benefit
under the pension plan at various levels of average annual compensation and
years of service under the pension plan. The amounts in the table are subject to
social security benefit offset allowance. For the current plan year, the maximum
permitted average annual compensation for determining pension benefits under the
Bank's pension plan was $160,000 and the maximum annual pension benefit was
$130,000.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
AVERAGE ANNUAL ------------------------------------------
COMPENSATION 15 20 25 30
- ------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$75,000............................................... $ 22,500 $ 30,000 $ 37,500 $ 45,000
100,000............................................... 30,000 40,000 50,000 60,000
125,000............................................... 37,500 50,000 62,500 75,000
150,000............................................... 45,000 60,000 75,000 90,000
160,000............................................... 48,000 64,000 80,000 96,000
175,000............................................... 48,000 64,000 80,000 96,000
200,000............................................... 48,000 64,000 80,000 96,000
225,000............................................... 48,000 64,000 80,000 96,000
</TABLE>
At March 31, 1998, Mr. Stisser had 44 years of credited service under the
pension plan.
401(K) PLAN. The Bank maintains a tax-qualified savings and profit sharing
plan under Section 401(k) of the Internal Revenue Code. Salaried employees with
at least one year of service who are at least age 21 may make pretax salary
deferrals and after tax contributions under the 401(k) Plan. Salary deferrals
are made by election and are limited to 10% of compensation up to $160,000 (for
1997), or to a limit imposed under the Internal Revenue Code ($10,000 subject to
annual adjustment). The Bank makes matching contributions equal to 75% of the
amount of salary contributions, up to 6% of salary. Employees are fully vested
in their salary deferrals and after tax contributions, and become incrementally
vested in the Bank's contribution after one year and fully vested in the Bank's
contributions after five years.
The 401(k) Plan has recently been amended to provide that one of the funds
which an employee may choose as an investment vehicle for his or her account is
a fund consisting of Common Stock of the Company. In the Conversion, each
employee who has subscription rights by virtue of his or her deposits with the
Bank will be permitted to exercise those subscription rights through the use of
money in his or her 401(k) Plan account. The 401(k) Plan will then submit
subscription forms on behalf of the employee who elects to invest in the Common
Stock funds. All shares purchased as a result of those subscription forms will
be held by the 401(k) Plan but will be voted by the employee. Whether or not a
particular employee's subscription is satisfied will depend upon whether that
employee qualifies for one of the priority groups with subscription rights.
EMPLOYEE STOCK OWNERSHIP PLAN. The Company has established, and the Bank
has adopted, an ESOP and related trust to become effective upon completion of
the Conversion. Substantially all employees of the Bank or the Company who have
attained age 21 and have completed one year of service are eligible to become
participants in the ESOP. The ESOP intends to purchase 8% of the Common Stock
issued in the Conversion, including shares contributed to the Foundation, using
the proceeds of a loan from the Company. Although future contributions to the
ESOP will be discretionary, the Company and the Bank intend to make annual
contributions to the ESOP in an aggregate amount at least equal to the payments
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due on the loan. It is expected that this loan will be for a term of fifteen
years and will call for level annual payments of principal and interest designed
to amortize the loan over its term. The loan will permit optional pre-payment.
The Company and the Bank may contribute more to the ESOP than is necessary to
service the loan.
Shares purchased by the ESOP will be pledged as collateral for the loan from
the Company and will be allocated among participants as the loan is repaid. The
pledged shares will be released annually from the security interest proportional
to the repayment of the loan for that year. The released shares, and any
subsequently acquired shares that are not pledged to secure a loan, will be
allocated among ESOP participants on the basis of the participant's total
taxable compensation for the year of allocation. Benefits generally become
vested at the rate of 20% per year beginning after the participant's first year
of service, with 100% vesting after five years of service. Employees will
receive credit for service prior to the Conversion for vesting purposes.
Participants are immediately vested upon termination of employment due to death,
retirement at age 65 or older, permanent disability or upon the occurrence of a
change of control. Forfeitures (shares allocated to an employee which are not
yet vested when such employee's employment terminates) will be reallocated among
remaining participating employees, in the same proportion as contributions.
Vested benefits may be paid in a single sum or installment payments and are
payable upon death, retirement at age 65 or older, disability or termination of
employment.
A corporate trustee for the ESOP not affiliated with the Bank or the Company
will be appointed prior to the Conversion and will continue thereafter. The
trustee, subject to its fiduciary duty, must vote all allocated shares held in
the ESOP in accordance with instructions received from the employees to whom the
shares have been allocated. Allocated shares for which no instructions have been
received and shares not yet allocated are voted generally in the same proportion
as allocated shares for which voting instructions are received.
The ESOP may purchase additional shares of Common Stock in the future, in
the open market or otherwise, and may do so either with borrowed funds or with
cash dividends, employer contributions or other cash flow.
STOCK OPTION PLAN. After the Conversion, the Board of Directors of the
Company intends to adopt the Stock Option Plan. If implemented prior to the
first anniversary of the Conversion, the Conversion Regulations require that the
plan be first approved by stockholders at a meeting held no earlier than six
months after the Conversion. The plan is expected to allow for options covering
10% of the Common Stock issued in the Conversion, including Common Stock
contributed to the Foundation. No final determinations have been made by the
Board of Directors as to the specific terms of the Stock Option Plan or the
amount of awards thereunder. However, the Conversion Regulations provide that no
officer or employee may receive more than 25% of the options granted and that
non-employee directors may not receive more than 5% individually or more than
30% in the aggregate of the options granted, if the plan is implemented within
one year after the Conversion.
The purpose of the Stock Option Plan is to attract and retain qualified
personnel in key positions, provide directors, officers and key employees with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company and its subsidiaries and reward directors, officers and key
employees for outstanding performance. Although the terms of the Stock Option
Plan have not yet been determined, it is expected that the Stock Option Plan
will provide for the grant of: (i) options to purchase the Company's Common
Stock intended to qualify for special tax benefits under Section 422 of the
Internal Revenue Code ; (ii) options that do not qualify for special tax
benefits; and (iii) rights exercisable only upon a change of control. The Stock
Option Plan is expected to be in effect for 10 years. Stock options granted to
non-employee directors will not qualify for the special tax treatment. If Mr
Stisser and the non-employee directors are granted the maximum number of options
permitted, Mr. Stisser would receive options to purchase from 130,156 to 202,507
shares and each non-employee director would receive options to purchase from
13,015 to 20,250 shares. No final determination regarding the amount of options
to be
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granted to directors, officers and employees has been made and such
determination is not currently expected to be made until just prior to, if not
after, the solicitation of proxies for the anticipated stockholders' meeting at
which the Stock Option Plan is presented for approval.
The Stock Option Plan will be administered by the Human Resources Committee
of the Board of Directors, which will determine which officers and employees
will be granted benefits under the plan, the nature and amount of the benefits,
the exercise price of any options granted, any vesting conditions in addition to
those imposed by the Conversion Regulations, and other conditions which may be
imposed. It is expected that the Stock Option Plan will permit options to be
granted for terms of up to 10 years (5 years for certain options granted to
employees who are 10% stockholders) and at exercise prices no less than the fair
market value at date of grant (110% of fair market value for certain options
granted to employees who are 10% stockholders).
The Stock Option Plan is expected to provide for the exercisability and
vesting of options granted thereunder in the manner specified by the Human
Resources Committee. The Conversion Regulations generally require that options
granted under plans implemented within one year after the Conversion begin
vesting no earlier than one year from the date of stockholder approval of the
plan and thereafter vest at a rate of no more than 20% per year. It is also
expected that, in the event of death or disability, grants would be 100% vested,
and options granted to officers or employees would terminate upon or within a
fixed period after termination of employment.
The Stock Option Plan, to the extent permitted by the Conversion Regulations
and subject to applicable vesting requirements, may provide for rights, either
attached to or independent of each option, which, upon a change of control, will
allow the holder to exercise the rights and receive a lump sum cash payment
instead of being required to exercise a stock option, pay the exercise price,
and then receive stock.
An employee who receives a stock option that qualifies for special tax
benefits will not have taxable income when the option is granted or exercised,
unless shares received upon exercise are disposed of within one year after the
stock is received or within two years after the grant of the option. Likewise,
the Company gets no tax deduction as a result of the grant or exercise of that
option unless the employee disposes of the stock in violation of the limits
described in the preceding sentence. For options that do not qualify for the
special tax treatment, or if an employee with an option that does qualify
violates the restrictions on disposition, the employee will be deemed to receive
ordinary taxable income when the option is exercised in an amount equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. The amount of ordinary taxable income deemed to be received
by an optionee may be a deductible expense for tax purposes for the Company.
PERSONNEL RECOGNITION AND RETENTION PROGRAM. After the Conversion, the
Company also intends to establish the PRRP to provide officers, employees and
non-employee directors with a proprietary interest in the Company in a manner
designed to encourage such persons to remain with the Bank and the Company at no
cost to the recipients of such awards. The plan will provide for the award of
shares of Common Stock, the full ownership of which will gradually vest over
five years. If implemented prior to the first anniversary of the Conversion, the
Conversion Regulations require that the adoption of the plan be subject to
stockholder approval obtained at a meeting held at least six months after the
Conversion.
The PRRP is expected to cover 4% of the shares of Common Stock issued in the
Conversion, including Common Stock contributed to the Foundation. These shares
are expected to be acquired through open market purchases, if permitted, or from
authorized but unissued shares. The Conversion Regulations provide that no
individual employee may receive more than 25% of the shares of any plan and that
non-employee directors may not receive more than 5% of the shares individually
or 30% in the aggregate for all directors, in the case of plans implemented
within one year after the Conversion. If Mr. Stisser and the non-employee
directors are awarded the maximum number of shares permitted, Mr. Stisser would
receive from 52,062 to 81,003 shares and each non-employee director would
receive from 5,206 to 8,100 shares. No final determination regarding the amount
of shares to be awarded to
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directors, officers and employees has been made and such determination is not
currently expected to be made until just prior to, if not after, the
solicitation of proxies for the anticipated stockholders' meeting at which the
PRRP is presented for approval.
The plan will be administered by the Human Resources Committee, which will
have similar authority with respect to the plan as it will have for the Stock
Option Plan discussed above. The Conversion Regulations require gradual five
year vesting of awards, in the same manner as stock option grants.
When shares under the plan vest, the recipient will recognize income equal
to the fair market value of the Common Stock at that time. The amount of income
recognized by the participants may be a deductible expense for tax purposes for
the Company. For financial reporting purposes, the Company will record
compensation expense as and when the awards vest equal to the fair market value
of the Common Stock on the date the Company first awarded those shares. This is
expected to significantly increase compensation expense for the Company after
the plan is approved. Dividends, if any, paid on unvested shares will be held
and then distributed to the grantee as and when the shares vest. It is expected
that the plan will be structured so that persons awarded shares under the plan
will be permitted to vote those shares prior to the vesting of the shares.
If authorized but unissued shares are used to fund the PRRP after the
Conversion, the interests of existing stockholders will be diluted. See "Pro
Forma Data."
EMPLOYEE SEVERANCE PLAN. The Bank has also adopted an employee severance
plan which provides for benefits to all employees of the Bank in the event of a
change in control, other than employees who have separate contracts providing
change-in-control benefits. In general, the plan provides benefits to employees
with at least one year of service with the Bank. If the employee's employment is
terminated within one year after a change in control of the Bank or the Company,
then each covered employee is entitled to a payment equal to one week of salary
for each month of service with the Bank, up to a severance payment equal to two
years' salary, which would be the amount payable after 8 years and 8 months of
service. The employee is not entitled to a benefit under the plan if the
termination is for cause.
OTHER STOCK BENEFIT PLANS. After the Conversion, the Board of Directors may
adopt other stock benefit plans for employees, officers or directors. Examples
of such plans which the Board may consider are employee stock purchase plans
under Section 423 of the Internal Revenue Code and plans for the payment of
directors' fees in stock of the Company. Employee stock purchase plans generally
involve the grant of options to purchase stock of the employer or its holding
company at a price which is as low as 85% of the fair market value of the stock
on the date the option is granted or on the date it is exercised. Under an
employee stock purchase plan, options are generally granted to all employees who
meet certain hours and years of service standards, without discrimination in
favor of officers. Employee stock purchase plans, in order to qualify under the
Internal Revenue Code, must be approved by stockholders. Directors' fee payment
plans generally involve the use of either authorized but unissued stock or stock
repurchased on the open market to pay directors' fees, in lieu of cash payments
for such fees.
It is impossible at this time to predict whether any such plans will be
adopted and, if they are adopted, what the terms and conditions of the plans
will be. If and to the extent required under applicable laws and regulations,
the plans will be submitted to stockholders for approval.
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RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE BANK
GENERAL
Certain provisions in the Company's Certificate of Incorporation and Bylaws
and in its management remuneration provided for in the Conversion, together with
provisions of Delaware corporate law, may have anti-takeover effects. In
addition, the Bank's Restated Organization Certificate and Bylaws and management
remuneration provided for in the Conversion may have anti-takeover effects as
described below. Finally, regulatory restrictions may make it difficult for
persons or companies to acquire control of either the Company or the Bank.
RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
GENERAL. The following discussion is a general summary of certain
provisions of the 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, which might be
deemed to have a potential "anti-takeover" effect. These provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which individual Company stockholders may deem to be in
their best interests or in which stockholders may receive a substantial premium
for their shares over then current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of the current Board of
Directors or management of the Company more difficult. The following description
of certain of the provisions of the Certificate of Incorporation and Bylaws of
the 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
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. Beneficial ownership is determined pursuant
to Rule 13d-3 of the General Rules and Regulations promulgated pursuant to the
Securities Exchange Act of 1934, and includes shares beneficially owned by such
person or any of his affiliates (as defined in the Company's Certificate of
Incorporation), shares which such person or his affiliates have the right to
acquire pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options or otherwise
and shares as to which such person and his affiliates have sole or shared voting
or investment power, but shall not include shares that are subject to a publicly
solicited revocable proxy and that are not otherwise deemed to be beneficially
owned by such person and his affiliates. No director or officer (or any
affiliate thereof) of the Company shall, solely by acting in such capacity, be
deemed to beneficially own any shares beneficially owned by any other director
or officer (or affiliate thereof) nor will the ESOP or any similar plan of the
Company or the Bank or any trustee with respect thereto (solely by reason of
such trustee's capacity) be deemed to beneficially own any shares held under any
such plan. The Certificate of Incorporation of the Company further provides that
the provisions limiting voting rights may only be amended upon the vote of the
holders of at least 80% of the voting power of all then outstanding shares of
capital stock entitled to vote thereon (after giving effect to the provision
limiting voting rights).
BOARD OF DIRECTORS. The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of the 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 Company's Certificate of Incorporation and Bylaws provide that the
size of the Board shall be determined by a majority of the total number of
authorized directorships, whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board
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for adoption (referred to as the "Whole Board"). 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 division of
the Board into three classes is intended to provide for continuity of the Board
of Directors and to make it more difficult and time consuming for a stockholder
group to use its voting power to gain control of the Board of Directors without
the consent of the incumbent Board of Directors of the Company. Directors may be
removed by the stockholders only for cause by the affirmative vote of the
holders of at least 80% of the voting power of all then outstanding shares of
capital stock entitled to vote thereon.
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 expressly provides that there shall not be
cumulative voting, which makes it more difficult for stockholders with a
minority interest in the Company to obtain representation on the Board of
Directors. Moreover, special meetings of stockholders of the Company may be
called only by a resolution adopted by a majority of the Whole Board of
Directors. The Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of the Company may be
taken only at an annual or special meeting and prohibits stockholder action by
written consent in lieu of a meeting.
AUTHORIZED SHARES. The Certificate of Incorporation authorizes the issuance
of 18,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock.
These shares exceed the number to be issued in the Conversion so the Company
will have the flexibility 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 rights, 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 currently has no plans for the issuance of additional shares, other than
the issuance of shares in the Conversion and the contribution of Common Stock to
the Foundation.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH INTERESTED
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock
entitled to vote thereon to approve certain "Business Combinations" with an
"Interested Stockholder," each 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
Company and any other affected class of stock. Under the Certificate of
Incorporation, the approval of the holders of at least 80% of the shares of
capital stock entitled to vote thereon is required for any business combination
involving an Interested Stockholder (as defined below) unless (i) the proposed
transaction has been approved by a majority of those members of the Company's
Board of Directors who are unaffiliated with the Interested Stockholder and were
directors prior to the time when the Interested Stockholder became an Interested
Stockholder or (ii) the proposed transaction meets certain conditions which are
designed to afford the stockholders a fair price in consideration for their
shares. The term "Interested Stockholder" is defined to include, among others,
any individual, a group acting in concert, corporation, partnership, association
or other entity (other than the Company or its subsidiary) who or which is the
beneficial owner, directly or indirectly, of
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<PAGE>
10% or more of the outstanding shares of voting stock of the 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 Company or any of its subsidiaries with any Interested Stockholder or
Affiliate (as defined in the Certificate of Incorporation) of an Interested
Stockholder or any corporation which is, or after such merger or consolidation
would be, an Affiliate of an Interested Stockholder; (ii) any sale, lease,
exchange, mortgage, pledge, transfer, or other disposition to or with any
Interested Stockholder or Affiliate of 25% or more of the assets of the Company
or combined assets of the Company and its subsidiary; (iii) the issuance or
transfer to any Interested Stockholder or its Affiliate by the Company (or any
subsidiary) of any securities of the Company (or any subsidiary) in exchange for
any cash, securities or other property the value of which equals or exceeds 25%
of the fair market value of the Common Stock of the Company; (iv) the adoption
of any plan for the liquidation or dissolution of the Company proposed by or on
behalf of any Interested Stockholder or Affiliate thereof; and (v) any
reclassification of securities, recapitalization, merger or consolidation of the
Company with any of its subsidiaries which has the effect of increasing the
proportionate share of Common Stock or any class of equity or convertible
securities of the Company or subsidiary owned directly or indirectly, by an
Interested Stockholder or Affiliate thereof.
EVALUATION OF OFFERS. The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating any
offer to (i) make a tender or exchange offer for any equity security of the
Company, (ii) merge or consolidate the Company with another corporation or
entity or (iii) purchase or otherwise acquire all or substantially all of the
properties and assets of the Company, may, in connection with the exercise of
its judgment in determining what is in the best interest of the Company and the
stockholders of the Company, give due consideration to all relevant factors,
including, without limitation, those factors that directors of any subsidiary
(including the Bank) may consider in evaluating any action that may result in a
change or potential change of control of such subsidiary, and the social and
economic effects of acceptance of such offer on: the Company's present and
future customers and employees and those of its subsidiaries (including the
Bank); the communities in which the Company and the Bank operate or are located;
the ability of the Company to fulfill its corporate objectives as a bank holding
company; and the ability of the Bank to fulfill the objectives of a stock
savings bank under applicable statutes and regulations. By having these
standards in the Certificate of Incorporation of the Company, the Board of
Directors may be in a stronger position to oppose such a transaction if the
Board concludes that the transaction would not be in the best interest of the
Company, even if the price offered is significantly greater than the then market
price of any equity security of the Company.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Company's Certificate of Incorporation must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of the holders of at
least 80% of the outstanding voting stock entitled to vote (after giving effect
to the provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation of the Company, including the
provision limiting voting rights, the provisions relating to approval of certain
business combinations, calling special meetings, the number and classification
of directors, director and officer indemnification by the Company and amendment
of the Company's Bylaws and Certificate of Incorporation. The Company's Bylaws
may be amended by a majority of the Whole Board of Directors, or by a vote of
the holders of at least 80% (after giving effect to the provision limiting
voting rights) of the total votes eligible to be voted at a duly constituted
meeting of stockholders.
CERTAIN BYLAW PROVISIONS. The Bylaws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or who intends to bring on any business to be conducted at an annual
stockholders' meeting to give at least 90 days advance notice to the Secretary
of the Company. The notice provision requires a stockholder who desires to raise
such business to provide certain information to the Company concerning the
nature of the new business, the stockholder and the stockholder's interest in
the business matter. Similarly, a stockholder wishing to nominate any person for
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<PAGE>
election as a director must provide the Company with certain information
concerning the nominee and the proposing stockholder.
ANTI-TAKEOVER EFFECTS OF MANAGEMENT COMPENSATION ARRANGEMENTS
The Company and the Bank have entered into agreements with four officers and
the Bank has adopted an Employee Severance Plan which provide payments and
benefits in connection with a change in control of the Company or the Bank. See
"Management of the Bank--Employment Contracts," and "--Employee Severance Plan."
Furthermore, in the future, the Stock Option Plan and the PRRP may provide for
accelerated benefits to participants in the event of a change in control of the
Company or the Bank or a tender or exchange offer for their stock, but such
provisions are currently not permitted. See "Management of the Bank--Benefit
Plans--Stock Option Plan," and "--Benefit Plans--Personnel Recognition and
Retention Program." These provisions could deter offers to acquire the
outstanding shares of the Company which might be viewed by stockholders to be in
their best interests.
The directors and executive officers of the Bank intend to purchase in the
aggregate from approximately 2.1% to 3.2% of the shares of Common Stock to be
issued in the Conversion. In addition, the ESOP intends to purchase 8% of the
Common Stock issued in the Conversion, including Common Stock contributed to the
Foundation. The Company anticipates that it will reacquire 4% of the Common
Stock issued in the Conversion to fund the PRRP and expects to grant options to
purchase shares equal to 10% of the Common Stock issued in the Conversion under
the Stock Option Plan to directors and executive officers. Furthermore, the
Company intends to contribute to the Foundation Common Stock equal to 2% of the
Common Stock to be sold in the Conversion. As a result, assuming that the PRRP
awards and stock options are satisfied out of shares repurchased by the Company,
directors, executive officers and employees have the potential to control the
voting of from approximately 24.1% to 25.2% of the Company's Common Stock,
enabling them to prevent transactions requiring the approval of at least 80% of
the Company's outstanding shares of voting stock described above.
The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation and Bylaws are in the best interest of the Company
and its stockholders. An unsolicited non-negotiated takeover 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 Company and its stockholders to encourage potential acquirors
to negotiate directly with management and that these provisions will encourage
such negotiations and discourage non-negotiated takeover attempts.
DELAWARE CORPORATE LAW
BUSINESS COMBINATIONS. In general, Section 203 of the Delaware General
Corporation Law ("Section 203") provides that a "Person" (as defined therein)
who owns 15% or more of the outstanding voting stock of a Delaware corporation
(an "Interested Stockholder") 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 an Interested Stockholder. 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
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, excluding, for purposes of
determining the number of shares outstanding, shares owned by the corporation's
directors who are also officers and certain employee stock plans; (iii) any
business combination with an Interested Stockholder that is approved by the
Board of Directors and by a two-thirds vote of the outstanding voting
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<PAGE>
stock not owned by the Interested Stockholder; 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 requirements of the statute by adopting an amendment to its
Certificate of Incorporation or Bylaws electing not to be governed by Section
203. 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 NEW BYLAWS
The Restated Organization Certificate and Bylaws of the Bank include
provisions which could have anti-takeover effects which provisions are
comparable to the provisions contained in the Company's Certificate of
Incorporation and Bylaws. These provisions include, for example, limits on
voting of more than 10% of the stock of the Bank held by a single person or
groups, super-majority stockholder voting requirement to approve certain
business combinations, no cumulative voting and a staggered Board of Directors.
REGULATORY RESTRICTIONS
The Conversion 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 Plan of Conversion also
prohibits 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.
As permitted by the Conversion Regulations, the Restated Organization
Certificate of the Bank prohibits, for three years after the Conversion, any
person from acquiring or making an offer to acquire more than 10% of the stock
of the Bank. In addition, the Banking Law requires the approval of the New York
Banking Board before any person or company acquires the power to vote, directly
or indirectly, more than 10% of the voting stock of the Bank.
In addition, any proposal to acquire 10% of any class of equity security of
the Company generally would be subject to approval by the Federal Reserve under
the Change in Bank Control Act. Federal law generally provides that no "person,"
acting directly or indirectly or through or in concert with one or more other
persons, may acquire "control," as that term is defined in Federal Reserve
regulations, of a state bank or its holding company without giving at least 60
days written notice to the Federal Reserve and providing the Federal Reserve an
opportunity to disapprove the proposed acquisition. Such acquisitions of control
may be disapproved by the Federal Reserve if it is determined, among other
things, that (i) the acquisition would substantially lessen competition or
result in a monopoly; (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 Company stock are not limited to three years after the
Conversion but will apply for as long as the regulations are in effect. Persons
holding revocable or irrevocable proxies may be deemed to be beneficial owners
of such securities under Federal Reserve regulations and therefore prohibited
from voting all or the portion of such proxies in excess of the 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.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue 18,000,000 shares of Common Stock having
a par value of $.01 per share and 2,000,000 shares of preferred stock having a
par value of $.01 per share (the "Preferred Stock"). The Company currently
expects to issue up to 8,262,312 shares of Common Stock and no shares of
Preferred Stock in the Conversion, including shares contributed to the
Foundation. Except for shares issued in connection with the Conversion, the
Company presently does not have plans to issue Common Stock, except for shares
that may be issued upon the exercise of stock options which may be granted
pursuant to the Stock Option Plan. The Company may also elect to fund awards
under the PRRP with authorized but unissued Common Stock. 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 of
Conversion, all such stock will be duly authorized, fully paid and
nonassessable.
The Common Stock of the Company will represent nonwithdrawable capital, will
not be an account of an insurable type, and will not be insured by the FDIC or
any other government agency.
COMMON STOCK
DIVIDENDS. The 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 "Dividend Policy" and "Regulation." The
holders of Common Stock of the Company will be entitled to receive and share
equally in such dividends as may be declared by the Board of Directors of the
Company out of funds legally available therefor. If the Company issues Preferred
Stock, the holders of it may have a priority over the holders of the Common
Stock with respect to dividends.
VOTING RIGHTS. Upon the Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company. They will elect the
Company's Board of Directors and act on such other matters as are required to be
presented to them under Delaware law or as are otherwise presented to them by
the Board of Directors. Except as discussed in "Restrictions on Acquisition of
the Company and the Bank," each holder of Common Stock will be entitled to one
vote per share. Stockholders will not have any right to cumulate votes in the
election of directors. If the Company issues Preferred Stock, holders of the
Preferred Stock may also possess voting rights. Certain matters require an 80%
stockholder vote (after giving effect to the provision limiting voting rights).
See "Restrictions on Acquisition of the Company and the Bank."
As a mutual savings bank, corporate powers and control of the Bank are
vested in its Board of Directors, who elect the officers of the Bank and who
fill any vacancies on the Board of Directors prior to the Conversion. Subsequent
to Conversion, voting rights will be vested exclusively in the Company as the
sole owner of the shares of capital stock of the Bank, and voting rights will be
exercised at the direction of the Company's Board of Directors. Consequently,
the holders of the Common Stock will not have direct control of the Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Bank, the 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 liquidation account (See "The
Conversion--Effects of Conversion on Depositors and Borrowers--Liquidation
Rights"), all assets of the Bank available for distribution. In the event of
liquidation, dissolution or winding up of the Company, the holders of its Common
Stock would be entitled to receive, after payment or provision for payment of
all of its debts and liabilities, all of the assets
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<PAGE>
of the 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 liquidation or dissolution.
PREEMPTIVE RIGHTS; REDEMPTION. Holders of the Common Stock of the 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.
INDEMNIFICATION AND LIMIT ON LIABILITY. The Company's Certificate of
Incorporation contains provisions which limit the liability of directors,
officers and employees of the Company and indemnify such individuals. See
"Management of the Company--Indemnification and Liability of Directors."
PREFERRED STOCK
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such designations,
powers, preferences and rights as the Board of Directors
may from time to time determine. The Board of Directors can, without stockholder
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 unfriendly takeover or
attempted change in control. The Company presently does not have plans to issue
Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Registrar and
Transfer Company.
EXPERTS
The consolidated financial statements of Cortland Savings Bank and its
subsidiary as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, have been included herein and in the
registration statement filed with the SEC in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
RP Financial, LC. has consented to the publication herein of the summary of
its report to the Bank and Company setting forth its opinion as to the estimated
pro forma market value of the Common Stock upon Conversion and its opinion 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 Company by Serchuk &
Zelermyer, LLP, White Plains, New York, counsel to the Bank and Company. Certain
legal matters will be passed upon for CIBC Oppenheimer Corp. and Trident
Securities, Inc. by Thacher Proffitt & Wood, New York, New York.
ADDITIONAL INFORMATION
The Company has filed with the SEC a registration statement under the
Securities Act of 1933 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 Appraisal, 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 maintains 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 Appraisal may also be
inspected by Eligible Account Holders and Supplemental Eligible Account Holders
at the offices of
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the Bank during normal business hours. 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 Conversion with the Banking
Department. Pursuant to the rules and regulations of the Banking Department,
this Prospectus omits certain information contained in that application. The
application may be examined at the principal office of the Banking Department,
Two Rector Street, New York, New York 10006.
In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section 12(g) of the Securities Exchange Act of 1934
and, upon such registration, the 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 Securities Exchange Act of 1934. Under the Plan of
Conversion, the Company has undertaken that it will not terminate such
registration for a period of at least three years following the Conversion.
Copies of the Certificate of Incorporation and the Bylaws of the Company and
the Restated Organization Certificate and Bylaws of the Bank are available
without charge from the Bank upon written or oral request.
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CORTLAND SAVINGS BANK
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1996 and at March 31, 1998
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995
and for the three months ended March 31, 1998 and 1997 (unaudited).................. 51
Consolidated Statements of Net Worth for the Years Ended December 31, 1997, 1996 and
1995 and the three months ended March 31, 1998 (unaudited).......................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995 and the three months ended March 31, 1998 and 1997 (unaudited)................. F-5
Notes to Financial Statements......................................................... F-7
</TABLE>
All data as of and for the three month periods ended March 31, 1998 and 1997
are unaudited
All schedules are omitted because the required information is not applicable
or is included in the Consolidated Financial Statements or related Notes.
The Financial Statements of the Company have been omitted because the
Company has not yet issued any stock, has no assets, no liabilities and has not
conducted any business other than of an organizational nature.
F-1
<PAGE>
KPMG Peat Marwick LLP
113 South Salina Street
Syracuse, NY 13202
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
Cortland Savings Bank:
We have audited the accompanying consolidated balance sheets of Cortland
Savings Bank and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, net worth and cash flows for each of the
years in the three-year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cortland
Savings Bank and subsidiary at December 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 December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
March 19, 1998
F-2
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
MARCH 31, ------------ -------------
1998
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................... $ 4,613 $ 4,679 $ 9,736
Federal funds sold................................ 5,200 3,400 2,800
Securities available-for-sale, at fair value...... 45,475 44,140 45,594
Securities held-to-maturity (fair value of $12,489
(unaudited), $12,569 and $11,633 at March 31,
1998 and December 31, 1997 and 1996,
respectively)................................... 12,479 12,550 11,757
Loans held for sale............................... -- 2,541 --
Loans receivable, net of deferred fees............ 156,430 157,565 160,563
Less allowance for loan losses.................... 2,230 2,143 1,952
------------ ------------ -------------
Net loans................................... 154,200 155,422 158,611
Premises and equipment, net....................... 3,446 3,447 3,655
Federal Home Loan Bank stock, at cost............. 1,303 1,291 1,228
Accrued interest receivable....................... 1,660 1,679 1,912
Deferred income taxes............................. 1,086 1,908 1,245
Real estate owned................................. 760 964 563
Other assets...................................... 2,166 1,708 999
------------ ------------ -------------
$ 232,388 $ 233,729 $ 238,100
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND NET WORTH
Liabilities:
Deposits:
Demand accounts............................... $ 9,128 $ 10,604 $ 9,563
Passbook, statement savings and club
accounts.................................... 63,658 62,769 63,003
Savings certificates.......................... 107,854 108,258 112,642
Money market accounts......................... 8,314 8,435 9,343
NOW accounts.................................. 9,280 9,704 10,089
------------ ------------ -------------
Total deposits.............................. 198,234 199,770 204,640
Advance payments by borrowers for property taxes
and insurance................................. 705 1,329 1,373
Other liabilities............................... 2,055 1,890 1,742
------------ ------------ -------------
Total liabilities........................... 200,994 202,989 207,755
------------ ------------ -------------
Commitments and contingencies (note 12)
Net worth:
Surplus fund.................................... 5,541 5,541 5,541
Retained earnings............................... 25,121 24,628 24,556
Accumulated other comprehensive income.......... 732 571 248
------------ ------------ -------------
Total net worth............................. 31,394 30,740 30,345
------------ ------------ -------------
$ 232,388 $ 233,729 $ 238,100
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET WORTH
THREE-MONTHS ENDED MARCH 31, 1998 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
SURPLUS RETAINED COMPREHENSIVE
FUND EARNINGS INCOME TOTAL
--------- --------- ----------------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1994...................................... $ 5,541 $ 21,267 $ 68 $ 26,876
Comprehensive income:
Change in net unrealized gain (loss) on securities, net of tax
and reclassification adjustment............................... -- -- 230 230
Net income...................................................... -- 1,924 -- 1,924
--------- --------- ----- ---------
Comprehensive income.............................................. -- 1,924 230 2,154
--------- --------- ----- ---------
Balance at December 31, 1995...................................... 5,541 23,191 298 29,030
Comprehensive income:
Change in net unrealized gain (loss) on securities, net of tax
and reclassification adjustment............................... -- -- (50) (50)
Net income...................................................... -- 1,365 -- 1,365
--------- --------- ----- ---------
Comprehensive income.............................................. -- 1,365 (50) 1,315
--------- --------- ----- ---------
Balance at December 31, 1996...................................... 5,541 24,556 248 30,345
Comprehensive income:
Change in net unrealized gain (loss) on securities, net of tax
and reclassification adjustment............................... -- -- 323 323
Net income...................................................... -- 72 -- 72
--------- --------- ----- ---------
Comprehensive income.............................................. -- 72 323 395
--------- --------- ----- ---------
Balance at December 31, 1997...................................... 5,541 24,628 571 30,740
Comprehensive income:
Change in net unrealized gain (loss) on securities, net of tax
and reclassification adjustment (unaudited)................... -- -- 161 161
Net income (unaudited).......................................... -- 493 -- 493
--------- --------- ----- ---------
Comprehensive income (unaudited).................................. -- 493 161 654
--------- --------- ----- ---------
Balance at March 31, 1998 (unaudited)............................. $ 5,541 $ 25,121 $ 732 $ 31,394
--------- --------- ----- ---------
--------- --------- ----- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 493 $ 411 $ 72 $ 1,365 $ 1,924
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 118 146 579 507 497
Decrease (increase) in accrued interest receivable........ 19 (41) 233 431 23
Provision for loan losses................................. 75 225 3,300 1,380 600
Write-down of real estate owned........................... 50 -- 365 59 --
Net (gains) losses on sales of securities................. (6) (7) (46) (15) (16)
Nationar (recovery) provision............................. -- -- (45) -- 100
Net losses (gains) on sale of real estate owned........... (44) -- (11) 37 (47)
Net amortization of premiums and discounts................ 1 (55) 104 251 566
Net gain on sale of loans held for sale................... (30) -- -- -- --
Proceeds from sale of loans held for sale................. 3,131 -- -- -- --
Increase (decrease) in other liabilities.................. 165 6 148 (70) 426
Deferred income taxes..................................... 706 (9) (869) (342) (323)
(Increase) decrease in other assets....................... (458) 91 (709) 1,597 (1,715)
--------- --------- --------- --------- ---------
Net cash provided by operating activities............. 4,220 767 3,121 5,200 2,035
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Net decrease (increase) in loans............................ 542 683 (3,746) (2,064) (6,654)
Proceeds from recovery of Nationar.......................... -- -- 45 -- --
Proceeds from sales of securities available-for-sale........ 2,006 1,533 3,121 1,057 3,412
Proceeds from maturities and principle reductions of
securities available-for-sale............................. 5,155 4,695 18,040 21,959 1,692
Purchases of securities available-for-sale.................. (8,214) (8,254) (19,237) (27,139) (12,985)
Purchases of securities held-to-maturity.................... (1,522) -- (3,847) (2,964) (2,991)
Proceeds from maturities and principle reductions of
securities held-to-maturity............................... 1,593 434 3,054 2,382 21,883
Proceeds from sale of real estate owned..................... 243 39 340 274 372
Additions to premises and equipment......................... (117) (215) (371) (291) (255)
Purchase of FHLB stock...................................... (12) -- (63) (1,228) --
--------- --------- --------- --------- ---------
Net cash provided (used) by investing activities...... (326) (1,085) (2,664) (8,014) 4,474
--------- --------- --------- --------- ---------
Cash flows from financing activities:
(Decrease) increase in deposits............................. (1,536) (1,648) (4,870) 1,530 2,800
Decrease in advance payments by borrowers for property taxes
and insurance............................................. (624) (684) (44) (356) (45)
--------- --------- --------- --------- ---------
Net cash (used) provided by financing activities...... (2,160) (2,332) (4,914) 1,174 2,755
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents.......... 1,734 (2,650) (4,457) (1,640) 9,264
Cash and cash equivalents at beginning of period.............. 8,079 12,536 12,536 14,176 4,912
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.................... $ 9,813 $ 9,886 $ 8,079 $ 12,536 $ 14,176
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-5
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE-MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activities:
Transfer of securities held-to-maturity to securities
available-for-sale...................................... $ -- $ -- $ -- $ -- $ 31,053
Transfer of loans held-to-maturity to loans
held-for-sale........................................... 661 -- 2,541 -- --
Transfer of loans held-for-sale to loans
held-to-maturity........................................ 101 -- -- -- --
Additions to real estate owned............................ 45 33 1,095 711 645
Cash paid during the three-months and year for:
Interest.................................................. 2,021 2,062 8,321 8,761 8,588
Income taxes.............................................. -- 54 1,125 1,644 1,420
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(1) BUSINESS
Cortland Savings Bank and subsidiary (the "Bank") are organized under the
laws of New York. The Bank is subject to regulation by the New York State
Banking Department and the Federal Deposit Insurance Corporation (FDIC) and is a
mutual savings bank. The financial services subsidiary has been inactive since
its formation in 1986. The Bank's lending activity is concentrated in Cortland
County and surrounding areas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Cortland
Savings Bank and its wholly-owned subsidiary, Cortland Financial Services, Inc.
All significant intercompany balances and transactions have been eliminated in
consolidation.
The balance sheet as of March 31, 1998 and the related statements of income
and cash flows for the three month periods ended March 31, 1998 and 1997 and
changes in net worth for the three month period ended March 31, 1998 are
unaudited and, in the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation as of March 31,
1998 and for the results for the unaudited periods have been made.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Certain prior year amounts have been
reclassified to conform to the current year's classifications. A description of
the significant accounting policies is presented below. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ from
those estimates.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include vault cash, amounts due from banks and
Federal funds sold which represents short-term highly liquid investments.
(C) SECURITIES
The Bank classifies its debt securities as either available-for-sale or
held-to-maturity as the Bank does not hold any securities considered to be
trading. Equity securities are classified as available-for-sale. Held-
to-maturity securities are those debt securities the Bank has the ability and
intent to hold until maturity. All other debt securities are classified as
available-for-sale.
Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost. Unrealized holding gains and losses,
net of the related tax effect, on available-for-sale securities are excluded
from earnings and reported as a separate component of net worth until realized.
Transfers of securities between categories are recorded at fair value at the
date of transfer.
F-7
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A decline in the fair value of an available-for-sale or held-to-maturity
security that is deemed to be other than temporary results in a charge to
earnings resulting in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the interest method. Dividend
and interest income are recognized when earned. Realized gains and losses on
securities are included in earnings and are calculated using the specific
identification method, for determining the cost of the securities sold.
(D) LOANS
Loans are reported at the principal amount outstanding, net of deferred
fees. Fees and certain direct origination costs related to lending activities
are recognized using the interest method over the lives of the loans. Management
has the ability and intent to hold its loans to maturity except for education
loans which are sold to a third party upon reaching repayment status.
The accrual of interest on loans (including impaired loans) is generally
discontinued and previously accrued interest is reversed when loan payments are
90 days or more past due or when, by the judgment of management, collectibility
becomes uncertain. Subsequent recognition of income occurs only to the extent
that payment is received. Loans are returned to an accrual status when both
principal and interest are current and the loan is determined to be performing
in accordance with the applicable loan terms.
(E) ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses consists of the provision charged to
operations based upon past loan loss experience, management(1)s evaluation of
the loan portfolio under current economic conditions and such other factors that
require current recognition in estimating loan losses. Loan losses and
recoveries of loans previously written-off are charged or credited to the
allowance as incurred or realized, respectively.
Management believes that the allowance for loan losses is adequate.
Management uses presently available information to recognize losses on loans;
however, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance for
loan losses and may require the Bank to recognize additions to the allowance
based on their judgment of information available to them at the time of their
examination.
The Bank estimates losses on impaired loans based on the present value of
expected future cash flows (discounted at the loan's effective interest rate) or
the fair value of the underlying collateral if the loan is collateral dependent.
An impairment loss exists if the recorded investment in a loan exceeds the value
of the loan as measured by the aforementioned methods. A loan is considered
impaired when it is probable that the Bank will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Generally, all
commercial mortgage loans and commercial loans in a delinquent payment status
(90 days or more delinquent) are considered impaired. Residential mortgage
loans, consumer loans, home equity lines of credit and education loans are
evaluated collectively since they are homogenous and generally carry smaller
individual balances. Impairment losses are included as a component of the
allowance for loan losses. The Bank recognizes interest income on impaired loans
using the cash basis of
F-8
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income recognition. Cash receipts on impaired loans are generally applied
according to the terms of the loan agreement, or as a reduction of principal,
based upon management judgment and the related factors discussed above.
(F) REAL ESTATE OWNED
Real estate acquired in settlement of loans is carried at the lower of the
unpaid loan balance or fair value less estimated costs to sell. Write-downs from
the unpaid loan balance to fair value at the time of foreclosure are charged to
the allowance for loan losses. Subsequent write-downs to fair value, net of
disposal costs, are charged to other expenses.
(G) PREMISES AND EQUIPMENT
Land is carried at cost and buildings and improvements and furniture and
equipment are carried at cost less accumulated depreciation. Depreciation is
computed on the straight-line method over the estimated useful lives of the
assets (3-39 years for building and improvements; 3-7 years for furniture and
equipment.)
(H) EMPLOYEE BENEFIT PLANS
The Bank maintains a non-contributory defined benefit pension plan that
covers substantially all employees. The benefits under the pension plan are
based on the employee's years of service and compensation. The Bank also has a
defined contribution 401(k) Savings Plan for all full time salaried employees.
Employees are permitted to contribute up to 10% of base pay to the Savings Plan,
subject to certain limitations. The Bank matches 75% of each employee's
contribution up to 6%.
(I) POSTRETIREMENT BENEFITS
The Bank maintains a non-contributory health and life insurance plan that
provides postretirement benefits to current and retired employees and certain
eligible dependents who meet minimum age and service requirements. The estimated
costs of providing benefits are accrued over the years the employees render
services necessary to earn those benefits.
(J) INCOME TAXES
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 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 the period that
includes the enactment date.
(K) COMPREHENSIVE INCOME
On January 1, 1998, the Bank adopted the provisions of Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME. This
statement establishes standards for reporting and display
F-9
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of comprehensive income and its components. Comprehensive income includes the
reported net income of a bank adjusted for items that are currently accounted
for as direct entries to net worth, such as the mark to market adjustment on
securities available for sale, foreign currency items and minimum pension
liability adjustments. At the Bank, comprehensive income represents net income
plus other comprehensive income, which consists of the net change in unrealized
gains or losses on securities available for sale for the period. Accumulated
other comprehensive income represents the net unrealized gains or losses on
securities available for sale as of the balance sheet dates. Comprehensive
income for the three-month periods ended March 31, 1998 and 1997 (unaudited) was
$654,000 and $242,000, respectively.
The following summarizes the components of other comprehensive income (in
thousands):
<TABLE>
<CAPTION>
THREE-MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Other comprehensive income, before tax:
Net unrealized holding gain on securities............................... $ 283 $ (275) $ 575 $ (68) $ 398
Reclassification adjustment for (gains) losses included in net income... (6) (7) (46) (15) (16)
--------- --------- --------- --- ---------
Other comprehensive income, before tax.................................... 277 (282) 529 (83) 382
Income tax expense related to items of other comprehensive income......... 116 (114) 206 (33) 152
--------- --------- --------- --- ---------
Other comprehensive income, net of tax.................................... $ 161 $ (168) $ 323 $ (50) $ 230
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
</TABLE>
(L) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank does not engage in the use of derivative financial instruments. The
Bank's off-balance sheet financial instruments are limited to commitments to
extend credit.
(M) NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Bank adopted the remaining provisions of
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which relate to the accounting for securities lending, repurchase agreements,
and other secured financing activities. These provisions, which were delayed for
implementation by SFAS No. 127, are not expected to have a material impact on
the Bank. In addition, the FASB is considering certain amendments and
interpretations of SFAS No. 125 which, if enacted in the future, could affect
the accounting for transactions within their scope.
F-10
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(3) SECURITIES
Securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities....................................... $ 16,543 $ 97 $ 18 $ 16,622
Mortgage-backed securities....................................... 11,886 123 28 11,981
Corporate debt securities........................................ 14,485 45 18 14,512
----------- ----------- --- ---------
Total debt securities.......................................... 42,914 265 64 43,115
Equity securities................................................ 1,340 1,031 11 2,360
----------- ----------- --- ---------
$ 44,254 $ 1,296 $ 75 $ 45,475
----------- ----------- --- ---------
----------- ----------- --- ---------
Held-to-maturity:
U.S. Government securities....................................... 2,001 1 5 1,997
Mortgage-backed securities....................................... 7,835 82 89 7,828
Corporate debt securities........................................ 2,359 18 1 2,376
State and municipal sub-divisions................................ 284 4 -- 288
----------- ----------- --- ---------
$ 12,479 $ 105 $ 95 $ 12,489
----------- ----------- --- ---------
----------- ----------- --- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities....................................... $ 16,041 $ 105 $ -- $ 16,146
Mortgage-backed securities....................................... 12,144 120 53 12,211
Corporate debt securities........................................ 13,819 46 4 13,861
----------- ----------- --- ---------
Total debt securities.......................................... 42,004 271 57 42,218
Equity securities................................................ 1,192 748 18 1,922
----------- ----------- --- ---------
$ 43,196 $ 1,019 $ 75 $ 44,140
----------- ----------- --- ---------
----------- ----------- --- ---------
Held-to-maturity:
U.S. Government securities....................................... $ 1,992 $ 3 $ -- $ 1,995
Mortgage-backed securities....................................... 8,279 87 92 8,274
Corporate debt securities........................................ 1,854 16 -- 1,870
State and municipal sub-divisions................................ 425 5 -- 430
----------- ----------- --- ---------
$ 12,550 $ 111 $ 92 $ 12,569
----------- ----------- --- ---------
----------- ----------- --- ---------
</TABLE>
F-11
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(3) SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities....................................... $ 19,485 $ 63 $ 5 $ 19,543
Mortgage-backed securities....................................... 11,833 56 167 11,722
Corporate debt securities........................................ 13,233 44 25 13,252
----------- ----------- ----- ---------
Total debt securities.......................................... 44,551 163 197 44,517
Equity securities................................................ 628 452 3 1,077
----------- ----------- ----- ---------
$ 45,179 615 200 45,594
----------- ----------- ----- ---------
----------- ----------- ----- ---------
Held-to-maturity:
Mortgage-backed securities....................................... $ 10,899 $ 64 $ 197 $ 10,766
State and municipal sub-divisions................................ 858 9 -- 867
----------- ----------- ----- ---------
$ 11,757 $ 73 $ 197 $ 11,633
----------- ----------- ----- ---------
----------- ----------- ----- ---------
</TABLE>
The following table presents the carrying value and fair value of debt
securities at March 31, 1998 (unaudited), based on the earlier of call or
maturity date (in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Available-for-sale:
Due within one year.................................................. $ 7,731 $ 7,752
Due after one year through five years................................ 22,300 22,392
Due after five years through ten years............................... 997 990
Due after ten years.................................................. -- --
----------- ---------
31,028 31,134
Mortgage-backed securities......................................... 11,886 11,981
----------- ---------
$ 42,914 $ 43,115
----------- ---------
----------- ---------
Held-to-maturity:
Due within one year.................................................. $ -- $ --
Due after one year through five years................................ 4,644 4,661
Due after five years through ten years............................... -- --
Due after ten years.................................................. -- --
----------- ---------
4,644 4,661
Mortgage-backed securities......................................... 7,835 7,828
----------- ---------
$ 12,479 $ 12,489
----------- ---------
----------- ---------
</TABLE>
F-12
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(3) SECURITIES (CONTINUED)
The following table presents the carrying value and fair value of debt
securities at December 31, 1997, based on the earlier of call or maturity date
(in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Available-for-sale:
Due within one year.................................................. $ 11,075 $ 11,096
Due after one year through five years................................ 17,784 17,908
Due after five years through ten years............................... 1,001 1,003
Due after ten years.................................................. -- --
----------- ---------
29,860 30,007
Mortgage-backed securities......................................... 12,144 12,211
----------- ---------
$ 42,004 $ 42,218
----------- ---------
----------- ---------
Held-to-maturity:
Due within one year.................................................. $ 1,638 $ 1,639
Due after one year through five years................................ 2,633 2,656
Due after five years through ten years............................... -- --
Due after ten years.................................................. -- --
----------- ---------
4,271 4,295
Mortgage-backed securities......................................... 8,279 8,274
----------- ---------
$ 12,550 $ 12,569
----------- ---------
----------- ---------
</TABLE>
Gross gains of $6,000 and $7,000 were realized on sales of securities during
the three months ended March 31, 1998 and 1997 (unaudited), respectively. There
were no gross losses realized on sales of securities during the three months
ended March 31, 1998 and 1997 (unaudited). Gross gains of $46,000 and $15,000
were realized on sales of securities in 1997 and 1996, respectively. There were
no gross losses realized on sales of securities in 1997 and 1996. Gross gains
and losses of $47,000 and $31,000, respectively, were realized on sales of
securities in 1995.
In February 1995, the Superintendent of Banks for the State of New York
seized Nationar, a check-clearing and trust company, freezing all of Nationar's
assets. The Bank held $100,000 of Nationar capital debentures. Based on
information set forth in certain publicly available documents, at that time,
management believed that there was a reasonable likelihood that the Bank would
not recover all amounts owed by Nationar. Accordingly, management established a
reserve of $100,000 for the Nationar capital debentures as of December 31, 1995.
During 1997, the Bank recovered $45,000 on the Nationar capital debenture.
Securities carried at $511,000 at March 31, 1998 (unaudited) and December
31, 1997 were pledged for other purposes required by law.
F-13
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(4) LOANS RECEIVABLE
Loans receivable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
MARCH 31, 1998 ---------- ----------
--------------
(UNAUDITED)
<S> <C> <C> <C>
Mortgage loans:
Residential........................................ $ 96,218 $ 96,328 $ 94,994
Partially guaranteed by VA......................... 384 444 590
Insured by FHA..................................... 829 847 1,041
Commercial......................................... 30,560 30,867 35,119
-------------- ---------- ----------
127,991 128,486 131,744
-------------- ---------- ----------
Other loans:
Commercial......................................... 6,528 7,049 8,020
Automobile......................................... 9,050 8,902 6,378
Home equity line of credit......................... 6,139 5,924 5,882
Property improvement............................... 828 907 1,031
Guaranteed student................................. 1,708 1,507 1,552
Other consumer..................................... 4,391 5,031 6,289
-------------- ---------- ----------
28,644 29,320 29,152
-------------- ---------- ----------
Total loans...................................... 156,635 157,806 160,896
Less:
Net deferred fees.................................. 205 241 333
-------------- ---------- ----------
$ 156,430 $ 157,565 $ 160,563
-------------- ---------- ----------
-------------- ---------- ----------
</TABLE>
In an effort to accelerate resolution of certain of its problem assets, in
December 1997 the Bank identified certain loans for bulk sale. Prior to December
31, 1997 the carrying value of the loans anticipated to be sold was
approximately $4,247,000, of which approximately $3,484,000 were then non-
performing and approximately $763,000 were then performing.
In anticipation of the bulk sale, the loans to be sold in such transaction
have been included on the Bank's consolidated balance sheet as of December 31,
1997 as loans held for sale at their fair value, based on an estimated sales
price. The Bank charged-off $1,698,000 against the allowance for loan losses to
reflect the fair value of the loans. In February 1998, the Bank transferred an
additional $661,000 (unaudited) of loans to loans held for sale and completed
the bulk transaction in March 1998. The proceeds of the sale approximated the
carrying value of the loans.
F-14
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(4) LOANS RECEIVABLE (CONTINUED)
Changes in the allowance for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period............. $ 2,143 $ 1,952 $ 1,952 $ 2,002 $ 1,752
Provision charged to operations............ 75 225 3,300 1,380 600
Recoveries................................. 51 105 170 283 255
Loans charged off.......................... (39) (202) (3,279) (1,713) (605)
--------- --------- --------- --------- ---------
Balance at end of period................... $ 2,230 $ 2,080 $ 2,143 $ 1,952 $ 2,002
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
At March 31, 1998, December 31, 1997 and 1996, impaired loans totaled
$756,000 (unaudited), $2,742,000 (of which $1,208,000 were loans held for sale)
and $3,381,000, respectively. At March 31, 1998, impaired loans included
$756,000 (unaudited) of loans for which the related allowance for loan losses
was $181,000 (unaudited). At December 31, 1997, impaired loans included $895,000
of loans for which the related allowance for loan losses was $234,000 and
$1,847,000 of impaired loans (of which $1,208,000 were loans held for sale) with
no related allowance for loan losses. At December 31, 1996, impaired loans
included $920,000 of loans for which the related allowance for loan losses was
$289,000 and $2,461,000 of impaired loans with no related allowance for loan
losses as a result of the adequacy of collateral values and cash flow analysis.
The average recorded investment in impaired loans was $1,749,000 and $3,131,000
during the three months ended March 31, 1998 and 1997 (unaudited), respectively
and $2,699,000, $3,514,000 and $3,334,000 during the years ended December 31,
1997, 1996 and 1995, respectively. Interest income recognized on impaired loans
was $52,000 and $33,000 during the three months ended March 31, 1998 and 1997
(unaudited), respectively and $290,000, $223,000 and $250,000 during the years
ended December 31, 1997, 1996 and 1995, respectively, all of which was
recognized using the cash basis of income recognition.
The principal balances of loans not accruing interest amounted to
approximately $1,458,000 (unaudited), $3,785,000 (of which $2,276,000 were loans
held for sale) and $3,633,000 at March 31, 1998, December 31, 1997 and 1996,
respectively. Interest income that would have been recorded if the non-accruing
loans had been performing in accordance with their original terms was
approximately $37,000 and $110,000 during the three month periods ended March
31, 1998 and 1997 (unaudited), respectively, and $402,000, $307,000 and $107,000
during the years ended December 31, 1997, 1996 and 1995, respectively.
In the ordinary course of business, the Bank makes loans to non-trustee
officers and employees, as well as to other related parties on substantially the
same terms, including interest rate and collateral, as those prevailing at the
same time for comparable transactions with other customers and do not involve
more than normal risk of collectibility or present other unfavorable features.
F-15
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(4) LOANS RECEIVABLE (CONTINUED)
A summary of the changes in these outstanding loans is as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1997 1996
THREE MONTHS --------- ---------
ENDED MARCH 31,
1998
---------------
(UNAUDITED)
<S> <C> <C> <C>
Balance at beginning of period............................ $ 2,207 $ 2,459 $ 2,248
New loans and increase in existing loans.................. 269 459 587
Loan principal repayments................................. (409) (711) (376)
------ --------- ---------
Balance at end of period.................................. $ 2,067 $ 2,207 $ 2,459
------ --------- ---------
------ --------- ---------
</TABLE>
(5) PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
THREE MONTHS --------- ---------
ENDED MARCH 31,
1998
---------------
(UNAUDITED)
<S> <C> <C> <C>
Land...................................................... $ 886 $ 836 $ 836
Buildings and improvements................................ 2,772 2,937 2,914
Furniture and equipment................................... 1,924 2,825 2,495
------ --------- ---------
5,582 6,598 6,245
Less accumulated depreciation............................. 2,136 3,151 2,590
------ --------- ---------
$ 3,446 $ 3,447 $ 3,655
------ --------- ---------
------ --------- ---------
</TABLE>
Depreciation and amortization expense amounted to $118,000 and $146,000
during the three months ended March 31, 1998 and 1997 (unaudited), respectively
and $579,000, $507,000 and $497,000 during the years ended December 31, 1997,
1996 and 1995, respectively.
(6) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
MARCH 31, 1998 --------- ---------
---------------
(UNAUDITED)
<S> <C> <C> <C>
Loans..................................................... $ 1,010 $ 1,081 $ 1,248
Securities................................................ 650 598 664
------ --------- ---------
$ 1,660 $ 1,679 $ 1,912
------ --------- ---------
------ --------- ---------
</TABLE>
F-16
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(7) DEPOSITS
At March 31, 1998 and December 31, 1997 and 1996, the aggregate amounts of
time deposits in denominations of $100,000 or more were approximately
$13,744,000 (unaudited), $10,164,000 and $15,459,000, respectively.
Contractual maturities of savings certificates are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARCH 31, 1998 -----------------
--------------
(UNAUDITED)
<S> <C> <C>
Within one year........................................... $ 64,010 $ 66,304
One through two years..................................... 17,843 17,125
Two through three years................................... 14,481 12,895
Three through four years.................................. 4,461 5,321
Four through five years................................... 7,059 6,530
Five years and over....................................... -- 83
-------------- --------
Total savings certificates................................ $ 107,854 $ 108,258
-------------- --------
-------------- --------
</TABLE>
Interest expense on deposits is summarized as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Passbook, statement savings and club
accounts................................... $ 474 $ 467 $ 1,936 $ 1,922 $ 1,991
Savings certificates......................... 1,439 1,494 5,983 6,354 6,005
Money market accounts........................ 57 63 243 288 339
NOW accounts................................. 40 40 166 194 227
--------- --------- --------- --------- ---------
$ 2,010 $ 2,064 $ 8,328 $ 8,758 $ 8,562
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(8) BORROWINGS
During 1996, the Bank became a member of the Federal Home Loan Bank (FHLB).
As a member, the Bank is required to own capital stock in the FHLB and is
authorized to apply for advances from the FHLB. At March 31, 1998 and December
31, 1997 the Bank may borrow up to $26,058,000 (unaudited) and $24,558,000,
respectively from the FHLB.
During the three-month period ended March 31, 1998 (unaudited), 1997 and
1996, the Bank did not hold borrowings with the FHLB.
F-17
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(9) INCOME TAXES
Income taxes were allocated as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31,
MARCH 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income before income tax expense (benefit)........... $ 333 $ 311 $ (16) $ 853 $ 1,400
Changes in net worth, for changes in unrealized gains
on securities...................................... 116 112 206 (33) 153
--------- --------- --------- --------- ---------
$ 449 $ 423 $ 190 $ 820 $ 1,553
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The components of income tax expense (benefit) attributable to income from
operations are (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal........................................ $ (283) $ 254 $ 672 $ 989 $ 1,247
State.......................................... (90) 66 181 206 476
--------- --------- --------- --------- ---------
(373) 320 853 1,195 1,723
--------- --------- --------- --------- ---------
Deferred:
Federal........................................ 546 (41) (698) (298) (237)
State.......................................... 160 32 (171) (44) (86)
--------- --------- --------- --------- ---------
706 (9) (869) (342) (323)
--------- --------- --------- --------- ---------
$ 333 $ 311 $ (16) $ 853 $ 1,400
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-18
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(9) INCOME TAXES (CONTINUED)
Actual tax expense (benefit) attributable to income before income taxes
differed from "expected" tax expense (benefit), computed by applying the U.S.
Federal statutory tax rate of 34% to income before income tax as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31,
MARCH 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed "expected" tax expense (benefit)................................ $ 281 $ 245 $ 19 $ 754 $ 1,130
Increase (decrease) in income taxes resulting from:
State taxes, net of Federal tax benefits............................. 47 61 7 107 257
Non-taxable interest income.......................................... (7) (10) (35) (48) (37)
Non-deductible expenses.............................................. 4 4 16 20 --
Other items, net..................................................... 8 11 (23) 20 50
--------- --------- --------- --------- ---------
$ 333 $ 311 $ (16) $ 853 $ 1,400
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
MARCH 31, 1998 --------- ---------
--------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Non-deductible reserves..................................................... $ 25 $ 25 $ 44
Non-accrual interest........................................................ 27 126 53
Losses on real estate owned................................................. 119 124 87
Loan bulk sale.............................................................. -- 666 --
Allowance for loan losses................................................... 1,153 1,118 1,047
Net deferred loan fees...................................................... 115 127 135
Postretirement benefit obligation........................................... 648 638 619
Deferred trustee fees....................................................... 38 30 --
Other....................................................................... 31 31 31
------- --------- ---------
Total gross deferred tax assets........................................... 2,156 2,885 2,016
------- --------- ---------
Deferred tax liabilities:
Accumulated depreciation on premises and equipment.......................... (96) (97) (122)
Prepaid pension cost........................................................ (322) (321) (292)
Unrealized gains on securities.............................................. (489) (373) (167)
Securities discount accretion............................................... (45) (62) (31)
Tax allowance for loan losses in excess of base year amount................. (118) (124) (159)
------- --------- ---------
Total gross deferred tax liabilities...................................... (1,070) (977) (771)
------- --------- ---------
Net deferred tax assets................................................... $ 1,086 $ 1,908 $ 1,245
------- --------- ---------
------- --------- ---------
</TABLE>
F-19
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(9) INCOME TAXES (CONTINUED)
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income within the
carryback period. A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax assets will not be realized. In
assessing the need for a valuation allowance, management considers the scheduled
reversal of the deferred tax liabilities, the level of historical taxable income
and projected future taxable income over the periods in which the temporary
differences comprising the deferred tax assets will be deductible. Management
believes that no valuation allowance is necessary.
Included in the surplus fund at December 31, 1997 is approximately
$3,700,000 representing aggregate provisions for loan losses taken under the
Internal Revenue Code. Use of these reserves to pay dividends in excess of
earnings and profits or to redeem stock, or if the institution fails to qualify
as a bank for Federal income tax purposes, would result in taxable income to the
Bank.
(10) EMPLOYEE BENEFITS
The status of the pension plan at the latest valuation dates of October 1,
is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested....................................................................................... $ 2,951 $ 2,492
Non-vested................................................................................... 16 113
--------- ---------
Total accumulated benefit obligation....................................................... $ 2,967 $ 2,605
--------- ---------
--------- ---------
Actuarial present value of projected benefit obligation for service rendered to date........... 3,490 3,296
Plan assets at fair value; primarily listed stocks, cash and short-term investments............ 5,068 4,194
--------- ---------
Plan assets in excess of projected benefit obligation.......................................... 1,578 898
Unrecognized transition asset.................................................................. 16 (25)
Unrecognized net gain resulting from past experience different from that assumed............... (788) (152)
--------- ---------
Prepaid pension cost (included in other assets).............................................. $ 806 $ 721
--------- ---------
--------- ---------
</TABLE>
Net pension expense for the years ended December 31, included in salaries
and employee benefits, is detailed as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period..................... $ 87 $ 84 $ 75
Interest cost on projected benefit obligation....................... 242 236 223
Actual return on plan assets........................................ (970) (497) (638)
Net amortization and deferral....................................... 620 176 371
--------- --------- ---------
Net pension (benefit) expense..................................... $ (21) $ (1) $ 31
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(10) EMPLOYEE BENEFITS (CONTINUED)
Assumptions used to develop the net periodic pension information were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Discount rate.................................................... 7.75% 7.50% 8.25%
Expected long-term rate of return on plan assets................. 8.00% 8.00% 8.00%
Rate of increase in compensation levels.......................... 5.00% 5.50% 6.00%
</TABLE>
Contributions to the defined contribution 401(k) Savings Plan were
approximately $16,000 and $17,000 during the three months ended March 31, 1998
and 1997 (unaudited), respectively and $64,000, $63,000 and $68,000 during the
years ended December 31, 1997, 1996 and 1995, respectively.
(11) OTHER POSTRETIREMENT BENEFIT PLANS
The following table presents the plan's funded status as of October 1, the
date of the most recent valuation (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents................................................ $ 786 $ 567
Fully eligible active plan participants and dependents................. 137 283
Other active plan participants......................................... 674 657
--------- ---------
Total accumulated postretirement benefit obligation.................. $ 1,597 $ 1,507
--------- ---------
--------- ---------
Accumulated postretirement benefit obligation............................ (1,597) (1,507)
Plan assets at fair value................................................ -- --
--------- ---------
Funded status............................................................ (1,597) (1,507)
Unrecognized gain........................................................ (2) (19)
--------- ---------
Accrued postretirement benefit cost included in other liabilities.... $ (1,599) $ (1,526)
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit cost includes the following components
(in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period....................... $ 37 $ 41 $ 34
Interest cost......................................................... 107 111 103
--------- --------- ---------
Net periodic postretirement benefit cost............................ $ 144 $ 152 $ 137
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumptions are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Discount rate.................................................. 7.75% 7.50% 8.25%
Average health care cost trend rate............................ 8.00% 10.00% 10.50%
First year ultimate trend rate (year 2005)..................... 5.00% 5.50% 5.50%
Salary increase................................................ 5.50% 5.50% 6.00%
</TABLE>
F-21
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(11) OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
The effect of a one percentage point increase in the assumed health care
cost trend rates for each future year on the aggregate of the service and
interest cost components of net periodic postretirement health care benefit cost
and the accumulated postretirement benefit obligation for health care benefits
would increase these amounts for 1997 by approximately 18%, to $170,000, and by
approximately 16%, to $1,853,000, respectively.
(12) COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and involve,
to varying degrees, elements of credit, market and interest rate risk in excess
of the amounts recognized in the consolidated balance sheet. Credit risk
represents the accounting loss that would be recognized at the reporting date if
obligated counterparties failed completely to perform as contracted. Market risk
represents risk that future changes in market prices make financial instruments
less valuable.
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 some of the commitments are expected to expire
without being 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 obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
evaluation of the customer's financial position. Collateral held varies, but may
include real estate, accounts receivable, inventory, property, plant and
equipment and income-producing commercial properties. Substantially all
commitments to extend credit, if exercised, will represent loans secured by real
estate.
The Bank was committed to originate fixed and adjustable rate mortgages of
approximately $3,809,000 (unaudited), $3,667,000 and $1,440,000 at March 31,
1998, December 31, 1997 and 1996, respectively. Unused lines of credit, which
includes home equity, consumer, commercial and credit cards, amounted to
$9,600,000 (unaudited) and $9,155,000 at March 31, 1998 and December 31, 1997,
respectively.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments is represented by
the contractual or notional amount of these instruments. The Bank uses the same
credit policies in making commitments as it does for on-balance sheet
instruments. The Bank controls its credit risk through credit approvals, limits,
and monitoring procedures.
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the aggregate amount involved in such
proceedings is not material to the financial condition or results of operations
of the Bank.
(13) CONCENTRATIONS OF CREDIT
A substantial portion of the Bank's loans are mortgage and consumer loans in
Central New York State. Accordingly, the ultimate collectibility of a
substantial portion of the Bank's loan portfolio is
F-22
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(13) CONCENTRATIONS OF CREDIT (CONTINUED)
susceptible to changes in market conditions in this area. A majority of the
Bank's loan portfolio is secured by real estate.
The Bank's concentrations of credit risk are disclosed in the schedule of
loan classifications. Other than general economic risks, management is not aware
of any material concentrations of credit risk to any industry or individual
borrower.
(14) REGULATORY MATTERS
The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC)
and the State of New York Banking Department and is subject to the capital
adequacy requirements of the FDIC.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. Capital amounts are
also subject to qualitative judgments by the FDIC about components, risk
weightings, and other factors. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
the FDIC that, if undertaken, could have a direct material effect on the Bank's
financial statement.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
established capital levels for which insured institutions are categorized as
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, or critically undercapitalized.
As of December 31, 1997 and 1996, the most recent notification from the FDIC
categorized the bank as well capitalized under the regulatory framework for
prompt corrective actions. To be categorized as well capitalized, the Bank must
meet the minimum ratios as set forth in the table. There have been no conditions
or events since that notification that management believes have changed the
Bank's category. Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
F-23
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(14) REGULATORY MATTERS (CONTINUED)
The following is a summary of the Bank's actual capital amounts and ratios
compared to the FDIC minimum capital adequacy requirements and the FDIC
requirements for classification as a well capitalized institution under prompt
corrective action provisions (in thousands):
<TABLE>
<CAPTION>
TO BE CLASSIFIED AS
MINIMUM CAPITAL WELL-CAPITALIZED UNDER
ADEQUACY REQUIREMENTS PROMPT CORRECTIVE
ACTUAL ACTION PROVISIONS
-------------------- --------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 1998 (UNAUDITED)
Total capital (to risk weighted assets)................ $ 32,408 23.19% $ 11,181 a8.00% $ 13,976 a10.00%
Tier 1 Capital (to risk weighted assets)............... 30,662 21.94% 5,590 a4.00% 8,385 a6.00%
Tier 1 Capital (to average assets)..................... 30,662 13.26% 9,246 a4.00% 11,558 a5.00%
AS OF DECEMBER 31, 1997
Total capital (to risk weighted assets)................ $ 31,938 22.56% $ 11,325 a8.00% $ 14,156 a10.00%
Tier 1 Capital (to risk weighted assets)............... 30,169 21.31% 5,662 a4.00% 8,493 a6.00%
Tier 1 Capital (to average assets)..................... 30,169 12.89% 9,363 a4.00% 11,704 a5.00%
AS OF DECEMBER 31, 1996
Total capital (to risk weighted assets)................ $ 31,813 23.17% $ 10,982 a8.00% $ 13,728 a10.00%
Tier 1 Capital (to risk weighted assets)............... 30,097 21.92% 5,491 a4.00% 8,237 a6.00%
Tier 1 Capital (to average assets)..................... 30,097 12.73% 9,457 a4.00% 11,822 a5.00%
</TABLE>
On August 14, 1995, the FDIC performed a review of the Bank's compliance
with governing consumer and civil rights laws, the Community Reinvestment Act
(CRA) and the Bank Secrecy Act. The review encompassed: Truth in Lending; Truth
in Savings; Real Estate Settlement Procedures; Fair Credit Reporting; Electronic
Fund Transfers; Right to Financial Privacy; Expedited Funds Availability; Equal
Credit Opportunity; Credit Practices Rule, Preservation of Consumer Claims and
Defenses; Flood Insurance; Interest on Deposits; and Fair Housing. On December
26, 1995, the Bank received the FDIC's written report on the examination and a
related Memorandum of Understanding.
As recommended in the Memorandum of Understanding, the Board of Trustees of
the Bank developed a written compliance policy which included appropriate
training of personnel in all Bank functions related to compliance, implementing
internal review procedures to ensure ongoing compliance, providing financial
training for the compliance officer, and instituting a formal review process
whereby loan disclosure statements are reviewed prior to issuance. As a result
of the examination, the Bank is required to submit progress reports describing
specific actions taken with regard to each violation on a quarterly basis, until
further notice. No enforcement action by the FDIC is contemplated, however,
nothing contained in the Memorandum of Understanding prevents the FDIC from
taking further supervisory action it deems appropriate. The Memorandum of
Understanding did not have a material impact on the Bank's consolidated
financial statements.
F-24
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments:
CASH AND CASH EQUIVALENTS: The fair values are considered to
approximate the carrying values, as reported in the balance sheet.
SECURITIES: Fair values of securities are based on exchange
quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of
similar instruments.
LOANS AVAILABLE FOR SALE: The fair value of loans available for
sale on an aggregate basis, are based on quoted market prices.
LOANS RECEIVABLE: For variable rate loans that reprice frequently
and loans due on demand with no significant change in credit risk,
fair values are considered to approximate carrying values. The
fair values for certain mortgage loans (e.g., one-to-four family
residential) and other consumer loans are based on quoted market
prices of similar loans sold on the secondary market, adjusted for
differences in loan characteristics. The fair values for other
loans (e.g., commercial real estate and rental property mortgage
loans) are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar
terms to borrowers of similar credit rating. The carrying amount
of accrued interest approximates its fair value.
FHLB STOCK: The carrying value of this instrument, which is
redeemable at par, approximates fair value.
OFF-BALANCE-SHEET INSTRUMENTS: Fair values for the Bank's
off-balance-sheet instruments (lines of credit and commitments to
fund loans) are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing. The fair value
of these financial instruments is immaterial and has therefore
been excluded from the table below.
DEPOSITS: The fair values of demand deposits (interest and
non-interest checking), passbook, statement savings, club and
money market accounts are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying
amounts). Fair values for fixed-rate certificates of deposits and
individual retirement accounts are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on these products to a schedule of aggregated expected
monthly maturities on time deposits.
F-25
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated carrying values and fair values of the Bank's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
MARCH 31, 1998 1997 1996
---------------------- ---------------------- ----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Financial assets:
Cash and cash equivalents............. $ 9,813 $ 9,813 $ 8,079 $ 8,079 $ 12,536 $ 12,536
Securities............................ 57,954 57,964 56,690 56,709 57,351 57,227
Loans held for sale................... -- -- 2,541 2,541 -- --
Loans receivable, net................. 154,200 154,440 155,422 155,657 158,611 158,954
FHLB stock............................ 1,303 1,303 1,291 1,291 1,228 1,228
Financial liabilities:
Deposits:
Demand accounts..................... 9,128 9,128 10,604 10,604 9,563 9,563
Passbook, statement savings and club
accounts.......................... 63,658 63,658 62,679 62,679 63,003 63,003
Savings certificates................ 107,854 107,683 108,258 108,099 112,642 112,520
Money market accounts............... 8,314 8,314 8,435 8,435 9,343 9,343
NOW accounts........................ 9,280 9,280 9,704 9,704 10,089 10,089
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. 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.
(16) SUBSEQUENT EVENTS--ADOPTION OF PLAN OF CONVERSION (UNAUDITED)
On March 23, 1998, the Board of Trustees of the Bank, subject to regulatory
approval and approval by the depositors 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 transaction is expected to be
accomplished through the sale of the holding company's common stock in an amount
equal to the pro forma 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 and employee benefit
plans of the Bank. At the time of the conversion, the Bank will establish a
liquidation account in an amount equal to its total net worth as of the date of
the latest balance sheet appearing in the final prospectus. The liquidation
account will be maintained for the benefit of eligible depositors who continue
to maintain their accounts at the 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
F-26
<PAGE>
CORTLAND SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(16) SUBSEQUENT EVENTS--ADOPTION OF PLAN OF CONVERSION (UNAUDITED) (CONTINUED)
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.
In connection with the conversion, the Bank proposes to create a charitable
foundation to be funded by the Holding Company by contributing a number of
authorized but unissued shares of common stock or grants of cash to the
charitable foundation, immediately following the conversion. Such contribution,
once made, will not be recoverable by the Bank or the Holding Company. The
Holding Company will recognize expense equal to the fair value of the stock in
the quarter in which the contribution occurs, which is expected to be the third
or fourth quarter of 1998. Such expense will reduce earnings and could have a
material impact on the Bank's earnings for such quarter and for 1998.
The cost of conversion and offering will be deferred and reduce the proceeds
from the shares sold in the offering. If the conversion and offering are not
completed, all costs will be charged to expense.
F-27
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY CNY FINANCIAL CORPORATION OR CORTLAND SAVINGS 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 CNY FINANCIAL CORPORATION OR CORTLAND SAVINGS BANK SINCE ANY OF THE
DATES AS OF WHICH INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
CNY FINANCIAL
CORPORATION
(PROPOSED HOLDING COMPANY FOR CORTLAND SAVINGS BANK)
7,043,750 SHARES
COMMON STOCK
PROSPECTUS
CIBC OPPENHEIMER CORP.
TRIDENT SECURITIES, INC.
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT FEDERALLY INSURED OR
GUARANTEED
AUGUST , 1998
UNTIL THE LATER OF , 1998, OR 25 DAYS AFTER THE COMMENCEMENT OF THE
SUBSCRIPTION OFFERING, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................................ $ 24,374
NASD filing fee(1).............................................................. $ 8,767
NASDAQ National Market Listing Fee(1)........................................... $ 80,000
Banking Department Conversion Application Fee................................... $ 5,000
Printing, postage and mailing................................................... $ 175,000
Legal fees and expenses......................................................... $ 150,000
Special Conversion Consultant Fees and expenses................................. $ 200,000
Financial advisor management fee and expenses................................... $ 865,000
Accounting fees and expenses.................................................... $ 100,000
Appraiser's fees and expenses (including business plan)......................... $ 27,500
Transfer agent and registrar fees and expenses.................................. $ 8,000
Conversion agent fees and expenses.............................................. $ 25,000
Stock Certificate printing...................................................... $ 3,000
Underwriter's legal fees and expenses........................................... $ 80,000
Blue Sky fees and expenses (including fees of counsel).......................... $ 3,000
Executive compensation consultant fees and expenses............................. $ 30,000
Miscellaneous................................................................... $ 52,364
------------
TOTAL....................................................................... $ 1,837,000
------------
------------
</TABLE>
- ------------------------
(1) Actual expenses based upon the registration of 82,623,182 shares at $10.00
per share. All other expenses are estimated.
(2) Estimated based upon the sale of 8,100,312 shares at $10.00 per share, with
no commission payable on 8% of the shares purchased by the ESOP and
$1,700,000 estimated to be purchased by directors, officers and employees.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the General Corporation Law of the State of Delaware
(being Chapter 1 of Title 8 of the Delaware Code), Articles 11 and 12 of the
Registrant's Certificate of Incorporation provide as follows:
ARTICLE ELEVEN
INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a Aproceeding@),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or, while a Director or Officer of the Corporation, is or was
serving at the request of the Corporation as a Director, Officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity or in any other capacity while serving shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
II-1
<PAGE>
prior to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties under the Employee
Retirement Income Security Act of 1974, as amended, and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C of this
Article the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
B. The right to indemnification conferred in Section A of this Article
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the General
Corporation Law of the State of Delaware requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a Director or Officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, services to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article is not paid in full by
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the General Corporation Law of the State of Delaware. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
II-2
<PAGE>
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
subsidiary or Affiliate or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of the State of
Delaware.
F. To the extent that any person who is or was or has agreed to become a
Director or officer of the Corporation is made a witness to any action, suit or
proceeding to which he or she is not a party by reason of the fact that he or
she was, is or has agreed to become a Director or Officer of the Corporation,
or, while a Director or Officer of the Corporation, is or was serving or has
agreed to serve as a Director, Officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the
request of the Corporation, such person shall be indemnified against all costs,
charges and expenses actually and reasonable incurred by such person or on such
person(1)s behalf in connection therewith. To the extent that any person who is
or was or has agreed to become an employee or agent of the Corporation is made a
witness to any action, suit or proceeding to which he or she is not a party by
reason of the fact that he or she was, is or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, at the request of the Corporation, such
person may be indemnified against all costs, charges and expenses actually and
reasonable incurred by such person or on such person's behalf in connection
therewith.
G. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
H. If this Article or any portion shall be invalidated on any ground by any
court of competent jurisdiction, the Corporation shall nevertheless indemnify
each Director or officer, and may indemnify each employee or agent, of the
Corporation as to any costs, charges, expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation), to
the full extent permitted by any applicable portion of this Article that shall
not have been invalidated and to the fullest extent permitted by applicable law.
ARTICLE TWELVE
LIABILITY OF DIRECTORS
A Director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the General Corporation Law of the
State of Delaware; or (iv) for any transaction from which the Director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of Directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits filed as part of this Registration Statement are as follows:
(a) List of Exhibits. (Filed herewith unless otherwise noted.)
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S>
Engagement Letter (proposal for marketing agent services), dated January 8, 1998 between Cortland
1.1 Savings Bank and CIBC Oppenheimer Corp. and Trident Securities, Inc.
1.2 Form of Agency Agreement*
2.1 Plan of Conversion of Cortland Savings Bank.
3.1 Certificate of Incorporation of CNY Financial Corporation.
3.2 Bylaws of CNY Financial Corporation.
3.3 Proposed Restated Organization Certificate of Cortland Savings Bank
3.4 Proposed Stock Bylaws of Cortland Savings Bank
4.1 Form of Stock Certificate of CNY Financial Corporation
5.1 Form of Opinion of Serchuk & Zelermyer, LLP regarding legality
8.1 Form of Opinion of Serchuk & Zelermyer, LLP regarding federal and state taxation
8.2 Letter of RP Financial L.C. regarding Subscription Rights
10.1 Employment Agreement between Cortland Savings Bank and Wesley D. Stisser, Jr.
10.2 Employment Agreement between Cortland Savings Bank and F. Michael Stapleton
10.3 Employment Agreement between Cortland Savings Bank and Steven A. Covert
10.4 Employment Agreement between Cortland Savings Bank and Kerry D. Meeker
10.5 Form of Employee Severance Plan
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Serchuk & Zelermyer, LLP
23.3 Consent of RP Financial, L.C.
24.1 Powers of Attorney
27.1 Financial Data Schedule (submitted only with filing in electronic format)
99.1 Appraisal Report of RP Financial, L.C.
99.2 Form of Marketing Materials to be used in connection with the Offerings*
99.3 Form of the Cortland Savings Foundation Gift Instrument*
</TABLE>
- ------------------------
* To be filed by amendment
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
II-4
<PAGE>
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change int he
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any 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 registered which remain unsold at the termination of
the Offering.
The undersigned Registrant hereby undertakes to provide to the agent at the
closing specified in the Agency Agreement, certificates in such denominations
and registered in such names as required by the agent to permit prompt delivery
to each purchaser.
Insofar as indemnification by the Registrant 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 Securities 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 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 securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purpose 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 the Rule 430A and contained in
a form of 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 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 Town of Cortland, State of New
York, on June 15, 1998.
<TABLE>
<S> <C> <C>
CNY FINANCIAL CORPORATION
By: /s/ WESLEY D. STISSER, JR.
-----------------------------------------
Wesley D. Stisser, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(duly authorized officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ WESLEY D. STISSER, JR. Officer and Director
- ------------------------------ (Principal Executive June 15, 1998
Wesley D. Stisser, Jr. Officer)
Executive Vice President
/s/ STEVEN A. COVERT and Chief Financial
- ------------------------------ Officer June 15, 1998
Steven A. Covert (Principal Financial and
Accounting Officer)
/s/ DONALD P. REED
- ------------------------------ Director June 15, 1998
Donald P. Reed
/s/ PATRICK J. HAYES, M.D
- ------------------------------ Director June 15, 1998
Patrick J. Hayes, M.D
/s/ HARVEY KAUFMAN
- ------------------------------ Director June 15, 1998
Harvey Kaufman
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
/s/ JOSEPH H. COMPAGNI
- ------------------------------ Director June 15, 1998
Joseph H. Compagni
/s/ ROBERT S. KASHDIN
- ------------------------------ Director June 15, 1998
Robert S. Kashdin
/s/ TERRANCE D. STALDER
- ------------------------------ Director June 15, 1998
Terrance D. Stalder
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
1.1 Engagement Letter (proposal for marketing agent services), dated January 8, 1998 between
Cortland Savings Bank and CIBC Oppenheimer Corp. and Trident Securities, Inc..................
1.2 Form of Agency Agreement*.......................................................................
2.1 Plan of Conversion of Cortland Savings Bank.....................................................
3.1 Certificate of Incorporation of CNY Financial Corporation.......................................
3.2 Bylaws of CNY Financial Corporation.............................................................
3.3 Proposed Restated Organization Certificate of Cortland Savings Bank.............................
3.4 Proposed Stock Bylaws of Cortland Savings Bank..................................................
4.1 Form of Stock Certificate of CNY Financial Corporation..........................................
5.1 Form of Opinion of Serchuk & Zelermyer, LLP regarding legality..................................
8.1 Form of Opinion of Serchuk & Zelermyer, LLP regarding federal and state taxation................
8.2 Letter of RP Financial L.C. regarding Subscription Rights.......................................
10.1 Employment Agreement between Cortland Savings Bank and Wesley D. Stisser, Jr....................
10.2 Employment Agreement between Cortland Savings Bank and F. Michael Stapleton.....................
10.3 Employment Agreement between Cortland Savings Bank and Steven A. Covert.........................
10.4 Employment Agreement between Cortland Savings Bank and Kerry D. Meeker..........................
10.5 Form of Employee Severance Plan.................................................................
23.1 Consent of KPMG Peat Marwick LLP................................................................
23.2 Consent of Serchuk & Zelermyer, LLP.............................................................
23.3 Consent of RP Financial, L.C....................................................................
24.1 Powers of Attorney..............................................................................
27.1 Financial Data Schedule (submitted only with filing in electronic format).......................
99.1 Appraisal Report of RP Financial, L.C...........................................................
99.2 Form of Marketing Materials to be used in connection with the Offerings*........................
99.3 Form of the Cortland Savings Foundation Gift Instrument*........................................
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
Exhibit 1.1
January 9, 1998
Board of Trustees
Cortland Savings Bank
1 North Main Street
Cortland, New York 13045
RE: Investment Banking Services
Gentlemen:
This letter sets forth the terms of the proposed engagement ("Engagement
Agreement") between CIBC Oppenheimer Corp. ("Oppenheimer") and Trident
Securities, Inc. ("Trident") and Cortland Savings Bank (the "Bank") concerning
our joint investment banking services in connection with the conversion
("Conversion") of the Bank from the mutual to the stock form of ownership and
the issuance of shares of a stock holding company (the "Holding Company") to be
formed as part of the transaction in a subscription and, under certain
circumstances, a community offering and/or to the general public in a syndicated
community offering (the "Syndicated Community Offering" and, together with the
subscription and community offering, the "Offerings"). In the event that the
Holding Company is not formed, the terms of this Engagement Agreement shall also
apply to investment banking services in connection with the reorganization of
the Bank into the mutual holding company form and the issuance of shares of
common stock of the Bank in the Offerings, with such modifications to this
Engagement Agreement as are necessary to reflect the changed structure of the
transaction. Oppenheimer and Trident are sometimes referred to jointly herein as
the "Financial Advisor."
Oppenheimer and Trident are prepared to assist the Bank in connection with the
offering of shares of common stock of the Holding Company during the Offerings,
as such term is defined in the Bank's Plan of Conversion (the "Plan"). It is
expected that Oppenheimer and Trident will assist the Bank in the Offerings as
set forth in Annex A attached hereto (which is incorporated by reference as if
fully set forth herein), which assistance shall include, but is not limited to,
the following: (1) acting as financial advisor to the Bank; (2) reviewing the
appraisal with the Bank's Board of Trustees; (3) reviewing the registration
statement, prospectus and other offering documents; (4) using best efforts to
<PAGE>
target sales efforts in the Bank's local communities; (5) conducting information
meetings for prospective investors (as desired); (6) assisting in the
solicitation of proxies by voting depositors; (7) training and educating the
Bank's management and employees regarding the mechanics and regulatory
requirements of the process; (8) providing support for the administration and
processing of orders and establishing a Conversion Center on site at the Bank;
and (9) assisting the Bank in its efforts to obtain approval for quotation on
the Nasdaq National Market System and acting as a market maker for the shares.
The Bank acknowledges that the Conversion Center activities portion of this
assignment, as further described in Annex A, may be performed by either
Oppenheimer or Trident, or in some combination of their services. The specific
terms of the services contemplated hereunder shall be set forth in a definitive
sales agency agreement (the "Agency Agreement") among Oppenheimer, Trident, the
Holding Company and the Bank to be executed on the date the registration
statement is declared effective by the Securities and Exchange Commission
("SEC"). The price of the shares during the Offerings will be the price
established by the Board of Directors of the Holding Company and by the Bank's
Board of Trustees, based upon an independent appraisal as approved by the
appropriate regulatory authorities, provided such price is mutually acceptable
to Oppenheimer, Trident, the Holding Company and the Bank. The Bank agrees it
will not negotiate with any other underwriter or advisor relating to a possible
Conversion of the Bank, unless either party informs the other in writing that it
will not proceed to the execution of the Agency Agreement for the reasons set
forth in the last sentence of the ninth paragraph of this Engagement Agreement.
The Bank recognizes and confirms that in performing its duties pursuant to this
Engagement Agreement, Oppenheimer and Trident will be using and relying on data,
material, and other information (the "Information") furnished by the Bank, the
Holding Company, or their respective employees and representatives. In
connection with Oppenheimer's and Trident's activities on the Bank's and the
Holding Company's behalf, the Bank and the Holding Company will cooperate with
Oppenheimer and Trident and will furnish Oppenheimer and Trident with all
Information concerning the Bank and the Holding Company which Oppenheimer and
Trident deem appropriate, and will provide Oppenheimer and Trident with access
to the Bank's and the Holding Company's respective officers, directors,
trustees, employees, independent accountants and legal counsel for the purpose
of performing Oppenheimer's and Trident's obligations pursuant to this
Engagement Agreement. The Bank hereby agrees and represents that all Information
(a) furnished to Oppenheimer and Trident pursuant to this Engagement Agreement,
and (b) contained in any filing by the Bank or the Holding Company with any
court or governmental or regulatory agency, commission or instrumentality (each,
an "Agency") shall, at all times during the period of the
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 3
engagement of Oppenheimer and Trident hereunder, be accurate and complete in all
material respects at the time provided, and that, if the Information provided by
the Bank becomes materially inaccurate, incomplete or misleading during the term
of Oppenheimer's and Trident's engagement hereunder, the Bank shall so advise
Oppenheimer and Trident in writing. Accordingly, Oppenheimer and Trident assume
no responsibility for the accuracy and completeness of the Information. In
rendering their services hereunder, Oppenheimer and Trident will be using and
relying upon the Information without independent verification thereof or
independent evaluation of any of the assets or liabilities of the Bank. All
Information that is not publicly available will be treated in strict confidence,
and will not be revealed, or used (except in the performance of Oppenheimer's
and Trident's duties under this Engagement Agreement) by Oppenheimer and Trident
unless legally compelled as determined in good faith by counsel to Oppenheimer
or Trident.
The Bank acknowledges that all advice (written or oral) given by Oppenheimer and
Trident to the Bank is intended solely for the benefit and use of the Bank and
the Holding Company (including without limitation their respective management,
trustees, directors, attorneys, accountants and transfer agent). Other than (a)
to the extent reflected in the minutes of meetings of the Board of Trustees of
the Bank and committees thereof, (b) for disclosure to the Federal Deposit
Insurance Corporation ("FDIC"), the Board of Governors of the Federal Reserve
System ("FRB"), the Office of Thrift Supervision ("OTS"), the New York State
Banking Department, the SEC or any other regulatory authority having
jurisdiction, the Bank's accountants, the Bank's attorneys, and the transfer
agent, and (c) pursuant to a subpoena or order issued by a court of competent
jurisdiction or by a judicial or administrative or legislative body or committee
or as otherwise required by law or regulation (based on the advice of counsel to
the Bank), no opinion or advice (written or oral) of Oppenheimer and Trident
shall be used, reproduced, disseminated, quoted or referred to at any time, in
any manner, or for any purpose, nor shall any public reference regarding
Oppenheimer's or Trident's services or advice hereunder be made by the Bank, the
Holding Company or their respective directors, trustees, officers, employees and
representatives without the prior written consent of Oppenheimer and Trident,
which consent shall not be unreasonably withheld. Oppenheimer and Trident
acknowledge and agree that all information provided to them by the Bank
regarding the Bank's financial condition or business affairs, whether now
existing or projected, shall be deemed confidential, except for such information
that has been disclosed publicly by the
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 4
Bank. Anything herein to the contrary notwithstanding, confidential information
shall not include: (a) any information which Oppenheimer or Trident or their
respective legal counsel or other representatives ("Representatives") possessed
prior to any disclosure by the Bank; (b) any information which was not received
from the Bank or the Holding Company, or their respective officers, trustees,
directors, agents and employees, regarding the Conversion; (c) any information
which is in the public domain; or (d) anything which becomes a matter in the
public domain or becomes known or available to Oppenheimer or Trident or any of
their respective Representatives on a nonconfidential basis from any source,
provided such source is not known to Oppenheimer's or Trident's actual knowledge
to be bound by a confidentiality agreement with the Bank. The obligations of the
parties under this paragraph shall survive termination of this Engagement
Agreement and the consummation of the Conversion.
For their services Oppenheimer and Trident will receive the following
compensation and reimbursement from the Bank:
1. A commission equal to one hundred and fifteen basis points (1.15%)
of the aggregate dollar amount of stock sold in the subscription
and direct community offerings excluding any shares of stock sold
to (i) the Bank's or Holding Company's directors, trustees,
officers and their immediate families and any Individual Retirement
Account or employee benefit plans for the benefit of any such
directors, trustees, officers and their immediate families and (ii)
any employee benefit plans of the Bank or the Holding Company and
excluding any shares sold or issued to or exchanged with the
shareholders of another holding company or financial institution in
a contemporaneous or subsequent merger, consolidation or other
business combination of the Holding Company or the Bank with such
other holding company or other financial institution; provided,
however, that in no event shall the commission payable pursuant to
this paragraph 1 be less than $750,000.
2. For stock sold by Oppenheimer and Trident or other National
Association of Securities Dealers ("NASD") member firms in the
Syndicated Community Offering, the commission shall not exceed
four and one-half percent (4.5%).
3. The foregoing fees and commissions are to be payable to
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 5
Oppenheimer and Trident at closing as defined in the Agency
Agreement.
4. Oppenheimer and Trident shall be reimbursed for out-of-pocket
expenses incurred by them, whether or not the Agency Agreement is
consummated, and Oppenheimer and Trident shall document such
expenses to the reasonable satisfaction of the Bank. Such
out-of-pocket expenses will not exceed $25,000, excluding the
expenses described in the succeeding paragraph and agreed upon
disbursements. The Bank agrees to pay directly the expenses for
Oppenheimer's and Trident's legal fees not to exceed $75,000,
exclusive of out-of-pocket expenses and disbursements for such
legal counsel, which shall also be the Bank's responsibility. The
Bank will forward to each of Oppenheimer and Trident a check in the
amount of $10,000 as an advance payment to defray the expenses of
Oppenheimer and Trident; provided, however, that if the Financial
Advisor terminates the engagement hereunder without cause, the
Financial Advisor shall only be entitled to reimbursement of its
out-of-pocket expenses through the date of such termination.
It further is understood that the Bank will pay all other expenses of the
Offerings, including, but not limited to, its attorneys' fees, the fees of the
independent appraiser, the fees of the account consolidation agent, the fees of
the independent vote tabulator, NASD filing fees, the fees of attorneys relating
to any required state securities laws filings, transfer agent charges, roadshow
related expenses, telephone charges, air freight, rental equipment, supplies,
fees relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing. These expenses are to be in addition
to those enumerated in item "4" of the preceding paragraph of this Engagement
Agreement.
For purposes of Oppenheimer's and Trident's obligation to file certain documents
and to make certain representations to the NASD in connection with the
Conversion and stock sale, and except as otherwise disclosed to Oppenheimer and
Trident in writing on the date hereof, the Bank warrants that: (a) the Bank has
not privately placed any securities within the last 18 months; (b) except for
Northeast Capital & Advisory, Inc, there have been no material dealings within
the last 12 months between the Bank and any NASD member or any person related to
or associated with any such member; (c) none of the officers, trustees or
directors of the Bank or the
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 6
Holding Company has any affiliation with the NASD; (d) except with respect to
Northeast Capital & Advisory, Inc. and as contemplated by this Engagement
Agreement with Oppenheimer and Trident, the Bank has no financial or management
consulting contracts outstanding with any NASD member or any person related to
or associated with any such member; (e) the Bank has not granted Oppenheimer or
Trident a right of first refusal with respect to the underwriting of any future
offering of the Bank's stock; and (f) there has been no intermediary between
Trident, Oppenheimer and the Bank in connection with the public offering of the
Holding Company's or the Bank's shares, and no NASD member or any person related
to or associated with any such member is being compensated in any manner for
providing such service.
The Bank agrees to indemnify and hold harmless Oppenheimer and Trident and each
person, if any, who controls either of such firms against all losses, claims,
damages or liabilities, joint or several, and all legal or other expenses
reasonably incurred by them in connection with the investigation or defense
thereof (collectively, "losses"), to which they may become subject under
securities laws or under the common law, that arise out of or are based upon the
Conversion or the engagement hereunder of Oppenheimer and Trident as set forth
in Annex B attached hereto, which is incorporated by reference as if fully set
forth herein. If the Agency Agreement is entered into with respect to the common
stock to be issued in the Conversion, the Agency Agreement will provide for
indemnification, which will be in addition to any rights that Oppenheimer and
Trident or any other indemnified party may have at common law or otherwise. The
indemnification provision of this paragraph will be superseded by the
indemnification provisions of the Agency Agreement entered into by the Bank, the
Holding Company, Oppenheimer and Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to (i) the fifth paragraph of this Engagement Agreement above with
regard to the obligation to reimburse Oppenheimer and Trident for out-of-pocket
expenses and disbursements to be incurred prior to the execution of the Agency
Agreement, (ii) the indemnity described in the preceding paragraph (iii) the
last sentence of the second paragraph of this Engagement Agreement and (iv) the
confidentiality provisions of the fourth paragraph of this Engagement Agreement.
While the Bank, Oppenheimer and Trident agree in principle to the contents
hereof and propose to proceed promptly, and in good faith, to work out the
arrangements with respect to the Offerings, any legal obligations between the
Bank, Oppenheimer and Trident shall be only as set
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 7
forth in the duly executed Agency Agreement. Such Agency Agreement shall be in
form and content satisfactory to Oppenheimer, Trident and the Bank, and shall be
subject to, among other things, there being in Oppenheimer's and Trident's
opinion, no material adverse change in the condition or operations of the Bank
or no market conditions which might render the sale of the shares by the Bank
hereby contemplated inadvisable, and, there being in the Bank's opinion, no
material change in the financial condition, operations or regulatory status of
either Oppenheimer or Trident.
In addition, the obligations of Oppenheimer and Trident to enter into the Agency
Agreement will be subject to the approval of Oppenheimer's and Trident's Due
Diligence and Commitment Committees, the satisfactory completion of
Oppenheimer's and Trident's due diligence investigation, market conditions and
the good faith negotiation of customary and mutually agreeable terms and
conditions.
Oppenheimer and Trident shall be permitted to advertise, in such newspapers and
periodicals as they may choose, the services they provided to the Bank in
connection with a Conversion subsequent to the consummation of a Conversion.
This Engagement Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of New York without regard to the conflict
of laws provisions thereof and may not be amended or modified except in a
writing signed by both parties.
Any action, suit or proceeding arising out of, based on, or in connection with
this Engagement Agreement or the transaction contemplated hereby may be brought
only in a court located in White Plains, New York, and each party covenants and
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Engagement Agreement or the subject matter hereof may not be
enforced in or by such court.
If any provision of this Engagement Agreement shall be held or made invalid by a
statute, rule, regulation, decision of a tribunal or otherwise, the remainder of
this Engagement Agreement shall not be affected thereby and, to this extent, the
provisions of this
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 8
Engagement Agreement shall be deemed to be severable.
The Bank, Oppenheimer and Trident represent and warrant that each has all
requisite power and authority, and all necessary authorizations, to enter into
and carry out the terms and provisions of this Engagement Agreement.
No waiver, amendment or other modification of this Engagement Agreement shall be
effective unless in writing and signed by all the parties to be bound thereby.
This Engagement Agreement and all rights, liabilities and obligations hereunder
shall be binding upon and inure to the benefit of each party's successors but
may not be assigned without the prior written approval of the other parties.
The Bank represents and warrants to Oppenheimer and Trident, and Oppenheimer and
Trident represent to the Bank to the best of their knowledge, that there are no
brokers, representatives or
other persons which have an interest in compensation due to Oppenheimer and
Trident from any transaction contemplated herein.
Please acknowledge your agreement to the foregoing by signing below and
returning to each of Oppenheimer and Trident an executed copy of this letter
along with the advance payment of $10,000.
Yours very truly,
CIBC OPPENHEIMER CORP. TRIDENT SECURITIES, INC.
By: By:
--------------------------------- ---------------------
Mary Anne Callahan Timothy E. Lavelle
Executive Director Managing Director
Agreed and accepted this
Day of January, 1998
CORTLAND SAVINGS BANK
By:
---------------------------------
Wesley D. Stisser
<PAGE>
Cortland Savings Bank
January 9, 1998
Page 9
President and Chief Executive Officer
ANNEX A
Conversion Center Activities As further described in the attached engagement
letter, Oppenheimer and/or Trident will supervise and administer the Conversion
Center. Designated representatives of either (or both) of such firms will train
Conversion Center staff to help record stock orders, answer customer inquiries
and handle special situations as they arise. Conversion Center activities
include the following:
- - Provide experienced on-site registered representatives to manage the
Conversion Center;
- - Identify and organize space for the on-site Conversion Center, the focal
point of conversion activity;
- - Administer the Conversion Center;
- - Prepare procedures for processing proxies, stock orders and cash, and for
handling requests for information;
- - Provide training and guidance for the telephone team in soliciting proxies;
- - Train branch managers and customer-contact employees on the proper response
to stock purchase inquiries;
- - Train and supervise Conversion Center staff assisting with proxy and order
processing;
- - Prepare daily sales reports for management;
- - Coordinate functions with the conversion agent, printer, transfer agent,
stock certificate printer and other professionals;
- - Organize and implement a proxy solicitation campaign;
- - Design and implement procedures for handling IRA and Keogh orders;
- - Provide post-offering subscriber assistance; and
- - Assist in the allocation of shares in the event of an oversubscription.
Securities Marketing Activities:
<PAGE>
- - Assign licensed registered representatives from our staff to work at the
Conversion Center to solicit orders on behalf of the Bank from prospective
investors who have been targeted as likely and desirable stockholders;
- - Assist management in developing a list of potential investors who are
viewed as priority prospects;
- - Respond to inquiries concerning the conversion and investment opportunity;
- - Organize, coordinate and participate in community informational meetings.
These meetings are intended to both relieve customer anxiety and attract
potential investors. The meetings generate widespread publicity for the
conversion while providing local exposure of the Bank and promoting
favorable stockholder relations;
- - Supervise and conduct a telemarketing campaign to identify prospects from
among the Bank's customer base (if requested);
- - Continually advise management on market conditions and the community's
responsiveness to the offering;
- - Educate the Bank's trustees, officers and employees about the conversion,
their roles and relevant securities laws; and
- - If appropriate, assemble a selling group of selected local broker-dealers
to assist in selling stock during the offering. In so doing, prepare broker
"fact sheets" and arrange "roadshows" (at the Bank's expense) for the
purpose of stimulating local interest in the stock and informing the
brokerage community of the particulars of the offering.
ANNEX B
The Holding Company and the Bank as defined in the attached Engagement Agreement
(collectively, the "Company") hereby agree to indemnify Oppenheimer and Trident,
their respective employees, directors, officers, agents, affiliates and each
person, if any, who controls either of such firms within the meaning of either
Section 20 of the Securities Exchange Act of 1934 or Section 15 of the
Securities Act of 1933 (each such person, including Oppenheimer and Trident, is
referred to as "Indemnified Party") from and against any losses, claims, damages
and liabilities, joint or several (including all legal or other expenses
reasonably incurred by any Indemnified Party in connection with the preparation
for or defense of any threatened or pending claim, action or proceeding, whether
or not resulting in any liability) ("Damages"), to which such Indemnified Party,
in connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of
Oppenheimer's and Trident's engagement or the rendering by any Indemnified Party
of its services under the Engagement Agreement; provided, however, that the
Company will not be liable to the Indemnified Party hereunder to the extent that
any Damages are found in a final non-appealable judgment by a court of competent
jurisdiction (x) to have resulted from the gross negligence, bad faith or
willful misconduct of the Indemnified Party seeking indemnification hereunder or
(y) to have arisen out of or be based upon any untrue statement of a material
fact required to be stated therein or necessary to make not misleading any
statements contained in any final proxy statement, registration statement or
prospectus, or any amendment or supplement thereto, or any of the applications,
notices, filings or documents related thereto made in reliance on and in
conformity with written information regarding (a) Oppenheimer and Trident or (b)
the possible use of a syndicated community offering which written information is
furnished to the Bank or the Holding Company by Oppenheimer and Trident
expressly for use therein.
These indemnification provisions shall be in addition to any liability which the
Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct, the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and Oppenheimer and Trident on the other, but also the relative fault of
the Company and the Indemnified Party as well as any relevant equitable
considerations, subject to the limitation that in no event shall the total
contribution
<PAGE>
of all Indemnified Parties to all such Damages exceed the total amount of fees
actually received and retained by Oppenheimer and Trident hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or of the
commencement of any action in respect of which indemnity may be sought, the
Indemnified Party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of fees and expenses of
such counsel), provided that the Indemnified Party shall have the right to
control its defense if, in the opinion of its counsel, the Indemnified Party's
defense is unique or separate to it as the case may be, as opposed to a defense
pertaining to the Company. In any event, the Indemnified Party shall have the
right to retain counsel reasonably satisfactory to the Company, at the Company's
expense, to represent the Indemnified Party in any claim or action in respect of
which indemnity may be sought and agrees to cooperate with the Company and the
Company's counsel in the defense of such claim or action, it being understood,
however, that the Company shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or action in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all the Indemnified Parties unless the defense of one Indemnified
Party is unique or separate from that of another Indemnified Party subject to
the same claim or action. In the event that the Company does not promptly assume
the defense of a claim or action, the Indemnified Party shall have the right to
employ counsel reasonably satisfactory to the Company, at the Company's expense,
to defend such claim or action. The omission by an Indemnified Party to promptly
notify the Company of the receipt or commencement of any claim or action in
respect of which indemnity may be sought will relieve the Company from any
liability the Company may have to such Indemnified Party only to the extent that
such a delay in notification materially prejudices the Company's defense of such
claim or action. The Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld or delayed. Any obligation pursuant to this Annex B shall
survive the termination or expiration of the Engagement Agreement.
<PAGE>
Exhibit 2.1
PLAN OF CONVERSION
FOR
CORTLAND SAVINGS BANK
CORTLAND, NEW YORK
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. INTRODUCTION ....................................................... 1
2. DEFINITIONS ........................................................ 2
3. PROCEDURE FOR APPROVAL OF THE CONVERSION ........................... 7
4. SALE OF CONVERSION STOCK ........................................... 9
5. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK............. 9
6. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE BANK............ 11
7. ESTABLISHMENT AND FUNDING OF FOUNDATION ............................ 11
8. SUBSCRIPTION RIGHTS AND SHARE ALLOCATIONS........................... 12
9. COMMUNITY OFFERING ................................................. 13
10. PUBLIC OFFERING..................................................... 14
11. LIMITATIONS ON PURCHASE AND TRANSFER OF CONVERSION STOCK............ 14
12. PAYMENT FOR CONVERSION STOCK........................................ 16
13. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS........ 17
14. UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS:
INSUFFICIENT PAYMENT................................................ 17
15. RESTRICTIONS ON ACQUISITION OF THE BANK AND
HOLDING COMPANY..................................................... 17
16. EFFECT OF CONVERSION; CERTAIN COVENANTS
AND AGREEMENTS...................................................... 19
17. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION.................... 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
18. VOTING RIGHTS AFTER CONVERSION...................................... 20
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT................................ 20
20. TRANSFER OF DEPOSIT ACCOUNTS........................................ 21
21. STOCK REPURCHASE AND STOCK BENEFIT PLANS............................ 22
22. AMENDMENT OF PLAN................................................... 22
23. CONSUMMATION AND COMPLETION OF CONVERSION........................... 22
24. REGISTRATION AND MARKETING.......................................... 22
25. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES................... 23
26. EXPENSES OF CONVERSION.............................................. 23
27. CONDITIONS TO CONVERSION............................................ 23
28. INTERPRETATION...................................................... 24
</TABLE>
ii
<PAGE>
1. INTRODUCTION
This Plan of Conversion ("Plan") provides for the conversion (the
"Conversion") of Cortland Savings Bank from a New York mutual savings bank to a
New York stock savings bank. The purpose of the Conversion is to increase the
Bank's capital, thereby enhancing its ability to pursue lending and investment
opportunities, diversification and growth, which may include the acquisition of
other financial institutions. The Bank's Board of Directors (which term also
includes its Board of Trustees prior to the Conversion) also believes that the
decline in the number of mutual institutions, as well as the decline in the
assets and deposits of mutual institutions, will place mutual institutions at a
disadvantage to stock institutions. Wherever appropriate for purposes of this
Plan of Conversion, capitalized terms shall have the meanings assigned to them
under Section 2 hereof.
The Board of Directors of the Bank currently contemplates that all of the
stock of the Bank shall be held by a Delaware business corporation (the "Holding
Company"). Shares of capital stock of the Bank will be sold to the Holding
Company and the Holding Company will offer the Conversion Stock, in a
Subscription Offering as described below, to Eligible Account Holders, the
Employee Plans established by the Bank or the Holding Company, which may be
funded by the Holding Company, and Supplemental Eligible Account Holders in the
priorities set forth in this Plan. Any shares of Conversion Stock not subscribed
for in the Subscription Offering will be offered for sale to certain members of
the public either directly by the Bank and the Holding Company, or through an
underwriter or syndicate of broker-dealers, in a Community Offering or a Public
Offering. If the Bank decides not to utilize the Holding Company in the
Conversion, Conversion Stock of the Bank, in lieu of the Holding Company, will
be sold in the same manner. Following the completion of the Conversion, the Bank
and the Holding Company, pursuant to applicable regulations of the Banking
Board, intend to implement stock option and other stock benefit plans and may
provide employment or severance agreements to certain management employees and
certain other benefits to the directors, officers and employees of the Bank as
described in the Prospectus.
In furtherance of the Bank's commitment to its communities, the Plan
provides for the establishment of a charitable foundation as part of the
Conversion. The Foundation is intended to complement the Bank's existing
community reinvestment activities to allow the Bank's local communities to share
over the long term in the potential growth and profitability of the Holding
Company and the Bank. Accordingly, the Holding Company intends to donate to the
Foundation from its authorized but unissued Common Stock up to 8% of the
Conversion Stock issued in the Conversion. The establishment of the Foundation
is subject to the approval of the Voting Depositors of the Bank. If the
Foundation is not approved, the Bank may determine to complete the Conversion
without the Foundation.
This Plan, which has been unanimously approved by the Board of Directors of
the Bank, must also be approved by the affirmative vote of at least seventy-five
percent
<PAGE>
(75%) in amount of deposit liabilities of Voting Depositors represented in
person or by proxy and eligible to vote at the Special Meeting, and by the
affirmative vote of at least a majority of the amount of votes eligible to be
cast by Voting Depositors at the Special Meeting. Prior to the submission of
this Plan to the Voting Depositors for consideration, the Plan must be approved
by the Superintendent or his or her designees, must not be objected to by the
FDIC, and certain waivers, if required, may be granted by the Banking Board.
After the Conversion, the Bank will succeed to all the rights, interests,
duties and obligations as existed 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. 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.
2. DEFINITIONS
As used in this Plan of Conversion, the following terms shall have the
following meanings:
"Account Holder" means any Person holding an Account in the Bank.
"Acting in Concert" means (i) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal, whether or not
pursuant to an express agreement or understanding; (ii) a combination or pooling
of voting or other interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise; or (iii) a Person or company which
acts in concert with another Person ("other party") shall also be deemed to be
acting in concert with any Person or company who is also acting in concert with
that other party, except that any Tax- Qualified Employee Stock Benefit Plan
will not be deemed to be acting in concert with its trustee or a Person who
serves in a similar capacity solely for the purpose of determining whether stock
held by the trustee and stock held by the plan will be aggregated, and
participants or beneficiaries of any such Tax-Qualified Employee Stock Benefit
Plan will not be deemed to be acting in concert solely as a result of their
common interests as participants or beneficiaries. Directors and Officers of the
Bank and the Holding Company shall not be deemed to be Associates or a group
affiliated with each other or otherwise acting in concert solely as a result of
their being Directors or Officers of the Bank or the Holding Company.
"Affiliate" means a Person who, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
"Appraiser" means the independent person retained by the Bank to prepare an
2
<PAGE>
appraisal of the estimated pro forma market value of the Conversion Stock. Such
Person shall be experienced and expert in the area of corporate appraisal and
acceptable to the Superintendent.
"Associate," when used to indicate a relationship with any Person, means
(a) 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 or
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; (b) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, except that for the purposes of Section 8 and
this Section, the term "Associate" does not include any Tax-Qualified Employee
Stock Benefit Plan or any Non-Tax-Qualified Employee Stock Benefit Plan 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 held by Officers and Directors and their
Associates, the term "Associate" does not include any Tax- Qualified Employee
Stock Benefit Plan; and (c) 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, the Bank or any of the Bank's
subsidiaries.
"Bank" means Cortland Savings Bank in its mutual form or in its stock form,
as the context of the reference requires.
"Banking Board" means the Banking Board of the State of New York.
"Banking Law" means the Banking Law of the State of New York.
"Board of Directors" means, as to the Bank, both the Board of Trustees
prior to the Conversion and the Board of Directors after the Conversion.
"Community Offering" means the offering for sale to certain members of the
general public directly by the Bank or the Holding Company, or through a
syndicate of selected broker-dealers, if utilized, of any shares of the
Conversion Stock not subscribed for in the Subscription Offering in accordance
with Section 9.
"Conversion" means (a) the restatement of the Bank's organization
certificate to authorize the issuance of capital stock in accordance with the
Banking Law and the Conversion Regulations and to otherwise conform to the
requirements applicable to a New York stock savings bank and (b) the issuance of
the common stock of the Bank in accordance with this Plan.
"Conversion Regulations" means Part 86 of the General Regulations of the
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Banking Board and the regulations of the FDIC applicable to mutual to stock
conversions, 12 C.F.R. Section 303.15, to the extent such regulations preempt or
supplement Part 86 .
"Conversion Stock" means the $.01 par value common stock offered and issued
pursuant to this Plan by the Holding Company (or by the Bank if the Holding
Company is not utilized). The Conversion Stock will not be insured by the FDIC.
"Deposit Account" means all deposits of the Bank as such term is used in
Section 9019 of the Banking Law of New York, and includes without limitation,
savings, time, demand, negotiable orders of withdrawal (NOW), money market and
passbook accounts maintained by the Bank.
"Depositor" means any Person owning a Deposit Account.
"Director" means a Trustee of the Bank prior to the Conversion, a Director
of the Bank after the Conversion or a Director of the Holding Company.
"Effective Date" means the effective date of the Conversion on which all of
the Conversion Stock is issued and sold and on which the Superintendent endorses
his or her approval on the Bank's Restated Organization Certificate and causes
such Certificate to be filed in the Office of the Superintendent.
"Eligibility Record Date" means the close of business on December 31, 1996.
"Eligible Account Holder" means any Depositor of the Bank who owned a
Qualifying Deposit on the Eligibility Record Date.
"Employee Plans" means the Tax-Qualified Employee Stock Benefit Plans and
the Non-Tax Qualified Employee Stock Benefit Plans approved by the Board of
Directors of the Bank or the Board of Directors of the Holding Company.
"Employees" means all persons who are employed by the Bank, the Holding
Company or a wholly owned subsidiary of either of them.
"Estimated Price Range" means the range of the estimated pro forma market
value of the Conversion Stock, as determined by the Appraiser, prior to the
Subscription Offering and as it may be amended from time to time thereafter.
"FDIC" means the Federal Deposit Insurance Corporation.
"Foundation" means a non-stock corporation that is a tax-exempt
organization under Section 501(c)(3) of the Internal Revenue Code formed by the
Bank and the Holding Company to which shares of Conversion Stock shall be
transferred upon the
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Conversion.
"FRB" means the Board of Governors of the Federal Reserve System.
"Holders of Subscription Rights" means the Tax-Qualified Employee Stock
Benefit Plans, Eligible Account Holders and Supplemental Eligible Account
Holders who have Subscription Rights pursuant to Section 8.
"Holding Company" means the Delaware business corporation to be formed for
the purpose of acquiring all of the shares of capital stock of the Bank to be
issued the Conversion unless the Holding Company form of organization is not
utilized.
"Non-Tax-Qualified Employee Stock Benefit Plan" means any defined benefit
or defined contribution plan such as an employee stock ownership plan, bonus
stock or profit sharing plan or other employee benefit plan that is not a
"Tax-Qualified Employee Stock Benefit Plan" and that is maintained by the
Holding Company or the Bank for the benefit of Officers or Employees.
"Officer" means an executive officer of the Holding Company or the Bank and
may include the Chairman of the Board, Chief Executive Officer, President,
Senior Vice President, any vice president in charge of a principal business
functions, Secretary, Treasurer or any person performing functions similar to
those performed by the foregoing persons.
"Order Form" means the form provided by the Holding Company or the Bank
that subscribers must use to order Conversion Stock in the Subscription and
Community Offerings.
"Person" means any corporation, partnership, trust, unincorporated
association, any other entity or any natural person.
"Plan" or "Plan of Conversion" means this Plan of Conversion, including any
amendments thereto.
"Prospectus" means the principal offering document pursuant to which the
Conversion Stock is offered for sale, in accordance with the Conversion
Regulations and SEC rules, and may be titled either a "Prospectus" if the
Holding Company is used or an "Offering Circular" if the Holding Company is not
used.
"Proxy Statement" means the document to be used to solicit proxies from
Voting Depositors to vote at the Special Meeting.
"Public Offering" means the offering for sale through the Underwriters to
the
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general public of any shares of Conversion Stock not subscribed for in the
Subscription Offering or Community Offering, if held.
"Purchase Order" means the document or other evidence reflecting an order
for the purchase of Conversion Stock in the Public Offering.
"Purchase Price" means the price per share at which the Conversion Stock is
ultimately sold in accordance with the terms hereof.
"Qualifying Deposit" means one or more Deposit Accounts with the Bank
totaling, in the aggregate, at least one hundred dollars ($100.00).
"SEC" means the Securities and Exchange Commission.
"Special Meeting" means the Special Meeting of Depositors and any
adjournments thereof held to consider and vote upon this Plan.
"Subaccount Balance" means, with respect to each Eligible Account Holder
and Supplemental Eligible Account Holder, the portion of the liquidation account
that such Eligible Account Holder and Supplemental Eligible Account Holder would
be entitled to receive pursuant to the Conversion Regulations in the event of a
complete liquidation of the Bank subsequent to the Conversion. The initial
Subaccount Balance of each Eligible Account Holder and Supplemental Eligible
Account Holder shall be determined in accordance with Section 86.4(g)(4) of the
Conversion Regulations.
"Subscription Offering" means the offering of the Conversion Stock to
Eligible Account Holders, Employee Plans and Supplemental Eligible Account
Holders.
"Superintendent" means the Superintendent of Banks of the State of New
York.
"Supplemental Eligibility Record Date" means the record date for
determining Supplemental Eligible Account Holders, which is the close of
business on the last day of the calendar quarter preceding the approval of the
Plan by the Superintendent.
"Supplemental Eligible Account Holder" means any depositor of the Bank
(other than an Eligible Account Holder) who owned a Qualifying Deposit, (except
Officers, Directors and their Associates), on the Supplemental Eligibility
Record Date.
"Tax-Qualified Employee Stock Benefit Plan" means any defined benefit or
defined contribution plan, such as an employee stock ownership plan, stock bonus
plan, profit-sharing plan or other plan, which with its related trust meets the
requirements to be qualified under Section 401 of the Internal Revenue Code of
1986, as amended.
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"Underwriter" means the investment banking firm or firms through which the
Conversion Stock will be offered in a Public Offering, if any.
"Voting Depositor" means any Depositor of the Bank who owns a Qualifying
Deposit on the Voting Record Date.
"Voting Record Date" means the date fixed by the Board of Directors of the
Bank as the date for determining eligibility to vote at the Special Meeting,
which date shall not be more than 60 nor less than 10 days before the date of
the Special Meeting.
3. PROCEDURE FOR APPROVAL OF THE CONVERSION
3.1 Application and Notice.
After approval by the Board of Directors of the Bank, the Bank will cause
notice of the adoption of the Plan by the Board of Directors, and of its
intention to convert to stock form to be conspicuously posted at its home office
and each of its branch offices. The Bank will also issue a press release
containing all of the material terms of the proposed Conversion and will place
an advertisement containing such material terms in a newspaper having general
circulation in the communities in which the principal office and branches of the
Bank are located. Thereafter, this Plan will be submitted, together with an
Application for Conversion and other requisite material in the forms required by
the Conversion Regulations, to the Superintendent for approval, to the Banking
Board to request certain waivers, if required, and to the FDIC for
non-objection.
3.2 Approval of Plan by Voting Depositors; the Special Meeting.
(a) Following approval of the Bank's Application for Conversion by the
Superintendent, the non-objection of the FDIC and the receipt of all necessary
waivers of the Banking Board, 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, a Notice of Special Meeting, proxy card, Proxy
Statement and such other documents as may be required, all in the form required
by the Conversion Regulations, describing the Plan and certain other matters
relating to the Bank and its Conversion. A subscription order form may be mailed
with such materials. Separate and readily distinguishable postage-paid envelopes
shall be provided for the return of proxy cards and subscription order forms.
(b) 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
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eligible to cast more than one thousand (1,000) votes. The Board of Directors
shall appoint an 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.
(c) 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 Special Meeting. In order to be approved, the Plan
must receive the affirmative vote of 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 the affirmative vote of at least a majority
of the amount of votes entitled to be cast by Voting Depositors at the Special
Meeting. Upon such approval of the Plan, the Bank will take all other necessary
steps pursuant to applicable laws to effect the Conversion in accordance with
the terms and conditions of the Plan. If the Plan is not approved at the Special
Meeting, 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.
3.3 Approval of Holding Company Applications.
The Holding Company will make timely applications for any requisite
regulatory approvals, including an Application with the Superintendent, an
Application on Form FR Y-3 with the FRB, and a registration statement on Form
S-1 to be filed with the SEC. The Bank will be a wholly owned subsidiary of the
Holding Company unless the Holding Company is not utilized in the Conversion (in
which event its registration statement will be withdrawn from the SEC and the
Bank will take all necessary steps to complete the Conversion). If the Holding
Company is utilized, upon the Conversion, the Bank will issue its capital stock
to the Holding Company, and the Holding Company will issue and sell the
Conversion Stock in accordance with this Plan.
The Conversion Stock will not be insured by the FDIC. The Bank will not
knowingly lend funds or otherwise extend credit to any person to purchase shares
of Conversion Stock.
4. SALE OF CONVERSION STOCK
(a) The Conversion Stock will be offered simultaneously in a Subscription
Offering to the Eligible Account Holders, Employee Plans and Supplemental
Eligible Account Holders in the priorities set forth in Section 8 of this Plan.
The Subscription Offering may be commenced as early as the mailing of the Proxy
Statement for the Special Meeting of Depositors and must be commenced in time to
complete the Conversion within the time period specified in Section 23.
Any shares of Conversion Stock not subscribed for in the Subscription
Offering
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may be offered for sale in the Community Offering as provided in Section 9 and
may also be offered in a Public Offering, as provided in Section 10, if
necessary and feasible. The Subscription Offering may be commenced prior to the
Special Meeting of Depositors, and, in that event, the Community Offering, if
any, may also be commenced prior to the Special Meeting of Depositors. The offer
and sale of Conversion Stock, prior to the Special Meeting of Depositors shall,
however, be conditioned upon approval of the Plan by the Voting Depositors.
Shares of Conversion Stock may be sold in a Public Offering in a manner
that will achieve a reasonably wide distribution of the Conversion Stock as
determined by the Bank. In the event of a Public Offering, the sale of all
Conversion Stock subscribed for will be consummated only if all unsubscribed for
Conversion Stock is sold.
(b) The Bank may elect to pay fees on either a fixed fee or commission
basis or combination thereof to one or more investment banking firms which
assist it in the sale of the Conversion Stock and may also elect to pay fees on
a per share basis to broker-dealers who assist Persons in determining to
purchase shares of Conversion Stock.
(c) The sales price per share of the Conversion Stock shall be a uniform
price determined in accordance with Section 86.5(c) of the Conversion
Regulations and this Plan, except that the price to be paid by or through the
Underwriter or broker-dealers in connection with a Community Offering or Public
Offering may be less a negotiated commission or discount.
5. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION
STOCK
(a) The total number of shares (or a range thereof) of Conversion Stock to
be issued and offered for sale will be determined by the Boards of Directors of
the Bank and Holding Company, immediately prior to the commencement of the
Subscription Offering, subject to adjustment thereafter if necessitated or
required by the Conversion Regulations or by market or financial conditions,
with the approval of the Superintendent, if necessary.
All shares of Conversion Stock not subscribed for at the completion of the
Subscription Offering shall be sold within 45 days after completion of the
Subscription Offering, or such longer period as the Superintendent may approve.
If all shares are not sold as provided for herein, the Bank and the Holding
Company will consult with the Superintendent to determine an alternative method
of sale. In such event and if required by the Superintendent or the SEC, a
resolicitation of those Persons who have subscribed for shares will be made. If
such an alternative method is not agreed upon, the Conversion will not be
effected, the Bank will remain in mutual form, all funds submitted to the Bank
and the Holding Company as payment for shares of the Conversion Stock will be
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returned to subscribers, with interest as provided herein, and all withdrawal
authorizations will be canceled.
(b) All Conversion Stock shall be sold at a uniform price per share
referred to in this Plan as the Purchase Price. The aggregate price at which all
the Conversion Stock shall be sold shall be consistent with the estimated pro
forma market value of such Conversion Stock on the Effective Date of the
Conversion, as determined by the Appraiser. An initial estimate of such pro
forma market value determined by the Appraiser in accordance with the Conversion
Regulations shall be submitted to the Superintendent and the FDIC as part of the
Bank's Application for Conversion, such valuation to be stated in terms of an
Estimated Price Range, the maximum of which shall be no more than 15% above the
average of the minimum and maximum of such price range and the minimum of which
shall be no more than 15% below such average. In the event that the aggregate
purchase price of the Conversion Stock is below the minimum of the Estimated
Price Range, or materially above the maximum of the Estimated Price Range, a
resolicitation of purchasers may be required; provided, that an increase up to
15% above the maximum of the Estimated Price Range which is supported by an
appropriate change in the estimated pro forma market value of the Conversion
Stock, and a resultant increase of up to 15% in the number of shares of
Conversion Stock to be sold, will not be deemed material so as to require a
resolicitation. Any such resolicitation shall be effected in such manner and
within such time as the Holding Company or the Bank shall establish, with the
approval of the Superintendent or the FDIC, if required.
(c) Based on the valuation of the Appraiser, the Boards of Directors of the
Bank and the Holding Company shall fix the price at which Conversion Stock is to
be offered and the number of shares to be offered. The total number of shares of
Conversion Stock offered shall be subject to increase or decrease at any time
prior to any Public Offering or other method of sale to reflect changes in
market and financial conditions. Subscribers shall not have the right to modify
or rescind their subscriptions as a result of any increase or decrease in the
number of shares of Conversion Stock offered, unless otherwise required by this
Plan or by the Superintendent.
(d) In the event shares of Conversion Stock are sold in excess of the
maximum of the Estimated Price Range, such shares will be allocated in the same
manner as other shares are allocated as set forth in Section 8(b) and if there
remain any shares after the satisfaction of all subscriptions in the
Subscription Offering, to fill unfulfilled subscriptions in the Community
Offering.
(e) The Boards of Directors of the Bank and the Holding Company, in
consultation with the Appraiser, shall determine the Purchase Price, with such
discounts, fees or commissions as may be allowed to the Underwriter, subject to
approval by the Superintendent.
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(f) The Holding Company shall not consummate any sale unless the Appraiser
shall have confirmed to the Holding Company, the Bank and the Superintendent
that nothing of a material nature has occurred that would cause the Appraiser to
conclude that the aggregate purchase price of the Conversion Stock is
incompatible with its estimate of the aggregate pro forma market value of the
Bank at the time it is to be sold. If such confirmation is not received, the
Bank and the Holding Company may cancel the Subscription Offering, the Community
Offering or the Public Offering, extend the Conversion, reopen or hold a new
Subscription Offering, Community Offering or Public Offering, or take such other
action as the Boards of Directors of the Bank and the Holding Company shall
determine and the Superintendent shall approve.
(g) The Conversion Stock, upon issuance, shall be fully paid and
nonassessable.
6. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE
BANK
Upon the consummation of the sale of the Conversion Stock, the Holding
Company will purchase from the Bank all of the capital stock of the Bank to be
issued by the Bank in the Conversion in exchange for 50% of the net proceeds
from the sale of the Conversion Stock, or such greater percentage as may be
approved by the Board of Directors of the Holding Company or required by the
Superintendent or the FDIC.
7. ESTABLISHMENT AND FUNDING OF FOUNDATION
(a) As part of the Conversion, the Holding Company and the Bank intend to
establish the Foundation and to donate to the Foundation from authorized but
unissued shares up to 8.0% of the number of shares of Conversion Stock sold in
the Conversion. The Foundation is being formed in connection with the Conversion
in order to complement the Bank's existing community reinvestment activities and
to share with the Bank's local communities a part of the Bank's financial
success as a locally headquartered, community-minded, financial services
institution. The funding of the Foundation in such manner accomplishes this goal
as it enables the community to share in the potential and profitability of the
Holding Company and the Bank over the long-term.
(b) The Foundation will be dedicated to the promotion of charitable
purposes including community development, grants or donations to support housing
assistance, not-for-profit community groups and other types of organizations or
civic- minded projects. The Foundation will annually distribute total grants to
assist charitable organizations or to fund projects within its local community
of not less than 5% of the average fair value of Foundation assets each year. In
order to serve the purposes for
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which it was formed and to maintain its qualification under Section 501(c)(3) of
the Internal Revenue Code, the Foundation may sell, on an annual basis, a
limited portion of the Conversion Stock contributed to it by the Holding
Company.
(c) A majority of the board of directors of the Foundation will be
comprised of individuals who are Officers or Directors of the Bank and the
remaining board members will be comprised of civic and community leaders from
within the Bank's local community. The board of directors of the Foundation will
be responsible for establishing the policies of the Foundation with respect to
grants or donations, consistent with the stated purposes of the Foundation. The
establishment and funding of the Foundation as part of the Conversion is subject
to the approval of the Superintendent and, if applicable, the FDIC, as more
fully described in the Prospectus.
8. SUBSCRIPTION RIGHTS AND SHARE ALLOCATIONS
(a) Each Eligible Account Holder and Supplemental Eligible Account Holder
shall receive, without payment, the right to subscribe in the Subscription
Offering for such number of shares of Conversion Stock as equates to an
aggregate purchase price of $150,000. The Employee Plans shall receive, without
payment, in the aggregate, the right to subscribe for 10% of the shares of
Conversion Stock, plus shares issued to the Foundation.
(b) If subscriptions are received in the Subscription Offering for more
shares of Conversion Stock than are to be sold, then shares shall be allocated
in the following order of priority: first to Eligible Account Holders; second to
Employee Plans and third to Supplemental Eligible Account Holders. Subscription
rights received in each category shall be subordinated to the subscription
rights received in all prior categories. No Person in any category shall be
allocated any shares unless all subscriptions in all prior categories have been
filled to the maximum permitted amount. If subscriptions received within any of
the first or third categories exceed the number of shares available for purchase
by that category, then each subscriber in that category shall first receive, to
the extent practicable, an allocation equal to the lesser of the number of
shares subscribed for by that subscriber or 100 shares. Any remaining shares
shall be allocated among members of such category, to the extent practicable,
based upon the ratio that each subscriber's Qualifying Deposit bears to the
Qualifying Deposits of all subscribers with unfilled subscriptions in that
category. If the amount so allocated to any subscriber exceeds the amount
subscribed for by that subscriber, the excess shall be reallocated (one or more
times as necessary) among those subscribers in such category whose subscriptions
are still not fully satisfied on the same principle until all available shares
have been allocated or all subscriptions satisfied. In no event shall fractional
shares be issued.
(c) Subscription rights of Eligible Account Holders received by Directors
and
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Officers and their Associates which are based on deposits made by such persons
during the twelve (12) months preceding the Eligibility Record Date shall be
subordinated to the Subscription Rights of all other Eligible Account Holders.
9. COMMUNITY OFFERING
(a) If less than the total number of shares of Conversion Stock to be
purchased in the Conversion is sold in the Subscription Offering, shares
remaining which are unsubscribed may be made available for purchase in the
Community Offering to certain members of the general public. The Bank may
establish all terms and conditions of such offer. The shares may be made
available in the Community Offering through a direct community marketing
program. The Community Offering may also be conducted, in whole or in part,
through a broker, dealer, consultant or investment banking firm, experienced and
an expert in the sale of savings institution securities, or a syndicate thereof.
In the Community Offering, if held, a preference will be given to natural
persons residing in Cortland County, New York. The Community Offering shall be
conducted in such a manner as to promote a reasonably wide distribution of
Conversion Stock.
(b) If the purchasers in the Community Offering, whose orders would
otherwise be accepted, subscribe for more shares than are available for
purchase, the shares available to them will be allocated among persons
submitting orders in the Community Offering in an equitable manner as determined
by the Boards of Directors of the Bank and the Company.
(c) The Community Offering, if held, may commence simultaneously with,
during or subsequent to the completion of the Subscription Offering and may be
limited in such manner as the Bank shall determine, subject to the approval of
the Superintendent, if required. If commenced, the Community Offering must be
completed within 45 days after the completion of the Subscription Offering
unless otherwise extended with the approval of the Superintendent.
(d) The Bank and the Holding Company, in their absolute discretion, reserve
the right to reject any or all orders in whole or in part which are received in
the Community Offering, at the time of receipt or as soon as practicable
following the completion of the Community Offering.
10. PUBLIC OFFERING
Any shares of Conversion Stock not sold in the Subscription Offering or in
the Community Offering, if held, may then be sold through the Underwriter to the
general public at the Purchase Price in the Public Offering, subject to such
terms, conditions and procedures as may be determined by the Boards of Directors
of the Bank and the Holding Company, in a manner that will achieve a reasonably
wide distribution of the Conversion
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Stock and subject to the right of the Bank and the Holding Company, in their
absolute discretion, to accept or reject in whole or in part all subscriptions
in the Public Offering.
11. LIMITATIONS ON PURCHASE AND TRANSFER OF CONVERSION
STOCK
The following limitations shall apply to all purchases of shares of
Conversion Stock:
(a) The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in the Conversion by any Person together with any
Associate or group of Persons Acting in Concert shall not exceed such number of
shares as shall equal $150,000 divided by the Purchase Price, except for
Employee Plans, which in the aggregate may subscribe for up to 10% of the
Conversion Stock issued.
(b) The maximum number of shares of Conversion Stock which may be purchased
in all categories of the Conversion by Officers and Directors of the Bank and
the Holding Company and their Associates, collectively, shall not exceed 25% of
the total number of shares of Conversion Stock issued. In applying this
limitation, Conversion Stock purchased by any one or more Tax-Qualified Employee
Stock Benefit Plans shall not be counted.
(c) Shares of Conversion Stock subscribed for in the Subscription Offering,
the Community Offering and any Public Offering or otherwise purchased shall be
aggregated for purposes of determining if the maximum purchase limitations set
forth in this Plan have been violated.
(d) Each person subscribing for shares must purchase, to the extent
available, the lesser of 25 shares of Conversion Stock or Conversion Stock with
an aggregate Purchase Price of at least $500.
(e) Depending upon market or financial conditions, the Boards of Directors
of the Bank and the Holding Company, without further approval of the
subscribers, may decrease or increase the purchase limitations in this Plan,
provided that the maximum purchase limitations may not be increased to a
percentage in excess of 5% of the shares being offered. If the Bank and the
Holding Company increase such maximum purchase limitations, they are only
required to resolicit Persons who subscribed for the maximum purchase amount and
may, in their sole discretion, resolicit other subscribers.
(f) Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations set forth in this Plan.
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(g) As used in this Section, Officers and Directors of the Bank and the
Holding Company shall not be deemed to be Associates or a group affiliated with
each other or otherwise Acting in Concert solely as a result of their being
Officers or Directors of the Bank or the Holding Company. Furthermore, the
Employee Plans shall not be deemed to be Associates or affiliates of or Persons
Acting in Concert with any Director or Officer of the Holding Company or the
Bank for the purpose of determining the right to purchase Conversion Stock.
(h) For three years after the Conversion, no Officer or Director of the
Bank or the Holding Company, or their Associates, shall purchase or acquire,
without the prior written approval of the Superintendent, direct or indirect
beneficial ownership of any capital stock of the Holding Company, except from a
broker or dealer registered with the SEC. This restriction shall not apply to
purchases made by or held by any Tax-Qualified Employee Stock Benefit Plan or
Non-Tax Qualified Employee Stock Benefit Plan of the Bank or the Holding Company
(including the Employee Plans) which may be attributable to any Officer or
Director.
12. PAYMENT FOR CONVERSION STOCK
All payments for Conversion Stock subscribed for in the Subscription,
Community and Public Offerings must be delivered in full to the Bank, together
with a properly completed and executed Order Form, or Purchase Order in the case
of the Public Offering, on or prior to the expiration date specified on the
Order Form or Purchase Order, as the case may be, unless such date is extended
by the Bank; provided, however, that if the Employee Plans subscribe for shares
during the Subscription Offering, the Employee Plans will not be required to pay
for the shares at the time they subscribe but rather may pay for such shares of
Conversion Stock upon consummation of the Conversion. The Bank and the Holding
Company shall have the right to require that payments in excess of $25,000 for
Conversion Stock be made by bank check, certified check or withdrawal
authorization from an account at the Bank with collected funds sufficient to pay
for the shares ordered.
Notwithstanding the foregoing, the Bank and the Holding Company shall have
the right, in their sole discretion, to permit institutional investors to submit
contractually irrevocable orders in the Community or Public Offering and to
thereafter submit payment for the Conversion Stock for which they are
subscribing in the Community Offering or Public Offering at any time prior to
the completion of the Conversion.
Payment for Conversion Stock subscribed for shall be made either in cash
(if delivered in person), check or money order. Alternatively, subscribers in
the Subscription and Community Offerings may authorize the Bank on the Order
Form to make a withdrawal from the subscriber's Deposit Account at the Bank in
an amount equal to the purchase price of such shares. Such withdrawal shall be
without penalty as to
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premature withdrawal. If the authorized withdrawal is from a certificate
account, and the remaining balance does not meet the applicable minimum balance
requirement, the certificate shall be canceled at the time of withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate. Funds for which a withdrawal is authorized will remain in the subscriber's
Deposit Account but may not be used by the subscriber until the Conversion Stock
has been sold or the 45- day period (or such longer period as may be approved by
the Superintendent) following the Subscription Offering has expired, whichever
occurs first. The withdrawal will be given effect only to the extent necessary
to satisfy the subscription (to the extent it can be filled) at the Purchase
Price per share. Interest will continue to be earned on any amounts authorized
for withdrawal from an account until such withdrawal is given effect at the
interest rate applicable to such account. Interest will be paid by the Bank at
not less than the passbook rate as of the date the Subscription Offering is
commenced on payments for Conversion Stock received in cash or by money order or
check. Such interest will be paid from the date payment is received by the Bank
until consummation or termination of the Conversion. If for any reason the
Conversion is not consummated, all payments made by subscribers in the
Subscription, Community and Public Offerings will be refunded to them with
interest. In case of amounts authorized for withdrawal from Deposit Accounts,
refunds will be made by canceling the authorization for withdrawal.
13. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH
ORDER FORMS
After the registration statement filed with the SEC for the Conversion
Stock has been declared effective and approvals have been obtained from the
Superintendent and all other required regulatory agencies, the Holding Company
shall distribute or make available the Prospectus, together with Order Forms for
the purchase of Conversion Stock, to the Holders of Subscription Rights for the
purpose of enabling them to exercise their respective Subscription Rights. Each
Order Form must be preceded or accompanied by the Prospectus describing the
Holding Company (if utilized), the Bank, the Conversion Stock, the Subscription
Offering and the Community Offering, and contain such information as required by
the Conversion Regulations.
Notwithstanding the above, the Bank and the Holding Company reserve the
right in their sole discretion to accept or reject orders received on
photocopied or facsimile order forms or whose payment is to be made by wire
transfer. The Holding Company may, subject to the provisions of this Plan and
any required approval of the Superintendent, extend the period during which an
Order Form must be completed and delivered. Any such extension shall be for a
period that the Boards of Directors of the Bank and the Holding Company
determine is appropriate.
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14. UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS:
INSUFFICIENT PAYMENT
In the event Order Forms or Purchase Orders (a) are not delivered and are
returned to the Bank by the United States Postal Service or the Bank is unable
to locate the addressee, (b) are not received back by the Bank or are received
by the Bank after the expiration date specified thereon, (c) are defectively
filled out or executed, (d) are not accompanied by the full required payment,
or, in the case of institutional investors in the Community Offering or the
Public Offering, by delivering irrevocable orders together with a legally
binding commitment to pay in cash, check, money order or wire transfer the full
amount of the purchase price prior to 48 hours before the completion of the
Conversion for the shares of Conversion Stock subscribed for (including cases in
which Deposit Accounts from which withdrawals are authorized are insufficient to
cover the amount of the required payment), or (e) are not mailed pursuant to a
"no mail" order placed in effect by the account holder, the subscription rights
of the person to whom such rights have been granted will lapse as though such
person failed to return the completed Order Form or Purchase Order within the
time period specified thereon; provided, however, that the Bank may in its sole
discretion, but will not be required to, waive any irregularity on any Order
Form or Purchase Order or require the submission of corrected Order Forms or
Purchase Orders or the remittance of full payment for subscribed shares by such
date as the Bank may specify. The interpretation of the Bank of terms and
conditions of the Plan and of the Order Forms or Purchase Orders will be final,
subject to the authority of the Superintendent.
15. RESTRICTIONS ON ACQUISITION OF THE BANK AND HOLDING
COMPANY
(a) In accordance with the Conversion Regulations, for a period of not less
than three years (or such longer period as may be subsequently authorized under
the Conversion Regulations) following the Effective Date, no Person or group of
Persons Acting in Concert shall, directly or indirectly, offer to acquire or
acquire the beneficial ownership of more than ten percent (10%) of any class of
any equity security of the Holding Company or the Bank without the prior consent
of the Superintendent.
(b) The Restated Organization Certificate of the Bank will contain a
provision stipulating that, for a period of three years following the Effective
Date, no Person or group of Persons Acting in Concert, except the Holding
Company (if a holding company form of organization is utilized) or an Employee
Plan, shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than ten percent (10%) of any class of an equity security of
the Bank, without the prior written approval of the Superintendent. In addition,
such Restated Organization Certificate may also provide that, for a period of
three years following the Conversion, shares beneficially owned in violation of
such provision shall not be entitled to vote and shall not be voted by any
17
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Person or counted as voting stock in connection with any matter submitted to
shareholders for a vote. In addition, the Restated Organization Certificate will
provide that 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 Directors and that shareholders shall not be permitted to cumulate
their votes for the election of directors.
(c) The Certificate of Incorporation of the Holding Company shall contain a
provision to the effect that any record owner of any outstanding shares of the
Holding Company's common stock who beneficially owns in excess of 10% of such
outstanding shares shall not be entitled to cast any votes with respect to any
shares held in excess of such 10% limit. Such provision shall also apply to the
record owner of any shares which are beneficially owned by any Person or group
of Persons Acting in Concert who beneficially own shares in excess of such
limit, even though such beneficial owners may not own any shares of record. In
addition, the Certificate of Incorporation and By-Laws of the Holding Company
contain provisions for staggered terms of the directors, noncumulative voting
for directors, limitations on the calling of special meetings, a fair price
provision for certain business combinations and certain notice requirements.
(d) For the purposes of this Section:
(i) The term "Person" includes an individual, a group Acting in
Concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate, or any other group formed for the purpose of acquiring, holding
or disposing, directly or indirectly, of securities of the Bank or the
Holding Company, but the term "Person" does not include the Holding Company
or any majority-owned subsidiary thereof, or any Tax-Qualified Employee
Stock Benefit Plan or any trust or custodial arrangement established in
connection with any such plan; provided, that the plan or plans do not have
beneficial ownership in the aggregate of more than twenty-five percent
(25%) of any class of equity security of the Bank or the Holding Company;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise; and
(iv) The term "security" includes non-transferable subscription rights
issued pursuant to a plan of conversion as well as a "security" as defined
in 15 U.S.C. Section 78c(a)(10).
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16. EFFECT OF CONVERSION; CERTAIN COVENANTS AND
AGREEMENTS
(a) On the Effective Date of the Conversion, the Bank shall cease to be a
mutual institution and shall simultaneously become a stock institution. All of
the property, rights, powers, franchises, debts, liabilities, obligations and
duties of the mutual institution shall continue as such in the stock institution
and all deposits in the mutual institution shall remain as deposits of equal
character and value in the stock institution. The corporate existence of the
Bank shall not terminate, and the converted Bank shall be a continuation of the
mutual institution that existed immediately before the filing of the Restated
Organization Certificate.
The Bank shall take all appropriate steps to restate its Organization
Certificate to read in the form of an Organization Certificate for a New York
stock savings bank as specified in the Banking Law and the regulations of the
New York Banking Board and approved by the Board of Directors of the Bank. By
their approval of the Plan, the Voting Depositors of the Bank will thereby
approve and adopt such Restated Organization Certificate. The Bank shall also
take all appropriate steps to adopt by-laws sufficient and appropriate for a New
York stock savings bank.
17. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
(a) All shares of Conversion Stock purchased by Directors or Officers of
the Bank or the Holding Company in the Conversion shall be subject to the
restriction that, except as provided in Section 17(b) below, or as may be
approved by the Superintendent, no interest in such shares may be sold or
otherwise disposed of for value for a period of one (1) year following the date
of purchase.
(b) The restriction on disposition of shares of Conversion Stock set forth
in Section 17(a) above shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the Bank or the Holding Company, which has been
approved by the Superintendent; and
(ii) Any disposition of such shares following the death of the person
to whom such shares were initially sold under the terms of the Plan.
(c) With respect to all shares of Conversion Stock subject to
restrictions on resale or subsequent disposition, each of the following
provisions shall apply;
(i) Each certificate representing shares restricted within the meaning
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of Section 17(b) above shall bear a legend prominently stamped on its face
giving notice of the restriction;
(ii) Appropriate instructions shall be issued to the stock transfer
agent for the Holding Company not to recognize or effect any transfer of
any certificate or record of ownership of any such shares in violation of
any of the transfer restrictions; and
(iii) Any shares of capital stock of the Holding Company issued with
respect to a stock dividend, stock split, or otherwise with respect to any
such restricted stock may not be sold until the restrictions respecting
such originally restricted stock are terminated, and any certificate for
such shares shall bear a legend advising of such restrictions.
18. VOTING RIGHTS AFTER CONVERSION
Upon Conversion, the holders of the capital stock of the Bank shall have
the exclusive voting rights with respect to the Bank as specified in its
Restated Organization Certificate and the holders of the capital stock of the
Holding Company shall have the exclusive voting rights with respect to the
Holding Company.
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The Bank shall establish at the time of Conversion a liquidation account in
an amount equal to its net worth as of the net worth of the Bank as set forth in
the latest statement of financial condition included in the Prospectus. The
liquidation account will be maintained by the Bank for the benefit of the
Eligible Account Holders and Supplemental Eligible Account Holders who continue
to maintain their Deposit Accounts at the Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to his Deposit Account,
hold a related inchoate interest in a portion of the liquidation account
balance, calculated as set forth below.
In the event of a complete liquidation of the Bank (and only in such
event), following all liquidation payments to creditors (including those to
Account Holders to the extent of their Deposit Accounts) each Eligible Account
Holder and Supplemental Eligible Account Holder shall be entitled to receive a
liquidating distribution from the liquidation account, in the amount of the then
adjusted subaccount balance for his Deposit Account then held, before any
liquidation distribution may be made to any holders of the Bank's capital stock.
No merger, consolidation, purchase of bulk assets with assumption of Deposit
Accounts and other liabilities, or similar transactions with an FDIC insured
institution, in which the Bank is not the surviving institution, shall be deemed
to be a complete liquidation for this purpose. In such transactions, the
liquidation account shall be assumed by the surviving institution.
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The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction, the
numerator of which is the amount of such Eligible Account Holder's or
Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of
which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the Bank. Such initial
subaccount balance shall not be increased, but shall be subject to downward
adjustment as described below.
If, at the close of business on any annual closing date, commencing on or
after the effective date of the Conversion, the deposit balance in the Deposit
Account of an Eligible Account Holder or Supplemental Eligible Account Holder is
less than the lesser of (i) the balance in the Deposit Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, as applicable, or (ii) the amount
of the Qualifying Deposit in such Deposit Account, the subaccount balance of
such Deposit Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Deposit Account. If any such Deposit Account is closed, the related
subaccount shall be reduced to zero.
The creation and maintenance of the liquidation account shall not operate
to restrict the use or application of any of the net worth accounts of the Bank.
20. TRANSFER OF DEPOSIT ACCOUNTS
Each Person holding a Deposit Account at the Bank at the time of Conversion
shall retain an identical Deposit Account at the Bank following the Conversion
in the same amount and subject to the same terms and conditions applicable to
such Deposit Account at the time of Conversion (except as to voting and
liquidation rights).
21. STOCK REPURCHASE AND STOCK BENEFIT PLANS
The Holding Company, or the Bank if the Holding Company is not utilized,
will restrict repurchases of Conversion Stock and the implementation of stock
option and management and employee stock benefit plans as required by the
Conversion Regulations, unless such requirements are waived by the appropriate
regulatory agency.
22. AMENDMENT OF PLAN
If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to solicitation of proxies from Voting Depositors to vote on the
Plan by a two-
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thirds vote of the Bank's Board of Directors and at any time thereafter by such
vote of such Board of Directors with the concurrence of the Superintendent. Any
amendment to the Plan made after approval by the Voting Depositors with the
approval of the Superintendent shall not necessitate further approval by the
Voting Depositors unless otherwise required by the Superintendent. The Plan may
be terminated by majority vote of the Bank's Board of Directors at any time
prior to the Special Meeting and at any time thereafter with the concurrence of
the Superintendent.
By adoption of the Plan, the Voting Depositors of the Bank authorize the
Board of Directors of the Bank to amend or terminate the Plan under the
circumstances set forth in this Section.
23. CONSUMMATION AND COMPLETION OF CONVERSION
The Conversion shall be deemed to take place and be effective upon the
completion of all requisite organizational procedures for obtaining the Restated
Organization Certificate for the Bank in stock form and sale of all Conversion
Stock. The Conversion shall be completed within 24 months from the date of
approval of this Plan by the Superintendent.
24. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
Conversion pursuant to the Securities Exchange Act of 1934 and will not
deregister such securities for a period of at least three years thereafter,
except that such three year registration maintenance requirement may be
fulfilled by any successor to the Holding Company. In addition, the Holding
Company will use its best efforts to encourage and assist market-makers to
establish and maintain a market for the Conversion Stock and to list those
securities on a national or regional securities exchange or the NASDAQ Stock
Market.
25. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
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
shares of Conversion Stock pursuant to the Plan reside. However, no such Person
will be issued subscription rights or be permitted to purchase shares of
Conversion Stock in the Subscription Offering if such Person resides in a
foreign country or in a state of the United States with respect to which any of
the following apply: (i) a small number of Persons otherwise eligible to
subscribe for shares under the Plan reside in such state; (ii) the issuance of
subscription rights or the offer or sale of shares of Conversion Stock to such
Persons would require the Bank or the Holding Company, as the case may be, under
the securities laws of such state, to register as a broker, dealer, salesman or
agent or to register or
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otherwise qualify its securities for sale in such state; or (iii) such
registration or qualification would be impracticable for reasons of cost or
otherwise.
26. EXPENSES OF CONVERSION
The expenses incurred by the Bank and Holding Company in connection with
the Conversion shall be reasonable.
27. CONDITIONS TO CONVERSION
The Conversion is expressly conditioned upon the following:
(a) Prior receipt by the Bank of rulings of the United States Internal
Revenue Service and the State of New York taxing authorities, or opinions of
counsel, substantially to the effect that the Conversion will not result in any
adverse federal or state tax consequences to Eligible Account Holders or
Supplemental Eligible Account Holders or the Bank and the Holding Company before
or after the Conversion;
(b) The sale of Conversion Stock with an aggregate purchase price at least
equal to the minimum of the Estimated Valuation Range, except as otherwise
permitted pursuant to this Plan upon the approval of the Superintendent;
(c) The completion of the Conversion within the time period specified in
Section 23 hereof; and
(d) The non-objection of the FDIC and the approval of the Superintendent to
the Conversion, the approval of the FRB to the Holding Company's acquisition of
the capital stock of the Bank, the declaration of effectiveness by the SEC of
the Holding Company's registration statement, and the receipt of any other
required regulatory approval.
28. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the Superintendent.
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CNY FINANCIAL CORPORATION
ARTICLE ONE
NAME
The name of the Corporation is CNY Financial Corporation (hereinafter sometimes
referred to as the "Corporation").
ARTICLE TWO
REGISTERED ADDRESS
The address of the registered office of the Corporation in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name
of the registered agent at that address is Corporation Service Company.
ARTICLE THREE
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE FOUR
DEFINITIONS
For the purposes of this Certificate of Incorporation, the following terms shall
have the meanings set forth in this Article Four.
A. "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on the date of the initial filing
of this Certificate of Incorporation with the Secretary of State of the State of
Delaware.
B. "Announcement Date" shall mean, as to any Business Combination, the date of
the first public announcement of the proposal to engage in the Business
Combination or, if earlier, the first public announcement of any related
Business Combination.
C. "Beneficial Ownership" shall be determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (or any successor rule or statutory provision), or, if said Rule 13d-3
shall be rescinded and there shall be no successor rule or
<PAGE>
provision thereto, pursuant to said Rule 13d-3 as in effect on the date of the
initial filing of this Certificate of Incorporation with the Secretary of State
of the State of Delaware; provided, however, that a person shall, in any event,
also be deemed the "beneficial owner" of any Common Stock which such person or
any of its Affiliates beneficially owns, directly or indirectly; or which such
person or any of its Affiliates has: (i) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (but shall not be deemed to be the
beneficial owner of any securities solely by reason of an agreement, contract,
or other arrangement with this Corporation to effect a Business Combination), or
upon the exercise of conversion rights, exchange rights, warrants, or options or
otherwise, or (ii) sole or shared voting or investment power with respect
thereto pursuant to any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner of any voting
shares solely by reason of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for such meeting,
with respect to shares of which neither such Person nor any such Affiliate is
otherwise deemed the beneficial owner); or which are beneficially owned,
directly or indirectly, by any other Person with which such first mentioned
person or any of its Affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
capital stock of this Corporation; and provided further, however, that: (1) no
Director or Officer of this Corporation (or any Affiliate of any such Director
or Officer) shall, solely by reason of any or all of such Directors or Officers
acting in their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by any other such Director
or Officer (or any Affiliate thereof); and (2) neither any employee stock
ownership or similar plan of this Corporation or any subsidiary of this
Corporation, nor any trustee with respect thereto or any Affiliate of such
trustee (solely by reason of such capacity of such trustee), shall be deemed,
for any purposes hereof, to beneficially own any Common Stock held under any
such plan. For purposes only of computing the percentage of Beneficial Ownership
of Common Stock of a Person, the outstanding Common Stock shall include shares
deemed owned by such Person through application of this subsection but shall not
include any other Common Stock which may be issuable by this Corporation
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise. For all other purposes, the outstanding Common Stock
shall include only Common Stock then outstanding and shall not include any
Common Stock which may be issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options, or
otherwise.
D. "Business Combination" shall mean any transaction described in one or more of
paragraphs 1 through 6 of Section A of Article Nine.
E. In the event of any Business Combination in which the Corporation survives,
the phrase "consideration other than cash to be received" shall include the
shares of Common Stock and/or the shares of any other class of capital stock
retained by the holder of such shares in addition to any other consideration and
securities of the Corporation retained by the recipient of such consideration.
F. "Determination Date" shall mean the date on which an Interested Stockholder
becomes an Interested Stockholder.
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<PAGE>
G. "Disinterested Director" means any member of the Board of Directors who is
unaffiliated with the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became an Interested
Stockholder, and any Director who is thereafter chosen to fill any vacancy of
the Board of Directors or who is elected and who, in either event, is
unaffiliated with the Interested Stockholder and in connection with his or her
initial assumption of office is recommended for appointment or election by a
majority of Disinterested Directors then on the Board of Directors.
H. "Fair Market Value" means:
(1) in the case of stock, the highest closing sales price of the stock
during the 30-day period immediately preceding the date in question of a share
of such stock on the National Association of Securities Dealers Automated
Quotation System or any system then in use, or, if such stock is admitted to
trading on a principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, Fair Market Value shall be the
highest sale price reported during the 30-day period preceding the date in
question, or, if no such quotations are available, the Fair Market Value on the
date in question of a share of such stock as determined by the Board of
Directors in good faith, in each case with respect to any class of stock,
appropriately adjusted for any dividend or distribution in shares of such stock
or any stock split or reclassification of outstanding shares of such stock into
a greater number of shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of shares of such
stock; and
(2) in the case of property other than cash or stock, the Fair Market Value
of such property on the date in question as determined by the Board of Directors
in good faith.
I. The "Foundation" shall mean the charitable foundation organized at the behest
of the Corporation and funded by the Corporation with a donation of common stock
of the Corporation at or about the time of the Corporation's initial issuance of
its common stock.
J. Reference to "Highest Per Share Price" shall in each case with respect to any
class of stock reflect an appropriate adjustment for any dividend or
distribution in shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such stock
or any combination or reclassification of outstanding shares of such stock into
a smaller number of shares of such stock.
K. "Interested Stockholder" shall mean any person (other than the Corporation or
Subsidiary thereof, the Foundation, and other than any pension, profit-sharing,
employee stock ownership or other employee benefit or compensation plan of the
Corporation or any Subsidiary or any trustee or fiduciary with respect to any
such plan or holding Voting Stock for the purpose of funding any such plan or
funding other employee benefits for employees of the Corporation or any
Subsidiary when acting in such capacity) who or which:
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<PAGE>
(1) is, or has announced or publicly disclaimed a plan or intention to
become the beneficial owner, directly or indirectly, of more than 10% of the
voting power of the outstanding Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the then
outstanding Voting Stock; or
(3) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately prior to the
date in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
L. The "Limit" shall mean 10% of the then-outstanding shares of Common Stock.
M. "Person" shall mean 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, an unincorporated organization or similar company, a
government or political subdivision, a syndicate or any other group formed for
the purpose of acquiring, holding or disposing of securities, or any other
entity.
N. "Subsidiary" means any corporation of which a majority of any class of equity
security is owned, directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder, the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Corporation.
O. "Voting Stock" shall mean all issued and outstanding capital stock of the
Corporation, without giving effect to the provisions Article Five, Section C,
entitled to vote in the election of Directors.
P. "Whole Board" shall mean the total number of authorized directorships
including all vacancies and unfilled, newly-created directorships.
ARTICLE FIVE
CAPITAL STOCK
A. The total number of shares of all classes of stock which the Corporation
shall have authority to issue is twenty million (20,000,000) consisting of two
million (2,000,000) shares of Preferred Stock, par value one cent ($.01) per
share (the "Preferred Stock"), and eighteen million (18,000,000) shares of
Common Stock, par value one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in one or more series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being
hereinafter referred to as a "Preferred Stock Designation"), to establish
from time to time the
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<PAGE>
number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof,
including:
(i) the voting powers, if any, of the holders of shares of such series
in addition to any voting rights affirmatively required by law;
(ii) the rights of shareholders in respect of dividends, including,
without limitation, the rate or rates per annum and the time or times
at which (or the formula or other method pursuant to which such rate
or rates and such time or times may be determined) and conditions upon
which the holders of shares of such series shall be entitled to
receive dividends and other distributions, and whether any such
dividends shall be cumulative or non-cumulative and, if cumulative,
the terms upon which such dividends shall be cumulative;
(iii) whether the stock of each such series shall be redeemable by the
Corporation at the option of the Corporation or the holder thereof
and, if redeemable, the terms and conditions upon which the stock of
such series may be redeemed;
(iv) the amount payable and the rights or preferences to which the holders
of the stock of such series shall be entitled upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of stock of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or classes or of any other series of the same or any other class
or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
(vi) any other powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, so far as they are not
inconsistent with the provisions of this Certificate of Incorporation
and to the full extent now or hereafter permitted by the laws of the
State of Delaware.
The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred
Stock Designation.
C. All shares of Common Stock shall be identical to each other in every respect.
Subject to the provisions of this Article, the shares of Common Stock shall
entitle the holders thereof to one vote for each share on all matters on which
stockholders have the right to vote. Notwithstanding the foregoing, except as
otherwise required by law, holders of Common Stock, as such, shall not be
entitled to vote on any amendment to this Certificate of Incorporation
(including any Preferred Stock Designation) that relates solely to the terms of
one or more outstanding series of Preferred Stock if the holders of such
affected series are entitled, either separately or together with the holders of
one or more other such series, to vote thereon pursuant to this Certificate of
Incorporation (including any Preferred Stock Designation) or pursuant to the
General Corporation Law of the State of Delaware.
D. 1. Notwithstanding any other provision of this Certificate of Incorporation,
in no event shall any record owner of any outstanding Common Stock which is
beneficially owned, directly or
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<PAGE>
indirectly, by a Person who, as of any record date for the determination of
stockholders entitled to vote on any matter, beneficially owns in excess of the
Limit, be entitled, or permitted to any vote in respect of the shares held in
excess of the Limit. The number of votes which may be cast by any record owner
by virtue of the provisions hereof in respect of Common Stock beneficially owned
by any Person who beneficially owns shares in excess of the Limit shall be a
number equal to the total number of votes which a single record owner of all
Common Stock beneficially owned by such person would be entitled to cast
(subject to the provisions of this Article), multiplied by a fraction, the
numerator of which is the number of shares of such class or series which are
both beneficially owned by such Person and owned of record by such record owner
and the denominator of which is the total number of shares of Common Stock
beneficially owned by such person owning shares in excess of the Limit. The
provisions of this Section C shall not apply to Common Stock owned of record by
the Foundation or any pension, profit-sharing, employee stock ownership or other
employee benefit or compensation plan maintained by the Corporation, or by a
member of a controlled group of corporations of which the Corporation is a
member, for the benefit of the Corporation or any Subsidiary.
2. The Board of Directors shall have the power to construe and apply the
provisions of this Section C and to determine on the basis of information known
to them after reasonable inquiry all facts necessary or desirable to ascertain
compliance with and implement such provisions including, but not limited to,
matters with respect to: (i) the number of shares of Common Stock beneficially
owned by any Person; (ii) whether a person is an Affiliate of another; (iii)
whether a Person has an agreement, arrangement, or understanding with another as
to the matters referred to in the definition of beneficial ownership; (iv) the
application of any other definition or operative provision of this Section to
the given facts; or (v) any other matter relating to the applicability or effect
of this Section.
3. The Board of Directors shall have the right to demand that any Person
who is reasonably believed to beneficially own Common Stock in excess of the
Limit (or holds of record Common Stock beneficially owned by any Person in
excess of the Limit) supply the Corporation with complete information as to: (i)
the record owner(s) of all shares beneficially owned by such Person who is
reasonably believed to own shares in excess of the Limit; and (ii) any other
factual matter relating to the applicability or effect of this section as may
reasonably be requested of such Person. If such Person fails to supply the
Corporation the information so requested within five (5) business days after
demand, the record owner of any shares beneficially owned by such Person shall
not be entitled to vote in respect of any shares beneficially owned by such
Person until such information is provided.
4. Except as otherwise provided by law or expressly provided in this
Section C, the presence, in person or by proxy, of the holders of record of
shares of capital stock of the Corporation entitling the holders thereof to cast
a majority of the votes (after giving effect, if required, to the provisions of
this Section C) entitled to be cast thereat shall constitute a quorum at all
meetings of the stockholders, and every reference in this Certificate of
Incorporation to a majority or other proportion of capital stock (or the holders
thereof) for purposes of determining any quorum requirement or any requirement
for stockholder consent or approval shall be deemed to
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refer to such majority or other proportion of the votes (or the holders thereof)
then entitled to be cast in respect of such capital stock thereat.
5. Any constructions, interpretations, applications, or determinations
made by the Board of Directors pursuant to this section in good faith and on the
basis of such information and assistance as was then reasonably available for
such purpose shall be conclusive and binding upon the Corporation and its
stockholders and neither the Corporation nor any of its stockholders shall have
the right to challenge any such application, interpretation, construction or
determination.
6. This Article Five, Section C shall not apply to (a) any offer or sale
with a view towards public resale made exclusively by the Corporation to any
underwriter or underwriters acting on behalf of the Corporation, or to the
selling group acting on such underwriter's or underwriters' behalf, in
connection with a public offering of Common Stock; or (b) any reclassification
of securities (including any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction or reorganization that does not have the
effect, directly or indirectly, of changing the beneficial ownership interests
of the Corporation's stockholders, other than pursuant to the exercise of any
dissenters' appraisal rights, except as a result of immaterial changes due to
fractional share adjustments, which changes do not exceed, in the aggregate, one
percent (1%) of the issued and outstanding shares of such class of equity or
convertible securities.
7. In the event any provision (or portion thereof) of this Section C
shall be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Section shall remain in full
force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this Corporation and its stockholders that
each such remaining provision (or portion thereof) of this Section C remain, to
the fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
E. No holder of any of the shares of any class or series of stock or of options,
warrants or other rights to purchase shares of any class or series of stock or
of other securities of the Corporation shall have any preemptive right to
purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures, or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates of indebtedness, debentures, or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to resolution of the Board of directors of the Corporation to
such persons, firms, corporations, or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
F. The Corporation may from time to time, pursuant to authorization by the Board
of Directors of the Corporation and without action by the stockholders, purchase
or otherwise
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acquire shares of any class, bonds, debentures, notes, scrip, warrants,
obligations, evidences of indebtedness, or other securities of the Corporation
in such manner, upon such terms, and in such amounts as the Board of Directors
shall determine; subject, however, to such limitations or restrictions, if any,
as are contained in the express terms of any class of shares of the Corporation
outstanding at the time of the purchase or acquisition in question or as are
imposed by law or regulation.
ARTICLE SIX
MANAGEMENT
The following provisions are inserted for the management of the business and the
conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its Directors
and stockholders:
A. The business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors. In addition to the powers and authority
expressly conferred upon them by statute or by this Certificate of Incorporation
or the Bylaws of the Corporation, the Directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation.
B. The Directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide. Shareholders shall not have the right to cumulate
their votes in the election of Directors.
C. Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders in lieu of a meeting of stockholders.
D. Special meetings of stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board or as otherwise provided in the Bylaws.
ARTICLE SEVEN
DIRECTORS
A. The number of Directors shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the Whole Board but
shall not be less than 5 nor more than 15 (other than Directors elected by the
holders of shares of only one or more series of preferred stock. The Directors
(other than those Directors elected by the holders of any series of Preferred
Stock provided for or fixed pursuant to the provision of Section B of Article
Five hereof) shall be divided into three classes, as nearly equal in number as
reasonably possible, with the term of office of the first class to expire at the
first annual meeting of stockholders, the term of office of the second class to
expire at the second annual meeting of stockholders and the term of office of
the third class to expire at the third annual meeting of stockholders, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders
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following such initial classification and election, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election with each Director to hold office until his or her successor shall have
been duly elected and qualified.
B. Subject to the rights of holders of any series of Preferred Stock
outstanding, all newly created directorships resulting from any increase in the
authorized number of Directors and any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, and Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been chosen expires. No decrease
in the number of Directors constituting the Board of Directors shall shorten the
term of any incumbent Director.
C. Advance notice of stockholder nominations for the election of Directors and
of business to be brought by stockholders before any meeting of the stockholders
of the Corporation shall be given in the manner provided in the Bylaws of the
Corporation.
D. Subject to the rights of holders of any series of Preferred Stock then
outstanding, any Director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote
of the holders of at least 80% of the voting power of all of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors (after giving effect to the
provisions of Article Five of this Certificate of Incorporation), voting
together as a single class. For purposes of this Section D, conduct worthy
of removal for "cause" shall include, but not be limited to (a) conduct as a
director of the Corporation or any subsidiary of the Corporation that
involves willful material misconduct, breach of fiduciary duty involving
personal pecuniary gain or gross negligence in the performance of duties,
(b) conduct, whether or not as a director of the Corporation or a subsidiary
of the Corporation that involves dishonesty or breach of fiduciary duty and
is punishable by imprisonment for a term exceeding one year under state or
federal law or (c) removal of such person from the Board of Directors of the
Bank, if such person is so serving, in accordance with the Restated
Organization Certificate and Bylaws of the Bank.
E. Notwithstanding anything set forth in this Certificate of Incorporation to
the contrary, the qualifications, term of office and provisions governing
vacancies, removal and other matters pertaining to Directors elected by
holders of shares of one or more series of Preferred Stock shall be as set
forth in a resolution or resolutions adopted by the Board of Directors
setting forth the designations, preferences and rights relating to any such
series of Preferred Stock pursuant to Article Five hereof.
ARTICLE EIGHT
BYLAWS
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A. The Board of Directors is expressly empowered to adopt, amend or repeal
Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of
the Corporation by the Board of Directors shall require the approval of a
majority of the Whole Board.
B. The stockholders shall also have power to amend, alter or repeal the Bylaws
at any meeting of stockholders provided notice of the proposed change was given
in the notice of the meeting; provided, however, that, notwithstanding any other
provisions of the Bylaws or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of the voting stock required by law, the
Certificate of Incorporation, any Preferred Stock Designation or the Bylaws, the
affirmative votes of the holders of at least 80% of the voting power of all the
then-outstanding shares of Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal any provisions of the Bylaws. Shares
owned in excess of the "Limit" as described in Article Five shall be counted for
the purpose of determining the aggregate voting power of the outstanding shares
of Voting Stock but such shares shall remain subject to any restrictions or
voting limitations set forth in Article Five.
ARTICLE NINE
CERTAIN BUSINESS COMBINATIONS
A. In addition to any affirmative vote required by law or this Certificate of
Incorporation, and except as otherwise expressly provided in this Article and
subject to applicable laws:
(1) any merger or consolidation of the Corporation or any Subsidiary with:
(i) any Interested Stockholder; or (ii) any other entity (whether or not itself
an Interested Stockholder) which is, or after such merger or consolidation would
be, an Affiliate or Associate of an Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to, with or for the
benefit of any Interested Stockholder, or any Affiliate or Associate of any
Interested Stockholder, of any assets of the Corporation or any Subsidiary
having an aggregate Fair Market Value equaling or exceeding 25% or more of the
combined assets of the Corporation and its Subsidiaries; or
(3) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value equaling or
exceeding 25% of the combined Fair Market Value of the outstanding Common Stock
of the Corporation and its Subsidiaries, except for any issuance or transfer
pursuant to an employee benefit plan of the Corporation or any Subsidiary
thereof; or
(4) the adoption of any plan or proposal for the liquidation or dissolution
of the Corporation proposed by or on behalf of an Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
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(5) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction (whether or
not with or into or otherwise involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of any Interested Stockholder; or
(6) any contract, agreement or other arrangement providing for any one or
more of the actions specified (1) through (5) above,
shall in any such event require the affirmative vote of the holders of at
least 80% of the voting power of the Voting Stock, voting together as a
single class. Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law or by any other provisions of this Certificate of
Incorporation or any Preferred Stock Designation in any agreement with any
national securities exchange or otherwise. Shares owned in excess of the
"Limit" as described in Article Five shall be counted for the purpose of
determining the aggregate voting power of the outstanding shares of Voting
Stock but such shares shall remain subject to any restrictions or voting
limitations set forth in Article Five.
B. The provisions of Section A of this Article shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only the affirmative vote (if any) as is required by law or by this Certificate
of Incorporation, if, in the case of any Business Combination that does not
involve any cash or other consideration being received by the stockholders of
the Corporation solely in their capacity as stockholders of the Corporation, the
condition specified in the following paragraph 1 is met or, in the case of any
other Business Combination, all of the conditions specified in either of the
following paragraphs 1 or 2 are met:
(1) The Business Combination shall have been approved by a majority of the
Disinterested Directors.
(2) All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration other
than cash to be received per share by the holders of Common Stock in such
Business Combination shall at least be equal to the higher of the following:
(i) (if applicable) the Highest Per Share Price, including any
brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for any shares of Common Stock
acquired by it: (x) within the two-year period immediately prior to the
applicable Announcement Date; or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, plus interest compounded annually
from the Determination Date to the date the Business Combination is consummated
at the highest prime rate of interest for United States Banks as published from
time to time in the Eastern Edition of the
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Wall Street Journal, or if no longer so published then such other indicator of
the prime bank rate of interest as is selected by a majority of the
Disinterested Directors then in office; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher;
(b) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding capital stock other than Common Stock shall be at least equal to
the highest of the following (it being intended that the requirements of this
subparagraph (b) shall be required to be met with respect to every such class or
series of outstanding capital stock, whether or not the Interested Stockholder
has previously acquired any shares of a particular class or series of capital
stock):
(i) (if applicable) the Highest Per Share Price, including any
brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class or series of capital stock
acquired by it: (x) within the two-year period immediately prior to the
Announcement Date; or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher; plus interest compounded annually from the
Determination Date to the date the Business Combination is consummated at the
highest prime rate of interest for United States Banks as published from time to
time in the Eastern Edition of the Wall Street Journal, or if no longer so
published then such other indicator of the prime bank rate of interest as is
selected by a majority of the Disinterested Directors then in office; or
(ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of capital stock are
entitled in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of
capital stock on the Announcement Date or on the Determination Date, whichever
is higher.
(c) The consideration to be received by holders of a particular class
of outstanding capital stock (including Common Stock) shall be in cash or in the
same form as the Interested Stockholder has previously paid for shares of such
class or series of Capital Stock. If the Interested Stockholder has paid for
shares of any class or series of Capital Stock with varying forms of
consideration, the form of consideration to be received per share by holders of
shares of such class or series of Capital Stock shall be either cash or the form
used to acquire the largest number of shares of such class or series of Capital
Stock previously acquired by the Interested Stockholder. The price determined in
accordance with subparagraph B(2) of this Article shall be subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
except as approved by a majority of the Disinterested Directors there shall have
been no failure to declare and pay at the regular date
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therefor any full quarterly dividends (whether or not cumulative) on any
outstanding stock having preference over the Common Stock as to dividends or
liquidation; (ii) there shall have been: (x) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors; and (y) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the Common Stock, unless the
failure to so increase such annual rate is approved by a majority of the
Disinterested Directors, and (iii) neither such Interested Stockholder nor any
of its Affiliates shall have become the beneficial owner of any additional
shares of capital stock except as part of the transaction that results in such
Interested Stockholder becoming an Interested Stockholder and except in a
transaction that, after giving effect thereto, would not result in any increase
in the Interested Stockholder's percentage beneficial ownership of any class or
series of capital stock of the Corporation.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided, directly or indirectly, by the Corporation,
whether in anticipation of or in connection with such Business Combination or
otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, and the rules or regulations
thereunder) shall be mailed to stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. A majority of the Disinterested Directors of the Corporation shall have the
power and duty to determine for the purposes of this Article, on the basis of
information known to them after reasonable inquiry: (i) whether a person is an
Interested Stockholder; (ii) the number of shares of Voting Stock beneficially
owned by any person; (iii) whether a person is an Affiliate or Associate of
another; (iv) whether the applicable conditions set forth in paragraph (2) of
Section B of this Article Nine have been met with respect to any Business
Combination, (v) the Fair Market Value of stock or other property in accordance
with Section H of Article Four, and (vi) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has an aggregate Fair Market Value equaling or
exceeding 25% of the combined Fair Market Value of the Common Stock of the
Corporation and its Subsidiaries. A majority of the Disinterested Directors
shall have the further power to interpret all of the terms and provisions of
this Article.
D. Nothing contained in this Article shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
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E. Notwithstanding any other provisions of this Certificate of Incorporation or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, this Certificate of Incorporation or
any Preferred Stock Designation, the affirmative vote of the holders of at least
80% of the voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class or series, shall be required to alter,
amend or repeal this Article. For the purposes of the preceding sentence, shares
owned in excess of the Limit which have no voting power pursuant to Article Five
shall be counted in determining the aggregate voting power of all outstanding
shares of Voting Stock but shall remain subject to the limitations on voting set
forth in Article Five.
ARTICLE TEN
BOARD DETERMINATIONS
The Board of Directors of the Corporation, when evaluating any offer of another
Person to (A) make a tender or exchange offer for any equity security of the
Corporation; (B) merge or consolidate the Corporation with another corporation
or entity; or (C) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation, may, in connection with the exercise
of its judgment in determining what is in the best interest of the Corporation
and its stockholders, give due consideration to all relevant factors, including,
without limitation, those factors that Directors of any subsidiary of the
Corporation may consider in evaluating any action that may result in a change or
potential change in the control of the subsidiary, and the social and economic
effect of acceptance of such offer: (i) on the Corporation's present and future
customers and employees and those of its Subsidiaries; (ii) on the communities
in which the Corporation and its Subsidiaries operate or are located; (iii) on
the ability of the Corporation to fulfill its corporate objective as a bank
holding company under applicable laws and regulations; and (iv) on the ability
of its Subsidiary banks or savings institutions to fulfill the objectives of a
stock form financial institution under applicable statutes and regulations.
ARTICLE ELEVEN
INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a Director or an Officer of the
Corporation or, while a Director or Officer of the Corporation, is or was
serving at the request of the Corporation as a Director, Officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity or in any other capacity while serving shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties
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under the Employee Retirement Income Security Act of 1974, as amended, and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith; provided, however, that, except as provided in Section
C of this Article the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the General
Corporation Law of the State of Delaware requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a Director or Officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, services to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the General Corporation Law of the State of Delaware. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not
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entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, the Corporation's Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect itself
and any Director, Officer, employee or agent of the Corporation or subsidiary or
Affiliate or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
F. To the extent that any person who is or was or has agreed to become a
Director or officer of the Corporation is made a witness to any action, suit or
proceeding to which he or she is not a party by reason of the fact that he or
she was, is or has agreed to become a Director or Officer of the Corporation,
or, while a Director or Officer of the Corporation, is or was serving or has
agreed to serve as a Director, Officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the
request of the Corporation, such person shall be indemnified against all costs,
charges and expenses actually and reasonable incurred by such person or on such
person's behalf in connection therewith. To the extent that any person who is or
was or has agreed to become an employee or agent of the Corporation is made a
witness to any action, suit or proceeding to which he or she is not a party by
reason of the fact that he or she was, is or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, at the request of the Corporation, such
person may be indemnified against all costs, charges and expenses actually and
reasonable incurred by such person or on such person's behalf in connection
therewith.
G. The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article with respect to the indemnification and advancement
of expenses of Directors and Officers of the Corporation.
H. If this Article or any portion shall be invalidated on any ground by any
court of competent jurisdiction, the Corporation shall nevertheless indemnify
each Director or officer, and may indemnify each employee or agent, of the
Corporation as to any costs, charges, expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation), to
the full extent permitted by any applicable portion of this Article that shall
not have been invalidated and to the fullest extent permitted by applicable law.
ARTICLE TWELVE
LIABILITY OF DIRECTORS
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A Director of this Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
Director, except for liability: (i) for any breach of the Director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the Director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of Directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
ARTICLE THIRTEEN
AMENDMENT
The Corporation reserves the right to amend or repeal any provision contained in
this Certificate of Incorporation in the manner prescribed by the laws of the
State of Delaware and all rights conferred upon stockholders are granted subject
to this reservation; provided, however, that, notwithstanding any other
provision of this Certificate of Incorporation or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to any vote of
the holders of any class or series or series of the stock of this Corporation
required by law or by this Certificate of Incorporation, the affirmative vote of
the holders of at least 80% of the voting power of all of the then-outstanding
Voting Stock, voting together as a single class or series, shall be required to
amend or repeal this Article, Article 4, Section C of Article 5, Sections C or D
of Article 6, Article 7, Article 8, Article 9, Article 11, or Article 12.
ARTICLE 14
INCORPORATOR
The name and mailing address of the sole incorporator are as follows:
Name: Jay L. Hack
Mailing Address: Serchuk & Zelermyer, LLP, 81 Main Street, White Plains,
New York 10601
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation and do certify that the facts herein stated
are true, and accordingly, have hereto set my hand this 17th day of June, 1998.
/s/ Jay L. Hack, Incorporator
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Exhibit 3.2
CNY FINANCIAL CORPORATION
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board"). Such special meetings shall be held at such place, on such date and at
such time as the Board of Directors shall determine.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article Five of the
Corporation's Certificate of Incorporation), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is required,
a majority of the shares of such class or classes present in person or
represented by proxy (after giving effect to any and all provisions of the
Corporation's Certificate of Incorporation which may provide that certain shares
are not entitled to vote) shall constitute a quorum entitled to take action with
respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to
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another place, date, or time. Once a quorum is present to organize a meeting of
stockholders, such quorum is not broken by the subsequent withdrawal of any
stockholders.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present in person or by proxy constituting a quorum, then except as
otherwise required by law, those present in person or by proxy at such adjourned
meeting shall constitute a quorum, and all matters shall be determined by a
majority of the votes cast at such meeting.
Section 5. Organization.
The Chairman of the Board of the Corporation or, in his or her absence,
the President of the Corporation or such other person as may be designated by
the Board, or in the absence of all of them such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as may be deemed by him or
her to be appropriate. The date and time of the opening and closing of the polls
for each matter upon which the stockholders will vote at the meeting shall be
announced at the meeting.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting: (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be in writing and
delivered or mailed to and received at the principal executive offices of the
Corporation not less than ninety (90) days prior to the date of the annual
meeting; provided, however, that as to the first annual meeting, or any
subsequent annual meeting held earlier than thirty (30) days in advance of the
anniversary of the annual meeting in the previous year, notice by the
stockholder to be timely must be received not later than the close of business
on the 10th day following the day on which notice of the date of the annual
meeting was mailed or public disclosure of the date of the meeting was made. For
the purpose of this and the following subsection of these Bylaws, public
disclosure shall be deemed to mean the issuance of a press release to the Dow
Jones News Service, the Associated Press or any other broadly distributed news
service, or the public filing of a document with the Securities and Exchange
Commission disclosing the date of the meeting. A stockholder's notice to the
Secretary shall be signed by such stockholder and shall set forth as to each
matter such stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business; (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder; and
(iv) any material interest of such stockholder in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of this
Section 6(b). The Officer of the Corporation or other person presiding over the
annual meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 6(b) and, if he or she should so determine,
any such business so determined to be not properly brought before the meeting
shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
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(c) Only persons who are nominated in accordance with the procedures set
forth in these Bylaws shall be eligible for election as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders at which directors are to be elected only: (i) by
or at the direction of the Board of Directors; or (ii) by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 6(c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be in writing and
delivered or mailed to and received at the principal executive offices of the
Corporation not less than ninety (90) days prior to the date of the meeting;
provided, however, that if the meeting is a special meeting, or an annual
meeting held earlier than 30 days in advance of the anniversary of the annual
meeting in the previous year, or if it is the first annual meeting, notice by
the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which notice of the date of the
meeting was mailed or public disclosure of the date of the meeting was made,
whichever is earlier. Such stockholder's notice shall be signed by such
stockholder and shall set forth: (i) as to each person whom such stockholder
proposes to nominate for election or re-election as a Director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected, provided, however, that
the Corporation shall not be required to name such nominee in any proxy
statement prepared by the Corporation or to solicit votes for such nominee
unless required by law to do so ); and (ii) as to the stockholder giving the
notice (x) the name and address, as they appear on the Corporation's books, of
such stockholder, (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder and (z) any
business, familial or employment relationship between such stockholder and such
nominees. At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a Director shall furnish to the Secretary of
the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The Officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she shall so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. The attendance of a stockholder in
person at a meeting shall not, as such, revoke any proxy given by such
stockholder unless such stockholder shall revoke such proxy in writing or vote
in person.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
or if no inspector is so appointed, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. The duties of the
inspectors shall include determining the number of shares outstanding and the
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voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, receiving votes, ballots or
consents, hearing and deciding all challenges and questions arising in
connection with the right to vote, counting and tabulating all votes, ballots or
consents, discharge of their duties determining the results and doing such acts
as are proper to the conduct of the election or the vote with fairness to all
stockholders. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote as certified by them.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, at the office of the Corporation
shown in the notice of the meeting.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders in lieu of such a meeting.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Term of Office and Limitations.
The business and affairs of the Corporation shall be under the direction
of its Board of Directors. The number of Directors who shall constitute the
Whole Board shall be such number as the Board of Directors shall from time to
time have designated, except that in the absence of such designation the number
of Directors shall be Seven (7). The Board of Directors shall annually elect a
Chairman of the Board from among its members who shall, when present, preside at
its meetings.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three (3) classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the second annual meeting of
stockholders and the term of office of the third class to expire at the third
annual meeting of stockholders, with each Director to hold office until his or
her successor shall have been duly elected and qualified. At each annual meeting
of stockholders, Directors elected to succeed those Directors whose terms then
expire shall be elected for a term of office to expire at the third annual
meeting of stockholders after their election, with each Director to hold office
until his or her successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of
Preferred Stock, and unless the Board of Directors otherwise determines, newly
created directorships resulting from any increase in the authorized
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number of directors or any vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office or other
cause may be filled only by a majority vote of the Directors then in office,
though less than a quorum, and Directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such Director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized Directors constituting the Board shall shorten the term of any
incumbent Director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the Directors then in office (rounded up to the nearest whole number),
by the Chairman of the Board or the President or, in the event that the Chairman
of the Board or President are incapacitated or otherwise unable to call such
meeting, by the Secretary, and shall be held at such place, on such date, and at
such time as they, or he or she, shall fix. Notice of the place, date, and time
of each such special meeting shall be given to each Director by whom it is not
waived by mailing written notice not less than five (5) days before the meeting
or by telegraphing or telexing or by facsimile transmission of the same not less
than twenty-four (24) hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting, a majority of those present may adjourn the meeting to another place,
date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if a majority of the members thereof
(or such greater number as may be required by these Bylaws, the Certificate of
Incorporation or by law) consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation.
Section 9. Compensation of Directors.
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Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for 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 who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock, to adopt a certificate
of ownership and merger or take any other action permitted by law if the
resolution which designates the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his or her place, the member
or members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings. The quorum requirements for each such
committee shall be a majority of the members of such committee unless otherwise
determined by the Board of Directors by a majority vote of the Board of
Directors which such quorum determined by a majority of the Board may be
one-third (1/3) or more of such members. All matters considered by such
committees shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
The Board of Directors may appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to these Bylaws in
order to determine compliance with such Bylaw; and (b) to recommend to the Whole
Board nominees for election to the Board of Directors to replace those Directors
whose terms expire at the annual meeting of stockholders next ensuing. If the
Board of Directors shall fail to appoint a nominating committee, then the
functions of such committee shall be performed directly by the Board of
Directors.
Section 4. Executive Committee.
There shall be an Executive Committee of the Board, consisting of at
least three (3) members, as shall be appointed by the Board of Directors. In
addition, the President shall be an ex-officio member of the Executive
Committee, with power to vote on all matters so long as the President is also a
Director of the Corporation. The vote of a majority of members present at any
meeting including the presiding member, who shall be eligible to vote, shall
constitute the action of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with law,
these Bylaws, the Certificate of Incorporation or resolutions adopted by the
Board, exercise all the powers and authority of
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the Board in the management of the business and affairs of the Corporation in
the intervals between the meetings of the Board.
Section 5. Audit Committee.
The Audit Committee shall consist of at least three (3) members, none of
whom shall be an officer or salaried employee of the Corporation or its
subsidiaries. The Audit Committee shall make, or cause to be made, such
examinations of the affairs of the Corporation as it may deem advisable or
whenever so directed by the Board of Directors and shall report thereon to the
Board of Directors. The Audit Committee shall make recommendations to the Board
in relation to the employment of accountants and independent auditors, review
the work of the accountants and independent auditors, and arrange for such other
assistance as it may deem necessary or desirable. The Audit Committee shall
review and evaluate the procedures and performance of the Corporation's internal
auditing staff. A quorum shall consist of at least one-third (1/3) of the
members of the committee, and in no event less than two (2) members of the
committee.
Section 6. Compensation Committee.
The Compensation Committee shall consist of at least three (3) members,
none of whom shall be an officer or salaried employee of the Corporation or its
subsidiaries. The Compensation Committee shall be responsible for overseeing the
development, implementation and conduct of the Corporation's employment and
personnel policies, notices and procedures, including the administration of the
Corporation's compensation and benefit programs.
ARTICLE IV - OFFICERS
Section 1. Generally.
(a) The Board of Directors, as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer and from
time to time may choose such other officers as it may deem proper. The Chairman
of the Board shall be chosen from among the Directors. Any number of offices may
be held by the same person, except that no person may simultaneously hold the
offices of president and secretary. The Board of Directors may designate one
officer as the Chief Executive Officer.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen but any
Officer may be removed from office at any time by the majority vote of the whole
Board of Directors.
(c) All Officers chosen by the Board of Directors shall have such powers
and duties as generally pertain to their respective Offices, subject to the
specific provisions of these Bylaws. Such officers shall also have such powers
and duties as from time to time may be conferred by the Board of Directors or by
any committee thereof.
(d) The Board of Directors may, except as otherwise required by law,
remove any Officer of the Corporation with or without cause, and from time to
time, devolve the powers and duties of any Officer upon any other person for the
time being, and to confer upon any Officer of the Corporation the power to
appoint, remove or suspend subordinate officers, employees and agents.
Section 2. Chairman of the Board of Directors.
The Chairman of the Board shall, subject to the provisions of these
Bylaws and to the direction of the Board of Directors, preside at all meetings
of the Board of Directors and stockholders of the Corporation. The
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Chairman of the Board shall perform all duties and have all powers which are
commonly incident to the office of Chairman of the Board or which are delegated
to him or her by the Board of Directors. He or she shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. President.
The President shall have general responsibility for the management and
control of the business and affairs of the Corporation, shall oversee all
aspects of the Corporation's business, and shall perform all duties and have all
powers which are commonly incident to the office of President or which are
delegated to him or her by the Board of Directors. Subject to the direction of
the Board of Directors, the President shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision of all of the other Officers
(other than the Chairman of the Board), employees and agents of the Corporation.
Section 4. Vice President.
The Vice President or Vice Presidents shall perform the duties of the
President in his or her absence or during his or her inability to act. In
addition, the Vice Presidents shall perform the duties and exercise the powers
usually incident to their respective offices and/or such other duties and powers
as may be properly assigned to them by the Board of Directors, the Chairman of
the Board or the President. A Vice President or Vice Presidents may be
designated as Executive Vice President or Senior Vice President and in the
absence or inability to act of the President, the highest ranking Vice President
who is available and ready to act shall substitute for the President.
Section 5. Secretary.
The Secretary or Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President. Subject to the direction of the Board of Directors, the Secretary
shall have the power to sign all stock certificates.
Section 6. Treasurer.
The Treasurer shall be the chief financial officer of the Corporation
and shall have the responsibility for maintaining the financial records of the
Corporation. He or she shall make such disbursements of the funds of the
Corporation as are authorized and shall render from time to time an account of
all such transactions and of the financial condition of the Corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe. Subject to the direction of the Board of Directors,
the Treasurer shall have the power to sign all stock certificates.
Section 7. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President. If authorized by the
Board of Directors, the President shall also be authorized to appoint such
lesser Officers who shall report to and be supervised by such Officers as are
appointed by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or
any Officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person
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or by proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.
Section 9. Executive Officers.
The President shall be an executive officer of the Corporation. No other
officer shall be an executive officer of the Corporation unless so designated by
the Board of Directors.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile. In case any officer or
officers who shall have signed any such certificate shall cease to be such
officer of officers of the Corporation, such certificate may nevertheless be
adopted by the Corporation and be issued and delivered as though the person or
persons who signed such certificate or certificates had not ceased to be such
officer or officers of the Corporation.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the next day preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
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In the event of the loss, theft or destruction of any certificate of
stock, the holder of record thereof shall immediately notify the Corporation.
Another certificate may be issued in its place pursuant to such regulations as
the Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity. The holder of record of such lost, stolen or destroyed certificate
shall also comply with all customary requirements of the transfer agents
designated by the Board to transfer shares of stock of the Corporation.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
Section 6. Holder of Record.
Subject to the provisions of the Certificate of Incorporation of the
Corporation, the Corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder thereof in fact and shall not be
bound to recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent pursuant to these Bylaws shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid telegram
or mailgram or other courier. Any such notice shall be addressed to such
stockholder, Director, Officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered through the
mails or by telegram or mailgram or other courier, shall be the time of the
giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, Director,
Officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, Director, Officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a written
waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by any other Officer.
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Section 3. Reliance Upon Books, Reports and Records.
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be included,
and the day of the event shall be excluded.
Section 6. Adoption of Regulations.
The Board of Directors may, except as otherwise required by law, adopt
from time to time regulations, not inconsistent with these Bylaws, for the
management of the Corporation's business and affairs.
ARTICLE VIII - AMENDMENTS
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board. The stockholders shall also have power to amend, alter or
repeal these Bylaws at any meeting of stockholders provided notice of the
proposed change was given in the notice of the meeting; provided, however, that,
notwithstanding any other provisions of the Bylaws or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the voting
stock required by law, the Certificate of Incorporation, any Preferred Stock
Designation or these Bylaws, the affirmative votes of the holders of at least
80% of the voting power of all the then-outstanding shares of the voting stock
of the Corporation, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws. For the purpose of this
Article, shares owned in excess of the "Limit" as described in Article Five of
the Corporation's Certificate of Incorporation shall be counted for the purpose
of determining the aggregate voting power of the outstanding shares of voting
stock but such shares shall remain subject to any restrictions or voting
limitations set forth in said Article Five.
The above Bylaws are effective as of the date of incorporation of the
Corporation.
<PAGE>
Exhibit 3.3
RESTATED ORGANIZATION CERTIFICATE
OF
CORTLAND SAVINGS BANK
UNDER SECTION 8007 OF THE BANKING LAW
<PAGE>
TABLE OF CONTENTS
ARTICLE I
NAME. . . . . . . . . . . . . . . . . 1
ARTICLE II
PRINCIPAL OFFICE. . . . . . . . . . . . . . 1
ARTICLE III
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized . . . . . . . . . . . . . 1
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE IV
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Prohibitions Relating to Beneficial Ownership of Voting
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Powers of the Board . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Exclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
BOARD OF DIRECTORS
Section 1. Number of Directors . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Classification of Board . . . . . . . . . . . . . . . . . . . . 7
Section 3. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Removal of Directors. . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Evaluation of Acquisition Proposals . . . . . . . . . . . . . . 7
<PAGE>
ARTICLE VI
Action By Shareholders By Written CONSENT. . . . . . . . 8
ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations. . . . . 8
Section 2. When Higher Vote is Not Required. . . . . . . . . . . . . . . . 9
Section 3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 4. Powers of the Disinterested Directors . . . . . . . . . . . . .15
Section 5. Effect on Fiduciary Obligations of Interested Shareholders. . .15
Section 6. Amendment, Repeal, Etc. . . . . . . . . . . . . . . . . . . . .15
ARTICLE VIII
INDEMNIFICATION
Section 1. Right to Indemnification. . . . . . . . . . . . . . . . . . . .16
Section 2. Accrual of Right to Indemnification . . . . . . . . . . . . . .16
Section 3. Individual Indemnification Agreements . . . . . . . . . . . . .16
Section 4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 5. Subsequent Amendment and Subsequent Legislation . . . . . . . .17
ARTICLE IX
AMENDMENTS
Section 1. Amendments of Restated Organization Certificate . . . . . . . .17
Section 2. Amendments of Bylaws. . . . . . . . . . . . . . . . . . . . . .18
<PAGE>
RESTATED ORGANIZATION CERTIFICATE
OF
CORTLAND SAVINGS BANK
UNDER SECTION 8007 OF THE BANKING LAW
WE, Wesley D. Stisser and Sandy F. Samson, being the President and Chief
Executive Officer and the Corporate Secretary, respectively, of Cortland Savings
Bank (the "Corporation"), in accordance with Section 8007 of the Banking Law of
the State of New York (the "Banking Law"), do hereby certify as follows:
FIRST, The name of the Corporation is Cortland Savings Bank.
SECOND, The Corporation was created under the name "Cortland Savings Bank"
by an Act of the Legislature of the State of New York, passed April 13, 1866,
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:
ARTICLE I
NAME
The name by which the Corporation is to be known is Cortland Savings Bank.
ARTICLE II
PRINCIPAL OFFICE
The principal office of the Corporation is to be located at One North Main
Street, in the City of Cortland, County of Cortland, State of New York.
ARTICLE III
CAPITAL STOCK
SECTION 1. SHARES, CLASSES AND SERIES AUTHORIZED. The total number of
shares of all classes of capital stock that the Corporation shall have authority
to issue is twenty million (20,000,000) shares, of which two million (2,000,000)
shares shall be preferred stock, par value one cent ($.01) per share (the
"Preferred Stock"), and eighteen million (18,000,000) shares shall be common
stock, par value one cent ($.01) per share (the "Common Stock"). The Preferred
Stock and Common Stock are sometimes hereinafter collectively referred to as the
"Capital Stock."
<PAGE>
SECTION 2. DESIGNATIONS, POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS RELATING TO THE CAPITAL STOCK. The following is a
statement of the designations, powers, preferences and rights in respect of the
classes of the Capital Stock, and the qualifications, limitations or
restrictions thereof, and of the authority with respect thereto expressly vested
in the Board of Directors of the Corporation (the "Board"):
(a) Preferred Stock. The Preferred Stock may be issued from time to
time in one or more series, the number of shares and any designation of each
series and the powers, preferences and rights of the shares of each series, and
the qualifications, limitations or restrictions thereof, to be as stated and
expressed in a resolution or resolutions providing for the issue of such series
adopted by the Board, subject to the limitations prescribed by law. The Board
in any such resolution or resolutions is expressly authorized to state for each
such series:
(i) the voting powers, if any, of the holders of shares of such series in
addition to any voting rights affirmatively required by law;
(ii) the rights of shareholders in respect of dividends, including,
without limitation, the rate or rates per annum and the time or times at which
(or the formula or other method pursuant to which such rates and such time or
times may be determined) and conditions upon which the holders of shares of such
series shall be entitled to receive dividends and other distributions, and
whether any such dividends shall be cumulative or non-cumulative and, if
cumulative, the terms upon which such dividends shall be cumulative;
(iii) whether the shares of each such series shall be redeemable by the
Corporation at the option of the Corporation or the holder thereof, and, if
redeemable, the terms upon which the shares of such series may be redeemed;
(iv) the amount payable and the rights or preferences to which the holders
of shares of such series shall be entitled upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of such series shall be
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class of classes, including the
price or prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any; and
(vi) any other powers, designations, preferences, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, so far as they are not inconsistent with the provisions
of this Restated Organization Certificate and to the full extent now or
hereafter permitted by the laws of the State of New York.
All shares of the Preferred Stock of any one series shall be identical to
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon, if
cumulative, shall be cumulative.
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Subject to any limitations or restrictions stated in the resolution or
resolutions of the Board originally fixing the number of shares constituting a
series, the Board may, by resolution or resolutions likewise adopted, increase
or decrease (but not below the number of shares of the series then outstanding)
the number of shares of the series subsequent to the issuance of shares of that
series and in case the number of shares of any series shall be so decreased, the
shares constituting the decrease shall resume that status that they had prior to
the adoption of the resolution originally fixing the number of shares
constituting such series.
(b) Common Stock. All shares of Common Stock shall be identical to each
other in every respect. Subject to Article IV hereof, the shares of Common
Stock shall entitle the holders thereof to one vote for each share on all
matters upon which shareholders have the right to vote. The holders of shares
of Common Stock shall not be permitted to cumulate their votes for the election
of directors. Notwithstanding the foregoing, except as otherwise required by
law, holders of Common Stock, as such, shall not be entitled to vote on any
amendment to this Restated Organization Certificate (including any Certificate
of Designation relating to any series of Preferred Stock) that relates solely to
the terms of one or more outstanding series of Preferred Stock if the holders of
such affected series are entitled, either separately or together with the
holders of one or more other such series, to vote thereon pursuant to this
Restated Organization Certificate (including any Certificate of Designation
relating to any series of Preferred Stock) or pursuant to the laws of the State
of New York.
Subject to the preferences, privileges and powers with respect to each
class of Capital Stock of the Corporation having any priority over the Common
Stock, and the qualifications, limitations or restrictions thereof, the holders
of the Common Stock shall have and possess all rights pertaining to the Capital
Stock.
No holder of shares of Common Stock shall be entitled as such, as a matter
of preemptive right, to subscribe for, purchase or otherwise acquire any part of
any new or additional issue of shares of any class or series whatsoever of the
Corporation, or of securities convertible into shares of any class or series
whatsoever of the Corporation, or of any warrants or other instruments
evidencing rights or options to subscribe for, purchase or otherwise acquire
such shares or securities, whether now or hereafter authorized or whether issued
for cash or other consideration or by way of dividend.
ARTICLE IV
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
SECTION 1. PROHIBITIONS RELATING TO BENEFICIAL OWNERSHIP OF VOTING STOCK.
No Person, for a period of not less than three years following the date of
filing by the Superintendent of Banks of the State of New York (the
"Superintendent") of this Restated Organization Certificate, shall directly or
indirectly acquire or hold the beneficial ownership of more than ten percent
(10%) of the issued and outstanding Voting Stock of the Corporation. Any Person
so prohibited who directly or indirectly acquires or holds the beneficial
ownership of more than ten percent (10%) of the issued and outstanding Voting
Stock in violation of this Section I shall be subject to the
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provisions of Sections 2 and 3 of this Article IV, below. All terms used in
this Article IV and not otherwise defined herein shall have the meanings
ascribed to such terms in Section 3 of Article VII, below, except that the term
"Person" shall not include the Corporation, any subsidiary of the Corporation or
any pension, profit-sharing, stock bonus or other compensation plan maintained
by the Corporation or by a member of a controlled group of corporations or
trades or businesses of which the Corporation is a member for the benefit of the
employees of the Corporation, and/or any subsidiary, or any trust or custodial
arrangement established in connection with any such plan.
SECTION 2. EXCESS SHARES. The transfer of any shares of Voting Stock that
would result in a violation of Section I of this Article IV is prohibited and
shall be null and void. If, notwithstanding the foregoing prohibition, a Person
shall, voluntarily or involuntarily, become or attempt to become the purported
beneficial owner (the "Purported Owner") of shares of Voting Stock in excess of
ten percent (10%) of the issued and outstanding shares of Voting Stock, the
number of shares in excess of ten percent (10%) shall be deemed to be "Excess
Shares," and all of the following provisions (a) through (g) shall apply to such
Excess Shares:
(a) The Purported Owner shall not obtain any rights in and to the Excess
Shares, and the purported transfer of the Excess Shares to the Purported Owner
shall not be recognized by the transfer agent for such shares (the "Transfer
Agent"). Until such time as the Excess Shares are transferred to a person whose
acquisition thereof will not violate the limitation set forth in Section 1 of
this Article IV (a "Permitted Transferee"), the transferor of the Excess Shares
to the Purported Owner (the "Purported Owner's Transferor") shall be deemed to
have retained the Excess Shares and shall hold and be entitled to exercise all
rights incident to ownership of such Excess Shares. All Excess Shares will
continue to be issued and outstanding.
(b) If the Transfer Agent obtains possession of a certificate or
certificates representing Excess Shares, the Transfer Agent shall deliver such
certificate or certificates to a trustee nominated and appointed by the Board to
hold Excess Shares (the "Share Trustee"). Upon receipt of notice from the
Corporation of the existence of Excess Shares and the identity of the Purported
Owner of such Excess Shares, the Share Trustee shall take all lawful action to
cause the Purported Owner to deliver or cause delivery of the Excess Shares and
any indicia of ownership thereof to the Share Trustee. Upon obtaining
possession of such Excess Shares, the Share Trustee shall sell or cause the sale
of the Excess Shares to a Permitted Transferee in the then existing public
market or in such other commercially reasonable fashion as the Corporation shall
direct. In performing the duties herein imposed upon it, the Share Trustee
shall act at all times as the agent for the Purported Owner's Transferor.
(c) Upon acquisition of the Excess Shares by a Permitted Transferee, the
Permitted Transferee shall have and be entitled to exercise all rights incident
to the ownership of such Excess Shares.
(d) The proceeds realized from the sale of the Excess Shares to the
Permitted Transferee (the "Proceeds") shall be distributed as follows: (i)
first, to the Share Trustee for any costs incurred in respect of its
administration of the Excess Shares, (ii) second, to the Purported Owner, if
known, in an amount up to the amount paid by the Purported Owner, if
determinable, for the
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Excess Shares and (iii) the remaining Proceeds, if any, shall be distributed to
the Purported Owner's Transferor, if known, and, if the Purported Owner's
Transferor is not known, such remaining Proceeds shall be held by the
Corporation for the benefit of the Purported Owner's Transferor or such other
persons or entities, as their interests may appear. Notwithstanding anything in
this Article IV to the contrary, the Corporation shall at all times be entitled
to make application to any court of competent jurisdiction within the State of
New York for an adjudication of the respective rights and interests of any
Person in and to the Proceeds pursuant to this Article IV and applicable law and
for leave to pay the Proceeds into such court.
(e) Immediately upon the purported acquisition of any Excess Shares, the
Purported Owner thereof shall give, or cause to be given, written notice of such
acquisition to the Corporation. In addition, at the request of the Corporation,
each owner of shares of Voting Stock shall furnish to the Corporation all
information reasonably requested with respect to all shares of Voting Stock
directly and indirectly owned by such Person.
(f) Upon a determination by the Board that a Person has attempted or may
attempt to transfer or to acquire Excess Shares, the Board may take such action
as it deems advisable to refuse to give effect to such transfer or acquisition
on the books and records of the Corporation, including, without limitation, any
such action that shall cause the Transfer Agent to record the Purported Owner's
Transferor as the record owner of the Excess Shares, and to institute
proceedings to enjoin or rescind any such transfer or acquisition.
(g) The restrictions set forth in this Article IV shall be noted
conspicuously on all certificates evidencing ownership of shares of Voting
Stock.
SECTION 3. POWERS OF THE BOARD.
(a) The Board may, to the extent permitted by law, from time to time
establish, modify, amend or rescind, by Bylaw or otherwise, regulations and
procedures not inconsistent with the express provisions of this Article IV for
the orderly application, administration and implementation of the provisions of
this Article IV. Such procedures and regulations shall be kept on file with the
Secretary of the Corporation and with the Transfer Agent, shall be made
available for inspection by the public and, upon request, shall be mailed to any
holder of shares of Voting Stock.
(b) When it appears that a particular Person has become a Purported Owner
of Excess Shares in violation of Section I of this Article IV and that the
provisions of this Article IV, or any of the rules and regulations of the Board
with respect to this Article IV, require application, interpretation or
construction, then a majority of the directors of the Corporation shall have the
power and duty to interpret all of the terms and provisions of this Article IV
and to determine on the basis of information known to them after reasonable
inquiry all facts necessary to ascertain compliance with this Article IV,
including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or
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understanding with any other Person or Purported Owner as to the voting or
disposition of any shares of Voting Stock, (iv) the application of any other
definition or operative provision of this Article IV to the given facts or (v)
any other matter relating to the applicability or effect of this Article IV.
The Board shall have the right to demand that any Person who is reasonably
believed to be a Purported Owner of Excess Shares (or who holds of record Voting
Stock beneficially owned by any Person reasonably believed to be a Purported
Owner) supply the Corporation with complete information as to (i) the record
owner(s) of all shares of Voting Stock beneficially owned by such Person or
Purported Owner and (ii) any other factual matter relating to the applicability
or effect of this Article IV as may reasonably be requested of such Person or
Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board pursuant to this Article IV, in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose, shall be conclusive and binding upon the Corporation and its
shareholders and neither the Corporation nor any of its shareholders shall have
the right to challenge any such application, interpretation, construction or
determination.
SECTION 4. SEVERABILITY. In the event any provision (or portion thereof)
of this Article IV shall be found to be invalid, prohibited or unenforceable for
any reason, the remaining provisions (or portions thereof) of this Article IV
shall remain in full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of this Corporation and its
shareholders that each such remaining provision (or portion thereof) of this
Article IV remain, to the fullest extent permitted by law, applicable and
enforceable as to all shareholders, including Purported Owners, if any,
notwithstanding any such finding.
SECTION 5. EXCLUSIONS. This Article IV shall not apply to (a) any offer or
sale with a view towards public resale made exclusively by the Corporation to
any underwriter or underwriters acting on behalf of the Corporation, or to the
selling group acting on such underwriter's or underwriters' behalf, in
connection with a public offering of the Common Stock; (b) any corporation
formed by the Corporation in connection with its conversion from mutual to stock
form to acquire all of the shares of capital stock of the Corporation to be
issued in connection with such conversion; or (c) any reclassification of
securities (including any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction or reorganization (including a transaction
in which the Corporation shall form a holding company) that does not have the
effect, directly or indirectly, of changing the beneficial ownership interests
of the Corporation's shareholders, other than pursuant to the exercise of any
appraisal rights, except as a result of immaterial changes due to fractional
share adjustments, which changes do not exceed, in the aggregate, one percent
(1%) of the issued and outstanding shares of such class of equity or convertible
securities.
ARTICLE V
BOARD OF DIRECTORS
6
<PAGE>
SECTION 1. NUMBER OF DIRECTORS. The number of directors of the Corporation
shall not be less than seven (7) nor more than twenty (20). Within such
limitations, the number of directors shall be determined by the bylaws of the
Corporation or by resolution of the Board.
SECTION 2. CLASSIFICATION OF BOARD. Subject to the rights of any holders
of shares of any series of Preferred Stock that may be issued by the Corporation
pursuant to a resolution or resolutions of the Board providing for such
issuance, the directors of the Corporation shall be divided into three classes
with respect to term of office, each class to contain, as near as may be
possible, one-third of the entire number of the Board, with the terms of office
of one class expiring each successive year. At each annual meeting of
shareholders, the successors to the class of directors whose term expires at
that time shall be elected by the shareholders to serve until the annual meeting
of shareholders held three years next following and until their successors shall
be elected and qualified.
In the event of any intervening changes in the authorized number of
directors, the Board shall designate the class or classes to which the increase
or decrease in directorships shall be apportioned and may designate one or more
directorships as directorships of another class in order to achieve, as near as
may be possible, equality of number of directors among the classes; provided,
however, that no such apportionment or redesignation shall shorten the term of
any incumbent director.
Unless and to the extent that the bylaws so provide, elections of directors
need not be by written ballot.
SECTION 3. VACANCIES. Subject to the limitations prescribed by law, the
bylaws and this Restated Organization Certificate, 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
shareholders, except that vacancies not exceeding one-third of the entire Board
may be filled by the affirmative vote of a majority of the directors then in
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, or a committee appointed by the Board. 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 4. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed at any time, but only for cause, and any such removal shall require the
vote, in addition to any vote required by law, of not less than eighty percent
(80%) of the total votes eligible to be cast by the holders of all outstanding
shares of Capital Stock entitled to vote generally in the election of directors
at a meeting of shareholders expressly called for that purpose. For purposes of
this Section 4, conduct worthy of removal for "cause" shall mean (a) conduct as
a director of the Corporation or any subsidiary of the Corporation that involves
willful material misconduct, breach of fiduciary duty involving personal
pecuniary gain or gross negligence in the performance of duties, or (b) conduct,
whether or not as a director of the Corporation or a subsidiary of the
Corporation, that involves dishonesty or breach of fiduciary duty and is
punishable by
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imprisonment for a term exceeding one year under state or federal law.
SECTION 5. EVALUATION OF ACQUISITION PROPOSALS. The Board, when evaluating
any offer to the Corporation or to the shareholders of the Corporation from
another party relating to a change or potential change in control of the
Corporation, including, without limitation, any offer to (a) purchase for cash
or exchange any securities or property for any outstanding equity securities of
the Corporation, (b) merge or consolidate the Corporation with another
corporation or (c) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation, in connection with the exercise of its
judgment in determining what is in the best interest of the Corporation and its
shareholders, may 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
Corporation and its shareholders and (2) the effects that the Corporation'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 Corporation; (ii) the Corporation's current employees;
(iii) the Corporation'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 Corporation; (iv) the
Corporation's customers and creditors; and (v) the ability of the Corporation 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.
ARTICLE VI
ACTION BY SHAREHOLDERS BY WRITTEN CONSENT
Whenever shareholders of the Corporation are required or permitted to take
any action by vote at any annual or special meeting, such action may be taken
without a meeting upon written consent, setting forth the action so taken,
signed by the holders of all outstanding shares of Capital Stock entitled to
vote thereon.
ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
SECTION 1. HIGHER VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. In
addition to any affirmative vote required by law or this Certificate of
Incorporation, and except as otherwise expressly provided in this Article and
subject to applicable laws:
(a) any merger or consolidation of the Corporation or any Subsidiary with:
(i) any Interested Shareholder; or (ii) any other corporation (whether or not
itself an Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested Shareholder;
or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one
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transaction or a series of transactions) to, with or for the benefit of any
Interested Shareholder, or any Affiliate or Associate of any Interested
Shareholder, of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value equaling or exceeding 25% or more of the combined
assets of the Corporation and its Subsidiaries; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Corporation or
any Subsidiary to any Interested Shareholder or any Affiliate or Associate of
any Interested Shareholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value equaling or
exceeding 25% of the combined Fair Market Value of the outstanding Common Stock
of the Corporation and its Subsidiaries, except for any issuance or transfer
pursuant to an employee benefit plan of the Corporation or any Subsidiary
thereof; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Shareholder)
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Shareholder or any Affiliate of any Interested Shareholder; or
(f) any contract, agreement or other arrangement providing for any one or
more of the actions specified in (a) through (e) above, shall in any such event
require the affirmative vote of the holders of at least 80% of the voting power
of the Voting Stock, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or by any other provisions of this
Certificate of Incorporation or any Preferred Stock Designation in any agreement
with any national securities exchange or otherwise.
SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of Section
A of this Article shall not be applicable to any particular Business
Combination, and such Business Combination shall require only the affirmative
vote (if any) as is required by law or by this Certificate of Incorporation, if,
in the case of any Business Combination that does not involve any cash or other
consideration being received by the stockholders of the Corporation solely in
their capacity as stockholders of the Corporation, the condition specified in
the following paragraph 1 is met or, in the case of any other Business
Combination, all of the conditions specified in either of the following
paragraphs a or b are met:
(a) The Business Combination shall have been approved by a majority of
the Disinterested Directors.
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(b) All of the following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration other
than cash to be received per share by the holders of Common Stock in such
Business Combination shall at least be equal to the higher of the following:
(a) (if applicable) the Highest Per Share Price, including any
brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the
Interested Shareholder or any of its Affiliates for any shares of Common Stock
acquired by it: (x) within the two-year period immediately prior to the
applicable Announcement Date; or (y) in the transaction in which it became an
Interested Shareholder, whichever is higher, plus interest compounded annually
from the Determination Date to the date the Business Combination is consummated
at the highest prime rate of interest for United States Banks as published from
time to time in the Eastern Edition of the Wall Street Journal, or if no longer
so published then such other indicator of the prime bank rate of interest as is
selected by a majority of the Disinterested Directors then in office; or
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher;
(ii) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding capital stock other than Common Stock shall be at least equal to
the highest of the following (it being intended that the requirements of this
subparagraph (b) shall be required to be met with respect to every such class or
series of outstanding capital stock, whether or not the Interested Shareholder
has previously acquired any shares of a particular class or series of capital
stock):
(a) (if applicable) the Highest Per Share Price, including any
brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the
Interested Shareholder for any shares of such class or series of capital stock
acquired by it: (x) within the two-year period immediately prior to the
Announcement Date; or (y) in the transaction in which it became an Interested
Shareholder, whichever is higher; plus interest compounded annually from the
Determination Date to the date the Business Combination is consummated at the
highest prime rate of interest for United States Banks as published from time to
time in the Eastern Edition of the Wall Street Journal, or if no longer so
published then such other indicator of the prime bank rate of interest as is
selected by a majority of the Disinterested Directors then in office; or
(b) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of capital stock are
entitled in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation; or
(c) the Fair Market Value per share of such class or series of
capital stock on the Announcement Date or on the Determination Date, whichever
is higher.
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(iii) The consideration to be received by holders of a particular
class of outstanding capital stock (including Common Stock) shall be in cash or
in the same form as the Interested Shareholder has previously paid for shares of
such class or series of Capital stock. If the Interested Shareholder has paid
for shares of any class or series of Capital stock with varying forms of
consideration, the form of consideration to be received per share by holders of
shares of such class or series of capital stock shall be either cash or the form
used to acquire the largest number of shares of such class or series of Capital
stock previously acquired by the Interested Shareholder. The price determined in
accordance with Section 2(b) of this Article shall be subject to appropriate
adjustment in the event of any stock dividend, stock split, combination of
shares or similar event.
(iv) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination: (1)
except as approved by a majority of the Disinterested Directors there shall have
been no failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any outstanding stock having
preference over the Common Stock as to dividends or liquidation; (2) there shall
have been: (x) no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors; and (y) an
increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the failure to so
increase such annual rate is approved by a majority of the Disinterested
Directors, and (3) neither such Interested Shareholder nor any of its Affiliates
shall have become the beneficial owner of any additional shares of capital stock
except as part of the transaction that results in such Interested Shareholder
becoming an Interested Shareholder and except in a transaction that, after
giving effect thereto, would not result in any increase in the Interested
Shareholder's percentage beneficial ownership of any class or series of capital
stock of the Corporation.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided, directly or indirectly, by the Corporation,
whether in anticipation of or in connection with such Business Combination or
otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, and the rules or regulations
thereunder) shall be mailed to stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions).
SECTION 3. DEFINITIONS. For purposes of this Article VII, the following
terms shall have the following meanings:
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(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of filing by the Superintendent of
this Restated Organization Certificate whether or not the Corporation was then
subject to such rule.
(b) "Announcement Date" shall mean the date of the first public
announcement of the proposal of the Business Combination.
(c) A Person shall be deemed the "beneficial owner," or to have
"beneficial ownership," of any shares of Voting Stock that:
(i) such Person or any of its Affiliates or Associates beneficially owns,
directly or indirectly;
(ii) such Person or any or its Affiliates or Associates has (A)the right
to acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding (but a
Person shall not be deemed to be the beneficial owner of any Voting Stock solely
by reason of an agreement, arrangement or understanding with the Corporation to
effect a Business Combination) or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote, or
to direct the vote of, pursuant to any agreement, arrangement or understanding
(but neither such Person nor any Affiliate or Associate shall be deemed to be
the beneficial owner of any shares of Voting Stock solely by reason of a
revocable proxy granted for a particular meeting of shareholders, pursuant to a
public solicitation of proxies for such meeting, and with respect to which
shares neither such Person nor any Affiliate or Associate is otherwise deemed
the beneficial owner); or
(iii) is beneficially owned, directly or indirectly, by any other Person
with which such first mentioned Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting (except to the extent contemplated by the parenthetical clause
of Section 3(c)(ii)(B)) or disposing of any shares of Voting Stock;
provided, however, that no director or officer of the Corporation (nor any
Affiliate or Associate of any such director or officer) (y) shall, solely by
reason of any or all of such directors or officers acting in their capacities as
such, be deemed, for any purposes hereof, to beneficially own any Voting Stock
of the Corporation beneficially owned by any other such director or officer (or
any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own
any Voting Stock of the Corporation owned by any pension, profit-sharing, stock
bonus or other compensation plan maintained by the Corporation or by a member of
a controlled group of corporations or trades or businesses of which the
Corporation is a member for the benefit of employees of the Corporation and/or
any Subsidiary, or any trust or custodial arrangement established in connection
with any such plan, not specifically allocated to such Person's personal
account.
(d) The term "Business Combination" shall mean any transaction that is
referred to in any one or more of the following paragraphs (i) through (vi):
(i) any merger or consolidation of the Corporation or any Subsidiary
with (A) any
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Interested Shareholder or (B) any other entity (whether or not such other entity
is itself an Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of any Interested Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate or Associate of any Interested
Shareholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value equal to five percent (5%) or more of the total
assets of the Corporation or the Subsidiary in question as of the end of its
most recent fiscal year ending prior to the time the determination is being
made;
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder having an aggregate Fair Market Value
equal to twenty percent (20%) or more of the aggregate Fair Market Value of all
of the outstanding Capital Stock other than on a pro rata basis to all holders
of Voting Stock and other than in connection with the exercise or conversion of
securities issued pro rata that are exercisable for, or convertible into,
securities of the Corporation or any Subsidiary;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder;
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any Subsidiary or any other transaction (whether or not
with or into or otherwise involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class or series of equity or convertible securities of
the Corporation or any Subsidiary that is directly or indirectly owned by any
Interested Shareholder or any Affiliate or Associate of any Interested
Shareholder, except as a result of immaterial changes due to fractional share
adjustments, which changes do not exceed, in the aggregate, one percent (1%) of
the issued and outstanding shares of such class or series of equity or
convertible securities; or
(vi) the acquisition by the Corporation or a Subsidiary of any
securities of an Interested Shareholder.
In the event of any Business Combination in which the Corporation survives
the phrase "consideration other than cash to be received" shall include the
shares of Common Stock and/or shares of any other class of capital stock
retained by the holder of such shares in addition to any other consideration and
securities of the corporation retained by the receipt of such consideration.
(e) "Consummation Date" shall mean the date of the consummation of the
Business Combination.
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(f) "Determination Date" shall mean the date on which the Interested
Shareholder became an Interested Shareholder.
(g) "Disinterested Director" shall mean any member of the Board of the
Corporation who is not affiliated with the Interested Shareholder and who either
was a member of the Board prior to the Determination Date or was recommended for
election by a majority of the Disinterested Directors in office at the time such
director was nominated for election.
(h) "Fair Market Value" shall mean (i) in the case of stock, the highest
closing price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange listed stocks, or, if such stock is not quoted on such Composite Tape
or if such stock is not listed on such Exchange, then on the principal United
States securities exchange registered under the Exchange Act, on which such
stock is listed, or, if such stock is not listed on any such exchange, then the
highest closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the Nasdaq Stock Market or any
system then in use, or if no such quotation is available, then the fair market
value on the date in question of a share of such stock as determined in good
faith by a majority of the Disinterested Directors then in office, in each case
with respect to any class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such stock
or any combination or reclassification of outstanding shares of such stock into
a smaller number of shares of such stock; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the Disinterested
Directors then in office.
(i) References to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any dividend
or distribution in shares of such stock or any stock split or reclassification
of outstanding shares of such stock into a greater number of shares of such
stock or any combination or reclassification of outstanding shares of such stock
into a smaller number of shares of such stock.
(j) "Interested Shareholder" shall mean any Person (other than the
Corporation, any parent of the Corporation, any Subsidiary or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of employees of
the Corporation, any parent of the Corporation or any Subsidiary, or any trust
or custodial arrangement established in connection with any such plan or holding
Voting Stock for the purpose of funding any such plan or funding employee
lending for employees of the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner of ten percent (10%) or more of the Voting
Stock;
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner of ten percent (1 0%) or more of the then outstanding Voting Stock; or
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(iii) is an assignee of or has otherwise succeeded to any shares of Voting
Stock that were at any time within the two-year period immediately prior to the
date in question beneficially owned by any other Interested Shareholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning Of the
Securities Act of 1933, as amended.
In determining whether a Person is an Interested Shareholder pursuant to
this subsection (j), the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through application of subsection
(c) of this Section 3, but shall not include any other shares of Voting Stock
that may be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(k) "Person" shall mean any corporation, partnership, trust,
unincorporated organization or association, syndicate, any other entity or a
natural person, together with any Affiliate or Associate of such person or any
other person acting in concert with such person (which shall include, without
limitation, persons seeking to combine or pool their voting or other interests
in the Voting Stock for a common purpose, pursuant to any contract,
understanding, relationship, agreement or otherwise, but shall not include the
directors or officers of the Corporation acting solely in their capacities as
such).
(l) "Subsidiary" shall mean any corporation of which a majority of any
class or series of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in subsection (j) of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class or
series of voting securities is owned, directly or indirectly, by the
Corporation.
(m) "Voting Stock" shall mean all of the outstanding shares of Capital
Stock entitled to vote generally in the election of directors.
SECTION 4. POWERS OF THE DISINTERESTED DIRECTORS. When it appears that a
particular Person may be an Interested Shareholder and that the provisions of
this Article VII need to be applied or interpreted, then a majority of the
directors of the Corporation who would qualify as Disinterested Directors shall
have the power and duty to interpret all of the terms and provisions of this
Article VII and to determine on the basis of information known to them after
reasonable inquiry all facts necessary to ascertain compliance with this Article
VII, including, without limitation, (a) whether a Person is an Interested
Shareholder, (b) the number of shares of Voting Stock beneficially owned by any
Person, (c) whether a Person is an Affiliate or Associate of another, (d) the
Fair Market Value of (i) the assets that are the subject of any Business
Combination, (ii) the securities to be issued or transferred by the Corporation
or any Subsidiary in any Business Combination, (iii) the consideration other
than cash to be received by holders of shares of any class or series of Common
Stock or Voting Stock other than Common Stock in any Business Combination, (iv)
the outstanding Capital Stock or (v) any other item the Fair Market Value of
which requires determination pursuant to this Article VII and (e) whether all of
the applicable conditions set forth in Section 2 of this Article VII have been
met with respect to any Business Combination.
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Any constructions, applications, or determinations made by the Board
pursuant to this Article VII, in good faith and on the basis of such information
and assistance as was then reasonably available for such purpose, shall be
conclusive and binding upon the Corporation and its shareholders, and neither
the Corporation nor any of its shareholders shall have the right to challenge
any such construction, application or determination.
SECTION 5. EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS.
Nothing contained in this Article VII shall be construed to relieve any
Interested Shareholder from any fiduciary obligations imposed by law.
SECTION 6. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of
this Restated Organization Certificate or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of the Voting Stock
required by law, this Organization Certificate or any Preferred Stock
Designation, the affirmative vote of the holders of at least 80 percent of the
voting power of all of the then-outstanding shares of the Voting Stock, voting
together as a single class or series, shall be required to alter, amend or
repeal this Article. For the purposes of the preceding sentence, shares owned
in excess of the Limit which have no voting power pursuant to Article V shall be
counted in determining the aggregate voting power of all outstanding shares of
Voting Stock but shall remain subject to the limitations on voting set forth in
Article V.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The Corporation shall, to the maximum
extent authorized or permitted and in the manner provided by the Banking Law and
any applicable federal law, indemnify any person who is made, or threatened to
be made, a party to any action, suit or proceeding, whether civil, criminal or
administrative, by reason of the fact that such person, or such person's
testator or intestate, is or was a trustee, director or officer of the
Corporation or one of the Corporation's subsidiaries, or any predecessor of the
Corporation, or serves or served any other corporation, or any partnership,
association, joint venture, trust, employee benefit plan, conference or other
group or enterprise in any capacity at the request of the Corporation or one of
the Corporation's subsidiaries, or any predecessor of the Corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and reasonably incurred, and the Corporation shall
advance any related expense in full. Employees or agents of the Corporation may
be similarly indemnified. Such right of indemnification and advancement shall
be in addition to and not exclusive of any other rights or remedies to which
such person may be or become entitled under any statute, insurance policy,
agreement, bylaw or otherwise.
SECTION 2. ACCRUAL OF RIGHT TO INDEMNIFICATION. In addition to the
Corporation's obligation to indemnify under Section 1 of this Article VIII, the
Corporation's obligation to indemnify, and any person's right to
indemnification, under this Article VIII shall accrue as of the time of the
accrual of the cause of action asserted in the threatened or pending action,
suit, or
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proceeding, and no subsequent change in this Restated Organization Certificate
or the bylaws of the Corporation shall have any effect on the Corporation's
obligation to indemnify or a person's right to indemnification. The provisions
of this Article VIII shall be deemed to be a contract between the Corporation
and each director, trustee and officer of the Corporation who serves in such
capacity at any time while this Article VIII is in effect, and any subsequent
change of this Article VIII shall not affect the rights or obligations then
existing with respect to any state of facts then or theretofore existing as it
relates to any action or proceeding therefore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
SECTION 3. INDIVIDUAL INDEMNIFICATION AGREEMENTS. In addition to the
Corporation's obligation to indemnify under Sections 1 and 2 of this Article
VIII, the Board may also, to the maximum extent permitted by law, in its
discretion, approve agreements between the Corporation and one or more
directors, officers or employees of the Corporation under which the Corporation
would indemnify such directors, officers and employees in the event that any
such person is made, or threatened to be made, a party to any action or
proceeding, whether civil, criminal or administrative, by reason of the fact
that such person is or was a trustee, director, officer or employee of the
Corporation or one of the Corporation's subsidiaries, or any predecessor of the
Corporation, or serves or served any other corporation, or any partnership,
association, joint venture, trust, employee benefit plan, conference or other
group or enterprise in any capacity at the request of the Corporation or one of
the Corporation's subsidiaries, or any predecessor of the Corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and reasonably incurred.
SECTION 4. INSURANCE. The Corporation may, but shall not be obliged to,
purchase and maintain insurance on behalf of any person who is or was a
director, trustee or officer of the Corporation or is or was serving at the
request of the Corporation as a director, trustee or officer of another
corporation of any type or kind, domestic or foreign, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article VIII.
SECTION 5. SUBSEQUENT AMENDMENT AND SUBSEQUENT LEGISLATION. Neither the
amendment, termination or repeal of this Article VIII or of relevant provisions
of the Banking Law or any other applicable laws, nor the adoption of any
provision of this Restated Organization Certificate or the bylaws of the
Corporation or of any statute inconsistent with this Article VIII shall
eliminate, affect or diminish in any way the rights of any trustee, director,
officer, employee or agent of the Corporation to indemnification under the
provisions of this Article VIII with respect to any action, suit or proceeding
arising out of, or relating to, any actions, transactions or facts occurring
prior to the final adoption of such amendment, termination or repeal.
If the Banking Law is amended to expand further the indemnification
permitted to trustees, directors, officers, employees or agents of the
Corporation, then the Corporation shall indemnify such persons to the fullest
extent permitted by the Banking Law as so amended.
ARTICLE IX
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AMENDMENTS
SECTION 1. AMENDMENTS OF RESTATED ORGANIZATION CERTIFICATE. In addition to
any affirmative vote required by applicable law and any voting rights granted to
or held by holders of shares of Preferred Stock, any alteration, amendment,
repeal or rescission (collectively, any "Change") of any provision of this
Restated Organization Certificate must be approved by a majority of the
directors of the Corporation then in office and by the affirmative vote of the
holders of a majority (or such greater proportion as may otherwise be required
pursuant to any specific provision of this Restated Organization Certificate) of
the total votes eligible to be cast by the holders of all outstanding shares of
Capital Stock entitled to vote thereon; provided, however, that if any such
Change relates to Section 5 of Article VIII or Articles IV, V, VI or IX of this
Restated Organization Certificate, such Change must be approved either (i) by
not less than a majority of the authorized number of directors and, if one or
more Interested Shareholders (as defined in Article VII hereof) exist, by not
less than a majority of the Disinterested Directors (as defined in Article VII
hereof), or (ii) by the affirmative vote of 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 Change
is proposed by or on behalf of an Interested Shareholder or a director who is an
Affiliate or Associate (as such terms are defined in Article VII hereof) 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 the 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.
Subject to the foregoing, the Corporation reserves the right to amend this
Restated Organization Certificate from time to time in any and as many respects
as may be desired and as may be lawfully contained in an original organization
certificate filed at the time of making such amendment.
Except as may otherwise be provided in this Restated Organization
Certificate, the Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this Restated
Organization Certificate, and to add or insert herein any other provisions
authorized by the laws of the State of New York at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon shareholders, directors or any other
persons whomsoever by and pursuant to this Restated Organization Certificate in
its present form or hereafter amended are granted subject to the rights reserved
in this Section.
SECTION 2. AMENDMENTS OF BYLAWS. The bylaws of the Corporation, except as
provided by applicable law or this Restated Organization Certificate, or as
otherwise provided by the bylaws, may be amended or repealed by the Board or by
vote of the shareholders entitled to vote in the election of directors;
provided, however, that no amendment to the bylaws shall be made by the Board
unless notice of the proposed amendment shall have been given at the previous
meeting of the Board.
FOURTH, This amendment and restatement of the Organization Certificate was
authorized by a majority vote of the members of the Board of Trustees of the
Corporation.
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IN WITNESS WHEREOF, we have made, signed and acknowledged this certificate
in duplicate, this ____ day of _________________, 1998.
------------------------------
Wesley D. Stisser
President and
Chief Executive Officer
Acknowledged by:
------------------------------
Sandy F. Samson
Corporate Secretary
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STATE OF NEW YORK )
)ss.:
COUNTY OF CORTLAND )
On the __ day of ________________, 1998, before me personally came Wesley
D. Stisser and Sandy F. Samson, to me known and known to me to be the individual
described in and who executed the foregoing instrument, and they duly
acknowledged to me that they executed the same.
------------------------------
Notary Public
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Exhibit 3.4
BYLAWS
OF
CORTLAND SAVINGS BANK
ARTICLE I
ORGANIZATION
This corporation shall be known as Cortland Savings Bank (the "Bank"). The
principal office of the Bank shall be located in the State of New York, in the
County of Cortland, in the City of Cortland. Subject to applicable banking laws
and any required approval of the Superintendent of Banks of the State of New
York (the "Superintendent"), the Bank may also have other offices at such other
places as the Board of Directors (the "Board") may from time to time designate
or the business of the Bank may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders of the Bank
for the election of directors and the transaction of any other business as may
properly come before such meeting shall be held each year on a date to be fixed
by the Board, but in no event later than April 30th of any year, at such time
and at such place in a city, town or village in which any office of the Bank is
located.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called at any time by the Chairman, if one has been
elected by the Board, the Chief Executive Officer or by resolution of at least
three-fourths of the entire Board, and shall be called by the Chairman, if one
has been elected, the President or the Secretary of the bank upon the written
request of the holders of three-fourths of all the outstanding capital stock of
the Bank entitled to vote at the meeting. Special meetings shall be held at such
time and at such place as may be designated by the Board. At a special meeting,
no business shall be transacted and no corporate action shall be taken other
than that stated in the notice of meeting.
SECTION 3. NOTICE OF MEETINGS. Written notice stating the place, day and
hour of any meeting of shareholders and the purpose or purposes for which the
meeting is called shall be delivered to each shareholder of record entitled to
vote at such meeting, either personally or by mail, not less than 10 nor more
than 50 days before the date of such meeting. If mailed, such notice shall
<PAGE>
be deemed to be delivered when deposited in the U.S. mail, with postage thereon
prepaid, addressed to the shareholder at his or her address as it appears on the
stock transfer books or records of the Bank as of the record date prescribed in
Section 5 of this Article II, or at such other address as the shareholder shall
have furnished in writing to the Secretary of the Bank. Notice of any special
meeting shall indicate that the notice is being issued by or at the direction of
the person or persons calling such meeting. When any meeting of shareholders,
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 fixes a new
record date for the adjourned meeting, notice of the adjourned meeting shall be
given to each shareholder of record on the new record date.
SECTION 4. WAIVER OF NOTICE. Notice of any annual or special meeting need
not be given to any shareholder who submits a signed waiver of notice, in person
or by proxy, whether before or after the meeting. The attendance of any
shareholder 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 shareholder.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend or the allotment of any rights, or in order to make a determination of
shareholders for any other proper purpose, the Board shall fix in advance a date
as the record date for any such determination of shareholders. Such date in any
case shall be not more than 50 days and, in the case of a meeting of
shareholders, not less than 10 days, prior to the date on which the particular
action requiring such determination of shareholders is to be taken. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 5, such determination shall, unless
otherwise provided by the Board, also apply to any adjournment thereof.
SECTION 6. QUORUM. The holders of a majority of the shares of the capital
stock of the Bank issued and outstanding and entitled to vote thereat,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders, except as otherwise provided by law, these Bylaws or the Restated
Organization Certificate of the Bank. If less than a majority of such shares are
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 represented, any business may be transacted that
might have been transacted at the meeting as originally noticed. When a quorum
is once present to organize a meeting, such quorum is not broken by the
subsequent withdrawal of any shareholders.
SECTION 7. CONDUCT OF MEETINGS. The Chairman shall serve as chairman at all
meetings of the shareholders or, if a Chairman has not been elected by the Board
or the Chairman is absent or otherwise unable to so serve, the President shall
serve as chairman. If the President is absent or otherwise unable to so serve,
such other person as shall be appointed by a majority of the
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entire Board shall serve as chairman at any meeting of shareholders held in such
absence. The Secretary of the Bank or, if the Secretary is absent or otherwise
unable to so serve, such other person as the chairman of the meeting shall
appoint, shall serve as secretary of the meeting. The chairman of the meeting
shall conduct all meetings of the shareholders 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 such meetings, including such
regulation of the manner of voting and the conduct of discussion as he or she
shall deem appropriate. The chairman of the meeting shall also have the
authority to adjourn the meeting from time to time and from place to place as he
or she may deem necessary and in the best interests of the Bank.
SECTION 8. PROXIES. Each shareholder entitled to vote at any meeting may
vote either in person or by proxy. All proxies shall be in writing, signed by
the shareholder or by his or her duly authorized attorney-in-fact, and shall be
filed with the Secretary of the Bank before being voted. No proxy shall be valid
after the expiration of 11 months from the date of its execution unless
otherwise provided in the proxy. The attendance at any meeting by a shareholder
who shall have previously given a proxy applicable thereto shall not, as such,
have the effect of revoking the proxy. The Bank may treat any duly executed
proxy as not revoked and in full force and effect until it receives a duly
executed instrument revoking it, or a duly executed proxy bearing a later date.
SECTION 9. VOTING; VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS.
Except for the election of directors or as otherwise provided by law or the
Restated Organization Certificate of the Bank, at all meetings of shareholders
all matters shall be determined by a majority vote of the shareholders present
and entitled to vote thereat. Directors shall, except as otherwise required by
law or the Restated Organization Certificate of the Bank, be elected by a
plurality of the votes cast by the shareholders entitled to vote in the
election.
When ownership of shares stands in the name of two or more persons, in the
absence of written directions to the Bank to the contrary, at any meeting of the
shareholders of the Bank any one or more of such shareholders may cast, in
person or by proxy, all votes to which such ownership is entitled. If an
attempt is made to cast conflicting votes, in person or by proxy, by several
persons in whose names shares of stock stand, the vote or votes to which those
persons are entitled shall be cast as directed by a majority of those holding
such stock and present, in person or by proxy, at such meeting. If such
conflicting votes are evenly split on any particular matter, each faction may
vote the securities in question proportionally or any person voting the shares,
or a beneficiary, if any, may apply to the Supreme Court of New York or such
other court as may have jurisdiction to appoint an additional person to act with
the persons so voting the shares, which shall then be voted as determined by a
majority of such persons and the person appointed by the court.
SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint one or more persons, other than officers,
directors or nominees for office, as inspectors of election to act at such
meeting or any adjournment thereof. Such appointment shall not be altered at the
meeting. If inspectors of election are not so appointed, the chairman of the
meeting may make such appointment at the meeting. In case any person appointed
as inspector fails to appear
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or fails or refuses to act, the vacancy may be filled by appointment by the
Board in advance of the meeting or at the meeting by the chairman of the
meeting. The duties of the inspectors of election shall include: determining the
number of shares outstanding and the voting power of each share, the shares
represented at the meeting, the existence of a quorum and the validity and
effect of proxies; receiving votes, ballots or consents; hearing and deciding
all challenges and questions arising in connection with the right to vote;
counting and tabulating all votes, ballots or consents; determining the results;
and doing such acts as are proper to the conduct of the election or the vote
with fairness to all shareholders. On request of the person presiding at the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them. Any report or certificate made
by them shall be prima facie evidence of the facts stated and of the vote as
certified by them. Each inspector shall be entitled to a reasonable compensation
for his or her services, to be paid by the Bank.
SECTION 11. PROCEDURE FOR NOMINATIONS. The Board, or a committee appointed
by the Board, 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 shall
deliver written nominations to the Secretary of the Bank at least 30 days prior
to the date of the annual meeting. Provided the Board, or a committee appointed
by the Board, makes such nominations, no nominations for directors except those
made by the Board or such committee shall be voted upon at the annual meeting of
shareholders unless other nominations by shareholders are made in accordance
with the provisions of this Section 11. Nominations of individuals for election
to the Board at an annual meeting of shareholders may be made by any shareholder
of the Bank entitled to vote for the election of directors at such meeting who
provides timely notice in writing to the Secretary of the Bank.
SECTION 12. NEW BUSINESS. Any new business to be taken up at the annual
meeting at the request of the Chairman, if one has been elected by the Board, or
the President shall be stated in writing and filed with the Secretary of the
Bank at least 15 days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting. Any
proposal offered by any shareholder who is not a director or executive officer
of the Bank may be made at the annual meeting and the same may be discussed and
considered, but unless properly brought before the meeting such proposal shall
not be acted upon at the meeting. For a proposal to be properly brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the Bank. This provision shall not
prevent the consideration and approval or disapproval at an annual meeting of
reports of officers, directors and committees of the Board or the management of
the Bank, but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided. This
provision shall not constitute a waiver of any right of the Bank under the proxy
rules of the Federal Deposit Insurance Corporation or any other rule or
regulation to omit a shareholder's proposal from the Bank's proxy materials.
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ARTICLE III
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates evidencing ownership of
shares of stock of the Bank shall be in such form as shall be approved by the
Board, provided that each certificate shall, when issued, state upon the face
thereof (a) that the Bank is a corporation organized under the laws of the State
of New York; (b) the name of the person to whom the certificate is issued; (c)
the number of shares, class and series, if any, that the certificate represents;
and (d) the par value of each share represented by the certificate; and further
provided that each certificate shall, when issued, state upon the back thereof
the existence of any supermajority voting provisions in the Restated
Organization Certificate of the Bank required to be noted on such certificate
under Section 6016 of the Banking Law of the State of New York (the "Banking
Law"). Each certificate shall further state that the Bank will furnish to any
shareholder upon request and without charge a statement of the rights and
preferences of the shares of each class or series of stock, or shall set forth
such statement on the certificate itself. The certificates shall be numbered in
the order of their issue and shall be signed by the Chairman, if one has been
elected, the President and the Secretary or any Assistant Secretary, and the
seal of the Bank or a facsimile thereof shall be impressed, affixed or
reproduced thereon. If the certificates are signed by a Transfer Agent acting on
behalf of the Bank, or are registered by a Registrar, the signatures of the
officers of the Bank may be facsimile signatures. In case any officer or
officers who shall have signed any such certificate or certificates shall cease
to be such officer or officers of the Bank, whether because of death,
resignation or otherwise, before such certificate or certificates shall have
been delivered by the Bank, such certificate or certificates may nevertheless be
adopted by the Bank and be issued and delivered as though the person or persons
who signed such certificate or certificates have not ceased to be such officer
or officers of the Bank.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board shall have the power to
appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
Transfer Agents and Registrars.
SECTION 3. REGISTRATION AND TRANSFER OF SHARES. Subject to the provisions
of the Restated Organization Certificate of the Bank, the name of each person
owning a share of the capital stock of the Bank shall be entered on the books of
the Bank together with the number of shares held by him or her, the numbers of
the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Bank shall be transferable on the books
of the Bank by the holders thereof in person, or by their duly authorized
attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, with such
guarantee or proof of the authenticity of the signature as the Bank or its
agents may reasonably require and with proper evidence of payment of all
applicable transfer taxes. A record shall be made of each transfer.
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SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder of any
shares of stock of the Bank shall immediately notify the Bank of any loss,
theft, destruction or mutilation of the certificates therefor. The Bank may
issue, or cause to be issued, a new certificate of stock in the place of any
certificate theretofore issued by it alleged to have been lost, stolen or
destroyed upon evidence satisfactory to the Bank of the loss, theft or
destruction of the certificate, and, in the case of mutilation, the surrender of
the mutilated certificate. The Board may, in its discretion, require the owner
of the lost, stolen or destroyed certificate, or his or her legal
representatives, to give the Bank a bond, in such sum not exceeding double the
value of the stock and with such surety or sureties as they may require, to
indemnify it against any claim that may be made against it by reason of the
issue of such new certificate and against all other liability in the premises,
or may refer such owner to such remedy or remedies as he or she may have under
the laws of the State of New York.
SECTION 5. HOLDER OF RECORD. The Bank shall be entitled to treat the holder
of record of any share or shares of stock as the holder thereof in fact and
shall not be bound to recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. RESPONSIBILITIES; NUMBER OF DIRECTORS. The business and affairs
of the Bank shall be under the direction of its Board. The Board shall consist
of not less than 7 nor more than 20 directors. Within the foregoing limits, the
number of directors shall be determined by resolution of the Board.
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. MANDATORY RETIREMENT. No director shall serve beyond the last
day of the year in which he or she reaches his or her 72nd birthday. However, a
director on attaining age 72 shall be eligible for election as Director
Emeritus.
SECTION 4. REGULAR AND ANNUAL MEETINGS. An annual meeting of the Board 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 the
shareholders of the Bank, or at such other time or place within 25 days
following the annual meeting of shareholders as the Board may fix by resolution.
The Board 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 may provide, by resolution, the
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time and place for the holding of regular meetings of the Board without notice
other than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may be called at
any time by or at the request of the Chairman, if one has been elected, or the
President. Special meetings of the Board 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 shall give notice of such meetings in the
manner prescribed by these Bylaws and may fix any place, within or without the
Bank's regular business area, as the place for holding any special meeting of
the Board 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 shall be presided
over by the Chairman, if a Chairman has been elected by the Board, or such other
director or officer as the Chairman shall designate. If a Chairman has not been
elected by the Board 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 in terms of length of service on
the Board. 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 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 meetings. Any one or more directors may participate in
a meeting of the Board 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. At least 24 hours' notice
of meetings shall be given to each director if given in person or by telephone,
telegraph, telex, facsimile, 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 shall consist of not less than a majority of the entire Board or such
greater number as shall be required by law, these Bylaws or the Restated
Organization Certificate of the Bank. In no case shall such number be less than
six. 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
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meeting at which a quorum shall be represented, any 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 Bylaws, 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.
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 Bylaws, any director or the entire
Board of the Bank may be removed at any time, but only for cause and only by 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 shareholders called for that
purpose. For purposes of this Section 10, conduct worthy of removal for "cause"
shall mean (a) conduct as a director of the Bank or a subsidiary of the Bank
that involves willful material misconduct, breach of fiduciary duty involving
personal pecuniary gain or gross negligence in the performance of duties or (b)
conduct, whether or not as a director of the Bank or a subsidiary of the Bank,
that involves dishonesty or breach of fiduciary duty and is punishable by
imprisonment for a term exceeding one year under state or federal law.
SECTION 11. VACANCIES. Subject to the limitations prescribed by law, the
Restated Organization Certificate of the Bank and these Bylaws, 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 shareholders, except that vacancies not exceeding one-third of the
entire Board 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, or a committee appointed by the Board. 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.
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ARTICLE V
COMMITTEES
SECTION 1. STANDING COMMITTEES. At each annual meeting of the Board, the
directors shall designate from their own number, by resolution adopted by a
majority of the entire Board, the following committees:
(a) Executive Committee
(b) Examining Committee
(c) Human Resources
which shall be standing committees of the Board. The Board shall appoint a
director to fill any vacancy on any committee of the Board. The members of the
committees shall serve at the pleasure of the Board.
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee shall consist of at
least five members appointed by Board resolution. The Chairman of the Board, if
a member, shall serve as chairman of the Executive Committee or, if no Chairman
has been elected, the President shall serve as chairman of the Executive
Committee. In the absence of the chairman of the Executive Committee, the
committee shall designate from among its membership a person to preside at any
meeting held in such absence. The Executive Committee shall designate, from its
membership or otherwise, a secretary who shall report to the Board at its next
regular meeting all proceedings and actions taken by the Executive Committee.
The Executive Committee shall meet as necessary at the call of the Chairman or,
in the absence of the Chairman, at the call of a majority of the members of the
Executive Committee.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business. The vote of a majority present at any meeting,
including the chairman of the committee, who shall be eligible to vote, shall
constitute the action of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with
applicable law or these By-Laws, exercise all the powers of the Board in the
intervals between the meetings of the Board. The Executive Committee shall
generally oversee the affairs of the Bank and shall exercise such other powers
not reserved by the Board or delegated to officers or to other committees. The
Executive Committee shall also consider proposals from management in relation to
the election of officers and shall make recommendations to the Board in relation
to those nominated to officer positions.
SECTION 3. EXAMINING COMMITTEE. The Examining Committee shall consist of at
least three members, none of whom shall be an officer or salaried employee of
the Bank or its subsidiaries or any other individual having a relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgement in carrying out the responsibilities of a director.
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At any regular meeting of the Board, any director who is otherwise eligible to
serve on the Examining Committee may be elected to fill a vacancy that has
occurred on the Examining Committee. The Board shall designate one member of
the committee to serve as chairman of the committee. A quorum shall consist of
at a majority of the voting members of the Human Resources Committee.
The Examining Committee shall meet as necessary at the call of the Chairman
or, in the absence of the Chairman, at the call of a majority of the members of
the Examining Committee. The Examining Committee shall examine, or cause to be
examined, the records and affairs of the Bank to determine its true financial
condition, and shall present a report of examination to the Board at the Board's
next regular meeting following the completion of the examination and the
approval thereof by the Examining Committee and shall present a copy thereof to
the Superintendent, all in conformity with the provisions of the Banking Law.
The committee shall appoint, from its membership or otherwise, a secretary who
shall cause to be kept written minutes of all meetings of the committee. The
Examining Committee shall make, or cause to be made, such other examinations as
it may deem advisable or whenever so directed by the Board and shall report
thereon in writing at a regular meeting of the Board. The Examining Committee
shall make recommendations to the Board in relation to the employment of
accountants and independent auditors and arrange for such other assistance as it
may deem necessary or desirable. The Examining Committee shall review and
evaluate the procedures and performance of the Bank's internal auditing staff.
SECTION 4. HUMAN RESOURCES COMMITTEE. The Human Resources Committee shall
consist of at least three (3) members, none of whom shall be an officer or
salaried employee of the Bank or its subsidiaries, as shall be appointed by
Board resolution or these Bylaws. The Board shall designate one member of the
committee to serve as chairman of the Human Resources Committee, who shall have
the authority to adopt and establish procedural rules for the conduct of all
meetings of the committee.
The Human Resources Committee shall meet as necessary at the call of the
Chairman or, in the absence of the Chairman, at the call of a majority of the
members of the Human Resources Committee. A quorum shall consist of at a
majority of the voting members of the Human Resources Committee. The vote of a
majority of the voting members present at any meeting, including the chairman of
the committee who shall be eligible to vote, shall constitute the action of the
Human Resources Committee. The committee shall appoint, from its membership or
otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee.
The Human Resources Committee shall be responsible for recommending to the
Board the compensation, employment arrangements and benefit programs for
officers of the Bank and its subsidiaries.
SECTION 5. OTHER COMMITTEES. The Board may, by resolution adopted by a
majority of the entire Board at any meeting, authorize such other committees as
from time to time it may deem necessary or appropriate for the conduct of the
business of the Bank. The members of each
10
<PAGE>
committee so authorized shall be appointed by the Board from members of the
Board or employees of the Bank. Each such committee shall exercise such powers
as may be assigned by the Board to the extent not inconsistent with these Bylaws
or the Restated Organization Certificate of the Bank. The Chairman, if one has
been elected, and the President shall be ex-officio members, with power to vote
on all matters, of all appointed committees.
ARTICLE VI
OFFICERS
SECTION 1. DESIGNATION OF EXECUTIVE OFFICERS. The Board shall, at each
annual meeting, elect a President and a Secretary, and may elect a Chairman and
such other officers as the Board from time to time may deem necessary or the
business of the Bank may require. The Board shall designate either the Chairman
or the President as the Chief Executive Officer, and may designate the President
or an Executive Vice President to be the Chief Operating Officer. Any number of
offices may be held by the same person except that no person may simultaneously
hold the offices of President and Secretary.
The election of all officers shall be made only by a vote of a majority of
the entire Board. If such election is not held at the meeting held annually for
the election of officers, such officers may be so elected at any subsequent
regular meeting or at a special meeting called for that purpose, in the same
manner above provided. Each person elected shall have such authority, bear such
title and perform such duties as provided in these Bylaws and as the Board may
prescribe from time to time. All officers elected or appointed by the Board
shall assume their duties immediately upon their election and shall hold office
at the pleasure of the Board. Whenever a vacancy occurs among the officers, it
may be filled at any regular or special meeting called for that purpose, in the
same manner as above provided.
SECTION 2. TERM OF OFFICE AND REMOVAL. Each officer shall serve until his
or her successor is elected and duly qualified, the office is abolished or he or
she is removed. Any officer may be removed at any regular or special meeting of
the Board called for that purpose, with or without cause, by an affirmative vote
of a majority of the entire Board.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman, if one has been elected by
the Board shall preside at all meetings of the shareholders; preside at all
meetings of the Board and the Executive Committee; make recommendations to the
Board regarding appointments to all committees; and sign instruments in the name
of the Bank.
SECTION 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank, subject to the direction of the Board, shall be responsible for assuring
that the policy decisions of the Board are implemented as formulated. The Chief
Executive Officer shall be responsible, in consultation with such officers and
members of the Board as he deems appropriate, for planning the growth of the
Bank. The Chief Executive Officer shall be responsible for shareholder
relations,
11
<PAGE>
relations with investments bankers, other similar financial institutions and
financial advisors, and shall be empowered to designate officers of the Bank and
its subsidiaries to assist in such activities. The Chief Executive Officer shall
be principally responsible for exploring opportunities for mergers, acquisitions
and new business. The Chief Executive Officer shall have the general supervision
and direction of all of the Bank's officers, subject to and consistent with
policies enunciated by the Board. The Chief Executive Officer shall under
authority given to him, sign instruments in the name of the Bank. The Chief
Executive Officer shall have such other powers as may be assigned to him by the
Board, its committees or, if a Chairman other than the Chief Executive Officer
is elected by the Board, the Chairman. The Chief Executive Officer shall be a
member ex-officio, with power to vote on all matters, of all committees of the
Board, except the Examining Committee and the Human Resources Committee.
SECTION 5. PRESIDENT. The President shall be the Chief Executive Officer of
the Bank unless otherwise determined by the by the Board, and shall be subject
to the direction of the Board. The President shall perform such duties as from
time to time may be assigned to him by these Bylaws, the Board, or, if elected
by the Board, the Chairman. The President shall be a member ex-officio, with
power to vote on all matters, of all committees of the Board, except the
Examining Committee and the Human Resources Committee.
In the absence of or disability of the Chairman, or if the office of the
Chairman is vacant by reason of death, resignation, failure of the Board to
elect a Chairman or otherwise, the President or such other person who the Board
shall designate, shall exercise the powers and perform the duties which
otherwise would fall upon the Chairman.
SECTION 6. CHIEF OPERATING OFFICER. The Chief Operating Officer shall have
the general supervision and direction of all of the Bank's operations and
personnel, subject to and consistent with policies enunciated by the Board and
the direction of the Chief Executive Officer. The Chief Operating Officer shall,
under authority given to him, sign instruments in the name of the Bank. The
Chief Operating Officer shall have such other powers and duties as may be
assigned to him by the Board, its committees or the Chief Executive Officer.
SECTION 7. VICE PRESIDENTS. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents may be appointed by the Board to perform such
duties as may be prescribed by these Bylaws, the Board or the Chief Executive
Officer and the Chief Operating Officer as permitted by the Board. One of said
vice presidents may be designated as the Chief Operating Officer of the Bank.
SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board
and of the shareholders and shall record, or cause to be recorded, all votes and
minutes of all proceedings of the Board and of the shareholders in a book or
books to be kept for that purpose. The Secretary shall perform such executive
and administrative duties as may be assigned by the Board or the President. The
Secretary shall have charge of the seal of the Bank, shall submit such reports
and statements as may be required by law or by the Board, shall conduct all
correspondence relating to the Board and
12
<PAGE>
its proceedings and shall have such other powers and duties as are generally
incident to the office of Secretary and as may be assigned to him or her by the
Board or the Chief Executive Officer.
SECTION 9. TREASURER. The Treasurer shall be the chief accounting officer
of the Bank and shall be responsible for the maintenance of adequate systems and
records. The Treasurer shall also be the chief financial officer of the Bank and
shall keep a record of all assets, liabilities, receipts, disbursements and
other financial transactions and shall see that all expenditures are made in
accordance with procedures duly established from time to time by the Board. The
Treasurer shall make such reports as may be required by the Board or as are
required by law.
SECTION 10. OTHER OFFICERS. Other officers appointed by the Board shall
have such authority and shall perform such duties as may be assigned to them,
from time to time, by the Board or the Chief Executive Officer.
SECTION 11. COMPENSATION OF OFFICERS. The compensation of all officers
shall be fixed from time to time by the Board, upon the recommendation of the
Human Resources Committee. The salary of each officer for each calendar year
shall be fixed at the meeting of the Board held in December of the previous
year. No motion to change the salary of an officer of the Bank shall be voted
upon unless, at a previous regular or special meeting of the Board, notice of
the proposed change shall have been given.
ARTICLE VII
AMENDMENTS OF BYLAWS
These Bylaws, except as provided by law or the Restated Organization
Certificate of the Bank, or as otherwise set forth in these Bylaws, may be
amended or repealed by the Board or by vote of the shareholders entitled to vote
in the election of directors; provided, however, that no amendment to these
By-Laws shall be made by the Board unless notice of the proposed amendment shall
have been given at the previous meeting of the Board. Notwithstanding the
foregoing, any provision of these Bylaws that contains a supermajority voting
requirement shall only be altered, amended, rescinded, or repealed by a vote of
the Board or the shareholders entitled to vote thereon that is not less than the
supermajority specified in such provision.
13
<PAGE>
Exhibit 4.1
COMMON STOCK COMMON STOCK
PAR VALUE $.01 SEE REVERSE FOR CERTAIN DEFINITIONS
AND INFORMATION REGARDING CERTAIN RESTRICTIONS
CUSIP
CNY FINANCIAL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of:
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK $.01 PAR VALUE PER SHARE OF
CNY FINANCIAL CORPORATION (the Corporation").
This certificate is not valid unless countersigned and registered by the
Corporation's transfer agent and registrar. The shares represented by this
Certificate are not a deposit or account and are not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
IN WITNESS THEREOF, CNY Financial Corporation has caused this
certificate to be executed by the facsimile signatures of its duly authorized
officers and has caused a facsimile of its corporate seal to be hereunto
affixed.
Dated:
-------------------
[SEAL}
- ------------------------------------- --------------------------------
President or Chairman of the Board Secretary or Treasurer
<PAGE>
The shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record thereof, or by his
duly authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation of the Corporation and any amendments thereto
(copies of which are on file at the principal executive offices of the
Corporation), to all of which provisions the holder by acceptance hereof,
assents.
The shares represented by this certificate are subject to a limitation contained
in the Certificate of Incorporation to the effect that, except for certain
exceptions set forth in said Certificate of Incorporation, in no event shall any
record owner of any outstanding common stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the outstanding shares of common stock (the "Limit") be entitled or permitted to
any vote in respect of shares held in excess of the Limit.
The Board of Directors of the Corporation is authorized by resolution(s), from
time to time adopted, to provide for the issuance of serial preferred stock in
series and to fix and state the voting powers, designations, preferences and
relative, participating, optional, or other special rights of the shares of each
such series and the qualifications, limitations and restrictions thereof. The
Corporation will furnish to any shareholder upon request and without charge a
full description of each class of stock and any series thereof.
The shares represented by this certificate may not be cumulatively voted on any
matter. The affirmative vote of the holders of at least 80% of the voting stock
of the Corporation, voting together as a single class, shall be required to
approve certain business combinations and other transactions, pursuant to the
Certificate of Incorporation or to amend certain provisions of the Certificate
of Incorporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common TEN ENT - as tenants by the entirety
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
<TABLE>
<CAPTION>
<S> <C>
UNIF GIFTS MIN ACT - __________ custodian ____________ under Uniform Gifts to Minors Act_______
(Cust) (Minor) (State)
UNIF TRANS MIN ACT - ________ custodian ___________ under Uniform Transfers to Minors Act _______
(Cust) (Minor) (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER OF TRANSFEREE
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
________________________________________________ shares of the common stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ______________________________________________ Attorney to transfer the
said stock on the books of the within-named Corporation with full power of
substitution in the premises.
DATED
------------------------ ----------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
SIGNATURE GUARANTEED:
----------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (SAVINGS BANKS, BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
SEC RULE 17Ad-15
<PAGE>
Exhibit 5.1
Form of Opinion of Serchuk & Zelermyer, LLP regarding legality of stock to
be issued
_________________, 1998
CNY Financial Corporation
1 North Main Street
Cortland, New York 13045
Ladies and Gentlemen:
We have acted as counsel to CNY Financial Corporation, a Delaware
corporation (the "Corporation"), in connection with the registration under the
Securities Act of 1933, as amended, by the Corporation of an aggregate of up to
8,262,318 shares of Common Stock, par value $.01 per share (the "Shares"), of
the Corporation, and the related preparation and filing by the Corporation with
the Securities and Exchange Commission of a Registration Statement on Form S-1
(the "Registration Statement"). In rendering the opinions set forth below, we do
not express any opinion concerning law other than the federal law of the United
States and the corporate law of the State of Delaware.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records and other instruments,
and have examined such matters of law, as we have deemed necessary or advisable
for purposes of rendering the opinions set forth below. As to matters of fact,
we have examined and relied upon the representations of the Corporation
contained in the Registration Statement and, where we have deemed appropriate,
representations or certificates of officers of the Corporation or public
officials. We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents submitted to us as
copies. In making our examination of any documents, we have assumed that all
parties, other than the Corporation, had the corporate power and authority to
enter into and perform all obligations thereunder, and, as to such parties, we
have also assumed the due authorization by all requisite action, the due
execution and delivery of such documents and the validity and binding effect and
enforceability thereof.
Based on the foregoing, we are of the opinion that the Shares to be issued
and sold by the Corporation have been duly authorized and, when issued and sold
as contemplated in the Registration Statement and the Plan of Conversion of
Cortland Savings Bank (the "Bank"), will be validly issued and outstanding,
fully paid and non-assessable, provided, however, that as to Common Stock
donated to the Foundation, the par value thereof must be paid to the
Corporation.
In rendering the opinions set forth above, we have not passed upon and do
not purport to pass upon the application of securities or "blue-sky" laws of any
jurisdiction (except federal securities laws).
<PAGE>
This opinion is given solely for the benefit of the Corporation and
investors who purchase Shares pursuant to the Registration Statement and may not
be relied upon by any other person or entity, nor quoted in whole or in part, or
otherwise referred to in any document without our express written consent.
We consent to the filing of this opinion as an Exhibit to the Corporation's
Registration Statement and to the Bank's Application for Conversion on Form
86-AC (the "Form 86-AC") and to the reference to our firm under the headings
"The Conversion-Effects of Conversion on Depositors and Borrowers-Tax Effects"
and "Legal and Tax Opinions" in the prospectus which is part of such
Registration Statement and to the reference to our firm in the Form 86-AC.
Very truly yours,
Serchuk & Zelermyer, LLP
<PAGE>
Exhibit 8.1
Form of Opinion of Serchuk & Zelermyer, LLP regarding tax matters
__________________, 1998
CNY Financial Corporation
1 North Main Street
Cortland, New York 13045
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax consequences
of the proposed conversion of Cortland Savings Bank (the "Bank") from a state
chartered mutual savings bank to a state chartered stock savings bank (the
"Conversion"), the sale of all of the outstanding capital stock of the Bank to
CNY Financial Corporation, a Delaware corporation (the "Company"), and the sale
by the Company of up to 8,100,312 shares of its common stock, par value of $.01
per share (the "Common Stock") to the Bank's Eligible Account Holders, Employee
Plans and Supplemental Eligible Account Holders, and to certain other parties,
pursuant to the Plan of Conversion of Cortland Savings Bank adopted by the Board
of Trustees of the Bank on March 23, 1998, as amended (the "Plan"). These and
related transactions are described in the Plan and in the prospectus included in
the Company's Registration Statement filed on Form S-1 with the Securities and
Exchange Commission in connection with the Conversion (the "Prospectus"). All
capitalized terms used but not defined in this letter shall have the meanings
set forth in the Plan or Prospectus.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Plan and the Prospectus and of such corporate records of
the Bank and the Company as we have deemed appropriate. We have also relied,
without independent verification, upon the representations of the Bank and the
Company. We have assumed that the Bank, the Company and other parties will act
in accordance with the Plan, and that the representations made by the Bank and
the Company are true. In addition, we have made such investigations of law as we
have deemed appropriate to form a basis for the opinions expressed below.
Based on and subject to the foregoing, it is our opinion that, for federal
income tax purposes, under current law:
1. The Conversion in accordance with the Plan will qualify as a
reorganization under Section 368(a)(1)(F) of the Code, and no gain or loss will
be recognized by the Bank in either its mutual form or its stock form, or by the
Company, by reason of the proposed Conversion.
<PAGE>
CNY Financial Corporation
________, 1998
Page 2
2. No gain or loss will be recognized by the Bank upon the receipt of
money from the Company for stock of the Bank, and no gain or loss will be
recognized by the Company upon the receipt of money for the Common Stock.
3. The assets of the Bank in either its mutual or its stock form will
have the same basis before and after the Conversion.
4. The holding period of the assets of the Bank will include the period
during which the assets were held by the Bank in its mutual form prior to the
Conversion.
5. No gain or loss will be recognized by the Eligible Account Holders and
Supplemental Eligible Account Holders upon the issuance to them of withdrawable
deposit accounts in the Bank after the Conversion in the same dollar amount as
their savings accounts in the Bank plus an interest in the liquidation account
of the Bank after the Conversion in exchange for their savings accounts in the
Bank prior to the Conversion.
6. The receipt by Eligible Account Holders and Supplemental Eligible
Account Holders of nontransferable subscription rights to purchase shares of the
Common Stock under the Plan is taxable to Eligible Account Holders and
Supplemental Eligible Account Holders to the extent the subscription rights have
value.
7. The basis of each account holder's savings accounts in the Bank after
the Conversion will be the same as the basis of his or her savings accounts in
the Bank prior to the Conversion, decreased by the fair market value of the
non-transferable subscription rights received and increased by the amount, if
any, of gain recognized on the exchange
8. The basis of each account holder's interest in the liquidation account
will be zero.
9. The holding period of the Common Stock acquired through the exercise
of subscription rights shall begin on the date on which the subscription rights
are exercised.
10. The Bank in its stock form will succeed to and take into account the
earnings and profits or deficit in earnings and profits of the Bank, in its
mutual form, as of the date of Conversion.
11. The Bank, immediately after Conversion, will succeed to the bad debt
reserve accounts of the Bank, in its mutual form, and the bad debt reserves will
have the same character in
<PAGE>
CNY Financial Corporation
________, 1998
Page 3
the hands of the Bank after Conversion as if no distribution or transfer had
occurred.
12. The creation of the liquidation account will have no effect on the
Bank's taxable income, deductions, or addition to reserve for bad debts either
in its mutual or stock form.
13. For purposes of the New York State banking and franchise tax, imposed
by Article 32 of the New York Tax Law, and for the purposes of the New York
personal income tax under Article 22 which may be applicable to Eligible Account
Holders, Supplemental Eligible Account Holders and other investors who purchase
shares pursuant to the Company's Registration Statement on Form S-1 (the
"Registration Statement") who receive non-transferrable subscription rights or
who purchase stock in the Conversion, the Conversion will be treated the same
for New York State tax purposes as for federal tax purposes under the Internal
Revenue Code, as set forth above.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the Conversion or of
any transaction related thereto or contemplated by the Plan. Without limiting
the generality of the preceding sentence, no opinion is expressed herein
regarding the tax consequences of the donation of Common Stock to the Foundation
as described in the Prospectus. This opinion is given solely for the benefit of
the parties to the Plan and Eligible Account Holders, Supplemental Eligible
Account Holders and other investors who purchase shares pursuant to the
Company's Registration Statement, and may not be relied upon by any other party
or entity or referred to in any document without our express written consent. We
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the Application for Conversion on Form 86-AC of the Bank.
Very truly yours,
Serchuk & Zelermyer, LLP
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
June 19, 1998
Board of Trustees
Cortland Savings Bank
1 North Main Street
Cortland, New York 13045
Re: Plan of Conversion: Subscription Rights
Cortland Savings Bank
---------------------
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion adopted by the Board of
Trustees of Cortland Savings Bank ("Cortland Savings" or the "Bank") whereby
the Bank will convert from a New York State mutual savings bank to a stock
savings bank incorporated under the laws of the State of New York and issue
all of the Bank's outstanding capital stock to CNY Financial Corporation (the
"Holding Company"). Simultaneously, the Holding Company will issue shares of
common stock.
We understand that in accordance with the Plan of Conversion,
subscription rights to purchase shares of Common Stock in the Holding Company
are to be issued to: (1) Eligible Account Holders; (2) the ESOP; and (3)
Supplemental Eligible Account Holders. Based solely upon our observation that
the subscription rights will be available to such parties without cost, will
be legally non-transferable and of short duration, and will afford such
parties the right only to purchase shares of Common Stock at the same price
as will be paid by members of the general public in the Community Offering,
but without undertaking any independent investigation of state or federal law
or the position of the Internal Revenue Service with respect to this issue,
we are of the belief that, as a factual matter:
(1) the subscription rights will have no ascertainable market value;
and
(2) the price at which the subscription rights are exercisable will
not be more or less than the pro forma market value of the shares
upon issuance.
Changes in the local and national economy, the legislative and
regulatory environment, the stock market, interest rates, and other external
forces (such as natural disasters or significant world events) may occur from
time to time, often with great unpredictability and may materially impact the
value of thrift stocks as a whole or the Holding Company's value alone.
Accordingly, no assurance can be given that persons who subscribe to shares
of common stock in the conversion will thereafter be able to buy or sell such
shares at the same prices paid in the Subscription Offering.
Sincerely,
/s/ James J. Oren
James J. Oren
Senior Vice President
- --------------------------------------------------------------------------------
WASHINGTON HEADQUARTERS
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
Exhibit 10-1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the first day of July, 1998, by and between Cortland Savings Bank (the "Bank")
and Wesley D. Stisser, Jr. ("Mr. Stisser").
In consideration of the mutual covenants set forth below, the parties agree
as follows:
1. EMPLOYMENT. The Bank hereby employs Mr. Stisser as its President and
Chief Executive Officer and Mr. Stisser accepts such employment.
2. EMPLOYMENT PERIOD. This Agreement shall be in effect for three years
beginning on the date set forth above (the "Employment Period").
3. DUTIES. During the Employment Period, Mr. Stisser shall:
(a) devote his full business time and attention to the business and affairs
of the Bank, its parent and subsidiary corporations (if any), and use his best
efforts to advance their interests;
(b) serve as President and Chief Executive Officer of the Bank and of CNY
Financial, Inc.; and
(c) have such functions, duties and responsibilities not inconsistent with
his title and office as may be assigned to him by or under the authority of the
Board.
(d) upon appointment as such by the Board of Directors of CNY Financial
Corporation, serve as the President and Chief Executive Officer of CNY Financial
Corporation, which is to become the holding company of the Bank upon the
completion of the Conversion of the Bank from the mutual tot he stock form of
ownership.
4. COMPENSATION; SALARY AND BONUS.
(a) During the Employment Period, the Bank shall pay to Mr. Stisser a
salary at an annual rate of $175,000, payable in the same manner and on the same
dates as apply to the payment of salary to other employees of the Bank
generally. The Bank may, in its sole discretion, increase said amount from time
to time.
<PAGE>
(b) Mr. Stisser shall be entitled to four weeks of paid annual vacation
during the Employment Period.
5. EMPLOYEE BENEFITS PLANS AND PROGRAMS; OTHER COMPENSATION. Mr. Stisser
shall be entitled to participate in and receive benefits under the Bank's
pension plan, group life and health and disability insurance plans, and such
other employee benefit plans and programs as the Bank may maintain from time to
time, on terms no less favorable than any other similarly situated employee.
6. BOARD MEMBERSHIPS AND PERSONAL ACTIVITIES. Mr. Stisser may serve as a
member of the board of directors of such business, community and charitable
organizations as he shall disclose to the Board from time to time, and he may
engage in personal business and investment activities for his own account;
provided, however, that such service and personal business and investment
activities shall not (a) interfere with the performance of his duties under this
Agreement, and (b) involve entities which either compete with the Bank or may
reasonably be expected to impact negatively on the Bank's standing and
reputation in the community it serves.
7. EXPENSES. The Bank shall reimburse Mr. Stisser for his ordinary and
necessary reasonable business expenses incurred in connection with the
performance of his duties under this Agreement upon presentation to the Bank of
itemized accounts in such form as the Bank may reasonably require.
8. TERMINATION GIVING RISE TO SEVERANCE BENEFITS.
(a) If Mr. Stisser's employment with the Bank is terminated during the
Employment Period for any reason other than the reasons described in 8(b) below,
including, without limitation, a resignation by Mr. Stisser, then the Bank shall
pay Mr. Stisser a termination payment equal to the greater of one year's regular
salary at the annual rate being paid to Mr. Stisser immediately prior to such
termination or the salary payable to Mr. Stisser at such rate for the remainder
of the unexpired Employment Period.
(b) Mr. Stisser shall not be entitled to receive the benefits described in
(a) if his employment is terminated:
(i) for Cause (as defined in section 10(a) of this Agreement);
(ii) upon his resignation not for a Good Reason (as defined in section
10(b) of this Agreement);
Page 2
<PAGE>
(iii) on account of his death; or
(iv) if (A) he has been absent from the full-time service of the Bank on
account of his Disability (as defined in section 12 of this Agreement) for at
least three consecutive months; and (B) he fails to return to work full-time
within thirty days after written notice requesting such return is given to Mr.
Stisser by the Bank.
(c) Mr. Stisser shall not be required to mitigate the amount of any payment
provided for in this section nor shall any payment be reduced by any
compensation or benefit earned by or paid to Mr. Stisser after termination
regardless of source.
9. TERMINATION WITHOUT SEVERANCE BENEFITS. If Mr. Stisser's employment is
terminated for the reasons described in 8(b)(i) through 8(b)(iv), then the Bank
shall have no further obligations under this Agreement, other than to pay
accrued but unpaid salary.
10. DEFINITION OF FOR CAUSE AND RESIGNATION FOR GOOD REASON.
(a) Termination for "Cause," shall mean personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final cease
and desist order, or material breach of any provision of this Agreement, in each
case as measured against standards generally prevailing at the relevant time in
the savings and community banking industry.
(b) Mr. Stisser's resignation shall be deemed a Good Reason resignation if
Mr. Stisser resigns within two months after any one or more of the following
events:
(i) the assignment to Mr. Stisser of any duties materially inconsistent
with Mr. Stisser's status as President and Chief Executive Officer of the Bank;
(ii) any reduction in Mr. Stisser's salary unless mandated by any
regulatory authority having jurisdiction over the Bank;
(iii) the relocation of either the Bank's executive offices or the
principal location at which Mr. Stisser works, to a place more than 50 miles
outside of the City of Cortland;
Page 3
<PAGE>
(iv) the failure of the Bank to pay, within seven days of the date when
due, any portion of Mr. Stisser's compensation, which failure is not inadvertent
and immaterial and which is not promptly cured by the Bank after notice of such
failure is given to the Bank by Mr. Stisser; or
(v) a material breach of this Agreement by the Bank, which the Bank fails
to cure within thirty days following written notice thereof from Mr. Stisser.
11. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, a
Change in Control of the Bank shall occur if:
(a) any "person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), other than (i)
the holding company to be formed in connection with the conversion of the Bank
to the stock form of ownership; or (ii) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of the Bank, becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of securities issued by
the Bank representing 25% or more of the combined voting power of all of the
Bank's then outstanding securities; or
(b) the individuals who on the date this Agreement is made are members of
the Board, together with their successors as defined below, cease for any reason
to constitute a majority of the members of the Board; or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with any other corporation,
other than a merger or consolidation following which both of the following
conditions are satisfied:
(A) either (x) the members of the Board of the Bank
immediately prior to such merger or consolidation constitute at least a majority
of the members of the governing body of the institution resulting from such
merger or consolidation; or (y) the shareholders of the Bank own securities of
the institution resulting from such merger or consolidation representing eighty
percent or more of the combined voting power of all such securities then
outstanding in substantially the same proportions as their ownership of voting
securities of the Bank before such merger or consolidation; and
Page 4
<PAGE>
(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform the Bank's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Bank or an agreement for
the sale or disposition by the Bank of all or substantially all of its assets;
and
(d) any event which would be described in sections 11(a), (b) or (c) if the
term "Parent Corporation of the Bank" were substituted for the term "Bank"
therein. Such an event shall be deemed to be a Change in Control under the
relevant provision of sections 11(a), (b) or (c).
It is understood and agreed that more than one Change in Control may occur at
the same or different times during the Employment Period and that the provisions
of this Agreement shall apply with equal force and effect with respect to each
such Change in Control.
12. ADDITIONAL DEFINITIONS. "Disability" shall mean any physical or mental
condition which makes Mr. Covert reasonably unable to perform any material
portion of his services as an officer of the Bank as defined in the Bank's
disability insurance program. "Successors" as used in Section 11(b) shall mean
any person who, in the future, is elected or nominated for election to the Board
by a majority of the directors of the Bank then in office who are either
directors of the Bank as of the date of this Agreement or who are themselves
successors as defined in this sentence.
13. ADDITIONAL RETENTION BENEFIT. If the employment of Mr. Stisser is
terminated within six months of a Change in Control and such termination does
not result from a termination as described in Section 8(b), then the Bank shall
pay to Mr. Stisser an amount equal to two hundred and ninety-nine percent (299%)
of his annual salary at the rate being paid to him immediately prior to such
termination, but in no event more than the maximum amount payable without the
imposition of any excise or golden parachute tax under Section 280G of the
Internal Revenue Code. Amounts paid to Mr. Stisser pursuant to this section or
section 8(a), if they occur under circumstances in which Mr. Stisser would
otherwise be entitled to receive a payment under any employee severance
compensation plan, shall be in lieu of and shall supersede any payments under
such plan and shall also supersede any amounts payable under Section 8.
14. NOTICES. Any communication required or permitted to be given under this
Agreement, shall be in writing and shall be deemed to have been given at such
time as it is delivered personally, or five days after mailing if mailed,
postage
Page 5
<PAGE>
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Stisser:
Wesley D. Stisser, Jr.
26 Bellrose Avenue
Cortland, New York 13045
If to the Bank:
Cortland Savings Bank
One North Main Street
Cortland, New York 13045
Attention: Corporate Secretary
With a copy to:
Serchuk & Zelermyer, LLP
81 Main Street
White Plains, NY 10601
Attention: Jay L. Hack, Esq.
15. SEVERABILITY. A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
16. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such right or power 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.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without reference
to conflicts of law principles.
18. ENTIRE AGREEMENT; MODIFICATIONS. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and supersedes
in
Page 6
<PAGE>
its entirety any and all prior agreements, understandings or representations
relating to the subject matter hereof between the Bank and Mr. Stisser. No
modifications of this Agreement shall be valid unless made in writing and signed
by the parties hereto.
19. REQUIRED REGULATORY PROVISIONS. The following provisions are included
for the purpose of complying with various laws, rules and regulations applicable
to the Bank. These provisions shall supersede any contrary provision contained
in this Agreement.
(a) Mr. Stisser shall have no right to receive compensation or other
benefits for any period after termination for Cause.
(b) Any payments to Mr. Stisser by the Bank, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their compliance
with section 18(k) of the Federal Deposit Insurance Act (the "FDI Act"), 12
U.S.C. Section 1828(k), and any regulations promulgated thereunder.
(c) If Mr. Stisser is suspended from office and/or temporarily prohibited
from participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be
suspended as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in such notice are dismissed, the Bank, in its
discretion, may (i) pay to Mr. Stisser all or part of the compensation withheld
while the Bank's obligations hereunder were suspended and (ii) reinstate, in
whole or in part, any of the obligations which were suspended.
(d) If Mr. Stisser is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order, but vested rights and obligations of the Bank
and Mr. Stisser shall not be affected.
(e) If the Bank is in default (within the meaning of section 3(x)(1) of the
FDI Act, 12 U.S.C. Section 1813(x)(1)), all obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and Mr. Stisser shall not be affected.
(f) All obligations of the Bank hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the continued
Page 7
<PAGE>
operation of the Bank: (i) by the New York Superintendent of Banks or the
Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. Section 1823(c);
(ii) by the Superintendent of Banks if the Superintendent approves a supervisory
merger to resolve problems related to the operation of the Bank or when the Bank
is determined to be in an unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
Mr. Stisser has hereto set his hand, all as of the day and year first above
written.
-----------------------------------
Wesley D. Stisser, Jr.
Cortland Savings Bank
By:
--------------------------------
Harvey Kaufman, Chairman
Page 8
<PAGE>
Exhibit 10-2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this ______ day of ___________________, 1998, by and between Cortland Savings
Bank (the "Bank") and F. Michael Stapleton ("Mr. Stapleton").
In consideration of the mutual covenants set forth below, the parties agree
as follows:
1. EMPLOYMENT. The Bank hereby employs Mr. Stapleton as its Executive Vice
President and Chief Operating Officer and Mr. Stapleton accepts such
employment during the Employment Period. Employment subsequent to the
Employment Period shall be employment at will, unless otherwise provided
for by a separate, mutually agreed and duly executed agreement subsequently
entered into by the parties.
2. EMPLOYMENT PERIOD. This Agreement shall be in effect for three years
beginning on the date set forth above (the "Employment Period").
3. DUTIES. During the Employment Period, Mr. Stapleton shall:
(a) devote his full business time and attention to the business and affairs
of the Bank, its parent and subsidiary corporations (if any), and use his
best efforts to advance their interests;
(b) serve as Executive Vice President and Chief Operating Officer of the
Bank; and
(c) have such functions, duties and responsibilities not inconsistent with
his title and office as may be assigned to him by or under the authority of
the Chief Executive Officer of the Bank or the Board.
4. COMPENSATION, SALARY AND BONUS.
During the Employment Period, the Bank shall pay to Mr. Stapleton a salary
at an annual rate of $110,000 or such higher annual rate as may be provided
for by the Board in its discretion.
5. EMPLOYEE BENEFIT PLANS AND PROGRAMS; OTHER COMPENSATION. Mr. Stapleton
shall be entitled to participate in and receive benefits under the Bank's
pension plan, group life and health and disability insurance plans, and
such other employee benefit plans and programs as the Bank may maintain
from time to time, on terms no less favorable than any other similarly
situated employee.
6. BOARD MEMBERSHIPS AND PERSONAL ACTIVITIES. Mr. Stapleton may serve as a
member of the board of directors of such business, community and charitable
organizations as he shall disclose to the Board from time to time, and he
may engage in personal business and investment activities for his own
account; provided, however, that such service and personal business and
investment activities shall not (a) interfere with the performance of
<PAGE>
his duties under this Agreement or (b) involve entities which either
compete with the Bank or may reasonably be expected to impact negatively on
the Bank's standing and reputation in the community it serves.
7. EXPENSES. The Bank shall reimburse Mr. Stapleton for his ordinary and
necessary reasonable business expenses incurred in connection with the
performance of his duties under this Agreement upon presentation to the
Bank of itemized accounts in such form as the Bank may reasonably require.
The Bank shall also reimburse Mr. Stapleton for his reasonable moving
expenses in moving his personal effects, furniture and household goods to
Cortland. Mr. Stapleton shall be entitled annually to four weeks of paid
vacation during the Employment Period.
8. TERMINATION GIVING RISE TO SEVERANCE BENEFITS.
(a) If Mr. Stapleton's employment with the Bank is terminated prior to the
end of the Employment Period for any reason other than the reasons
described in 8(b) below, including, without limitation, a resignation by
Mr. Stapleton, then the Bank shall pay Mr. Stapleton for each year, or
portion thereof, left in the unexpired Employment Period a termination
payment equal to one year's, or portion thereof, regular salary at the
annual rate being paid to Mr. Stapleton immediately prior to such
termination, reduced by the aggregate market value immediately prior to
such termination of any vested stock grants and vested in-the-money stock
options which may have been issued to Mr. Stapleton during the Employment
Period pursuant to such employee benefit programs adopted by the Bank.
(b) Mr. Stapleton shall not be entitled to receive the benefits described
in (a) if his employment is terminated:
(i) for Cause (as defined in Section 10(a) of the Agreement);
(ii) upon his resignation not for Good Reason (as defined in
Section 10(b) of this Agreement);
(iii) on account of his death; or
(iv) has been absent from the full-time service of the Bank on
account of his Disability (as defined in Section 12 of this
Agreement) for at least three consecutive months, and he fails to
return to work full-time within thirty days after written notice
requesting such return is given to Mr. Stapleton by the Bank.
(c) Stapleton shall not be required to mitigate the amount of payment
provided for in this section nor shall any payment be reduced by any
compensation or benefit earned by or paid to Mr. Stapleton after
termination regardless of source.
2
<PAGE>
9. TERMINATION WITHOUT SEVERANCE BENEFITS. If Mr. Stapleton's employment is
terminated for the reasons described in 8(b)(I) through 8(b)(iv), then the
Bank shall have no further obligations under this Agreement, other than to
pay accrued but unpaid salary.
10. DEFINITION OF FOR CAUSE AND RESIGNATION FOR GOOD REASON.
(a) Termination for "Cause," shall mean personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law
(other than traffic violations or similar offense), willful violation of
any law, rule or regulation or final cease and desist order applicable to
the Bank, or material breach of any provision of this Agreement, in each
case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry.
(b) Mr. Stapleton's resignation shall be deemed a resignation for Good
Reason if Mr. Stapleton resigns within two months after any one or more of
the following events:
(i) the assignment to Mr. Stapleton of any duties inconsistent with Mr.
Stapleton's status as Executive Vice President and Chief Operating Officer
of the Bank;
(ii) any reduction in Mr. Stapleton's salary unless mandated by any
regulatory authority having jurisdiction over the Bank;
(iii) the relocation of either the Bank's executive offices or the
principal location at which Mr. Stapleton works outside of Cortland County;
(iv) the failure of the Bank to pay, within seven days of the date when
due, any portion of Mr. Stapleton's compensation, which failure is not
inadvertent and immaterial and which is not promptly cured by the Bank
after notice of such failure is given to the Bank by Mr. Stapleton; or
(v) a material breach of the Agreement by the Bank, which the Bank fails to
cure within thirty days following written notice thereof from Mr.
Stapleton.
11. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, a Change
in Control of the Bank shall occur if:
(a) any "person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), other than
(I) the holding company to be formed in connection with the conversion of
the Bank to the stock form of ownership; or (ii) a trustee or other
fiduciary holding securities under an employee benefit plan maintained for
the benefit of employees of the Bank, becomes the "beneficial owner" (as
defined in rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities issued by the Bank representing 25% or more of
the combined voting power of all of the Bank's then outstanding securities;
or
3
<PAGE>
(b) the individuals who on the date this Agreement is made are members of
the Board, together with their successors as defined below, cease for any
reason to constitute a majority of the members of the Board; or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with any other corporation, other
than a merger or consolidation following which both of the following
conditions are satisfied:
(A) either (x) the members of the Board of the Bank immediately prior to
such merger or consolidation constitute at least a majority of the members
of the governing body of the institution resulting from such merger or
consolidation; or (y) the shareholders of the Bank own securities of the
institution resulting from such merger or consolidation representing eighty
percent or more of the combined voting power of all such securities of the
Bank before such merger or consolidation; and
(B) the entity which results from such merger or consolidation expressly
agrees in writing to assume and perform the Bank's obligations under this
Agreement; or
(ii) a plan of complete liquidation of the Bank or an Agreement for the
sale or disposition by the Bank of all or substantially all of its assets;
and
(d) any event which would be described in sections 11(a), (b) or (c) if
the term "Parent Corporation of the Bank" were substituted for the term
"Bank" therein. Such an event shall be deemed a Change in Control under
the relevant provisions of sections 11(a), (b) or (c).
(e) It is understood and agreed that more than one Change in Control may
occur at the same time or different times during the Employment Period and
that the provisions of this Agreement shall apply with equal force and
effect with respect to each such Change in Control.
12. ADDITIONAL DEFINITIONS. "Disability" shall mean any physical or mental
condition which makes Mr. Stapleton reasonably unable to perform any
material portion of his services as an officer of the Bank, as defined in
the Bank's disability insurance program. "Successors" as used in Section
11(b) shall mean any person who, in the future, is elected or nominated for
election to the Board by a majority of the directors of the Bank then in
office who are either directors of the Bank as of the date of this
Agreement or who are themselves successors as defined in this sentence.
13. ADDITIONAL RETENTION BENEFIT.
4
<PAGE>
(a) If during the Employment Period there occurs a Change in Control
approved by the Board of Directors, and within six (6) months after such
Change in Control Mr. Stapleton either is terminated other than for Cause
or resigns for a Good Reason, then the Bank shall pay to Mr. Stapleton an
amount equal to the amount described in section 8(a).
(b) If during the Employment Period there occurs a Change in Control not
approved by the Board of Directors, and within six (6) months after such
Change in Control Mr. Stapleton either is terminated other than for Cause
or resigns for a Good Reason, then the Bank shall pay to Mr. Stapleton an
amount equal to two and ninety nine one hundredths (2.99) times the annual
salary being paid to Mr. Stapleton immediately prior to such Change in
Control
(c) In no event shall the amount payable under Sections 13(a) or 13(b)
exceed the maximum permitted to be paid without the imposition of an excise
tax under Section 280G of the Internal Revenue Code.
(d) Amounts paid to Mr. Stapleton pursuant to this section or section 8(a),
if they occur under circumstances in which Mr. Stapleton would otherwise be
entitled to receive a payment under any employee severance compensation
plan, shall be in lieu of and shall supersede any lesser payments under
such plan.
14. NOTICES. Any communication required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given at
such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such
other address as one party may by written notice specify to the other
party:
If to Mr. Stapleton:
116 Seneca Parkway
Auburn, New York 13021
With a copy to:
Boyle & Anderson, P.C.
110 Genesee Street, Suite 300
Auburn, New York 13021
Attention: Charles H. Lynch, Jr., Esq.
If to the Bank:
Cortland Savings Bank:
One North Main Street
Cortland, New York 13045
Attention: Corporate Secretary
With a copy to:
Serchuk & Zelermyer, LLP
5
<PAGE>
81 Main Street
White Plains, NY 10601
Attention: Jay L. Hack, Esq.
15. SEVERABILITY. A determination that any provision of this Agreement is
invalid or unenforceable shall not effect the validity or enforceability of
any other provisions hereof.
16. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against
who its enforcement is sought. Any waiver or relinquishment of such right
or power 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.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without
reference to conflicts of law principles.
18. ENTIRE AGREEMENT; MODIFICATIONS. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and
supersedes in its entirety any and all prior agreements, understandings or
representations relating to the subject matter hereof between the Bank and
Mr. Stapleton. No modifications of this Agreement shall be valid unless
made in writing and signed by the parties hereto.
19. REQUIRED REGULATORY PROVISIONS. The following provisions are included for
the purpose of complying with various laws, rules and regulations
applicable to the Bank. These provisions shall supersede any contrary
provision contained in this Agreement.
(a) Mr. Stapleton shall have no right to receive compensation or other
benefits for any period after termination for Cause.
(b) Any payments to Mr. Stapleton by the Bank, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act (the
"FDI Act"), 12 U.S.C. Section 1828(k), and any regulations promulgated
thereunder.
(c) If Mr. Stapleton is suspended from office and/or temporarily
prohibited from participating in the conduct of the affairs of the Bank
pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI
Act, 12 U.S.C. Section 1818(e)(3) or 1818(g)(1), the Bank's obligations
under this Agreement shall be suspended as of the date of service of such
notice, unless stayed by appropriate proceedings. If the charges in such
notice are dismissed, the Bank, in its discretion, may (I) pay to Mr.
Stapleton all or part of the compensation withheld while the Bank's
obligations hereunder are suspended and (ii) reinstate, in whole or in
part, any of the obligations which were suspended.
6
<PAGE>
(d) If Mr. Stapleton is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights and obligations of
the Bank and Mr. Stapleton shall not be affected.
(e) If the Bank is in default (within the meaning of section 3(x)(1) of
the FDI Act, 12 U.S.C. Section 1813(x)(1)), all obligations of the Bank
under this Agreement shall terminate as of the date of default, but vested
rights and obligations of the Bank and Mr. Stapleton shall not be affected.
(f) All obligations of the Bank hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (I) by the New York Superintendent of
Banks or the Federal Deposit Insurance Corporation ("FDIC"), at the time
the FDIC enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in section 13(c) of the FDI Act, 12
U.S.C. Section 1823(c); (ii) by the Superintendent of Banks if the
Superintendent approves a supervisory merger to resolve problems related to
the operation of the Bank or when the Bank is determined to be in an unsafe
or unsound condition. The vested rights and obligations of the parties
shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment to this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
Mr. Stapleton has hereto set his hand, all as of the day and year first
above written.
-----------------------------------
Michael Stapleton
Cortland Savings Bank
By:
--------------------------------
Wesley D. Stisser, Jr.
7
<PAGE>
Exhibit 10-2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 15th day of June, 1998, by and between Cortland Savings Bank (the "Bank"),
and Steven A. Covert ("Mr. Covert").
In consideration of the mutual covenants set forth below, the parties agree
as follows:
1. EMPLOYMENT. The Bank hereby employs Mr. Covert as its Executive Vice
President and Chief Financial Officer and Mr. Covert accepts such employment.
2. EMPLOYMENT PERIOD. This Agreement shall be in effect for two years
beginning on the date set forth above (the "Employment Period").
DUTIES. During the Employment Period, Mr. Covert shall:
(a) devote his full business time and attention to the business and affairs
of the Bank, its parent and subsidiary corporations (if any), and use his best
efforts to advance their interests;
(b) serve as Executive Vice President and Chief Financial Officer of the
Bank;
(c) have such functions, duties and responsibilities not inconsistent with
his title and office as may be assigned to him by or under the authority of the
Board; and
(d) upon appointment as such by the Board of Directors of CNY Financial
Corporation, serve as the Executive Vice President and Chief Financial Officer
of CNY Financial Corporation, which is to become the holding company of the Bank
upon the completion of the Conversion of the Bank from the mutual tot he stock
form of ownership.
4. COMPENSATION; SALARY AND BONUS.
(a) During the Employment Period, the Bank shall pay to Mr. Covert a salary
at an annual rate of $110,000, payable in the same manner and on the same dates
as apply to the payment of salary to other employees of the Bank generally.
(b) The Bank shall pay Mr. Covert an initial lump sum payment of $35,000 as
additional compensation upon the commencement of employment by Mr. Covert, which
amount shall be in addition to salary as described in Section 4(a). If, within
six months after the commencement of employment with the Bank, Mr. Covert is
terminated by the Bank with Cause or if Mr. Covert resigns from the Bank other
than for Good Reason, as defined in Section 10, Mr. Covert shall, upon demand,
repay the full amount of such lump sum payment to the Bank.
5. EMPLOYEE BENEFITS PLANS AND PROGRAMS; OTHER COMPENSATION. Mr. Covert
shall be entitled to participate in and receive benefits under the Bank's
pension plan, group life and health and disability insurance plans, and such
other employee benefit plans and programs as the Bank may maintain from time to
time, on terms no less favorable than any other similarly situated employee.
<PAGE>
6. BOARD MEMBERSHIPS AND PERSONAL ACTIVITIES. Mr. Covert may serve as a
member of the board of directors of such business, community and charitable
organizations as he shall disclose to the Board from time to time, and he may
engage in personal business and investment activities for his own account;
provided, however, that such service and personal business and investment
activities shall not (a) interfere with the performance of his duties under this
Agreement, or (b) involve entities which either compete with the Bank or may
reasonably be expected to impact negatively on the Bank's standing and
reputation in the community it serves.
7. EXPENSES. The Bank shall reimburse Mr. Covert for his ordinary and
necessary reasonable business expenses incurred in connection with the
performance of his duties under this Agreement upon presentation to the Bank of
itemized accounts in such form as the Bank may reasonably require. The Bank
shall also reimburse Mr. Covert for his reasonable moving expenses in moving his
personal effects, furniture and household goods to Cortland, provided that he
must give the Bank two competitive bids for such service from nationally
recognized moving companies and use the company with the lowest bid. Mr. Covert
shall be entitled to four weeks of paid annual vacation during the Employment
Period.
8. TERMINATION GIVING RISE TO SEVERANCE BENEFITS.
(a) If the Bank is unwilling to renew this Employment Agreement under its
original terms upon its original expiration, or if Mr. Covert's employment with
the Bank is terminated during the Employment Period for any reason other than
the reasons described in 8(b) below, including, without limitation, a
resignation by Mr. Covert, then the Bank shall pay Mr. Covert a termination
payment equal to the greater of one year's regular salary at the annual rate
being paid to Mr. Covert immediately prior to such termination or the salary
payable to Mr. Covert at such rate for the remainder of the unexpired Employment
Period.
(b) Mr. Covert shall not be entitled to receive the benefits described in
(a) if his employment is terminated:
(i) for Cause (as defined in section 10(a) of this Agreement);
(ii) upon his resignation not for a Good Reason (as defined in section
10(b) of this Agreement);
(iii) on account of his death; or
(iv) if he has been absent from the full-time service of the Bank on
account of his Disability (as defined in section 12 of this Agreement) for at
least three consecutive months and he fails to return to work full-time within
thirty days after written notice requesting such return is given to Mr. Covert
by the Bank.
(c) Mr. Covert shall not be required to mitigate the amount of any payment
provided for in this section nor shall any payment be reduced by any
compensation or benefit earned by or paid to Mr. Covert after termination
regardless of source.
Page 2
<PAGE>
9. TERMINATION WITHOUT SEVERANCE BENEFITS. If Mr. Covert's employment is
terminated for the reasons described in 8(b)(i) through 8(b)(iv), then the Bank
shall have no further obligations under this Agreement, other than to pay
accrued but unpaid salary.
10. DEFINITION OF FOR CAUSE AND RESIGNATION FOR GOOD REASON.
(a) Termination for "Cause," shall mean personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final cease
and desist order, or material breach of any provision of this Agreement, in each
case as measured against standards generally prevailing at the relevant time in
the savings and community banking industry.
(b) Mr. Covert's resignation shall be deemed a Good Reason resignation if
Mr. Covert resigns within one month after any one or more of the following
events:
(i) the assignment to Mr. Covert of any duties materially inconsistent
with Mr. Covert's status as Chief Financial Officer of the Bank;
(ii) any reduction in Mr. Covert's salary unless mandated by any
regulatory authority having jurisdiction over the Bank;
(iii) the relocation of either the Bank's executive offices or the
principal location at which Mr. Covert works, to a place more than 50 miles
outside of the City of Cortland;
(iv) the failure of the Bank to pay, within seven days of the date when
due, any portion of Mr. Covert's compensation, which failure is not inadvertent
and immaterial and which is not promptly cured by the Bank after notice of such
failure is given to the Bank by Mr. Covert; or
(v) a material breach of this Agreement by the Bank, which the Bank fails
to cure within thirty days following written notice thereof from Mr. Covert.
11. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, a
Change in Control of the Bank shall occur if:
(a) any "person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), other than (i)
the holding company to be formed in connection with the conversion of the Bank
to the stock form of ownership; or (ii) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of the Bank, becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of securities issued by
the Bank representing 25% or more of the combined voting power of all of the
Bank's then outstanding securities; or
(b) the individuals who on the date this Agreement is made are members of
the Board, together with their successors as defined below, cease for any reason
to constitute a majority
Page 3
<PAGE>
of the members of the Board; or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with any other corporation,
other than a merger or consolidation following which both of the following
conditions are satisfied:
(A) either (A) the members of the Board of the Bank
immediately prior to such merger or consolidation constitute at least a majority
of the members of the governing body of the institution resulting from such
merger or consolidation; or (B) the shareholders of the Bank own securities of
the institution resulting from such merger or consolidation representing eighty
percent or more of the combined voting power of all such securities then
outstanding in substantially the same proportions as their ownership of voting
securities of the Bank before such merger or consolidation; and
(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform the Bank's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Bank or an agreement for
the sale or disposition by the Bank of all or substantially all of its assets;
and
(d) any event which would be described in sections 11(a), (b) or (c) if the
term "Parent Corporation of the Bank" were substituted for the term "Bank"
therein. Such an event shall be deemed to be a Change in Control under the
relevant provision of sections 11(a), (b) or (c).
It is understood and agreed that more than one Change in Control may occur at
the same or different times during the Employment Period and that the provisions
of this Agreement shall apply with equal force and effect with respect to each
such Change in Control.
12. ADDITIONAL DEFINITIONS. "Disability" shall mean any physical or mental
condition which makes Mr. Covert reasonably unable to perform any material
portion of his services as an officer of the Bank. "Successors" as used in
Section 11(b) shall mean any person who, in the future, is elected or nominated
for election to the Board by a majority of the directors of the Bank then in
office who are either directors of the Bank as of the date of this Agreement or
who are themselves successors as defined in this sentence.
13. ADDITIONAL RETENTION BENEFIT. If the employment of Mr. Covert is
terminated within six months after a Change in Control, or if the term of this
Agreement expires and is not renewed and there is a Change in Control approved
by the Bank's Board of Directors within six months after the non-renewal of this
Agreement, and such termination does not result from a termination as described
in Section 8(b), then the Bank shall pay to Mr. Covert an amount equal to 299%
of his annual salary at the rate being paid to him immediately prior to such
termination, but in no event more than the maximum amount payable without the
imposition of any excise or golden parachute tax under Section 280G of the
Internal Revenue Code. Nothing contained in this section shall be deemed to
continue any other provisions of this Agreement beyond the expiration of the
Employment Period. This section shall not constitute Mr. Covert as
Page 4
<PAGE>
anything other than an employee at will after such expiration. Amounts paid to
Mr. Covert pursuant to this section or section 8(a), if they occur under
circumstances in which Mr. Covert would otherwise be entitled to receive a
payment under any employee severance compensation plan, shall be in lieu of and
shall supersede any payments under such plan and shall also supersede any
amounts payable under Section 8.
14. NOTICES. Any communication required or permitted to be given under this
Agreement, shall be in writing and shall be deemed to have been given at such
time as it is delivered personally, or five days after mailing if mailed,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below or at such other address as
one such party may by written notice specify to the other party:
If to Mr. Covert:
If to the Bank:
Cortland Savings Bank
One North Main Street
Cortland, New York 13045
Attention: Corporate Secretary
With a copy to:
Serchuk & Zelermyer, LLP
81 Main Street
White Plains, NY 10601
Attention: Jay L. Hack, Esq.
15. SEVERABILITY. A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
16. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such right or power 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.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without reference
to conflicts of law principles.
Page 5
<PAGE>
18. ENTIRE AGREEMENT; MODIFICATIONS. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and supersedes
in its entirety any and all prior agreements, understandings or representations
relating to the subject matter hereof between the Bank and Mr. Covert. No
modifications of this Agreement shall be valid unless made in writing and signed
by the parties hereto.
19. REQUIRED REGULATORY PROVISIONS. The following provisions are included
for the purpose of complying with various laws, rules and regulations applicable
to the Bank. These provisions shall supersede any contrary provision contained
in this Agreement.
(a) Mr. Covert shall have no right to receive compensation or other
benefits for any period after termination for Cause.
(b) Any payments to Mr. Covert by the Bank, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their compliance
with section 18(k) of the Federal Deposit Insurance Act (the "FDI Act"), 12
U.S.C. Section 1828(k), and any regulations promulgated thereunder.
(c) If Mr. Covert is suspended from office and/or temporarily prohibited
from participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be
suspended as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in such notice are dismissed, the Bank, in its
discretion, may (i) pay to Mr. Covert all or part of the compensation withheld
while the Bank's obligations hereunder were suspended and (ii) reinstate, in
whole or in part, any of the obligations which were suspended.
(d) If Mr. Covert is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order, but vested rights and obligations of the Bank
and Mr. Covert shall not be affected.
(e) If the Bank is in default (within the meaning of section 3(x)(1) of the
FDI Act, 12 U.S.C. Section 1813(x)(1)), all obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and Mr. Covert shall not be affected.
(f) All obligations of the Bank hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the New York Superintendent of Banks or the
Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. Section 1823(c);
(ii) by the Superintendent of Banks if the Superintendent approves a supervisory
merger to resolve problems related to the operation of the Bank or when the Bank
is determined to be in an unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
Page 6
<PAGE>
If and to the extent that any of the foregoing provisions shall cease to be
required by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
Mr. Covert has hereto set his hand, all as of the day and year first above
written.
-----------------------------------
Steven A. Covert
Cortland Savings Bank
By:
--------------------------------
Wesley D. Stisser, President
Page 7
<PAGE>
EXHIBIT 10-4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the first day of July, 1998, by and between Cortland Savings Bank (the "Bank"),
and Kerry D. Meeker ("Mr. Meeker").
In consideration of the mutual covenants set forth below, the parties agree
as follows:
1. EMPLOYMENT. The Bank hereby employs Mr. Meeker as the Senior Vice
President and Senior Lending Officer of Cortland Savings Bank and Mr. Meeker
accepts such employment.
2. EMPLOYMENT PERIOD. This Agreement shall be in effect for two years
beginning on the date set forth above (the "Employment Period").
3. DUTIES. During the Employment Period, Mr. Meeker shall:
(a) devote his full business time and attention to the business and affairs
of the Bank, its parent and subsidiary corporations (if any), and use his best
efforts to advance their interests;
(b) serve as Senior Vice President and Senior Lending Officer of the
Cortland Savings Bank; and
(c) have such functions, duties and responsibilities not inconsistent with
his title and office as may be assigned to him by or under the authority of the
Board.
4. COMPENSATION; SALARY AND BONUS.
(a) During the Employment Period, the Bank shall pay to Mr. Meeker a salary
at an annual rate of $80,000, payable in the same manner and on the same dates
as apply to the payment of salary to other employees of the Bank generally. The
Bank may, in its sole discretion, increase said amount from time to time.
(b) Mr. Meeker shall be entitled to a paid annual vacation during the
Employment Period as provided in the Bank's applicable personnel policy.
5. EMPLOYEE BENEFITS PLANS AND PROGRAMS; OTHER COMPENSATION. Mr. Meeker
shall be entitled to participate in and receive benefits under the Bank's
pension plan, group life and health and disability insurance plans, and such
other employee benefit plans and programs as the Bank may maintain from time to
time, on terms no less favorable than any other similarly situated employee.
6. BOARD MEMBERSHIPS AND PERSONAL ACTIVITIES. Mr. Meeker may serve as a
member of the board of directors of such business, community and charitable
organizations as he shall disclose to the Board from time to time, and he may
engage in personal business and investment activities for his own account;
provided, however, that such service and personal business and investment
activities shall not (a) interfere with the performance of his duties under this
Agreement or (b) involve entities which either compete with the Bank or may
<PAGE>
reasonably be expected to impact negatively on the Bank's standing and
reputation in the community it serves.
7. EXPENSES. The Bank shall reimburse Mr. Meeker for his ordinary and
necessary reasonable business expenses incurred in connection with the
performance of his duties under this Agreement upon presentation to the Bank of
itemized accounts in such form as the Bank may reasonably require.
8. TERMINATION GIVING RISE TO SEVERANCE BENEFITS.
(a) If Mr. Meeker's employment with the Bank is terminated during the
Employment Period for any reason other than the reasons described in 8(b) below,
including, without limitation, a resignation by Mr. Meeker, then the Bank shall
pay Mr. Meeker a termination payment equal to the lesser of one year's regular
salary at the annual rate being paid to Mr. Meeker immediately prior to such
termination or the salary payable to Mr. Meeker at such rate for the remainder
of the unexpired Employment Period.
(b) Mr. Meeker shall not be entitled to receive the benefits described in
(a) if his employment is terminated:
(i) for Cause (as defined in section 10(a) of this Agreement);
(ii) upon his resignation not for a Good Reason (as defined in section
10(b) of this Agreement);
(iii) on account of his death; or
(iv) if (A) he has been absent from the full-time service of the Bank on
account of his Disability (as defined in section 12 of this Agreement) for at
least three consecutive months; and (B) he fails to return to work full-time
within thirty days after written notice requesting such return is given to Mr.
Meeker by the Bank.
(c) Mr. Meeker shall not be required to mitigate the amount of any payment
provided for in this section nor shall any payment be reduced by any
compensation or benefit earned by or paid to Mr. Meeker after termination
regardless of source.
9. TERMINATION WITHOUT SEVERANCE BENEFITS. If Mr. Meeker's employment is
terminated for the reasons described in 8(b)(i) through 8(b)(iv), then the Bank
shall have no further obligations under this Agreement, other than to pay
accrued but unpaid salary.
10. DEFINITION OF FOR CAUSE AND RESIGNATION FOR GOOD REASON.
(a) Termination for "Cause," shall mean personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final cease
and desist order, or material breach of any provision of this Agreement, in each
case as measured against standards generally prevailing at the relevant time in
the
Page 2
<PAGE>
savings and community banking industry.
(b) Mr. Meeker's resignation shall be deemed a Good Reason resignation if
Mr. Meeker resigns within one month after any one or more of the following
events:
(i) the assignment to Mr. Meeker of any duties materially inconsistent
with Mr. Meeker's status of Senior Vice President and Senior Lending Officer;
(ii) any reduction in Mr. Meeker's salary unless mandated by any
regulatory authority having jurisdiction over the Bank;
(iii) the relocation of either the Bank's executive offices or the
principal location at which Mr. Meeker works, to a place more than 50 miles
outside of the City of Cortland;
(iv) the failure of the Bank to pay, within seven days of the date when
due, any portion of Mr. Meeker's compensation, which failure is not inadvertent
and immaterial and which is not promptly cured by the Bank after notice of such
failure is given to the Bank by Mr. Meeker; or
(v) a material breach of this Agreement by the Bank, which the Bank fails
to cure within thirty days following written notice thereof from Mr. Meeker.
11. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, a
Change in Control of the Bank shall occur if:
(a) any "person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), other than (i)
the holding company to be formed in connection with the conversion of the Bank
to the stock form of ownership; or (ii) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of the Bank, becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the 1934 Act), directly or indirectly, of securities issued by
the Bank representing 25% or more of the combined voting power of all of the
Bank's then outstanding securities; or
(b) the individuals who on the date this Agreement is made are members of
the Board, together with their successors as defined below, cease for any reason
to constitute a majority of the members of the Board; or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with any other corporation,
other than a merger or consolidation following which both of the following
conditions are satisfied:
(A) either (x) the members of the Board of the Bank immediately
prior to such merger or consolidation constitute at least a majority of the
members of the governing body of the institution resulting from such merger or
consolidation; or (y) the shareholders of the Bank own securities of the
institution resulting from such merger or consolidation representing eighty
percent or more of the combined voting power of all such securities then
Page 3
<PAGE>
outstanding in substantially the same proportions as their ownership of voting
securities of the Bank before such merger or consolidation; and
(B) the entity which results from such merger or consolidation
expressly agrees in writing to assume and perform the Bank's obligations under
this Agreement; or
(ii) a plan of complete liquidation of the Bank or an agreement for
the sale or disposition by the Bank of all or substantially all of its assets;
and
(d) any event which would be described in sections 11(a), (b) or (c) if the
term "Parent Corporation of the Bank" were substituted for the term "Bank"
therein. Such an event shall be deemed to be a Change in Control under the
relevant provision of sections 11(a), (b) or (c).
It is understood and agreed that more than one Change in Control may occur at
the same or different times during the Employment Period and that the provisions
of this Agreement shall apply with equal force and effect with respect to each
such Change in Control.
12. ADDITIONAL DEFINITIONS. "Disability" shall mean any physical or mental
condition which makes Mr. Meeker reasonably unable to perform any material
portion of his services as an officer of the Bank, as defined in the Bank's
disability insurance program. "Successors" as used in Section 12(b) shall mean
any person who, in the future, is elected or nominated for election to the Board
by a majority of the directors of the Bank then in office who are either
directors of the Bank as of the date of this Agreement or who are themselves
successors as defined in this sentence.
13. ADDITIONAL RETENTION BENEFIT. If the employment of Mr. Meeker is
terminated within six months after a Change in Control and such termination does
not result from a termination as described in Section 8(b), then the Bank shall
pay to Mr. Meeker an amount equal to two hundred and ninety-nine percent (299%)
of his annual salary at the rate being paid to him immediately prior to such
termination, but in no event more than the maximum amount payable without the
imposition of any excise or golden parachute tax under Section 280G of the
Internal Revenue Code. Amounts paid to Mr. Meeker pursuant to this section or
section 8(a), if they occur under circumstances in which Mr. Meeker would
otherwise be entitled to receive a payment under any employee severance
compensation plan, shall be in lieu of and shall supercede any payments under
such plan and shall also supercede any amounts payable under Section 8.
14. NOTICES. Any communication required or permitted to be given under this
Agreement, shall be in writing and shall be deemed to have been given at such
time as it is delivered personally, or five days after mailing if mailed,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below or at such other address as
one such party may by written notice specify to the other party:
If to Mr. Meeker:
Kerry D. Meeker.
23 Melvin Avenue
Page 4
<PAGE>
Cortland, New York 13045
If to the Bank:
Cortland Savings Bank
One North Main Street
Cortland, New York 13045
Attention: Corporate Secretary
With a copy to:
Serchuk & Zelermyer, LLP
81 Main Street
White Plains, NY 10601
Attention: Jay L. Hack, Esq.
15. SEVERABILITY. A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
16. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such right or power 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.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without reference
to conflicts of law principles.
18. ENTIRE AGREEMENT; MODIFICATIONS. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and supersedes
in its entirety any and all prior agreements, understandings or representations
relating to the subject matter hereof between the Bank and Mr. Meeker. No
modifications of this Agreement shall be valid unless made in writing and signed
by the parties hereto.
19. REQUIRED REGULATORY PROVISIONS. The following provisions are included
for the purpose of complying with various laws, rules and regulations applicable
to the Bank. These provisions shall supercede any contrary provision contained
in this Agreement.
(a) Mr. Meeker shall have no right to receive compensation or other
benefits for any period after termination for Cause.
(b) Any payments to Mr. Meeker by the Bank, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their compliance
with section 18(k) of the Federal Deposit Insurance Act (the "FDI Act"), 12
U.S.C. Section 1828(k), and any regulations promulgated thereunder.
Page 5
<PAGE>
(c) If Mr. Meeker is suspended from office and/or temporarily prohibited
from participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement shall be
suspended as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in such notice are dismissed, the Bank, in its
discretion, may (i) pay to Mr. Meeker all or part of the compensation withheld
while the Bank's obligations hereunder were suspended and (ii) reinstate, in
whole or in part, any of the obligations which were suspended.
(d) If Mr. Meeker is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order, but vested rights and obligations of the Bank
and Mr. Meeker shall not be affected.
(e) If the Bank is in default (within the meaning of section 3(x)(1) of the
FDI Act, 12 U.S.C. Section 1813(x)(1)), all obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and Mr. Meeker shall not be affected.
(f) All obligations of the Bank hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the New York Superintendent of Banks or the
Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. Section 1823(c);
(ii) by the Superintendent of Banks if the Superintendent approves a supervisory
merger to resolve problems related to the operation of the Bank or when the Bank
is determined to be in an unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
Mr. Meeker has hereto set his hand, all as of the day and year first above
written.
-----------------------------------
Kerry D. Meeker.
Cortland Savings Bank
By:
--------------------------------
Wesley D. Stisser, Jr., President
Page 6
<PAGE>
Exhibit 10.5
CORTLAND SAVINGS BANK
EMPLOYEE SEVERANCE COMPENSATION PLAN
PLAN PURPOSE
This plan is the Cortland Savings Bank Employee Severance Compensation
Plan, the purpose of which is to preserve for Cortland Savings Bank the services
of employees of the bank in the event of a change in control of CNY Financial
Corporation or Cortland Savings Bank. The benefits contemplated by this plan
recognize the value to Cortland Savings Bank of the services and contributions
of the bank's employees and the potentially disruptive effects upon them of a
change in control of Cortland Savings Bank or CNY Financial Corporation.
Cortland Savings Bank's board of directors believes that it is in the best
interests of the bank to provide employees who have been with Cortland Savings
Bank for a minimum of one year with the benefits provided in this plan in order
to defray the costs and mitigate the changes in employee status and other
adverse effects that could follow such change in control. Cortland Savings
Bank's board of directors believes that the plan will also aid the bank in
attracting and retaining highly qualified individuals who are essential to its
continued success and growth.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1 ESTABLISHMENT OF PLAN
The Plan has been established as of the Effective Date as defined herein.
<PAGE>
1.2 APPLICABILITY OF PLAN
The benefits provided by the Plan shall be available to all Employees, who,
at or after the Effective Date, meet the eligibility requirements of Article
III.
1.3 CONTRACTUAL RIGHT TO BENEFITS
The Plan establishes and vests in each Participant a contractual right to
the benefits to which each Participant is entitled hereunder, enforceable by the
Participant against the Employer.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below.
(a) "Administrator" means the plan administrator provided for in Article
XI.
(b) "Annual Compensation" of a Participant means and includes all wages,
salary, bonus, and cash compensation includable in the gross income of the
Participant receiving the same for federal income tax purposes, paid or accrued
by the Employer as consideration for the Participant's service during the last
12 calendar months immediately preceding a termination of employment following a
Change in Control as specified in Section 4.2.
(c) "Bank" means Cortland Savings Bank, a New York chartered
2
<PAGE>
savings bank, or any successor as provided for in Article VII hereof.
(d) "Board of Directors", or "Board" means the board of directors of the
Bank, and, in the following definition of Change of Control, means the board of
directors of the Holding Company.
(e) "Change in Control" means an event in which: a) any "person" (as such
term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "1934 Act")), other than (i) the Holding Company; or (ii) a
trustee or other fiduciary holding securities under an employee benefit plan
maintained for the benefit of employees of the Bank or the Holding Company,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the
1934 Act), directly or indirectly, of securities issued by the Bank or the
Holding Company representing 25% or more of the combined voting power of all of
the Bank's or the Holding Company's then outstanding securities; or b) the
individuals who on the date this Agreement is made are members of the Board,
together with their successors as defined below, cease for any reason to
constitute a majority of the members of the Board; or c) the shareholders of the
Bank or the Holding Company approve either: (i) a merger or consolidation of the
Bank or the Holding Company with any other corporation, other than a merger or
consolidation following which both of the following conditions are satisfied:
(I) either (A) the members of the Board immediately prior to such merger or
consolidation constitute at least a
3
<PAGE>
majority of the members of the governing body of the institution resulting from
such merger or consolidation; or (B) the shareholders of the Bank or the Holding
Company own securities of the institution resulting from such merger or
consolidation representing eighty percent or more of the combined voting power
of all such securities then outstanding in substantially the same proportions as
their ownership of voting securities of the Bank or the Holding Company before
such merger or consolidation; and (II) the entity which results from such merger
or consolidation expressly agrees in writing to assume and perform the Bank's or
the Holding Company's obligations under this Agreement; or (ii) a plan of
complete liquidation of the Bank or the Holding Company or an agreement for the
sale or disposition by the Bank or the Holding Company of all or substantially
all of its assets.
(f) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of an Employee to perform the work
customarily assigned to him. A Disability shall not exist unless a medical
doctor selected or approved by the Board of Directors advises the Board that it
either is not possible to determine if or when such Disability will terminate or
appears probable that such Disability will be permanent during the remainder of
said Employee's lifetime.
(g) "Effective Date" means the date the Plan is approved by the Board of
Directors, or such other date as the Board shall designate in its resolution
approving the Plan.
4
<PAGE>
(h) "Employee" means any employee of the Bank who has completed at least
one Year of Service with the Bank, except for employees who are covered or
hereinafter become covered by a written agreement with the Employer that
expressly provides for payments to the Employee upon a Change of Control.
(i) "Employer" means the Bank or a subsidiary or a parent of the Bank
which has adopted the Plan pursuant to Article VI hereof.
(j) "ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
(k) "Expiration Date" means a date ten (10) years from the Effective Date
unless earlier terminated pursuant to Section 8.2 or extended pursuant to
Section 8.l.
(l) "Holding Company" means CNY Financial Corporation, a Delaware
corporation.
(m) "Just Cause" shall mean termination because of Participant's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure or unjustified neglect to perform
stated duties, wilful violation of any law, rule or regulation (excluding
traffic violations or other similar offenses), or violation of any final
cease-and desist order, in each case as measured against standards generally
prevailing in the savings and community banking industry.
(n) "Leave of Absence" and "LOA" mean an authorized or approved leave of
absence under (i) the federal Family and Medical
5
<PAGE>
Leave Act ("FMLA"), (ii) any state law providing qualitatively similar benefits
as the FMLA, or (iii) a leave of absence authorized under the policies of the
Bank. "Leave of Absence" and "LOA" are defined in this paragraph for the
exclusive purposes of this Plan.
(o) "Participant" means an Employee who meets the eligibility requirements
of Article III.
(p) "Payment" means the payment of severance compensation as provided in
Article IV hereof.
(q) "Plan Year" means the period beginning on the Effective Date and
ending on ______________ and the 12 consecutive-month period ending each year
thereafter.
(r) "Plan" means the Cortland Savings Bank Employee Severance Compensation
Plan.
(s) "Year of Service" means each consecutive 12 calendar month period,
beginning with the first day of the month beginning on or after an Employee's
date of hire, until a termination of employment, in which an Employee is
credited with at least one hour of service in each of the 12 calendar months in
such period. The Employee shall be credited with one hour of service for each
month, or part thereof, in which the Employee has taken a LOA.
2.2 APPLICABLE LAW
The laws of the State of New York shall be the controlling law in all
matters relating to the Plan to the extent not
6
<PAGE>
preempted by ERISA or other applicable Federal law.
2.3 SEVERABILITY
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
ARTICLE III
ELIGIBILITY
3.1 PARTICIPATION
Employees of the Bank who have completed at least One Year of Service with
the Bank at the time of any termination pursuant to Section 4.2 herein shall be
Participants in the Plan.
3.2 DURATION OF PARTICIPATION
A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an Employee of an Employer and receives the full amount
of any Payment to which the Participant is entitled pursuant to the Plan.
ARTICLE IV
PAYMENTS
4.1 RIGHT TO PAYMENT
A Participant shall be entitled to receive from the Employer a Payment if
there has been a Change in Control of the Bank or the Holding Company and if,
within one (1) year thereafter, the
7
<PAGE>
Participant's employment by the Employer shall terminate for any reason
specified in Section 4.2, whether the termination is voluntary or involuntary.
A Participant shall not be entitled to a Payment if termination occurs by reason
of death, voluntary retirement, voluntary termination other than for reasons
specified in Section 4.2, Disability, or for Just Cause.
4.2 REASONS FOR TERMINATION
Following a Change in Control, a Participant shall be entitled to a Payment
if employment by the Employer is terminated, voluntarily or involuntarily, for
any one or more of the following reasons:
(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control.
(b) The Employer materially changes Participant's function, duties or
responsibilities which would cause Participant's position to be one of lesser
responsibility, importance or scope with the Employer than immediately prior to
the Change in Control.
(c) The Employer requires the Participant to change the location of the
Participant's job or office, so that such Participant will be based at a
location more than thirty (30) miles from the location of the Participant's job
or office immediately prior to the Change in Control provided that such new
location is not closer to Participant's home.
(d) The Employer materially reduces the benefits and
8
<PAGE>
perquisites available to the Participant immediately prior to the Change in
Control, provided, however, that a material reduction in benefits and
perquisites generally provided to all Employees of the Bank on a
nondiscriminatory basis would not trigger a Payment pursuant to this Plan.
(e) A successor to the Bank fails or refuses to assume the Bank's
obligations under this Plan, as required by Article VII.
(f) The Bank or any successor to the Bank breaches any other provisions of
this Plan.
(g) The Employer terminates the employment of a Participant at or after a
Change in Control other than for Just Cause.
4.3 AMOUNT OF PAYMENT
(a) Each Participant entitled to a Payment under this Plan shall receive
from the Bank a lump sum cash payment equal to one week's equivalent of Annual
Compensation (calculated by dividing Annual Compensation by 365 and multiplying
the result by 7) for each month of service up to a maximum of 200% of Annual
Compensation.
(b) Notwithstanding the provisions of (a) above, if a Payment to a
Participant who is a Disqualified Individual shall be in an amount which
includes an Excess Parachute Payment, the Payment hereunder to that Participant
shall be reduced to the maximum amount which does not include an Excess
Parachute Payment. The terms "Disqualified Individual" and "Excess Parachute
Payment"
9
<PAGE>
shall have the same meaning as defined in Section 28OG of the Internal Revenue
Code of 1986, as amended, or any successor section thereof.
(c) The Participant shall not be required to mitigate the amount of the
Payment by seeking other employment or otherwise, nor shall the amount of such
Payment be reduced by any compensation earned by the Participant as a result of
employment after termination of employment hereunder.
4.4 TIME OF PAYMENT
The Payment to which a Participant is entitled shall be paid to the
Participant by the Employer or the successor to the Employer, in cash and in
full, not later than twenty (20) business days after the termination of the
Participant's employment. If any Participant should die after termination of
the employment but before all amounts have been paid, such unpaid amounts shall
be paid to the Participant's named beneficiary, if living, other-wise to the
Participant's estate.
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 OTHER BENEFITS
Neither the provisions of this Plan nor the Payment provided for hereunder
shall reduce any amounts otherwise payable, or in any way diminish the
Participant's rights as an Employee of the Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership
10
<PAGE>
or other plan or arrangement.
5.2 EMPLOYMENT STATUS
This Plan does not constitute a contract of employment or impose on the
Participant or the Employer any obligation to retain the Participant as an
Employee, to change the status of the Participant's employment, or to change the
Employer's policies regarding termination of employment.
ARTICLE VI
PARTICIPATING EMPLOYERS
6.1 Upon approval by the Board of Directors, this Plan may be adopted by
any Subsidiary or Parent of the Bank. Upon such adoption, the Subsidiary or
Parent shall become an Employer hereunder and the provisions of the Plan shall
be fully applicable to the Employees of that Subsidiary or Parent. The term
"Subsidiary" means any corporation in which the Bank, directly or indirectly,
holds a majority of the voting power of the outstanding shares of capital stock.
The term "Parent" means any corporation which holds a majority of the voting
power of the Bank's outstanding shares of capital stock.
ARTICLE VII
SUCCESSOR TO THE BANK
7.1 The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to
11
<PAGE>
perform the Bank's obligations under the Plan, in the same manner and to the
same extent that the Bank would be required to perform if no such succession or
assignment had taken place.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
8.1 DURATION
If a Change in Control has not occurred, the Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2, or unless
extended for an additional period or periods by resolution adopted by the Board
of Directors. Notwithstanding the foregoing, if a Change in Control occurs, this
Plan shall continue in full force and effect, and shall not terminate or expire
until such date as all Participants who become entitled to Payments hereunder
shall have received such Payments in full.
8.2 AMENDMENT AND TERMINATION
The Plan may be terminated or amended in any respect by resolution adopted
by a majority of the Board of Directors unless a Change in Control has
previously occurred. If a Change in Control occurs, the Plan no longer shall be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect whatsoever.
8.3 FORM OF AMENDMENT
The Plan may be amended or terminated by a written instrument
12
<PAGE>
signed by a duly authorized officer of the Bank, certifying that the amendment
or termination has been approved by the Board of Directors.
8.4 NO ATTACHMENT
Except as required by law, no right to receive Payments under this Plan
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect such action shall be null, void, and of no
effect.
ARTICLE IX
LEGAL FEES AND EXPENSES
9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto arising out of any dispute related to the Plan shall be paid or
reimbursed by the prevailing party in any judicial or administrative action or
proceeding, or arbitration.
ARTICLE X
REQUIRED PROVISIONS
10.1 The Bank may terminate the Employee's employment at any time, for any
reason, or no reason, but any termination by the Bank, other than Termination
for Cause, shall not prejudice Employee's right to compensation or other
benefits under this
13
<PAGE>
Agreement arising prior to or as a result of such termination. Employee shall
not have the right to receive compensation or other benefits for any period
after termination for Just Cause as defined in Section 2.1 hereinabove.
10.2 If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. '
1818(e)(3) or (g)(1), the Bank's obligations under the Plan shall be suspended
as of the date of service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank shall pay the Employee any payment
which may have come due during such suspension or temporary prohibition.
10.3 If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. '
1818(e)(4) or (g)(1), all obligations of the Bank under the Plan shall terminate
as of the effective date of the order.
10.4 If the Bank is in default as defined in Section 3(x)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. ' 1813(x)(1), all obligations of the Bank under
the Plan shall terminate as of the date of default, but this paragraph shall not
affect any vested rights of the Employee.
14
<PAGE>
ARTICLE XI
ADMINISTRATIVE PROVISIONS
11.1 PLAN ADMINISTRATOR. The administration of the Plan shall be under the
supervision of an Administrator which shall be the Board of Directors or a
committee appointed by the Board. It shall be a principal duty of the
Administrator to see that the Plan is carried out in accordance with its terms,
for the exclusive benefit of persons entitled to participate in the Plan without
discrimination among them. The Administrator will have full power to administer
the Plan in all of its details subject, however, to the requirements of ERISA.
For this purpose, the Administrator's powers will include, but will not be
limited to, the following authority, in addition to all other powers provided by
the Plan: (a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan; (b) to
interpret the Plan, its interpretation thereof in good faith to be final and
conclusive on all persons claiming benefits under the Plan; (c) to decide all
questions concerning the Plan and the eligibility of any person to participate
in the Plan; (d) to compute the amount of Payment that will be payable to any
Participant or other person in accordance with the provisions of the Plan, and
to determine the person or persons to whom such benefits will be paid; (e) to
authorize Payments; (f) to appoint such agents, counsel, accountants,
consultants and actuaries as may be required to
15
<PAGE>
assist in administering the Plan; and (g) to allocate and delegate its
responsibilities under the Plan and to designate other persons to carry out any
of its responsibilities under the Plan, any such allocation, delegation or
designation to be by written instrument and in accordance with Section 405 of
ERISA.
11.2 NAMED FIDUCIARY. The Administrator will be a "named fiduciary" for
purposes of Section 402(a)(1) of ERISA with authority to control and manage the
operation and administration of the Plan, and will be responsible for complying
with all of the reporting and disclosure requirements of Part I of Subtitle B of
Title I of ERISA.
11.3 CLAIMS AND REVIEW PROCEDURES.
(a) CLAIMS PROCEDURE. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in writing with
the Administrator. If any such claim is wholly or partially denied, the
Administrator will notify such person of its decision in writing. Such
notification will be written in a manner calculated to be understood by such
person and will contain (i) specific reasons for the denial, (ii) specific
reference to pertinent Plan provisions, (iii) a description of any additional
material or information necessary for such person to perfect such claim and an
explanation of why such material or information is necessary and (iv)
information as to the steps to be taken if the person wishes to submit a request
for review. Such notification will be given within 90 days after
16
<PAGE>
the claim is received by the Administrator (or within 180 days, if special
circumstances require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to such person
within the initial 90 day period). If such notification is not given within
such period, the claim will be considered denied as of the last day of such
period and such person may request a review of his claim.
(b) REVIEW PROCEDURE, Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60 days
after the date on which such denial is considered to have occurred) such person
(or his duly authorized representative) may (i) file a written request with the
Administrator for a review of his denied claim and of pertinent documents and
(ii) submit written issues and comments to the Administrator. The Administrator
will notify such person of its decision in writing. Such notification will be
written in a manner calculated to be understood by such person and will contain
specific reasons for the decision as well as specific references to pertinent
Plan provisions. The decision on review will be made within 60 days after the
request for review is received by the Administrator (or within 120 days, if
special circumstances require an extension of time for processing the requests
such as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within the
initial 60 day
17
<PAGE>
period). If the decision on review is not made within such period, the claim
will be considered denied.
11.4 NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the
administration of the Plan, any discretionary action by the Administrator is
required, the Administrator shall exercise its authority in a nondiscriminatory
manner so that all persons similarly situated will receive substantially the
same treatment.
11.5 INDEMNIFICATION OF ADMINISTRATOR. The Bank will indemnify and defend
to the fullest extent permitted by law any person serving as, or as a member of,
the Administrator (including any person who formerly served as a member of the
Administrator) against all liabilities, damages, costs and expenses (including
attorneys fees and amounts paid in settlement of any claims approved by the
Bank) occasioned by any act or omission to act in connection with the Plan, if
such act or omission is in good faith.
11.6 BENEFITS SOLELY FROM GENERAL ASSETS. The benefits provided hereunder
will be paid solely from the general assets of the Bank. Nothing herein will be
construed to require the Bank or the Board to maintain any fund or segregate any
amount for the benefit of any Participant, and no Participant or other person
shall have any claim against, right to, or security or other interest in, any
fund, account or asset of the Bank from which any payment under the Plan may be
made.
Having been adopted by its Board of Directors on
18
<PAGE>
____________, 1998, this Plan is executed by its duly authorized officers this
______ day of __________ , 1998.
Attest CORTLAND SAVINGS BANK
BY:
- ------------------------------ ------------------------------
Sandy F. Samson Wesley D. Stisser, Jr.
Secretary President & Chief
Executive Officer
19
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Cortland Savings Bank:
We consent to the inclusion of our audit report dated March 19, 1998 on the
consolidated balance sheets of Cortland Savings Bank and Subsidiary as of
December 31, 1997 and 1996, and the related consolidated statements of income,
net worth and cash flows for each of the years in the three-year period ended
December 31, 1997.
We also consent to the reference to our firm under the heading "Experts" in
the prospectus.
Syracuse, New York
June 16, 1998
<PAGE>
Exhibit 23.2
Consent of Serchuk & Zelermyer, LLP
The Board of Trustees
Cortland Savings Bank
Re: The Registration Statement on Form S-1 and Application for Conversion of
Form 86-AC in connection with the conversion of Cortland Savings Bank from the
mutual to the stock form of ownership.
We hereby consent to the reference to our firm under the heading "Legal and
Tax Opinions" in the prospectus which is part of the (i) Registration Statement
on Form S-1 of CNY Financial Corporation, filed with the Securities and Exchange
Commission and (ii) the Application for Conversion on Form 86-AC of Cortland
Savings Bank filed with the New York State Banking Department.
Very truly yours,
/s/ Serchuk & Zelermeyer, LLP
White Plains, New York
June 18, 1998
<PAGE>
Exhibit 23.3
CONSENT OF RP FINANCIAL, L.C.
June 19, 1998
Board of Trustees
Cortland Savings Bank
1 North Main Street
Cortland, New York 13045-2129
Ladies & Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion on Form 86-AC of Cortland Savings Bank, Cortland, New York, and any
amendments thereto, and in the Form S-1 Registration Statement and any
amendments thereto for CNY Financial Corporation. We also hereby consent to the
inclusion of, summary of and references to our Appraisal Report and our
statement concerning subscription rights in such filings including the
Prospectus of CNY Financial Corporation.
Sincerely,
RP FINANCIAL, LC.
By: /s/ James J. Oren
Senior Vice President
<PAGE>
Exhibit 24.1
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Wesley D. Stisser, Jr. and F. Michael
Stapleton, or either of them, acting alone, as the true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign the Registration Statement on Form S-1 and any
and all amendments thereto of CNY Financial Corp., and the Application for
Conversion on Form 86-AC and all amendments thereto of Cortland Savings Bank,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and the New
York State Banking Department, respectively, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and things requisite and necessary to be done as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, and the Banking Board
regulations, the foregoing Powers of Attorney prepared in conjunction with the
Registration Statement on Form S-1 and the Application for Conversion on Form
86-AC have been duly signed by the following persons in the capacities and on
the dates indicated.
Dated: June 19, 1998
/s/Wesley D. Stisser /s/Edward G. Burgess
- ---------------------------------------- -------------------------------
Wesley D. Stisser, Jr., President, Chief Edward G. Burgess Trustee
Executive Officer, Director and
Trustee
/s/Roland Fragnoli /s/Donald P. Reed
- ----------------------------------- -------------------------------
Roland Fragnoli Donald P. Reed, Director and
Trustee Trustee
/s/Patrick J. Hayes /s/Harwood Spaulding
- ------------------------------------ --------------------------------
Patrick J. Hayes, M.D., Trustee Harwood Spaulding Trustee
<PAGE>
/s/Harvey Kaufman /s/Joseph H. Compagni
- ------------------------------------ --------------------------------
Harvey Kaufman, Director and Joseph H. Compagni, Director and
Trustee Trustee
/s/Robert S. Kashdin /s/Edward E. Hatter, Jr.
- ------------------------------------ --------------------------------
Robert S. Kashdin, Director and Edward E. Hatter and Trustee
Trustee
/s/Peter A. Potter /s/Judith F. Reihlman
- ------------------------------------ --------------------------------
Peter A. Potter, Trustee Judith F. Reihlman Trustee
/s/Terrance D. Stalder
- ------------------------------------
Terrance D. Stalder, Director and
Trustee
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM "THE
CONSOLIDATED FINANCIAL STATEMENTS" OF CORTLAND SAVINGS BANK AND SUBSIDIARY AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 DEC-31-1997
<CASH> 4,613 4,679
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 5,200 3,400
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 45,475 44,140
<INVESTMENTS-CARRYING> 12,479 12,550
<INVESTMENTS-MARKET> 12,489 12,569
<LOANS> 156,430 157,565
<ALLOWANCE> 2,230 2,143
<TOTAL-ASSETS> 232,388 233,729
<DEPOSITS> 198,234 199,770
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,760 3,219
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 31,394 30,740
<TOTAL-LIABILITIES-AND-EQUITY> 232,388 233,729
<INTEREST-LOAN> 3,377 13,582
<INTEREST-INVEST> 934 4,085
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 4,311 17,667
<INTEREST-DEPOSIT> 2,010 8,328
<INTEREST-EXPENSE> 2,010 8,328
<INTEREST-INCOME-NET> 2,301 9,339
<LOAN-LOSSES> 75 3,300
<SECURITIES-GAINS> 6 46
<EXPENSE-OTHER> 1,645 6,872
<INCOME-PRETAX> 826 56
<INCOME-PRE-EXTRAORDINARY> 493 72
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 493 72
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 4.27 4.17
<LOANS-NON> 1,458 3,785
<LOANS-PAST> 10 9
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 2,143 1,952
<CHARGE-OFFS> 39 3,279
<RECOVERIES> 51 170
<ALLOWANCE-CLOSE> 2,230 2,143
<ALLOWANCE-DOMESTIC> 2,230 2,143
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
<PAGE>
Exhibit 99.1
----------------------------------
CONVERSION APPRAISAL REPORT
CNY FINANCIAL CORPORATION
PROPOSED HOLDING COMPANY FOR
CORTLAND SAVINGS BANK
Cortland, New York
Dated As Of:
June 5, 1998
----------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
June 5, 1998
Board of Trustees
Cortland Savings Bank
1 North Main Street
Cortland, New York 13045
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
Cortland Savings Bank, Cortland, New York ("Cortland" or the "Bank"). The common
stock issued in connection with the Bank's conversion will simultaneously be
acquired by a holding company, CNY Financial Corporation ("CNY Financial" or the
"Holding Company"). Pursuant to the Plan of Conversion, CNY Financial common
stock will be offered in a Subscription Offering with nontransferable
subscription rights being granted to Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders. To the extent shares remain available for
purchase after filling all orders received in the Subscription Offering, the
Common Stock will be offered in a Direct Community Offering and a Syndicated
Community Offering, with preference given to residents of Cortland County.
This Appraisal is furnished pursuant to the requirements of the Code of
Federal Regulations 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"), which have been adopted in practice by the
Federal Deposit Insurance Corporation ("FDIC"), including the most recent
revisions as of October 21, 1994 and applicable regulatory interpretations
thereof.
Description of Reorganization
The Board of Trustees of the Bank has adopted a Plan of Conversion
pursuant to which the Bank will convert from a state chartered mutual savings
bank to a state chartered stock savings bank and issue all of its outstanding
shares to the Holding Company. The Holding Company will sell in the Subscription
Offering and, if necessary, in the Community Offering and Public Offering
Holding Company stock in the amount equal to the appraised value of the Bank.
Immediately following the conversion, the only significant assets of the Holding
Company will be the capital stock of the Bank and the net conversion proceeds
remaining after purchase of the Bank's common stock by the Holding Company. The
Holding Company will use 50 percent of the net conversion proceeds to purchase
the Bank's common stock. A portion of the remaining 50 percent of the net
conversion proceeds will be used to fund a loan to the ESOP with the remainder
to be used as general working capital. In addition, the Holding Company intends
to donate to a charitable foundation (the "Foundation"), immediately following
the conversion, authorized but unissued shares of CNY Financial stock totaling 2
percent of the common stock sold in the conversion.
<PAGE>
RP Financial
Board of Trustees
June 5, 1998
Page 2
RP Financial, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank and the other parties engaged by the Bank to assist in
the stock conversion process.
Valuation Methodology
In preparing our appraisal, we have reviewed Cortland's application for
Approval of Conversion, including the Proxy Statement, as filed with the FDIC
and the New York State Banking Department, and the Holding Company's Form S-1
registration statement as filed with the Securities and Exchange Commission. We
have conducted a financial analysis of the Bank that has included due diligence
related discussions with the Bank's management; KPMG Peat Marwick LLP, the
Bank's independent auditor; Serchuk & Zelermyer, LLP, the Bank's conversion
counsel; and CBIC Oppenheimer Corp and Trident Securities, Inc., who have been
retained by the Bank as financial and marketing advisors in connection with the
Holding Company's stock offering. All conclusions set forth in the appraisal
were reached independently from such discussions. In addition, where
appropriate, we have considered information based on other available published
sources that we believe are reliable. While we believe the information and data
gathered from all these sources are reliable, we cannot guarantee the accuracy
and completeness of such information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment 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 of Cortland.
We have reviewed the economy in the Bank's primary market area and have compared
the Bank's financial performance and condition with selected publicly-traded
savings institutions with similar characteristics as the Bank's, as well as all
publicly-traded savings institutions. We have reviewed conditions in the
securities markets in general and in the market for savings institution stocks
in particular, including the market for existing savings institution issues and
the market for initial public offerings by savings institutions.
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 are truthful, accurate and complete.
We did not independently verify the financial statements and other information
provided by the Bank and its independent auditors, 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 of Cortland.
<PAGE>
RP Financial
Board of Trustees
June 5, 1998
Page 3
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and for all savings institutions. Changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of savings
institution stocks as a whole or the Bank's value alone. It is our understanding
that Cortland intends to remain an independent institution and there are no
current plans for selling control of the Bank as a converted institution. To the
extent that such factors can be foreseen, they have been factored into our
analysis.
Pro forma market value is defined as the price at which Cortland's stock,
immediately upon completion of the conversion offering, would change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of relevant facts.
Valuation Conclusion
It is our opinion that, as of June 5, 1998, the aggregate pro forma market
value of the shares to be issued was $62,475,000 at the midpoint, inclusive of
the shares to be issued to the Foundation, equal to 6,247,500 shares offered at
a per share value of $10.00. Pursuant to the conversion guidelines, the 15
percent offering range indicates a minimum value of $53,103,750 and a maximum
value of $71,846,250. Based on the $10.00 per share offering price, this
valuation range equates to an offering of 5,310,375 shares at the minimum to
7,184,625 shares at the maximum. In the event that the Bank's appraised value is
subject to an increase, up to 8,262,319 shares may be sold at an issue price of
$10.00 per share, for an aggregate market value of $82,623,190, without a
resolicitation.
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of March 31, 1998, the date of the financial data
included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
<PAGE>
RP Financial
Board of Trustees
June 5, 1998
Page 4
The valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for savings
institution shares. These updates may also consider changes in other external
factors which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
savings institution stocks, and interest rates. Should any such new developments
or changes be material, in our opinion, to the valuation of the shares,
appropriate adjustments to the estimated pro forma market value will be made.
The reasons for any such adjustments will be explained in the update at the date
of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ James J. Oren
James J. Oren
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
CORTLAND SAVINGS BANK
Cortland, New York
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
Introduction 1.1
Establishment of Charitable Foundation 1.1
Strategic Discussion 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.8
Interest Rate Risk Management 1.11
Lending Activities and Strategy 1.11
Asset Quality 1.14
Funding Composition and Strategy 1.14
Subsidiary Operations 1.15
Legal Proceedings 1.15
CHAPTER TWO MARKET AREA
Introduction 2.1
National Economic Factors 2.2
Market Area Demographics 2.6
Economy 2.7
Deposit Trends and Competition 2.9
Summary 2.9
CHAPTER THREE PEER GROUP ANALYSIS
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.7
Loan Composition 3.10
Credit Risk 3.10
Interest Rate Risk 3.13
Summary 3.13
<PAGE>
TABLE OF CONTENTS
CORTLAND SAVINGS BANK
Cortland, 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 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.5
5. Dividends 4.5
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.8
B. The New Issue Market 4.13
C. The Acquisition Market 4.14
8. Management 4.17
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Valuation Approaches 4.18
1. Price-to-Tangible Book ("P/TB") 4.19
2. Price-to-Earnings ("P/E") 4.19
3. Price-to-Assets ("P/A") 4.20
Comparison to Recent Conversions 4.20
Valuation Conclusion 4.21
<PAGE>
RP Financial, LC.
LIST OF TABLES
CORTLAND SAVINGS BANK
Cortland, New York
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.9
2.1 Cortland County Employment Characteristics 2.7
2.2 Major Cortland County Employers 2.8
2.3 Market Area Unemployment Trends 2.8
2.4 Deposit Summary 2.10
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 3.8
3.4 Loan Portfolio Composition Comparative Analysis 3.11
3.5 Peer Group Credit Risk Comparative Analysis 3.12
3.6 Interest Rate Risk Comparative Analysis 3.14
4.1 Peer Group Market Area Comparative Analysis 4.6
4.2 Conversion Pricing Characteristics 4.15
4.3 Market Pricing Comparatives 4.16
4.4 Public Market Pricing 4.22
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Cortland Savings Bank ("Cortland" or the "Bank") is a state-chartered
mutual savings bank headquartered in Cortland, Cortland County, New York. The
Bank also operates two other branch offices in Cortland County in close
proximity to the City of Cortland. The Bank considers its primary market for
deposits to consist of Cortland County, in particular the areas surrounding the
office locations. Lending activities are also concentrated in Cortland County,
although additional lending activities are performed in the contiguous counties
of Tompkins, Cayuga and Onondaga (see Exhibit I-1). The Bank was chartered as a
New York mutual savings bank in 1866. The Bank is currently a member of the
Federal Home Loan Bank ("FHLB") system and is regulated by the New York State
Banking Department (the "Banking Department"). The Bank's deposits are insured
up to the regulatory maximums by the Bank Insurance Fund ("BIF") of the Federal
Deposit Insurance Corporation ("FDIC"). As of March 31, 1998, the Bank
maintained $232.4 million in assets, $198.2 million in deposits and $31.4
million in stockholders' equity, equal to 13.5 percent of assets.
CNY Financial Corporation ("CNY Financial" or the "Holding Company"), a
Delaware corporation, was recently organized to facilitate the conversion of
Cortland. 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, CNY Financial will own 100
percent of the Bank's stock, and the Bank will be CNY Financial's sole
subsidiary. Approximately 50 percent 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 CNY Financial other than the ownership of the Bank, a loan to
the newly-formed employee stock ownership plan ("ESOP") and investment of the
cash retained at the holding company in investment securities. In the future CNY
Financial may acquire or organize other operating subsidiaries.
Establishment of Charitable Foundation
In order to enhance the Bank's existing historically strong service and
reinvestment activities in the local community, the conversion provides for the
establishment of Cortland Savings Foundation, a private charitable foundation
(the "Foundation") in connection with the stock offering. The Bank and the
Holding Company will create the Foundation and fund it with authorized but
unissued shares of common stock contributed by the Holding Company in an amount
equal to 2 percent of the shares sold in the conversion, which based on an
initial offering price of $10.00 per share will result in the issuance of
122,500 shares to the Foundation at the midpoint. The Foundation is intended to
complement the Bank's existing community reinvestment activities and will be
dedicated to the promotion of charitable and educational purposes within the
Cortland County area. Funding the
<PAGE>
RP Financial, LC.
Page 1.2
Foundation with shares of common stock of the Holding Company will enable the
local community served to share in the growth and profitability of the Holding
Company over the long term through dividends and price appreciation. As such,
the Bank believes the Foundation will create a high level of community goodwill
toward the Holding Company and the Bank, increase the Bank's local visibility
and further enhance the Bank's reputation for community service, thereby
strengthening its community banking franchise.
Strategic Discussion
The Bank is a community-oriented financial institution dedicated to
meeting the borrowing, savings and financial services needs of its market area
served. The market area served by the Bank (Cortland County, and to a lesser
extent, contiguous counties), has been experiencing relatively stable levels of
population and households in recent years. The economy and employment base is
relatively diversified into most economic sectors, including services and
education. Located outside of the Syracuse and Binghamton metropolitan
statistical areas ("MSA"), Cortland faces notable competition from a number of
other community oriented banks, as well as from larger regional financial
institutions. In this operating environment the Bank has pursued a strategy of
maintaining its asset base, increasing the branch office network and improving
the capital ratio in order to more effectively compete.
Throughout its history, the Bank has generally pursued a traditional
operating strategy of mortgage lending secured by 1-4 family residential
properties in Cortland County and contiguous counties in central New York State,
with such lending supplemented with commercial real estate loans, home equity
loans, non-mortgage consumer and commercial loans and construction loans. The
Bank has recorded moderate growth in the loan portfolio in recent years,
reflecting increases in residential mortgage loans and consumer loans, in
particular automobile loans. The Bank has attempted to develop a more
customer-oriented approach and continues to developing business relations with
real estate brokers and businesses. The recent moderate increase in loans
receivable has been funded internally through a reduction in cash and
investments. The Bank has not traditionally sold fixed rate 1-4 family loan
originations for interest rate risk management purposes, although such sales may
occur following completion of the conversion. The Bank expects the majority of
its loan activity in the future to be within Cortland County.
Cortland is currently operating under the terms of a Memorandum of
Understanding ("MOU") entered into with the FDIC in December 1995 as a result of
certain weaknesses implied by the FDIC in the administration of the loan
origination function. The MOU, which remains effective currently, requires
Cortland to upgrade certain compliance procedures regarding consumer loans,
increase employee training, upgrade future compliance and provide periodic
reports to the FDIC. The Bank believes that it has complied with the terms of
the MOU and
<PAGE>
RP Financial, LC.
Page 1.3
expects the MOU to be terminated in connection with the next FDIC consumer
compliance examination of the Bank, but there is no assurance that the FDIC will
agree to the termination of the MOU.
Also, since late 1996, two interrelated problem matters have had a
substantial direct effect on the Bank's results of operations. Cortland has
worked aggressively to identify the scope of these problems, resolve them and
recognize the financial consequences of them in order to move forward with
overall operations of the Bank. During the fourth quarter of 1996, the Bank
discovered that the senior loan officer had been involved in various schemes to
defraud the Bank, including making false entries in the Bank's books, creation
of loans to borrowers who either did not exist or were unaware of the loans and
the diversion of bank funds for personal purposes. Upon discovery of these
matters, the officer was dismissed and was subsequently convicted of criminal
charges. Cortland's investigation into this situation resulted in a chargeoff of
approximately $0.6 million of loans during the fourth quarter of 1996 which were
deemed uncollectible and the identification of $0.3 million of expenses related
to this officer's actions which had been previously expensed. Cortland has made
a claim against its fidelity bond carrier in the amount of approximately $1.0
million, which such claim currently under discussion with the carrier and the
amount recoverable on the claim is currently in dispute. No asset is recorded on
the Bank's books reflecting the value of the claim, which may or may not
ultimately be collected. Cortland has also incurred expenses in connection with
the investigation and resolution of this matter, including professional fees in
excess of $120,000 through March 31, 1998.
In part as a result of the above described officer defalcation, in recent
years Cortland has operated with a level of non-performing assets generally in
excess of 1.0 percent of assets, with such loans consisting of residential
mortgage, non-residential mortgage and non-mortgage loans. In the fourth quarter
of 1997, Cortland decided to sell a substantial portion of the non-performing
loans to a single purchaser. During December 1997, the Bank identified $4.3
million of loans as candidates for such a sale. These loans were all either
non-performing or were performing but had been identified by management as
potential problem loans. Approximately half of the loans were commercial
mortgage loans and half were residential mortgage loans. When these loans were
designated for disposition, Cortland charged off $1.7 million against the
allowance for loan losses to reflect the fair value of the loans. During the
first quarter of 1998, while identifying a purchaser for the loan package and
negotiating the terms of the sale, the Bank designated $0.7 million of
additional loans to include in the package being sold. The Bank consummated the
sale during the first quarter of 1998, which substantially reduced the level of
non-performing assets at the Bank, and improved the overall credit quality
measures. Currently, the Bank's allowance for loan losses relative to loans is
comparatively higher by industry standards, as the Bank has historically
maintained a strong level of reserves, and has added to the allowance recently
(in light of the previously mentioned loan package sale). The ratio of
non-performing assets ("NPAs"), consisting of real
<PAGE>
RP Financial, LC.
Page 1.4
estate owned and other repossessed assets, non-accruing loans and delinquent
accruing loans assets declined to 0.96 percent of assets as of March 31, 1998.
The Bank's lending strategies to limit exposure to interest rate risk have
involved originating adjustable rate residential mortgage loans ("ARMs")
whenever possible, adjustable rate commercial real estate loans and shorter-term
consumer, commercial business and construction loans. Cortland also has
attempted to: (1) maintain a relatively short-term to maturity investment
portfolio; (2) increase the balance of adjustable rate mortgage-backed
securities; and, (3) build a strong level of interest-free capital to support
operations. Liability strategies have involved attempts to maintain or expand
the level of core deposits such as passbook, NOW/MMDA and demand accounts and
lengthen the maturity of time deposits. Cortland's calculated one-year
cumulative gap position as of March 31, 1998 was a negative 10.5 percent
Cortland anticipates the conversion proceeds will facilitate improvement in the
gap analysis as the net capital raised in the conversion will increase the ratio
of interest-earning assets ("IEA") to interest-bearing liabilities ("IBL") and
the proceeds will increase the proportion of shorter-term or adjustable rate
assets.
The Bank's main source of net income, the net interest margin, has
remained relatively stable over the past few years, in concert with the stable
asset base. Core profitability has been primarily affected by an increasing
level of operating expenses that have been incurred in connection with normal
inflationary increases in costs, while additional costs (loan loss provisions
and professional fees) have been incurred in connection with the above described
officer defalcation event. Cortland opened a new branch office in 1994,
requiring investment in fixed assets and personnel. Further improvement in core
profitability has also been limited by the competitive pricing of deposits in
the local market area. Future core profitability is projected to improve
moderately with the reinvestment benefit of the new capital raised and income
benefits of expanded products and services without a commensurate increase in
operating expenses.
Cortland's Board of Trustees has determined that a conversion to stock
form is an attractive business strategy for several reasons. First, the new
structure will provide the ability to diversify business activities, provide
greater flexibility in structuring acquisitions and increase the future access
to capital markets. Second, it will provide the capital necessary to improve the
overall competitive position of the Bank in its market area, with regard to
rates and services offered and ability to expand. Third, the conversion may
provide the opportunity for expanded local stock ownership which could enhance
the financial success of the Bank as local shareholders promote the Bank's
products and services. As disclosed in the prospectus, the proceeds from stock
conversion are anticipated to be invested as follows.
o CNY Financial. Approximately 50 percent of the conversion proceeds
will be retained by CNY Financial, with the balance to be invested
in the Bank. Such holding company funds are anticipated to be
invested initially into high-quality short- to intermediate-term
securities and a
<PAGE>
RP Financial, LC.
Page 1.5
loan to the Bank's ESOP to fund stock purchases in the conversion.
The Holding Company funds may be utilized for various corporate
purposes, including funding expansion through diversification or
acquisition, stock repurchase programs, funding stock purchases for
the PRRP and/or payment of regular or special dividends, although
there are no specific plans at present.
o Cortland. The net proceeds infused into the Bank will be exchanged
for all of the Bank's newly issued stock. The Bank's proceeds are
anticipated to initially be held in short-term cash and investments
until such funds are redeployed into lending and investment
activities consistent with the Bank's plan.
On a pro forma basis, Cortland is expected to have a capital ratio above
both regulatory requirements and industry averages. The Board of Directors has
determined to pursue a strategy of controlled growth in order to maintain
well-capitalized status, with growth expected to be funded primarily through
local retail deposit growth and increases in equity.
Balance Sheet Trends
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years and as of March 31, 1998. Cortland's audited financial statements
are incorporated by reference as Exhibit I-2, while historical key operating
ratios are presented in Exhibit I-3. From December 31, 1993 through March 31,
1998, Cortland exhibited annual asset shrinkage of 0.1 percent, with similar
minimal changes in the major balance sheet categories. The Bank's asset base has
fluctuated within a relatively narrow range over this time period, with loans
receivable showing material growth only during fiscal 1994. The Bank has
historically maintained an investment in mortgage-backed securities ("MBS"),
along with a balance of cash and investments. Cortland's deposit base also
declined over the time period shown in Table 1.1, at a 0.9 percent annual rate,
with increases in equity replacing a portion of the deposit runoff. Cortland did
not utilize any borrowed funds for operations over the most recent five year
period.
The balance of loans receivable increased from fiscal 1993 to 1996, and
declined slightly through March 31, 1998, although loans receivable as a percent
of assets has been maintained at approximately 66 percent since fiscal 1994.
Loans receivable have decreased since 1996 as the Bank has focused efforts on
improving asset quality following the resignation of the former senior loan
officer (including the recent non-performing loan sale of approximately $4.3
million). At March 31, 1998, loans receivable totaled $154.2 million, or 66.4
percent of total assets. The composition of the loan portfolio reflects the
relatively diversified lending activity, as 1-4 family permanent loans
constituted $97.2 million, or 62.0 percent of the net loan portfolio at March
31, 1998. The second largest segment of the loan portfolio is commercial real
estate loans, which totaled $30.6 million, or 19.5 percent of the loan
portfolio, as Cortland has remained active in lending on certain commercial real
estate property in the local market, including multi-family properties. These
loans are attractive for their higher yields
<PAGE>
RP Financial, LC.
Table 1.1
Cortland Savings Bank
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------------------------------
1993 1994 1995 1996
---------------------- ---------------------- ---------------------- -------------------
Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $233,750 100.00% $230,339 100.00% $235,681 100.00% $238,100 100.00%
Cash and Investments 63,144 27.01% 48,963 21.26% 49,673 21.08% 48,494 20.37%
Loans Receivable (net) 142,600 61.01% 152,476 66.20% 158,507 67.25% 158,611 66.62%
Mortgage-Backed Securities (net) 20,337 8.70% 20,184 8.76% 17,468 7.41% 22,621 9.50%
Deposits 205,855 88.07% 200,310 86.96% 203,110 86.18% 204,640 85.95%
Stockholders' Equity 24,780 10.60% 26,876 11.67% 29,030 12.32% 30,345 12.74%
AFS Adjustment 143 0.06% 68 0.03% 298 0.13% 248 0.10%
Loans/Deposits 69.27% 76.12% 78.04% 77.51%
<CAPTION>
12/31/93-
As of December 31, 3/31/98
----------------------- As of March 31, Annual
1997 1998 Growth Rate
----------------------- ---------------------- -----------
Amount Pct Amount Pct Pct
------ --- ------ --- ---
($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $233,729 100.00% $232,388 100.00% -0.14%
Cash and Investments 45,570 19.50% 49,254 21.19% -5.68%
Loans Receivable (net) 155,422 66.50% 154,200 66.35% 1.86%
Mortgage-Backed Securities (net) 20,490 8.77% 19,816 8.53% -0.61%
Deposits 199,770 85.47% 198,234 85.30% -0.88%
Stockholders' Equity 30,740 13.15% 31,394 13.51% 5.72%
AFS Adjustment 571 0.24% 732 0.31% N/M
Loans/Deposits 77.80% 77.79%
</TABLE>
Source: Prospecus, audited financial reports and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.7
and generally higher average balances. Cortland also originates home equity
loans as an additional product for consumers, which totaled $6.1 million as of
March 31, 1998. At the same date, construction loans totaled $0.3 million, or
0.2 percent of the loan portfolio. Consumer and commercial business loans
constitute the remainder of the loan portfolio, totaling $22.5 million, or 14.4
percent of loans receivable, including $9.1 million of automobile loans.
Essentially all of the Bank's loan portfolio is secured by local property.
The portfolio of cash and investment securities totaled $49.3 million, or
21.2 percent of assets, at March 31, 1998 (see Exhibit I-4). The cash and
investments portfolio consisted of cash and equivalents, including
interest-earning deposits in other financial institutions ($4.6 million),
federal funds sold ($5.2 million), U.S. Government and agency securities ($18.6
million), FHLB stock ($1.3 million), corporate debt obligations ($16.9 million),
equity securities ($2.4 million) and other investments ($0.3 million). In
concert with the rest of the asset base, the cash and investments portfolio has
remained relatively stable over the most recent five year period, both in dollar
amount and as a percent of assets. Management utilizes the portfolio of cash and
investments for liquidity purposes and as part of the asset-liability management
strategy, as the investments portfolio generally consists of short- to
intermediate-term instruments with terms-to-maturity of generally less than
three years. The Bank has historically utilized the services of an outside
investment advisory firm, Fleet Investment, for assistance in the investment
process. The Bank seeks to maintain a target ratio of approximately 80 percent
of the portfolio as available-for-sale ("AFS"), and as of March 31, 1998, 78.5
percent of the investment securities portfolio was classified as AFS with an
unrealized pretax gain of $1.133 million tax adjusted and added to stated equity
on the Bank's audited financial statements. Cortland invests in certain
corporate debt securities in order to provide additional yields without
substantially higher credit risk, as such securities are limited to those rated
in the three highest grades by a national rating firm. The Bank also invests in
a limited amount of corporate equity securities to diversify the Bank's
investments and provide opportunities for capital appreciation and dividend
income. All equity securities are classified as AFS, however Cortland does not
regularly trade these securities. The Bank seeks to invest approximately $50,000
per month in additional equity securities. Going forward, the composition of the
cash and investments portfolio is not anticipated to change significantly,
although the level will initially increase on a post-conversion basis.
MBS totaled $19.8 million at March 31, 1998, the third largest component
of interest-earning assets. The balance of MBS has also remained relatively
stable since fiscal 1993, as the Bank has opted to invest in MBS to supplement
yields on the loan portfolio while minimizing credit risk. The MBS portfolio
consists of FNMA, FHLMC and GNMA pass-through certificates. Approximately 60
percent of the MBS portfolio was classified as AFS at March 31, 1998, with an
unrealized pre-tax gain of $88,000. Going forward, the Bank intends to reinvest
a portion of available funds MBS, and increase the balance of adjustable rate
MBS for interest rate risk management purposes.
<PAGE>
RP Financial, LC.
Page 1.8
As noted previously, deposits have traditionally met most of the Bank's
funding needs, and all of the Bank's deposits are generated through its three
office locations in Cortland County. The deposit base has remained relatively
stable since fiscal 1993, as overall financial institution deposits in Cortland
County have remained stable. Currently, savings rates offered by Cortland are
generally in line with the local competition, with certificates of deposits
("CDs") accounting for the majority of total deposits. The Bank has a portfolio
of core deposits totaling approximately 46 percent of deposits, providing a base
of stable lower costing deposits for operations. The Bank has not utilized
borrowed funds since fiscal 1993, with deposits and equity providing sufficient
funds for operations.
Positive earnings from fiscal 1993 through March 31, 1998 and a positive
adjustment for FAS 122 resulted in an increase in the Bank's capital to $31.4
million, or 13.5 percent of assets, as of March 31, 1998. The Bank's capital
ratio increased steadily over the time period shown in Table 1.1, as equity
increased due to profitable operations and the asset base remained relatively
stable. Cortland is currently in compliance with respect to all of its fully
phased-in capital requirements. The addition of conversion proceeds will enhance
the Bank's capital position and strengthen Cortland's competitive posture within
its market area.
Income and Expense Trends
Table 1.2 displays the Bank's earnings over the past five fiscal years and
for the most recent twelve month period, and reveals that earnings for this time
period has fluctuated between 0.03 and 0.98 percent of average assets, and
totaled 0.07 percent for the twelve months ended March 31, 1998 and 0.03 percent
for fiscal 1997. The more recent lower earnings have been attributable in part
to the resolution of the loan quality problems resulting from the officer
defalcation that was uncovered in late 1996. During fiscal 1997, the Bank
incurred elevated levels of loan loss provisions in order to recognize the fair
value of certain loans and higher levels of losses on the sale of real estate
owned ("REO"). Operating expenses were also higher in fiscal 1997 and the most
recent period as additional professional fees and other expenses were incurred
in connection with the loan portfolio quality and officer defalcation issues.
Net interest income comprises the majority of the Bank's net income, and
totaled $9.3 million for the twelve months ended March 31, 1998, or 3.98 percent
of average assets. Cortland has been successful in maintaining a level of net
interest income in excess of 3.75 percent of average assets over the past five
fiscal years, resulting from a strong yield/cost spread. Exhibit I-5 highlights
the changes in the Bank's asset yields and cost of funds over the past three
fiscal years, which have influenced the level of net interest income. Spreads
have
<PAGE>
RP Financial, LC.
Table 1.2
Cortland Savings Bank
Historical Income Statements
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------
1993 1994 1995
---------------------- ---------------------- ----------------------
Amount Pct(1) Amount Pct(1) Amount Pct(1)
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
($000) (%) ($000) (%) ($000) (%)
Interest Income $17,451 8.53% $16,855 7.14% $17,811 7.59%
Interest Expense (8,580) -4.20% (7,915) -3.35% (8,613) -3.67%
------- ------ ------- ------ ------- ------
Net Interest Income $ 8,871 4.34% $ 8,940 3.79% $ 9,198 3.92%
Provision for Loan Losses (550) -0.27% (300) -0.13% (600) -0.26%
------- ------ ------- ------ ------- ------
Net Interest Income after Provisions $ 8,321 4.07% $ 8,640 3.66% $ 8,598 3.66%
Other Operating Income $ 573 0.28% $ 558 0.24% $ 755 0.32%
Operating Expense (5,644) -2.76% (5,463) -2.32% (5,738) -2.45%
------- ------ ------- ------ ------- ------
Net Operating Income $ 3,250 1.59% $ 3,735 1.58% $ 3,615 1.54%
Gain(Loss) on Sale of Securities $ 0 0.00% $ (80) -0.03% $ 16 0.01%
Gain(Loss) on REO Operations 0 0.00% (123) -0.05% (207) -0.09%
Nationar Recovery(Provision) 0 0.00% 0 0.00% (100) -0.04%
------- ------ ------- ------ ------- ------
Net Non-Operating Income/Expense $ 0 0.00% $ (203) -0.09% $ (291) -0.12%
Net Income Before Tax $ 3,250 1.59% $ 3,532 1.50% $ 3,324 1.42%
Income Taxes (1,144) -0.56% (1,361) -0.58% (1,400) -0.60%
------- ------ ------- ------ ------- ------
Net Inc(Loss) Before Extraordinary Items $ 2,106 1.03% $ 2,171 0.92% $ 1,924 0.82%
Cumulative Effect of Change in
Accounting For Income Taxes $ (103) -0.05% $ 0 0.00% $0 0.00%
------- ------ ------- ------ ------- ------
Net Income (Loss) $ 2,003 0.98% $ 2,171 0.92% $ 1,924 0.82%
Adjusted Earnings
Net Operating Income $ 3,250 1.59% $ 3,735 1.58% $ 3,615 1.54%
Tax Effect (2) (1,144) -0.56% (1,439) -0.61% (1,523) -0.65%
------- ------ ------- ------ ------- ------
Adjusted Earnings $ 2,106 1.03% $ 2,296 0.97% $ 2,092 0.89%
Memo:
Efficiency Ratio 59.76% 57.52% 57.65%
Effective Tax Rate 35.20% 38.53% 42.12%
<CAPTION>
For the Year Ended December 31,
-------------------------------------------- 12 Months Ended
1996 1997 March 31, 1998
--------------------- ---------------------- ----------------------
Amount Pct(1) Amount Pct(1) Amount Pct(1)
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
($000) (%) ($000) (%) ($000) (%)
Interest Income $17,787 7.56% $17,667 7.36% $17,561 7.54%
Interest Expense (8,758) -3.72% (8,328) -3.47% (8,274) -3.55%
------- ----- ------- ----- ------- -----
Net Interest Income $ 9,029 3.84% $ 9,339 3.89% $ 9,287 3.98%
Provision for Loan Losses (1,380) -0.59% (3,300) -1.38% (3,150) -1.35%
------- ----- ------- ----- ------- -----
Net Interest Income after Provisions $ 7,649 3.25% $ 6,039 2.52% $ 6,137 2.63%
Other Operating Income $ 755 0.32% $ 798 0.33% $ 825 0.35%
Operating Expense (5,941) -2.52% (6,372) -2.66% (6,321) -2.71%
------- ----- ------- ----- ------- -----
Net Operating Income $ 2,463 1.05% $ 465 0.19% $ 641 0.28%
Gain(Loss) on Sale of Securities $ 15 0.01% $ 46 0.02% $ 45 0.02%
Gain(Loss) on REO Operations (260) -0.11% (500) -0.21% (571) -0.25%
Nationar Recovery(Provision) 0 0.00% 45 0.02% 45 0.02%
------- ----- ------- ----- ------- -----
Net Non-Operating Income/Expense $ (245) -0.10% $ (409) -0.17% $ (481) -0.21%
Net Income Before Tax $ 2,218 0.94% $ 56 0.02% $ 160 0.07%
Income Taxes (853) -0.36% 16 0.01% (6) -0.00%
------- ----- ------- ----- ------- -----
Net Inc(Loss) Before Extraordinary Items $ 1,365 0.58% $ 72 0.03% $ 154 0.07%
Cumulative Effect of Change in
Accounting For Income Taxes 0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ----- ------- -----
Net Income (Loss) $ 1,365 0.58% $ 72 0.03% $ 154 0.07%
Adjusted Earnings
Net Operating Income $ 2,463 1.05% $ 465 0.19% $ 641 0.28%
Tax Effect (2) (947) -0.40% 133 0.06% (24) -0.01%
------- ----- ------- ----- ------- -----
Adjusted Earnings $ 1,516 0.64% $ 598 0.25% $ 617 0.26%
Memo:
Efficiency Ratio 60.72% 62.86% 62.51%
Effective Tax Rate 38.46% -28.57% 3.75%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Based on effective tax rate for each year.
Source: Prospecus, audited financial reports and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.10
historically been in excess of 3.45 percent, and declined by 12 basis points
between fiscal 1995 and 1997, as the Bank's asset yields fell by 20 basis
points, while the cost of funds declined by only 8 basis points. For the most
recent three month period, the yield cost spread increased to 3.70 percent.
These trends indicate that the Bank has been successful in maintaining and/or
improving the yield/cost spread and maintaining the net interest margin.
Cortland has historically derived income from non-interest sources, which
has provided some protection from changes in the net interest margin due to
interest rate fluctuations. For the most recent twelve month period,
non-interest operating income totaled $825,000, or 0.35 percent of average
assets, and the level of such income has increased since fiscal 1994. A majority
of this income results from the Bank's deposit base in the form of various fees
and charges on deposit accounts and transactions. A smaller portion of this
income is obtained from miscellaneous banking service charges and fees. Going
forward, the Bank anticipates that non-interest income will remain primarily
related to the deposit base, as other significant income sources are not
expected to be developed in the short term.
Cortland's operating expenses have increased in the time period shown in
Table 1.2, in part due to the growth in the general cost of operations,
including the new branch office in 1994 and inflationary increases in costs. In
addition, Cortland has incurred costs in connection with resolving the officer
defalcation and problem asset disposition issues in the most recent periods. The
Bank's operating expenses are expected to initially increase following the
conversion as a result of the following items. The ESOP and PRRP purchases in
the offering and in the year following conversion, respectively, will increase
annual expenses. In addition, as a full stock institution, the Bank will incur
additional legal, accounting, printing/mailing and related costs.
Provisions for loan losses have also had a material impact on earnings in
recent years, totaling $3,150,000, or 1.35 percent of assets, for the most
recent twelve month period. Cortland added to the allowance for loan losses in
recognition of the level of problem loans resulted from the officer defalcation,
and in recognition of the fair value of the loans which were ultimately sold in
early 1998. The Bank is budgeting provisions of $75,000 per quarter in the
future in order to maintain or slightly increase the allowance for loan losses
("ALL") ratio as a percent of loans receivable. As of March 31, 1998 the ALL
balance was equal to $2,230,000, or 1.45 percent of net loans receivable and
152.95 percent of non-performing loans, as compared to $1,952,000, or 1.23
percent of net loans and 53.73 percent of non-performing loans at fiscal year
end 1996 (see Exhibit I-6).
Historically, non-operating gains and losses have been limited to gains or
losses on the sale of investment securities and losses on the sale of REO
properties (see Table 1.2). The losses on the sales of REO increased during
fiscal 1997, primarily due to additional problem assets resulting from the
officer defalcation issue. In addition, during fiscal 1995 the Bank booked a
provision for loss of $100,000 on an investment in Nationar, a
<PAGE>
RP Financial, LC.
Page 1.11
bank that experienced financial difficulties. During fiscal 1997, Cortland
received a distribution of $45,000 from the liquidation of Nationar.
Interest Rate Risk Management
Cortland attempts to manage exposure to interest rate fluctuations on both
the asset and liability side of the balance sheet, and has attempted to enhance
the interest sensitivity of its operations through several means, including: (1)
increasing the balance of short-term to maturity commercial business loans and
consumer loans; (2) maintaining a balance of holding short-term investment
securities; (3) building a balance of interest-free capital; (4) extending
whenever possible the term to maturity of the certificate of deposit base; and,
(5) increasing the proportion of transaction accounts in the deposit base which
are considered to be less interest rate sensitive funds. Exhibit I-7 displays
the distribution of the Bank's fixed and adjustable rate loans.
Cortland monitors its exposure to interest rate risk using a calculation
of the cumulative gap position for the Bank. As shown in Exhibit I-8, according
to the most recent calculation, the Bank's cumulative gap position in the
one-year time period was a negative 10.5 percent, indicating a level of interest
rate risk. Although this measure is within the Board-established limits of the
Bank, Cortland is seeking to reduce exposure to interest rate risk, and the
reinvestment of conversion proceeds is expected to contribute to reduced
exposure.
Lending Activities and Strategy
The Bank's historical lending activities emphasize the origination of 1-4
family mortgage loans (see Exhibits I-9 and I-10, loan composition and
maturity). Cortland has also concentrated on loan portfolio diversification by
maintaining portfolios of commercial real estate loans, commercial business
loans and non-mortgage loans in an effort to enhance overall portfolio yields
and expand the Bank's products and services offered. Illustrating the stability
of the portfolio composition, gross loans increased by 8.3 percent between
December 31, 1993 and March 31, 1998, from $144.6 million to $156.6 million,
with the proportion of residential real estate, commercial real estate,
construction, home equity and non-mortgage loans remaining relatively constant.
As of March 31, 1998, residential mortgage loans secured by 1-4 family
properties totaled $97.2 million, or 62.0 percent of total loans receivable,
consisting of both ARMs and fixed-rate residential mortgages. In recent years,
with relatively low mortgage interest rates, customer preference has favored
fixed-rate mortgage loans, which have increased from 29.9 percent to 39.9
percent of the overall loan portfolio between December 31, 1993 and March 31,
1998, while residential ARMs have declined from 31.0 percent to 22.2 percent
over the same time
<PAGE>
RP Financial, LC.
Page 1.12
period. In the past, the Bank's residential mortgage loans have not been
originated using standards, procedures and documentation customary on the
secondary market, and thus these loans are generally not saleable to regular
secondary market purchasers. Cortland anticipates that by the end of 1998, most
of the new residential mortgage loan originations will meet secondary market
standards. Residential loans made by the Bank originated with loan-to-value
("LTV") ratios in excess of 80 percent currently require private mortgage
insurance ("PMI") coverage, although the Bank has approximately $7.5 million of
residential mortgage loans with LTV ratios between 80 percent and 90 percent
without PMI coverage for CRA purposes. Fixed-rate mortgages are offered with
maturities of up to 30 years, with all loans currently held in portfolio. The
Bank anticipates beginning to sell longer-term fixed rate residential loans in
the secondary market by the end of 1998.
Approximately 36 percent of the Bank's 1-4 family residential mortgages
consisted of ARMs at March 31, 1998, which are retained for portfolio as part of
asset/liability management strategy. Cortland offers ARMs with one- or
three-year adjustment periods that are indexed to the weekly average rate on the
corresponding U.S. Treasury securities, adjusted to a constant maturity, plus a
margin of three percent. The majority of ARMs are originated with annual
adjustment caps of 2.0 percent for one year ARMs and 3.0 percent for three year
ARMs. There is typically a lifetime adjustment cap of 6.0 percentage points.
Cortland also originates home equity lines of credit loans secured by 1-4
family residential property, usually as a second lien. These loans are generally
adjustable rate in nature, interest-only with ten year terms, followed by a
repayment period of generally 15 years during which the loan is repaid in
principal and interest installments. Cortland also offers home equity loans that
are fully advanced at closing and repayable in monthly principal and interest
payments over periods of up to 10 years. Maximum LTVs on these loans is
generally 80 percent.
Cortland originates commercial real estate loans in order to diversify the
loan portfolio and increase overall asset yields. As of March 31, 1998,
commercial real estate loans totaled $30.6 million, or 19.5 percent of loans
receivable. The Bank's commercial real estate portfolio consists primarily of
loans secured by the buildings in which various small businesses conduct their
operations, such as small office buildings, warehouses and office condos.
Commercial real estate loans originated by Cortland are predominantly fixed rate
loans that generally have terms of up to 20 years, although most of the Bank's
recent fixed rate commercial mortgage loans have five year terms that allow the
Bank to adjust the interest rate after each term. Adjustable rate commercial
real estate loans are indexed to the prime rate of interest or the U.S. Treasury
rate of a similar term as the adjustment period. LTVs on income property loans
typically do not exceed 75 percent. The Bank seeks to manage credit risk on such
loans by lending primarily on local property, to borrowers with whom management
is familiar, and obtaining personal guarantees.
<PAGE>
RP Financial, LC.
Page 1.13
Construction loans totaled $0.3 million, or 0.2 percent of loans
receivable, at March 31, 1998, primarily for residential property. Most of the
construction loans are underwritten as construction/permanent loans to the
future occupants, structured to become permanent loans upon completion of the
construction. Construction loans are structured as interest-only during the
construction period, which generally equals three months. Construction/permanent
loans have maximum LTV ratios equal to the requirements of the permanent loans.
Cortland also offers consumer loans, which totaled $16.0 million, or 10.2
percent of gross loans receivable, at March 31, 1998. The Bank offers a variety
of types of consumer loans, including loans secured by automobiles, student
loans, deposit accounts, credit cards and secured and unsecured personal loans.
Cortland has recently emphasized the origination of automobile loans in order to
improve overall asset yields, increase the interest sensitivity of the assets
and expand the customer base. Auto loans are originated through both direct
contact with borrowers and through auto dealers as indirect loans. Cortland
performs its own underwriting of these indirect loans. Auto loans are made on
both new and used vehicles with maturities of no more than five years with LTVs
of less than 85 percent. Other consumer loans are generally offered as short
term loans of up to five years at fixed interest rates.
Commercial business loans also represent an area of loan portfolio
diversification, as Cortland strives to provide all financing needs for a
business customer (i.e. real estate loans and working capital or operating
loans). The Bank's commercial business loans have remained in the range of $6.5
to $9.0 million over the past five fiscal years and totaled $6.5 million as of
March 31, 1998. These loans are primarily made to local small businesses in
Cortland County, and are attractive due to the higher yields and shorter
durations. Commercial business loans usually carry a floating rate and are
secured by assets such as inventory, equipment or other assets and guaranteed by
the principals.
As shown in Exhibit I-11, Cortland's overall loan origination volume has
been relatively stable at $31.7 to $33.6 million over the most recent three
fiscal years. The table highlights the Bank's emphasis on residential real
estate and consumer lending, with residential originations increasing from $10.8
million, or 32.1 percent, of loan originations in fiscal 1995 to $14.7 million,
or 44.8 percent of loan originations for fiscal 1997. Cortland has not
historically purchased loans, and has not sold loans in the secondary market.
<PAGE>
Asset Quality
Exhibit I-12 displays Cortland's NPAs from fiscal 1993 to March 31, 1998,
and shows that the level of NPLs has declined to 0.94 percent of total loans at
March 31, 1998, following an extended period in excess of 1.2 percent of loans.
This decline is primarily due to the previously described sale of problem loans,
which substantially reduced the level of non-accrual loans. The Bank recorded
REO of $760,000 at March 31, 1998. As of the same date, the ratio of NPAs to
assets equaled 0.96 percent of assets, a decline from 2.27 percent of assets at
fiscal year end 1997. At March 31, 1998, NPAs totaled $2,228,000 and consisted
of residential real estate, commercial real estate and non-mortgage loans on
non-accrual status, other loans greater than 90 days delinquent and still
accruing and REO. As of the same date, the Bank maintained valuation allowances
of $2,230,000, equal to 1.45 percent of loans receivable and 100.09 percent of
NPAs. Cortland had classified assets of $2.2 million at March 31, 1998, all of
which were classified as substandard or doubtful (see Exhibit I-13).
Funding Composition and Strategy
Exhibit I-14 provides data pertaining to Cortland's deposit composition at
fiscal year ends 1995 through March 31, 1998. Cortland's deposits consist of CD
accounts, which totaled $107.9 million, or 54 percent of total deposits, and a
base of core deposits (passbook accounts, NOW accounts, non-interest checking
accounts, and MMDAs) which totaled $90.4 million, or 46 percent of total
deposits. Passbook accounts were the largest component of core deposits and
totaled $63.7 million, or 32 percent of total deposits, at March 31, 1998,
followed by NOW accounts totaling $9.3 million, and demand accounts totaling
$9.1 million. From December 31, 1995 to March 31, 1998, the proportion of non-CD
deposit funds as a percent of total deposits increased slightly from 44.3
percent to 45.6 percent, indicating the Bank has been successful in maintaining
this low-cost deposit base.
CDs accounted for approximately 54 percent of Cortland's deposit base at
March 31, 1998. Approximately 59 percent of the CD portfolio was scheduled to
mature in one year or less. Jumbo CDs, which tend to be more rate sensitive than
lower balance CDs, accounted for $13.7 million, or 6.9 percent of deposits, at
March 31, 1998. The level of jumbo CDs in the Bank's CD portfolio is significant
in that jumbo CDs tend to be more rate sensitive than smaller denomination CDs,
increasing the Bank's interest rate risk to a degree.
<PAGE>
RP Financial, LC.
Page 1.15
Subsidiary Operations
The Bank currently has one subsidiary operation, which was incorporated in
New York in 1986 but which has been inactive for many years and does not engage
in any business at this time.
Legal Proceedings
Other than the routine legal proceedings that occur in the Bank's ordinary
course of business, the Bank is not involved in litigation which is expected to
have a material impact on the Bank's financial condition or operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
Cortland conducts operations in the central region of the State of New
York, operating out of a headquarters office in Cortland, Cortland County, New
York, a branch office in the adjoining community of Cortlandville to the south,
and a branch office in Homer, a small city adjacent to the north of the City of
Cortland. Cortland has also recently opened a representative office in Ithaca,
Tompkins County, New York, an adjoining county to southwest, to originate
mortgage loans. All of the Bank's full-service facilities are located in
Cortland County. Exhibit I-1 details the locations of the Bank's offices, while
Exhibit II-1 details the general characteristics of the Bank's offices. Cortland
County is a primarily rural county located to the south of the Syracuse
metropolitan statistical area ("MSA") and north of the Binghamton, New York MSA.
Cortland County has an estimated 1997 population of 48,000, while the Syracuse
MSA has an estimated population of 750,000 and the Binghamton MSA has an
estimated population of 250,000. While the more rural nature of Cortland County
area has historically limited overall population levels, U.S. Interstate Route
I-81 has provided access to the larger population and employment centers of
Syracuse and Binghamton. The City of Cortland and Cortland County, in particular
the local areas surrounding the Bank's offices, represent the primary market
area for deposit generation as most of the Bank's depositors live in the areas
surrounding the office locations. Cortland's sources for loans is primarily
Cortland County, and to a lesser extent, the surrounding counties.
The Bank's market area has in general reported stable levels of
population, households and income in recent years, as the rural nature of the
county has acted to restrict employment opportunities and limit increases in
income. The Cortland County employment base is generally diversified into a
broad variety of employment sectors, including education, tourism, health care,
services and manufacturing.
Competition from other financial institutions operating in the Bank's
market area includes a number of both large and small commercial banks, and
against this competition the Bank maintains a market share of approximately
forty percent of overall financial institution deposits in Cortland County. The
other financial institutions in Cortland County consist of both locally-owned
community-oriented institutions and subsidiaries of larger regional and
superregional institutions. The Bank has experienced little change in deposits
in recent years primarily due to the lack of growth in market area deposits and
continued competition for deposits.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions.
<PAGE>
RP Financial, LC.
Page 2.2
These factors have been briefly examined in the following pages to help
determine the growth potential that exists, the relative economic health of the
market area and the relative impact on value.
National Economic Factors
Over the past year, national economic growth has been mixed. Second
quarter economic data for 1997 generally reflected a less robust pace of growth
than maintained during the first quarter. Most notably, a lower than anticipated
National Association of Purchasing Managers index in April 1997 indicated a
slowdown of expansion in the manufacturing sector. New home sales also dropped
by 7.7 percent in April 1997, the sharpest decline in six months. Automobile
sales for April and May declined from year earlier levels, and discounting
became more common by automakers. A rise in the June unemployment rate and GDP
growth slowing to an annual rate of 2.2 percent in the second quarter, which was
well below the revised 4.9 percent rate recorded in the first quarter, further
signaled that the economy was slowing to a more sustainable pace.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade deficit provided indications of a strengthening
economy. At the same time, a modest increase in the July consumer price index
and a decline in July wholesale prices suggested that inflation remained
non-threatening. At the end of August, the second quarter GDP was revised upward
to a 3.6 percent annual growth rate compared to a 2.2 percent original estimate.
In early-September, a slight increase in the August unemployment rate did little
to alleviate inflation concerns, as the employment data indicated that the job
market remained tight and wages continued to rise. Comparatively, only a slight
increase in the August consumer price index provided evidence that inflation
remained tame at the end of the third quarter. September unemployment data
served to further calm inflation fears in early-October, as the unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy.
At the beginning of the fourth quarter of 1997, inflation concerns became
more notable following congressional testimony by the Federal Reserve Chairman,
as he indicated that it would be difficult for the U.S. economy to maintain the
current balance between tight labor markets and low inflation. However, economic
data released in October and November provided mixed signals on the strength of
the economy. For example, a decline in the October unemployment rate to a
24-year low of 4.7 percent indicated a rapidly expanding 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, as the tight
<PAGE>
RP Financial, LC.
Page 2.3
labor market pushed hourly wages higher. Economic data released in mid-December
provided for a more favorable inflation outlook, since 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 higher 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
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.
Economic data released in early-March 1998 provided mixed economic
signals, with a decline in the February unemployment rate to 4.6 percent being
indicative of a robust U.S. economy. However, the February employment data also
reflected a decline in manufacturing jobs, which suggested that the growth may
not be sustainable. A decline in February producer prices and plunging oil
prices further eased inflation concerns in mid-March 1998. However, the February
CPI reflected an accelerating economy, after factoring out the sharp decline in
energy prices, indicating that competition from cheap Asian imports hadn't yet
forced many U.S. companies to lower prices. At the end of March, data which
showed a record pace for new and existing home sales in February further
signaled a strong U.S. economy. Tight labor markets were a further indication of
the growing U.S. economy, as inflation adjusted wages for the lowest paid
workers started to rise in 1997, reversing a 25-year economic trend in the U.S.
economy. While the March employment data reflected a loss of jobs and an
increase in the unemployment rate to 4.7 percent from 4.6 percent in February,
the decline in economic activity was believed to be mostly weather-related. A
slower pace of economic growth was also indicated by a slight decline in March
retail sales and consumer prices stayed flat during March.
<PAGE>
RP Financial, LC.
Page 2.4
First quarter GDP growth of 4.2 percent signaled a strong pace of economic
growth, although inflation remained in-check. The favorable inflation data
included decelerating labor costs during the first quarter of 1998 compared to
the fourth quarter of 1997 and the price index for gross domestic purchases was
flat during the first quarter. The April 1998 employment data showed a
surprising decline in the unemployment rate to 4.3 percent, the lowest level
since February 1970. However, inflation concerns that were raised by the sharp
decline in the unemployment rate were somewhat eased by a decline in
manufacturing employment, suggesting that the economy may be slowing.
Comparatively, consumer prices rose 0.2 percent in April, which was the largest
increase in six months. Overall, however, the April economic data indicated that
inflation continued to be contained, as the annual core rate of inflation was
measured at just 2.1 percent.
Consistent with the mixed economic activity, interest rate trends have
been varied as well over the past year. News of the budget agreement and
favorable inflation data provided for a rally in bond prices in early-May 1997.
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 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
<PAGE>
RP Financial, LC.
Page 2.5
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 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 it
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 data 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.
At the beginning of March 1998, signs of a strengthening U.S. economy
pushed the yield on the 30-year bond above 6.0 percent for the first time in
three months. However, the decline in bond prices was short-lived, as declining
oil prices and news of a 1.6 percent decline in February producer prices served
to edge the 30-year bond year back below 6.0 percent in mid-March. The 30-year
bond yield approached 6.0 percent again in late-March, as the economic strength
indicated by the new and existing home sales reports for February heightened
speculation that the Federal Reserve would raise interest rates. At its
late-March meeting the Federal Reserve elected to leave interest rates
unchanged, which along with the slight increase in the March unemployment rate,
provided for a mild rally in bond prices during late-March and early-April.
Indications of slower economic growth, such as a decline in March retail
sales, provided for a fairly stable interest rate environment through mid-April
1998. Speculation that the Federal Reserve was leaning
<PAGE>
RP Financial, LC.
Page 2.6
towards increasing interest rates triggered a sell-off in bonds during
late-April, as the 30-year bond yield moved above 6.0 percent. However, the
downturn was abbreviated by the favorable inflation data reflected for labor
costs during the first quarter of 1998, which pushed the yield on the 30-year
bond back below 6.0 percent at the end of April. News of the sharp decline in
the April unemployment rate translated into slightly higher interest rates in
early-May, reflecting concerns that the tight labor market would result in
higher labor costs. Comparatively, interest rates edged lower in mid-May, with
turmoil in the Asian markets and the Federal Reserve's decision not to raise
interest rates at its May meeting being noted as reasons for the decline in
interest rates. As of June 5, 1998, one- and thirty-year U.S. Government bonds
were yielding 5.43 percent and 5.79 percent, respectively, versus comparative
year ago rates of 5.74 percent and 6.88 percent. Exhibit II-2 provides
historical interest rate trends from 1991 through June 5, 1998.
Market Area Demographics
Demographic growth trends in Cortland County have been measured by changes
in population, number of households and median household income and other data,
with trends in those areas summarized by the data presented in Exhibit II-3,
while additional data concerning sources of personal income and employment
sectors is presented in Exhibit II-4. Syracuse and Binghamton MSA, New York and
U.S. data is provided for comparative purposes, and trends in this data provide
some indication of future levels of business activities for financial
institutions. As shown in Exhibit II-3, and illustrating the rural nature of
Cortland County, there was an estimated population of 48,000 in Cortland County
as of 1997. Since 1990, Cortland County has experienced a slight decline in both
population and households, while the State of New York has recorded only minimal
growth. This history of stable population and household numbers is prevalent
throughout central New York State, as both the Syracuse and Binghamton MSAs
recorded stable or declining population and household figures since 1990. These
trends are projected to continue through the year 2002, and indicate that the
Bank operates in a market area with essentially zero growth in these key
demographic areas.
Median household income levels in the primary market area of Cortland
County are generally in line with the central New York region averages
(including the Syracuse and Binghamton MSAs), but lower than the statewide
averages (which have an upward bias due to the higher incomes of the New York
City area). Estimated per capita annual income for 1997 in Cortland County was
less than all comparative area figures, including 14 percent less than the
Syracuse MSA and 33 percent less than the state average. However, these lower
income levels are offset by the relatively lower cost of living found in the
more rural Cortland County. Income
<PAGE>
RP Financial, LC.
Page 2.7
distribution levels are similar to per capita income figures, revealing that
Cortland County has a higher proportion of lower income households (below
$50,000 annually), reflecting the lower income nature of the area. Based on the
projections of stable population and households, along with comparable or lower
income levels, growth opportunities in the primary market area counties can be
expected to remain limited, with growth most likely achievable through expansion
of the Bank's market overall area.
Economy
The Bank's deposit gathering activities and a substantial portion of the
lending operations are conducted in Cortland County. Employment in this county
is generally diversified, containing employment in services, wholesale and
retail trade, manufacturing and state and local government. As shown in Table
2.1 below, Cortland County has a higher proportion of employment in wholesale
and retail trade and manufacturing than the state as a whole, 42 percent versus
29 percent, respectively, while the state of New York has a higher employment
rate in services. As indicated previously, the I-81 corridor provides access to
the Syracuse and Binghamton MSAs and the rest of the eastern coast of the United
States. Table 2.2 presents the major employers within Cortland County. As shown
by this list of employers, the Bank's market area county contains a relatively
well diversified employment base.
Table 2.1
Cortland Savings Bank
Cortland County Employment Characteristics
Employment Area New York Cortland County
- --------------- -------- ---------------
Services 35.2% 28.2%
Wholesale/Retail Trade 19.2% 22.3%
Manufacturing 10.1% 19.2%
Government 14.6% 14.4%
Construction 3.8% 4.2%
Other 17.1% 11.7%
----- -----
Total 100.0% 100.0%
Source: REIS, Inc.
<PAGE>
RP Financial, LC.
Page 2.8
Table 2.2
Cortland Savings Bank
Major Cortland County Employers
Employer Industry Employees
- -------- -------- ---------
Cortland Memorial Hospital Health Care 501-1,000
Cortland Asphalt-Suit Kote Asphalt Products 501-1,000
Pall Trinity Corporation Filters, FiltrationSystems 501-1,000
SUNY - Cortland Education 501-1,000
Buckbee-Mears Cortland TV Screen Manufacturing 251-500
Marietta Corporation Packaging Supplies/Samples 251-500
Cooper Hand Tools Tools 100-250
Intertect Laboratories Testing Laboratories 100-250
Monarch Machine and Tool Machine Tools 100-250
Saulsbury Fire Equipment Fire Equipment 100-250
Source: Cortland County Chamber of Commerce.
Table 2.3 displays unemployment data in the local market area as of March
1997 and March 1998. While the unemployment rate has declined for the United
States and the state of New York over the past year, the unemployment rate for
Cortland County increased, and remains well above state and national averages as
of March 1998. The unemployment rate for New York is also above the national
average. This data indicates that the Bank's market area county is experiencing
a comparatively low level of job availability for the current residents eligible
for employment, and this elevated unemployment rate is significant in view of
the stable levels of population that have existed over the recent past.
Table 2.3
Cortland Savings Bank
Market Area Unemployment Trends
Region March 1997 March 1998
- ------ ---------- ----------
United States 5.5% 5.0%
New York 7.0% 6.5%
Cortland County 8.2% 8.5%
Source: U.S. Bureau of Labor Statistics.
<PAGE>
RP Financial, LC.
Page 2.9
Deposit Trends 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. Smaller
institutions such as Cortland will be forced to either compete with larger
institutions on pricing, or to identify and operate in a "niche" that will allow
for operating margins to be maintained at profitable levels.
The Bank's market area for deposits, defined as Cortland County, is
characterized by the presence of both locally-based and locally-owned financial
institutions and larger, regional and superregional institutions. Major
competitors include local commercial banks such as the First National Bank of
Cortland, and larger regional and superregional banks such as Marine Midland
Bank (Buffalo, NY), Manufacturers and Traders Trust Company (Buffalo, NY),
Keybank National Association (Cleveland, OH) and Fleet Bank (Albany, NY).
Table 2.4 displays deposit market trends for the State of New York and the
primary market area from June 30, 1995 to June 30, 1997. Overall, financial
institution deposits showed an increase statewide, with commercial banks showing
growth while savings institutions lost deposits. This trend of moderate
increases in overall deposits, similar to the rest of the nation, reflects in
part disintermediation whereby banking customers have also placed available
funds into other types of financial intermediaries such as mutual funds,
investment firms, brokerage houses, and insurance companies. In contrast,
deposit trends in Cortland County exhibited a slight decline over the same two
year period. Cortland is the only savings institutions operating in Cortland
County, and reported an increase in deposits of less than one percent, while
commercial banks decreased deposits by approximately the same amount. Commercial
banks hold approximately 58 percent of financial institution deposits in
Cortland County. Cortland Savings maintains a market share of over 42 percent of
financial institution deposits in Cortland County, indicating that further gains
in deposits may be difficult.
Summary
The overall condition of the primary market area can be characterized as
stable with a relatively small population and household base. The local economy
is relatively diversified and is attractive to new businesses. In order to
support the Bank's desired level of business operations, lending activities have
been pursued in a larger geographical area including several of the surrounding
counties. Going forward, in view of the local demographic and economic trends
and the numbers and types of competitors in the market area, the competition for
deposits is
<PAGE>
-----------------------------
Table 2.4
Cortland Savings Bank
Deposit Summary
-----------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
As of June 30,
-------------------------------------------------------------------------
1995 1997
-------------------------------------- --------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1995-1997
-------- ------ --------- -------- ------ -------- -----------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of New York $348,599,172 100.0% 4,796 $397,560,108 100.0% 4,520 6.8%
Commercial Banks 249,623,347 71.6% 3,645 314,746,311 79.2% 3,509 12.3%
Savings Institutions/Savings Banks 98,975,825 28.4% 1,151 82,813,797 20.8% 1,011 -8.5%
Cortland County $ 491,647 100.0% 15 $ 490,448 100.0% 15 -0.1%
Commercial Banks 286,361 58.2% 12 283,869 57.9% 12 -0.4%
Savings Institutions/Savings Banks 205,286 41.8% 3 206,579 42.1% 3 0.3%
Cortland Savings 205,286 41.8% 3 206,579 42.1% 3 0.3%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.11
expected to remain substantial, which will result in Cortland having to pay
competitive deposit rates to maintain local market share. The reinvestment of
stock proceeds from the conversion may mitigate to some extent the potentially
higher funding costs to attract deposits through anticipated loyalty of local
shareholders and referrals from local shareholders.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Cortland's operations versus a group
of comparable public companies (the "Peer Group") selected from the universe of
all publicly-traded savings institutions. The primary basis of the pro forma
market valuation of the Bank is provided by these public companies. Factors
affecting Cortland's pro forma market value such as financial condition, credit
risk, interest rate risk, and recent operating results can be readily assessed
in relation to the Peer Group. Current market pricing of the Peer Group, subject
to appropriate adjustments to account for differences between Cortland and the
Peer Group, will then be used as a basis for the valuation of the Bank's
to-be-issued common stock.
Selection of Peer Group
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have excluded from the Peer Group all
publicly-traded subsidiary institutions of mutual holding companies, because
their pricing ratios are distorted by the minority issuance of their shares. We
have also excluded from the Peer Group those companies under acquisition and/or
companies whose market prices appear to be distorted by speculative factors or
unusual operating conditions. The universe of all publicly-traded institutions
is included as Exhibit III-1. Pricing characteristics of all savings
institutions are included as Exhibit IV-1 (institutions excluded from the
calculation of averages are denoted with a footnote (8)).
Under ideal circumstances, the Peer Group would be comprised of a minimum
of ten publicly-traded New York savings institutions with capital, earnings,
asset sizes, balance sheet composition, risk profiles, operating strategies and
market areas comparable to the Bank. Since 10 such institutions do not exist, it
was necessary to expand the search beyond state boundaries and with search
criteria for similarly sized, well capitalized institutions located in other
states. Thus, in the selection process we applied the two primary "screens" to
the universe of all public companies as follows:
o Screen #1. New York State institutions outside of New York City with
assets more than $100 million less than $1.0 billion. Seven
companies met the criteria for this screen and were included in the
Peer Group (see Exhibit III-2). The remaining New York institutions
were excluded due to the company's location in New York City and
asset size considerations.
<PAGE>
RP Financial, LC.
Page 3.2
o Screen #2. Institutions operating in Ohio with equity/assets ratios
in excess of 20 percent and meaningful price/earnings multiples
(less than 30 times). Three companies met the criteria for this
screen and were included in the Peer Group (see Exhibit III-3).
Table 3.1 lists key characteristics of the Peer Group companies. In
general, the Peer Group is comprised of relatively seasoned publicly-traded
institutions operating in New York and Ohio with a moderately lower average
asset size. While the Peer Group is not exactly comparable to the Bank, we
believe that it provides a reasonable representation of publicly-traded savings
institutions with operations comparable to those of the Bank and thus forms a
sound basis for valuation. A summary description of the key characteristics of
each of the Peer Group companies selected is detailed below.
o Ambanc Holding Co., Inc. of Amsterdam, NY. Ambanc, the largest member of
the Peer Group with over $520 million in assets, is traded on the NASDAQ
and was selected due to its meeting the selection criteria described
above, including operating in close proximity to Cortland in central New
York. Ambanc operates with a relatively high percentage of assets in MBS
and utilizes borrowings to fund operations. Ambanc also reported net
income below the Peer Group averages, and also reported relatively low
levels of non-performing assets along with comparatively high reserve
coverage ratios.
o Catskill Financial Corporation of Catskill, NY. Catskill is a $296 million
institution operating 4 offices in southeastern New York. Catskill
converted to stock form in April 1996, and is a well-seasoned public
company. Catskill reported relatively high investment in cash and
investments and MBS and a loan portfolio dominated by 1-4 family loans.
Catskill reported a high equity/assets ratio and the second highest income
of the Peer Group, which was supported by low operating expenses.
o Skaneateles Bancorp of Skaneateles, NY. Skaneateles, a $258 million
savings institution, operates from nine office locations in central New
York state. Skaneateles, in addition to satisfying the selection criteria,
reported relatively high investment in loans receivable funded almost
completely with deposit funds. Loan portfolio diversification included
commercial real estate and consumer loans. Skaneateles reported a
relatively low equity/assets ratio and income which was supported by a
strong net interest margin, offset by relatively high operating expenses.
Reserve coverage ratios were lower than the Peer Group averages.
o The Elmira Savings Bank of Elmira, NY. Elmira Savings operates in Elmira,
New York in close proximity to the Cortland area in central New York from
six offices. Maintaining an asset base of $230 million, Elmira Savings is
also a seasoned institution that converted in 1985. Elmira Savings
reported a high proportion of assets invested into loans receivable funded
with a high concentration of deposits. Elmira reported loan
diversification into commercial business, commercial real estate and
non-mortgage lending, resulting in a comparatively high risk-weighted
assets-to-assets ratio. Elmira Savings also reported relatively comparable
reserve coverage ratios. Elmira Savings also reported the largest
portfolio of loans serviced for others of the Peer Group members.
o Peekskill Financial Corporation of Peekskill, NY. Peekskill, traded on the
NASDAQ, is a $196 million savings institution operating 3 offices in
southeastern New York. Similar to Ambanc and Catskill, Peekskill reported
relatively high investment in MBS, along with little loan diversification
beyond 1-4 family residential lending, which resulted in the lowest
risk-weighted assets-to-assets ratio of the Peer Group. Peekskill's
profitability was supported by a strong net interest margin and operating
expenses lower than the Peer Group average.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Ambanc Holding Co., Inc. of NY(3) OTC East-Central NY Thrift 520 12 12-31 12/95 18.63 79
CATB Catskill Fin. Corp. of NY(3) OTC Albany NY Thrift 296 4 09-30 04/96 17.38 78
SKAN Skaneateles Bancorp Inc of NY(3) OTC Northwest NY Thrift 258 9 12-31 06/86 17.50 25
ESBK Elmira Svgs Bank (The) of NY(3) OTC NY,PA Thrift 230 6 12-31 03/85 29.25 21
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 196 3 06-30 12/95 18.00 54
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 175 4 12-31 06/95 22.00 27
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 134 D 2 12-31 09/96 12.75 36
GOSB GSB Financial Corp. of NY(3) OTC Southeast NY Thrift 119 2 09-30 07/97 17.13 39
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 113 1 09-30 11/96 20.50 39
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 106 1 06-30 04/97 24.38 44
</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: 06/16/98
<PAGE>
RP Financial, LC.
Page 3.4
o SFS Bancorp of Schenectady, NY. SFS Bancorp is the sixth New York
institution included in the Peer Group, and operates 4 offices in
northcentral New York. SFS Bancorp reported a high investment in loans
receivable (in particular 1-4 family residential loans) and no use of
borrowed funds. SFS Bancorp profitability was affected by a relatively low
level of net interest income and reported lower than average reserve
coverage ratios.
o Westwood Homestead Financial Corporation of Cincinnati, OH. Westwood
Homestead is the first Ohio institution included in the Peer Group, and
operates two offices in Cincinnati, Ohio. Westwood Homestead reported a
strong capital level in excess of 22 percent, and investment primarily in
loans receivable and only minor levels of investment in MBS, with recent
profitability effected by non-operating losses. Westwood Homestead's loan
portfolio showed diversification into commercial real estate, and asset
quality figures were more favorable than the Peer Group averages in terms
of non-performing assets as a percent of assets. Reserves as a percent of
non-performing assets were also higher in comparison to Peer Group
averages.
o GSB Financial Corporation of Goshen, NY. GS Financial is a $119 million
asset company operating out of two offices in New York, and represents the
most recently converted institution in the Peer Group. GS Financial
maintained a majority of earning assets in loans receivable and cash and
investments, with little in terms of MBS. GS Financial reported income
that was below Peer Group averages, with the net interest margin and
operating expenses above Peer Group averages.
o Delphos Citizens Bancorp of Delphos, OH. Delphos has $113 million in
assets and operates out of one office in northeastern Ohio. Delphos
converted in 1996 and thus is well seasoned in the marketplace and
maintains a strong capital position. Delphos reported investment primarily
in MBS and loans receivable, with profitability positively affected by the
lowest level of operating expenses of all Peer Group members. Delphos'
loan portfolio revealed only moderate levels of diversification into non
1-4 family lending. Asset quality figures were more favorable than Peer
Group averages in terms of non-performing assets to total assets, however
reserve coverage ratios were also below Peer Group averages.
o Peoples Sidney Financial Corporation of Sidney, OH. Peoples Sidney
represents the second most recently converted company in the Peer Group,
having converted in April of 1997. Peoples Sidney has $106 million in
assets and operates out of one office in west-central Ohio. Peoples Sidney
operates with a high capital position (due to the recent conversion).
Income was supported by a strong net interest margin, although Peoples
Sidney reported relatively low levels of non-interest income from the
non-diversified operations. Asset quality figures were less favorable than
the Peer Group averages.
In aggregate, the Peer Group companies have an average capital ratio that is
higher than the industry average, and lower core profitability. The Peer Group's
much higher capital ratio combined with lower earnings results in a lower core
ROE of 5.28 percent versus 10.16 percent for the all BIF average. In terms of
pricing, the Peer Group on average trades at a lower price/book ("P/B") multiple
and a higher price/earnings ("P/E") multiple relative to the industry (see the
following table).
<PAGE>
RP Financial, LC.
Page 3.5
As of June 5, 1998
------------------
Peer All BIF
Group Insured
----- -------
Equity-to-Assets 18.43% 11.56%
Return on Assets ("ROA")-Core 0.91% 1.01%
Return on Equity ("ROE")-Core 5.28% 10.16%
Market Capitalization ($Mil) $ 44.15 $628.84
Price-to-Tangible Book Ratio ("P/TB") 131.68% 191.24%
Price-to-Earnings Multiple ("P/E")-Core 22.48x 19.53x
Price-to-Assets Ratio ("P/A") 23.87% 20.50%
Source: Chapter IV tables.
The following sections present a comparison of the Bank's financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the Peer Group. The conclusions drawn from the comparative
analysis are then factored into the valuation analysis discussed in the final
chapter.
Financial Condition
Table 3.2 shows comparative balance sheet measures for the Bank and the
Peer Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. Information for Cortland is as of March 31,
1998, and as of the latest available (December 31 or March 31) for the Peer
Group. The Bank's pre-conversion net worth of 13.5 percent was below the Peer
Group's average net worth ratio of 18.4 percent, although the Bank's capital
level can be expected to exceed the Peer Group average on a pro forma basis. The
increase in the Bank's capital on a pro forma basis can also be expected to
reduce its ROE. Neither the Bank or the Peer Group, on average, had a balance of
goodwill. The Bank and all of the Peer Group companies were in compliance with
all fully phased-in regulatory capital requirements and were considered to be
well-capitalized by FDICIA standards.
In terms of asset composition, the Bank's ratio of loans to assets was
only slightly lower than the Peer Group's ratio (66.4 percent of assets versus
67.6 percent for the Peer Group), while the Peer Group recorded a higher level
of MBS (15.0 percent versus 8.5 percent for the Bank). The Bank maintains a
higher balance of cash and investments as part of its operating strategy, and
the portfolio totaled 21.2 percent of total assets. In contrast, the Peer Group
maintained a ratio of cash and investments of 15.2 percent of assets. Following
the conversion, the Bank's level of cash and investments is expected to
initially increase, pending the Bank's deployment of the proceeds into loans.
Overall, the Bank's IEA totaled 96.1 percent of assets, versus 97.8 percent for
the Peer Group.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1998
<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> <C>
Cortland SB of Cortland NY
- --------------------------
March 31, 1998 21.2 66.4 8.5 85.3 0.0 0.0 13.5 0.0 13.5 0.0
SAIF-Insured Thrifts 19.0 67.5 10.2 68.9 15.6 0.2 13.4 0.2 13.2 0.0
BIF-Insured Thrifts 21.6 62.3 12.5 71.3 15.5 0.0 11.1 0.4 10.7 0.0
Comparable Group Average 15.2 67.6 15.0 74.3 5.9 0.0 18.4 0.0 18.4 0.0
Mid-Atlantic Companies 18.4 59.8 19.1 76.1 6.3 0.0 16.0 0.0 15.9 0.0
Mid-West Companies 7.7 85.6 5.2 70.1 5.1 0.0 24.2 0.0 24.2 0.0
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AHCI Ambanc Holding Co., Inc. of NY 15.6 54.6 27.5 62.4 22.4 0.0 11.7 0.0 11.7 0.0
CATB Catskill Fin. Corp. of NY 25.0 42.5 30.8 68.9 6.1 0.0 23.4 0.0 23.4 0.0
ESBK Elmira Svgs Bank (The) of NY 14.9 77.0 4.4 91.6 1.4 0.0 6.2 0.0 6.2 0.0
GOSB GSB Financial Corp. of NY 27.2 60.3 9.3 69.0 1.7 0.0 28.1 0.0 28.1 0.0
PEEK Peekskill Fin. Corp. of NY 22.7 24.1 52.0 70.2 5.1 0.0 23.0 0.0 23.0 0.0
SFED SFS Bancorp of Schenectady NY 10.7 78.0 9.0 86.2 0.0 0.0 12.4 0.0 12.4 0.0
SKAN Skaneateles Bancorp Inc of NY 12.8 82.3 1.1 84.8 7.1 0.0 7.0 0.2 6.8 0.0
Mid-West Companies
- ------------------
DCBI Delphos Citizens Bancorp of OH 3.9 81.0 13.9 70.1 4.4 0.0 25.0 0.0 25.0 0.0
PSFC Peoples Sidney Fin. Corp of OH 9.9 88.3 0.0 74.5 0.0 0.0 25.2 0.0 25.2 0.0
WEHO Westwood Hmstd Fin Corp of OH(1) 9.2 87.6 1.6 65.7 11.0 0.0 22.5 0.0 22.5 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------- -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY
- --------------------------
March 31, 1998 -1.92 1.25 -2.23 -2.51 0.00 2.76 2.76 13.21 22.03 23.28
SAIF-Insured Thrifts 14.82 9.36 13.50 9.01 17.89 4.86 4.75 11.40 11.64 23.17
BIF-Insured Thrifts 16.09 14.21 15.36 8.30 16.58 9.48 8.43 10.05 9.87 19.12
Comparable Group Average 9.18 3.39 12.45 3.74 -15.70 -4.12 -3.45 15.83 14.93 35.04
Mid-Atlantic Companies 8.87 12.01 8.62 3.63 12.40 -0.16 0.74 15.09 13.91 36.75
Mid-West Companies 9.90 -16.72 21.39 3.99 -100.00 -15.99 -15.99 17.31 17.31 31.04
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AHCI Ambanc Holding Co., Inc. of NY 8.72 17.31 7.38 4.17 14.02 -0.11 -0.11 8.80 8.80 22.06
CATB Catskill Fin. Corp. of NY 8.03 13.22 6.63 3.38 NM -6.22 -6.22 20.88 20.88 60.42
ESBK Elmira Svgs Bank (The) of NY 3.19 -17.23 7.54 2.96 22.52 1.74 6.26 6.24 6.24 10.25
GOSB GSB Financial Corp. of NY 24.30 32.89 22.21 -0.65 NM NM NM 19.68 19.68 39.70
PEEK Peekskill Fin. Corp. of NY 7.26 21.13 3.32 3.63 NM -3.65 -3.65 22.60 22.60 89.70
SFED SFS Bancorp of Schenectady NY 3.90 -29.18 10.51 4.72 NM -1.15 -1.15 12.36 12.36 23.77
SKAN Skaneateles Bancorp Inc of NY 6.70 45.93 2.76 7.22 0.66 8.42 9.28 NM 6.78 11.35
Mid-West Companies
- ------------------
DCBI Delphos Citizens Bancorp of OH 5.19 -72.78 19.29 3.81 NM -7.38 -7.38 12.40 12.40 25.20
PSFC Peoples Sidney Fin. Corp of OH 12.58 81.76 8.07 -3.40 -100.00 NM NM 17.10 17.10 27.40
WEHO Westwood Hmstd Fin Corp of OH(1) 11.93 -59.15 36.80 11.57 NM -24.60 -24.60 22.42 22.42 40.51
</TABLE>
(1) Financial information is for the quarter ending December 31, 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
While the Bank relied solely on deposits as the source to fund operations,
the Peer Group relied on deposits and borrowings as funding sources, as
reflected in the current deposits to assets ratios of 85.3 percent and 74.3
percent, respectively, and borrowings to assets ratios of 0.0 percent and 5.9
percent, respectively. Total interest-bearing liabilities ("IBL") maintained by
the Bank and the Peer Group equaled 85.3 percent and 80.2 percent, respectively,
with the Peer Group's lower ratio attributable to its higher capital ratio. On a
pro forma basis, the Bank's IBL ratio is expected to decline as a result of the
Bank's enhanced capital base and potential deposit withdrawals to fund stock
purchases.
The growth rate section of Table 3.2 shows growth rates for key balance
sheet items. The growth rates (annualized) for the Bank are for the fifteen
months ended March 31, 1998 while growth rates for the Peer Group are for the
latest trailing twelve months available. The Bank reported a slight decrease in
assets since December 31, 1996, while the Peer Group reported asset growth equal
to 9.2 percent. Changes in the Bank's balance sheet occurred in the area of
loans receivable and MBS (a decrease of 2.2 percent), offset by an increase in
cash and investments of 1.3 percent. The Peer Group funded increases in loans
and MBS through increases in assets. The Bank's slight asset shrinkage was
evidenced by declines in deposits, while equity increased slightly. The Peer
Group funded asset growth through a combination of deposits, borrowings and
equity (the "NMs" in Table 3.2 reflect increases in excess of 100 percent).
Cortland's profitable operations resulted in growth in the capital account equal
to 2.8 percent, while various capital management strategies employed by Peer
Group members (such as stock repurchases and dividends), resulted in a decline
in the Peer Group's capital of 4.1 percent on average.
Income and Expense Components
For the twelve months ended March 31, 1998, the Bank's net income amounted
to 0.07 percent of average assets, below the 0.88 percent average return posted
by the Peer Group (see Table 3.3). Net interest income was the primary component
of the Bank's and the Peer Group's earnings, with Cortland's net interest margin
above the Peer Group average (3.99 and 3.65 percent of average assets,
respectively). Cortland reported a higher level of interest income and a lower
level of interest expense, with the greatest difference reported in interest
income. As shown in the "yields, costs, and spreads" section of Table 3.3, the
Bank has a higher yield on assets and lower cost of funds in comparison to the
Peer Group and the industry as a whole, resulting in a favorable yield/cost
spread of 3.58 percent versus 2.87 for the Peer Group and 3.18 for all
BIF-insured thrifts). Cortland's interest income was supported by the greater
loan portfolio diversification (as described later in this section) into higher
yielding commercial real estate and non-mortgage loans. The reinvestment of the
net
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1998
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY
- --------------------------
March 31, 1998 0.07 7.54 3.55 3.99 1.35 2.64 0.00 0.00 0.35 0.35
SAIF-Insured Thrifts 0.92 7.46 4.16 3.29 0.13 3.17 0.10 0.01 0.30 0.42
BIF-Insured Thrifts 1.04 7.30 3.82 3.49 0.14 3.34 0.09 0.00 0.36 0.46
Comparable Group Average 0.88 7.30 3.65 3.65 0.09 3.57 0.05 -0.01 0.24 0.28
Mid-Atlantic Companies 0.76 7.15 3.55 3.60 0.11 3.49 0.03 -0.01 0.32 0.34
Mid-West Companies 1.17 7.66 3.88 3.78 0.04 3.74 0.09 0.00 0.07 0.16
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AHCI Ambanc Holding Co., Inc. of NY 0.51 7.12 3.99 3.12 0.19 2.93 0.00 -0.05 0.22 0.17
CATB Catskill Fin. Corp. of NY 1.33 7.22 3.26 3.96 0.09 3.87 0.00 0.03 0.14 0.17
ESBK Elmira Svgs Bank (The) of NY 0.44 7.57 4.04 3.53 0.13 3.39 0.11 -0.04 0.64 0.70
GOSB GSB Financial Corp. of NY 0.73 6.41 2.68 3.73 0.04 3.69 0.00 0.00 0.20 0.20
PEEK Peekskill Fin. Corp. of NY 1.03 6.72 3.14 3.58 0.03 3.55 0.00 0.00 0.12 0.12
SFED SFS Bancorp of Schenectady NY 0.64 7.27 3.92 3.35 0.07 3.28 0.07 0.01 0.20 0.28
SKAN Skaneateles Bancorp Inc of NY 0.64 7.71 3.79 3.92 0.20 3.72 0.04 -0.04 0.71 0.70
Mid-West Companies
- ------------------
DCBI Delphos Citizens Bancorp of OH 1.59 7.40 3.53 3.86 0.01 3.85 0.27 0.00 0.04 0.31
PSFC Peoples Sidney Fin. Corp of OH 1.24 7.83 3.90 3.93 0.03 3.90 0.00 0.00 0.06 0.06
WEHO Westwood Hmstd Fin Corp of OH(1) 0.67 7.76 4.20 3.56 0.08 3.48 0.00 0.00 0.11 0.11
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY
- --------------------------
March 31, 1998 2.71 0.00 -0.21 0.00 7.89 4.31 3.58 2,446 3.75
SAIF-Insured Thrifts 2.20 0.02 0.07 0.00 7.60 4.82 2.78 4,372 37.02
BIF-Insured Thrifts 2.28 0.04 0.07 0.00 7.52 4.34 3.18 4,210 38.49
Comparable Group Average 2.37 0.00 -0.04 0.00 7.47 4.61 2.87 4,185 39.15
Mid-Atlantic Companies 2.57 0.01 0.03 0.00 7.34 4.32 3.03 3,586 41.18
Mid-West Companies 1.92 0.00 -0.20 0.00 7.77 5.28 2.49 5,581 34.41
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
AHCI Ambanc Holding Co., Inc. of NY 2.43 0.00 0.16 0.00 7.32 4.69 2.64 2,937 38.97
CATB Catskill Fin. Corp. of NY 1.91 0.00 0.02 0.00 7.35 4.43 2.92 3,843 38.13
ESBK Elmira Svgs Bank (The) of NY 3.13 0.01 -0.04 0.00 7.85 4.35 3.50 2,088 51.53
GOSB GSB Financial Corp. of NY 2.75 0.00 0.06 0.00 6.62 3.78 2.84 3,212 40.75
PEEK Peekskill Fin. Corp. of NY 1.82 0.00 -0.03 0.00 6.81 4.29 2.52 7,834 43.34
SFED SFS Bancorp of Schenectady NY 2.52 0.00 0.03 0.00 7.45 4.56 2.89 3,024 40.29
SKAN Skaneateles Bancorp Inc of NY 3.41 0.03 0.02 0.00 8.01 4.14 3.88 2,165 35.24
Mid-West Companies
- ------------------
DCBI Delphos Citizens Bancorp of OH 1.71 0.00 0.00 0.00 7.48 4.88 2.59 5,363 35.06
PSFC Peoples Sidney Fin. Corp of OH 2.03 0.00 0.00 0.00 7.97 5.04 2.93 5,276 35.99
WEHO Westwood Hmstd Fin Corp of OH(1) 2.02 0.00 -0.59 0.00 7.88 5.92 1.95 6,103 32.18
</TABLE>
(1) Financial information is for the quarter ending December 31, 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 3.9
conversion proceeds may serve to initially dilute the Bank's asset yields due to
current market rates on short- to intermediate-term investment securities but
the net interest margin should increase with an increase in the IEA/IBL ratio.
In another key area of core earnings strength, and offsetting in part the
advantage in the net interest margin, the Bank operates with a higher operating
expense ratio than the Peer Group (2.71 percent versus 2.37 percent of assets
for the Peer Group), which is attributable to a relatively large number of
employees for the Bank's asset size (as shown in Table 3.3, assets/full time
employee totaled $2,446 for Cortland versus $4,185 for the Peer Group. In
addition, operating expenses have been elevated in recent periods due to
professional fees and other costs incurred in connection with the officer
defalcation and problem loan issues. Going forward, Cortland's operating
expenses will be subject to increase related to operations as a publicly-held
company and stock plan expenses.
Non-interest operating income made a higher contribution to the Bank's
earnings than the Peer Group's earnings, offsetting some of the disadvantage in
the operating expense area. For the trailing twelve months ended March 31, 1998,
the Bank recorded non-interest operating income of 0.35 percent of average
assets versus a level of 0.28 percent recorded by the Peer Group. Going forward,
the Bank anticipates that non-interest operating income will continue to
contribute similar levels to overall revenues.
When viewed together, net interest income, other operating income and
operating expenses provide insight into an institution's earnings strength,
since those sources of income and expense 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, the Bank's efficiency ratio of 62.4 percent compares less favorably than
the Peer Group's ratio of 60.3 percent. Both ratios are higher than the average
of 58.7 percent for all BIF-insured savings institutions.
During the most recent fiscal year, Cortland recorded non-operating
expense of 0.21 percent of average assets, while the Peer Group as a whole
recorded net non-operating expense of 0.04 percent of average assets, although
most of the Peer Group's non-operating expense was due to one savings
institution. Excluding this one Peer Group member, the Peer Group's net
non-operating income totaled a minimal 2 basis points. The Bank recorded
non-operating expense primarily in the form of losses on the sale of REO and
gains on the sale of securities.
The largest income statement disadvantage in comparison to the Peer Group
for Cortland was the level of loan loss provisions. During the most recent
twelve month period, Cortland incurred loan loss provisions of 1.35 percent of
average assets, well in excess of the Peer Group average of 0.14 percent, and
this difference was the
<PAGE>
RP Financial, LC.
Page 3.10
primary reason for the Bank's minimal profitability in the last twelve months.
As discussed in Chapter One, Cortland established loan loss provisions in order
to write down a portion of the loan portfolio to fair value in connection with
the recently completed sale of problem loans. Such provisions totaled $3.150
million for the most recent twelve month period.
Loan Composition
Table 3.4 presents data related to the loan composition of the Bank and
the Peer Group. The similar emphasis on residential lending for the Bank in
comparison to the Peer Group was evident, with 1-4 family permanent mortgage
loans accounting for 59.4 percent and 58.5 percent of the Bank's and the Peer
Group's total loan and MBS portfolios, respectively. The Peer Group, however,
maintains a relatively larger investment in MBS than the Bank.
The Bank's loan portfolio exhibited greater diversification into higher
risk weight loans than the Peer Group's loan portfolio. Commercial real estate
lending and consumer lending are the Bank's primary methods of lending
diversification, and such loans comprised 17.6 and 9.2 percent of the total loan
and MBS portfolio at March 31, 1998. The Peer Group achieved their loan
portfolio diversification primarily through commercial real estate and
commercial business lending categories. The Peer Group's loan diversification
totaled 20.82 percent of total loans and MBS, while Cortland's combined level of
these loan categories totaled 30.64 percent. The Bank reported a higher
risk-weighted assets ratio than the Peer Group at 59.92 and 50.45 percent,
respectively. While Cortland does not maintain a loans serviced for others
portfolio, several members of the Peer Group maintain a moderate level of loans
serviced for others, representing an additional source of income.
Credit Risk
Cortland's credit risk exposure appears to be higher than the Peer Group's
exposure based on the Bank's higher level of risk-weighted assets and lower
proportion of 1-4 family loans and MBS held in portfolio. In addition, the Bank
maintains a higher level of NPAs, offset by a higher reserve coverage ratio than
the Peer Group. As shown in Table 3.5, as of March 31, 1998, the Bank recorded
NPAs of 0.96 percent of assets, higher than the Peer Group average of 0.71
percent, and maintained a similar ratio of non-performing loans ("NPLs") to
loans of 0.95 percent versus 0.96 percent for the Peer Group. Most of the Bank's
and Peer Group's NPAs consist of non-accruing loans, although Cortland reported
a higher level of real estate owned. The Bank maintained a higher level of loss
reserves as a percent of loans receivable (1.45 percent versus 0.80 percent for
the Peer Group), and a higher ratio of reserves as a percent of total NPAs.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 1998
<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> <C>
Cortland SB of Cortland NY 11.39 59.37 0.15 17.56 3.75 9.18 59.92 0 0
SAIF-Insured Thrifts 14.85 62.82 5.52 11.17 6.06 1.71 52.98 386,542 3,584
BIF-Insured Thrifts 16.23 53.27 2.01 21.30 4.16 3.30 56.24 1,092,937 11,767
Comparable Group Average 21.47 58.50 1.20 9.12 8.04 2.46 50.45 7,317 5
Comparable Group
- ----------------
AHCI Ambanc Holding Co., Inc. of NY 35.78 41.39 0.85 10.91 8.46 2.45 42.02 0 0
CATB Catskill Fin. Corp. of NY 22.04 62.93 0.27 3.19 11.93 0.02 34.92 0 0
DCBI Delphos Citizens Bancorp of OH 16.79 73.11 5.72 7.60 2.37 0.00 49.41 0 0
ESBK Elmira Svgs Bank (The) of NY 5.63 38.32 0.93 10.92 36.66 7.78 67.17 33,368 0
GOSB GSB Financial Corp. of NY NA NA NA NA NA NA 46.81 6,498 0
PEEK Peekskill Fin. Corp. of NY 70.63 28.19 0.49 0.45 0.47 0.00 25.44 0 0
PSFC Peoples Sidney Fin. Corp of OH NA NA NA NA NA NA 63.82 0 0
SFED SFS Bancorp of Schenectady NY 15.34 80.21 0.25 3.65 0.42 0.00 53.99 3,215 0
SKAN Skaneateles Bancorp Inc of NY 1.90 69.67 0.87 14.60 3.76 9.23 67.09 24,851 0
WEHO Westwood Hmstd Fin Corp of OH(1) 3.66 74.19 0.24 21.65 0.26 0.18 53.80 5,242 53
</TABLE>
(1) Financial information is for the quarter ending December 31, 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.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31, 1998 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> <C>
Cortland SB of Cortland NY 0.33 0.96 0.95 1.45 152.95 100.09 3,109 2.02
SAIF-Insured Thrifts 0.26 0.67 0.71 0.80 195.99 138.70 247 0.09
BIF-Insured Thrifts 0.17 0.64 0.88 1.28 192.89 174.76 268 0.07
Comparable Group Average 0.08 0.71 0.96 0.80 139.36 97.29 22 0.03
Comparable Group
- ----------------
AHCI Ambanc Holding Co., Inc. of NY 0.03 0.62 0.93 1.37 147.90 122.28 80 0.11
CATB Catskill Fin. Corp. of NY 0.08 0.29 0.50 1.49 296.88 219.08 29 0.09
DCBI Delphos Citizens Bancorp of OH 0.00 0.56 NA 0.12 NA 17.75 0 0.00
ESBK Elmira Svgs Bank (The) of NY 0.19 0.68 0.63 0.85 134.69 97.63 30 0.07
GOSB GSB Financial Corp. of NY 0.00 0.10 0.16 0.24 147.83 147.83 1 -0.01
PEEK Peekskill Fin. Corp. of NY 0.08 0.89 2.65 1.39 52.52 38.25 0 0.00
PSFC Peoples Sidney Fin. Corp of OH 0.00 1.10 0.81 0.44 54.15 35.55 4 -0.01
SFED SFS Bancorp of Schenectady NY 0.05 0.72 0.84 0.61 72.48 66.56 4 -0.09
SKAN Skaneateles Bancorp Inc of NY 0.35 2.01 2.00 1.21 60.25 49.89 71 0.13
WEHO Westwood Hmstd Fin Corp of OH(1) 0.00 0.12 0.08 0.23 287.50 178.06 0 0.00
</TABLE>
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.13
Interest Rate Risk
Table 3.6 reflects the relative interest rate risk exposure of Cortland
and the Peer Group. The Bank's lower capital level was the key factor
contributing to its lower IEA/IBL ratio relative to the Peer Group (112.7
percent versus 122.9 percent, respectively). The Bank's lower capital and
IEA/IBL ratios increases its funding costs relative to the Peer Group. However,
the Bank's capital ratio and IEA/IBL ratio will increase on a post-conversion
basis. The Bank maintained a higher ratio of non-interest earning assets to the
Peer Group.
In the absence of available or comparable gap and rate shock analyses for
the Peer Group, the change in the quarterly net interest income ratio to average
assets for the Bank and the Peer Group has been examined in relation to the
change in market interest rates. As shown in Table 3.6, the Bank's net interest
margin has recently shown similar sensitivity to changing market interest rates
in comparison to the Peer Group's average net interest margin. On a pro forma
basis, the Bank's higher capital position and reinvestment of proceeds in short-
to intermediate-term securities can be expected to lower exposure to changes in
interest rates.
Summary
Based on the above analysis and the criteria employed by in the Peer Group
selection process, the Peer Group appears to form a reasonable basis for
determining the pro forma market value of the Bank, subject to the adjustments
noted in the following section.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of March 31, 1998 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
---------------------------- Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 03/31/98 12/31/97 09/30/97 06/30/97 03/31/97 12/31/96
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY 13.5 112.7 3.9 4 -7 -8 1 18 0
SAIF-Insured Thrifts 13.2 115.3 3.4 0 -3 -4 2 0 5
BIF-Insured Thrifts 10.6 109.6 3.8 -5 -2 -4 -6 2 7
Comparable Group Average 18.4 122.9 2.3 -3 4 6 -3 12 0
Comparable Group
- ----------------
AHCI Ambanc Holding Co., Inc. of NY 11.7 115.1 2.3 -8 2 -27 -5 3 -8
CATB Catskill Fin. Corp. of NY 23.4 131.2 1.7 -6 -11 -8 -8 10 15
DCBI Delphos Citizens Bancorp of OH 25.0 132.7 1.1 -15 15 -3 -3 84 -12
ESBK Elmira Svgs Bank (The) of NY 6.2 103.5 3.7 12 -7 -1 0 -4 -2
GOSB GSB Financial Corp. of NY 28.1 137.0 3.2 -18 58 80 -77 NA NA
PEEK Peekskill Fin. Corp. of NY 23.0 131.0 1.3 -3 -6 -5 4 -17 9
PSFC Peoples Sidney Fin. Corp of OH 25.2 131.8 1.8 2 -4 8 66 7 6
SFED SFS Bancorp of Schenectady NY 12.4 113.4 2.3 9 -9 -1 -3 3 -8
SKAN Skaneateles Bancorp Inc of NY 6.8 104.8 3.7 4 -12 10 18 9 NA
WEHO Westwood Hmstd Fin Corp of OH(1) 22.5 128.3 1.5 NA 13 4 -19 11 NA
</TABLE>
(1) Financial information is for the quarter ending December 31, 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 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of Cortland from the mutual-to-stock form of ownership. The valuation
has been prepared utilizing the pro forma valuation methodology promulgated by
the OTS, most recently set forth in their 1994 valuation guidelines.
Appraisal Guidelines
The OTS appraisal guidelines, most recently amended in written form in
October 1984, specify the methodology for estimating the pro forma market value
of an institution pursuant to a mutual-to-stock conversion. Such valuation
guidelines are relied upon by the New York State Department of Banking (the
"Department") and the FDIC in evaluating conversion appraisals and neither
agency has issued separate written valuation guidelines. The valuation
methodology provides for: (1) selection of a peer group of comparable seasoned
publicly-traded institutions whose pricing is not distorted due to a variety of
factors; (2) a fundamental analysis of the subject company to the peer group;
and (3) a 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 the valuation, incorporating valuation adjustments for key differences.
In addition, the pricing characteristics of recent conversions, both at
conversion and in the aftermarkets, 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. It should be noted
that such analysis cannot possibly fully account for all the market forces which
impact after-market trading activity and pricing characteristics of a stock on a
given day.
The pro forma market value determined herein is a preliminary value for
the Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Bank's operations and financial
condition; (2) monitor the Bank's operations and financial condition relative to
the Peer Group to identify any fundamental changes; (3) monitor the external
factors affecting value including, but not limited to,
<PAGE>
RP Financial, LC.
Page 4.2
local and national economic conditions, interest rates, and the stock market
environment, including the market for savings institution stocks; and (4)
monitor pending initial and second step conversion offerings (including those in
the offering phase) both regionally and nationally. If material changes should
occur during the conversion process, RP Financial will prepare updated valuation
reports reflecting such changes and their related impact on 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 savings institutions. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability), may materially impact the market value of
all savings institution stocks, including 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 its analysis.
Valuation Analysis
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
such differences between the 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 savings institution 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 strength of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Bank's financial strength can be summarized as follows:
<PAGE>
RP Financial, LC.
Page 4.3
o Overall A/L Composition. Loans funded by retail deposits were the
components of both Cortland's and the Peer Group's balance sheets.
The Bank maintains a similar proportion of overall loans receivable
to the Peer Group, compared to a higher level of cash and
investments and lower level of investment in MBS. Cortland reported
a higher level of diversification into higher credit risk types of
loans relative to the Peer Group. The Peer Group relied on borrowed
funds to a greater extent than the Bank, although retail deposits
comprised the major portion of the respective funding needs.
o Credit Risk. Cortland maintains comparatively higher NPAs/assets and
REO/assets ratios, along with a higher credit risk profile and
higher risk-weighted assets ratio, and has only recently resolved a
large dollar amount of problem loans through loan sales. While
reserves as a percent of loans receivable were higher than the Peer
Group, the reserve coverage ratio as a percent of total NPAs was
only slightly more favorable than the Peer Group.
o Liquidity. Cortland maintained a higher level of cash and
investments than the Peer Group and a lower balance of MBS. The
Bank's proportion of cash and investments is likely to initially
increase on a pro forma basis. Borrowings were utilized to a higher
degree by the Peer Group, and both maintain ample borrowings
capacity. The Bank's loans generally do not meet secondary market
standards for sale. Overall, Cortland appears to have less balance
sheet liquidity than the Peer Group.
o Capital. While the Bank maintains a lower capital position in
relation to the Peer Group, following the infusion of conversion
proceeds, the Bank's capital position is expected to exceed the Peer
Group average. As a result, the Bank is expected to have more
leverage capacity than the Peer Group. The Bank's pro forma return
on equity ("ROE") is not expected to exceed the Peer Group average
due to lower profitability.
On balance, RP Financial applied a slight downward adjustment for
financial condition.
2. Profitability, Growth and Viability of Earnings
Earnings are an important 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 are typically heavily factored
into an investment decision. The historical income statements of Cortland and
the Peer Group were generally reflective of traditional savings institution
operating strategies, with net interest income and operating expenses being the
major determinants of their respective core earnings. The specific factors
considered in the valuation include:
o Reported Earnings. The Bank reported net income of 0.07 percent of
average assets for the most recent twelve month period versus
earnings of 0.88 percent for the Peer Group. The differential in
reported earnings is due to the Bank's higher levels of loan loss
provisions, non-operating expense and operating expenses, offset by
a higher net interest margin and non-interest income.
o Core Earnings. The Bank maintains a stronger core earnings posture
relative to the Peer Group, as reported earnings were adversely
effected by high levels of loan loss provisions, expenses from the
resolution of REO properties and various costs incurred in
connection with the officer defalcation and problem loan issues. The
Bank operated with a higher level of net interest
<PAGE>
RP Financial, LC.
Page 4.4
income, more favorable non-interest operating income and less
favorable operating expenses than the Peer Group. While redeployment
of conversion proceeds into interest-earning assets should enhance
Cortland's net interest income, operating expenses for the Bank are
expected to increase as well. On a pro forma basis, Cortland's core
profitability is expected to exceed that of the Peer Group.
o Interest Rate Risk. Cortland's cumulative one year gap position
measures indicated relatively high exposure to rising interest
rates. Although gap data was not available for the Peer Group, other
analyses indicated a general comparable advantage for the Peer
Group. The pro forma increase in the IEA/IBL ratio can be expected
to reduce the Bank's interest rate risk exposure, but the Bank is
expected to remain at a disadvantage.
o Credit Risk. Loss provisions had a higher impact on the earnings of
the Bank in comparison to the Peer Group. In terms of credit quality
related losses, the Bank maintained higher reserve coverage ratios
as a percent of loans receivable and higher coverage ratios as a
percent of total NPAs. The Bank's higher level of non-residential
loans exposes it to potentially greater credit risk than the Peer
Group, which adds a higher risk of earnings volatility relative to
the Peer Group.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. In recent years, Cortland
County's overall demographics and economic situation has remained
relatively stable, including the level of overall financial
institution deposit funds. In addition, the Bank currently holds a
substantial market share of Cortland County deposits, and indicating
that future increases in deposits may be difficult to achieve. These
factors, along with continued competition for loans in the local
market and expectations of continued growth in operating expenses,
in part due to operating as a public company and the uncertain cost
of acquiring new deposit funds for lending result in the Bank's
earnings appearing to have less upside potential than the Peer
Group.
o Return on Equity. On a pro forma basis the Bank's pro forma return
on equity will be lower to the Peer Group average, as the lower pro
forma profitability is measured against a comparatively higher
capital position.
Overall, RP Financial made a moderate downward adjustment for
profitability, growth and viability of earnings.
3. Asset Growth
The Bank's asset growth in recent periods has been lower than the Peer
Group's, which has been achieved in part by utilizing borrowed funds as deposit
growth has been insufficient. Cortland's asset growth has been restricted by the
already high deposit market share the Bank maintains in Cortland County, and the
stable demographic and economic situation. The Bank expects to continue to
record relatively slow asset growth following the conversion, and is expected to
have adequate capital post-conversion to support such growth. We concluded that
a slight downward adjustment was warranted for the Bank's asset growth
potential.
<PAGE>
RP Financial, LC.
Page 4.5
4. Primary Market Area
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Summary demographic and deposit
market share data for the Bank and the Peer Group is included in Table 4.1. The
Bank's market area of Cortland, and Cortland County, New York is a rural market
that has been experiencing declining levels of population and households in
recent years, while the Peer Group companies operate in larger markets that are
also experiencing declines in population and households. The per capita income
in the Bank's market is below the average of the primary markets of the Peer
Group members. In addition, Cortland maintains a market share of headquarter's
county deposits well in excess of the Peer Group average, indicating a strong
competitive position, although future market share increases may likely be
difficult. The Bank's competitive position is not dissimilar from the average
position of the Peer Group institutions in their primary market areas. On
balance, RP Financial concluded that no adjustment was warranted for market
area.
5. Dividends
While the Bank has not indicated its intention to commence payment of a
cash dividend following the conversion, Cortland's pro forma capitalization and
profitability clearly position the Bank to have the capacity to pay cash
dividends. Historically, savings institutions typically have not established
dividend policies at the time of their conversion to stock ownership. Newly
converted institutions, in general, have preferred to gain market seasoning,
establish an earnings track record and 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 savings institution's capital levels and profitability
have improved and as weakened institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. Eight of the ten
institutions in the Peer Group presently pay regular cash dividends, with
implied dividend yields ranging from 1.15 percent to 2.82 percent. The average
dividend yield on the stocks of the Peer Group institutions was 1.43 percent as
of June 5, 1998, representing an average earnings payout ratio of 36.11 percent.
As of June 5, 1998, approximately 84 percent of all publicly-traded savings
institutions had adopted cash dividend policies (see
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj.
------------------------ Pop. 1990-97 1997-2002
Institution County 1990 1997 2002 % Change % Change Median Age
- ----------- ------ ---- ---- ---- -------- --------- ----------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
Ambanc Holding Company of NY Montgomery 52 52 52 -0.4% -0.2% 37.3
Catskill Financial Corporation of NY Greene 45 47 49 5.8% 3.8% 37.2
Skaneateles Bancorp, Inc. of NY Onondaga 469 464 461 -1.0% -0.7% 34.3
The Elmira Savings Bank of NY Chemung 95 93 91 -2.6% -1.8% 35.5
Peekskill Financial Corp. of NY Westchester 875 896 910 2.4% 1.6% 37.3
SFS Bancorp, Inc. of NY Schenectady 149 147 145 -1.7% -1.2% 37.0
Westwood Homest. Fin Corp of OH Hamilton 866 854 846 -1.4% -0.9% 34.5
GS Financial Corporation of NY Orange 308 326 339 6.1% 4.0% 33.2
Delphos Citizens Bancorp of OH Allen 110 108 107 -1.6% -1.1% 35.0
Peoples Sidney Fin. Corp. of OH Shelby 45 47 48 4.5% 3.0% 33.7
--- --- --- ---- ---- -----
Averages: 301 303 305 1.0% 0.6% 35.5
Medians: 130 127 126 -0.7% -0.5% 35.3
Cortland Savings Bank Cortland 49 48 48 -1.3% -0.9% 31.6
<CAPTION>
Per Capita Income
---------------------- Deposit
% State Market
Institution Amount Average Share(1)
- ----------- ------- ----- -----
<S> <C> <C> <C>
Ambanc Holding Company of NY 12,121 65.5% 28.2%
Catskill Financial Corporation of NY 13,507 73.0% 29.8%
Skaneateles Bancorp, Inc. of NY 15,641 84.5% 4.0%
The Elmira Savings Bank of NY 13,104 70.8% 21.6%
Peekskill Financial Corp. of NY 27,713 149.8% 0.7%
SFS Bancorp, Inc. of NY 16,937 91.5% 7.1%
Westwood Homest. Fin Corp of OH 19,841 115.1% 0.5%
GS Financial Corporation of NY 17,481 94.5% 2.9%
Delphos Citizens Bancorp of OH 14,868 86.2% 5.8%
Peoples Sidney Fin. Corp. of OH 17,803 103.2% 14.0%
------- ----- -----
Averages: 16,902 93.4% 11.5%
Medians: 16,289 88.9% 6.5%
Cortland Savings Bank Cortland $12,433 67.2% 40.8%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits, excludes credit unions.
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.7
Exhibit IV-1), exhibiting an average yield of 1.91 percent and an average payout
ratio of 36.29 percent. The dividend paying institutions generally maintain
higher than average profitability ratios, facilitating their ability to pay cash
dividends, which supports a market pricing premium on average relative to
non-dividend paying institutions.
The Holding Company's ability following the completion of the conversion
to pay a dividend would appear to be similar relative to the Peer Group based on
higher pro forma capital and similar post-conversion core earnings, and thus no
adjustment is warranted for this valuation factor.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $21.3 million to $79.3
million as of June 5, 1998, with an average market value of $44.2 million. The
shares outstanding of the Peer Group members ranged from 0.8 million to 4.5
million, with average shares outstanding of approximately 2.4 million. The
Bank's pro forma market value is expected to be more than the comparative Peer
Group averages, and the number of shares expected to be outstanding will be
comparable to the Peer Group. The Bank's stock is expected to be listed on the
NASDAQ National Market System, and accordingly, we anticipate the liquidity of
the Bank's shares will be similar to that of the Peer Group on average, and thus
there has been no valuation adjustment applied for this factor.
7. Marketing of the Issue
We believe that three separate markets exists for savings institution
stocks coming to market such as Cortland: (A) 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; (B)
the new issue market in which converting thrifts are evaluated on the basis of
the same factors but on a pro forma basis without the benefit of a stock trading
history and reporting quarterly operating results as a publicly-held company;
and (C) the acquisition market for savings institution franchises in New York.
All of these markets were considered in the valuation of the Bank's conversion.
<PAGE>
RP Financial, LC.
Page 4.8
A. Public Market
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. News of a budget
agreement and a favorable ruling for tobacco companies sent the stock market
soaring to record highs in early-May 1997. 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 Dow Jones Industrial
Average ("DJIA") moved at least 100 points for five consecutive days from August
18, 1997 through August 21, 1997, which set a record for volatility. Profit
worries among some of the large blue chip companies and mixed inflation readings
were factors contributing to the roller-coaster performance of the stock market.
Despite strengthening bond prices, stocks traded lower through the end of
August. Bond prices moved higher on inflation data which showed that prices
stayed low during the second quarter, even though second quarter GDP growth was
revised upward to an annual rate of 3.6 percent compared to an original estimate
of 2.2 percent.
Volatility returned to the stock market in early-September, with the
DJIA posting a record breaking point increase of 257.36 on September 2, 1997.
The rally was sparked by economic data that indicated manufacturing growth
slowed in August, thereby easing investors' inflation worries. However, the
rally was not
<PAGE>
RP Financial, LC.
Page 4.9
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 posting consecutive losses of more than 1.0 percent on October 16 and
17.
Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure,
which was led by the decline in the Hong Kong stock market, as the DJIA posted a
two-day loss approximating 320 points on October 23 and 24, 1997. The sell-off
in the world financial markets turned into a rout on the following Monday, with
a 5.8 percent decline in the Hong Kong stock market fueling the largest ever
point decline in the DJIA. On October 27, the DJIA declined 554 points or 7.2
percent. While the selling was broad based, technology stocks sensitive to Asian
demand experienced some of the sharpest declines. The turmoil in the stock
market provided for a sharp rally in U.S. Treasury bonds, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day after
the record breaking point decline, as the DJIA surged a record breaking 337
points on October 28. Comparatively, bond prices declined sharply on October 28,
as investors pulled out of the Treasury market to reinvest into the stock
market.
Market conditions remained uneven through the week ended October 31,
1997, which was followed by a soaring stock market on November 3, 1997. The DJIA
posted a 232 point increase on November 3, which was supported by a resurgence
in the Hong Kong market. Following the one day rally, volatility returned to the
stock market through mid-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. In mid-
<PAGE>
RP Financial, LC.
Page 4.10
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 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 record
high 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.
At the beginning of March 1998, signs of a strengthening economy
pushed the 30-year bellwether bond above 6.0 percent for the first time in three
months. Earnings concerns, particularly in the technology sector, provided for
an uneven stock market in early-March. Despite a decline in the February
<PAGE>
RP Financial, LC.
Page 4.11
unemployment rate to 4.6 percent, bond prices advanced on news of a loss of jobs
in the manufacturing sector and stocks moved higher as technology issues
rallied. Both bond and stock prices benefitted from plunging oil prices in
mid-March, as further new highs were established in the DJIA and the yield on
30-year bond moved back below 6.0 percent. In late-March 1998, stocks drifted
lower due to first quarter earnings worries and uncertainty over the outcome of
the Federal Reserve's meeting at the end of March.
Stocks and bonds moved higher in early-April 1998, following the
Federal Reserve's decision not to raise interest rates. Aided by the $82.9
billion merger agreement between Travelers Group and Citicorp, the Dow Jones
Industrial Average closed above 9000 for the first time on April 6, 1998. The
positive trend in stocks strengthened through mid-April, reflecting a more
bullish outlook for technology stocks and expectations of further consolidation
among financial stocks punctuated by BankAmerica's merger pact with NationsBank
in a deal valued at $60 billion and Banc One's proposed $30 billion merger with
FirstChicago. Profit taking and speculation that the Federal Reserve was leaning
towards raising interest rates provided for a late-April sell-off in both stocks
and bonds. The threat of higher interest rates pushed the 30-year bellwether
bond back above 6.0 percent in late-April, its highest level since early-March.
Stocks recovered in early-May 1998, as first quarter economic data
reflected a strong pace of economic expansion with declining inflation. The
favorable economic data powered the DJIA to a new high in early-May, while the
yield on the 30-year bond move back below 6.0 percent. Uncertainty over the
possibility of a rate increase by the Federal Reserve provided for a narrow
trading range through mid-May, while the announced merger between Chrysler and
Daimler-Benz had little impact on the overall market. The stock market reacted
positively to the Federal's decision to leave interest rates at its mid-May
meeting, although the rally was stalled by earnings concerns in the technology
sector. Economic turmoil in Asia and Russia's faltering economy caused stock to
slide further at the end of May. On June 5, 1998, the DJIA closed at 9037.71, an
increase of 21.5 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. Favorable inflation
data and the budget agreement provided for a substantial rally in thrift stocks
in late-April and early-May 1997, as interest rate sensitive issues were
bolstered by declining interest rates. Thrift stocks continued to trend higher
through June and early-July 1997, based on the improved interest rate outlook
and an overall positive outlook for the economy. Generally favorable second
quarter earnings and the 30-year U.S. Treasury bond yield declining below 6.50
percent served to further boost thrift prices in mid-July, with the declining
interest rate environment serving to sustain the rally in thrift prices through
the end of July.
<PAGE>
RP Financial, LC.
Page 4.12
Thrift prices generally declined during the first half of August
1997, due to higher interest rates and profit taking. From July 31, 1997 to
August 15, 1997, the SNL Index declined by 3.7 percent. Thrift prices recovered
modestly during the second half of August, as the Federal Reserve left
short-term interest rates unchanged at its August meeting. Thrift stocks
participated in the one day stock market rally on September 2, 1997, as
evidenced by a 1.95 percent increase in the SNL Index. News of NationsBank's
proposed acquisition of Barnett Banks for more than four times its book value
appears to have further contributed to the one day run-up in thrift prices. In
contrast to the overall stock market, thrift prices continued to move higher
following the one day rally in the DJIA. Stable interest rates and acquisition
news sustained the positive market for thrift issues. The decline in interest
rates following the release of the August consumer price index in mid-September
served to further the rally in thrift prices. During late-September and
early-October, interest rate sensitive issues in general benefited from the
declining interest rate environment and expectations of strong third quarter
earnings.
The upward trend in thrift prices stalled in mid-October 1997, as
interest rates moved higher following warnings by the Federal Reserve Chairman
of inflation creeping back into the economy due to the tight labor markets.
Thrift stocks gyrated in conjunction with the overall market in late-October,
with the SNL index declining by 5.2 percent on October 27 and increasing by 2.4
percent on October 28. Thrift prices further recovered on October 29, which was
supported by a rally in the bond market. Aided by the favorable interest rate
climate, thrift stocks posted further gains in early-November and then retreated
modestly in mid-November. Thrift and bank issues declined on concerns that a
slowing U.S. economy could lead to weaker loan demand and higher delinquency
rates. However, led by the strengthening bond market, thrift and bank issues
moved higher during late-November and early-December. Acquisition news also
contributed to the upturn in bank and thrift prices, as two major bank
acquisitions were announced for relatively high price-to-book multiples. First
Union Corp.'s proposed acquisition of CoreStates Financial ($47 billion in
assets) was for 539 percent of book value, while First American Corporation's
proposed acquisition for Deposit Guaranty Corporation ($6.8 billion in assets)
was for 419 percent of book value. Those deals, along with speculation of
possible other major thrift and bank acquisitions, filtered into the prices of
bank and thrift issues in general. Concern of relatively high valuations
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
<PAGE>
RP Financial, LC.
Page 4.13
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 ($30.9 billion in assets)
and Golden State Bancorp ($16.0 billion in assets), which was announced in
early-February. Stable interest rates and acquisitions provided for a mildly
positive increase in thrift stocks during the balance of February.
Thrift issues continued to edge higher during the first half of
March 1998, reflecting improving fundamentals and improving expectations of
favorable first quarter earnings. The announcement of Washington Mutual's
acquisition of H.F. Ahmanson for 390 percent of book value on March 17, 1998
provided a more notable boost to thrift prices, particularly the stocks of the
California-based institutions. Thrift issues traded in a narrow range in
late-March 1998, reflecting uncertainty over the possibility of higher interest
rates and forthcoming first quarter earnings.
The Federal Reserve's decision to leave interest rates unchanged at
its late-March meeting, along with the mega mergers occurring within the
financial services sector, provided for a positive trend in thrift prices during
the first half of April 1998. However, bank and thrift issues experienced
selling pressure in late-April, reflecting speculation of higher interest rates
which triggered a sell-off in the overall market. Likewise, thrift stocks
followed the overall market higher in early-May, as the inflation data contained
in the first quarter growth numbers provided for an improved interest rate
outlook. Speculation of higher interest rates translated into a fairly flat
market for thrift issues through mid-May. Thrift stocks eased lower in late-May,
reflecting the decline in the overall stock market. On June 5, 1998, the SNL
Index for all publicly-traded thrifts closed at 860.6, an increase of 45.7
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. RP Financial considered the market for new issues,
both at the time of the conversion and in the aftermarket.
<PAGE>
RP Financial, LC.
Page 4.14
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 early March-1998, conversion offerings completed and began
trading have exhibited an average price increase of 51.2 percent on the first
day of trading. As shown in Table 4.2, the average one week change in price for
conversion offerings completed during the latest three month period ending June
5, 1998 equaled positive 56.3 percent. The average pro forma price/tangible book
and core price/earnings ratios of the recent conversions was 79.0 percent and
20.9 times, respectively. The conversions that have began trading since
early-March 1998 were all closed at the top of the super range.
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 savings institutions. Specifically, the current
average P/B ratio of the conversions completed in the most recent three month
period of 139.85 percent reflects a discount of 18.0 percent from the average
P/B ratio of all publicly-traded savings institutions (equal to 170.54 percent),
and the average core P/E ratio of 26.11 times reflects a premium of 26.7 percent
from the all public average core P/E ratio of 20.61 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
Cortland'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 13 New York thrifts acquired in 1996, 1997 and year-to-date 1998, and 5
acquisitions of New York thrifts are currently pending. The recent acquisition
activity involving New York savings institutions may imply a certain degree of
acquisition speculation for the Bank's stock. To the extent that acquisition
speculation may impact the Bank's offering, we have largely taken this into
account in selecting largely New York based companies, which operate in markets
that have experienced a comparable level of acquisition activity as the Bank's
market and, thus, are subject to the same type of acquisition speculation that
may influence Cortland's trading price.
<PAGE>
RP Financial, LC.
Table 4.2
Pricing Characteristics and After-Market Trends
Recent Conversions Completed (Last Three Months)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data
--------------------------------------------
Financial Info. Asset Quality
- ------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res.
Institution State Date Ticker Assets Assets Assets Cov.
- ----------- ----- ---- ------ ------ ------ ------ ----
($Mil) (%) (%)(2) (%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
BOC Financial Corp. NC 05/01/98 Pink $ 25 17.99% 0.19% 64%
Columbia Financial of KY KY 04/15/98 CFKY 104 12.59% 0.58% 50%
Adirondack Fin. Services NY* 04/07/98 Pink 60 5.57% 6.10% 44%
Heritage Bancorp, Inc. SC* 04/07/98 HBSC 252 11.91% 0.54% 106%
Quitman Bancorp, Inc. GA 04/07/98 Pink 40 7.52% 0.42% 209%
EFC Bancorp, Inc. IL 04/06/98 EFC 332 9.71% 0.62% 55%
Northeast Penn. Fin. Corp. PA 04/01/98 NEP 387 7.63% 0.28% 135%
Bay State Bancorp, Inc. MA 03/31/98 BYS 250 8.08% 0.80% 107%
Independence Community NY* 03/17/98 ICBC 3,794 8.56% 0.69% 117%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 276 10.69% 0.02% 43%
SFSB Holding Company PA 03/02/98 SFSH 38 9.20% 0.59% 47%
Averages - Standard Conversions: $ 505 9.95% 0.98% 89%
Medians - Standard Conversions: $ 250 9.20% 0.58% 64%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. SC* 04/15/98 SBAN $ 292 10.48% 0.30% 362%
First Source Bancorp, Inc. NJ 04/09/98 FSLA 1,049 9.69% 0.54% 107%
Peoples Bancorp, Inc. NJ 04/09/98 TSBS 640 17.18% 0.92% 61%
Pocahontas Bancorp AR* 04/01/98 PFSL 389 6.36% 0.23% 190%
Harbor Florida Bancshares FL* 03/19/98 HARB 1,129 8.95% 0.43% 240%
Averages - 2nd Step Conversions: $ 700 10.53% 0.48% 192%
Medians - 2nd Step Conversions: $ 700 9.69% 0.43% 190%
Averages - All Conversions: $ 566 10.13% 0.83% 121%
Medians - All Conversions: $ 284 9.45% 0.54% 106%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Offering Information Contribution to
Charitable Found.
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion Gross % of Exp./ % of
Institution State Date Ticker Proc. Mid. Proc. Form Offering
- ----------- ----- ---- ------ ----- ---- ----- ---- --------
($Mil.) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
BOC Financial Corp. NC 05/01/98 Pink $ 9.3 132% 4.9% N.A. N.A.
Columbia Financial of KY KY 04/15/98 CFKY 26.7 132% 2.8% N.A. N.A.
Adirondack Fin. Services NY* 04/07/98 Pink 6.6 132% 7.7% N.A. N.A.
Heritage Bancorp, Inc. SC* 04/07/98 HBSC 69.4 132% 1.9% N.A. N.A.
Quitman Bancorp, Inc. GA 04/07/98 Pink 6.6 132% 5.7% N.A. N.A.
EFC Bancorp, Inc. IL 04/06/98 EFC 69.4 132% 2.3% Stock 8.00%
Northeast Penn. Fin. Corp. PA 04/01/98 NEP 59.5 132% 2.4% Stock 8.00%
Bay State Bancorp, Inc. MA 03/31/98 BYS 46.9 132% 3.2% Stock 8.00%
Independence Community NY* 03/17/98 ICBC 704.1 132% 2.3% Stock 8.00%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 75.4 132% 1.8% N.A. N.A.
SFSB Holding Company PA 03/02/98 SFSH 7.3 132% 4.4% N.A. N.A.
Averages - Standard Conversions: $ 98.3 132% 3.6% N.A. N.A.
Medians - Standard Conversions: $ 46.9 132% 2.8% N.A. N.A.
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. SC* 04/15/98 SBAN $ 45.6 132% 2.7% N.A. N.A.
First Source Bancorp, Inc. NJ 04/09/98 FSLA 165.5 132% 1.4% N.A. N.A.
Peoples Bancorp, Inc. NJ 04/09/98 TSBS 238.1 132% 0.8% N.A. N.A.
Pocahontas Bancorp AR* 04/01/98 PFSL 35.7 132% 2.1% N.A. N.A.
Harbor Florida Bancshares FL* 03/19/98 HARB 166.6 132% 1.1% N.A. N.A.
Averages - 2nd Step Conversions: $ 130.3 132% 1.6% N.A. N.A.
Medians - 2nd Step Conversions: $ 165.5 132% 1.4% N.A. N.A.
Averages - All Conversions: $ 108.3 132% 3.0% N.A. N.A.
Medians - All Conversions: $ 53.2 132% 2.4% N.A. N.A.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Insider Purchases Pro Forma Data
-----------------------
Pricing Ratios(4)
------------------------- -----------------------
Benefit Plans Initial
Conversion Recog. Mgmt.& Dividend Core
Institution State Date Ticker ESOP Plans Dirs. Yield P/TB P/E(5) P/A
- ----------- ----- ---- ------ ---- ----- ----- ----- ---- ------ ---
(%) (%) (%)(3) (%) (%) (x) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
BOC Financial Corp. NC 05/01/98 Pink 8.0% 4.0% 3.1% 0.00% 76.4% 31.4x 28.7%
Columbia Financial of KY KY 04/15/98 CFKY 8.0% 4.0% 7.5% 0.00% 74.5% 23.3 21.1%
Adirondack Fin. Services NY* 04/07/98 Pink 8.0% 4.0% 25.5% 0.00% 76.6% N.M. 10.2%
Heritage Bancorp, Inc. SC* 04/07/98 HBSC 8.0% 4.0% 3.6% 2.00% 77.3% 19.3 22.3%
Quitman Bancorp, Inc. GA 04/07/98 Pink 8.0% 4.0% 5.8% 2.00% 78.3% 16.7 14.5%
EFC Bancorp, Inc. IL 04/06/98 EFC 8.0% 4.0% 4.4% 0.00% 80.5% 18.0 19.1%
Northeast Penn. Fin. Corp. PA 04/01/98 NEP 8.0% 4.0% 3.6% 0.00% 80.5% 23.7 14.7%
Bay State Bancorp, Inc. MA 03/31/98 BYS 8.0% 4.0% 2.7% 0.00% 84.5% 19.0 17.5%
Independence Community NY* 03/17/98 ICBC 8.0% 4.0% 0.1% 0.00% 85.1% 20.2 17.3%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 8.0% 4.0% 20.3% 0.00% 79.8% 16.5 21.7%
SFSB Holding Company PA 03/02/98 SFSH 8.0% 4.0% 7.9% 0.00% 76.1% N.M. 16.6%
Averages - Standard Conversions: 8.0% 4.0% 7.7% 0.36% 79.0% 20.9x 18.5%
Medians - Standard Conversions: 8.0% 4.0% 4.4% 0.00% 78.3% 19.3x 17.5%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. SC* 04/15/98 SBAN 0.0% 4.0% 24.1% 0.00% 117.6% 26.7x 25.7%
First Source Bancorp, Inc. NJ 04/09/98 FSLA 8.0% 4.0% 0.5% 1.00% 129.6% 24.5 26.6%
Peoples Bancorp, Inc. NJ 04/09/98 TSBS 4.0% 4.0% 0.3% 1.00% 114.5% 26.6 42.3%
Pocahontas Bancorp AR* 04/01/98 PFSL 8.0% 4.0% 1.8% 0.00% 120.3% 21.2 15.9%
Harbor Florida Bancshares FL* 03/19/98 HARB 8.0% 4.0% 20.3% 3.50% 126.5% 17.8 24.1%
Averages - 2nd Step Conversions: 5.6% 4.0% 9.4% 1.10% 121.7% 23.4x 26.9%
Medians - 2nd Step Conversions: 8.0% 4.0% 1.8% 1.00% 120.3% 24.5x 25.7%
Averages - All Conversions: 7.3% 4.0% 8.2% 0.59% 92.4% 21.8x 21.1%
Medians - All Conversions: 8.0% 4.0% 4.0% 0.00% 80.5% 20.7x 20.1%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Institutional Information
-----------------------------
Financial Charac.
-----------------------------
Conversion IPO
Institution State Date Ticker ROA TE/A ROE Price
- ----------- ----- ---- ------ --- ---- --- -----
(%) (%) (%) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
BOC Financial Corp. NC 05/01/98 Pink 0.9% 37.5% 2.4% $ 10.00
Columbia Financial of KY KY 04/15/98 CFKY 0.9% 28.3% 3.2% 10.00
Adirondack Fin. Services NY* 04/07/98 Pink -0.5% 13.3% -3.7% 10.00
Heritage Bancorp, Inc. SC* 04/07/98 HBSC 1.2% 28.8% 4.0% 15.00
Quitman Bancorp, Inc. GA 04/07/98 Pink 0.9% 18.6% 4.7% 10.00
EFC Bancorp, Inc. IL 04/06/98 EFC 1.1% 23.8% 4.5% 10.00
Northeast Penn. Fin. Corp. PA 04/01/98 NEP 0.6% 18.3% 3.4% 10.00
Bay State Bancorp, Inc. MA 03/31/98 BYS 0.9% 20.7% 4.5% 20.00
Independence Community NY* 03/17/98 ICBC 0.6% 20.3% 3.2% 10.00
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 1.3% 27.2% 4.8% 10.00
SFSB Holding Company PA 03/02/98 SFSH -0.2% 21.8% -0.9% 10.00
Averages - Standard Conversions: 0.7% 23.5% 2.7% $ 11.36
Medians - Standard Conversions: 0.9% 21.8% 3.4% $ 10.00
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. SC* 04/15/98 SBAN 0.9% 21.9% 4.3% $ 20.00
First Source Bancorp, Inc. NJ 04/09/98 FSLA 1.1% 20.5% 5.3% 10.00
Peoples Bancorp, Inc. NJ 04/09/98 TSBS 1.6% 36.9% 4.3% 10.00
Pocahontas Bancorp AR* 04/01/98 PFSL 0.8% 13.2% 5.7% 10.00
Harbor Florida Bancshares FL* 03/19/98 HARB 1.4% 19.1% 7.3% 10.00
Averages - 2nd Step Conversions: 1.2% 22.3% 5.4% $ 12.00
Medians - 2nd Step Conversions: 1.1% 20.5% 5.3% $ 10.00
Averages - All Conversions: 0.8% 23.1% 3.6% $ 11.56
Medians - All Conversions: 0.9% 21.2% 4.3% $ 10.00
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
-------------------------------------------------------------
Closing Price:
-------------------------------------------------------------
First After After
Conversion Trading % First % First %
Institution State Date Ticker Day Change Week(6) Change Month(7) Change
- ----------- ----- ---- ------ --- ------ ------- ------ -------- ------
($) (%) ($) (%) ($) (%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
BOC Financial Corp. NC 05/01/98 Pink $ 13.68 36.8% $ 14.75 47.5% $ 13.25 32.5%
Columbia Financial of KY KY 04/15/98 CFKY 17.13 71.3% 15.94 59.4% 16.00 60.0%
Adirondack Fin. Services NY* 04/07/98 Pink 12.00 20.0% 12.13 21.3% 12.31 23.1%
Heritage Bancorp, Inc. SC* 04/07/98 HBSC 22.31 48.7% 22.00 46.7% 22.00 46.7%
Quitman Bancorp, Inc. GA 04/07/98 Pink 12.81 28.1% 14.31 43.1% 14.75 47.5%
EFC Bancorp, Inc. IL 04/06/98 EFC 14.75 47.5% 14.94 49.4% 14.69 46.9%
Northeast Penn. Fin. Corp. PA 04/01/98 NEP 15.50 55.0% 15.38 53.8% 15.44 54.4%
Bay State Bancorp, Inc. MA 03/31/98 BYS 29.87 49.4% 29.63 48.1% 30.56 52.8%
Independence Community NY* 03/17/98 ICBC 17.25 72.5% 17.56 75.6% 18.13 81.3%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 20.56 105.6% 24.38 143.8% 24.00 140.0%
SFSB Holding Company PA 03/02/98 SFSH 12.81 28.1% 13.13 31.3% 14.38 43.8%
Averages - Standard Conversions: $ 17.15 51.2% $ 17.65 56.3% $ 17.77 57.2%
Medians - Standard Conversions: $ 15.50 48.7% $ 15.38 48.1% $ 15.44 47.5%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. SC* 04/15/98 SBAN $ 22.75 13.8% $ 22.50 12.5% $ 20.88 4.4%
First Source Bancorp, Inc. NJ 04/09/98 FSLA 10.56 5.6% 10.50 5.0% 10.50 5.0%
Peoples Bancorp, Inc. NJ 04/09/98 TSBS 12.00 20.0% 10.56 5.6% 10.50 5.0%
Pocahontas Bancorp AR* 04/01/98 PFSL 10.75 7.5% 10.25 2.5% 9.94 -0.6%
Harbor Florida Bancshares FL* 03/19/98 HARB 12.25 22.5% 11.69 16.9% 12.81 28.1%
Averages - 2nd Step Conversions: $ 13.66 13.9% $ 13.10 8.5% $ 12.93 8.4%
Medians - 2nd Step Conversions: $ 12.00 13.8% $ 10.56 5.6% $ 10.50 5.0%
Averages - All Conversions: $ 16.06 39.5% $ 16.23 41.4% $ 16.26 41.9%
Medians - All Conversions: $ 14.22 32.5% $ 14.84 44.9% $ 14.72 8.4%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrift.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Simultaneously converted to commercial bank charter.
June 1, 1998
- --------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of June 5, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
--------------- --------------- -------------------------------
Core Book
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.84 174.72 0.96 13.81 20.15 160.44 20.63 166.60
All Public Companies 22.34 251.09 1.00 13.73 19.90 165.97 20.66 170.54
Special Selection Grouping(8) 15.96 223.55 0.49 12.75 25.84 138.59 30.16 139.85
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
BYS Bay State Bancorp of MA 27.75 70.35 1.05 23.66 26.43 117.29 24.29 117.29
CAVB Cavalry Bancorp of TN 22.50 169.61 0.43 13.23 NM 170.07 48.35 170.07
CFKY Columbia Financial of KY 15.00 40.07 0.15 13.42 NM 111.77 31.61 301.20
EFC EFC Bancorp Inc of IL 13.50 93.65 0.56 12.42 24.11 108.70 25.84 108.70
FSLA First Source Bancorp of NJ 10.00 317.40 0.41 7.72 24.39 129.53 26.62 129.53
HARB Harbor Florida Bancshrs of FL 11.94 366.55 0.45 8.29 25.40 144.03 28.54 145.61
HBSC Heritage Bancorp, Inc of SC 20.50 94.89 0.78 19.41 26.28 105.62 30.40 105.62
HLFC Home Loan Financial Corp of OH 15.50 34.84 0.37 13.82 NM 112.16 43.67 112.16
ICBC Independence Comm Bnk Cp of NY 16.81 1183.61 0.49 12.55 NM 133.94 29.07 143.06
NEP Northeast PA Fin. Corp of PA 14.50 93.19 0.42 12.43 NM 116.65 21.30 116.65
TSBS Peoples Bancorp Inc of NJ 10.00 362.37 0.15 3.09 NM 323.62 40.77 NM
PFSL Pocahontas Bancorp of AR 9.88 65.89 0.35 8.72 27.44 113.30 16.44 113.30
SBAN SouthBanc Shares Inc. of SC 19.56 13.79 0.73 17.01 26.79 114.99 25.13 114.99
<CAPTION>
Dividends(4) Financial Characteristics(6)
------- ----------------------- ----- -----------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ --------------- ---------------
Financial Institution P/CORE Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- -------- ------- ------ ------- ------ ------- ------- ------- ------- ------- -------
(x) ($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.81 0.35 1.64 31.79 1,058 13.89 0.67 0.93 7.95 0.88 7.48
All Public Companies 20.61 0.36 1.62 31.61 1,440 13.52 0.66 0.95 8.43 0.90 7.94
Special Selection Grouping(8) 26.11 0.16 1.07 18.52 763 22.94 0.44 1.00 5.44 0.91 5.00
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
BYS Bay State Bancorp of MA 26.43 0.00 0.00 0.00 290 20.71 0.77 0.92 4.44 0.92 4.44
CAVB Cavalry Bancorp of TN NM 0.00 0.00 0.00 351 28.43 0.01 1.48 7.18 1.02 4.98
CFKY Columbia Financial of KY NM 0.00 0.00 0.00 127 28.28 NA 0.91 3.20 0.32 1.12
EFC EFC Bancorp Inc of IL 24.11 0.00 0.00 0.00 362 23.77 0.46 1.07 4.51 1.07 4.51
FSLA First Source Bancorp of NJ 24.39 0.12 1.20 29.27 1,192 20.55 0.47 1.09 5.31 1.09 5.31
HARB Harbor Florida Bancshrs of FL 26.53 0.26 2.18 57.78 1,284 19.81 0.47 1.25 11.33 1.20 10.84
HBSC Heritage Bancorp, Inc of SC 26.28 0.00 0.00 0.00 312 28.79 NA 1.16 4.02 1.16 4.02
HLFC Home Loan Financial Corp of OH NM 0.00 0.00 0.00 80 38.94 0.44 1.30 5.70 1.30 5.70
ICBC Independence Comm Bnk Cp of NY NM 0.00 0.00 0.00 4,072 21.70 0.70 0.64 2.95 0.85 3.90
NEP Northeast PA Fin. Corp of PA NM 0.00 0.00 0.00 437 18.26 0.22 0.62 3.38 0.62 3.38
TSBS Peoples Bancorp Inc of NJ NM 0.10 1.00 66.67 889 12.60 0.64 1.06 6.69 0.79 5.02
PFSL Pocahontas Bancorp of AR 28.23 0.24 2.43 68.57 401 14.51 0.25 0.62 7.74 0.61 7.53
SBAN SouthBanc Shares Inc. of SC 26.79 1.40 7.16 NM 117 21.85 NA 0.94 4.29 0.94 4.29
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.17
8. Management
Cortland's management team has experience and expertise in all of the key
areas of the Bank's operations. Exhibit IV-5 lists Cortland's Board of Trustees
and executive management with summary resumes, showing that the Bank has also
recently hired experienced professionals for the positions of chief operating
officer and chief financial officer. The Bank's operations to date indicates
that Cortland's management team, in conjunction with the Board, has developed
and implemented an effective operating philosophy. With the recent additions of
two senior officers, Cortland currently has no apparent senior management or
Board vacancies and there appears to be a well-defined organizational structure.
Similarly, the financial results of the Peer Group companies indicate that
they have been effectively managed, as all of the Peer Group companies
maintained capital positions in compliance with regulatory requirements, solid
core earnings and favorable credit quality measures. We have therefore concluded
that, in general, Cortland is currently being operated at least as effectively
as the Peer Group companies and no adjustment for this factor was necessary.
9. Effect of Government Regulation and Regulatory Reform
The 1996 recapitalization of the SAIF insurance fund has removed the
difference in deposit insurance costs between BIF and SAIF-insured institutions.
Thus, although five of the Peer Group members are SAIF-insured, the deposit
insurance costs are similar. As a fully-converted BIF-insured institution,
Cortland will operate in substantially the same regulatory environment as the
Peer Group members -- all of whom are adequately capitalized institutions
(Exhibit IV-6 reflects the Bank's pro forma regulatory capital ratios). As
discussed previously, Cortland has been operating since late 1995 under and MOU
with the FDIC to address certain loan origination and compliance matters.
Although Cortland believes it has complied with all aspects of the MOU, there is
no assurance that the FDIC will terminate the MOU in the near future. The Peer
Group members operate with no apparent regulatory restrictions. On balance, RP
Financial concluded that a slight downward adjustment to the Bank's value was
warranted for this factor.
Summary of Adjustments
Overall, we believe the Bank's pro forma market value should take into
account the valuation adjustments relative to the Peer Group:
<PAGE>
RP Financial, LC.
Page 4.18
Key Valuation Parameters: Valuation Adjustment
------------------------- --------------------
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth Slight Downward
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 Slight Downward
and Regulatory Reform
Valuation Approaches
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Cortland's to-be-issued stock -- the
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters disclosed in
Cortland's prospectus for offering expenses, and the effective tax rate and
stock benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). We have
utilized the reinvestment rate set forth in the prospectus, the one year T-Bill
rate as of March 31, 1998 of 5.39 percent. With regard to the employee stock
ownership plan and stock reward plans, we have performed the valuation assuming
the ESOP purchases an amount equal to 8.0 percent of the offering (15 year
amortization) and the PRRP acquires 4.0 percent of the offering. We also took
into account that concurrent with the conversion, Cortland will contribute
authorized but unissued shares equal to two percent of the shares issued in the
conversion to a charitable foundation. In our estimate of value, we assessed the
relationship of the pro forma pricing ratios relative to the Peer Group and the
recent conversions.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
long-term value for a stock. Since the Bank and the Peer Group
reported pro forma core profitability, the P/E approach was heavily
considered in this valuation. In applying this approach, we took
into account primarily estimated core earnings.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of savings institution stocks, with the greater
determinant of long term value being earnings. We have also modified
the P/B approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"). RP Financial considered the
P/TB approach to be a reliable indicator of value given current
market conditions, particularly the market for new conversions,
which often exhibit a willingness to pay premium P/E multiples in
the expectation that such institutions will implement leveraging
strategies to promote earnings growth. At the
<PAGE>
RP Financial, LC.
Page 4.19
same time, with lower ROE ratios, new conversions are typically
discounted on a book value basis relative to the market at least
until there is partial realization of leveraging strategies.
o P/A Approach. P/A ratios are generally a less reliable indicator of
market value, as investors do not place exclusive weight simply on
the size of total assets as a determinant of market value.
Furthermore, this approach does not take into account the amount of
stock purchases funded by deposit withdrawals, thus understating the
pro forma P/A ratio. Investors place significantly greater weight on
book value and earnings -- which have received greater weight in our
valuation analysis. At the same time, the P/A ratio is an indicator
of franchise value and, in the case of a highly capitalized
institution, a high P/A ratio limits the investment community's
willingness to pay average market multiples for earnings and book
value when ROE is low.
The Bank intends to adopt Statement of Position ("SOP" 93-6), which will
cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Bank's shareholders. However, we have considered the impact
of adoption of SOP 93-6 on the Bank in the determination of the Bank's pro forma
value.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/TB and P/E approaches, followed by the P/A approach, RP
Financial concluded that the pro forma market value of the Bank's conversion
stock is $62,475,000 at the midpoint at this time.
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB valuation
method requires calculating the Bank's pro forma market value by applying a
valuation P/TB ratio to Cortland's pro forma tangible book value. Based on the
$62,475,000 midpoint valuation, Cortland's pro forma P/TB ratio was 74.49
percent. In comparison to the average P/TB ratio for the Peer Group of 131.68
percent, Cortland's valuation reflected a discount of 43.4 percent. RP Financial
considered a discount under the P/TB approach to be reasonable in light of the
valuation adjustments discussed previously. Given the historically high P/TB
pricing for thrifts in today's market, a valuation discount under the P/TB
approach could only be expected and is consistent with the aftermarket trading
of new conversion issues.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple times the pro forma earnings base. Ideally, the pro forma earnings
base is composed principally of the Bank's recurring earnings base, that is,
earnings adjusted to exclude any one-time non-operating items, plus the
estimated after-tax earnings benefit of the reinvestment of net conversion
proceeds. Cortland reported net income of $154,000 for the twelve months ended
March 31, 1998, which included net non-operating items such as substantial
amounts of loan loss provisions,
<PAGE>
RP Financial, LC.
Page 4.20
other non-operating expense in the form of expenses on REO, and non-operating
income consisting of minor levels of gains on the sale of securities and a
recovery on the Nationar investment. Excluding these various non-operating items
and normalizing the loan loss provisions to match the Bank's 1998 budgeted
figure of $300,000 annually, the Bank's core earnings were calculated to equal
the following (Note: the adjustments applied to the Peer Group's earnings in the
calculation of core earnings are shown in Exhibit IV-9):
Est. Core
Earnings
--------
($000)
Net Int. Margin, (12 Mths Ended 3/31/98) $ 9,287
Less: Loan Loss Provisions @$300,000 Annualized (300)
Plus: Other Operating Income (12 Mths Ended 3/31/98) 825
Less: Operating Expense (12 Mths Ended 3/31/98) (6,321)
------
Adjusted Income Before Taxes $ 3,491
Taxes @ 39% (1,361)
------
Estimated Core Earnings $ 2,130
Based on Cortland's trailing twelve month adjusted earnings, and
incorporating the impact of the pro forma assumptions previously discussed, the
Bank's pro forma core P/E multiple at the $62,475,000 midpoint value equaled
18.75 times. Comparatively, the Peer Group posted an average core P/E multiple
of 22.48 times, which indicates a discount of 16.6 percent in the Bank's pro
forma earnings multiple at the midpoint. At the supermaximum of the valuation
range, the Bank's core P/E multiple equaled 22.12 times, an indicated discount
of 1.6 percent. In reaching the valuation conclusion, we also evaluated the
Bank's price/earnings multiple on the basis of projected earnings as reflected
in the business plan.
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, Cortland's value equaled 21.93 percent of pro forma
assets. Comparatively, the Peer Group companies exhibited an average P/A ratio
of 23.87 percent, which implies an 8.1 percent discount being applied to the
Bank's pro forma P/A ratio.
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
<PAGE>
RP Financial, LC.
Page 4.21
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 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 79.0
percent. On average, the prices of recent conversions appreciated by 56 percent
following the first week of trading. In comparison, the Bank's P/TB ratio at the
appraised midpoint reflects only a moderate discount relative to the closing
ratios and a larger discount to the aftermarket ratios. 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
Based on the foregoing, it is our opinion that, as of June 5, 1998, the
aggregate pro forma market value of the Bank was $62,475,000 at the midpoint,
equal to 6,247,500 shares offered at $10.00 per share. Pursuant to the
conversion guidelines, the 15 percent offering range includes a minimum of
$53,103,750 and a maximum of $71,846,250. Based on the $10.00 per share offering
price, this valuation range equates to an offering of 5,310,375 shares at the
minimum to 7,184,625 shares at the maximum. The Holding Company's offering also
includes a provision for a super maximum, which would result in an offering size
of $82,623,190, equal to 8,262,319 shares at the $10.00 per share offering
price.
Based on this valuation range, incorporating the 2 percent shares issued
to the Foundation following consummation of the offering, the offering range is
as follows: $52,062,500 at the minimum, $61,250,000 at the midpoint, $70,437,500
at the maximum and $81,003,125 at the supermaximum. Based on a $10.00 per share
offering price, the number of offering shares is as follows: 5,206,250 at the
minimum, 6,125,000 at the midpoint, 7,043,750 at the maximum and 8,100,313 at
the supermaximum.
The comparative pro forma valuation ratios relative to the Peer Group are
shown in Table 4.4, and the key valuation assumptions are detailed in Exhibit
IV-7. The pro forma calculations for the range are detailed in Exhibit IV-8.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Cortland SB of Cortland NY and the Comparables
As of June 5, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
------------------------------- ---------------------------------------
Core Book
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY
- --------------------------
Superrange 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Range Maximum 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Range Midpoint 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Range Minimum 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BIF-Insured Thrifts(7)
- ----------------------
Averages 24.92 628.84 1.21 13.40 18.56 193.05 20.50 191.24 19.53
Medians --- --- --- --- 16.65 189.11 18.49 195.98 18.52
All Non-MHC State of NY(7)
- --------------------------
Averages 27.76 604.99 1.19 16.56 21.46 161.11 21.52 169.65 22.15
Medians --- --- --- --- 21.04 151.26 18.49 152.14 22.24
Comparable Group Averages
- -------------------------
Averages 19.75 44.15 0.79 14.99 21.98 131.31 23.87 131.68 22.48
Medians --- --- --- --- 21.79 126.56 26.60 126.56 22.53
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY(7) 19.75 27.22 0.89 14.58 22.19 135.46 16.97 135.46 22.19
ALBK ALBANK Fin. Corp. of Albany NY 52.38 673.24 3.38 28.54 15.32 183.53 16.46 234.68 15.50
ALBC Albion Banc Corp. of Albion NY 9.50 7.14 0.43 8.28 21.11 114.73 9.80 114.73 22.09
AHCI Ambanc Holding Co., Inc. of NY 18.63 79.33 0.48 14.27 NM 130.55 15.26 130.55 NM
ASFC Astoria Financial Corp. of NY 54.31 1431.94 2.52 32.88 19.82 165.18 13.14 233.39 21.55
CNY Carver Bancorp, Inc. of NY 13.31 30.80 0.03 15.24 NM 87.34 7.41 90.79 NM
CATB Catskill Fin. Corp. of NY 17.38 77.53 0.85 15.54 20.21 111.84 26.20 111.84 20.45
DME Dime Bancorp, Inc. of NY 30.13 3442.59 1.03 11.37 23.54 265.00 15.63 323.63 29.25
DIME Dime Community Bancorp of NY 29.00 360.76 0.89 15.22 NM 190.54 22.87 219.03 NM
ESBK Elmira Svgs Bank (The) of NY 29.25 21.26 1.47 19.63 21.04 149.01 9.26 149.01 19.90
FIBC Financial Bancorp, Inc. of NY 27.50 46.94 1.58 16.43 16.98 167.38 15.12 168.09 17.41
FFIC Flushing Fin. Corp. of NY 26.50 207.44 1.14 17.52 23.45 151.26 19.23 157.27 23.25
GOSB GSB Financial Corp. of NY 17.13 38.51 0.37 14.88 NM 115.12 32.40 115.12 NM
GPT GreenPoint Fin. Corp. of NY 40.94 3458.16 1.74 15.15 24.37 270.23 26.14 NM 23.53
HAVN Haven Bancorp of Woodhaven NY 26.88 237.51 1.11 12.91 24.00 208.21 11.77 208.70 24.22
ICBC Independence Comm Bnk Cp of NY 16.81 1183.61 0.49 12.55 NM 133.94 29.07 143.06 NM
JSB JSB Financial, Inc. of NY 58.44 577.56 2.64 35.96 19.68 162.51 37.72 162.51 22.14
LISB Long Island Bancorp, Inc of NY(7) 61.50 1471.94 1.77 23.55 28.08 261.15 23.38 263.38 NM
PEEK Peekskill Fin. Corp. of NY 18.00 54.31 0.65 14.92 28.57 120.64 27.73 120.64 27.69
PSBK Progressive Bank, Inc. of NY(7) 42.00 161.95 2.23 20.68 18.92 203.09 18.07 222.58 18.83
QCSB Queens County Bancorp of NY 44.44 663.13 1.48 11.36 29.63 NM 40.87 NM NM
RELY Reliance Bancorp, Inc. of NY 39.25 377.90 2.04 20.13 20.34 194.98 17.34 282.58 19.24
RCBK Richmond County Fin Corp of NY 18.50 488.84 0.74 12.21 NM 151.52 33.39 152.14 25.00
RSLN Roslyn Bancorp, Inc. of NY 22.13 947.65 0.99 14.51 21.49 152.52 25.57 153.25 22.35
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ _______________ _______________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cortland SB of Cortland NY
- --------------------------
Superrange 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00
Range Maximum 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00
Range Midpoint 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00
Range Minimum 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00
BIF-Insured Thrifts(7)
- ----------------------
Averages 0.40 1.53 31.00 3,341 11.56 0.64 1.05 10.76 1.01 10.16
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of NY(7)
- --------------------------
Averages 0.42 1.34 31.22 2,942 13.83 0.79 0.85 7.29 0.91 7.55
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.28 1.43 36.11 215 18.43 0.71 0.88 5.25 0.91 5.28
Medians --- --- --- --- --- --- --- --- --- ---
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY(7) 0.28 1.42 31.46 160 12.52 0.37 0.78 5.89 0.78 5.89
ALBK ALBANK Fin. Corp. of Albany NY 0.84 1.60 24.85 4,089 8.97 0.92 1.16 12.76 1.14 12.61
ALBC Albion Banc Corp. of Albion NY 0.12 1.26 27.91 73 8.54 0.55 0.48 5.58 0.46 5.33
AHCI Ambanc Holding Co., Inc. of NY 0.24 1.29 50.00 520 11.69 0.62 0.51 4.18 0.41 3.34
ASFC Astoria Financial Corp. of NY 0.80 1.47 31.75 10,895 7.96 0.54 0.81 10.29 0.74 9.46
CNY Carver Bancorp, Inc. of NY 0.00 0.00 0.00 416 8.48 NA -0.11 -1.33 0.02 0.20
CATB Catskill Fin. Corp. of NY 0.32 1.84 37.65 296 23.42 0.29 1.33 5.36 1.32 5.30
DME Dime Bancorp, Inc. of NY 0.20 0.66 19.42 22,024 5.90 1.03 0.72 12.65 0.58 10.18
DIME Dime Community Bancorp of NY 0.36 1.24 40.45 1,577 12.01 0.48 0.83 6.19 0.79 5.86
ESBK Elmira Svgs Bank (The) of NY 0.64 2.19 43.54 230 6.21 0.68 0.44 7.04 0.47 7.45
FIBC Financial Bancorp, Inc. of NY 0.50 1.82 31.65 310 9.04 2.19 0.94 10.24 0.92 9.99
FFIC Flushing Fin. Corp. of NY 0.32 1.21 28.07 1,078 12.72 0.31 0.92 6.57 0.93 6.63
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 119 28.14 0.10 0.73 3.54 0.69 3.36
GPT GreenPoint Fin. Corp. of NY 0.64 1.56 36.78 13,228 9.67 2.73 1.08 10.71 1.11 11.10
HAVN Haven Bancorp of Woodhaven NY 0.30 1.12 27.03 2,018 5.65 0.57 0.53 9.11 0.53 9.03
ICBC Independence Comm Bnk Cp of NY 0.00 0.00 0.00 4,072 21.70 0.70 0.64 2.95 0.85 3.90
JSB JSB Financial, Inc. of NY 1.60 2.74 60.61 1,531 23.21 NA 1.92 8.59 1.71 7.64
LISB Long Island Bancorp, Inc of NY(7) 0.60 0.98 33.90 6,296 8.95 0.86 0.87 9.63 0.71 7.78
PEEK Peekskill Fin. Corp. of NY 0.36 2.00 55.38 196 22.99 0.89 1.03 4.09 1.06 4.22
PSBK Progressive Bank, Inc. of NY(7) 0.80 1.90 35.87 896 8.90 0.76 0.97 11.15 0.97 11.20
QCSB Queens County Bancorp of NY 1.00 2.25 67.57 1,622 10.45 0.55 1.47 12.54 1.45 12.37
RELY Reliance Bancorp, Inc. of NY 0.72 1.83 35.29 2,180 8.89 NA 0.90 10.66 0.95 11.27
RCBK Richmond County Fin Corp of NY 0.20 1.08 27.03 1,464 22.04 0.47 0.19 1.11 1.53 9.09
RSLN Roslyn Bancorp, Inc. of NY 0.34 1.54 34.34 3,706 16.76 0.25 1.31 7.08 1.26 6.81
</TABLE>
<PAGE>
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
Cortland SB of Cortland NY and the Comparables
As of June 5, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
--------------- -------------- ---------------------------------------
Core Book
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED SFS Bancorp of Schenectady NY 22.00 26.58 0.89 17.95 23.91 122.56 15.15 122.56 24.72
SKAN Skaneateles Bancorp Inc of NY 17.50 25.20 1.09 12.48 15.63 140.22 9.78 143.91 16.06
SIB Staten Island Bancorp of NY 21.44 967.59 0.79 15.51 NM 138.23 36.22 141.89 27.14
ROSE T R Financial Corp. of NY 42.25 740.64 1.85 14.05 20.22 300.71 18.49 300.71 22.84
TPNZ Tappan Zee Fin., Inc. of NY(7) 20.13 29.75 0.67 14.56 28.76 138.26 23.52 138.26 NM
WSBI Warwick Community Bncrp of NY 16.88 111.53 0.55 12.60 NM 133.97 31.84 133.97 NM
YFCB Yonkers Fin. Corp. of NY 18.94 57.12 1.01 14.90 18.39 127.11 17.22 127.11 18.75
Comparable Group
- ----------------
AHCI Ambanc Holding Co., Inc. of NY 18.63 79.33 0.48 14.27 NM 130.55 15.26 130.55 NM
CATB Catskill Fin. Corp. of NY 17.38 77.53 0.85 15.54 20.21 111.84 26.20 111.84 20.45
DCBI Delphos Citizens Bancorp of OH 20.50 39.03 0.91 14.76 22.53 138.89 34.66 138.89 22.53
ESBK Elmira Svgs Bank (The) of NY 29.25 21.26 1.47 19.63 21.04 149.01 9.26 149.01 19.90
GOSB GSB Financial Corp. of NY 17.13 38.51 0.37 14.88 NM 115.12 32.40 115.12 NM
PEEK Peekskill Fin. Corp. of NY 18.00 54.31 0.65 14.92 28.57 120.64 27.73 120.64 27.69
PSFC Peoples Sidney Fin. Corp of OH 24.38 43.52 0.71 14.87 NM 163.95 41.24 163.95 NM
SFED SFS Bancorp of Schenectady NY 22.00 26.58 0.89 17.95 23.91 122.56 15.15 122.56 24.72
SKAN Skaneateles Bancorp Inc of NY 17.50 25.20 1.09 12.48 15.63 140.22 9.78 143.91 16.06
WEHO Westwood Hmstd Fin Corp of OH 12.75 36.25 0.49 10.60 NM 120.28 27.00 120.28 26.02
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ --------------- --------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED SFS Bancorp of Schenectady NY 0.32 1.45 35.96 175 12.36 0.72 0.64 5.13 0.62 4.96
SKAN Skaneateles Bancorp Inc of NY 0.28 1.60 25.69 258 6.98 2.01 0.64 9.32 0.63 9.07
SIB Staten Island Bancorp of NY 0.28 1.31 35.44 2,671 26.20 0.85 0.86 5.00 1.59 9.19
ROSE T R Financial Corp. of NY 0.72 1.70 38.92 4,006 6.15 0.57 0.99 15.97 0.88 14.13
TPNZ Tappan Zee Fin., Inc. of NY(7) 0.28 1.39 41.79 126 17.02 1.24 0.84 4.86 0.81 4.65
WSBI Warwick Community Bncrp of NY 0.00 0.00 0.00 350 23.76 0.52 1.04 4.37 1.04 4.37
YFCB Yonkers Fin. Corp. of NY 0.28 1.48 27.72 332 13.54 0.41 1.05 7.10 1.03 6.96
Comparable Group
- ----------------
AHCI Ambanc Holding Co., Inc. of NY 0.24 1.29 50.00 520 11.69 0.62 0.51 4.18 0.41 3.34
CATB Catskill Fin. Corp. of NY 0.32 1.84 37.65 296 23.42 0.29 1.33 5.36 1.32 5.30
DCBI Delphos Citizens Bancorp of OH 0.00 0.00 0.00 113 24.95 0.56 1.60 5.91 1.60 5.91
ESBK Elmira Svgs Bank (The) of NY 0.64 2.19 43.54 230 6.21 0.68 0.44 7.04 0.47 7.45
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 119 28.14 0.10 0.73 3.54 0.69 3.36
PEEK Peekskill Fin. Corp. of NY 0.36 2.00 55.38 196 22.99 0.89 1.03 4.09 1.06 4.22
PSFC Peoples Sidney Fin. Corp of OH 0.28 1.15 39.44 106 25.15 1.10 1.24 5.56 1.24 5.56
SFED SFS Bancorp of Schenectady NY 0.32 1.45 35.96 175 12.36 0.72 0.64 5.13 0.62 4.96
SKAN Skaneateles Bancorp Inc of NY 0.28 1.60 25.69 258 6.98 2.01 0.64 9.32 0.63 9.07
WEHO Westwood Hmstd Fin Corp of OH 0.36 2.82 73.47 134 22.45 0.12 0.67 2.33 1.05 3.68
</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 Cortland's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 Gap Analysis
I-9 Loan Portfolio Composition
I-10 Contractual Maturity By Loan Type
I-11 Loan Originations, Purchases, and Sales
I-12 Non-Performing Assets
I-13 Classified Assets
I-14 Deposit Composition
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Demographic/Economic Reports
II-4 Sources of Personal Income/Employment Sectors
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 New York Savings Institutions
III-3 Selected Ohio Savings Institutions
<PAGE>
LIST OF EXHIBITS (continued)
IV-1 Stock Prices: June 5, 1998
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Cortland Savings Bank
Map of Office Locations
===================
County-Town
NEW YORK
(UPPER)
===================
Explanation of Symbols
====================================================
* State Capital [Illegible] MSA Boundary
Newton County Seat 256 MSA Number
Population Key
====================================================
o Under 250 o 20,000-24,999
o 250-499 o 25,000-49,999
o 500-999 o 50,000-99,999
o 1,000-2,499 o 100,000-249,999
o 2,500-4,999 o 250,000-999,999
o 5,000-9,999
o 10,000-19,999
[Map of Upstate New York State depicting office locations of Cortland Savings
Bank omitted]
[Map inset of Schenectady/Albany area omitted]
[Map inset of Buffalo area omitted]
<PAGE>
EXHIBIT I-2
Cortland Savings Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Cortland Savings Bank
Key Operating Ratios
<TABLE>
<CAPTION>
At or for the
Three Months
Ended March 31, At or for the Year Ended December 31,
----------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income
to average total assets) ............. 0.86% 0.71% 0.03% 0.58% 0.82% 0.92% 1.03%
Return on average net worth equity
(net income to average equity) ....... 6.54% 5.53% 0.23% 4.64% 6.85% 8.41% 10.16%
Average interest-earning assets to
average interest-bearing liabilities . 115.34% 114.97% 115.80% 113.90% 112.17% 111.39% 109.31%
Net interest rate spread(5) ............. 3.70% 3.71% 3.58% 3.48% 3.70% 3.62% 4.41%
Net interest margin(6) .................. 4.27% 4.27% 4.17% 4.02% 4.18% 4.03% 4.84%
Net interest income after provision for
loan losses to total other expenses .. 1.35x 1.31x 0.88x 1.23x 1.45x 1.55x 1.47x
Capital and Asset Quality Ratios:
Average net worth to average total assets 13.16% 12.78% 13.04% 12.40% 12.00% 10.96% 10.15%
Total net worth to assets end of period . 13.51% 12.96% 13.15% 12.74% 12.32% 11.67% 10.60%
Non-performing assets to total assets ... 0.96% 2.13% 2.04% 1.78% 1.00% 1.32% 1.40%
Non-performing loans to total loans ..... 0.94% 2.84% 2.37% 2.28% 1.24% 1.60% 2.22%
Allowance for loan losses to total loans 1.43% 1.30% 1.34% 1.22% 1.25% 1.14% 1.12%
Allowance for loan losses to
non-performing loans ................. 106.62% 45.73% 49.38% 47.93% 55.75% 55.97% 41.84%
Other Data:
Number of real estate loans outstanding . 2,953 3,033 3,029 3,104 3,169 2,936 2,882
Number of deposit accounts .............. 33,548 34,031 34,069 34,213 34,710 NA NA
Full service offices .................... 3 3 3 3 3 3 2
</TABLE>
(1) Shown net of deferred fees and the allowance for loan losses.
(2) In December 1995, the Bank transferred securities classified as
held-to-maturity with a fair value of $31,153,000 to available-for-sale.
(3) Includes the cumulative effect of changes in accounting for post-retirement
benefits other than pensions and changes in accounting for income taxes.
(4) Asset quality and capital ratios are at end of period. All average balances
are daily average balances except for 1995 and prior, for which monthly average
balances are used because daily average balances are unavailable. Ratios for the
three-month periods have been annualized where appropriate.
(5) The net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(6) The net interest margin, also known as the net yield on average interest-
earning assets, represents net interest income as a percentage of average
interest-earning assets.
NA The information is not available.
<PAGE>
EXHIBIT I-4
Cortland Savings Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ ---------------
1998 1997 1996 1995
---- ---- ---- ----
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
------- ------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities Available-for-sale:
U.S. Treasury securities ........ $12,048 $12,137 $15,045 $15,141 $14,497 $14,550 $ 3,053 $ 3,068
U.S. Government agencies ........ 4,495 4,485 996 1,005 4,988 4,993 5,502 5,542
Corporate debt obligations ...... 14,485 14,512 13,819 13,861 13,233 13,252 24,545 24,679
Mortgage-backed securities ...... 11,886 11,981 12,144 12,211 11,833 11,722 7,764 7,752
------- ------- ------- ------- ------- ------- ------- -------
Total debt securities ......... 42,914 43,115 42,004 42,218 44,551 44,517 40,864 41,041
Equity securities ............... 1,340 2,360 1,192 1,922 628 1,077 418 736
------- ------- ------- ------- ------- ------- ------- -------
Total Available-for-sale ...... 44,254 45,475 43,196 44,140 45,179 45,594 41,282 41,777
------- ------- ------- ------- ------- ------- ------- -------
Securities Held-to-maturity:
U.S. Government agencies ........ 2,001 1,997 1,992 1,995 -- -- -- --
Corporate debt obligations ...... 2,359 2,376 1,854 1,870 -- -- -- --
State and municipal sub-divisions 284 288 425 430 858 867 1,472 1,501
Mortgage-backed securities ...... 7,835 7,828 8,279 8,274 10,899 10,766 9,716 9,794
------- ------- ------- ------- ------- ------- ------- -------
Total held-to-maturity ........ 12,479 12,489 12,550 12,569 11,757 11,633 11,188 11,295
------- ------- ------- ------- ------- ------- ------- -------
Total Securities .............. $56,733 $57,964 $55,746 $56,709 $56,936 $57,227 $52,470 $53,072
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-5
Cortland Savings Bank
Yields and Costs
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------------------------------
At March 3l, 1998 1998(6) 1997(6)
----------------- --------------------------- ------------------------------
(Dollars in thousands)
Average Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
-------- -------- ------ ---- -------- ------ ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans(1) $154,200 $157,134 $3,377 8.72% $158,434 $3,433 8.79%
-------- -------- ------ ---- -------- ------ ----
Securities(2) 58,038 54,852 848 6.27 58,393 898 6.24
Other short-term investments 6,791 6,645 86 5.25 6,769 86 5.15
-------- -------- ------ -------- ------
Total interest-earning assets 219,029 218,631 4,311 8.00 223,596 4,417 8.01
Non-interest-earning assets 13,359 13,553 11,740
------ ------ ------
Total assets 232,388 232,184 235,336
======= ======= =======
Liabilities:
Passbook, statement savings and
club accounts(3) 64,326 63,748 474 3.02 63,621 467 2.98
Savings certificates 107,854 108,067 1,439 5.40 112,578 1,494 5.38
Money market accounts 8,314 8,385 57 2.76 8,985 63 2.84
NOW accounts 9,280 9,357 40 1.73 9,298 40 1.74
Total interest-bearing liabilities 189,774 189,557 2,010 4.30 194,482 2,064 4.30
Non-interest-bearing liabilities 11,220 12,076 10,772
------ ------ ------
Total liabilities 200,994 201,633 205,254
Net worth 31,394 30,551 30,082
------ ------ ------
Total liabilities and net worth 232,388 232,184 235,336
======= ======= =======
Net interest income/spread(4) 0.00% $2,301 3.70% $2,353 3.71%
===== ====== ===== ====== =====
Net earning assets/net interest margin(5) $ 29,255 NA $ 29,074 -- 4.27% $ 29,114 4.27%
======== ======== ===== ======== =====
Ratio of average interest-earning assets
to average interest-bearing liabilities l.15x l.15x l.l5x
===== ===== =====
</TABLE>
Notes appear on following page.
<PAGE>
EXHIBIT I-5
Cortland Savings Bank
Yields and Costs
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
December 31,
----------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- --------------------------- ---------------------------
(Dollars in thousands)
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
-------- -------- ---- -------- -------- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans(1) $157,713 $ 13,582 8.61% $158,779 $ 13,805 8.69% $157,317 $ 14,012 8.91%
Securities(2) 60,226 3,769 6.26 58,557 3,620 6.18 56,235 3,404 6.05
Other short-term investments 6,019 316 5.25 7,300 362 4.96 6,580 395 6.00
-------- -------- -------- -------- -------- --------
Total interest-earning assets 223,958 17,667 7.89 224,636 17,787 7.92 220,132 17,811 8.09
-------- -------- --------
Non-interest-earning assets 12,254 12,442 14,077
-------- -------- --------
Total assets $236,212 $237,078 $234,209
======== ======== ========
Liabilities:
Passbook, statement savings and
club accounts(3) 64,576 1,936 3.00 64,405 1,922 2.98 66,384 1,991 3.00
Savings certificates 110,728 5,983 5.40 113,890 6,354 5.58 108,614 6,005 5.53
Money market accounts 8,643 243 2.81 9,635 288 2.99 11,242 339 3.02
NOW accounts 9,457 166 1.76 9,295 194 2.09 9,134 227 2.49
Other borrowings -- -- -- -- -- -- 875 51 5.83
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 193,404 8,328 4.31 197,225 8,758 4.44 196,249 8,613 4.39
Non-interest-bearing liabilities 12,003 10,464 9,864
-------- -------- --------
Total liabilities 205,407 207,689 206,113
Net worth 30,806 29,389 28,095
-------- -------- --------
Total liabilities and net worth $236,213 $237,078 $234,208
======== ======== ========
Net interest income/spread(4) $ 9,339 3.58% $ 9,029 3.48% $ 9,198 3.70%
======== ===== ======== ===== ======== =====
Net earning assets/net interest margin(5) $ 30,554 4.17% $ 27,411 4.02% $ 23,883 4.18%
======== ===== ======== ===== ======== =====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.16x 1.14x 1.12x
======= ======= =======
</TABLE>
(1) Average balances include loans held for sale and non-accrual loans,
net of the allowance for loan losses. Interest is recognized on
non-accrual loans only as and when received.
(2) Securities are included at amortized cost, with net unrealized gains
or losses on securities available-for-sale included as a component of
non-earning assets. Securities include FHLBNY stock.
(3) Includes advance payments by borrowers for taxes and insurance
(mortgage escrow deposits).
(4) The spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(5) The net interest margin, also known as the net yield on average
interest-earning assets, represents net interest income as a percentage of
average interest-earning assets.
(6) Yields and related ratios for the three month periods have been
annualized when appropriate.
<PAGE>
EXHIBIT I-6
Cortland Savings Bank
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
--------- ------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning
of period............................. $2,143 $1,952 $2,002 $1,752 $1,620 $1,223
Provision for loan losses............... 75 3,300 1,380 600 300 550
------ ------ ------ ------ ------ -------
Charge-offs:
Real estate........................... - 2,484 264 478 110 25
Commercial............................ 23 395 898 31 21 48
Other................................. 16 400 551 96 137 205
------ ------ ------ ------ ------ ------
Total charge-offs................... 39 3,279 1,713 605 268 278
Recoveries:
Real estate........................... 23 9 24 161 - -
Commercial............................ 9 61 190 - - -
Other................................. 19 100 69 94 100 125
------ ------ ------ ------ ------ ------
Total recoveries.................... 51 170 283 255 100 125
Net charge-offs (recoveries)............ (12) 3,109 1,430 350 168 153
------ ------ ------ ------ ------ ------
Allowance for loan losses, end
of period............................. $2,230 $2,143 $1,952 $2,002 $1,752 $1,620
====== ====== ====== ====== ====== ======
Allowance for loan losses as a
percent of total loans................ 1.43% 1.34% 1.22% 1.25% 1.14% 1.12%
Allowance for loan losses as a
percent of non-performing loans....... 151.91% 56.48% 53.23% 100.40% 71.13% 50.50%
Ratio of net charge-offs
(recoveries)
to average loans outstanding.......... (0.01%) 1.97% 0.90% 0.22% 0.12% 0.13%
</TABLE>
<PAGE>
EXHIBIT I-7
Cortland Savings Bank
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------------------------------------
At March 31, 1998 1997 1996 1995 1994
----------------- ---- ---- ---- ----
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate loans:
Real estate loans:
Residential................. $ 62,475 39.89% 59,048 37.42% 49,879 31.00 48,292 30.01% 47,433 30.68%
Construction................ 264 0.17 316 0.20 528 0.33 155 0.10 1,065 0.69
Commercial mortgages........ 27,681 17.67 28,077 17.79 31,281 19.44 31,177 19.38 28,370 18.35
-------- ----- ------ ----- ------ ----- ------ ----- ------ ----
Total real estate loans... 90,420 57.73 87,441 55.41 81,688 50.77 79,624 49.49 76,868 49.72
Other loans................... 19,107 12.20 19,167 12.15 17,716 11.01 16,627 10.33 14,719 9.52
-------- ----- ------ ----- ------ ----- ------ ----- ------ ----
Total fixed-rate loans..... 109,527 69.92 106,608 67.56 99,404 61.78 96,251 59.82 91,587 59.24
Adjustable-rate loans:
Real estate loans:
Residential................. 34,692 22.15 38,255 24.24 46,218 28.73 47,562 29.56 45,509 29.44
Home equity................. 6,139 3.92 5,924 3.75 5,882 3.65 6,344 3.94 7,085 4.57
Commercial mortgages........ 2,879 1.83 2,790 1.77 3,838 2.39 3,988 2.48 4,386 2.84
-------- ----- ------ ----- ------ ----- ------ ----- ------ ----
Total real estate loans... 43,710 27.91 46,969 29.76 55,938 34.77 57,894 35.98 56,980 36.85
Other loans................... 3,398 2.17 4,229 2.68 5,554 3.45 6,743 4.20 6,039 3.91
------- ----- ------ ----- ------ ----- ------ ----- ------ ----
Total adjustable-rate loans. 47,108 30.08 51,198 32.44 61,492 38.22 64,637 40.18 63,019 40.76
Total loans............... 156,635 100.00% 157,806 100.00% 160,896 100.00% 160,888 100.00% 154,606 100.00%
-------- ====== ------- ====== ------- ====== ------- ====== ------- ======
Less:
Deferred loan fees, net.... 205 241 333 379 378
Allowance for loan losses.. 2,230 2,143 1,952 2,002 1,752
-------- -------- -------- -------- --------
Total loans, net......... $154,200 $155,422 $158,611 $158,507 $152,476
======== ======== ======== ======== ========
</TABLE>
At December 31,
-----------------
1993
----
Percent
Amount of Total
------ --------
Fixed-rate loans:
Real estate loans:
Residential................. 43,281 29.93%
Construction................ 534 0.37
Commercial mortgages........ 25,403 17.57
------ ------
Total real estate loans... 69,218 47.87
Other loans................... 12,749 8.82
------ ------
Total fixed-rate loans....... 81,967 56.69
Adjustable-rate loans:
Real estate loans:
Residential................. 44,761 30.96
Home equity................. 7,141 4.94
Commercial mortgages........ 4,592 3.18
------ ------
Total real estate loans..... 56,494 39.08
Other loans................... 6,122 4.23
------ ------
Total adjustable-rate loans.. 62,616 43.31
Total loans............... 144,583 100.00%
------- ======
Less:
Deferred loan fees, net...... 363
Allowance for loan losses.... 1,620
--------
Total loans, net......... $142,600
========
<PAGE>
EXHIBIT I-8
Cortland Savings Bank
Gap Analysis
<TABLE>
<CAPTION>
Amounts Estimated to Mature or Reprice Within:
-----------------------------------------------------------------------------------
Less than
Three 3-6 6 Months to 1-2 2-3 Over 3
Months Months 1 Year Years Years Years Total
------ ------ ------ ----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities $ 7,687 $ 4,068 $ 11,280 $ 17,393 $ 9,267 $ 8,343 $ 58,038
Loans 14,556 7,072 14,143 31,418 31,417 55,594 154,200
Other short-term investments 6,79l - - - - - 6,791
------- -------- -------- -------- ------- ------- --------
Total interest-earning assets 29,034 11,140 25,423 48,811 40,684 63,937 219,029
------- -------- -------- -------- ------- ------- --------
Interest-bearing liabilities:
Passbook, statement savings
and club accounts 3,870 5,160 6,450 5,160 3,870 39,853 64,363
Money market accounts 2,744 2,744 2,826 - - - 8,314
NOW accounts 556 742 928 742 557 5,755 9,280
Savings certificates 15,969 20,337 27,704 17,843 14,481 11,520 107,854
------- -------- -------- -------- ------- ------- --------
Total interest-bearing liabilities 23,139 28,983 37,908 23,745 18,908 57,128 189,811
------- -------- -------- -------- ------- ------- --------
Interest sensitivity gap $ 5,895 $(17,843) $(l2,485) $ 25,066 $ 21,776 $ 6,809 $ 29,218
======= ======== ======== ======== ======== ======= ========
Cumulative interest sensitivity gap $ 5,895 $(11,948) $(24,433) $ 633 $ 22,409 $29,218
======= ======== ======== ======== ======== =======
Ratio of cumulative gap to total
interest-earning assets 2.69% (5.45%) (1l.16%) 0.29% 10.23% 13.34%
======= ======== ======== ======== ======== =======
Ratio of cumulative gap to total assets 2.54% (5.14%) (10.51%) 0.27% 9.64% 12.57%
======= ======== ======== ======== ======== =======
Ratio of interest-earning assets to
interest-bearing liabilities 125.48% 38.44% 67.06% 205.56% 215.17% 111.92% 115.39%
======= ======== ======== ======== ======== ======= ========
</TABLE>
<PAGE>
EXHIBIT I-9
Cortland Savings Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ --------------------------------------------------------------
1998 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>
Real estate loans:
Residential ............... $ 97,167 62.03% 97,303 61.66% 96,097 59.73% 95,854 59.57%
Construction .............. 264 0.17% 316 0.20% 528 0.33% 155 0.10%
Home equity ............... 6,139 3.92% 5,924 3.75% 5,882 3.66% 6,344 3.94%
Commercial mortgages ...... 30,560 19.51% 30,867 19.56% 35,119 21.83% 35,165 21.86%
------ ----- ------ ----- ------ ----- ------ -----
Total real estate loans ... 134,130 85.63% 134,410 85.17% 137,626 85.55% 137,518 85.47%
Other loans:
Guaranteed student loans .. 1,708 1.09% 1,507 0.96% 1,552 0.96% 1,747 1.09%
Property improvement. loans 828 0.53% 907 0.57% 1,031 0.64% 916 0.57%
Automobile loans .......... 9,050 5.78% 8,902 5.64% 6,378 3.96% 5,510 3.42%
Other consumer loans ...... 4,391 2.80% 5,031 3.19% 6,289 3.91% 6,174 3.84%
Commercial loans .......... 6,528 4.17% 7,049 4.47% 8,020 4.98% 9,023 5.61%
----- ---- ----- ---- ----- ---- ----- ----
Total other loans ......... 22,505 14.37% 23,396 14.83% 23,270 14.45% 23,370 14.53%
Total loans ............... 156,635 100.00% 157,806 100.00% 160,896 100.00% 160,888 100.00%
------- ====== ------- ====== ------- ====== ------- ======
Less:
Deferred loan fees, net ... 205 241 333 379
Allowance for loan losses . 2,230 2,143 1,952 2,002
----- ----- ----- -----
Total loans, net ........ $ l54,200 155,422 158,611 158,507
======= ======= ======= =======
<CAPTION>
At December 31,
-------------------------------------------
1994 1993
---- ----
Percent Percent
Amount of Total Amount of Total
------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
Residential ............... 92,942 60.12% 88,042 60.89%
Construction .............. 1,065 0.69% 534 0.37%
Home equity ............... 7,085 4.58% 7,141 4.94%
Commercial mortgages ...... 32,756 21.19% 29,995 20.75%
------ ----- ------ -----
Total real estate loans ... 133,848 86.58% 125,712 86.95%
Other loans:
Guaranteed student loans .. 1,960 1.27% 1,621 1.12%
Property improvement. loans 822 0.53% 824 0.57%
Automobile loans .......... 4,617 2.99% 3,775 2.61%
Other consumer loans ...... 5,993 3.88% 5,784 4.00%
Commercial loans .......... 7,366 4.75% 6,867 4.75%
----- ---- ----- ----
Total other loans ......... 20,758 13.42% 18,871 13.05%
Total loans ............... 154,606 100.00% 144,583 100.00%
------- ====== ------- ======
Less:
Deferred loan fees, net ... 378 363
Allowance for loan losses . 1,752 1,620
----- -----
Total loans, net ........ 152,476 142,600
======= =======
</TABLE>
<PAGE>
EXHIBIT I-10
Cortland Savings Bank
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Residential Home Commercial
Mortgage(1) Equity Mortgage Commercial Other loans Total
----------- ------ -------- ---------- ----------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due:
Within 3 months .... $ 18 $ -- $ 923 $ 1,490 $ 167 $ 2,598
3 months to one year 194 -- 3,050 1,678 1,339 6,261
l to 3 years ....... 762 -- 9,720 1,007 5,143 16,632
3 to 5 years ....... 3,402 -- 4,998 640 6,706 15,746
5 to l0 years ...... 14,868 -- 5,071 1,665 367 21,971
l0 to 20 years ..... 43,366 2,285 5,828 -- 1,674 53,153
Over 20 years ...... 34,821 3,854 970 48 581 40,274
-------- -------- -------- -------- -------- --------
Total loans ........ $ 97,431 $ 6,139 $ 30,560 $ 6,528 $ 15,977 $156,635
======== ======== ======== ======== ======== ========
</TABLE>
(1) Includes construction loans on residential property.
<PAGE>
EXHIBIT I-11
Cortland Savings Bank
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Three months Year ended December 31,
ended ----------------------------------
March 31, 1998 1997 1996 1995
-------------- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Total loans, beginning of period ..... $ 157,806 160,896 160,888 154,606
--------- ------- ------- -------
Loans originated:
Residential mortgages ................ 3,600 14,732 12,382 10,789
Commercial mortgages ................. 496 1,260 2,987 5,436
Commercial loans ..................... 1,335 3,940 5,072 5,987
Otherloans ........................... 2,358 12,982 11,227 11,430
--------- ------- ------- -------
Total loans originated ............ 7,789 32,914 31,668 33,642
Principal repayments ................. (8,316) (29,089) (29,236) (26,110)
Loans transferred to held-for-sale ... (661) (2,541) -- --
Loans transferred from held-for-sale . 101 -- -- --
Loans transferred to real estate owned (45) (1,095) (711) (645)
Total charge-offs .................... (39) (3,279) (1,713) (605)
--------- ------- ------- -------
Net loan activity .................... (1,171) (3,090) 8 6,282
--------- ------- ------- -------
Total loans, end of period ........ $ 156,635 $ 157,806 $ 160,896 $ 160,888
========= ========= ========= =========
</TABLE>
<PAGE>
EXHIBIT I-12
Cortland Savings Bank
Non-Performing Assets
<TABLE>
<CAPTION>
At March 3l, At December 3l,
--------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans: (1)
Residential mortgages ................. $ 893 $2,010 $1,069 $ 772 $1,295 $ 299
Commercial mortgages .................. 363 1,235 1,416 421 -- 896
------ ------ ------ ------ ------ ------
Total real estate loans ............. 1,256 3,245 2,485 1,193 1,295 1,195
Commercial loans ...................... 115 331 790 739 51 243
Other loans ........................... 87 209 358 62 -- --
------ ------ ------ ------ ------ ------
Total non-accrual loans ............. 1,458 3,785 3,633 1,994 1,346 1,438
Accruing loans past due 90 days or more:
Residential mortgages ................. -- 2 1 -- 1,057 1,141
Commercial mortgages .................. -- -- -- -- -- 1,132
------ ------ ------ ------ ------ ------
Total real estate loans ............. -- 2 1 -- 1,057 2,273
Commercial loans ....................... -- -- -- -- 13 67
Other loans ............................ 10 7 33 -- 47 108
------ ------ ------ ------ ------ ------
Total loans past due 90 days or more
and still accruing ..................... 10 9 34 -- 1,117 2,448
------ ------ ------ ------ ------ ------
Total non-performing loans ............. 1,468 3,794 3,667 1,994 2,463 3,886
Real estate owned ...................... 760 964 563 374 572 75
------ ------ ------ ------ ------ ------
Total non-performing assets ............ $2,228 $4,758 $4,230 $2,368 $3,035 $3,961
====== ====== ====== ====== ====== ======
Non-performing loans as a percent
of total loans ......................... 0.94% 2.37% 2.28% 1.24% 1.60% 2.69%
Non-performing assets as a percent
of total assets ........................ 0.96% 2.04% 1.78% 1.00% 1.32% 1.69%
</TABLE>
(1) Non-accrual loans at December 31, 1997 include $2.3 million of non-accrual
loans held for sale.
<PAGE>
EXHIBIT I-13
Cortland Savings Bank
Classified Assets
Classified Assets. FDIC regulations require that the Bank classify its
assets on a regular basis and establish prudent valuation allowances based on
such classifications. In addition, in connection with examinations, FDIC and
Banking Department examiners have the authority to identify problem assets and,
if appropriate, require that they be classified. There are three adverse
classifications for problem assets: Substandard, Doubtful and Loss. Substandard
assets have one or more defined weaknesses and are characterized by the distinct
possibility that the Bank will sustain some loss if the deficiencies are not
corrected. Doubtful assets have the weaknesses of Substandard assets, with the
additional characteristics that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions and values
questionable, and there is a high probability of loss. An asset classified Loss
is considered uncollectible and of such little value that its continuance as an
asset of the Bank is not warranted.
Assets classified as Substandard or Doubtful require the Bank to establish
prudent valuation allowances. If an asset or portion thereof is classified as
Loss, the Bank must either establish a specific allowance for loss equal to 100%
of the portion of the asset classified Loss or charge off such amount. If the
Bank does not agree with an examiner's classification of an asset, it may appeal
this determination. On the basis of management's review of its loans at March
31, 1998, the Bank had $2.1 million of assets classified substandard, $49,000
classified doubtful, and none classified loss. All classified loans are
non-performing and shown in the above table of non-performing loans.
<PAGE>
EXHIBIT 1-14
Cortland Savings Bank
Deposit Composition
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------
At March 31, 1998 1997 1996 1995
-------------------- ---- ---- ----
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-time accounts:
Passbook, statement savings
and club accounts (2.5-3.0%).. $ 63,658 32.11% $ 62,769 31.42% $ 63,003 30.79% $ 62,138 30.59%
NOW accounts (1.76%)............ 9,280 4.69% 9,704 4.86% 10,089 4.93% 9,638 4.75%
Demand accounts................. 9,128 4.60% 10,604 5.31% 9,563 4.67% 8,158 4.02%
Money market accounts (2.76%)... 8,314 4.19% 8,435 4.22% 9,343 4.57% 10,054 4.95%
--------- ------ -------- ------ -------- ------ --------- ------
Total non-time accounts...... 90,380 45.59% 91,512 45.81% 91,998 44.96% 89,988 44.31%
========= ====== ======== ====== ======== ====== ========= ======
Time accounts:
3.00 - 3.99%.................... 370 0.19% 164 0.08% 381 0.19% 923 0.45%
4.00 - 4.99%.................... 7,004 3.53% 8,066 4.04% 20,750 10.14% 8,518 4.20%
5.00 - 5.99%.................... 92,917 46.87% 90,507 45.30% 70,609 34.50% 59,073 29.08%
6.00 - 6.99%.................... 7,155 3.62% 9,120 4.57% 20,375 9.96% 37,399 18.41%
7.00 - 7.99%.................... 406 0.20% 399 0.20% 525 0.25% 7,207 3.55%
8.00 - 8.99%.................... 2 0.00% 2 0.00% 2 0.00% 2 0.00%
--------- ------ --------- ------ --------- ------ --------- ------
Total time accounts........... $ 107,854 54.41% $ 108,258 54.19% $ 112,642 55.04% $ 113,122 55.69%
========= ====== ========= ====== ========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
Amount Due During the
Twelve Months Ended March 31, Due After
----------------------------------------- March 31,
Interest Rate 1999 2000 2001 2001 Total
------------- ---- ---- ---- ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
3.00 - 3.99%.............. $ 370 $ - $ - $ - $ 370
4.00 - 4.99%.............. 7,004 - - 7,004
5.00 - 5.99%.............. 54,754 13,827 13,200 11,136 92,917
6.00 - 6.99%.............. 1,882 3,608 1,281 384 7,155
7.00 - 7.99%.............. - 406 - - 406
8.00 - 8.99%.............. - 2 - - 2
-------- -------- -------- -------- ---------
Total..................... $ 64,010 $ 17,843 $ 14,481 $ 11,520 $ 107,854
======== ======== ======== ======== =========
</TABLE>
<PAGE>
EXHIBIT II-1
Cortland Savings Bank
List of Office Locations
<TABLE>
<CAPTION>
Date Owned/ Net Book
Location Acquired Leased Value
(In Thousands)
<S> <C> <C> <C>
One North Main Street, Cortland, NY 13045 Various Owned $887
and nearby drive through facility at 29-31 North Main Street
12 South Main Street, Homer, NY 13077 Various Owned 983
860 Route 13, Cortlandville, NY 13045 Various Owned 497
</TABLE>
<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%
1998: Quarter 1 8.50% 5.12% 5.39% 5.93%
June 5,1998 8.50% 5.11% 5.43% 5.79%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Cortland Savings Bank
Demographic/Economic Reports
<PAGE>
- --------------------------------------------------------------------------------
STATE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State 00
State Name UNITED STATES
Population
- ----------
1980 226,542,204
1990 248,709,873
1997 267,805,150
2002 281,208,787
Population Growth Rate 1
Households
- ----------
1990 91,947,410
1997 99,019,931
2002 104,000,643
Household Growth Rate 1
Average Household Size 2.64
Families
- --------
1990 64,517,947
1997 68,999,546
Family Growth Rate 0.9
Race 1990 1997
- ---- ---- ----
% White 80.3 78.4
% Black 12.1 12.4
% Asian
/Pacific Isl. 2.9 3.7
% Hispanic* 9 10.8
1997 Age Distribution
- ---------------------
0-4 7.2
5-9 7.4
10-14 7.1
15-19 7.1
20-24 6.5
25-44 31.4
45-64 20.5
65-84 11.3
85+ 1.4
18+ 74.3
Median Age
- ----------
1990 32.9
1997 34.8
Male/Female Ratio 95.9
Per Capita Income $18,100
1997 Household Income*
- ----------------------
Base 99,019,225
% < $15K 17.7
% $15K-25K 14.4
% $25K-50K 33.5
% $50K-100K 26.5
% $100K-150K 5.4
% > $150K 2.6
Median Household Income
- -----------------------
1997 $36,961
2002 $42,042
1997 Average Disposable Income
- ------------------------------
Total $35,584
Householder < 35 $30,999
Householder 35-44 $40,281
Householder 45-54 $45,940
Householder 55-64 $39,611
Householder 65+ $22,603
Spending Potential Index*
- -------------------------
Auto Loan 100
Home Loan 100
Investments 100
Retirement Plans 100
Home Repair 100
Lawn & Garden 100
Remodeling 100
Appliances 100
Electronics 100
Furniture 100
Restaurants 100
Sporting Goods 100
Theater/Concerts 100
Toys & Hobbies 100
Travel 100
Video Rental 100
Apparel 100
Auto Aftermarket 100
Health Insurance 100
Pets & Supplies 100
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 5/5/98
<PAGE>
- --------------------------------------------------------------------------------
STATE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State 36
State Name NEW YORK
Population
- ----------
1980 17,558,165
1990 17,990,455
1997 18,191,341
2002 18,332,121
Population Growth Rate 0.2
Households
- ----------
1990 6,639,322
1997 6,699,651
2002 6,743,853
Household Growth Rate 0.1
Average Household Size 2.63
Families
- --------
1990 4,489,312
1997 4,530,808
Family Growth Rate 0.1
Race 1990 1997
- ---- ---- ----
% White 74.4 71.6
% Black 15.9 16.5
% Asian
/Pacific Isl. 3.9 5
% Hispanic* 12.3 15.2
1997 Age Distribution
- ---------------------
0-4 6.9
5-9 7
10-14 6.7
15-19 6.6
20-24 6.4
25-44 32.3
45-64 20.9
65-84 11.7
85+ 1.5
18+ 75.7
Median Age
- ----------
1990 33.9
1997 35.3
Male/Female Ratio 93.8
Per Capita Income $18,504
1997 Household Income*
- ----------------------
Base 6,699,533
% < $15K 20.2
% $15K-25K 13.9
% $25K-50K 31.3
% $50K-100K 25.9
% $100K-150K 5.5
% > $150K 3.2
Median Household Income
- -----------------------
1997 $36,341
2002 $38,815
1997 Average Disposable Income
- ------------------------------
Total $33,910
Householder < 35 $30,429
Householder 35-44 $36,263
Householder 45-54 $43,029
Householder 55-64 $39,393
Householder 65+ $21,618
Spending Potential Index*
- -------------------------
Auto Loan 101
Home Loan 108
Investments 110
Retirement Plans 106
Home Repair 103
Lawn & Garden 103
Remodeling 96
Appliances 101
Electronics 101
Furniture 108
Restaurants 104
Sporting Goods 103
Theater/Concerts 105
Toys & Hobbies 101
Travel 111
Video Rental 100
Apparel 105
Auto Aftermarket 103
Health Insurance 100
Pets & Supplies 101
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 5/5/98
<PAGE>
- --------------------------------------------------------------------------------
MSA DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
MSA 8160
MSA Name SYRACUSE, NY
Population
- ----------
1980 722,865
1990 742,177
1997 743,412
2002 744,252
Population Growth Rate 0
Households
- ----------
1990 272,974
1997 273,760
2002 274,110
Household Growth Rate 0
Average Household Size 2.61
Families
- --------
1990 187,569
1997 188,309
Family Growth Rate 0.1
Race 1990 1997
- ---- ---- ----
% White 92.2 90.7
% Black 5.7 6.5
% Asian
/Pacific Isl. 1.1 1.6
% Hispanic* 1.4 1.9
1997 Age Distribution
- ---------------------
0-4 7.3
5-9 7.4
10-14 7.2
15-19 7.8
20-24 7.3
25-44 30.7
45-64 19.3
65-84 11.4
85+ 1.5
18+ 74.2
Median Age
- ----------
1990 32.3
1997 33.9
Male/Female Ratio 94.8
Per Capita Income $14,465
1997 Household Income*
- ----------------------
Base 273,759
% < $15K 21.5
% $15K-25K 16.7
% $25K-50K 36.1
% $50K-100K 22.2
% $100K-150K 2.5
% > $150K 1
Median Household Income
- -----------------------
1997 $31,477
2002 $32,600
1997 Average Disposable Income
- ------------------------------
Total $27,838
Householder < 35 $24,744
Householder 35-44 $31,847
Householder 45-54 $37,260
Householder 55-64 $31,966
Householder 65+ $16,822
Spending Potential Index*
- -------------------------
Auto Loan 99
Home Loan 94
Investments 98
Retirement Plans 95
Home Repair 97
Lawn & Garden 95
Remodeling 97
Appliances 98
Electronics 97
Furniture 97
Restaurants 96
Sporting Goods 98
Theater/Concerts 96
Toys & Hobbies 100
Travel 96
Video Rental 97
Apparel 96
Auto Aftermarket 96
Health Insurance 99
Pets & Supplies 99
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 5/7/98
<PAGE>
- --------------------------------------------------------------------------------
MSA DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
MSA 0960
MSA Name BINGHAMTON, NY
Population
- ----------
1980 263,460
1990 264,497
1997 250,857
2002 241,958
Population Growth Rate -0.7
Households
- ----------
1990 100,681
1997 95,429
2002 91,957
Household Growth Rate -0.7
Average Household Size 2.54
Families
- --------
1990 69,289
1997 65,582
Family Growth Rate -0.8
Race 1990 1997
- ---- ---- ----
% White 96.2 95.2
% Black 1.8 2
% Asian
/Pacific Isl. 1.5 2.2
% Hispanic* 1.1 1.5
1997 Age Distribution
- ---------------------
0-4 6.9
5-9 7.1
10-14 6.9
15-19 7.3
20-24 6.6
25-44 30.4
45-64 20.3
65-84 12.8
85+ 1.7
18+ 75.3
Median Age
- ----------
1990 33.9
1997 35.5
Male/Female Ratio 95
Per Capita Income $13,715
1997 Household Income*
- ----------------------
Base 95,429
% < $15K 24
% $15K-25K 18.2
% $25K-50K 35.5
% $50K-100K 19.8
% $100K-150K 1.8
% > $150K 0.7
Median Household Income
- -----------------------
1997 $28,860
2002 $29,396
1997 Average Disposable Income
- ------------------------------
Total $25,909
Householder < 35 $22,941
Householder 35-44 $29,796
Householder 45-54 $35,674
Householder 55-64 $30,035
Householder 65+ $15,822
Spending Potential Index*
- -------------------------
Auto Loan 99
Home Loan 93
Investments 99
Retirement Plans 94
Home Repair 97
Lawn & Garden 95
Remodeling 98
Appliances 98
Electronics 96
Furniture 97
Restaurants 96
Sporting Goods 97
Theater/Concerts 96
Toys & Hobbies 100
Travel 96
Video Rental 97
Apparel 95
Auto Aftermarket 95
Health Insurance 100
Pets & Supplies 99
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 5/7/98
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State/County 36023
County Name CORTLAND NY
Population
- ----------
1980 48,820
1990 48,963
1997 48,304
2002 47,855
Population Growth Rate -0.2
Households
- ----------
1990 17,247
1997 17,114
2002 16,943
Household Growth Rate -0.1
Average Household Size 2.64
Families
- --------
1990 11,799
1997 11,671
Family Growth Rate -0.2
Race 1990 1997
- ---- ---- ----
% White 98.3 97.9
% Black 0.7 0.8
% Asian
/Pacific Isl. 0.5 0.7
% Hispanic* 0.9 1.3
1997 Age Distribution
- ---------------------
0-4 7.1
5-9 6.9
10-14 6.7
15-19 9.4
20-24 10.8
25-44 28.8
45-64 18.4
65-84 10.6
85+ 1.4
18+ 75.3
Median Age
- ----------
1990 30.3
1997 31.6
Male/Female Ratio 92.5
Per Capita Income $12,433
1997 Household Income*
- ----------------------
Base 17,114
% < $15K 22.7
% $15K-25K 18.6
% $25K-50K 38.9
% $50K-100K 17.5
% $100K-150K 1.8
% > $150K 0.6
Median Household Income
- -----------------------
1997 $28,991
2002 $31,169
1997 Average Disposable Income
- ------------------------------
Total $25,384
Householder < 35 $22,391
Householder 35-44 $30,233
Householder 45-54 $34,347
Householder 55-64 $29,120
Householder 65+ $14,846
Spending Potential Index*
- -------------------------
Auto Loan 98
Home Loan 86
Investments 91
Retirement Plans 88
Home Repair 93
Lawn & Garden 90
Remodeling 101
Appliances 97
Electronics 94
Furniture 90
Restaurants 91
Sporting Goods 95
Theater/Concerts 90
Toys & Hobbies 99
Travel 89
Video Rental 96
Apparel 90
Auto Aftermarket 92
Health Insurance 99
Pets & Supplies 99
- --------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current
dollars, including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the
ratio of the average amount spent locally to the average U.S. spending for
a product or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 5/5/98
<PAGE>
EXHIBIT II-4
Cortland Savings Bank
Sources of Personal Income/Employment Sectors
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY(1)
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
New York [36.000]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 426,449,104 449,864,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income(2) 617,981 671,167 700,612 528,229 500,389
Population (number of persons)(3) 18,036,973 18,099,081 18,170,321 18,196,829 18,190,562
Per capita personal income (dollars) 23,643 24,856 25,162 26,185 27,572
Derivation of personal income
Earnings by place of work 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Less: Personal cont. for social insurance(4) 20,157,669 21,277,343 21,723,056 22,809,811 20,969,575
Plus: Adjustment for residence(5) -14,032,029 -16,253,295 -16,176,404 -16,054,849 -17,458,226
Equals: Net earnings by place of residence 271,251,641 288,944,503 293,390,203 301,263,987 315,214,465
Plus: Dividends, interest, and rent(6) 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Plus: Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Earnings by place of work
Components of earnings
Wage and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,813,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income(7) 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Farm proprietors' income 286,741 348,667 346,393 179,067 109,167
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 38,438,534
Earnings by industry
Farm earnings 617,981 671,167 700,612 528,229 500,389
Nonfarm earnings 304,823,358 325,803,974 330,589,051 339,600,418 356,141,877
Private earnings 256,703,602 276,348,868 279,258,676 286,634,354 302,158,622
Ag. serv., forestry, fishing, and other(8) 1,086,872 1,102,025 1,139,347 1,174,292 1,239,111
Mining 276,048 273,802 281,155 298,633 293,435
Construction 12,677,634 11,765,608 11,856,560 12,667,535 12,766,179
Manufacturing 44,745,691 45,876,270 45,362,772 45,494,376 46,445,386
Durable goods 25,068,221 25,047,552 24,575,906 24,293,517 24,738,903
Nondurable goods 19,677,470 20,828,718 20,786,866 21,200,859 21,706,483
Transportation and public utilities 19,450,794 20,065,314 20,486,738 21,318,786 22,111,552
Who1esale trade 19,119,719 19,824,455 19,800,313 20,338,035 21,278,758
Retail trade 21,686,107 22,345,983 22,588,182 23,592,343 24,447,935
Finance, insurance, and real estate 44,488,557 54,163,800 53,874,820 52,813,729 58,166,600
Services 93,172,180 100,931,611 103,868,789 108,936,625 115,409,666
Government and government enterprises 48,119,756 49,455,106 51,330,375 52,966,064 53,983,255
Federal, civilian 6,006,187 6,332,570 6,418,896 6,543,912 6,584,486
Military 1,138,593 1,185,018 1,155,578 1,083,014 979,334
State and local 40,974,976 41,937,518 43,755,901 45,339,138 46,419,435
State 9,418,527 9,580,671 10,046,333 10,577,353 10,448,545
Local 31,556,449 32,356,847 33,709,568 34,761,785 35,970,890
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CAO5.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY(1)
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Cortland, New York [36.023]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 745,879 786,663 802,853 832,919 857,455
Nonfarm personal income 739,439 777,903 794,609 827,594 853,629
Farm income(2) 6,440 8,760 8,244 5,325 3,826
Population (number of persons)(3) 49,208 49,384 49,416 49,269 48,946
Per capita personal income (dollars) 15,158 15,930 16,247 16,906 17,518
Derivation of personal income
Earnings by place of work 504,401 539,213 538,732 556,191 557,171
Less: Personal cont. for social insurance(4) 32,520 34,270 34,447 36,375 36,658
Plus: Adjustment for residence(5) 17,846 14,062 16,612 19,823 24,112
Equals: Net earnings by place of residence 489,727 519,005 520,897 539,639 544,625
Plus: Dividends, interest, and rent(6) 116,454 112,436 122,976 121,093 127,093
Plus: Transfer payments 139,698 155,222 158,980 172,187 185,737
Earnings by place of work
Components of earnings
Wage and salary disbursements 402,245 426,195 427,183 432,617 433,252
Other labor income 48,029 52,452 55,385 55,790 55,424
Proprietors' income(7) 54,127 60,566 56,164 67,784 68,495
Farm proprietors' income 2,418 4,911 4,018 1,152 -846
Nonfarm proprietors' income 51,709 55,655 52,146 66,632 69,341
Earnings by industry
Farm earnings 6,440 8,760 8,244 5,325 3,826
Nonfarm earnings 497,961 530,453 530,488 550,866 553,345
Private earnings 402,412 430,218 426,925 442,373 442,124
Ag. serv., forestry, fishing, and other(8) 3,071 2,883 2,750 2,770 2,715
Mining 165 172 213 216 243
Construction 28,868 29,305 29,152 30,586 27,874
Manufacturing 163,130 174,278 171,342 163,295 155,895
Durable goods 113,915 118,927 116,603 104,547 98,421
Nondurable goods 49,215 55,351 54,739 58,748 57,474
Transportation and public utilities 12,465 13,983 15,488 15,520 17,122
Wholesale trade 12,645 12,732 14,023 15,237 14,937
Retail trade 57,927 61,395 60,061 61,252 62,951
Finance, insurance, and real estate 11,370 12,137 11,946 12,764 13,992
Services 112,771 123,333 121,950 140,733 146,395
Government and government enterprises 95,549 100,235 103,563 108,493 111,221
Federal, civilian 3,634 4,282 4,159 3,991 4,005
Military 965 1,013 966 979 924
State and local 90,950 94,940 98,438 103,523 106,292
State 36,541 36,924 37,601 39,918 40,129
Local 54,409 58,016 60,837 63,605 66,163
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CAO5.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for table CA05
Personal Income by major source and Earnings by Major Industry
(1) 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on
1987 SIC.
(2) Farm income consists of proprietors' net income; the cash wages,
pay-in-kind, and other labor income of hired farm workers; and the
salaries of officers of corporate farms.
(3) Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as
a result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
(4) Personal contributions for social insurance are included in earnings by
type and industry but excluded from personal income.
(5) The adjustment for residence is the net inflow of the earnings of
interarea commuters. For the United States, it consists of adjustments for
border workers: Earnings of U.S. residents commuting outside U.S. borders
to work less earnings of foreign residents commuting inside U.S. borders
to work and of certain Caribbean seasonal workers.
(6) Includes the capital consumption adjustment for rental income of persons.
(7) Includes the inventory valuation and capital consumption adjustments.
(8) "Other" consists of wage and salary disbursements of U.S. residents
employed by international organizations and foreign embassies and
consulates in the United States.
(13) Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
(14) Cibola, NM was separated from Valencia in June 1981, but in these
estimates, Valencia includes Cibola through the end of 1981.
(15) La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA contains La Paz, AZ through 1982.
(16) Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee),
WI for the years prior to 1989.
E The estimate shown here constitutes the major portion of the true
estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY(1)
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
New York [36.000]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
By type
Wage and salary employment 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Proprietors' employment 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Farm proprietors' employment 39,291 39,417 38,626 36,670 36,674
Nonfarm proprietors' employment(2) 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
By industry
Farm employment 65,040 64,787 63,878 62,579 60,966
Nonfarm employment 9,554,342 9,522,842 9,536,563 9,630,370 9,679,827
Private employment 8,054,500 8,047,730 8,063,842 8,172,340 8,260,522
Ag. serv., forestry, fishing, and other(3) 56,253 57,490 62,005 64,437 67,572
Mining 10,964 10,698 10,790 10,897 10,748
Construction 381,720 364,084 358,140 368,762 373,361
Manufacturing 1,091,374 1,049,796 1,017,410 995,564 982,532
Transportation and public utilities 475,571 460,298 466,961 472,117 476,424
Wholesale trade 469,070 466,328 455,794 455,376 463,204
Retail trade 1,337,963 1,342,957 1,343,627 1,373,590 1,403,944
Finance, insurance, and real estate 1,083,164 1,058,557 1,052,103 1,068,536 1,049,318
Services 3,148,421 3,237,522 3,297,012 3,363,061 3,433,419
Government and government enterprises 1,499,842 1,475,112 1,472,721 1,458,030 1,419,305
Federal, civilian 156,797 154,683 149,185 146,900 145,670
Military 87,585 84,377 81,039 73,994 65,142
State and local 1,255,460 1,236,052 1,242,497 1,237,136 1,208,493
State 265,674 264,629 266,643 267,737 259,036
Local 989,786 971,423 975,854 969,399 949,457
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY(1)
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Cortland, New York [36.023]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 25,397 25,587 25,252 25,244 25,132
By type
Wage and salary employment 20,745 20,487 2O,227 20,206 20,027
Proprietors' employment 4,652 5,100 5,025 5,038 5,105
Farm proprietors' employment 609 616 604 573 573
Nonfarm proprietors' employment(2) 4,043 4,484 4,421 4,465 4,532
By industry
Farm employment 1,023 1,008 994 973 948
Nonfarm employment 24,374 24,579 24,258 24,271 24,184
Private employment 20,478 20,960 20,639 20,615 20,567
Ag. serv., forestry, fishing, and other(3) 222 210 226 236 238
Mining (L) (L) (L) (L) 10
Construction 1,138 1,216 1,168 1,122 1,053
Manufacturing 5,670 5,605 5,417 5,057 4,833
Transportation and public utilities 456 465 503 496 528
Wholesale trade 533 535 579 597 569
Retail trade 4,659 4,781 4,849 4,952 5,045
Finance, insurance, and real estate 1,141 1,217 1,122 1,213 1,215
Services 6,654 6,926 6,767 6,933 7,076
Government and government enterprises 3,896 3,619 3,619 3,656 3,617
Federal, civilian 102 111 103 104 103
Military 152 145 136 123 112
State and local 3,642 3,363 3,380 3,429 3,402
State 1,300 1,068 1,053 1,073 1,066
Local 2,342 2,295 2,327 2,356 2,336
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA25
Total Full- and Part-time Employment by Major Industry
(1) 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on
1987 SIC.
(2) Excludes limited partners.
(3) "Other" consists of the number of jobs held by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
(4) Cibola, NM was separated from Valencia in June 1981, but in these
estimates Valencia includes Cibola through the end of 1981.
(5) La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
(6) Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
end Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
(7) Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee),
WI for the years prior to 1989.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
New York [36.000]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 426,449,104 449,864,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income 617,981 671,167 700,612 528,229 500,389
Derivation or personal income
Net earnings(1) 271,251,641 288,944,503 293,390,203 301,263,987 315,214,465
Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Income maintenance(2) 7,423,158 8,638,524 9,532,421 10,383,993 10,999,344
Unemployment insurance 2,654,137 4,716,712 3,424,635 2,250,673 2,085,462
Retirement and other 62,019,263 67,880,934 70,524,482 78,224,701 85,033,852
Dividends, interest, and rent 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Population (number of persons)(3) 18,036,973 18,099,081 18,170,321 18,196,829 18,190,562
Per capita incomes (dollars)(4)
Per capita personal income 23,643 24,856 25,162 26,185 27,572
Per capita net earnings 15,039 15,965 16,147 16,556 17,328
Per capita transfer payments 3,997 4,488 4,594 4,993 5,394
Per capita income maintenance 412 477 525 571 605
Per capita unemployment insurance 147 261 188 124 115
Per capita retirement & other 3,438 3,751 3,881 4,299 4,675
Per capita dividends, interest, & rent 4,607 4,403 4,421 4,636 4,850
Place of work profile
Total earnings (place of work, $000) 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Wages and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,813,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 38,438,534
Farm proprietors' income 286,741 348,667 346,393 179,067 109,167
Total full- and part-time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
Wage and salary jobs 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Number of proprietors 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Number of nonfarm proprietors(5) 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
Number of farm proprietors 39,291 39,417 38,626 36,670 36,674
Average earnings per job (dollars) 31,753 34,052 34,508 35,090 36,613
Wage & salary earnings per job 29,730 32,024 32,527 33,038 34,504
Average earnings per nonfarm proprietor 25,178 26,327 25,179 25,826 27,057
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Cortland, New York [36.023]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 745,879 786,663 802,853 832,919 857,455
Nonfarm personal income 739,439 777,903 794,609 827,594 853,629
Farm income 6,440 8,760 8,244 5,325 3,326
Derivation of personal income
Net earnings(1) 489,727 519,005 520,897 539,639 544,625
Transfer payments 139,698 155,222 158,980 172,187 185,737
Income maintenance(2) 14,306 15,755 17,144 18,120 19,239
Unemployment insurance 7,362 11,913 8,997 6,459 5,794
Retirement and other 118,030 127,554 132,839 147,608 160,704
Dividends, interest, and rent 116,454 112,436 122,976 121,093 127,093
Population (number of persons)(3) 49,208 49,384 49,416 49,269 48,946
Per capita incomes (dollars)(4)
Per capita personal income 15,158 15,930 16,247 16,906 17,518
Per capita net earnings 9,952 10,510 10,541 10,953 11,127
Per capita transfer payments 2,839 3,143 3,217 3,495 3,795
Per capita income maintenance 291 319 347 368 393
Per capita unemployment insurance 150 241 182 131 118
Per capita retirement & other 2,399 2,583 2,688 2,996 3,283
Per capita dividends, interest, & rent 2,367 2,277 2,489 2,458 2,597
Place of work profile
Total earnings (place of work, $000) 504,401 539,213 538,732 556,191 557,171
Wages end salary disbursements 402,245 426,195 427,183 432,617 433,252
Other labor income 48,029 52,452 55,385 55,790 55,424
Proprietors' income 54,127 60,566 56,164 67,784 68,495
Nonfarm proprietors' income 51,709 55,655 52,146 66,632 69,341
Farm proprietors' income 2,418 4,911 4,018 1,152 -846
Total full- and part-time employment 25,397 25,587 25,252 25,244 25,132
Wage and salary jobs 20,745 20,487 20,227 20,206 20,027
Number of proprietors 4,652 5,100 5,025 5,038 5,105
Number of nonfarm proprietors(5) 4,043 4,484 4,421 4,465 4,532
Number of farm proprietors 609 616 604 573 573
Average earnings per job (dollars) 19,861 21,074 21,334 22,033 22,170
Wage & salary earnings per job 19,390 20,803 21,119 21,410 21,633
Average earnings per nonfarm proprietor 12,790 12,412 11,795 14,923 15,300
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA3O, Regional Economic Profiles
(1) Total earnings less personal contributions for social insurance adjusted
to place of residence.
(2) Consists largely of supplemental security income payments, payments to
families with dependent children (AFDC), general assistance payments, food
stamp payments, and other assistance payments, including emergency
assistance.
(3) Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as
a result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
(4) Type of income divided by population yields a per capita for that type of
income.
(5) Excludes limited partners.
(6) Cibola, NM was separated from Valencia in June 1981, but in these
estimates Valencia includes Cibola through the end of 1981.
(7) La Paz county, AZ was separated from Yuma county on January 1, 1983. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
(8) Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough
from Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census Area
and Yakutat Borough.
(9) Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee),
WI for the years prior to 1989.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
Cortland Savings Bank
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 54,520 371 12-31 10/72 75.63 8,299
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,669 249 12-31 05/59 106.06 6,066
GSB Golden State Bancorp of CA NYSE California Div. 16,029 D 178 06-30 10/83 34.50 1,771
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,872 85 12-31 01/71 34.31 964
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 5,341 37 12-31 05/86 32.25 653
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 4,220 37 12-31 / 13.25 257
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,067 24 12-31 12/83 50.38 534
WES Westcorp Inc. of Orange CA NYSE California Div. 3,729 D 26 12-31 05/86 12.00 316
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,812 23 03-31 03/96 19.44 332
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,066 19 06-30 06/95 16.75 106
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 1,047 6 12-31 / 17.25 55
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 1,034 14 12-31 04/94 20.31 150
ITLA ITLA Capital Corp of CA (3) OTC Los Angeles CA R.E. 1,011 6 12-31 10/95 22.13 170
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 860 8 06-30 12/93 22.00 103
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 765 10 06-30 06/96 22.75 106
HBNK Highland Bancorp of CA OTC Los Angeles CA R.E. 556 7 12-31 / 42.75 99
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 403 7 12-31 02/95 21.38 68
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 401 8 06-30 06/95 18.13 43
LFCO Life Financial Corp of CA OTC Southern CA Thrift 387 5 12-31 / 21.38 140
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 128 3 12-31 01/96 11.00 9
Florida Companies
- -----------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 3,527 60 12-31 11/83 13.50 445
OCN Ocwen Financial Corp. of FL NYSE Southeast FL Div. 3,421 1 12-31 / 24.63 1,495
BKUNA BankUnited Fin. Corp. of FL OTC Miami FL Thrift 3,327 16 09-30 12/85 17.13 265
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,821 D 47 09-30 09/93 43.88 222
FFFL Fidelity Bcsh MHC of FL (47.7) OTC Southeast FL Thrift 1,321 20 12-31 01/94 28.75 196
HARB Harbor Florida Bancshrs of FL OTC Eastern FL Thrift 1,284 23 09-30 03/98 11.94 367
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 761 21 12-31 10/94 34.50 176
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
- -----------------------------
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 409 9 12-31 01/94 20.13 75
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 22,024 91 12-31 08/86 30.13 3,443
SVRN Sovereign Bancorp, Inc. of PA OTC PA,NJ,DE M.B. 18,096 150 12-31 08/86 17.38 2,310
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,228 74 12-31 01/94 40.94 3,458
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 10,895 61 12-31 11/93 54.31 1,432
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 6,296 35 09-30 04/94 61.50 1,472
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 4,089 108 12-31 04/92 52.38 673
ICBC Independence Comm Bnk Cp of NY OTC New York City Thrift 4,072 P 34 March 03/98 16.81 1,184
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 4,006 15 12-31 06/93 42.25 741
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,706 8 12-31 01/97 22.13 948
NBCP Niagara Bancorp of NY MHC(45.4 (3) OTC Northern NY Thrift 3,145 P 15 12/31 04/98 14.56 433
SIB Staten Island Bancorp of NY (3) NYSE New York City NY Thrift 2,671 16 12-31 12/97 21.44 968
NWSB Northwest Bcrp MHC of PA (30.7 OTC Northwest PA Thrift 2,409 67 06-30 11/94 16.00 749
CMSB Commonwealth Bancorp Inc of PA OTC Philadelphia PA M.B. 2,390 56 12-31 06/96 24.00 390
HARS Harris Fin. MHC of PA (24.3) OTC Harrisburg PA M.B. 2,260 33 12-31 01/94 24.31 825
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,180 30 06-30 03/94 39.25 378
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 2,018 33 12-31 09/93 26.88 238
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,622 11 12-31 11/93 44.44 663
DIME Dime Community Bancorp of NY (3) OTC New York City NY Thrift 1,577 15 06-30 06/96 29.00 361
JSB JSB Financial, Inc. of NY (3) NYSE New York City NY Thrift 1,531 S 13 12-31 06/90 58.44 578
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,518 10 12-31 07/96 19.50 303
WSFS WSFS Financial Corp. of DE (3) OTC Wilmington Div. 1,515 D 16 12-31 11/86 21.25 265
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,469 18 06-30 07/94 17.00 164
RCBK Richmond County Fin Corp of NY OTC New York City Thrift 1,464 13 June 02/98 18.50 489
FSLA First Source Bancorp of NJ OTC Eastern NJ Thrift 1,192 P 17 12-31 04/98 10.00 317
MFSL Maryland Fed. Bancorp of MD OTC Southern MD Thrift 1,192 27 02-28 06/87 39.00 254
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,182 D 22 06-30 02/84 21.75 194
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 1,078 7 12-31 11/95 26.50 207
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,055 29 06-30 07/87 31.75 164
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
ESBF ESB Financial Corp of PA OTC Western PA Thrift 946 11 12-31 06/90 18.13 104
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 896 17 12-31 08/84 42.00 162
TSBS Peoples Bancorp Inc of NJ (3) OTC Central NJ Thrift 889 14 12-31 04/98 10.00 362
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 818 13 12-31 03/96 20.25 154
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 752 10 09-30 10/94 18.06 198
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 671 16 12-31 10/95 22.25 101
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 669 20 12-31 12/88 45.00 108
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 665 7 12-31 06/95 19.69 128
THRD TF Financial Corp. of PA OTC PA, NJ Thrift 639 14 12-31 07/94 26.00 83
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 611 D 4 03-31 08/97 16.25 147
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 546 10 12-31 04/87 31.13 84
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 540 4 09-30 09/86 27.63 86
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 520 12 12-31 12/95 18.63 79
PFNC Progress Financial Corp. of PA OTC Southeastern PA Thrift 485 10 12-31 07/83 19.50 82
LVSB Lakeview Financial of NJ OTC Northern NJ Thrift 473 D 8 07-31 12/93 24.25 94
NEP Northeast PA Fin. Corp of PA AMEX Northeast PA Thrift 437 P 10 DEC 04/98 14.50 93
RARB Raritan Bancorp of Raritan NJ (3) OTC Central NJ Thrift 419 6 12-31 03/87 30.00 72
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 D 7 03-31 10/94 13.31 31
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 403 4 12-31 04/93 41.25 85
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 403 8 09-30 06/88 24.00 47
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 385 5 09-30 01/95 18.75 45
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 381 10 12-31 11/89 28.25 80
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 368 11 12-31 01/95 36.25 87
HARL Harleysville SB of PA OTC Southeastern PA Thrift 368 4 09-30 08/87 32.38 54
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 355 6 12-31 01/96 19.50 48
WSBI Warwick Community Bncrp of NY (3) OTC Southeast NY Thrift 350 P 4 05-31 12/97 16.88 112
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 344 7 06-30 03/87 31.88 70
PHFC Pittsburgh Home Fin Corp of PA OTC Pittsburgh PA Thrift 338 9 09-30 04/96 17.63 35
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 335 4 09-30 09/93 30.50 37
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 332 D 4 09-30 04/96 18.94 57
FBER 1st Bergen Bancorp of NJ OTC Northern NJ Thrift 316 4 12-31 04/96 19.13 52
FIBC Financial Bancorp, Inc. of NY OTC New York City NY Thrift 310 5 09-30 08/94 27.50 47
LFED Leeds Fed Bksr MHC of MD (36.3 OTC Baltimore MD Thrift 299 1 06-30 05/94 19.75 102
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 296 4 09-30 04/96 17.38 78
WVFC WVS Financial Corp. of PA OTC Pittsburgh PA Thrift 292 D 5 06-30 11/93 18.50 67
ALLB Alliance Bank MHC of PA (19.9) OTC Southeast PA Thrift 273 7 12-31 03/95 34.00 111
WYNE Wayne Bancorp, Inc. of NJ OTC Northern NJ Thrift 270 D 5 12-31 06/96 31.38 63
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 266 D 5 12-31 / 7.13 31
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 258 9 12-31 06/86 17.50 25
IFSB Independence FSB of DC OTC Washington DC Ret. 252 S 2 12-31 06/85 18.25 23
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 251 5 12-31 11/94 19.63 70
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 231 9 03-31 08/94 21.50 36
ESBK Elmira Svgs Bank (The) of NY (3) OTC NY,PA Thrift 230 6 12-31 03/85 29.25 21
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 223 9 12-31 07/97 20.13 56
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 217 6 06-30 02/87 20.50 45
PBHC Pathfinder BC MHC of NY (46.1) (3) OTC Upstate NY Thrift 196 5 12-31 11/95 22.25 63
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 196 3 06-30 12/95 18.00 54
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 191 6 12-31 04/97 18.25 38
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 175 4 12-31 06/95 22.00 27
PRBC Prestige Bancorp of PA OTC Southwestern PA Thrift 161 4 12-31 06/96 20.50 22
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 160 D 5 09-30 10/96 19.75 27
SKBO First Carnegie MHC of PA(45.0) OTC Western PA Thrift 144 D 3 03-31 04/97 19.50 45
CFKY Columbia Financial of KY *** NorthCentral KY Thrift 127 P 5 12-31 04/98 15.00 40
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 126 D 1 03-31 10/95 20.13 30
GOSB GSB Financial Corp. of NY (3) OTC Southeast NY Thrift 119 2 09-30 07/97 17.13 39
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 111 2 06-30 01/97 18.50 20
USAB USABancshares, Inc of PA (3) OTC Philadelphia PA Thrift 103 1 12-31 / 14.50 22
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 101 D 5 09-30 04/96 16.00 22
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 73 2 09-30 07/93 9.50 7
PWBK Pennwood Bancorp, Inc. of PA OTC Pittsburgh PA Thrift 46 3 06-30 07/96 14.00 10
Mid-West Companies
- ------------------
COFI Charter One Financial of OH OTC OH,MI,NY Div. 19,457 221 12-31 01/88 35.50 4,549
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 8,529 108 06-30 12/84 33.13 1,335
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,583 52 12-31 05/87 24.88 854
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,533 35 03-31 01/92 49.25 645
MAFB MAF Bancorp, Inc. of IL OTC Chicago IL Thrift 3,511 21 12-31 01/90 38.13 573
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,564 19 12/31 / 23.94 327
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,999 35 03-31 07/92 40.94 367
DNFC D&N Financial Corp. of MI OTC Northern MI Ret. 1,868 37 12-31 02/85 26.25 240
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,688 26 12-31 08/83 25.75 328
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,648 23 09-30 06/93 42.25 221
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,580 49 12-31 11/89 35.00 324
ABCL Alliance Bancorp, Inc. of IL OTC Chicago IL M.B. 1,537 14 12-31 07/92 26.75 215
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,238 D 32 12-31 04/93 30.25 303
METF Metropolitan Fin. Corp. of OH OTC Northeast OH Thrift 990 15 12-31 / 15.00 106
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 915 26 12-31 08/94 29.00 154
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 846 17 12-31 06/90 26.75 220
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 815 25 06-30 12/89 25.00 201
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 732 7 12-31 06/94 18.00 112
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 705 16 06-30 01/88 30.00 154
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 685 14 03-31 01/88 25.00 189
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 677 19 12-31 12/83 13.50 120
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 657 22 12-31 07/92 11.75 50
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 645 10 06-30 06/93 32.88 133
EMLD Emerald Financial Corp. of OH OTC Cleveland OH Thrift 616 14 12-31 / 13.25 136
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 607 5 12-31 04/95 17.38 58
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 577 10 12-31 10/95 14.94 121
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 576 11 12-31 / 29.50 108
FFSX First FSB MHC Sxld of IA(46.1) OTC Western IA Thrift 571 13 06-30 07/92 36.50 104
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 570 19 06-30 04/92 23.75 105
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 553 4 06-30 / 11.38 38
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 540 12 12-31 03/96 17.38 97
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 520 D 13 03-31 09/93 32.00 124
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 490 5 12-31 02/92 36.75 115
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 484 5 09-30 12/93 23.13 65
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 446 12 12-31 03/92 47.25 60
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 421 3 06-30 01/94 15.00 44
PERM Permanent Bancorp, Inc. of IN OTC Southwest IN Thrift 420 D 11 03-31 04/94 16.00 67
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 419 9 06-30 12/92 26.50 70
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 411 11 09-30 10/94 19.00 56
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 407 8 06-30 07/87 26.50 110
CASH First Midwest Fin., Inc. of OH OTC IA,SD R.E. 405 12 09-30 09/93 23.25 62
KNK Kankakee Bancorp, Inc. of IL AMEX Illinois Thrift 399 9 12-31 01/93 35.50 49
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 393 6 12-31 06/92 31.75 89
FMBD First Mutual Bancorp Inc of IL OTC Central IL Thrift 390 14 12-31 07/95 17.63 62
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 388 8 12-31 03/87 19.75 64
INBI Industrial Bancorp of OH OTC Northern OH Thrift 374 10 12-31 08/95 19.25 98
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 372 D 10 12-31 07/94 25.50 60
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 369 4 12-31 09/96 16.00 110
EFC EFC Bancorp Inc of IL AMEX Southeast IL Thrift 362 P 6 DEC 04/98 13.50 94
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 353 9 09-30 03/95 31.88 75
FFFD North Central Bancshares of IA OTC Central IA Thrift 333 4 12-31 03/96 22.13 72
WFI Winton Financial Corp. of OH AMEX Cincinnati OH R.E. 324 S 5 09-30 08/88 16.44 66
WCBI WestCo Bancorp, Inc. of IL OTC Chicago IL Thrift 316 D 1 12-31 06/92 30.50 75
FSFF First SecurityFed Fin of IL OTC Chicago, IL Thrift 316 D 5 12-31 10/97 16.69 107
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 301 D 5 09-30 10/94 28.00 62
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 301 7 09-30 07/87 22.75 77
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 300 5 06-30 11/90 24.00 55
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 291 5 09-30 03/94 26.50 44
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 280 7 12-31 05/96 20.13 51
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 260 2 06-30 04/87 28.00 31
WAYN Wayne Svgs Bks MHC of OH (47.8 OTC Central OH Thrift 255 D 6 03-31 06/93 28.00 70
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 251 5 12-31 02/93 17.25 43
GFED Guaranty Fed Bancshares of MO OTC Southwest MO Thrift 246 4 06-30 12/97 12.94 81
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 232 7 12-31 01/88 17.13 31
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 232 8 06-30 12/93 20.75 39
LARK Landmark Bancshares, Inc of KS OTC Central KS Thrift 231 5 09-30 03/94 27.13 45
EBI Equality Bancorp, Inc. of MO AMEX St Louis Thrift 229 D 3 03-31 12/97 13.31 33
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 227 3 09-30 10/94 16.13 36
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 D 2 06-30 06/93 24.13 30
HFBC HopFed Bancorp of KY OTC Southwest KY Thrift 221 5 09-30 02/98 20.38 82
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 221 3 09-30 04/95 20.38 52
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 216 4 12-31 02/95 30.00 29
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 212 6 09-30 07/92 24.38 38
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 209 3 06-30 12/96 19.38 49
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 201 D 8 12-31 04/95 21.50 42
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 200 3 12-31 06/95 21.50 36
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 199 4 06-30 04/93 17.00 25
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 197 4 06-30 08/87 7.38 23
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 197 3 12-31 08/96 18.75 44
MARN Marion Capital Holdings of IN OTC Central IN Thrift 193 2 06-30 03/93 28.25 50
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 191 3 12-31 04/97 18.38 37
PULB Pulaski Bk,SB MHC of MO (29.8) OTC St. Louis MO Thrift 180 D 5 09-30 05/94 45.25 95
EGLB Eagle BancGroup of IL OTC Central IL Thrift 180 3 12-31 07/96 19.75 23
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 180 3 06-30 03/95 14.38 38
FBSI First Bancshares, Inc. of MO OTC Southcentral MO Thrift 178 6 06-30 12/93 12.75 28
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 170 4 12-31 04/95 21.50 41
FFWD Wood Bancorp of OH OTC Northern OH Thrift 165 7 06-30 08/93 17.50 47
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 159 4 12-31 11/92 15.75 16
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 157 8 06-30 04/94 21.50 35
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 153 D 2 06-30 04/95 30.25 41
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 147 7 09-30 10/92 11.88 20
GTPS Great American Bancorp of IL OTC East Central IL Thrift 146 3 12-31 06/95 21.88 35
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 137 D 6 12-31 12/96 19.00 23
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 134 D 2 12-31 09/96 12.75 36
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 16.25 26
CLAS Classic Bancshares, Inc. of KY OTC Eastern KY Thrift 133 D 3 03-31 12/95 14.88 19
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 127 4 12-31 12/93 18.75 18
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 124 2 09-30 10/93 14.00 13
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 121 3 03-31 09/95 19.38 16
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 118 2 12-31 12/93 16.25 21
CBES CBES Bancorp, Inc. of MO OTC Western MO Thrift 116 2 06-30 09/96 20.63 19
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 115 1 06-30 05/95 16.50 27
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 113 5 09-30 04/95 19.25 19
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 113 1 09-30 11/96 20.50 39
FTNB Fulton Bancorp, Inc. of MO OTC Central MO Thrift 110 2 06-30 10/96 19.75 34
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 109 4 06-30 07/97 12.69 21
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 16.25 32
UCBC Union Community Bancorp of IN OTC W.Central IN Thrift 108 1 12-31 12/97 14.88 45
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 106 4 12-31 04/96 18.25 18
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 106 1 06-30 04/97 24.38 44
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 102 3 06-30 02/95 20.50 18
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 102 2 09-30 06/95 15.00 22
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 100 1 06-30 04/96 23.50 34
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 100 D 3 03-31 10/94 20.38 17
CNSB CNS Bancorp, Inc. of MO OTC Central MO Thrift 98 5 12-31 06/96 17.52 29
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 97 D 4 06-30 08/95 19.44 16
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 D 1 12-31 08/94 18.88 40
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 95 1 09-30 06/96 15.88 18
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 93 D 3 09-30 10/94 15.00 13
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 93 3 06-30 06/94 16.88 15
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 90 3 06-30 03/95 19.50 15
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 90 2 06-30 01/94 14.38 22
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 89 1 12-31 06/95 17.25 22
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 86 1 09-30 02/95 23.38 19
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 84 1 12-31 11/96 13.13 27
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 82 2 09-30 09/96 13.63 19
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 82 2 06-30 08/95 15.75 20
HLFC Home Loan Financial Corp of OH OTC Central Ohio Thrift 80 0 03/98 15.50 35
MSBF MSB Financial, Inc of MI OTC Southcentral MI Thrift 79 2 06-30 02/95 17.00 21
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 76 1 06-30 12/96 14.75 13
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 63 1 12-31 01/95 19.00 16
NSLB NS&L Bancorp, Inc of Neosho MO OTC Southwest MO Thrift 61 2 09-30 06/95 17.59 12
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 58 2 09-30 03/97 13.88 19
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 53 1 06-30 07/96 15.50 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 49 S 2 09-30 10/95 13.75 12
RELI Reliance Bancshares Inc of WI OTC Milwaukee WI Thrift 44 1 06-30 04/96 8.50 20
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 9.13 8
JOAC Joachim Bancorp, Inc. of MO OTC Eastern MO Thrift 34 D 1 03-31 12/95 17.00 12
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 9,150 111 12-31 07/88 38.06 2,439
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 7,310 141 12-31 12/86 23.56 1,311
WBST Webster Financial Corp. of CT OTC Central CT Thrift 7,020 D 84 12-31 12/86 32.88 901
SISB SIS Bancorp, Inc. of MA (3) OTC Central MA Div. 1,794 25 12-31 02/95 41.13 287
BRKL Brookline Bncp MHC of MA(47.0) OTC Brookline Thrift 1,451 P 5 08-31 03/98 16.31 475
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,386 12 12-31 05/86 34.13 221
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,293 15 12-31 08/87 22.63 171
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,160 D 13 03-31 01/97 20.25 176
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,141 12 12-31 10/95 38.34 252
MDBK Medford Bancorp, Inc. of MA (3) OTC Eastern MA Thrift 1,120 16 12-31 03/86 41.63 189
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 1,032 10 12-31 10/95 23.50 127
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 1,016 11 12-31 07/86 34.63 182
FFES First Fed of E. Hartford CT OTC Central CT Thrift 991 12 12-31 06/87 36.50 99
MECH MECH Financial Inc of CT (3) OTC Hartford CT Thrift 946 14 12-31 06/96 28.88 153
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 929 15 12-31 05/86 51.00 183
PBKB People's Bancshares of MA (3) OTC Southeastern MA Thrift 862 14 12-31 10/86 26.19 87
NSSY NSS Bancorp of CT (3) OTC Southwest CT Thrift 669 8 12-31 06/94 43.25 103
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 651 14 12-31 12/81 27.63 129
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 647 12 12-31 10/86 7.75 110
ABBK Abington Bancorp of MA (3) OTC Southeastern MA M.B. 550 8 12-31 06/86 18.50 66
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 533 5 12-31 07/86 5.06 85
SWCB Sandwich Bancorp of MA (3) OTC Southeastern MA Thrift 527 11 12-31 07/86 64.00 125
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 480 3 12-31 07/86 20.13 103
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 371 D 6 12-31 07/86 12.00 92
NMSB Newmil Bancorp, Inc. of CT (3) OTC Western CT Thrift 370 15 06-30 02/86 13.25 51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
- ---------------------------------
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 367 D 8 03-31 10/86 27.88 55
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 355 5 12-31 05/86 15.63 67
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 321 10 12-31 05/86 19.50 41
BYS Bay State Bancorp of MA (3) NYSE Brookline Thrift 290 P 0 DEC 03/98 27.75 70
NBN Northeast Bancorp of ME (3) AMEX Eastern ME Thrift 279 D 11 06-30 08/87 16.25 36
ANE Alliance Bncp of New Eng of CT (3) AMEX Northern CT Thrift 247 7 12-31 12/86 15.13 38
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 238 6 12-31 05/93 17.13 41
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 232 5 12-31 12/88 35.00 46
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 226 2 12-31 08/88 26.75 49
MYST Mystic Financial of MA (3) OTC Medford Thrift 188 3 06-30 01/98 15.25 41
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 150 7 12-31 / 14.00 19
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 150 S 8 12-31 06/93 19.00 24
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 132 D 4 04-30 12/87 23.75 21
NTMG Nutmeg FS&LA of CT OTC Eastern CT M.B. 112 3 12-31 / 10.88 11
FCB Falmouth Bancorp, Inc. of MA (3) AMEX Southeast MA Thrift 105 2 09-30 03/96 20.00 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 63 2 03-31 11/89 12.00 9
North-West Companies
- --------------------
WAMU Washington Mutual, Inc. of WA (3) OTC CA,WA,FL,OR,UT Div. 96,983 D 914 12-31 03/83 46.50 17,988
WFSL Washington Federal, Inc. of WA OTC Western US Thrift 5,713 D 104 09-30 11/82 28.25 1,480
IWBK Interwest Bancorp of WA OTC Western WA Div. 2,091 39 09-30 / 47.00 396
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,888 41 12-31 / 25.88 197
FWWB First Savings Bancorp of WA OTC Central WA Thrift 1,137 D 20 03-31 11/95 25.00 254
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 994 33 09-30 10/95 19.38 193
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 547 12 03-31 08/86 17.50 131
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 S 8 12-31 12/85 17.00 71
CASB Cascade Financial Corp. of WA OTC Seattle WA Thrift 435 11 06-30 09/92 19.25 65
HFWA Heritage Financial Corp of WA OTC NW Washington Thrift 323 10 06-30 01/98 14.88 145
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 273 9 03-31 10/97 16.75 103
TSBK Timberland Bancorp of WA OTC Grays Harbor Thrift 261 5 06-30 01/98 16.88 103
OTFC Oregon Trail Fin. Corp. of OR OTC Baker City Thrift 257 D 7 03-31 10/97 16.63 72
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North-West Companies (continued)
- --------------------------------
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 184 5 03-31 07/97 20.75 41
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 D 3 12-31 01/97 16.63 43
South-East Companies
- --------------------
BNKU Bank United Corp. of TX OTC TX,AZ Thrift 13,109 71 09-30 08/96 50.63 1,600
FFCH First Fin. Holdings Inc. of SC OTC Charleston SC Div. 1,858 34 09-30 11/83 23.00 313
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,275 D 31 09-30 12/83 23.88 278
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 979 10 06-30 12/95 12.31 212
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 934 D 14 03-31 04/86 23.63 135
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 734 19 12-31 08/92 23.25 116
FCBK First Coastal Bankshares of VA OTC Southeast VA M.B. 625 14 12-31 11/80 17.94 89
CFCP Coastal Fin. Corp. of SC OTC South Carolina Thrift 583 9 09-30 09/90 20.00 125
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 570 13 12-31 05/96 27.38 134
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 503 7 06-30 07/97 44.50 197
TSH Teche Holding Company of LA AMEX Southern LA Thrift 407 9 09-30 04/95 19.63 68
PFSL Pocahontas Bancorp of AR OTC Northeast AR Thrift 401 6 09-30 04/98 9.88 66
COOP Cooperative Bancshares of NC OTC Eastern NC Thrift 381 16 12-31 08/91 18.00 54
CAVB Cavalry Bancorp of TN OTC Murfreesburg Thrift 351 0 Sept 03/98 22.50 170
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 S 9 03-31 03/86 31.00 86
HBSC Heritage Bancorp, Inc of SC OTC Laurens Thrift 312 P 4 Sept 04/98 20.50 95
UFRM United FSB of Rocky Mount NC OTC Eastern NC M.B. 306 13 12-31 07/80 18.00 59
SOPN First Svgs Bancorp of NC OTC Central NC Thrift 300 5 06-30 01/94 23.25 86
ANA Acadiana Bancshares, Inc of LA AMEX Southern LA Thrift 293 5 12-31 07/96 23.38 60
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 254 2 09-30 03/96 17.50 79
FLAG Flag Financial Corp of GA OTC Western GA M.B. 248 D 4 12-31 12/86 18.50 85
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 217 2 09-30 10/96 9.75 46
HCBB HCB Bancshares of Camden AR OTC Southern AR Thrift 205 D 7 06-30 05/97 15.13 40
ESX Essex Bancorp of Norfolk VA AMEX VA,NC M.B. 193 4 12-31 07/90 3.63 4
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 185 5 09-30 07/95 29.75 52
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 D 4 03-31 03/88 15.50 40
FFDB FirstFed Bancorp, Inc. of AL OTC Central AL Thrift 179 D 8 03-31 11/91 25.00 29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
- --------------------------------
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 16.38 70
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 176 7 09-30 02/87 13.25 42
GBNK Gaston Fed Bncp MHC of NC(47.0 OTC Southwest NC Thrift 171 P 4 9-30 04/98 15.75 71
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 162 2 09-30 02/95 19.50 19
BFSB Bedford Bancshares, Inc. of VA OTC Southern VA Thrift 153 3 09-30 08/94 29.00 33
HBS Haywood Bancshares, Inc. of NC (3) AMEX Northwest NC Thrift 152 4 12-31 12/87 22.75 28
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 143 5 12-31 07/95 22.00 20
PDB Piedmont Bancorp, Inc. of NC AMEX Central NC Thrift 133 1 06-30 12/95 9.63 26
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 129 3 12-31 04/97 17.38 58
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 118 4 06-30 11/96 16.94 32
SBAN SouthBanc Shares Inc. of SC OTC Northwest SC Thrift 117 P 6 09-30 04/98 19.56 30
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 111 2 12-31 04/96 19.94 38
TWIN Twin City Bancorp, Inc. of TN OTC Northeast TN Thrift 110 3 12-31 01/95 13.75 17
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 106 S 4 06-30 10/95 16.13 20
CENB Century Bancorp, Inc. of NC OTC Charlotte NC Thrift 104 1 06-30 12/96 20.25 26
PEDE Great Pee Dee Bancorp of SC OTC Northeast SC Thrift 79 P 1 06-30 12/97 15.50 34
UTBI United Tenn. Bancshares of TN OTC Eastern TN Thrift 75 2 12-31 01/98 14.88 22
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 71 S 1 09-30 12/96 17.25 20
SSB Scotland Bancorp, Inc. of NC AMEX S. Central NC Thrift 61 2 09-30 04/96 9.00 17
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 3 06-30 07/94 21.75 13
MBSP Mitchell Bancorp, Inc. of NC OTC Western NC Thrift 37 1 06-30 07/96 16.75 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,966 37 12-31 / 38.94 196
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 303 D 6 03-31 06/93 23.75 40
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 237 6 09-30 04/96 20.75 51
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 121 2 09-30 01/95 15.75 24
GUPB GFSB Bancorp, Inc of Gallup NM OTC Northwest NM Thrift 118 1 06-30 06/95 15.50 19
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 114 3 12-31 08/86 11.50 14
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 16, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp of CO OTC Colorado Thrift 1,555 D 27 12-31 01/96 28.63 482
WSTR WesterFed Fin. Corp. of MT OTC Montana Thrift 1,035 D 36 06-30 01/94 24.88 139
UBMT United Fin. Corp. of MT OTC Central MT Thrift 96 D 4 12-31 09/86 27.88 47
HCBC High Country Bancorp of CO OTC Salida Thrift 92 2 12-31 12/97 15.00 20
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 89 2 12-31 09/93 14.75 17
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 62 1 09-30 03/96 17.75 17
</TABLE>
Other Areas
- -----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 06/16/98
<PAGE>
EXHIBIT III-2
Cortland Savings Bank
New York Savings Institutions
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Pricing Comparatives
Prices As of June 5, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
--------------- --------------- -------------------------------------
Core Book
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------- ------- ------- ----- ------ ----- ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.84 174.72 0.96 13.81 20.15 160.44 20.63 166.60 20.81
BIF-Insured Thrifts 24.92 628.84 1.21 13.40 18.56 193.05 20.50 191.24 19.53
State of NY 26.86 552.47 1.12 15.80 21.64 168.90 21.83 178.56 22.29
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY(7) 19.75 27.22 0.89 14.58 22.19 135.46 16.97 135.46 22.19
ALBK ALBANK Fin. Corp. of Albany NY 52.38 673.24 3.38 28.54 15.32 183.53 16.46 234.68 15.50
ALBC Albion Banc Corp. of Albion NY 9.50 7.14 0.43 8.28 21.11 114.73 9.80 114.73 22.09
AHCI Ambanc Holding Co., Inc. of NY 18.63 79.33 0.48 14.27 NM 130.55 15.26 130.55 NM
- ------------------------------------------------------------------------------------------------------------------
ASFC Astoria Financial Corp. of NY 54.31 1431.94 2.52 32.88 19.82 165.18 13.14 233.39 21.55
CNY Carver Bancorp, Inc. of NY 13.31 30.80 0.03 15.24 NM 87.34 7.41 90.79 NM
CATB Catskill Fin. Corp. of NY 17.38 77.53 0.85 15.54 20.21 111.84 26.20 111.84 20.45
- ------------------------------------------------------------------------------------------------------------------
DME Dime Bancorp, Inc. of NY 30.13 3442.59 1.03 11.37 23.54 265.00 15.63 323.63 29.25
DIME Dime Community Bancorp of NY 29.00 360.76 0.89 15.22 NM 190.54 22.87 219.03 NM
ESBK Elmira Svgs Bank (The) of NY 29.25 21.26 1.47 19.63 21.04 149.01 9.26 149.01 19.90
- ------------------------------------------------------------------------------------------------------------------
FIBC Financial Bancorp, Inc. of NY 27.50 46.94 1.58 16.43 16.98 167.38 15.12 168.09 17.41
FFIC Flushing Fin. Corp. of NY 26.50 207.44 1.14 17.52 23.45 151.26 19.23 157.27 23.25
GOSB GSB Financial Corp. of NY 17.13 38.51 0.37 14.88 NM 115.12 32.40 115.12 NM
- ------------------------------------------------------------------------------------------------------------------
GPT GreenPoint Fin. Corp. of NY 40.94 3458.16 1.74 15.15 24.37 270.23 26.14 NM 23.53
HAVN Haven Bancorp of Woodhaven NY 26.88 237.51 1.11 12.91 24.00 208.21 11.77 208.70 24.22
ICBC Independence Comm Bnk Cp of NY 16.81 1183.61 0.49 12.55 NM 133.94 29.07 143.06 NM
JSB JSB Financial, Inc. of NY 58.44 577.56 2.64 35.96 19.68 162.51 37.72 162.51 22.14
LISB Long Island Bancorp, Inc of NY(7) 61.50 1471.94 1.77 23.55 28.08 261.15 23.38 263.38 NM
NBCP Niagara Bancorp of NY MHC(45.4 14.56 196.59 0.58 12.71 25.10 114.56 13.78 114.56 25.10
PBHC Pathfinder BC MHC of NY (46.1) 22.25 19.62 0.50 8.15 NM 273.01 32.11 322.00 NM
PEEK Peekskill Fin. Corp. of NY 18.00 54.31 0.65 14.92 28.57 120.64 27.73 120.64 27.69
- ------------------------------------------------------------------------------------------------------------------
PSBK Progressive Bank, Inc. of NY(7) 42.00 161.95 2.23 20.68 18.92 203.09 18.07 222.58 18.83
QCSB Queens County Bancorp of NY 44.44 663.13 1.48 11.36 29.63 NM 40.87 NM NM
RELY Reliance Bancorp, Inc. of NY 39.25 377.90 2.04 20.13 20.34 194.98 17.34 282.58 19.24
RCBK Richmond County Fin Corp of NY 18.50 488.84 0.74 12.21 NM 151.52 33.39 152.14 25.00
RSLN Roslyn Bancorp, Inc. of NY 22.13 947.65 0.99 14.51 21.49 152.52 25.57 153.25 22.35
SBFL SB Fngr Lakes MHC of NY (33.1) 19.63 23.20 0.22 6.10 NM 321.80 27.94 321.80 NM
SFED SFS Bancorp of Schenectady NY 22.00 26.58 0.89 17.95 23.91 122.56 15.15 122.56 24.72
- ------------------------------------------------------------------------------------------------------------------
SKAN Skaneateles Bancorp Inc of NY 17.50 25.20 1.09 12.48 15.63 140.22 9.78 143.91 16.06
- ------------------------------------------------------------------------------------------------------------------
SIB Staten Island Bancorp of NY 21.44 967.59 0.79 15.51 NM 138.23 36.22 141.89 27.14
ROSE T R Financial Corp. of NY 42.25 740.64 1.85 14.05 20.22 300.71 18.49 300.71 22.84
TPNZ Tappan Zee Fin., Inc. of NY(7) 20.13 29.75 0.67 14.56 28.76 138.26 23.52 138.26 NM
WSBI Warwick Community Bncrp of NY 16.88 111.53 0.55 12.60 NM 133.97 31.84 133.97 NM
YFCB Yonkers Fin. Corp. of NY 18.94 57.12 1.01 14.90 18.39 127.11 17.22 127.11 18.75
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- -------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ----- ----- -------- ------ ------ ------ ----- ------ ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.64 31.79 1,058 13.89 0.67 0.93 7.95 0.88 7.48
BIF-Insured Thrifts 0.40 1.53 31.00 3,341 11.56 0.64 1.05 10.76 1.01 10.16
State of NY 0.39 1.28 29.50 2,768 13.53 0.77 0.83 7.12 0.88 7.28
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY(7) 0.28 1.42 31.46 160 12.52 0.37 0.78 5.89 0.78 5.89
ALBK ALBANK Fin. Corp. of Albany NY 0.84 1.60 24.85 4,089 8.97 0.92 1.16 12.76 1.14 12.61
ALBC Albion Banc Corp. of Albion NY 0.12 1.26 27.91 73 8.54 0.55 0.48 5.58 0.46 5.33
AHCI Ambanc Holding Co., Inc. of NY 0.24 1.29 50.00 520 11.69 0.62 0.51 4.18 0.41 3.34
- ------------------------------------------------------------------------------------------------------------------------
ASFC Astoria Financial Corp. of NY 0.80 1.47 31.75 10,895 7.96 0.54 0.81 10.29 0.74 9.46
CNY Carver Bancorp, Inc. of NY 0.00 0.00 0.00 416 8.48 NA -0.11 -1.33 0.02 0.20
CATB Catskill Fin. Corp. of NY 0.32 1.84 37.65 296 23.42 0.29 1.33 5.36 1.32 5.30
- ------------------------------------------------------------------------------------------------------------------------
DME Dime Bancorp, Inc. of NY 0.20 0.66 19.42 22,024 5.90 1.03 0.72 12.65 0.58 10.18
DIME Dime Community Bancorp of NY 0.36 1.24 40.45 1,577 12.01 0.48 0.83 6.19 0.79 5.86
ESBK Elmira Svgs Bank (The) of NY 0.64 2.19 43.54 230 6.21 0.68 0.44 7.04 0.47 7.45
- ------------------------------------------------------------------------------------------------------------------------
FIBC Financial Bancorp, Inc. of NY 0.50 1.82 31.65 310 9.04 2.19 0.94 10.24 0.92 9.99
FFIC Flushing Fin. Corp. of NY 0.32 1.21 28.07 1,078 12.72 0.31 0.92 6.57 0.93 6.63
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 119 28.14 0.10 0.73 3.54 0.69 3.36
- ------------------------------------------------------------------------------------------------------------------------
GPT GreenPoint Fin. Corp. of NY 0.64 1.56 36.78 13,228 9.67 2.73 1.08 10.71 1.11 11.10
HAVN Haven Bancorp of Woodhaven NY 0.30 1.12 27.03 2,018 5.65 0.57 0.53 9.11 0.53 9.03
ICBC Independence Comm Bnk Cp of NY 0.00 0.00 0.00 4,072 21.70 0.70 0.64 2.95 0.85 3.90
JSB JSB Financial, Inc. of NY 1.60 2.74 60.61 1,531 23.21 NA 1.92 8.59 1.71 7.64
LISB Long Island Bancorp, Inc of NY(7) 0.60 0.98 33.90 6,296 8.95 0.86 0.87 9.63 0.71 7.78
NBCP Niagara Bancorp of NY MHC(45.4 0.00 0.00 0.00 3,145 12.03 0.25 0.55 4.56 0.55 4.56
PBHC Pathfinder BC MHC of NY (46.1) 0.20 0.90 12.46 196 11.76 1.33 0.91 7.74 0.73 6.24
PEEK Peekskill Fin. Corp. of NY 0.36 2.00 55.38 196 22.99 0.89 1.03 4.09 1.06 4.22
- ------------------------------------------------------------------------------------------------------------------------
PSBK Progressive Bank, Inc. of NY(7) 0.80 1.90 35.87 896 8.90 0.76 0.97 11.15 0.97 11.20
QCSB Queens County Bancorp of NY 1.00 2.25 67.57 1,622 10.45 0.55 1.47 12.54 1.45 12.37
RELY Reliance Bancorp, Inc. of NY 0.72 1.83 35.29 2,180 8.89 NA 0.90 10.66 0.95 11.27
RCBK Richmond County Fin Corp of NY 0.20 1.08 27.03 1,464 22.04 0.47 0.19 1.11 1.53 9.09
RSLN Roslyn Bancorp, Inc. of NY 0.34 1.54 34.34 3,706 16.76 0.25 1.31 7.08 1.26 6.81
SBFL SB Fngr Lakes MHC of NY (33.1) 0.24 1.22 NM 251 8.68 0.27 0.40 4.39 0.34 3.72
SFED SFS Bancorp of Schenectady NY 0.32 1.45 35.96 175 12.36 0.72 0.64 5.13 0.62 4.96
- ------------------------------------------------------------------------------------------------------------------------
SKAN Skaneateles Bancorp Inc of NY 0.28 1.60 25.69 258 6.98 2.01 0.64 9.32 0.63 9.07
- ------------------------------------------------------------------------------------------------------------------------
SIB Staten Island Bancorp of NY 0.28 1.31 35.44 2,671 26.20 0.85 0.86 5.00 1.59 9.19
ROSE T R Financial Corp. of NY 0.72 1.70 38.92 4,006 6.15 0.57 0.99 15.97 0.88 14.13
TPNZ Tappan Zee Fin., Inc. of NY(7) 0.28 1.39 41.79 126 17.02 1.24 0.84 4.86 0.81 4.65
WSBI Warwick Community Bncrp of NY 0.00 0.00 0.00 350 23.76 0.52 1.04 4.37 1.04 4.37
YFCB Yonkers Fin. Corp. of NY 0.28 1.48 27.72 332 13.54 0.41 1.05 7.10 1.03 6.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
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
Cortland Savings Bank
Selected Ohio Savings 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 June 5, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
---------------- -------------- -------------------------------------
Core Book
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ----- ----- ------ ----- ----- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.84 174.72 0.96 13.81 20.15 160.44 20.63 166.60 20.81
BIF-Insured Thrifts 24.92 628.84 1.21 13.40 18.56 193.05 20.50 191.24 19.53
State of OH 20.36 195.71 0.84 12.44 20.58 174.40 22.23 177.96 21.70
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
State of OH
- -----------
ASBP ASB Financial Corp. of OH 16.50 26.98 0.65 10.68 25.00 154.49 23.48 154.49 25.38
CAFI Camco Fin. Corp. of OH 29.50 107.56 1.34 15.62 16.67 188.86 18.69 201.23 22.01
COFI Charter One Financial of OH 35.50 4548.83 1.57 11.19 NM 317.25 23.38 338.42 22.61
CTZN CitFed Bancorp of Dayton OH(7) 49.25 644.53 2.24 16.89 22.29 291.59 18.24 316.52 21.99
CIBI Community Inv. Bancorp of OH 20.50 18.25 1.02 12.56 20.10 163.22 17.93 163.22 20.10
DCBI Delphos Citizens Bancorp of OH 20.50 39.03 0.91 14.76 22.53 138.89 34.66 138.89 22.53
- ------------------------------------------------------------------------------------------------------------------
EMLD Emerald Financial Corp. of OH 13.25 135.97 0.59 4.96 20.70 267.14 22.08 270.96 22.46
EFBI Enterprise Fed. Bancorp of OH 28.00 61.91 0.90 14.65 28.28 191.13 20.55 191.26 NM
FFDF FFD Financial Corp. of OH 23.50 33.96 0.49 15.43 21.56 152.30 33.92 152.30 NM
FFYF FFY Financial Corp. of OH 32.88 133.33 1.90 20.82 17.04 157.93 20.68 157.93 17.31
FFOH Fidelity Financial of OH 17.38 97.24 0.84 11.64 19.98 149.31 17.99 168.57 20.69
FDEF First Defiance Fin.Corp. of OH 14.94 121.36 0.63 12.54 22.64 119.14 21.02 119.14 23.71
FFBZ First Federal Bancorp of OH 24.38 38.40 1.15 10.24 21.02 238.09 18.14 238.32 21.20
FFHS First Franklin Corp. of OH 17.13 30.63 0.91 12.01 16.31 142.63 13.18 143.35 18.82
CASH First Midwest Fin., Inc. of OH 23.25 61.52 0.77 15.92 26.42 146.04 15.17 164.19 NM
GFCO Glenway Financial Corp. of OH 24.00 54.77 1.10 12.60 21.62 190.48 18.23 192.15 21.82
HHFC Harvest Home Fin. Corp. of OH 15.00 13.37 0.66 11.62 19.74 129.09 14.35 129.09 22.73
HCFC Home City Fin. Corp. of OH 14.75 13.35 1.02 15.68 14.46 94.07 17.48 94.07 14.46
HLFC Home Loan Financial Corp of OH 15.50 34.84 0.37 13.82 NM 112.16 43.67 112.16 NM
INBI Industrial Bancorp of OH 19.25 97.75 1.03 12.14 18.69 158.57 26.13 158.57 18.69
MRKF Market Fin. Corp. of OH 13.88 18.54 0.48 15.25 28.92 91.02 32.11 91.02 28.92
METF Metropolitan Fin. Corp. of OH 15.00 105.77 0.82 5.42 16.13 276.75 10.69 299.40 18.29
MFFC Milton Fed. Fin. Corp. of OH 16.13 36.08 0.56 11.50 25.60 140.26 15.92 140.26 28.80
OHSL OHSL Financial Corp. of OH 17.25 42.95 0.76 10.64 21.04 162.12 17.10 162.12 22.70
PVFC PVF Capital Corp. of OH 26.50 70.49 1.83 11.34 13.66 233.69 16.83 233.69 14.48
PFFC Peoples Fin. Corp. of OH 13.63 19.31 0.29 11.11 18.17 122.68 23.49 122.68 NM
PSFC Peoples Sidney Fin. Corp of OH 24.38 43.52 0.71 14.87 NM 163.95 41.24 163.95 NM
- ------------------------------------------------------------------------------------------------------------------
PTRS Potters Financial Corp of OH 18.75 18.13 0.98 11.40 18.56 164.47 14.32 164.47 19.13
SFSL Security First Corp. of OH(7) 25.00 188.88 1.23 8.56 20.33 292.06 27.55 296.21 20.33
WAYN Wayne Svgs Bks MHC of OH (47.8 28.00 30.10 0.71 9.74 NM 287.47 27.26 287.47 NM
WOFC Western Ohio Fin. Corp. of OH 25.50 59.98 0.14 23.21 NM 109.87 16.12 117.57 NM
WEHO Westwood Hmstd Fin Corp of OH 12.75 36.25 0.49 10.60 NM 120.28 27.00 120.28 26.02
- ------------------------------------------------------------------------------------------------------------------
WFI Winton Financial Corp. of OH 16.44 65.99 0.66 5.80 20.55 283.45 20.34 289.44 24.91
FFWD Wood Bancorp of OH 17.50 46.59 0.76 8.18 19.66 213.94 28.23 213.94 23.03
<CAPTION>
Dividends(4) Financial Characteristics(6)
---------------------- ------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- -------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ----- ----- ------- ------ ------ ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.64 31.79 1,058 13.89 0.67 0.93 7.95 0.88 7.48
BIF-Insured Thrifts 0.40 1.53 31.00 3,341 11.56 0.64 1.05 10.76 1.01 10.16
State of OH 0.40 1.97 39.07 888 14.46 0.42 1.01 8.44 0.93 7.83
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
State of OH
- -----------
ASBP ASB Financial Corp. of OH 0.40 2.42 61.54 115 15.20 0.14 0.96 6.17 0.94 6.08
CAFI Camco Fin. Corp. of OH 0.58 1.97 43.28 576 9.89 0.68 1.26 13.08 0.95 9.90
COFI Charter One Financial of OH 0.56 1.58 35.67 19,457 7.37 0.38 0.87 12.46 1.21 17.31
CTZN CitFed Bancorp of Dayton OH(7) 0.36 0.73 16.07 3,533 6.26 0.32 0.89 14.17 0.90 14.36
CIBI Community Inv. Bancorp of OH 0.32 1.56 31.37 102 10.99 0.56 0.94 8.15 0.94 8.15
DCBI Delphos Citizens Bancorp of OH 0.00 0.00 0.00 113 24.95 0.56 1.60 5.91 1.60 5.91
- ----------------------------------------------------------------------------------------------------------------------
EMLD Emerald Financial Corp. of OH 0.14 1.06 23.73 616 8.27 0.38 1.09 13.88 1.00 12.80
EFBI Enterprise Fed. Bancorp of OH 1.00 3.57 NM 301 10.75 0.01 0.81 6.91 0.74 6.28
FFDF FFD Financial Corp. of OH 0.30 1.28 61.22 100 22.27 0.08 1.73 7.25 0.78 3.26
FFYF FFY Financial Corp. of OH 0.80 2.43 42.11 645 13.10 0.53 1.28 9.36 1.26 9.21
FFOH Fidelity Financial of OH 0.32 1.84 38.10 540 12.05 0.18 0.92 7.30 0.89 7.05
FDEF First Defiance Fin.Corp. of OH 0.36 2.41 57.14 577 17.64 0.31 0.95 4.82 0.90 4.60
FFBZ First Federal Bancorp of OH 0.28 1.15 24.35 212 7.62 0.46 0.90 11.79 0.89 11.69
FFHS First Franklin Corp. of OH 0.27 1.58 29.67 232 9.24 0.49 0.82 9.03 0.71 7.82
CASH First Midwest Fin., Inc. of OH 0.48 2.06 62.34 405 10.39 1.11 0.59 5.41 0.52 4.73
GFCO Glenway Financial Corp. of OH 0.44 1.83 40.00 300 9.57 0.19 0.86 9.12 0.86 9.04
HHFC Harvest Home Fin. Corp. of OH 0.44 2.93 66.67 93 11.12 0.23 0.77 6.53 0.67 5.67
HCFC Home City Fin. Corp. of OH 0.36 2.44 35.29 76 18.58 0.65 1.29 6.57 1.29 6.57
HLFC Home Loan Financial Corp of OH 0.00 0.00 0.00 80 38.94 0.44 1.30 5.70 1.30 5.70
INBI Industrial Bancorp of OH 0.60 3.12 58.25 374 16.48 0.25 1.48 8.53 1.48 8.53
MRKF Market Fin. Corp. of OH 0.28 2.02 58.33 58 35.28 0.33 1.13 3.21 1.13 3.21
METF Metropolitan Fin. Corp. of OH 0.00 0.00 0.00 990 3.86 0.92 0.74 18.94 0.66 16.70
MFFC Milton Fed. Fin. Corp. of OH 0.60 3.72 NM 227 11.35 0.28 0.68 5.39 0.61 4.79
OHSL OHSL Financial Corp. of OH 0.50 2.90 65.79 251 10.55 0.17 0.86 7.92 0.80 7.34
PVFC PVF Capital Corp. of OH 0.00 0.00 0.00 419 7.20 0.69 1.34 18.73 1.26 17.66
PFFC Peoples Fin. Corp. of OH 0.60 4.40 NM 82 19.15 0.01 1.29 6.79 0.50 2.63
PSFC Peoples Sidney Fin. Corp of OH 0.28 1.15 39.44 106 25.15 1.10 1.24 5.56 1.24 5.56
- ----------------------------------------------------------------------------------------------------------------------
PTRS Potters Financial Corp of OH 0.24 1.28 24.49 127 8.71 0.13 0.80 9.05 0.78 8.78
SFSL Security First Corp. of OH(7) 0.36 1.44 29.27 685 9.43 0.42 1.39 14.89 1.39 14.89
WAYN Wayne Svgs Bks MHC of OH (47.8 0.56 2.00 NM 255 9.48 NA 0.75 8.03 0.70 7.51
WOFC Western Ohio Fin. Corp. of OH 1.00 3.92 NM 372 14.68 0.91 0.04 0.26 0.08 0.61
WEHO Westwood Hmstd Fin Corp of OH 0.36 2.82 73.47 134 22.45 0.12 0.67 2.33 1.05 3.68
- ----------------------------------------------------------------------------------------------------------------------
WFI Winton Financial Corp. of OH 0.25 1.52 37.88 324 7.17 NA 1.05 14.60 0.86 12.04
FFWD Wood Bancorp of OH 0.34 1.94 44.74 165 13.20 0.35 1.44 11.31 1.23 9.66
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Cortland Savings Bank
Stock Prices:
As of June 5, 1998
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(291) 21.75 6,764 181.1 24.54 15.59 21.93 -0.89 42.54 4.06
NYSE Traded Companies(8) 43.42 37,199 1,784.9 48.53 27.89 43.34 0.64 46.72 4.37
AMEX Traded Companies(22) 18.09 3,372 59.1 21.14 14.27 18.18 -0.60 29.92 1.90
NASDAQ Listed OTC Companies(260) 21.55 6,309 151.8 24.26 15.40 21.75 -0.94 43.53 4.04
California Companies(19) 29.31 13,758 647.2 32.87 19.73 29.50 -1.15 39.21 2.81
Florida Companies(6) 21.87 24,780 478.3 24.46 14.70 22.06 -1.45 49.35 -1.46
Mid-Atlantic Companies(58) 22.71 9,699 209.7 25.50 15.52 22.97 -1.25 50.85 6.06
Mid-West Companies(133) 20.71 4,710 122.7 23.50 14.98 20.84 -0.63 38.93 2.70
New England Companies(8) 22.22 6,864 194.9 24.97 14.91 22.35 0.00 53.46 2.22
North-West Companies(11) 22.78 10,609 271.8 24.77 18.01 22.91 -1.05 42.03 17.18
South-East Companies(44) 20.96 4,239 112.4 23.99 15.68 21.18 -0.99 41.55 4.08
South-West Companies(6) 20.49 2,287 60.7 21.90 14.10 20.55 -0.89 50.78 3.00
Western Companies (Excl CA)(6) 20.05 2,145 48.1 22.10 16.69 20.53 -2.19 36.55 2.75
Thrift Strategy(244) 20.70 4,667 108.4 23.46 15.18 20.92 -1.06 40.42 3.64
Mortgage Banker Strategy(29) 29.07 18,151 631.0 32.09 18.87 29.20 -0.30 54.19 3.79
Real Estate Strategy(8) 27.80 6,612 170.1 29.82 16.20 27.63 0.39 71.79 23.56
Diversified Strategy(7) 27.84 45,244 1,320.3 32.13 19.65 27.46 0.76 34.67 -2.29
Retail Banking Strategy(3) 20.63 4,580 107.0 23.42 12.70 20.34 1.55 64.10 4.45
Companies Issuing Dividends(243) 22.18 6,611 186.7 25.05 15.86 22.37 -0.86 41.29 2.20
Companies Without Dividends(48) 19.53 7,550 152.1 21.89 14.18 19.69 -1.03 48.94 13.56
Equity/Assets < 6%(21) 25.52 16,225 397.4 28.58 15.52 25.78 -1.41 63.23 7.53
Equity/Assets 6-12%(132) 23.95 7,370 242.7 26.77 16.11 24.14 -0.89 47.64 2.95
Equity/Assets > 12%(138) 19.21 4,825 93.8 21.94 15.13 19.38 -0.81 34.86 4.54
Converted Last 3 Mths (no MHC)(11) 15.43 15,589 224.9 17.59 12.84 15.85 -2.54 72.19 34.20
Actively Traded Companies(34) 30.26 23,631 801.7 33.67 20.64 30.60 -1.27 48.69 0.99
Market Value Below $20 Million(46) 16.17 1,002 15.9 18.92 12.59 16.42 -1.46 29.70 -1.77
Holding Company Structure(266) 22.05 6,759 185.6 24.87 15.89 22.24 -0.90 40.98 4.53
Assets Over $1 Billion(59) 29.59 23,340 705.9 32.80 20.23 29.63 -0.40 47.85 5.54
Assets $500 Million-$1 Billion(40) 23.97 5,500 121.6 26.63 16.13 24.39 -1.71 50.87 4.65
Assets $250-$500 Million(70) 21.76 3,359 67.8 24.59 15.37 21.91 -0.64 48.94 8.23
Assets less than $250 Million(122) 17.63 1,677 28.8 20.25 13.50 17.81 -0.98 34.21 0.96
Goodwill Companies(118) 24.52 12,267 316.5 27.51 16.92 24.65 -0.70 46.43 3.92
Non-Goodwill Companies(173) 19.95 3,187 93.1 22.61 14.73 20.16 -1.00 40.00 4.14
Acquirors of FSLIC Cases(8) 39.96 30,421 1,655.5 43.47 26.69 39.83 1.69 54.43 5.64
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(291) 1.04 0.99 14.06 13.58 127.87
NYSE Traded Companies(8) 2.51 2.08 20.39 19.95 282.73
AMEX Traded Companies(22) 0.80 0.76 13.82 13.51 108.48
NASDAQ Listed OTC Companies(260) 1.03 0.98 13.92 13.46 125.99
California Companies(19) 1.63 1.52 17.85 17.10 240.60
Florida Companies(6) 0.99 0.63 11.41 10.86 148.21
Mid-Atlantic Companies(58) 1.12 1.08 13.91 12.97 145.26
Mid-West Companies(133) 0.97 0.92 13.92 13.60 113.21
New England Companies(8) 1.05 1.15 13.65 13.08 185.62
North-West Companies(11) 1.08 0.97 13.92 13.50 110.52
South-East Companies(44) 0.92 0.87 13.65 13.43 97.60
South-West Companies(6) 1.34 1.33 13.93 13.33 191.37
Western Companies (Excl CA)(6) 0.83 0.83 14.94 14.22 90.57
Thrift Strategy(244) 0.99 0.95 14.06 13.63 116.54
Mortgage Banker Strategy(29) 1.38 1.32 14.81 13.73 206.80
Real Estate Strategy(8) 1.57 1.46 14.21 13.81 202.40
Diversified Strategy(7) 1.48 1.01 11.63 11.39 144.78
Retail Banking Strategy(3) 0.44 0.30 13.08 12.52 194.44
Companies Issuing Dividends(243) 1.09 1.03 14.14 13.65 127.23
Companies Without Dividends(48) 0.78 0.78 13.61 13.21 131.16
Equity/Assets < 6%(21) 1.28 1.37 12.13 11.46 245.04
Equity/Assets 6-12%(132) 1.23 1.13 13.78 13.05 159.83
Equity/Assets > 12%(138) 0.84 0.80 14.59 14.37 81.86
Converted Last 3 Mths (no MHC)(11) 0.50 0.47 12.64 11.79 53.85
Actively Traded Companies(34) 1.61 1.67 15.30 14.63 187.05
Market Value Below $20 Million(46) 0.77 0.70 13.20 13.10 95.02
Holding Company Structure(266) 1.05 1.00 14.27 13.79 127.92
Assets Over $1 Billion(59) 1.55 1.49 15.24 13.91 207.35
Assets $500 Million-$1 Billion(40) 1.10 1.06 13.62 13.25 145.41
Assets $250-$500 Million(70) 1.07 1.00 14.32 13.89 126.83
Assets less than $250 Million(122) 0.79 0.74 13.52 13.37 88.18
Goodwill Companies(118) 1.23 1.15 14.22 13.09 161.47
Non-Goodwill Companies(173) 0.92 0.88 13.95 13.90 106.02
Acquirors of FSLIC Cases(8) 2.35 2.27 20.32 19.50 256.52
</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-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(58) 24.92 18,466 642.5 27.71 16.90 25.11 -0.85 51.42 4.14
NYSE Traded Companies(5) 35.74 51,255 1,703.3 37.79 26.78 35.86 -0.78 49.94 14.07
AMEX Traded Companies(5) 20.35 2,417 52.0 23.20 13.58 20.78 -2.35 51.90 7.01
NASDAQ Listed OTC Companies(48) 24.21 16,564 589.1 27.08 16.16 24.38 -0.69 51.54 2.68
California Companies(1) 22.13 7,700 170.4 24.00 15.00 22.63 -2.21 45.11 14.96
Mid-Atlantic Companies(20) 26.73 22,190 654.7 28.82 18.06 26.91 -0.74 57.78 5.24
New England Companies(31) 24.47 5,770 135.4 27.56 16.12 24.66 -0.84 54.83 5.90
North-West Companies(3) 27.00 132,825 6,063.1 30.11 21.04 27.17 -0.81 27.65 -0.07
South-East Companies(3) 16.48 2,611 35.4 20.96 13.38 16.71 -1.26 5.24 -18.67
Thrift Strategy(44) 24.77 8,288 235.2 27.38 16.77 25.01 -1.07 53.24 5.39
Mortgage Banker Strategy(6) 23.48 28,757 795.3 27.28 15.22 23.46 0.15 50.46 -5.80
Real Estate Strategy(3) 17.07 7,682 131.2 19.19 11.82 17.51 -2.64 38.27 9.65
Diversified Strategy(5) 31.01 93,893 4,004.2 34.39 22.10 31.00 0.43 42.92 3.53
Companies Issuing Dividends(50) 25.90 20,658 727.6 28.78 17.33 26.09 -0.86 49.97 3.05
Companies Without Dividends(8) 18.29 3,752 71.3 20.59 14.06 18.53 -0.82 61.19 11.46
Equity/Assets < 6%(5) 28.24 103,851 4,364.5 31.07 17.55 28.29 -0.52 73.99 6.82
Equity/Assets 6-12%(36) 26.28 8,961 275.7 29.09 16.93 26.45 -0.63 51.94 3.03
Equity/Assets > 12%(17) 21.37 11,245 238.3 24.14 16.67 21.66 -1.37 43.81 5.43
Converted Last 3 Mths (no MHC)(2) 18.88 19,386 216.4 22.23 16.36 19.35 -1.84 66.27 11.64
Actively Traded Companies(17) 31.59 43,915 1,754.3 34.29 20.98 31.64 -0.44 49.99 5.54
Market Value Below $20 Million(1) 14.00 1,359 19.0 15.75 8.88 13.56 3.24 49.25 -5.91
Holding Company Structure(46) 24.42 17,939 639.2 27.16 16.96 24.55 -0.66 49.70 4.59
Assets Over $1 Billion(18) 33.43 49,262 1,880.4 36.01 22.71 33.73 -0.95 50.58 8.31
Assets $500 Million-$1 Billion(13) 24.93 8,497 140.2 27.66 15.95 24.90 -0.20 57.50 1.76
Assets $250-$500 Million(12) 19.30 3,893 69.3 22.38 14.11 19.55 -1.45 45.89 -1.09
Assets less than $250 Million(15) 19.76 1,868 33.1 22.61 13.20 19.94 -0.71 52.76 5.16
Goodwill Companies(30) 26.34 31,512 1,138.1 29.20 17.29 26.42 -0.46 57.56 4.76
Non-Goodwill Companies(27) 23.33 5,531 149.9 25.99 16.09 23.62 -1.18 45.54 2.15
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(58) 1.29 1.25 13.52 13.05 135.71
NYSE Traded Companies(5) 1.48 1.45 20.33 18.50 135.55
AMEX Traded Companies(5) 1.17 0.99 12.84 12.42 111.53
NASDAQ Listed OTC Companies(48) 1.28 1.25 12.82 12.50 138.48
California Companies(1) 1.70 1.70 13.36 13.32 131.30
Mid-Atlantic Companies(20) 1.12 1.08 14.31 13.64 127.93
New England Companies(31) 1.47 1.38 13.34 12.95 146.58
North-West Companies(3) 1.01 1.24 10.66 10.36 144.06
South-East Companies(3) 0.88 0.91 13.11 12.92 76.72
Thrift Strategy(44) 1.28 1.22 14.22 13.80 130.28
Mortgage Banker Strategy(6) 1.32 1.23 11.44 10.87 145.79
Real Estate Strategy(3) 1.33 1.28 9.29 9.27 89.86
Diversified Strategy(5) 1.30 1.50 11.94 11.04 186.52
Companies Issuing Dividends(50) 1.34 1.29 13.55 13.01 142.90
Companies Without Dividends(8) 0.96 0.95 13.33 13.31 87.48
Equity/Assets < 6%(5) 1.23 1.08 9.31 8.64 184.99
Equity/Assets 6-12%(36) 1.53 1.48 13.33 12.77 156.70
Equity/Assets > 12%(17) 0.86 0.85 15.11 14.88 81.73
Converted Last 3 Mths (no MHC)(2) 0.63 0.60 13.38 13.23 69.40
Actively Traded Companies(17) 1.77 1.65 15.83 15.10 175.01
Market Value Below $20 Million(1) 0.94 0.82 11.10 11.10 110.39
Holding Company Structure(46) 1.25 1.21 13.67 13.33 127.86
Assets Over $1 Billion(18) 1.53 1.54 15.50 14.46 163.32
Assets $500 Million-$1 Billion(13) 1.53 1.38 13.36 13.07 153.96
Assets $250-$500 Million(12) 1.12 1.07 12.08 11.82 110.73
Assets less than $250 Million(15) 1.00 0.96 12.53 12.43 112.24
Goodwill Companies(30) 1.36 1.31 13.53 12.60 153.83
Non-Goodwill Companies(27) 1.23 1.19 13.11 13.11 117.72
</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-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(17) 23.24 9,676 69.7 26.84 13.71 23.83 -2.53 89.36 12.11
BIF-Insured Thrifts(3) 24.96 32,223 382.3 28.09 15.78 25.55 -3.39 82.98 19.00
NASDAQ Listed OTC Companies(20) 23.51 13,236 119.1 27.04 14.03 24.10 -2.67 88.35 13.20
Florida Companies(2) 31.63 5,951 89.0 38.07 20.25 32.72 -3.42 55.98 -7.01
Mid-Atlantic Companies(10) 20.84 13,256 78.9 24.39 10.91 21.41 -2.72 111.70 12.10
Mid-West Companies(5) 26.22 2,336 27.0 29.13 15.26 26.66 -1.88 68.27 5.77
New England Companies(2) 27.19 46,589 576.9 29.56 20.10 27.47 -1.58 59.61 31.63
South-East Companies(1) 15.75 4,497 33.3 18.06 15.75 16.75 -5.97 57.50 57.50
Thrift Strategy(18) 22.60 9,027 66.7 26.16 13.87 23.19 -2.70 80.66 13.43
Mortgage Banker Strategy(1) 24.31 33,942 198.6 27.88 6.71 25.50 -4.67 251.30 22.28
Diversified Strategy(1) 38.06 64,083 930.7 41.13 24.19 38.13 -0.18 56.11 0.16
Companies Issuing Dividends(17) 25.00 11,758 113.1 28.79 13.77 25.53 -2.09 94.53 5.29
Companies Without Dividends(3) 15.54 21,116 151.0 17.68 15.44 16.48 -5.75 55.40 55.40
Equity/Assets 6-12%(12) 26.81 14,648 142.4 31.00 13.97 27.37 -2.06 106.07 7.40
Equity/Assets > 12%(8) 17.84 10,815 79.0 20.24 14.15 18.49 -3.72 57.97 23.15
Holding Company Structure(3) 21.60 11,690 82.1 24.38 12.87 21.92 -2.41 88.52 21.02
Assets Over $1 Billion(6) 23.00 35,086 311.9 26.23 14.57 23.77 -3.67 97.71 22.14
Assets $500 Million-$1 Billion(2) 35.50 3,969 66.4 39.88 21.25 36.32 -2.25 66.22 6.24
Assets $250-$500 Million(4) 25.35 3,627 28.1 29.31 11.98 25.63 -1.11 110.69 7.35
Assets less than $250 Million(8) 19.47 2,645 20.8 22.76 12.68 20.02 -2.82 73.90 10.87
Goodwill Companies(6) 27.65 26,222 253.1 31.25 14.36 28.30 -2.41 116.43 8.39
Non-Goodwill Companies(14) 21.60 7,242 57.2 25.09 13.88 22.16 -2.79 75.39 15.42
MHC Institutions(20) 23.51 13,236 119.1 27.04 14.03 24.10 -2.67 88.35 13.20
MHC Converted Last 3 Months(3) 15.54 21,116 151.0 17.68 15.44 16.48 -5.75 55.40 55.40
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(17) 0.63 0.59 9.77 9.49 89.53
BIF-Insured Thrifts(3) 0.90 0.63 11.35 10.30 105.92
NASDAQ Listed OTC Companies(20) 0.67 0.60 10.02 9.62 92.11
Florida Companies(2) 1.05 0.94 14.56 14.37 171.65
Mid-Atlantic Companies(10) 0.53 0.50 8.69 8.46 73.82
Mid-West Companies(5) 0.77 0.72 11.02 10.26 109.48
New England Companies(2) 0.94 0.60 10.87 9.93 96.33
South-East Companies(1) 0.43 0.43 8.56 8.56 38.07
Thrift Strategy(18) 0.63 0.60 10.10 9.80 90.64
Mortgage Banker Strategy(1) 0.55 0.45 5.41 4.86 66.59
Diversified Strategy(1) 1.49 0.80 13.18 11.29 142.78
Companies Issuing Dividends(17) 0.71 0.62 10.03 9.56 97.28
Companies Without Dividends(3) 0.47 0.47 9.94 9.94 64.55
Equity/Assets 6-12%(12) 0.76 0.64 9.95 9.32 109.20
Equity/Assets > 12%(8) 0.54 0.53 10.14 10.14 62.83
Holding Company Structure(3) 0.65 0.60 10.20 9.79 92.57
Assets Over $1 Billion(6) 0.75 0.60 9.57 9.02 101.76
Assets $500 Million-$1 Billion(2) 1.10 1.06 15.31 13.80 175.21
Assets $250-$500 Million(4) 0.58 0.55 8.57 8.57 78.50
Assets less than $250 Million(8) 0.54 0.50 9.72 9.54 67.89
Goodwill Companies(6) 0.89 0.71 9.80 8.54 120.92
Non-Goodwill Companies(14) 0.58 0.55 10.12 10.12 78.82
MHC Institutions(20) 0.67 0.60 10.02 9.62 92.11
MHC Converted Last 3 Months(3) 0.47 0.47 9.94 9.94 64.55
</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-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 75.63 109,737 8,299.4 82.81 43.19 76.25 -0.81 77.41 12.98
BYS Bay State Bancorp of MA* 27.75 2,535 70.3 32.63 27.75 28.63 -3.07 38.75 38.75
CFB Commercial Federal Corp. of NE 33.13 40,306 1,335.3 38.19 23.75 33.31 -0.54 40.98 -6.83
DME Dime Bancorp, Inc. of NY* 30.13 114,258 3,442.6 32.06 17.00 29.19 3.22 70.90 -0.40
DSL Downey Financial Corp. of CA 34.31 28,094 963.9 34.47 20.00 33.13 3.56 72.59 26.70
FED FirstFed Fin. Corp. of CA 50.38 10,592 533.6 50.38 28.38 49.06 2.69 79.93 30.01
GSB Golden State Bancorp of CA(8) 34.50 51,328 1,770.8 41.81 25.13 38.31 -9.95 31.43 -7.85
GDW Golden West Fin. Corp. of CA 106.06 57,190 6,065.6 114.25 69.13 108.00 -1.80 54.83 8.43
GPT GreenPoint Fin. Corp. of NY* 40.94 84,469 3,458.2 42.06 29.34 41.19 -0.61 31.51 12.84
JSB JSB Financial, Inc. of NY* 58.44 9,883 577.6 58.56 41.00 57.84 1.04 29.87 16.74
OCN Ocwen Financial Corp. of FL 24.63 60,709 1,495.3 30.38 14.56 24.38 1.03 60.88 -3.18
SIB Staten Island Bancorp of NY* 21.44 45,130 967.6 23.63 18.81 22.44 -4.46 78.67 2.39
WES Westcorp Inc. of Orange CA 12.00 26,301 315.6 23.50 11.50 12.13 -1.07 -28.91 -28.91
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 23.38 2,575 60.2 25.63 19.25 23.00 1.65 17.61 0.00
ANE Alliance Bncp of New Eng of CT* 15.13 2,493 37.7 16.08 8.78 16.00 -5.44 68.11 37.55
BKC American Bank of Waterbury CT* 27.63 4,652 128.5 32.56 17.50 28.00 -1.32 57.89 13.33
BFD BostonFed Bancorp of MA 23.50 5,423 127.4 24.88 16.88 23.38 0.51 40.30 7.40
CNY Carver Bancorp, Inc. of NY 13.31 2,314 30.8 17.13 10.00 13.63 -2.35 29.85 -18.09
CBK Citizens First Fin.Corp. of IL 20.13 2,536 51.0 22.38 15.38 20.00 0.65 25.81 -0.59
EFC EFC Bancorp Inc of IL 13.50 6,937 93.6 14.94 13.50 14.00 -3.57 35.00 35.00
EBI Equality Bancorp, Inc. of MO 13.31 2,486 33.1 16.00 12.50 13.56 -1.84 33.10 -8.21
ESX Essex Bancorp of Norfolk VA(8) 3.63 1,059 3.8 7.94 1.00 3.88 -6.44 190.40 -7.87
FCB Falmouth Bancorp, Inc. of MA* 20.00 1,455 29.1 23.88 15.75 20.00 0.00 25.00 -2.44
FAB FirstFed America Bancorp of MA 20.25 8,707 176.3 23.25 14.63 20.31 -0.30 38.41 -7.45
GAF GA Financial Corp. of PA 20.25 7,595 153.8 22.25 16.50 20.38 -0.64 22.73 7.26
HBS Haywood Bancshares, Inc. of NC* 22.75 1,250 28.4 24.00 16.38 22.88 -0.57 38.89 1.11
KNK Kankakee Bancorp, Inc. of IL 35.50 1,378 48.9 37.75 28.50 34.75 2.16 22.92 -5.96
KYF Kentucky First Bancorp of KY 15.75 1,240 19.5 15.88 10.56 15.75 0.00 43.97 5.42
NBN Northeast Bancorp of ME* 16.25 2,237 36.4 19.50 9.50 17.00 -4.41 69.62 -14.47
NEP Northeast PA Fin. Corp of PA 14.50 6,427 93.2 16.00 14.00 14.88 -2.55 45.00 45.00
PDB Piedmont Bancorp, Inc. of NC 9.63 2,751 26.5 11.63 9.63 10.00 -3.70 -6.05 -11.49
SSB Scotland Bancorp, Inc. of NC 9.00 1,914 17.2 19.25 8.63 8.63 4.29 -43.32 -9.46
SZB SouthFirst Bancshares of AL 19.50 976 19.0 22.75 14.88 19.75 -1.27 30.00 -14.29
SRN Southern Banc Company of AL 16.13 1,230 19.8 19.13 14.38 16.13 0.00 12.17 -9.13
SSM Stone Street Bancorp of NC 19.94 1,881 37.5 27.25 19.25 19.94 0.00 -23.86 -10.14
TSH Teche Holding Company of LA 19.63 3,439 67.5 23.50 17.50 20.00 -1.85 6.11 -13.71
FTF Texarkana Fst. Fin. Corp of AR 29.75 1,759 52.3 30.63 17.63 30.38 -2.07 70.00 19.00
THR Three Rivers Fin. Corp. of MI 19.44 825 16.0 23.50 14.88 20.00 -2.80 29.60 -10.62
WSB Washington SB, FSB of MD 7.13 4,406 31.4 9.50 4.88 7.13 0.00 46.11 -21.30
WFI Winton Financial Corp. of OH 16.44 4,014 66.0 20.63 6.25 16.25 1.17 152.92 61.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 28.00 1,090 30.5 34.50 18.41 28.00 0.00 43.44 -4.40
FBER 1st Bergen Bancorp of NJ 19.13 2,729 52.2 20.75 13.63 19.25 -0.62 40.35 0.00
AFED AFSALA Bancorp, Inc. of NY(8) 19.75 1,378 27.2 20.75 13.50 20.25 -2.47 41.07 2.60
ALBK ALBANK Fin. Corp. of Albany NY 52.38 12,853 673.2 54.50 36.75 52.00 0.73 42.03 1.83
AMFC AMB Financial Corp. of IN 18.25 964 17.6 19.38 14.00 18.38 -0.71 21.67 14.92
ASBP ASB Financial Corp. of OH 16.50 1,635 27.0 16.75 11.75 14.56 13.32 40.43 24.53
ABBK Abington Bancorp of MA* 18.50 3,564 65.9 22.25 12.13 18.00 2.78 51.76 -11.90
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 3.64 3.43 27.07 19.91 496.82
BYS Bay State Bancorp of MA* 1.05 1.05 23.66 23.66 114.26
CFB Commercial Federal Corp. of NE 1.49 1.74 14.63 12.79 211.60
DME Dime Bancorp, Inc. of NY* 1.28 1.03 11.37 9.31 192.76
DSL Downey Financial Corp. of CA 1.80 1.84 15.88 15.70 209.01
FED FirstFed Fin. Corp. of CA 2.46 2.38 21.95 21.80 384.00
GSB Golden State Bancorp of CA(8) 2.04 2.21 18.85 17.01 312.29
GDW Golden West Fin. Corp. of CA 6.52 6.55 49.22 49.22 693.64
GPT GreenPoint Fin. Corp. of NY* 1.68 1.74 15.15 8.45 156.60
JSB JSB Financial, Inc. of NY* 2.97 2.64 35.96 35.96 154.92
OCN Ocwen Financial Corp. of FL 1.39 0.27 7.37 6.98 56.35
SIB Staten Island Bancorp of NY* 0.43 0.79 15.51 15.11 59.19
WES Westcorp Inc. of Orange CA 1.40 -0.28 13.26 13.23 141.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 1.14 1.07 17.49 17.49 113.98
ANE Alliance Bncp of New Eng of CT* 0.87 0.51 7.91 7.72 99.21
BKC American Bank of Waterbury CT* 1.77 1.48 12.62 12.23 139.99
BFD BostonFed Bancorp of MA 1.30 1.10 14.98 14.44 190.23
CNY Carver Bancorp, Inc. of NY -0.20 0.03 15.24 14.66 179.67
CBK Citizens First Fin.Corp. of IL 0.78 0.49 15.27 15.27 110.35
EFC EFC Bancorp Inc of IL 0.56 0.56 12.42 12.42 52.24
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 -0.19 0.03 -0.14 182.29
FCB Falmouth Bancorp, Inc. of MA* 0.68 0.54 16.19 16.19 72.26
FAB FirstFed America Bancorp of MA 0.20 0.63 14.87 14.87 133.17
GAF GA Financial Corp. of PA 1.10 1.04 15.09 14.95 107.71
HBS Haywood Bancshares, Inc. of NC* 1.76 1.76 18.06 17.49 121.60
KNK Kankakee Bancorp, Inc. of IL 2.20 2.14 27.96 23.26 289.90
KYF Kentucky First Bancorp of KY 0.79 0.78 11.24 11.24 65.97
NBN Northeast Bancorp of ME* 0.76 0.67 9.40 8.48 124.60
NEP Northeast PA Fin. Corp of PA 0.42 0.42 12.43 12.43 68.06
PDB Piedmont Bancorp, Inc. of NC 0.57 0.56 7.77 7.77 48.28
SSB Scotland Bancorp, Inc. of NC 0.50 0.50 7.91 7.91 32.02
SZB SouthFirst Bancshares of AL 0.69 0.65 16.75 16.34 166.27
SRN Southern Banc Company of AL 0.41 0.41 14.74 14.61 86.31
SSM Stone Street Bancorp of NC 0.78 0.78 16.51 16.51 58.99
TSH Teche Holding Company of LA 1.09 1.08 16.38 16.38 118.43
FTF Texarkana Fst. Fin. Corp of AR 1.77 1.74 15.99 15.99 105.05
THR Three Rivers Fin. Corp. of MI 1.00 0.95 15.91 15.86 118.17
WSB Washington SB, FSB of MD 0.46 0.33 5.23 5.23 60.31
WFI Winton Financial Corp. of OH 0.80 0.66 5.80 5.68 80.84
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.82 1.24 21.48 21.13 238.13
FBER 1st Bergen Bancorp of NJ 0.78 0.78 13.54 13.54 115.82
AFED AFSALA Bancorp, Inc. of NY(8) 0.89 0.89 14.58 14.58 116.41
ALBK ALBANK Fin. Corp. of Albany NY 3.42 3.38 28.54 22.32 318.17
AMFC AMB Financial Corp. of IN 1.05 0.60 15.54 15.54 110.17
ASBP ASB Financial Corp. of OH 0.66 0.65 10.68 10.68 70.28
ABBK Abington Bancorp of MA* 1.25 1.06 9.70 8.82 154.28
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AABC Access Anytime Bancorp of NM 11.50 1,217 14.0 13.00 5.52 12.00 -4.17 103.90 4.55
AFBC Advance Fin. Bancorp of WV 18.50 1,074 19.9 20.88 13.63 18.13 2.04 32.14 6.44
AFCB Affiliated Comm BC, Inc of MA(8) 38.34 6,581 252.3 41.88 23.50 38.44 -0.26 55.66 1.56
ALBC Albion Banc Corp. of Albion NY 9.50 752 7.1 14.17 7.33 10.50 -9.52 34.18 -28.73
ABCL Alliance Bancorp, Inc. of IL 26.75 8,024 214.6 29.25 19.75 27.31 -2.05 33.08 0.94
ALLB Alliance Bank MHC of PA (19.9) 34.00 3,273 22.1 39.00 12.50 35.00 -2.86 163.98 9.68
AHCI Ambanc Holding Co., Inc. of NY* 18.63 4,258 79.3 20.00 14.13 19.19 -2.92 34.22 -0.64
ASBI Ameriana Bancorp of IN 19.75 3,252 64.2 22.00 15.50 19.75 0.00 27.42 -0.65
ABCW Anchor Bancorp Wisconsin of WI 40.94 8,963 366.9 46.50 21.56 42.38 -3.40 91.49 12.53
ANDB Andover Bancorp, Inc. of MA* 34.13 6,474 221.0 36.20 23.50 34.25 -0.35 42.80 5.99
ASFC Astoria Financial Corp. of NY 54.31 26,366 1,431.9 62.50 42.31 55.03 -1.31 30.08 -2.58
AVND Avondale Fin. Corp. of IL 17.38 3,324 57.8 18.88 13.25 18.13 -4.14 27.51 6.95
BKCT Bancorp Connecticut of CT* 20.13 5,100 102.7 25.00 12.25 20.38 -1.23 56.29 -4.14
BPLS Bank Plus Corp. of CA 13.25 19,383 256.8 16.13 9.88 12.94 2.40 26.19 4.91
BNKU Bank United Corp. of TX 50.63 31,596 1,599.7 56.00 35.00 50.00 1.26 42.62 3.45
BWFC Bank West Fin. Corp. of MI 14.38 2,624 37.7 17.50 8.83 14.25 0.91 59.78 -10.85
BANC BankAtlantic Bancorp of FL 13.50 32,996 445.4 17.00 12.50 13.75 -1.82 -2.74 -19.40
BKUNA BankUnited Fin. Corp. of FL 17.13 15,468 265.0 18.13 9.38 18.03 -4.99 73.38 11.16
BVCC Bay View Capital Corp. of CA 32.25 20,243 652.8 38.00 24.69 32.13 0.37 28.33 -11.03
FSNJ Bayonne Banchsares of NJ 16.25 9,050 147.1 17.38 8.78 16.25 0.00 87.86 21.45
BFSB Bedford Bancshares, Inc. of VA 29.00 1,149 33.3 34.75 19.88 29.38 -1.29 46.84 -14.71
BFFC Big Foot Fin. Corp. of IL 19.38 2,513 48.7 23.94 15.63 19.38 0.00 20.15 -7.71
BYFC Broadway Fin. Corp. of CA 11.00 863 9.5 13.75 10.50 12.00 -8.33 2.33 -16.98
BRKL Brookline Bncp MHC of MA(47.0) 16.31 29,095 223.0 17.98 16.00 16.81 -2.97 63.10 63.10
CBES CBES Bancorp, Inc. of MO 20.63 940 19.4 26.00 16.13 21.25 -2.92 25.03 -7.28
CCFH CCF Holding Company of GA 22.00 897 19.7 24.00 14.32 23.94 -8.10 50.07 9.29
CFSB CFSB Bancorp of Lansing MI 26.75 8,220 219.9 28.30 13.94 27.38 -2.30 85.89 12.11
CKFB CKF Bancorp of Danville KY 19.00 855 16.2 21.25 17.75 19.00 0.00 -1.30 2.70
CNSB CNS Bancorp, Inc. of MO 17.52 1,645 28.8 21.50 15.63 17.63 -0.62 13.03 -14.54
CSBF CSB Financial Group Inc of IL 13.75 840 11.6 14.00 11.75 13.75 0.00 13.36 1.85
CBCI Calumet Bancorp of Chicago IL 36.75 3,141 115.4 39.00 24.83 36.00 2.08 45.08 10.53
CAFI Camco Fin. Corp. of OH 29.50 3,646 107.6 31.00 17.14 29.00 1.72 67.42 15.69
CMRN Cameron Fin. Corp. of MO 20.38 2,563 52.2 22.19 16.25 20.88 -2.39 25.42 -0.59
CAPS Capital Savings Bancorp of MO(8) 20.75 1,891 39.2 25.25 15.50 22.50 -7.78 27.69 -17.82
CFNC Carolina Fincorp of NC* 16.94 1,906 32.3 18.88 14.38 17.50 -3.20 16.83 -8.43
CASB Cascade Financial Corp. of WA 19.25 3,399 65.4 20.00 12.00 19.50 -1.28 26.64 45.28
CATB Catskill Fin. Corp. of NY* 17.38 4,461 77.5 19.13 15.25 17.75 -2.08 12.13 -7.94
CAVB Cavalry Bancorp of TN 22.50 7,538 169.6 25.25 20.56 23.50 -4.26 125.00 125.00
CNIT Cenit Bancorp of Norfolk VA 23.25 4,977 115.7 28.58 14.83 24.50 -5.10 55.00 -12.26
CEBK Central Co-Op. Bank of MA* 27.88 1,965 54.8 33.50 17.13 28.44 -1.97 62.76 -2.18
CENB Century Bancorp, Inc. of NC(8) 20.25 1,271 25.7 39.00 19.75 19.75 2.53 -10.99 -28.32
COFI Charter One Financial of OH 35.50 128,136 4,548.8 36.38 22.86 34.25 3.65 57.36 12.48
CVAL Chester Valley Bancorp of PA 31.88 2,185 69.7 37.00 17.86 32.19 -0.96 69.48 8.99
CTZN CitFed Bancorp of Dayton OH(8) 49.25 13,087 644.5 58.00 24.50 49.44 -0.38 101.02 26.28
CLAS Classic Bancshares, Inc. of KY 14.88 1,300 19.3 21.50 13.88 16.13 -7.75 1.71 -11.16
CBSA Coastal Bancorp of Houston TX 38.94 5,035 196.1 40.00 27.00 38.50 1.14 43.21 11.64
CFCP Coastal Fin. Corp. of SC 20.00 6,248 125.0 20.81 14.72 20.00 0.00 16.55 8.81
CMSB Commonwealth Bancorp Inc of PA 24.00 16,264 390.3 24.00 15.13 23.63 1.57 58.63 20.72
CMSV Commty. Svgs, MHC of FL (48.5) 34.50 5,100 85.2 40.75 21.75 35.38 -2.49 58.62 -2.49
CFTP Community Fed. Bancorp of MS 17.50 4,527 79.2 21.00 16.38 18.00 -2.78 -0.74 -13.58
CFFC Community Fin. Corp. of VA 15.50 2,554 39.6 16.38 10.75 14.88 4.17 37.78 12.24
CIBI Community Inv. Bancorp of OH 20.50 890 18.2 22.88 12.67 21.38 -4.12 61.80 26.86
COOP Cooperative Bancshares of NC 18.00 2,984 53.7 25.00 10.50 18.25 -1.37 63.64 -26.53
CRZY Crazy Woman Creek Bncorp of WY 17.75 955 17.0 20.00 13.13 18.13 -2.10 30.23 18.33
DNFC D&N Financial Corp. of MI 26.25 9,135 239.8 29.75 16.36 25.88 1.43 59.28 -0.94
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AABC Access Anytime Bancorp of NM 1.28 1.19 7.58 7.58 93.71
AFBC Advance Fin. Bancorp of WV 0.89 0.84 14.52 14.52 103.04
AFCB Affiliated Comm BC, Inc of MA(8) 1.84 1.76 17.62 17.54 173.34
ALBC Albion Banc Corp. of Albion NY 0.45 0.43 8.28 8.28 96.94
ABCL Alliance Bancorp, Inc. of IL 1.55 1.59 16.46 16.27 191.56
ALLB Alliance Bank MHC of PA (19.9) 0.62 0.62 8.93 8.93 83.33
AHCI Ambanc Holding Co., Inc. of NY* 0.60 0.48 14.27 14.27 122.08
ASBI Ameriana Bancorp of IN 1.16 0.99 13.90 13.64 119.46
ABCW Anchor Bancorp Wisconsin of WI 2.29 2.04 14.28 14.05 223.06
ANDB Andover Bancorp, Inc. of MA* 2.12 2.06 16.97 16.97 214.01
ASFC Astoria Financial Corp. of NY 2.74 2.52 32.88 23.27 413.24
AVND Avondale Fin. Corp. of IL -1.41 -1.01 13.87 13.87 182.51
BKCT Bancorp Connecticut of CT* 1.22 1.05 9.44 9.44 94.07
BPLS Bank Plus Corp. of CA 0.62 0.72 9.57 8.76 217.72
BNKU Bank United Corp. of TX 3.29 3.13 20.67 18.68 414.91
BWFC Bank West Fin. Corp. of MI 0.41 0.33 8.93 8.93 68.66
BANC BankAtlantic Bancorp of FL 0.81 0.35 6.58 5.51 106.88
BKUNA BankUnited Fin. Corp. of FL 0.42 0.32 9.43 8.18 215.09
BVCC Bay View Capital Corp. of CA 0.68 1.06 19.20 12.29 263.86
FSNJ Bayonne Banchsares of NJ 0.30 0.43 10.63 10.63 67.47
BFSB Bedford Bancshares, Inc. of VA 1.45 1.44 17.71 17.71 133.29
BFFC Big Foot Fin. Corp. of IL 0.44 0.38 15.24 15.24 83.36
BYFC Broadway Fin. Corp. of CA 0.69 0.48 15.08 15.08 148.83
BRKL Brookline Bncp MHC of MA(47.0) 0.39 0.39 8.56 8.56 49.88
CBES CBES Bancorp, Inc. of MO 1.17 0.97 17.63 17.63 123.86
CCFH CCF Holding Company of GA 0.18 -0.16 12.91 12.91 159.49
CFSB CFSB Bancorp of Lansing MI 1.36 1.24 7.95 7.95 102.94
CKFB CKF Bancorp of Danville KY 1.34 1.01 15.61 15.61 73.18
CNSB CNS Bancorp, Inc. of MO 0.54 0.50 14.63 14.63 59.28
CSBF CSB Financial Group Inc of IL 0.29 0.25 13.87 13.09 57.78
CBCI Calumet Bancorp of Chicago IL 3.25 3.26 27.30 27.30 156.09
CAFI Camco Fin. Corp. of OH 1.77 1.34 15.62 14.66 157.86
CMRN Cameron Fin. Corp. of MO 0.95 0.93 17.91 17.91 86.18
CAPS Capital Savings Bancorp of MO(8) 1.39 1.19 12.42 12.42 122.61
CFNC Carolina Fincorp of NC* 0.55 0.63 13.89 13.89 62.16
CASB Cascade Financial Corp. of WA 0.91 0.86 8.93 8.93 127.89
CATB Catskill Fin. Corp. of NY* 0.86 0.85 15.54 15.54 66.34
CAVB Cavalry Bancorp of TN 0.62 0.43 13.23 13.23 46.54
CNIT Cenit Bancorp of Norfolk VA 1.29 1.20 10.15 9.36 147.56
CEBK Central Co-Op. Bank of MA* 1.42 1.30 18.35 16.59 186.82
CENB Century Bancorp, Inc. of NC(8) 1.06 1.06 14.58 14.58 82.12
COFI Charter One Financial of OH 1.13 1.57 11.19 10.49 151.85
CVAL Chester Valley Bancorp of PA 1.52 1.38 13.64 13.64 157.38
CTZN CitFed Bancorp of Dayton OH(8) 2.21 2.24 16.89 15.56 270.00
CLAS Classic Bancshares, Inc. of KY 0.84 0.98 15.38 13.12 102.15
CBSA Coastal Bancorp of Houston TX 2.83 2.91 21.95 18.92 589.12
CFCP Coastal Fin. Corp. of SC 1.03 0.85 5.63 5.63 93.35
CMSB Commonwealth Bancorp Inc of PA 0.96 0.72 13.41 10.72 146.98
CMSV Commty. Svgs, MHC of FL (48.5) 1.03 0.95 16.11 16.11 149.14
CFTP Community Fed. Bancorp of MS 0.59 0.56 13.25 13.25 56.12
CFFC Community Fin. Corp. of VA 0.73 0.74 9.76 9.72 71.60
CIBI Community Inv. Bancorp of OH 1.02 1.02 12.56 12.56 114.31
COOP Cooperative Bancshares of NC 0.76 0.69 9.76 9.76 127.83
CRZY Crazy Woman Creek Bncorp of WY 0.77 0.78 15.23 15.23 64.59
DNFC D&N Financial Corp. of MI 1.63 1.45 11.13 11.03 204.44
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DCBI Delphos Citizens Bancorp of OH 20.50 1,904 39.0 24.25 14.00 20.75 -1.20 46.43 -1.20
DIME Dime Community Bancorp of NY* 29.00 12,440 360.8 29.13 17.88 29.00 0.00 64.49 22.11
DIBK Dime Financial Corp. of CT(8)* 34.63 5,248 181.7 37.00 23.00 35.63 -2.81 45.02 13.54
ESBF ESB Financial Corp of PA 18.13 5,751 104.3 20.00 11.16 18.75 -3.31 56.70 3.60
EGLB Eagle BancGroup of IL 19.75 1,177 23.2 21.13 15.00 19.38 1.91 29.51 4.61
EBSI Eagle Bancshares of Tucker GA 23.63 5,719 135.1 27.25 16.13 23.00 2.74 46.50 7.41
ETFS East Texas Fin. Serv. of TX 15.75 1,539 24.2 16.25 11.50 15.88 -0.82 36.96 -0.51
ESBK Elmira Svgs Bank (The) of NY* 29.25 727 21.3 32.25 18.33 29.00 0.86 48.03 -2.50
EMLD Emerald Financial Corp. of OH 13.25 10,262 136.0 16.00 6.69 13.25 0.00 85.83 19.80
EFBC Empire Federal Bancorp of MT 16.63 2,592 43.1 18.25 13.00 16.88 -1.48 26.08 -2.92
EFBI Enterprise Fed. Bancorp of OH 28.00 2,211 61.9 35.00 18.00 29.38 -4.70 47.37 -11.11
EQSB Equitable FSB of Wheaton MD 30.50 1,218 37.1 34.00 17.00 31.00 -1.61 79.41 15.09
FCBF FCB Fin. Corp. of Neenah WI 32.00 3,863 123.6 34.00 24.13 32.75 -2.29 29.29 8.47
FFDF FFD Financial Corp. of OH 23.50 1,445 34.0 23.75 13.38 23.50 0.00 70.91 30.56
FFLC FFLC Bancorp of Leesburg FL 20.13 3,747 75.4 23.50 16.05 20.03 0.50 22.00 -7.45
FFWC FFW Corporation of Wabash IN 17.00 1,450 24.7 21.50 13.00 17.25 -1.45 30.77 -10.53
FFYF FFY Financial Corp. of OH 32.88 4,055 133.3 35.38 25.50 32.50 1.17 25.83 -0.75
FMCO FMS Financial Corp. of NJ 45.00 2,395 107.8 50.00 19.75 47.38 -5.02 127.85 26.76
FFHH FSF Financial Corp. of MN 19.00 2,949 56.0 21.25 16.63 19.25 -1.30 14.25 -9.26
FOBC Fed One Bancorp of Wheeling WV(8) 36.25 2,394 86.8 40.63 20.00 37.75 -3.97 75.71 31.82
FBCI Fidelity Bancorp of Chicago IL 23.13 2,822 65.3 26.00 18.50 23.75 -2.61 23.36 -9.75
FSBI Fidelity Bancorp, Inc. of PA 24.00 1,966 47.2 28.00 16.00 24.88 -3.54 42.86 3.45
FFFL Fidelity Bcsh MHC of FL (47.7) 28.75 6,802 92.7 35.38 18.75 30.06 -4.36 53.33 -11.54
FFED Fidelity Fed. Bancorp of IN 7.38 3,127 23.1 10.50 7.38 7.63 -3.28 -18.00 -28.42
FFOH Fidelity Financial of OH 17.38 5,595 97.2 19.88 14.50 17.38 0.00 16.80 12.13
FIBC Financial Bancorp, Inc. of NY 27.50 1,707 46.9 28.00 17.00 27.38 0.44 59.42 13.97
FBSI First Bancshares, Inc. of MO 12.75 2,211 28.2 17.50 9.50 13.38 -4.71 34.21 -18.43
FBBC First Bell Bancorp of PA 19.69 6,524 128.5 21.63 14.50 20.25 -2.77 35.79 3.63
SKBO First Carnegie MHC of PA(45.0) 19.50 2,300 20.2 21.00 13.25 19.88 -1.91 45.74 4.00
FSTC First Citizens Corp of GA 31.00 2,765 85.7 35.50 16.50 31.88 -2.76 87.88 -8.82
FCBK First Coastal Bankshares of VA(8) 17.94 4,982 89.4 17.94 17.94 17.94 0.00 ***.** ***.**
FCME First Coastal Corp. of ME* 14.00 1,359 19.0 15.75 8.88 13.56 3.24 49.25 -5.91
FFBA First Colorado Bancorp of CO(8) 28.63 16,827 481.8 30.13 17.38 28.50 0.46 62.39 20.55
FDEF First Defiance Fin.Corp. of OH 14.94 8,123 121.4 16.25 13.50 15.50 -3.61 6.26 -6.63
FESX First Essex Bancorp of MA* 22.63 7,535 170.5 26.13 16.38 22.75 -0.53 37.15 -2.67
FFSX First FSB MHC Sxld of IA(46.1) 36.50 2,838 47.6 39.00 20.75 37.25 -2.01 73.81 14.96
FFES First Fed of E. Hartford CT 36.50 2,713 99.0 42.25 25.25 37.00 -1.35 43.81 -2.01
BDJI First Fed. Bancorp. of MN 19.25 998 19.2 22.00 12.33 18.75 2.67 54.00 -12.50
FFBH First Fed. Bancshares of AR 27.38 4,896 134.1 30.25 19.00 27.75 -1.33 41.28 15.28
FTFC First Fed. Capital Corp. of WI 35.00 9,258 324.0 35.75 19.83 34.75 0.72 72.84 3.31
FFKY First Fed. Fin. Corp. of KY 26.50 4,133 109.5 28.75 18.25 27.50 -3.64 37.66 16.48
FFBZ First Federal Bancorp of OH 24.38 1,575 38.4 25.75 17.00 25.75 -5.32 39.31 15.38
FFCH First Fin. Holdings Inc. of SC 23.00 13,587 312.5 27.00 13.38 23.13 -0.56 71.90 -13.40
FFHS First Franklin Corp. of OH 17.13 1,788 30.6 20.83 13.17 17.25 -0.70 26.89 -17.76
FGHC First Georgia Hold. Corp of GA 13.25 3,199 42.4 14.50 7.00 14.50 -8.62 76.67 39.47
FSPG First Home Bancorp of NJ(8) 31.13 2,708 84.3 37.50 18.13 31.13 0.00 61.71 3.32
FFSL First Independence Corp. of KS 14.00 956 13.4 15.63 11.19 14.13 -0.92 24.44 0.00
FISB First Indiana Corp. of IN 25.75 12,737 328.0 30.00 17.08 24.25 6.19 48.50 2.14
FKFS First Keystone Fin. Corp of PA 18.75 2,413 45.2 21.75 11.25 19.00 -1.32 64.76 4.87
FLKY First Lancaster Bncshrs of KY 15.50 947 14.7 16.38 15.00 15.56 -0.39 1.64 -2.76
FLFC First Liberty Fin. Corp. of GA 23.88 11,622 277.5 25.25 14.17 23.50 1.62 68.53 11.95
CASH First Midwest Fin., Inc. of OH 23.25 2,646 61.5 24.88 15.13 24.25 -4.12 45.31 3.33
FMBD First Mutual Bancorp Inc of IL 17.63 3,531 62.3 25.00 14.75 17.25 2.20 19.53 -29.48
FMSB First Mutual SB of Bellevue WA* 17.00 4,166 70.8 20.17 11.50 17.13 -0.76 37.65 -8.11
FNGB First Northern Cap. Corp of WI 13.50 8,917 120.4 14.00 9.81 13.50 0.00 33.27 -3.57
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DCBI Delphos Citizens Bancorp of OH 0.91 0.91 14.76 14.76 59.15
DIME Dime Community Bancorp of NY* 0.94 0.89 15.22 13.24 126.78
DIBK Dime Financial Corp. of CT(8)* 2.97 2.95 15.71 15.33 193.67
ESBF ESB Financial Corp of PA 1.02 1.01 11.83 10.56 164.41
EGLB Eagle BancGroup of IL 0.50 0.25 17.56 17.56 153.11
EBSI Eagle Bancshares of Tucker GA 0.96 0.97 12.80 12.80 163.40
ETFS East Texas Fin. Serv. of TX 0.45 0.41 13.70 13.70 78.59
ESBK Elmira Svgs Bank (The) of NY* 1.39 1.47 19.63 19.63 315.97
EMLD Emerald Financial Corp. of OH 0.64 0.59 4.96 4.89 60.01
EFBC Empire Federal Bancorp of MT 0.61 0.61 15.66 15.66 42.36
EFBI Enterprise Fed. Bancorp of OH 0.99 0.90 14.65 14.64 136.26
EQSB Equitable FSB of Wheaton MD 1.86 1.80 14.25 14.25 275.09
FCBF FCB Fin. Corp. of Neenah WI 1.25 0.92 18.97 18.97 134.59
FFDF FFD Financial Corp. of OH 1.09 0.49 15.43 15.43 69.28
FFLC FFLC Bancorp of Leesburg FL 1.01 0.95 13.86 13.86 109.06
FFWC FFW Corporation of Wabash IN 1.27 1.23 13.13 12.05 137.04
FFYF FFY Financial Corp. of OH 1.93 1.90 20.82 20.82 158.98
FMCO FMS Financial Corp. of NJ 2.25 2.24 16.60 16.44 279.17
FFHH FSF Financial Corp. of MN 1.10 1.06 14.49 14.49 139.39
FOBC Fed One Bancorp of Wheeling WV(8) 1.29 1.28 17.26 16.57 153.58
FBCI Fidelity Bancorp of Chicago IL 0.37 1.08 18.51 18.48 171.63
FSBI Fidelity Bancorp, Inc. of PA 1.42 1.40 14.01 14.01 204.94
FFFL Fidelity Bcsh MHC of FL (47.7) 1.07 0.92 13.01 12.62 194.16
FFED Fidelity Fed. Bancorp of IN -0.25 -0.19 4.28 4.28 63.14
FFOH Fidelity Financial of OH 0.87 0.84 11.64 10.31 96.59
FIBC Financial Bancorp, Inc. of NY 1.62 1.58 16.43 16.36 181.82
FBSI First Bancshares, Inc. of MO 0.83 0.79 10.80 10.35 80.48
FBBC First Bell Bancorp of PA 1.15 1.12 11.43 11.43 101.87
SKBO First Carnegie MHC of PA(45.0) 0.41 0.46 10.74 10.74 62.46
FSTC First Citizens Corp of GA 2.15 1.92 12.34 9.73 121.95
FCBK First Coastal Bankshares of VA(8) 0.85 0.65 8.96 8.96 125.50
FCME First Coastal Corp. of ME* 0.94 0.82 11.10 11.10 110.39
FFBA First Colorado Bancorp of CO(8) 1.18 1.12 12.44 12.19 92.43
FDEF First Defiance Fin.Corp. of OH 0.66 0.63 12.54 12.54 71.09
FESX First Essex Bancorp of MA* 1.36 1.24 12.09 10.66 171.64
FFSX First FSB MHC Sxld of IA(46.1) 1.16 1.17 14.51 11.48 201.27
FFES First Fed of E. Hartford CT 2.09 2.32 25.26 25.26 365.27
BDJI First Fed. Bancorp. of MN 0.77 0.77 12.35 12.35 113.39
FFBH First Fed. Bancshares of AR 1.11 1.05 17.20 17.20 116.50
FTFC First Fed. Capital Corp. of WI 1.99 1.51 12.24 11.61 170.70
FFKY First Fed. Fin. Corp. of KY 1.52 1.48 13.02 12.33 98.56
FFBZ First Federal Bancorp of OH 1.16 1.15 10.24 10.23 134.38
FFCH First Fin. Holdings Inc. of SC 1.12 1.08 8.70 8.70 136.76
FFHS First Franklin Corp. of OH 1.05 0.91 12.01 11.95 129.94
FGHC First Georgia Hold. Corp of GA 0.57 0.57 4.44 4.14 54.87
FSPG First Home Bancorp of NJ(8) 1.71 1.68 14.10 13.92 201.54
FFSL First Independence Corp. of KS 0.79 0.79 12.09 12.09 130.22
FISB First Indiana Corp. of IN 1.42 1.07 12.27 12.14 132.52
FKFS First Keystone Fin. Corp of PA 1.13 1.00 10.64 10.64 159.62
FLKY First Lancaster Bncshrs of KY 0.51 0.51 14.91 14.91 55.97
FLFC First Liberty Fin. Corp. of GA 0.82 0.85 8.33 7.57 109.74
CASH First Midwest Fin., Inc. of OH 0.88 0.77 15.92 14.16 153.22
FMBD First Mutual Bancorp Inc of IL 0.37 0.29 15.64 12.11 110.52
FMSB First Mutual SB of Bellevue WA* 1.05 1.03 7.35 7.35 108.29
FNGB First Northern Cap. Corp of WI 0.70 0.66 8.43 8.43 75.93
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 43.88 5,058 221.9 44.94 29.63 43.81 0.16 48.75 1.74
FWWB First Savings Bancorp of WA 25.00 10,156 253.9 28.56 21.19 25.88 -3.40 17.65 -9.09
FSFF First SecurityFed Fin of IL 16.69 6,408 106.9 17.25 14.50 16.75 -0.36 66.90 5.97
SHEN First Shenango Bancorp of PA(8) 41.25 2,069 85.3 46.25 24.50 43.50 -5.17 68.37 11.49
FSLA First Source Bancorp of NJ 10.00 31,740 317.4 13.93 5.52 10.13 -1.28 73.91 -28.21
SOPN First Svgs Bancorp of NC 23.25 3,710 86.3 26.00 20.00 23.25 0.00 12.05 -8.82
FBNW FirstBank Corp of Clarkston WA 20.75 1,984 41.2 23.50 15.50 21.13 -1.80 107.50 9.90
FFDB FirstFed Bancorp, Inc. of AL 25.00 1,155 28.9 25.50 16.53 24.50 2.04 40.85 15.58
FSPT FirstSpartan Fin. Corp. of SC 44.50 4,430 197.1 47.25 35.00 45.81 -2.86 122.50 10.56
FLAG Flag Financial Corp of GA 18.50 4,574 84.6 18.50 8.50 18.40 0.54 117.65 29.10
FLGS Flagstar Bancorp, Inc of MI 23.94 13,670 327.3 28.38 15.44 23.88 0.25 45.09 20.91
FFIC Flushing Fin. Corp. of NY* 26.50 7,828 207.4 28.00 18.88 27.13 -2.32 40.36 10.97
FBHC Fort Bend Holding Corp. of TX(8) 23.75 1,668 39.6 28.00 13.25 23.00 3.26 79.25 9.20
FTSB Fort Thomas Fin. Corp. of KY 15.00 1,474 22.1 15.75 10.13 15.25 -1.64 42.86 -2.47
FKKY Frankfort First Bancorp of KY 16.25 1,619 26.3 24.50 15.75 16.50 -1.52 -26.97 -7.83
FTNB Fulton Bancorp, Inc. of MO 19.75 1,701 33.6 26.50 19.25 19.88 -0.65 1.28 -10.75
GUPB GFSB Bancorp, Inc of Gallup NM 15.50 1,201 18.6 17.00 12.00 15.50 0.00 29.17 10.09
GSLA GS Financial Corp. of LA 17.38 3,350 58.2 21.00 14.38 18.00 -3.44 21.96 -17.24
GOSB GSB Financial Corp. of NY* 17.13 2,248 38.5 18.94 14.25 17.75 -3.49 71.30 -5.15
GBNK Gaston Fed Bncp MHC of NC(47.0 15.75 4,497 33.3 18.06 15.75 16.75 -5.97 57.50 57.50
GFCO Glenway Financial Corp. of OH 24.00 2,282 54.8 24.25 11.50 22.25 7.87 93.86 28.00
GTPS Great American Bancorp of IL 21.88 1,588 34.7 23.00 15.50 21.50 1.77 38.92 15.16
PEDE Great Pee Dee Bancorp of SC 15.50 2,202 34.1 16.25 14.75 15.50 0.00 55.00 -3.91
GSBC Great Southern Bancorp of MO 25.00 8,036 200.9 26.38 16.00 25.91 -3.51 47.58 2.04
GSFC Green Street Fin. Corp. of NC 16.38 4,298 70.4 20.75 16.25 16.38 0.00 -8.39 -10.25
GFED Guaranty Fed Bancshares of MO 12.94 6,226 80.6 14.44 8.67 13.25 -2.34 48.05 0.47
HCBB HCB Bancshares of Camden AR 15.13 2,645 40.0 16.13 12.88 15.63 -3.20 15.23 4.34
HEMT HF Bancorp of Hemet CA 16.75 6,312 105.7 18.25 13.31 17.75 -5.63 25.19 -4.29
HFFC HF Financial Corp. of SD 23.75 4,402 104.5 24.17 12.83 24.01 -1.08 83.82 34.41
HFNC HFNC Financial Corp. of NC(8) 12.31 17,193 211.6 17.63 12.13 12.63 -2.53 -29.17 -15.10
HMNF HMN Financial, Inc. of MN 18.00 6,217 111.9 21.67 14.08 18.38 -2.07 25.61 -16.94
HALL Hallmark Capital Corp. of WI 15.00 2,934 44.0 18.00 9.63 14.88 0.81 50.00 -11.76
HRBF Harbor Federal Bancorp of MD 21.50 1,693 36.4 25.75 17.00 23.50 -8.51 24.64 -14.85
HARB Harbor Florida Bancshrs of FL 11.94 30,699 366.5 12.81 6.10 12.38 -3.55 93.83 8.35
HFSA Hardin Bancorp of Hardin MO 19.38 824 16.0 19.75 14.63 19.38 0.00 32.47 6.19
HARL Harleysville SB of PA 32.38 1,672 54.1 35.00 21.75 32.75 -1.13 47.18 17.75
HFGI Harrington Fin. Group of IN 11.38 3,311 37.7 13.75 10.75 11.50 -1.04 -5.17 -12.46
HARS Harris Fin. MHC of PA (24.3) 24.31 33,942 198.6 27.88 6.71 25.50 -4.67 251.30 22.28
HFFB Harrodsburg 1st Fin Bcrp of KY 16.25 1,947 31.6 18.00 14.75 16.88 -3.73 8.33 -2.99
HHFC Harvest Home Fin. Corp. of OH 15.00 891 13.4 16.75 10.50 15.00 0.00 41.11 -4.76
HAVN Haven Bancorp of Woodhaven NY 26.88 8,836 237.5 28.75 16.75 26.50 1.43 58.12 19.47
HTHR Hawthorne Fin. Corp. of CA 17.25 3,164 54.6 24.00 11.00 19.13 -9.83 51.58 -14.31
HMLK Hemlock Fed. Fin. Corp. of IL 18.38 2,000 36.8 19.00 12.88 18.88 -2.65 41.38 7.30
HBSC Heritage Bancorp, Inc of SC 20.50 4,629 94.9 22.38 20.13 21.00 -2.38 36.67 36.67
HFWA Heritage Financial Corp of WA 14.88 9,755 145.2 15.94 13.00 15.25 -2.43 48.80 48.80
HCBC High Country Bancorp of CO 15.00 1,323 19.8 15.50 14.44 15.25 -1.64 50.00 -3.23
HBNK Highland Bancorp of CA 42.75 2,323 99.3 43.50 21.50 42.25 1.18 97.64 30.53
HIFS Hingham Inst. for Sav. of MA* 35.00 1,304 45.6 37.00 18.25 36.75 -4.76 89.19 21.74
HBEI Home Bancorp of Elgin IL(8) 16.00 6,856 109.7 19.31 15.75 17.38 -7.94 0.00 -10.51
HBFW Home Bancorp of Fort Wayne IN 31.88 2,358 75.2 37.63 20.13 32.50 -1.91 54.53 8.07
HCFC Home City Fin. Corp. of OH 14.75 905 13.3 22.75 13.25 16.63 -11.30 11.32 -20.27
HOMF Home Fed Bancorp of Seymour IN 30.00 5,127 153.8 33.75 18.00 32.38 -7.35 66.67 15.38
HWEN Home Financial Bancorp of IN 9.13 929 8.5 9.75 7.44 8.75 4.34 15.86 -1.30
HLFC Home Loan Financial Corp of OH 15.50 2,248 34.8 16.75 15.25 15.75 -1.59 55.00 55.00
HPBC Home Port Bancorp, Inc. of MA* 26.75 1,842 49.3 27.63 19.25 25.00 7.00 33.75 15.65
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 1.86 1.43 22.94 22.43 360.04
FWWB First Savings Bancorp of WA 1.26 1.19 14.97 13.87 111.92
FSFF First SecurityFed Fin of IL 0.28 0.55 14.34 14.29 49.29
SHEN First Shenango Bancorp of PA(8) 2.10 2.14 23.34 23.34 194.85
FSLA First Source Bancorp of NJ 0.41 0.41 7.72 7.72 37.57
SOPN First Svgs Bancorp of NC 1.40 1.40 18.61 18.61 80.81
FBNW FirstBank Corp of Clarkston WA 0.86 0.52 15.13 15.13 92.50
FFDB FirstFed Bancorp, Inc. of AL 1.48 1.48 15.00 13.77 154.80
FSPT FirstSpartan Fin. Corp. of SC 1.52 1.51 29.87 29.87 113.62
FLAG Flag Financial Corp of GA 0.44 0.31 4.82 4.82 54.22
FLGS Flagstar Bancorp, Inc of MI 1.83 1.83 9.77 9.46 187.56
FFIC Flushing Fin. Corp. of NY* 1.13 1.14 17.52 16.85 137.77
FBHC Fort Bend Holding Corp. of TX(8) 1.41 1.04 12.29 11.52 181.49
FTSB Fort Thomas Fin. Corp. of KY 0.82 0.82 10.87 10.87 68.93
FKKY Frankfort First Bancorp of KY 0.20 0.65 13.96 13.96 82.34
FTNB Fulton Bancorp, Inc. of MO 0.75 0.58 15.06 15.06 64.45
GUPB GFSB Bancorp, Inc of Gallup NM 0.79 0.79 12.14 12.14 98.40
GSLA GS Financial Corp. of LA 0.56 0.50 16.08 16.08 38.63
GOSB GSB Financial Corp. of NY* 0.39 0.37 14.88 14.88 52.87
GBNK Gaston Fed Bncp MHC of NC(47.0 0.43 0.43 8.56 8.56 38.07
GFCO Glenway Financial Corp. of OH 1.11 1.10 12.60 12.49 131.66
GTPS Great American Bancorp of IL 0.58 0.58 16.88 16.88 92.09
PEDE Great Pee Dee Bancorp of SC 0.56 0.56 13.51 13.51 35.68
GSBC Great Southern Bancorp of MO 1.73 1.55 8.31 8.25 101.40
GSFC Green Street Fin. Corp. of NC 0.66 0.66 14.81 14.81 41.39
GFED Guaranty Fed Bancshares of MO 0.39 0.38 11.21 11.21 39.56
HCBB HCB Bancshares of Camden AR 0.22 0.22 14.45 13.94 77.48
HEMT HF Bancorp of Hemet CA -0.07 0.21 13.27 11.26 168.84
HFFC HF Financial Corp. of SD 1.41 1.31 12.60 12.60 129.58
HFNC HFNC Financial Corp. of NC(8) 0.70 0.48 9.82 9.82 56.97
HMNF HMN Financial, Inc. of MN 0.93 0.66 13.66 12.71 117.76
HALL Hallmark Capital Corp. of WI 0.95 0.90 11.02 11.02 143.47
HRBF Harbor Federal Bancorp of MD 0.99 0.95 17.32 17.32 136.53
HARB Harbor Florida Bancshrs of FL 0.47 0.45 8.29 8.20 41.84
HFSA Hardin Bancorp of Hardin MO 1.06 0.91 16.36 16.36 147.02
HARL Harleysville SB of PA 2.08 2.08 14.66 14.66 219.85
HFGI Harrington Fin. Group of IN -0.03 0.07 7.39 7.39 167.06
HARS Harris Fin. MHC of PA (24.3) 0.55 0.45 5.41 4.86 66.59
HFFB Harrodsburg 1st Fin Bcrp of KY 0.76 0.76 14.79 14.79 55.89
HHFC Harvest Home Fin. Corp. of OH 0.76 0.66 11.62 11.62 104.54
HAVN Haven Bancorp of Woodhaven NY 1.12 1.11 12.91 12.88 228.36
HTHR Hawthorne Fin. Corp. of CA 2.81 3.29 14.07 14.07 330.88
HMLK Hemlock Fed. Fin. Corp. of IL 0.85 0.85 15.47 15.47 95.51
HBSC Heritage Bancorp, Inc of SC 0.78 0.78 19.41 19.41 67.43
HFWA Heritage Financial Corp of WA 0.37 0.19 9.53 9.53 33.09
HCBC High Country Bancorp of CO 0.53 0.53 13.64 13.64 69.73
HBNK Highland Bancorp of CA 2.91 2.53 18.76 18.76 239.20
HIFS Hingham Inst. for Sav. of MA* 2.10 2.10 16.84 16.84 177.69
HBEI Home Bancorp of Elgin IL(8) 0.36 0.36 13.95 13.95 53.82
HBFW Home Bancorp of Fort Wayne IN 1.25 1.22 18.03 18.03 149.86
HCFC Home City Fin. Corp. of OH 1.02 1.02 15.68 15.68 84.39
HOMF Home Fed Bancorp of Seymour IN 1.95 1.58 12.65 12.31 137.54
HWEN Home Financial Bancorp of IN 0.42 0.33 8.03 8.03 44.64
HLFC Home Loan Financial Corp of OH 0.37 0.37 13.82 13.82 35.49
HPBC Home Port Bancorp, Inc. of MA* 1.63 1.81 11.98 11.98 122.53
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HFBC HopFed Bancorp of KY 20.38 4,034 82.2 21.88 16.00 20.50 -0.59 103.80 103.80
HZFS Horizon Fin'l. Services of IA 16.88 880 14.9 16.88 9.38 16.13 4.65 75.29 40.67
HRZB Horizon Financial Corp. of WA* 17.50 7,478 130.9 19.25 14.88 17.75 -1.41 17.61 -1.41
IBSF IBS Financial Corp. of NJ(8) 18.06 10,960 197.9 21.19 15.00 18.75 -3.68 21.37 2.09
ITLA ITLA Capital Corp of CA* 22.13 7,700 170.4 24.00 15.00 22.63 -2.21 45.11 14.96
ICBC Independence Comm Bnk Cp of NY 16.81 70,411 1,183.6 19.13 16.81 17.38 -3.28 68.10 68.10
IFSB Independence FSB of DC 18.25 1,281 23.4 21.63 8.50 17.00 7.35 105.52 7.35
INBI Industrial Bancorp of OH 19.25 5,078 97.8 25.00 12.50 20.94 -8.07 50.98 8.45
IWBK Interwest Bancorp of WA 47.00 8,419 395.7 47.00 34.00 45.63 3.00 32.84 24.50
IPSW Ipswich SB of Ipswich MA* 17.13 2,390 40.9 20.75 7.88 18.00 -4.83 110.70 3.82
JXVL Jacksonville Bancorp of TX 20.75 2,444 50.7 23.25 14.50 20.88 -0.62 40.68 -10.75
JXSB Jcksnville SB,MHC of IL (45.6) 21.50 1,908 12.5 25.50 10.83 22.50 -4.44 98.52 7.50
JSBA Jefferson Svgs Bancorp of MO 30.25 10,020 303.1 31.88 14.13 31.75 -4.72 110.36 47.56
JOAC Joachim Bancorp, Inc. of MO(8) 17.00 722 12.3 17.00 14.25 16.38 3.79 14.25 6.25
KSBK KSB Bancorp of Kingfield ME* 19.00 1,259 23.9 22.50 9.75 18.63 1.99 72.73 -15.56
KFBI Klamath First Bancorp of OR 19.38 9,970 193.2 24.25 18.50 19.81 -2.17 2.65 -9.86
LSBI LSB Fin. Corp. of Lafayette IN 30.00 962 28.9 31.43 18.57 31.75 -5.51 61.55 10.54
LVSB Lakeview Financial of NJ 24.25 3,882 94.1 26.56 14.75 23.50 3.19 62.97 -4.90
LARK Landmark Bancshares, Inc of KS 27.13 1,665 45.2 29.25 19.75 27.00 0.48 35.65 9.04
LARL Laurel Capital Group of PA 20.50 2,187 44.8 23.50 14.00 20.50 0.00 43.06 -5.40
LSBX Lawrence Savings Bank of MA* 15.63 4,316 67.5 19.31 10.63 16.13 -3.10 46.21 -4.58
LFED Leeds Fed Bksr MHC of MD (36.3 19.75 5,182 37.2 23.50 11.83 20.25 -2.47 64.58 -9.20
LXMO Lexington B&L Fin. Corp. of MO 15.88 1,121 17.8 17.88 14.75 15.75 0.83 7.66 -10.54
LFCO Life Financial Corp of CA(8) 21.38 6,547 140.0 25.38 10.75 19.50 9.64 N.A. 69.28
LFBI Little Falls Bancorp of NJ 19.50 2,478 48.3 22.25 13.00 20.63 -5.48 46.51 -4.88
LOGN Logansport Fin. Corp. of IN 17.25 1,261 21.8 19.63 13.25 18.50 -6.76 23.21 -4.17
LISB Long Island Bancorp, Inc of NY(8) 61.50 23,934 1,471.9 67.63 34.75 61.78 -0.45 75.06 23.92
MAFB MAF Bancorp, Inc. of IL 38.13 15,030 573.1 43.25 27.33 37.75 1.01 39.52 7.77
MBLF MBLA Financial Corp. of MO 24.13 1,251 30.2 30.63 23.25 24.13 0.00 3.78 -20.89
MECH MECH Financial Inc of CT* 28.88 5,294 152.9 31.50 18.38 29.88 -3.35 61.52 10.82
MFBC MFB Corp. of Mishawaka IN 26.50 1,652 43.8 30.38 19.00 27.00 -1.85 35.90 -12.77
MSBF MSB Financial, Inc of MI 17.00 1,231 20.9 19.50 11.00 16.25 4.62 54.55 -10.53
MARN Marion Capital Holdings of IN 28.25 1,774 50.1 29.50 22.00 28.25 0.00 25.56 4.13
MRKF Market Fin. Corp. of OH 13.88 1,336 18.5 20.25 12.75 14.00 -0.86 6.77 -11.20
MFSL Maryland Fed. Bancorp of MD(8) 39.00 6,501 253.5 40.00 21.00 39.00 0.00 86.78 11.43
MASB MassBank Corp. of Reading MA* 51.00 3,587 182.9 54.25 31.88 49.50 3.03 59.97 7.08
MFLR Mayflower Co-Op. Bank of MA* 23.75 899 21.4 27.50 15.75 25.00 -5.00 46.15 -11.21
MDBK Medford Bancorp, Inc. of MA* 41.63 4,540 189.0 44.25 27.25 42.50 -2.05 52.77 6.06
MWBX MetroWest Bank of MA* 7.75 14,220 110.2 9.50 5.38 7.69 0.78 44.05 -13.89
METF Metropolitan Fin. Corp. of OH 15.00 7,051 105.8 18.88 6.69 15.63 -4.03 124.22 -3.23
MIFC Mid Iowa Financial Corp. of IA 11.88 1,724 20.5 12.75 8.50 11.75 1.11 32.00 3.30
MCBN Mid-Coast Bancorp of ME 12.00 712 8.5 14.00 6.50 11.50 4.35 84.62 20.00
MWBI Midwest Bancshares, Inc. of IA 15.75 1,028 16.2 19.50 10.42 15.88 -0.82 50.00 -13.70
MFFC Milton Fed. Fin. Corp. of OH 16.13 2,237 36.1 17.00 13.63 16.00 0.81 18.34 4.88
MBSP Mitchell Bancorp, Inc. of NC 16.75 931 15.6 18.00 16.38 16.75 0.00 3.08 -1.47
MBBC Monterey Bay Bancorp of CA 21.38 3,166 67.7 26.75 16.00 21.75 -1.70 31.57 9.64
MONT Montgomery Fin. Corp. of IN 12.69 1,653 21.0 13.63 11.00 12.88 -1.48 26.90 -1.48
MSBK Mutual SB, FSB of Bay City MI 11.75 4,290 50.4 14.63 8.13 12.38 -5.09 40.21 -9.62
MYST Mystic Financial of MA* 15.25 2,711 41.3 18.56 14.44 15.25 0.00 52.50 52.50
NHTB NH Thrift Bancshares of NH 19.50 2,091 40.8 22.75 15.00 19.63 -0.66 25.81 -4.88
NSLB NS&L Bancorp, Inc of Neosho MO 17.59 686 12.1 19.50 16.50 17.50 0.51 6.61 -6.83
NSSY NSS Bancorp of CT* 43.25 2,373 102.6 47.75 26.88 42.50 1.76 60.19 14.57
NMSB Newmil Bancorp, Inc. of CT* 13.25 3,839 50.9 14.63 9.50 13.50 -1.85 37.59 1.92
NBCP Niagara Bancorp of NY MHC(45.4* 14.56 29,756 196.6 17.00 14.56 15.88 -8.31 45.60 45.60
NBSI North Bancshares of Chicago IL 16.25 1,280 20.8 18.83 12.83 16.94 -4.07 25.00 -9.12
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HFBC HopFed Bancorp of KY 0.65 0.65 14.26 14.26 54.89
HZFS Horizon Fin'l. Services of IA 0.90 0.69 9.60 9.60 105.35
HRZB Horizon Financial Corp. of WA* 1.10 1.09 11.22 11.22 73.17
IBSF IBS Financial Corp. of NJ(8) 0.55 0.55 11.91 11.91 68.62
ITLA ITLA Capital Corp of CA* 1.70 1.70 13.36 13.32 131.30
ICBC Independence Comm Bnk Cp of NY 0.37 0.49 12.55 11.75 57.83
IFSB Independence FSB of DC 1.09 0.45 14.23 12.67 196.38
INBI Industrial Bancorp of OH 1.03 1.03 12.14 12.14 73.66
IWBK Interwest Bancorp of WA 2.40 2.03 16.79 16.53 248.37
IPSW Ipswich SB of Ipswich MA* 1.06 0.80 5.25 5.25 99.40
JXVL Jacksonville Bancorp of TX 1.37 1.37 14.29 14.29 97.01
JXSB Jcksnville SB,MHC of IL (45.6) 0.51 0.33 9.23 9.23 88.91
JSBA Jefferson Svgs Bancorp of MO 1.02 0.95 11.60 9.22 123.56
JOAC Joachim Bancorp, Inc. of MO(8) 0.37 0.37 13.71 13.71 47.41
KSBK KSB Bancorp of Kingfield ME* 1.20 1.20 8.75 8.32 118.87
KFBI Klamath First Bancorp of OR 0.85 0.85 14.97 13.74 99.72
LSBI LSB Fin. Corp. of Lafayette IN 1.72 1.54 18.90 18.90 224.60
LVSB Lakeview Financial of NJ 1.82 1.14 11.75 9.64 121.76
LARK Landmark Bancshares, Inc of KS 1.49 1.31 19.61 19.61 138.90
LARL Laurel Capital Group of PA 1.39 1.36 10.54 10.54 99.12
LSBX Lawrence Savings Bank of MA* 2.03 2.00 9.16 9.16 82.27
LFED Leeds Fed Bksr MHC of MD (36.3 0.66 0.66 9.52 9.52 57.70
LXMO Lexington B&L Fin. Corp. of MO 0.62 0.62 15.19 14.25 84.31
LFCO Life Financial Corp of CA(8) 2.17 2.25 8.94 8.94 59.14
LFBI Little Falls Bancorp of NJ 0.75 0.72 14.63 13.51 143.44
LOGN Logansport Fin. Corp. of IN 1.00 1.02 13.31 13.31 70.58
LISB Long Island Bancorp, Inc of NY(8) 2.19 1.77 23.55 23.35 263.05
MAFB MAF Bancorp, Inc. of IL 2.52 2.45 18.08 16.04 233.61
MBLF MBLA Financial Corp. of MO 1.43 1.46 22.66 22.66 178.70
MECH MECH Financial Inc of CT* 2.49 2.49 17.14 17.14 178.69
MFBC MFB Corp. of Mishawaka IN 1.31 1.29 20.71 20.71 175.93
MSBF MSB Financial, Inc of MI 0.97 0.86 10.77 10.77 64.51
MARN Marion Capital Holdings of IN 1.37 1.37 22.30 21.83 108.53
MRKF Market Fin. Corp. of OH 0.48 0.48 15.25 15.25 43.23
MFSL Maryland Fed. Bancorp of MD(8) 1.14 1.60 16.07 15.91 183.36
MASB MassBank Corp. of Reading MA* 2.94 2.65 29.85 29.44 259.12
MFLR Mayflower Co-Op. Bank of MA* 1.56 1.48 14.31 14.10 146.73
MDBK Medford Bancorp, Inc. of MA* 2.60 2.45 22.79 21.54 246.77
MWBX MetroWest Bank of MA* 0.54 0.53 3.28 3.28 45.47
METF Metropolitan Fin. Corp. of OH 0.93 0.82 5.42 5.01 140.36
MIFC Mid Iowa Financial Corp. of IA 0.89 0.96 7.55 7.54 85.29
MCBN Mid-Coast Bancorp of ME 0.67 0.62 7.50 7.50 88.50
MWBI Midwest Bancshares, Inc. of IA 1.29 1.13 10.64 10.64 154.34
MFFC Milton Fed. Fin. Corp. of OH 0.63 0.56 11.50 11.50 101.35
MBSP Mitchell Bancorp, Inc. of NC 0.54 0.54 15.60 15.60 39.67
MBBC Monterey Bay Bancorp of CA 0.55 0.51 14.87 13.91 127.33
MONT Montgomery Fin. Corp. of IN 0.50 0.50 12.05 12.05 66.02
MSBK Mutual SB, FSB of Bay City MI -2.01 -0.71 7.76 7.76 153.06
MYST Mystic Financial of MA* 0.52 0.48 13.20 13.20 69.27
NHTB NH Thrift Bancshares of NH 1.36 1.26 12.41 10.78 153.32
NSLB NS&L Bancorp, Inc of Neosho MO 0.59 0.59 16.74 16.62 89.13
NSSY NSS Bancorp of CT* 2.83 3.20 22.87 22.26 281.78
NMSB Newmil Bancorp, Inc. of CT* 0.74 0.73 8.59 8.59 96.45
NBCP Niagara Bancorp of NY MHC(45.4* 0.58 0.58 12.71 12.71 105.69
NBSI North Bancshares of Chicago IL 0.44 0.41 10.60 10.60 92.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFFD North Central Bancshares of IA 22.13 3,266 72.3 24.88 15.13 21.50 2.93 43.33 11.32
NEIB Northeast Indiana Bncrp of IN 21.50 1,689 36.3 22.75 14.75 22.00 -2.27 38.71 -2.85
NWSB Northwest Bcrp MHC of PA (30.7 16.00 46,838 229.6 18.00 7.19 16.25 -1.54 116.80 13.23
NWEQ Northwest Equity Corp. of WI 20.38 839 17.1 22.25 14.25 20.69 -1.50 39.30 -1.78
NTMG Nutmeg FS&LA of CT 10.88 989 10.8 11.38 5.53 10.88 0.00 81.33 3.62
OHSL OHSL Financial Corp. of OH 17.25 2,490 43.0 18.38 11.63 16.75 2.99 45.20 27.78
OCFC Ocean Fin. Corp. of NJ 19.50 15,534 302.9 20.00 15.56 19.25 1.30 23.81 4.67
OTFC Oregon Trail Fin. Corp. of OR 16.63 4,333 72.1 18.50 15.63 16.63 0.00 66.30 -4.32
OFCP Ottawa Financial Corp. of MI 29.00 5,317 154.2 34.00 19.43 29.13 -0.45 50.10 -14.71
PFFB PFF Bancorp of Pomona CA 19.44 17,067 331.8 21.50 15.13 19.56 -0.61 25.42 -2.21
PSFI PS Financial of Chicago IL 13.13 2,074 27.2 22.38 13.13 13.75 -4.51 -7.86 -41.33
PVFC PVF Capital Corp. of OH 26.50 2,660 70.5 28.25 16.36 26.50 0.00 61.98 31.25
PBCI Pamrapo Bancorp, Inc. of NJ 28.25 2,843 80.3 29.00 19.75 28.50 -0.88 43.04 3.67
PFED Park Bancorp of Chicago IL 18.75 2,333 43.7 19.75 14.50 18.20 3.02 27.12 0.64
PVSA Parkvale Financial Corp of PA 31.75 5,150 163.5 34.25 21.40 31.75 0.00 43.02 -7.30
PBHC Pathfinder BC MHC of NY (46.1)* 22.25 2,831 19.6 26.13 8.58 22.63 -1.68 147.22 11.25
PEEK Peekskill Fin. Corp. of NY 18.00 3,017 54.3 18.25 14.00 17.50 2.86 27.39 7.46
PFSB PennFed Fin. Services of NJ 17.00 9,647 164.0 19.00 12.59 17.50 -2.86 38.78 -0.76
PWBK Pennwood Bancorp, Inc. of PA 14.00 734 10.3 17.44 11.06 14.75 -5.08 24.44 -5.47
PBKB People's Bancshares of MA* 26.19 3,309 86.7 27.75 13.38 26.38 -0.72 94.00 15.12
TSBS Peoples Bancorp Inc of NJ* 10.00 36,237 362.4 11.83 4.97 10.06 -0.60 93.80 -15.47
PFDC Peoples Bancorp of Auburn IN 22.75 3,378 76.8 25.00 14.50 22.00 3.41 49.97 3.41
PBCT Peoples Bank, MHC of CT (40.1)* 38.06 64,083 930.7 41.13 24.19 38.13 -0.18 56.11 0.16
PFFC Peoples Fin. Corp. of OH 13.63 1,417 19.3 19.00 12.75 15.38 -11.38 -9.91 -9.91
PHBK Peoples Heritage Fin Grp of ME* 23.56 55,662 1,311.4 26.50 17.00 22.50 4.71 37.54 2.43
PSFC Peoples Sidney Fin. Corp of OH 24.38 1,785 43.5 24.38 13.00 20.50 18.93 87.54 36.35
PERM Permanent Bancorp, Inc. of IN 16.00 4,206 67.3 18.25 11.38 16.50 -3.03 30.61 2.83
PCBC Perry Co. Fin. Corp. of MO 23.38 828 19.4 25.00 19.50 24.00 -2.58 17.61 -3.11
PHFC Pittsburgh Home Fin Corp of PA 17.63 1,969 34.7 20.81 14.38 17.75 -0.68 18.48 -2.06
PFSL Pocahontas Bancorp of AR 9.88 6,669 65.9 11.43 4.85 9.94 -0.60 109.77 -10.67
PTRS Potters Financial Corp of OH 18.75 967 18.1 22.25 10.13 18.75 0.00 85.09 -6.25
PHSB Ppls Home SB, MHC of PA (45.0) 20.13 2,760 25.0 22.13 13.63 20.25 -0.59 101.30 6.62
PRBC Prestige Bancorp of PA 20.50 1,052 21.6 22.07 13.48 21.25 -3.53 49.64 17.88
PFNC Progress Financial Corp. of PA 19.50 4,201 81.9 22.75 8.57 19.50 0.00 118.37 18.18
PSBK Progressive Bank, Inc. of NY(8)* 42.00 3,856 162.0 44.50 27.25 41.13 2.12 54.13 9.80
PROV Provident Fin. Holdings of CA 22.75 4,669 106.2 24.25 16.13 22.75 0.00 42.19 3.98
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 45.25 2,106 28.2 51.00 17.38 45.50 -0.55 156.66 44.20
PLSK Pulaski SB, MHC of NJ (46.0) 18.25 2,108 17.4 24.50 12.75 18.50 -1.35 38.99 -5.19
PULS Pulse Bancorp of S. River NJ 27.63 3,111 86.0 29.75 18.25 27.63 0.00 51.40 5.74
QCFB QCF Bancorp of Virginia MN 30.25 1,365 41.3 31.75 20.50 30.25 0.00 46.63 1.68
QCBC Quaker City Bancorp of CA 22.00 4,665 102.6 25.00 15.88 22.13 -0.59 38.54 3.53
QCSB Queens County Bancorp of NY* 44.44 14,922 663.1 47.13 27.75 44.00 1.00 60.61 9.73
RARB Raritan Bancorp of Raritan NJ* 30.00 2,388 71.6 30.00 19.50 29.00 3.45 47.57 7.14
REDF RedFed Bancorp of Redlands CA(8) 20.31 7,388 150.1 21.13 15.13 20.19 0.59 38.82 2.16
RELY Reliance Bancorp, Inc. of NY 39.25 9,628 377.9 42.25 24.63 38.19 2.78 60.20 7.15
RELI Reliance Bancshares Inc of WI 8.50 2,371 20.2 10.13 7.25 8.13 4.55 11.40 -10.53
RCBK Richmond County Fin Corp of NY 18.50 26,424 488.8 19.75 15.69 19.00 -2.63 85.00 85.00
RIVR River Valley Bancorp of IN 19.00 1,190 22.6 20.75 14.50 18.38 3.37 33.33 1.33
RVSB Riverview Bancorp of WA 16.75 6,154 103.1 19.13 7.49 16.75 0.00 109.64 -5.63
RSLN Roslyn Bancorp, Inc. of NY* 22.13 42,822 947.7 30.50 17.44 23.53 -5.95 26.89 -4.82
SCCB S. Carolina Comm. Bnshrs of SC 21.75 580 12.6 25.25 18.25 21.50 1.16 14.47 -3.33
SBFL SB Fngr Lakes MHC of NY (33.1) 19.63 3,570 23.2 24.75 8.13 20.00 -1.85 141.45 22.69
SFED SFS Bancorp of Schenectady NY 22.00 1,208 26.6 27.25 16.50 22.00 0.00 32.29 -18.15
SGVB SGV Bancorp of W. Covina CA 18.13 2,345 42.5 19.38 12.88 17.75 2.14 40.76 2.14
SISB SIS Bancorp, Inc. of MA* 41.13 6,970 286.7 44.50 27.63 41.88 -1.79 45.59 2.34
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFFD North Central Bancshares of IA 1.16 1.16 15.72 13.68 101.90
NEIB Northeast Indiana Bncrp of IN 1.33 1.33 15.82 15.82 118.59
NWSB Northwest Bcrp MHC of PA (30.7 0.44 0.44 4.55 4.07 51.44
NWEQ Northwest Equity Corp. of WI 1.22 1.17 13.77 13.77 118.66
NTMG Nutmeg FS&LA of CT 0.57 0.40 6.58 6.58 112.78
OHSL OHSL Financial Corp. of OH 0.82 0.76 10.64 10.64 100.87
OCFC Ocean Fin. Corp. of NJ 0.90 0.90 13.90 13.90 97.75
OTFC Oregon Trail Fin. Corp. of OR 0.68 0.69 15.34 15.34 59.32
OFCP Ottawa Financial Corp. of MI 1.44 1.33 14.55 11.92 172.18
PFFB PFF Bancorp of Pomona CA 0.94 0.88 14.90 14.75 164.78
PSFI PS Financial of Chicago IL 0.44 0.74 11.24 11.24 40.42
PVFC PVF Capital Corp. of OH 1.94 1.83 11.34 11.34 157.49
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.67 17.20 17.11 134.17
PFED Park Bancorp of Chicago IL 0.69 0.74 16.84 16.84 84.59
PVSA Parkvale Financial Corp of PA 2.11 2.11 16.02 15.94 204.95
PBHC Pathfinder BC MHC of NY (46.1)* 0.62 0.50 8.15 6.91 69.30
PEEK Peekskill Fin. Corp. of NY 0.63 0.65 14.92 14.92 64.91
PFSB PennFed Fin. Services of NJ 1.15 1.12 10.96 9.50 152.28
PWBK Pennwood Bancorp, Inc. of PA 0.50 0.60 11.59 11.59 63.21
PBKB People's Bancshares of MA* 1.59 0.70 9.56 9.23 260.50
TSBS Peoples Bancorp Inc of NJ* 0.20 0.15 3.09 2.80 24.53
PFDC Peoples Bancorp of Auburn IN 1.29 1.29 13.43 13.43 89.00
PBCT Peoples Bank, MHC of CT (40.1)* 1.49 0.80 13.18 11.29 142.78
PFFC Peoples Fin. Corp. of OH 0.75 0.29 11.11 11.11 58.02
PHBK Peoples Heritage Fin Grp of ME* 1.37 1.36 8.82 6.71 131.32
PSFC Peoples Sidney Fin. Corp of OH 0.71 0.71 14.87 14.87 59.12
PERM Permanent Bancorp, Inc. of IN 0.63 0.62 9.98 9.86 99.81
PCBC Perry Co. Fin. Corp. of MO 1.04 1.03 19.69 19.69 103.96
PHFC Pittsburgh Home Fin Corp of PA 1.12 0.95 12.77 12.62 171.82
PFSL Pocahontas Bancorp of AR 0.36 0.35 8.72 8.72 60.08
PTRS Potters Financial Corp of OH 1.01 0.98 11.40 11.40 130.90
PHSB Ppls Home SB, MHC of PA (45.0) 0.63 0.56 10.33 10.33 80.94
PRBC Prestige Bancorp of PA 0.70 0.68 15.00 15.00 152.64
PFNC Progress Financial Corp. of PA 0.89 0.80 6.37 5.65 115.40
PSBK Progressive Bank, Inc. of NY(8)* 2.22 2.23 20.68 18.87 232.39
PROV Provident Fin. Holdings of CA 1.06 0.52 18.16 18.16 163.75
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 0.91 0.78 11.49 11.49 85.70
PLSK Pulaski SB, MHC of NJ (46.0) 0.55 0.55 10.44 10.44 90.50
PULS Pulse Bancorp of S. River NJ 1.81 1.83 14.47 14.47 173.58
QCFB QCF Bancorp of Virginia MN 1.82 1.82 19.65 19.65 111.84
QCBC Quaker City Bancorp of CA 1.35 1.31 16.14 16.14 184.35
QCSB Queens County Bancorp of NY* 1.50 1.48 11.36 11.36 108.73
RARB Raritan Bancorp of Raritan NJ* 1.65 1.62 13.22 13.05 175.38
REDF RedFed Bancorp of Redlands CA(8) 1.53 1.58 12.00 11.96 139.90
RELY Reliance Bancorp, Inc. of NY 1.93 2.04 20.13 13.89 226.40
RELI Reliance Bancshares Inc of WI 0.20 0.20 9.31 9.31 18.63
RCBK Richmond County Fin Corp of NY 0.09 0.74 12.21 12.16 55.40
RIVR River Valley Bancorp of IN 1.10 0.92 15.12 14.91 115.17
RVSB Riverview Bancorp of WA 0.64 0.61 9.93 9.60 44.39
RSLN Roslyn Bancorp, Inc. of NY* 1.03 0.99 14.51 14.44 86.55
SCCB S. Carolina Comm. Bnshrs of SC 0.80 0.80 16.27 16.27 79.84
SBFL SB Fngr Lakes MHC of NY (33.1) 0.26 0.22 6.10 6.10 70.26
SFED SFS Bancorp of Schenectady NY 0.92 0.89 17.95 17.95 145.22
SGVB SGV Bancorp of W. Covina CA 0.66 0.75 13.49 13.31 171.03
SISB SIS Bancorp, Inc. of MA* 1.55 2.00 18.39 18.39 257.38
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- -----------------------------------------------
52 Week(1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- --------- ------ ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SWCB Sandwich Bancorp of MA(8)* 64.00 1,946 124.5 64.50 30.25 63.50 0.79 108.13 45.45
SFSL Security First Corp. of OH(8) 25.00 7,555 188.9 27.88 14.00 24.13 3.61 76.43 19.73
SKAN Skaneateles Bancorp Inc of NY* 17.50 1,440 25.2 22.25 12.33 17.25 1.45 41.93 -20.92
SOBI Sobieski Bancorp of S. Bend IN 19.50 764 14.9 24.25 14.75 19.25 1.30 32.20 -4.32
SOSA Somerset Savings Bank of MA(8)* 5.06 16,727 84.6 5.94 2.56 5.13 -1.36 90.23 1.20
SSFC South Street Fin. Corp. of NC* 9.75 4,676 45.6 20.00 9.38 9.75 0.00 -40.00 -48.68
SBAN SouthBanc Shares Inc. of SC 19.56 1,509 13.8 23.76 9.47 19.88 -1.61 101.86 -8.00
SCBS Southern Commun. Bncshrs of AL 17.25 1,137 19.6 20.75 13.75 16.75 2.99 25.45 -5.48
SMBC Southern Missouri Bncrp of MO 21.50 1,605 34.5 23.25 17.00 21.56 -0.28 22.86 4.88
SWBI Southwest Bancshares of IL(8) 31.75 2,788 88.5 34.25 20.19 31.75 0.00 58.75 6.72
SVRN Sovereign Bancorp, Inc. of PA 17.38 132,925 2,310.2 22.19 11.25 17.69 -1.75 55.87 0.52
STFR St. Francis Cap. Corp. of WI 42.25 5,223 220.7 50.75 29.50 41.25 2.42 40.83 -16.34
SPBC St. Paul Bancorp, Inc. of IL 24.88 34,311 853.7 28.50 21.58 25.25 -1.47 13.97 -5.22
SFFC StateFed Financial Corp. of IA 14.38 1,563 22.5 15.00 9.25 14.38 0.00 55.46 -2.51
SFIN Statewide Fin. Corp. of NJ 22.25 4,519 100.5 26.69 16.25 23.00 -3.26 34.85 -7.29
STSA Sterling Financial Corp. of WA 25.88 7,596 196.6 27.63 17.50 26.25 -1.41 39.89 18.99
SFSB SuburbFed Fin. Corp. of IL(8) 47.25 1,270 60.0 50.00 24.00 48.75 -3.08 96.88 -5.50
ROSE T R Financial Corp. of NY* 42.25 17,530 740.6 44.75 21.63 44.75 -5.59 101.19 27.07
THRD TF Financial Corp. of PA 26.00 3,189 82.9 30.00 17.94 26.38 -1.44 45.41 -13.33
TPNZ Tappan Zee Fin., Inc. of NY(8) 20.13 1,478 29.8 22.63 16.50 20.13 0.00 15.82 7.36
TSBK Timberland Bancorp of WA 16.88 6,092 102.8 18.50 14.50 17.25 -2.14 68.80 68.80
TRIC Tri-County Bancorp of WY 14.75 1,167 17.2 16.50 10.13 15.25 -3.28 43.90 -1.67
TWIN Twin City Bancorp, Inc. of TN 13.75 1,260 17.3 15.50 12.33 14.00 -1.79 11.52 -11.29
USAB USABancshares, Inc of PA* 14.50 1,502 21.8 15.50 6.56 14.00 3.57 108.93 45.00
UCBC Union Community Bancorp of IN 14.88 3,042 45.3 15.81 13.94 14.69 1.29 48.80 1.71
UFRM United FSB of Rocky Mount NC(8) 18.00 3,263 58.7 21.00 10.50 17.69 1.75 65.44 -8.30
UBMT United Fin. Corp. of MT 27.88 1,698 47.3 31.50 25.63 29.50 -5.49 N.A. N.A.
UTBI United Tenn. Bancshares of TN 14.88 1,455 21.7 16.00 13.63 14.88 0.00 48.80 48.80
WHGB WHG Bancshares of MD 16.00 1,389 22.2 19.00 13.75 16.75 -4.48 12.28 -14.67
WSFS WSFS Financial Corp. of DE* 21.25 12,464 264.9 23.88 12.75 21.25 0.00 66.67 6.25
WVFC WVS Financial Corp. of PA 18.50 3,616 66.9 20.13 12.22 18.75 -1.33 51.76 4.93
WRNB Warren Bancorp of Peabody MA* 12.00 7,664 92.0 14.38 8.63 12.38 -3.07 31.43 4.35
WSBI Warwick Community Bncrp of NY* 16.88 6,607 111.5 18.00 15.38 17.00 -0.71 68.80 -2.88
WFSL Washington Federal, Inc. of WA 28.25 52,405 1,480.4 30.29 23.24 27.81 1.58 25.22 -1.15
WAMU Washington Mutual, Inc. of WA* 46.50 386,832 17,987.7 50.92 36.75 46.62 -0.26 27.68 9.31
WYNE Wayne Bancorp, Inc. of NJ 31.38 2,013 63.2 32.00 18.13 31.63 -0.79 79.31 17.31
WAYN Wayne Svgs Bks MHC of OH (47.8 28.00 2,484 30.1 30.00 15.46 27.25 2.75 72.73 6.22
WCFB Wbstr Cty FSB MHC of IA (45.2) 18.88 2,112 17.9 22.00 14.00 19.63 -3.82 28.00 -5.60
WBST Webster Financial Corp. of CT 32.88 27,411 901.3 36.25 20.56 33.75 -2.58 59.92 -1.11
WEFC Wells Fin. Corp. of Wells MN 21.50 1,959 42.1 22.00 14.00 21.00 2.38 45.76 20.25
WCBI WestCo Bancorp, Inc. of IL 30.50 2,462 75.1 30.50 23.81 30.38 0.39 29.07 11.93
WSTR WesterFed Fin. Corp. of MT 24.88 5,584 138.9 27.00 20.13 24.50 1.55 22.08 -2.43
WOFC Western Ohio Fin. Corp. of OH 25.50 2,352 60.0 29.25 21.00 26.00 -1.92 18.60 -5.13
WEHO Westwood Hmstd Fin Corp of OH 12.75 2,843 36.2 18.13 12.63 13.50 -5.56 -3.77 -25.00
FFWD Wood Bancorp of OH 17.50 2,662 46.6 27.00 8.53 17.00 2.94 105.16 -6.91
YFCB Yonkers Fin. Corp. of NY 18.94 3,016 57.1 22.00 14.63 18.38 3.05 24.20 -1.61
YFED York Financial Corp. of PA 21.75 8,924 194.1 27.25 15.50 22.19 -1.98 37.66 -15.53
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------ ------ ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SWCB Sandwich Bancorp of MA(8)* 2.57 2.47 21.87 21.18 270.57
SFSL Security First Corp. of OH(8) 1.23 1.23 8.56 8.44 90.73
SKAN Skaneateles Bancorp Inc of NY* 1.12 1.09 12.48 12.16 178.89
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.64 16.58 16.58 117.60
SOSA Somerset Savings Bank of MA(8)* 0.46 0.44 2.31 2.31 31.87
SSFC South Street Fin. Corp. of NC* 0.32 0.33 7.37 7.37 46.40
SBAN SouthBanc Shares Inc. of SC 0.73 0.73 17.01 17.01 77.85
SCBS Southern Commun. Bncshrs of AL 0.70 0.70 12.73 12.73 62.34
SMBC Southern Missouri Bncrp of MO 0.70 0.66 16.45 16.45 98.09
SWBI Southwest Bancshares of IL(8) 1.54 1.51 16.38 16.38 140.95
SVRN Sovereign Bancorp, Inc. of PA 0.46 0.70 6.70 5.75 136.14
STFR St. Francis Cap. Corp. of WI 2.48 2.39 25.25 22.56 315.50
SPBC St. Paul Bancorp, Inc. of IL 1.44 1.41 12.48 12.43 133.58
SFFC StateFed Financial Corp. of IA 0.70 0.70 10.16 10.16 57.31
SFIN Statewide Fin. Corp. of NJ 1.22 1.21 14.59 14.56 148.39
STSA Sterling Financial Corp. of WA 1.26 1.10 13.93 12.98 248.58
SFSB SuburbFed Fin. Corp. of IL(8) 2.15 1.64 23.65 23.58 351.56
ROSE T R Financial Corp. of NY* 2.09 1.85 14.05 14.05 228.51
THRD TF Financial Corp. of PA 1.47 1.24 15.99 13.46 200.52
TPNZ Tappan Zee Fin., Inc. of NY(8) 0.70 0.67 14.56 14.56 85.57
TSBK Timberland Bancorp of WA 0.63 0.60 13.79 13.79 42.92
TRIC Tri-County Bancorp of WY 0.77 0.80 12.03 12.03 76.49
TWIN Twin City Bancorp, Inc. of TN 0.88 0.73 11.17 11.17 87.59
USAB USABancshares, Inc of PA* 0.09 0.16 8.53 8.48 68.27
UCBC Union Community Bancorp of IN 0.47 0.47 14.22 14.22 35.53
UFRM United FSB of Rocky Mount NC(8) 0.54 0.35 7.02 7.02 93.67
UBMT United Fin. Corp. of MT 0.80 0.80 14.52 14.52 56.69
UTBI United Tenn. Bancshares of TN 0.57 0.57 13.92 13.92 51.58
WHGB WHG Bancshares of MD 0.54 0.55 14.34 14.34 72.95
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.96 6.92 121.57
WVFC WVS Financial Corp. of PA 1.03 1.04 8.61 8.61 80.76
WRNB Warren Bancorp of Peabody MA* 0.95 0.85 5.22 5.22 48.41
WSBI Warwick Community Bncrp of NY* 0.55 0.55 12.60 12.60 53.02
WFSL Washington Federal, Inc. of WA 2.06 2.04 14.06 12.97 109.02
WAMU Washington Mutual, Inc. of WA* 0.89 1.59 13.42 12.50 250.71
WYNE Wayne Bancorp, Inc. of NJ 0.97 0.97 16.86 16.86 134.15
WAYN Wayne Svgs Bks MHC of OH (47.8 0.76 0.71 9.74 9.74 102.71
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.65 0.65 10.58 10.58 45.04
WBST Webster Financial Corp. of CT 1.15 1.75 13.94 12.16 256.09
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 19.73 19.73 128.33
WSTR WesterFed Fin. Corp. of MT 1.30 1.26 19.28 15.67 185.37
WOFC Western Ohio Fin. Corp. of OH 0.06 0.14 23.21 21.69 158.16
WEHO Westwood Hmstd Fin Corp of OH 0.31 0.49 10.60 10.60 47.22
FFWD Wood Bancorp of OH 0.89 0.76 8.18 8.18 61.99
YFCB Yonkers Fin. Corp. of NY 1.03 1.01 14.90 14.90 110.01
YFED York Financial Corp. of PA 1.25 1.04 11.74 11.74 132.48
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(291) 13.96 13.63 0.93 8.02 4.57 0.88 7.55 0.67 137.69 0.79
NYSE Traded Companies(8) 8.29 8.01 1.19 14.44 6.35 0.63 9.34 1.64 103.88 1.32
AMEX Traded Companies(22) 14.52 14.38 0.87 6.21 4.30 0.83 5.68 0.46 179.35 0.73
NASDAQ Listed OTC Companies(260) 14.00 13.72 0.93 8.03 4.56 0.89 7.69 0.66 135.57 0.79
California Companies(19) 8.00 7.65 0.65 9.01 5.70 0.56 8.35 1.41 96.13 1.26
Florida Companies(6) 10.42 9.98 1.13 12.18 4.55 0.62 6.78 1.44 87.72 0.83
Mid-Atlantic Companies(58) 11.31 10.58 0.82 8.34 4.73 0.81 8.13 0.75 107.46 0.93
Mid-West Companies(133) 14.59 14.36 0.95 7.47 4.40 0.91 7.13 0.56 144.07 0.68
New England Companies(8) 7.69 7.39 0.60 8.35 4.79 0.64 8.97 0.45 194.08 1.01
North-West Companies(11) 18.25 17.91 1.16 9.70 4.50 1.03 8.67 0.68 249.01 0.76
South-East Companies(44) 17.81 17.65 1.08 7.75 4.26 1.03 7.25 0.62 133.35 0.79
South-West Companies(6) 11.26 11.16 0.98 10.39 6.59 0.95 10.16 0.45 117.24 0.59
Western Companies (Excl CA)(6) 18.98 18.59 1.05 6.07 4.24 1.06 6.09 0.45 214.01 0.94
Thrift Strategy(244) 15.02 14.70 0.96 7.61 4.62 0.92 7.28 0.63 139.02 0.75
Mortgage Banker Strategy(29) 7.67 7.11 0.72 9.55 3.85 0.67 9.16 0.73 143.92 0.93
Real Estate Strategy(8) 7.35 7.11 0.85 11.94 5.50 0.78 11.07 1.26 106.47 1.62
Diversified Strategy(7) 8.71 8.49 1.29 14.90 6.04 0.72 9.74 1.46 136.93 1.09
Retail Banking Strategy(3) 6.76 6.48 0.21 4.77 1.36 0.15 3.51 1.04 67.45 1.16
Companies Issuing Dividends(243) 13.77 13.49 0.97 8.28 4.77 0.91 7.75 0.63 140.47 0.77
Companies Without Dividends(48) 14.94 14.36 0.77 6.66 3.57 0.72 6.51 0.92 122.35 0.93
Equity/Assets < 6%(21) 5.03 4.77 0.53 10.80 4.25 0.59 11.79 1.07 95.39 0.93
Equity/Assets 6-12%(132) 8.87 8.49 0.83 9.57 4.99 0.75 8.71 0.69 138.41 0.90
Equity/Assets > 12%(138) 19.86 19.56 1.09 6.21 4.25 1.04 5.88 0.61 143.22 0.68
Converted Last 3 Mths (no MHC)(11) 24.08 22.32 1.01 5.42 3.32 0.92 5.05 0.38 128.91 0.83
Actively Traded Companies(34) 9.61 9.29 1.00 11.11 4.84 1.02 11.87 0.86 155.81 0.98
Market Value Below $20 Million(46) 15.77 15.65 0.92 6.25 4.88 0.84 5.64 0.61 107.56 0.67
Holding Company Structure(266) 14.20 13.87 0.94 7.95 4.60 0.89 7.49 0.69 135.35 0.79
Assets Over $1 Billion(59) 8.77 8.14 0.86 11.10 5.12 0.80 10.54 0.92 119.95 0.99
Assets $500 Million-$1 Billion(40) 10.10 9.85 0.86 8.84 4.05 0.81 8.54 0.58 160.79 0.87
Assets $250-$500 Million(70) 13.17 12.86 0.94 8.33 4.73 0.88 7.77 0.66 162.69 0.82
Assets less than $250 Million(122) 17.84 17.60 0.99 6.25 4.41 0.93 5.81 0.60 125.22 0.67
Goodwill Companies(118) 10.25 9.59 0.87 9.67 4.86 0.81 9.01 0.75 120.96 0.88
Non-Goodwill Companies(173) 16.37 16.26 0.98 6.94 4.39 0.93 6.60 0.62 149.15 0.74
Acquirors of FSLIC Cases(8) 8.90 8.40 1.00 11.89 5.84 0.95 11.29 0.89 56.32 0.59
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(291) 20.04 157.56 20.10 163.73 20.73 0.34 1.64 30.64
NYSE Traded Companies(8) 17.39 218.70 18.78 202.97 18.76 0.21 0.62 9.08
AMEX Traded Companies(22) 20.64 134.94 18.86 137.16 21.11 0.31 1.73 33.40
NASDAQ Listed OTC Companies(260) 20.07 158.22 20.19 164.69 20.74 0.35 1.67 31.16
California Companies(19) 17.37 151.86 11.80 161.66 18.25 0.18 0.61 13.38
Florida Companies(6) 20.66 200.26 20.58 188.18 23.86 0.24 1.05 23.49
Mid-Atlantic Companies(58) 19.76 164.56 17.31 178.37 20.57 0.34 1.47 30.41
Mid-West Companies(133) 19.66 154.60 20.45 158.64 20.36 0.34 1.69 29.94
New England Companies(8) 19.24 165.13 12.33 174.29 19.65 0.36 1.61 29.45
North-West Companies(11) 22.03 164.45 26.01 169.88 22.91 0.32 1.36 30.72
South-East Companies(44) 22.42 155.16 25.21 160.21 22.80 0.43 2.21 40.55
South-West Companies(6) 14.38 143.39 15.21 149.08 14.45 0.29 1.33 26.42
Western Companies (Excl CA)(6) 22.41 134.04 26.18 139.98 22.31 0.53 2.57 51.04
Thrift Strategy(244) 20.32 150.03 20.79 155.66 20.75 0.35 1.75 32.16
Mortgage Banker Strategy(29) 18.80 197.80 15.67 218.64 21.23 0.28 1.01 23.07
Real Estate Strategy(8) 19.07 199.33 14.48 204.84 18.78 0.25 0.85 17.17
Diversified Strategy(7) 16.74 247.60 21.65 235.60 21.18 0.39 1.38 26.80
Retail Banking Strategy(3) 16.42 163.14 10.55 169.11 18.10 0.15 0.71 17.60
Companies Issuing Dividends(243) 20.10 159.35 20.10 166.09 20.88 0.41 1.96 36.73
Companies Without Dividends(48) 19.58 148.45 20.06 151.47 19.54 0.00 0.00 0.00
Equity/Assets < 6%(21) 18.20 210.71 10.71 224.53 18.99 0.17 0.61 12.41
Equity/Assets 6-12%(132) 18.91 176.87 15.58 186.89 19.98 0.35 1.52 27.57
Equity/Assets > 12%(138) 21.53 132.67 25.54 134.09 21.81 0.36 1.90 36.31
Converted Last 3 Mths (no MHC)(11) 25.74 123.71 29.72 141.90 26.06 0.18 1.18 15.13
Actively Traded Companies(34) 17.56 206.88 18.90 218.57 18.66 0.44 1.51 29.13
Market Value Below $20 Million(46) 20.27 125.09 18.85 125.87 21.70 0.33 1.98 35.79
Holding Company Structure(266) 20.10 157.14 20.39 163.20 20.76 0.35 1.64 30.64
Assets Over $1 Billion(59) 18.92 197.07 16.51 213.20 19.60 0.34 1.15 23.48
Assets $500 Million-$1 Billion(40) 19.26 181.99 17.72 188.01 20.46 0.38 1.54 32.93
Assets $250-$500 Million(70) 19.90 157.94 19.52 163.63 20.54 0.32 1.44 26.94
Assets less than $250 Million(122) 20.94 132.61 22.70 135.11 21.47 0.35 2.00 35.67
Goodwill Companies(118) 19.29 179.68 17.01 193.70 20.27 0.36 1.45 26.71
Non-Goodwill Companies(173) 20.56 143.00 22.10 144.20 21.05 0.34 1.77 33.21
Acquirors of FSLIC Cases(8) 17.51 188.21 16.52 199.95 17.54 0.47 1.63 26.84
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(58) 11.59 11.27 1.06 10.88 5.24 1.03 10.39 0.64 176.97 1.29
NYSE Traded Companies(5) 17.14 15.93 1.10 8.28 3.84 1.18 8.51 1.35 65.41 1.00
AMEX Traded Companies(5) 12.36 12.02 1.07 10.24 5.59 0.90 8.34 1.05 84.96 1.20
NASDAQ Listed OTC Companies(48) 10.87 10.66 1.06 11.24 5.36 1.02 10.84 0.53 194.59 1.33
California Companies(1) 10.18 10.14 1.43 13.51 7.68 1.43 13.51 1.31 102.95 1.63
Mid-Atlantic Companies(20) 13.77 13.26 0.96 8.49 3.95 0.95 8.34 0.75 130.00 1.17
New England Companies(31) 9.77 9.53 1.13 12.86 6.13 1.05 11.74 0.61 200.27 1.47
North-West Companies(3) 9.16 9.04 1.03 11.77 4.79 1.16 14.26 0.31 399.42 1.01
South-East Companies(3) 17.69 17.54 1.01 5.73 4.76 1.06 5.96 0.25 148.78 0.51
Thrift Strategy(44) 12.73 12.43 1.06 10.01 5.11 1.02 9.32 0.62 166.83 1.20
Mortgage Banker Strategy(6) 8.50 8.16 1.01 12.66 5.73 0.95 11.77 0.41 304.65 1.20
Real Estate Strategy(3) 10.48 10.46 1.72 16.49 7.80 1.61 15.47 1.16 105.13 1.63
Diversified Strategy(5) 6.40 5.83 0.88 13.62 4.73 0.98 15.49 0.81 151.00 1.95
Companies Issuing Dividends(50) 10.84 10.47 1.06 11.17 5.23 1.02 10.62 0.65 175.99 1.28
Companies Without Dividends(8) 16.64 16.62 1.09 8.87 5.33 1.09 8.86 0.55 182.73 1.29
Equity/Assets < 6%(5) 5.19 4.87 0.87 16.45 4.92 0.77 14.51 0.88 92.00 1.34
Equity/Assets 6-12%(36) 8.69 8.34 1.11 12.75 6.09 1.06 12.19 0.76 198.48 1.46
Equity/Assets > 12%(17) 18.94 18.67 1.03 5.72 3.74 1.03 5.81 0.34 162.76 0.95
Converted Last 3 Mths (no MHC)(2) 16.65 16.06 0.99 5.56 2.89 0.86 4.73 0.71 86.68 0.98
Actively Traded Companies(17) 9.79 9.39 1.24 13.44 6.12 1.17 12.62 0.52 166.76 1.09
Market Value Below $20 Million(1) 10.06 10.06 0.85 8.88 6.71 0.74 7.75 0.50 358.51 2.48
Holding Company Structure(46) 12.61 12.36 1.07 10.25 5.12 1.04 9.84 0.53 177.30 1.27
Assets Over $1 Billion(18) 10.73 10.05 1.06 11.30 4.69 1.10 11.70 0.80 154.49 1.39
Assets $500 Million-$1 Billion(13) 9.50 9.25 1.11 12.19 5.86 0.99 10.56 0.62 159.32 1.26
Assets $250-$500 Million(12) 12.29 12.12 1.18 11.36 6.03 1.12 10.77 0.66 207.44 1.46
Assets less than $250 Million(15) 13.40 13.32 0.94 9.13 4.82 0.89 8.49 0.45 189.72 1.04
Goodwill Companies(30) 9.74 9.10 0.96 11.01 5.13 0.93 10.49 0.83 148.94 1.29
Non-Goodwill Companies(27) 13.16 13.16 1.17 10.98 5.41 1.13 10.52 0.44 209.12 1.29
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(58) 18.25 191.21 20.29 187.16 19.40 0.41 1.56 29.55
NYSE Traded Companies(5) 23.50 190.65 28.00 186.33 25.70 0.54 1.25 34.54
AMEX Traded Companies(5) 19.34 166.52 18.88 173.43 21.38 0.39 1.75 30.98
NASDAQ Listed OTC Companies(48) 17.50 194.15 19.58 188.96 18.27 0.39 1.57 28.78
California Companies(1) 13.02 165.64 16.85 166.14 13.02 0.00 0.00 0.00
Mid-Atlantic Companies(20) 21.14 190.98 24.43 184.42 21.81 0.41 1.30 32.49
New England Companies(31) 17.55 193.47 17.49 195.65 17.91 0.41 1.63 27.95
North-West Companies(3) 16.05 244.59 19.39 193.63 20.60 0.48 1.80 29.52
South-East Companies(3) 12.93 126.74 22.32 128.11 23.12 0.41 2.72 38.86
Thrift Strategy(44) 18.53 178.78 21.22 175.90 19.57 0.42 1.60 31.22
Mortgage Banker Strategy(6) 17.99 209.63 16.80 224.57 19.66 0.29 1.18 21.00
Real Estate Strategy(3) 12.82 197.76 20.82 198.01 13.57 0.18 1.50 18.95
Diversified Strategy(5) 19.15 265.95 16.63 247.67 20.35 0.51 1.64 30.94
Companies Issuing Dividends(50) 18.53 198.60 19.95 194.54 19.73 0.47 1.79 34.14
Companies Without Dividends(8) 15.51 142.68 22.61 142.90 16.08 0.00 0.00 0.00
Equity/Assets < 6%(5) 18.10 303.41 15.79 310.19 24.06 0.36 1.17 18.15
Equity/Assets 6-12%(36) 17.16 195.97 17.43 195.43 17.67 0.46 1.69 30.21
Equity/Assets > 12%(17) 22.09 149.54 27.00 141.41 22.72 0.32 1.41 31.08
Converted Last 3 Mths (no MHC)(2) 26.43 220.46 32.53 117.29 26.43 0.05 0.50 25.00
Actively Traded Companies(17) 16.58 212.37 19.14 206.85 18.85 0.59 1.83 30.73
Market Value Below $20 Million(1) 14.89 126.13 12.68 126.13 17.07 0.00 0.00 0.00
Holding Company Structure(46) 18.15 183.47 21.22 177.48 19.44 0.41 1.56 29.94
Assets Over $1 Billion(18) 20.29 219.39 22.09 212.45 21.25 0.56 1.55 35.12
Assets $500 Million-$1 Billion(13) 15.17 205.85 19.00 197.58 15.88 0.45 1.74 32.03
Assets $250-$500 Million(12) 17.49 171.20 19.32 174.66 18.45 0.26 1.43 24.43
Assets less than $250 Million(15) 18.66 167.42 19.90 168.99 20.07 0.32 1.53 25.79
Goodwill Companies(30) 17.62 205.62 18.75 199.48 20.01 0.41 1.46 28.69
Non-Goodwill Companies(27) 18.53 178.62 21.74 178.62 18.34 0.42 1.71 31.62
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(17) 12.63 12.41 0.82 6.90 2.71 0.78 6.46 0.52 154.92 0.88
BIF-Insured Thrifts(3) 11.01 9.97 0.88 8.58 3.56 0.64 6.01 0.75 139.39 1.19
NASDAQ Listed OTC Companies(20) 12.37 12.03 0.83 7.16 2.84 0.76 6.39 0.56 152.33 0.93
Florida Companies(2) 8.75 8.65 0.70 7.55 3.35 0.62 6.70 0.29 105.15 0.46
Mid-Atlantic Companies(10) 11.81 11.46 0.78 6.98 2.65 0.73 6.54 0.65 145.53 0.90
Mid-West Companies(5) 12.64 12.26 0.87 7.05 2.93 0.81 6.44 0.45 176.48 0.64
New England Companies(2) 13.20 12.53 0.98 9.00 3.15 0.71 5.88 0.64 206.44 2.03
South-East Companies(1) 22.48 22.48 1.13 5.02 2.73 1.13 5.02 0.32 134.01 0.92
Thrift Strategy(18) 12.81 12.55 0.80 6.57 2.81 0.76 6.19 0.54 157.13 0.88
Mortgage Banker Strategy(1) 8.12 7.30 0.88 10.93 2.26 0.72 8.95 0.66 60.87 0.99
Diversified Strategy(1) 9.23 7.91 1.18 13.44 3.91 0.63 7.21 0.66 166.94 1.76
Companies Issuing Dividends(17) 11.46 11.05 0.83 7.62 2.80 0.74 6.70 0.59 142.99 0.83
Companies Without Dividends(3) 17.22 17.22 0.82 4.71 3.03 0.82 4.71 0.40 199.04 1.44
Equity/Assets 6-12%(12) 9.46 8.91 0.76 8.06 2.74 0.65 6.84 0.68 92.57 0.85
Equity/Assets > 12%(8) 17.37 17.37 0.94 5.63 3.02 0.93 5.60 0.35 246.24 1.07
Holding Company Structure(3) 11.09 10.49 0.73 6.78 3.16 0.66 6.10 0.79 125.62 0.90
Assets Over $1 Billion(6) 10.35 9.80 0.83 8.69 3.17 0.70 7.12 0.53 142.65 1.22
Assets $500 Million-$1 Billion(2) 9.01 8.25 0.71 7.44 3.08 0.68 7.22 0.31 128.55 0.58
Assets $250-$500 Million(4) 11.35 11.35 0.78 6.68 2.30 0.76 6.38 0.56 257.76 0.75
Assets less than $250 Million(8) 15.66 15.40 0.88 6.05 2.80 0.82 5.52 0.64 122.24 0.86
Goodwill Companies(6) 8.65 7.55 0.88 9.85 3.10 0.72 8.04 0.67 91.51 0.88
Non-Goodwill Companies(14) 14.09 14.09 0.80 5.93 2.72 0.77 5.62 0.50 182.74 0.96
MHC Institutions(20) 12.37 12.03 0.83 7.16 2.84 0.76 6.39 0.56 152.33 0.93
MHC Converted Last 3 Months(3) 17.22 17.22 0.82 4.71 3.03 0.82 4.71 0.40 199.04 1.44
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(17) 28.61 218.51 29.40 224.14 29.49 0.40 1.63 43.10
BIF-Insured Thrifts(3) 25.32 225.44 24.18 257.89 25.10 0.35 1.04 29.54
NASDAQ Listed OTC Companies(20) 27.30 219.81 28.57 230.47 28.02 0.39 1.54 40.20
Florida Companies(2) 26.87 217.57 18.97 220.98 0.00 0.90 2.87 0.00
Mid-Atlantic Companies(10) 27.51 209.72 29.27 216.72 27.51 0.26 1.23 41.56
Mid-West Companies(5) 29.05 237.60 27.87 254.20 29.05 0.54 2.24 57.96
New England Companies(2) 25.54 239.65 29.68 263.82 0.00 0.42 1.10 28.19
South-East Companies(1) 0.00 184.00 41.37 184.00 0.00 0.00 0.00 0.00
Thrift Strategy(18) 27.74 215.21 28.22 223.36 28.02 0.37 1.53 38.87
Mortgage Banker Strategy(1) 0.00 0.00 36.51 0.00 0.00 0.22 0.90 40.00
Diversified Strategy(1) 25.54 288.77 26.66 337.11 0.00 0.84 2.21 56.38
Companies Issuing Dividends(17) 27.85 232.91 28.44 246.03 29.49 0.46 1.82 51.16
Companies Without Dividends(3) 25.10 163.03 29.28 163.03 25.10 0.00 0.00 0.00
Equity/Assets 6-12%(12) 26.21 251.72 26.90 270.67 0.00 0.46 1.62 50.17
Equity/Assets > 12%(8) 28.02 178.78 31.44 178.78 28.02 0.27 1.40 22.25
Holding Company Structure(3) 25.10 225.01 24.38 241.34 25.10 0.25 0.97 35.31
Assets Over $1 Billion(6) 25.84 203.71 25.92 217.50 25.10 0.35 1.21 26.55
Assets $500 Million-$1 Billion(2) 0.00 232.85 20.63 266.05 0.00 0.69 1.96 41.38
Assets $250-$500 Million(4) 29.92 272.25 32.56 272.25 29.92 0.43 1.78 65.87
Assets less than $250 Million(8) 29.05 202.80 30.83 209.80 29.05 0.31 1.56 42.82
Goodwill Companies(6) 26.21 258.58 26.55 301.22 0.00 0.47 1.58 41.28
Non-Goodwill Companies(14) 28.02 206.88 29.51 206.88 28.02 0.35 1.52 39.60
MHC Institutions(20) 27.30 219.81 28.57 230.47 28.02 0.39 1.54 40.20
MHC Converted Last 3 Months(3) 25.10 163.03 29.28 163.03 25.10 0.00 0.00 0.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 5.45 4.01 0.82 18.69 4.81 0.77 17.61 2.14 41.19 1.32
BYS Bay State Bancorp of MA* 20.71 20.71 0.92 4.44 3.78 0.92 4.44 0.77 110.27 1.10
CFB Commercial Federal Corp. of NE 6.91 6.04 0.81 12.90 4.50 0.95 15.06 0.83 79.52 0.88
DME Dime Bancorp, Inc. of NY* 5.90 4.83 0.72 12.65 4.25 0.58 10.18 1.03 48.09 0.66
DSL Downey Financial Corp. of CA 7.60 7.51 0.87 12.02 5.25 0.89 12.29 0.85 63.98 0.59
FED FirstFed Fin. Corp. of CA 5.72 5.68 0.63 12.23 4.88 0.61 11.83 0.89 236.92 2.68
GSB Golden State Bancorp of CA(8) 6.04 5.45 0.66 11.61 5.91 0.72 12.58 0.99 92.79 1.22
GDW Golden West Fin. Corp. of CA 7.10 7.10 0.95 14.35 6.15 0.96 14.41 1.02 58.45 0.72
GPT GreenPoint Fin. Corp. of NY* 9.67 5.40 1.08 10.71 4.10 1.11 11.10 2.73 30.41 1.22
JSB JSB Financial, Inc. of NY* 23.21 23.21 1.92 8.59 5.08 1.71 7.64 NA NA 0.56
OCN Ocwen Financial Corp. of FL 13.08 12.39 2.83 24.05 5.64 0.55 4.67 5.68 12.11 1.19
SIB Staten Island Bancorp of NY* 26.20 25.53 0.86 5.00 2.01 1.59 9.19 0.85 72.87 1.44
WES Westcorp Inc. of Orange CA 9.35 9.33 1.03 11.08 11.67 -0.21 -2.22 0.55 172.31 1.88
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 15.34 15.34 1.07 6.44 4.88 1.00 6.04 0.33 292.15 1.28
ANE Alliance Bncp of New Eng of CT* 7.97 7.78 0.89 12.20 5.75 0.52 7.15 1.51 82.82 1.96
BKC American Bank of Waterbury CT* 9.01 8.74 1.33 15.40 6.41 1.11 12.88 2.28 40.39 1.54
BFD BostonFed Bancorp of MA 7.87 7.59 0.72 8.51 5.53 0.61 7.20 0.15 467.89 0.84
CNY Carver Bancorp, Inc. of NY 8.48 8.16 -0.11 -1.33 -1.50 0.02 0.20 NA NA 1.04
CBK Citizens First Fin.Corp. of IL 13.84 13.84 0.72 5.13 3.87 0.45 3.22 0.71 47.08 0.41
EFC EFC Bancorp Inc of IL 23.77 23.77 1.07 4.51 4.15 1.07 4.51 0.46 57.60 0.45
EBI Equality Bancorp, Inc. of MO 11.18 11.18 0.53 7.30 3.46 0.12 1.59 0.39 31.69 0.25
ESX Essex Bancorp of Norfolk VA(8) 0.02 -0.08 -0.11 NM -5.51 -0.11 NM 1.69 71.25 1.33
FCB Falmouth Bancorp, Inc. of MA* 22.41 22.41 1.02 4.33 3.40 0.81 3.44 0.05 NA 0.74
FAB FirstFed America Bancorp of MA 11.17 11.17 0.17 1.58 0.99 0.53 4.99 0.31 275.70 1.16
GAF GA Financial Corp. of PA 14.01 13.88 1.09 7.23 5.43 1.03 6.84 0.21 81.02 0.42
HBS Haywood Bancshares, Inc. of NC* 14.85 14.38 1.46 10.18 7.74 1.46 10.18 0.37 131.68 0.65
KNK Kankakee Bancorp, Inc. of IL 9.64 8.02 0.86 7.99 6.20 0.83 7.77 1.12 55.72 0.98
KYF Kentucky First Bancorp of KY 17.04 17.04 1.13 6.76 5.02 1.11 6.68 0.18 263.19 0.76
NBN Northeast Bancorp of ME* 7.54 6.81 0.66 9.10 4.68 0.58 8.02 NA NA 1.12
NEP Northeast PA Fin. Corp of PA 18.26 18.26 0.62 3.38 2.90 0.62 3.38 0.22 178.76 0.64
PDB Piedmont Bancorp, Inc. of NC 16.09 16.09 1.24 7.56 5.92 1.22 7.43 0.48 142.37 0.82
SSB Scotland Bancorp, Inc. of NC 24.70 24.70 1.47 5.01 5.56 1.47 5.01 NA NA 0.60
SZB SouthFirst Bancshares of AL 10.07 9.83 0.55 4.64 3.54 0.52 4.37 1.04 46.23 0.75
SRN Southern Banc Company of AL 17.08 16.93 0.48 2.77 2.54 0.48 2.77 NA NA 0.19
SSM Stone Street Bancorp of NC 27.99 27.99 1.37 4.54 3.91 1.37 4.54 0.28 191.69 0.62
TSH Teche Holding Company of LA 13.83 13.83 0.93 6.90 5.55 0.92 6.84 0.20 423.05 0.98
FTF Texarkana Fst. Fin. Corp of AR 15.22 15.22 1.76 11.39 5.95 1.73 11.20 0.23 267.38 0.76
THR Three Rivers Fin. Corp. of MI 13.46 13.42 0.88 6.42 5.14 0.84 6.10 1.00 48.12 0.74
WSB Washington SB, FSB of MD 8.67 8.67 0.77 9.15 6.45 0.55 6.56 NA NA 0.99
WFI Winton Financial Corp. of OH 7.17 7.03 1.05 14.60 4.87 0.86 12.04 NA NA NA
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 9.02 8.87 0.75 8.78 6.50 0.51 5.98 1.71 26.55 0.62
FBER 1st Bergen Bancorp of NJ 11.69 11.69 0.75 5.40 4.08 0.75 5.40 0.95 104.08 2.38
AFED AFSALA Bancorp, Inc. of NY(8) 12.52 12.52 0.78 5.89 4.51 0.78 5.89 0.37 185.39 1.46
ALBK ALBANK Fin. Corp. of Albany NY 8.97 7.02 1.16 12.76 6.53 1.14 12.61 0.92 78.98 1.05
AMFC AMB Financial Corp. of IN 14.11 14.11 1.02 6.89 5.75 0.58 3.93 0.33 122.66 0.52
ASBP ASB Financial Corp. of OH 15.20 15.20 0.96 6.17 4.00 0.94 6.08 0.14 513.38 1.03
ABBK Abington Bancorp of MA* 6.29 5.72 0.86 12.72 6.76 0.73 10.78 0.14 310.69 0.72
AABC Access Anytime Bancorp of NM 8.09 8.09 1.45 18.31 11.13 1.35 17.02 0.14 335.63 0.77
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 20.78 279.39 15.22 NM 22.05 0.88 1.16 24.18
BYS Bay State Bancorp of MA* 26.43 117.29 24.29 117.29 26.43 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 22.23 226.45 15.66 259.03 19.04 0.22 0.66 14.77
DME Dime Bancorp, Inc. of NY* 23.54 265.00 15.63 323.63 29.25 0.20 0.66 15.63
DSL Downey Financial Corp. of CA 19.06 216.06 16.42 218.54 18.65 0.32 0.93 17.78
FED FirstFed Fin. Corp. of CA 20.48 229.52 13.12 231.10 21.17 0.00 0.00 0.00
GSB Golden State Bancorp of CA(8) 16.91 183.02 11.05 202.82 15.61 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 16.27 215.48 15.29 215.48 16.19 0.50 0.47 7.67
GPT GreenPoint Fin. Corp. of NY* 24.37 270.23 26.14 NM 23.53 0.64 1.56 38.10
JSB JSB Financial, Inc. of NY* 19.68 162.51 37.72 162.51 22.14 1.60 2.74 53.87
OCN Ocwen Financial Corp. of FL 17.72 334.19 43.71 NM NM 0.00 0.00 0.00
SIB Staten Island Bancorp of NY* NM 138.23 36.22 141.89 27.14 0.28 1.31 65.12
WES Westcorp Inc. of Orange CA 8.57 90.50 8.46 90.70 NM 0.20 1.67 14.29
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 20.51 133.68 20.51 133.68 21.85 0.44 1.88 38.60
ANE Alliance Bncp of New Eng of CT* 17.39 191.28 15.25 195.98 29.67 0.13 0.86 14.94
BKC American Bank of Waterbury CT* 15.61 218.94 19.74 225.92 18.67 0.76 2.75 42.94
BFD BostonFed Bancorp of MA 18.08 156.88 12.35 162.74 21.36 0.40 1.70 30.77
CNY Carver Bancorp, Inc. of NY NM 87.34 7.41 90.79 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 25.81 131.83 18.24 131.83 NM 0.00 0.00 0.00
EFC EFC Bancorp Inc of IL 24.11 108.70 25.84 108.70 24.11 0.00 0.00 0.00
EBI Equality Bancorp, Inc. of MO 28.93 129.10 14.43 129.10 NM 0.24 1.80 52.17
ESX Essex Bancorp of Norfolk VA(8) NM NM 1.99 NM NM 0.00 0.00 NM
FCB Falmouth Bancorp, Inc. of MA* 29.41 123.53 27.68 123.53 NM 0.24 1.20 35.29
FAB FirstFed America Bancorp of MA NM 136.18 15.21 136.18 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 18.41 134.19 18.80 135.45 19.47 0.56 2.77 50.91
HBS Haywood Bancshares, Inc. of NC* 12.93 125.97 18.71 130.07 12.93 0.60 2.64 34.09
KNK Kankakee Bancorp, Inc. of IL 16.14 126.97 12.25 152.62 16.59 0.48 1.35 21.82
KYF Kentucky First Bancorp of KY 19.94 140.12 23.87 140.12 20.19 0.50 3.17 63.29
NBN Northeast Bancorp of ME* 21.38 172.87 13.04 191.63 24.25 0.21 1.29 27.63
NEP Northeast PA Fin. Corp of PA NM 116.65 21.30 116.65 NM 0.00 0.00 0.00
PDB Piedmont Bancorp, Inc. of NC 16.89 123.94 19.95 123.94 17.20 0.40 4.15 70.18
SSB Scotland Bancorp, Inc. of NC 18.00 113.78 28.11 113.78 18.00 0.20 2.22 40.00
SZB SouthFirst Bancshares of AL 28.26 116.42 11.73 119.34 30.00 0.60 3.08 NM
SRN Southern Banc Company of AL NM 109.43 18.69 110.40 NM 0.35 2.17 NM
SSM Stone Street Bancorp of NC 25.56 120.78 33.80 120.78 25.56 0.46 2.31 58.97
TSH Teche Holding Company of LA 18.01 119.84 16.58 119.84 18.18 0.50 2.55 45.87
FTF Texarkana Fst. Fin. Corp of AR 16.81 186.05 28.32 186.05 17.10 0.56 1.88 31.64
THR Three Rivers Fin. Corp. of MI 19.44 122.19 16.45 122.57 20.46 0.44 2.26 44.00
WSB Washington SB, FSB of MD 15.50 136.33 11.82 136.33 21.61 0.10 1.40 21.74
WFI Winton Financial Corp. of OH 20.55 283.45 20.34 289.44 24.91 0.25 1.52 31.25
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 15.38 130.35 11.76 132.51 22.58 0.27 0.96 14.84
FBER 1st Bergen Bancorp of NJ 24.53 141.29 16.52 141.29 24.53 0.20 1.05 25.64
AFED AFSALA Bancorp, Inc. of NY(8) 22.19 135.46 16.97 135.46 22.19 0.28 1.42 31.46
ALBK ALBANK Fin. Corp. of Albany NY 15.32 183.53 16.46 234.68 15.50 0.84 1.60 24.56
AMFC AMB Financial Corp. of IN 17.38 117.44 16.57 117.44 NM 0.28 1.53 26.67
ASBP ASB Financial Corp. of OH 25.00 154.49 23.48 154.49 25.38 0.40 2.42 60.61
ABBK Abington Bancorp of MA* 14.80 190.72 11.99 209.75 17.45 0.20 1.08 16.00
AABC Access Anytime Bancorp of NM 8.98 151.72 12.27 151.72 9.66 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AFBC Advance Fin. Bancorp of WV 14.09 14.09 0.90 5.94 4.81 0.85 5.61 0.60 51.29 0.35
AFCB Affiliated Comm BC, Inc of MA(8) 10.16 10.12 1.09 11.03 4.80 1.04 10.55 0.41 186.48 1.24
ALBC Albion Banc Corp. of Albion NY 8.54 8.54 0.48 5.58 4.74 0.46 5.33 0.55 67.74 0.50
ABCL Alliance Bancorp, Inc. of IL 8.59 8.49 0.89 9.72 5.79 0.91 9.97 0.22 156.51 0.56
ALLB Alliance Bank MHC of PA (19.9) 10.72 10.72 0.80 7.09 1.82 0.80 7.09 1.38 41.98 1.02
AHCI Ambanc Holding Co., Inc. of NY* 11.69 11.69 0.51 4.18 3.22 0.41 3.34 0.62 122.28 1.37
ASBI Ameriana Bancorp of IN 11.64 11.42 0.96 8.54 5.87 0.82 7.28 0.47 64.16 0.41
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.30 1.06 16.56 5.59 0.94 14.75 0.68 160.68 1.34
ANDB Andover Bancorp, Inc. of MA* 7.93 7.93 1.06 13.22 6.21 1.03 12.84 0.49 184.92 1.24
ASFC Astoria Financial Corp. of NY 7.96 5.63 0.81 10.29 5.05 0.74 9.46 0.54 67.50 0.85
AVND Avondale Fin. Corp. of IL 7.60 7.60 -0.78 -9.53 -8.11 -0.56 -6.82 1.14 84.08 2.31
BKCT Bancorp Connecticut of CT* 10.04 10.04 1.42 13.66 6.06 1.22 11.76 0.74 151.22 2.06
BPLS Bank Plus Corp. of CA 4.40 4.02 0.31 6.79 4.68 0.36 7.89 1.64 69.52 1.66
BNKU Bank United Corp. of TX 4.98 4.50 0.87 17.22 6.50 0.82 16.38 0.65 52.00 0.44
BWFC Bank West Fin. Corp. of MI 13.01 13.01 0.66 4.68 2.85 0.53 3.76 0.44 35.64 0.23
BANC BankAtlantic Bancorp of FL 6.16 5.16 0.89 15.06 6.00 0.39 6.51 1.17 72.73 1.12
BKUNA BankUnited Fin. Corp. of FL 4.38 3.80 0.28 6.84 2.45 0.21 5.21 0.44 32.93 0.19
BVCC Bay View Capital Corp. of CA 7.28 4.66 0.38 6.07 2.11 0.60 9.46 0.37 244.94 1.22
FSNJ Bayonne Banchsares of NJ 15.76 15.76 0.46 3.99 1.85 0.65 5.73 1.01 48.09 1.27
BFSB Bedford Bancshares, Inc. of VA 13.29 13.29 1.20 8.51 5.00 1.19 8.45 0.43 112.25 0.60
BFFC Big Foot Fin. Corp. of IL 18.28 18.28 0.52 2.95 2.27 0.45 2.55 0.09 150.75 0.28
BYFC Broadway Fin. Corp. of CA 10.13 10.13 0.48 4.65 6.27 0.33 3.23 1.22 69.07 1.01
BRKL Brookline Bncp MHC of MA(47.0) 17.16 17.16 0.78 4.56 2.39 0.78 4.56 0.62 245.94 2.30
CBES CBES Bancorp, Inc. of MO 14.23 14.23 1.04 6.29 5.67 0.86 5.22 0.53 92.07 0.54
CCFH CCF Holding Company of GA 8.09 8.09 0.14 1.36 0.82 -0.13 -1.21 0.41 123.98 0.67
CFSB CFSB Bancorp of Lansing MI 7.72 7.72 1.32 17.09 5.08 1.20 15.58 0.08 724.89 0.65
CKFB CKF Bancorp of Danville KY 21.33 21.33 1.87 8.17 7.05 1.41 6.16 0.43 48.87 0.23
CNSB CNS Bancorp, Inc. of MO 24.68 24.68 0.91 3.68 3.08 0.84 3.41 0.10 422.34 0.59
CSBF CSB Financial Group Inc of IL 24.00 22.65 0.50 2.01 2.11 0.43 1.73 0.95 39.74 0.66
CBCI Calumet Bancorp of Chicago IL 17.49 17.49 2.08 12.69 8.84 2.08 12.72 1.45 82.15 1.53
CAFI Camco Fin. Corp. of OH 9.89 9.29 1.26 13.08 6.00 0.95 9.90 0.68 43.07 0.35
CMRN Cameron Fin. Corp. of MO 20.78 20.78 1.16 5.38 4.66 1.13 5.26 0.81 95.78 0.94
CAPS Capital Savings Bancorp of MO(8) 10.13 10.13 1.10 11.90 6.70 0.94 10.19 0.38 91.74 0.43
CFNC Carolina Fincorp of NC* 22.35 22.35 0.92 4.05 3.25 1.06 4.64 0.15 226.37 0.49
CASB Cascade Financial Corp. of WA 6.98 6.98 0.77 11.70 4.73 0.73 11.05 0.42 226.15 1.08
CATB Catskill Fin. Corp. of NY* 23.42 23.42 1.33 5.36 4.95 1.32 5.30 0.29 219.08 1.49
CAVB Cavalry Bancorp of TN 28.43 28.43 1.48 7.18 2.76 1.02 4.98 0.01 NA 1.23
CNIT Cenit Bancorp of Norfolk VA 6.88 6.34 0.90 12.81 5.55 0.84 11.92 0.36 145.18 0.72
CEBK Central Co-Op. Bank of MA* 9.82 8.88 0.81 8.09 5.09 0.74 7.40 0.42 185.68 1.08
CENB Century Bancorp, Inc. of NC(8) 17.75 17.75 1.33 4.81 5.23 1.33 4.81 0.37 144.73 0.82
COFI Charter One Financial of OH 7.37 6.91 0.87 12.46 3.18 1.21 17.31 0.38 151.36 0.87
CVAL Chester Valley Bancorp of PA 8.67 8.67 1.02 11.89 4.77 0.93 10.80 0.24 390.28 1.21
CTZN CitFed Bancorp of Dayton OH(8) 6.26 5.76 0.89 14.17 4.49 0.90 14.36 0.32 137.85 0.78
CLAS Classic Bancshares, Inc. of KY 15.06 12.84 0.83 5.60 5.65 0.97 6.53 0.42 148.74 0.92
CBSA Coastal Bancorp of Houston TX 3.73 3.21 0.49 13.88 7.27 0.50 14.27 0.57 50.93 0.64
CFCP Coastal Fin. Corp. of SC 6.03 6.03 1.22 19.88 5.15 1.01 16.41 0.91 98.94 1.22
CMSB Commonwealth Bancorp Inc of PA 9.12 7.29 0.68 7.23 4.00 0.51 5.43 0.42 90.64 0.64
CMSV Commty. Svgs, MHC of FL (48.5) 10.80 10.80 0.74 6.58 2.99 0.68 6.07 0.26 134.87 0.55
CFTP Community Fed. Bancorp of MS 23.61 23.61 1.20 4.37 3.37 1.14 4.15 0.49 48.59 0.44
CFFC Community Fin. Corp. of VA 13.63 13.58 1.06 7.80 4.71 1.08 7.91 0.44 129.75 0.65
CIBI Community Inv. Bancorp of OH 10.99 10.99 0.94 8.15 4.98 0.94 8.15 0.56 89.73 0.61
COOP Cooperative Bancshares of NC 7.64 7.64 0.63 8.22 4.22 0.57 7.46 0.16 167.34 0.35
CRZY Crazy Woman Creek Bncorp of WY 23.58 23.58 1.27 5.13 4.34 1.29 5.20 0.09 511.11 0.94
DNFC D&N Financial Corp. of MI 5.44 5.40 0.87 15.78 6.21 0.77 14.04 0.56 101.76 0.77
DCBI Delphos Citizens Bancorp of OH 24.95 24.95 1.60 5.91 4.44 1.60 5.91 0.56 17.75 0.12
DIME Dime Community Bancorp of NY* 12.01 10.44 0.83 6.19 3.24 0.79 5.86 0.48 159.03 1.36
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AFBC Advance Fin. Bancorp of WV 20.79 127.41 17.95 127.41 22.02 0.32 1.73 35.96
AFCB Affiliated Comm BC, Inc of MA(8) 20.84 217.59 22.12 218.59 21.78 0.60 1.56 32.61
ALBC Albion Banc Corp. of Albion NY 21.11 114.73 9.80 114.73 22.09 0.12 1.26 26.67
ABCL Alliance Bancorp, Inc. of IL 17.26 162.52 13.96 164.41 16.82 0.44 1.64 28.39
ALLB Alliance Bank MHC of PA (19.9) NM NM 40.80 NM NM 0.36 1.06 58.06
AHCI Ambanc Holding Co., Inc. of NY* NM 130.55 15.26 130.55 NM 0.24 1.29 40.00
ASBI Ameriana Bancorp of IN 17.03 142.09 16.53 144.79 19.95 0.64 3.24 55.17
ABCW Anchor Bancorp Wisconsin of WI 17.88 286.69 18.35 291.39 20.07 0.36 0.88 15.72
ANDB Andover Bancorp, Inc. of MA* 16.10 201.12 15.95 201.12 16.57 0.72 2.11 33.96
ASFC Astoria Financial Corp. of NY 19.82 165.18 13.14 233.39 21.55 0.80 1.47 29.20
AVND Avondale Fin. Corp. of IL NM 125.31 9.52 125.31 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 16.50 213.24 21.40 213.24 19.17 0.54 2.68 44.26
BPLS Bank Plus Corp. of CA 21.37 138.45 6.09 151.26 18.40 0.00 0.00 0.00
BNKU Bank United Corp. of TX 15.39 244.94 12.20 271.04 16.18 0.64 1.26 19.45
BWFC Bank West Fin. Corp. of MI NM 161.03 20.94 161.03 NM 0.24 1.67 58.54
BANC BankAtlantic Bancorp of FL 16.67 205.17 12.63 245.01 NM 0.10 0.74 12.35
BKUNA BankUnited Fin. Corp. of FL NM 181.65 7.96 209.41 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA NM 167.97 12.22 262.41 NM 0.40 1.24 58.82
FSNJ Bayonne Banchsares of NJ NM 152.87 24.08 152.87 NM 0.17 1.05 56.67
BFSB Bedford Bancshares, Inc. of VA 20.00 163.75 21.76 163.75 20.14 0.56 1.93 38.62
BFFC Big Foot Fin. Corp. of IL NM 127.17 23.25 127.17 NM 0.00 0.00 0.00
BYFC Broadway Fin. Corp. of CA 15.94 72.94 7.39 72.94 22.92 0.20 1.82 28.99
BRKL Brookline Bncp MHC of MA(47.0) NM 190.54 32.70 190.54 NM 0.00 0.00 0.00
CBES CBES Bancorp, Inc. of MO 17.63 117.02 16.66 117.02 21.27 0.40 1.94 34.19
CCFH CCF Holding Company of GA NM 170.41 13.79 170.41 NM 0.64 2.91 NM
CFSB CFSB Bancorp of Lansing MI 19.67 336.48 25.99 336.48 21.57 0.47 1.76 34.56
CKFB CKF Bancorp of Danville KY 14.18 121.72 25.96 121.72 18.81 0.50 2.63 37.31
CNSB CNS Bancorp, Inc. of MO NM 119.75 29.55 119.75 NM 0.24 1.37 44.44
CSBF CSB Financial Group Inc of IL NM 99.13 23.80 105.04 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 11.31 134.62 23.54 134.62 11.27 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 16.67 188.86 18.69 201.23 22.01 0.58 1.97 32.77
CMRN Cameron Fin. Corp. of MO 21.45 113.79 23.65 113.79 21.91 0.28 1.37 29.47
CAPS Capital Savings Bancorp of MO(8) 14.93 167.07 16.92 167.07 17.44 0.24 1.16 17.27
CFNC Carolina Fincorp of NC* NM 121.96 27.25 121.96 26.89 0.24 1.42 43.64
CASB Cascade Financial Corp. of WA 21.15 215.57 15.05 215.57 22.38 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.21 111.84 26.20 111.84 20.45 0.32 1.84 37.21
CAVB Cavalry Bancorp of TN NM 170.07 48.35 170.07 NM 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 18.02 229.06 15.76 248.40 19.38 0.40 1.72 31.01
CEBK Central Co-Op. Bank of MA* 19.63 151.93 14.92 168.05 21.45 0.32 1.15 22.54
CENB Century Bancorp, Inc. of NC(8) 19.10 138.89 24.66 138.89 19.10 0.68 3.36 64.15
COFI Charter One Financial of OH NM 317.25 23.38 338.42 22.61 0.56 1.58 49.56
CVAL Chester Valley Bancorp of PA 20.97 233.72 20.26 233.72 23.10 0.44 1.38 28.95
CTZN CitFed Bancorp of Dayton OH(8) 22.29 291.59 18.24 316.52 21.99 0.36 0.73 16.29
CLAS Classic Bancshares, Inc. of KY 17.71 96.75 14.57 113.41 15.18 0.28 1.88 33.33
CBSA Coastal Bancorp of Houston TX 13.76 177.40 6.61 205.81 13.38 0.48 1.23 16.96
CFCP Coastal Fin. Corp. of SC 19.42 NM 21.42 NM 23.53 0.27 1.35 26.21
CMSB Commonwealth Bancorp Inc of PA 25.00 178.97 16.33 223.88 NM 0.32 1.33 33.33
CMSV Commty. Svgs, MHC of FL (48.5) NM 214.15 23.13 214.15 NM 0.90 2.61 NM
CFTP Community Fed. Bancorp of MS 29.66 132.08 31.18 132.08 NM 0.32 1.83 54.24
CFFC Community Fin. Corp. of VA 21.23 158.81 21.65 159.47 20.95 0.28 1.81 38.36
CIBI Community Inv. Bancorp of OH 20.10 163.22 17.93 163.22 20.10 0.32 1.56 31.37
COOP Cooperative Bancshares of NC 23.68 184.43 14.08 184.43 26.09 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 23.05 116.55 27.48 116.55 22.76 0.40 2.25 51.95
DNFC D&N Financial Corp. of MI 16.10 235.85 12.84 237.99 18.10 0.20 0.76 12.27
DCBI Delphos Citizens Bancorp of OH 22.53 138.89 34.66 138.89 22.53 0.00 0.00 0.00
DIME Dime Community Bancorp of NY* NM 190.54 22.87 219.03 NM 0.36 1.24 38.30
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIBK Dime Financial Corp. of CT(8)* 8.11 7.92 1.70 21.06 8.58 1.69 20.92 0.29 396.36 3.17
ESBF ESB Financial Corp of PA 7.20 6.42 0.70 9.13 5.63 0.69 9.04 0.44 116.49 1.37
EGLB Eagle BancGroup of IL 11.47 11.47 0.34 2.87 2.53 0.17 1.43 1.27 41.32 0.77
EBSI Eagle Bancshares of Tucker GA 7.83 7.83 0.66 8.05 4.06 0.67 8.14 1.18 56.90 0.92
ETFS East Texas Fin. Serv. of TX 17.43 17.43 0.60 3.31 2.86 0.54 3.01 0.41 47.58 0.38
ESBK Elmira Svgs Bank (The) of NY* 6.21 6.21 0.44 7.04 4.75 0.47 7.45 0.68 97.63 0.85
EMLD Emerald Financial Corp. of OH 8.27 8.15 1.09 13.88 4.83 1.00 12.80 0.38 73.95 0.37
EFBC Empire Federal Bancorp of MT 36.97 36.97 1.45 4.91 3.67 1.45 4.91 0.01 NA 0.43
EFBI Enterprise Fed. Bancorp of OH 10.75 10.74 0.81 6.91 3.54 0.74 6.28 0.01 NA 0.29
EQSB Equitable FSB of Wheaton MD 5.18 5.18 0.72 14.03 6.10 0.70 13.57 0.39 NA NA
FCBF FCB Fin. Corp. of Neenah WI 14.09 14.09 1.15 7.62 3.91 0.84 5.61 0.26 269.82 0.89
FFDF FFD Financial Corp. of OH 22.27 22.27 1.73 7.25 4.64 0.78 3.26 0.08 329.27 0.40
FFLC FFLC Bancorp of Leesburg FL 12.71 12.71 0.98 7.28 5.02 0.92 6.84 0.31 147.07 0.56
FFWC FFW Corporation of Wabash IN 9.58 8.79 1.01 10.48 7.47 0.98 10.15 0.33 113.70 0.57
FFYF FFY Financial Corp. of OH 13.10 13.10 1.28 9.36 5.87 1.26 9.21 0.53 81.15 0.60
FMCO FMS Financial Corp. of NJ 5.95 5.89 0.90 14.36 5.00 0.90 14.29 0.70 68.15 1.05
FFHH FSF Financial Corp. of MN 10.40 10.40 0.83 7.50 5.79 0.80 7.23 0.18 131.50 0.34
FOBC Fed One Bancorp of Wheeling WV(8) 11.24 10.79 0.86 7.66 3.56 0.85 7.60 0.29 141.57 0.90
FBCI Fidelity Bancorp of Chicago IL 10.78 10.77 0.21 2.04 1.60 0.62 5.95 0.29 33.82 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.84 6.84 0.75 10.93 5.92 0.74 10.78 0.08 658.57 1.05
FFFL Fidelity Bcsh MHC of FL (47.7) 6.70 6.50 0.66 8.52 3.72 0.57 7.32 0.32 75.42 0.36
FFED Fidelity Fed. Bancorp of IN 6.78 6.78 -0.34 -5.64 -3.39 -0.26 -4.29 0.38 613.16 2.77
FFOH Fidelity Financial of OH 12.05 10.67 0.92 7.30 5.01 0.89 7.05 0.18 174.24 0.39
FIBC Financial Bancorp, Inc. of NY 9.04 9.00 0.94 10.24 5.89 0.92 9.99 2.19 23.74 0.93
FBSI First Bancshares, Inc. of MO 13.42 12.86 1.11 7.98 6.51 1.06 7.60 0.87 33.59 0.36
FBBC First Bell Bancorp of PA 11.22 11.22 1.09 10.37 5.84 1.06 10.10 0.07 156.05 0.13
SKBO First Carnegie MHC of PA(45.0) 17.20 17.20 0.64 4.58 2.10 0.71 5.13 0.78 47.72 0.85
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.63 6.94 1.75 18.43 1.12 99.21 1.46
FCBK First Coastal Bankshares of VA(8) 7.14 7.14 0.69 9.82 4.74 0.53 7.51 1.34 51.28 0.93
FCME First Coastal Corp. of ME* 10.06 10.06 0.85 8.88 6.71 0.74 7.75 0.50 358.51 2.48
FFBA First Colorado Bancorp of CO(8) 13.46 13.19 1.31 9.83 4.12 1.24 9.33 0.18 176.16 0.41
FDEF First Defiance Fin.Corp. of OH 17.64 17.64 0.95 4.82 4.42 0.90 4.60 0.31 158.28 0.62
FESX First Essex Bancorp of MA* 7.04 6.21 0.84 11.58 6.01 0.77 10.56 0.54 152.35 1.49
FFSX First FSB MHC Sxld of IA(46.1) 7.21 5.70 0.68 8.30 3.18 0.69 8.38 0.36 122.22 0.61
FFES First Fed of E. Hartford CT 6.92 6.92 0.58 8.72 5.73 0.64 9.68 0.31 85.02 1.32
BDJI First Fed. Bancorp. of MN 10.89 10.89 0.68 6.36 4.00 0.68 6.36 0.24 161.48 0.81
FFBH First Fed. Bancshares of AR 14.76 14.76 1.00 6.61 4.05 0.94 6.25 0.85 21.71 0.24
FTFC First Fed. Capital Corp. of WI 7.17 6.80 1.18 17.50 5.69 0.90 13.28 0.21 229.95 0.61
FFKY First Fed. Fin. Corp. of KY 13.21 12.51 1.63 12.01 5.74 1.59 11.69 0.47 94.14 0.52
FFBZ First Federal Bancorp of OH 7.62 7.61 0.90 11.79 4.76 0.89 11.69 0.46 219.63 1.18
FFCH First Fin. Holdings Inc. of SC 6.36 6.36 0.88 14.12 4.87 0.85 13.62 1.26 51.68 0.80
FFHS First Franklin Corp. of OH 9.24 9.20 0.82 9.03 6.13 0.71 7.82 0.49 92.09 0.68
FGHC First Georgia Hold. Corp of GA 8.09 7.55 1.13 13.67 4.30 1.13 13.67 1.64 38.60 0.72
FSPG First Home Bancorp of NJ(8) 7.00 6.91 0.88 12.87 5.49 0.86 12.64 0.80 82.62 1.30
FFSL First Independence Corp. of KS 9.28 9.28 0.66 6.57 5.64 0.66 6.57 0.51 102.98 0.76
FISB First Indiana Corp. of IN 9.26 9.16 1.15 12.13 5.51 0.87 9.14 1.38 103.15 1.70
FKFS First Keystone Fin. Corp of PA 6.67 6.67 0.77 11.25 6.03 0.68 9.96 1.34 34.27 0.89
FLKY First Lancaster Bncshrs of KY 26.64 26.64 1.03 3.44 3.29 1.03 3.44 1.70 18.91 0.36
FLFC First Liberty Fin. Corp. of GA 7.59 6.90 0.76 10.21 3.43 0.78 10.59 0.82 114.75 1.38
CASH First Midwest Fin., Inc. of OH 10.39 9.24 0.59 5.41 3.78 0.52 4.73 1.11 78.58 1.40
FMBD First Mutual Bancorp Inc of IL 14.15 10.96 0.32 2.39 2.10 0.25 1.87 0.43 85.81 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.03 15.35 6.18 1.01 15.06 0.15 714.97 1.23
FNGB First Northern Cap. Corp of WI 11.10 11.10 0.96 8.56 5.19 0.90 8.07 0.12 405.46 0.54
FFPB First Palm Beach Bancorp of FL 6.37 6.23 0.56 8.55 4.24 0.43 6.57 0.57 62.53 0.61
FWWB First Savings Bancorp of WA 13.38 12.39 1.21 8.51 5.04 1.14 8.04 0.25 263.53 0.97
FSFF First SecurityFed Fin of IL 29.09 28.99 0.66 4.22 1.68 1.29 8.28 0.37 158.47 0.96
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIBK Dime Financial Corp. of CT(8)* 11.66 220.43 17.88 225.90 11.74 0.48 1.39 16.16
ESBF ESB Financial Corp of PA 17.77 153.25 11.03 171.69 17.95 0.33 1.82 32.35
EGLB Eagle BancGroup of IL NM 112.47 12.90 112.47 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 24.61 184.61 14.46 184.61 24.36 0.64 2.71 66.67
ETFS East Texas Fin. Serv. of TX NM 114.96 20.04 114.96 NM 0.20 1.27 44.44
ESBK Elmira Svgs Bank (The) of NY* 21.04 149.01 9.26 149.01 19.90 0.64 2.19 46.04
EMLD Emerald Financial Corp. of OH 20.70 267.14 22.08 270.96 22.46 0.14 1.06 21.88
EFBC Empire Federal Bancorp of MT 27.26 106.19 39.26 106.19 27.26 0.32 1.92 52.46
EFBI Enterprise Fed. Bancorp of OH 28.28 191.13 20.55 191.26 NM 1.00 3.57 NM
EQSB Equitable FSB of Wheaton MD 16.40 214.04 11.09 214.04 16.94 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 25.60 168.69 23.78 168.69 NM 0.88 2.75 70.40
FFDF FFD Financial Corp. of OH 21.56 152.30 33.92 152.30 NM 0.30 1.28 27.52
FFLC FFLC Bancorp of Leesburg FL 19.93 145.24 18.46 145.24 21.19 0.36 1.79 35.64
FFWC FFW Corporation of Wabash IN 13.39 129.47 12.41 141.08 13.82 0.42 2.47 33.07
FFYF FFY Financial Corp. of OH 17.04 157.93 20.68 157.93 17.31 0.80 2.43 41.45
FMCO FMS Financial Corp. of NJ 20.00 271.08 16.12 273.72 20.09 0.36 0.80 16.00
FFHH FSF Financial Corp. of MN 17.27 131.12 13.63 131.12 17.92 0.50 2.63 45.45
FOBC Fed One Bancorp of Wheeling WV(8) 28.10 210.02 23.60 218.77 28.32 0.62 1.71 48.06
FBCI Fidelity Bancorp of Chicago IL NM 124.96 13.48 125.16 21.42 0.40 1.73 NM
FSBI Fidelity Bancorp, Inc. of PA 16.90 171.31 11.71 171.31 17.14 0.36 1.50 25.35
FFFL Fidelity Bcsh MHC of FL (47.7) 26.87 220.98 14.81 227.81 NM 0.90 3.13 NM
FFED Fidelity Fed. Bancorp of IN NM 172.43 11.69 172.43 NM 0.40 5.42 NM
FFOH Fidelity Financial of OH 19.98 149.31 17.99 168.57 20.69 0.32 1.84 36.78
FIBC Financial Bancorp, Inc. of NY 16.98 167.38 15.12 168.09 17.41 0.50 1.82 30.86
FBSI First Bancshares, Inc. of MO 15.36 118.06 15.84 123.19 16.14 0.12 0.94 14.46
FBBC First Bell Bancorp of PA 17.12 172.27 19.33 172.27 17.58 0.40 2.03 34.78
SKBO First Carnegie MHC of PA(45.0) NM 181.56 31.22 181.56 NM 0.30 1.54 73.17
FSTC First Citizens Corp of GA 14.42 251.22 25.42 318.60 16.15 0.32 1.03 14.88
FCBK First Coastal Bankshares of VA(8) 21.11 200.22 14.29 200.22 27.60 0.00 0.00 0.00
FCME First Coastal Corp. of ME* 14.89 126.13 12.68 126.13 17.07 0.00 0.00 0.00
FFBA First Colorado Bancorp of CO(8) 24.26 230.14 30.97 234.86 25.56 0.52 1.82 44.07
FDEF First Defiance Fin.Corp. of OH 22.64 119.14 21.02 119.14 23.71 0.36 2.41 54.55
FESX First Essex Bancorp of MA* 16.64 187.18 13.18 212.29 18.25 0.56 2.47 41.18
FFSX First FSB MHC Sxld of IA(46.1) NM 251.55 18.13 317.94 NM 0.48 1.32 41.38
FFES First Fed of E. Hartford CT 17.46 144.50 9.99 144.50 15.73 0.68 1.86 32.54
BDJI First Fed. Bancorp. of MN 25.00 155.87 16.98 155.87 25.00 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 24.67 159.19 23.50 159.19 26.08 0.28 1.02 25.23
FTFC First Fed. Capital Corp. of WI 17.59 285.95 20.50 301.46 23.18 0.56 1.60 28.14
FFKY First Fed. Fin. Corp. of KY 17.43 203.53 26.89 214.92 17.91 0.56 2.11 36.84
FFBZ First Federal Bancorp of OH 21.02 238.09 18.14 238.32 21.20 0.28 1.15 24.14
FFCH First Fin. Holdings Inc. of SC 20.54 264.37 16.82 264.37 21.30 0.42 1.83 37.50
FFHS First Franklin Corp. of OH 16.31 142.63 13.18 143.35 18.82 0.27 1.58 25.71
FGHC First Georgia Hold. Corp of GA 23.25 298.42 24.15 320.05 23.25 0.40 3.02 70.18
FSPG First Home Bancorp of NJ(8) 18.20 220.78 15.45 223.64 18.53 0.40 1.28 23.39
FFSL First Independence Corp. of KS 17.72 115.80 10.75 115.80 17.72 0.00 0.00 0.00
FISB First Indiana Corp. of IN 18.13 209.86 19.43 212.11 24.07 0.48 1.86 33.80
FKFS First Keystone Fin. Corp of PA 16.59 176.22 11.75 176.22 18.75 0.20 1.07 17.70
FLKY First Lancaster Bncshrs of KY NM 103.96 27.69 103.96 NM 0.50 3.23 NM
FLFC First Liberty Fin. Corp. of GA 29.12 286.67 21.76 315.46 28.09 0.30 1.26 36.59
CASH First Midwest Fin., Inc. of OH 26.42 146.04 15.17 164.19 NM 0.48 2.06 54.55
FMBD First Mutual Bancorp Inc of IL NM 112.72 15.95 145.58 NM 0.32 1.82 NM
FMSB First Mutual SB of Bellevue WA* 16.19 231.29 15.70 231.29 16.50 0.20 1.18 19.05
FNGB First Northern Cap. Corp of WI 19.29 160.14 17.78 160.14 20.45 0.36 2.67 51.43
FFPB First Palm Beach Bancorp of FL 23.59 191.28 12.19 195.63 NM 0.70 1.60 37.63
FWWB First Savings Bancorp of WA 19.84 167.00 22.34 180.25 21.01 0.36 1.44 28.57
FSFF First SecurityFed Fin of IL NM 116.39 33.86 116.79 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SHEN First Shenango Bancorp of PA(8) 11.98 11.98 1.09 9.41 5.09 1.11 9.59 0.97 83.39 1.27
FSLA First Source Bancorp of NJ 20.55 20.55 1.09 5.31 4.10 1.09 5.31 0.47 115.69 1.04
SOPN First Svgs Bancorp of NC 23.03 23.03 1.78 7.65 6.02 1.78 7.65 0.16 125.31 0.30
FBNW FirstBank Corp of Clarkston WA 16.36 16.36 1.03 7.72 4.14 0.62 4.67 0.73 83.64 0.76
FFDB FirstFed Bancorp, Inc. of AL 9.69 8.90 0.96 9.89 5.92 0.96 9.89 1.42 45.57 0.95
FSPT FirstSpartan Fin. Corp. of SC 26.29 26.29 1.33 6.94 3.42 1.32 6.89 0.35 115.67 0.49
FLAG Flag Financial Corp of GA 8.89 8.89 0.87 9.46 2.38 0.62 6.67 0.99 91.47 1.30
FLGS Flagstar Bancorp, Inc of MI 5.21 5.04 1.30 21.55 7.64 1.30 21.55 2.32 11.78 0.31
FFIC Flushing Fin. Corp. of NY* 12.72 12.23 0.92 6.57 4.26 0.93 6.63 0.31 199.94 1.04
FBHC Fort Bend Holding Corp. of TX(8) 6.77 6.35 0.78 12.28 5.94 0.57 9.06 0.47 114.18 1.02
FTSB Fort Thomas Fin. Corp. of KY 15.77 15.77 1.23 7.71 5.47 1.23 7.71 2.22 19.86 0.49
FKKY Frankfort First Bancorp of KY 16.95 16.95 0.25 1.31 1.23 0.80 4.26 0.12 63.29 0.08
FTNB Fulton Bancorp, Inc. of MO 23.37 23.37 1.22 5.01 3.80 0.95 3.88 0.70 126.01 1.06
GUPB GFSB Bancorp, Inc of Gallup NM 12.34 12.34 0.91 6.67 5.10 0.91 6.67 0.37 86.67 0.54
GSLA GS Financial Corp. of LA 41.63 41.63 1.44 3.79 3.22 1.29 3.39 0.13 264.81 0.77
GOSB GSB Financial Corp. of NY* 28.14 28.14 0.73 3.54 2.28 0.69 3.36 0.10 147.83 0.24
GBNK Gaston Fed Bncp MHC of NC(47.0 22.48 22.48 1.13 5.02 2.73 1.13 5.02 0.32 134.01 0.92
GFCO Glenway Financial Corp. of OH 9.57 9.49 0.86 9.12 4.63 0.86 9.04 0.19 184.71 0.41
GTPS Great American Bancorp of IL 18.33 18.33 0.66 3.24 2.65 0.66 3.24 0.11 346.45 0.48
PEDE Great Pee Dee Bancorp of SC 37.86 37.86 1.57 4.15 3.61 1.57 4.15 0.73 65.48 0.59
GSBC Great Southern Bancorp of MO 8.20 8.14 1.89 21.95 6.92 1.69 19.67 1.51 129.74 2.39
GSFC Green Street Fin. Corp. of NC 35.78 35.78 1.60 4.49 4.03 1.60 4.49 0.18 78.95 0.19
GFED Guaranty Fed Bancshares of MO 28.34 28.34 1.12 5.49 3.01 1.09 5.34 0.59 152.53 1.14
HCBB HCB Bancshares of Camden AR 18.65 17.99 0.30 2.05 1.45 0.30 2.05 0.23 316.88 1.42
HEMT HF Bancorp of Hemet CA 7.86 6.67 -0.04 -0.54 -0.42 0.13 1.61 0.95 59.24 1.00
HFFC HF Financial Corp. of SD 9.72 9.72 1.09 11.50 5.94 1.01 10.69 0.49 196.91 1.26
HFNC HFNC Financial Corp. of NC(8) 17.24 17.24 1.34 7.36 5.69 0.92 5.05 0.73 98.43 0.89
HMNF HMN Financial, Inc. of MN 11.60 10.79 0.93 6.97 5.17 0.66 4.95 0.12 327.35 0.61
HALL Hallmark Capital Corp. of WI 7.68 7.68 0.67 9.13 6.33 0.64 8.65 0.27 197.24 0.78
HRBF Harbor Federal Bancorp of MD 12.69 12.69 0.75 5.86 4.60 0.72 5.62 0.42 50.26 0.33
HARB Harbor Florida Bancshrs of FL 19.81 19.60 1.25 11.33 3.94 1.20 10.84 0.47 198.97 1.33
HFSA Hardin Bancorp of Hardin MO 11.13 11.13 0.77 6.54 5.47 0.66 5.61 0.19 110.22 0.40
HARL Harleysville SB of PA 6.67 6.67 1.01 15.23 6.42 1.01 15.23 NA NA 0.79
HFGI Harrington Fin. Group of IN 4.42 4.42 -0.02 -0.40 -0.26 0.04 0.94 0.16 23.48 0.16
HARS Harris Fin. MHC of PA (24.3) 8.12 7.30 0.88 10.93 2.26 0.72 8.95 0.66 60.87 0.99
HFFB Harrodsburg 1st Fin Bcrp of KY 26.46 26.46 1.36 5.08 4.68 1.36 5.08 0.44 79.96 0.45
HHFC Harvest Home Fin. Corp. of OH 11.12 11.12 0.77 6.53 5.07 0.67 5.67 0.23 56.81 0.27
HAVN Haven Bancorp of Woodhaven NY 5.65 5.64 0.53 9.11 4.17 0.53 9.03 0.57 112.56 1.08
HTHR Hawthorne Fin. Corp. of CA 4.25 4.25 0.97 21.97 16.29 1.14 25.72 6.04 22.28 1.46
HMLK Hemlock Fed. Fin. Corp. of IL 16.20 16.20 0.99 5.53 4.62 0.99 5.53 0.23 175.34 0.94
HBSC Heritage Bancorp, Inc of SC 28.79 28.79 1.16 4.02 3.80 1.16 4.02 NA NA 0.38
HFWA Heritage Financial Corp of WA 28.80 28.80 1.11 5.92 2.49 0.57 3.04 0.12 761.93 1.28
HCBC High Country Bancorp of CO 19.56 19.56 0.84 5.87 3.53 0.84 5.87 0.45 167.06 0.94
HBNK Highland Bancorp of CA 7.84 7.84 1.30 17.06 6.81 1.13 14.83 1.95 84.08 2.06
HIFS Hingham Inst. for Sav. of MA* 9.48 9.48 1.25 13.13 6.00 1.25 13.13 0.42 166.84 0.89
HBEI Home Bancorp of Elgin IL(8) 25.92 25.92 0.70 2.57 2.25 0.70 2.57 0.32 93.09 0.36
HBFW Home Bancorp of Fort Wayne IN 12.03 12.03 0.86 6.72 3.92 0.84 6.56 0.08 463.00 0.45
HCFC Home City Fin. Corp. of OH 18.58 18.58 1.29 6.57 6.92 1.29 6.57 0.65 90.76 0.66
HOMF Home Fed Bancorp of Seymour IN 9.20 8.95 1.45 16.58 6.50 1.17 13.44 0.53 107.55 0.68
HWEN Home Financial Bancorp of IN 17.99 17.99 0.94 5.32 4.60 0.74 4.18 1.32 53.55 0.86
HLFC Home Loan Financial Corp of OH 38.94 38.94 1.30 5.70 2.39 1.30 5.70 0.44 56.90 0.36
HPBC Home Port Bancorp, Inc. of MA* 9.78 9.78 1.47 14.04 6.09 1.63 15.59 0.29 430.57 1.49
HFBC HopFed Bancorp of KY 25.98 25.98 1.12 10.32 3.19 1.12 10.32 0.15 70.97 0.23
HZFS Horizon Fin'l. Services of IA 9.11 9.11 0.91 9.24 5.33 0.70 7.08 0.92 45.20 0.69
HRZB Horizon Financial Corp. of WA* 15.33 15.33 1.55 10.00 6.29 1.54 9.91 0.01 NA 0.83
IBSF IBS Financial Corp. of NJ(8) 17.36 17.36 0.82 4.70 3.05 0.82 4.70 0.09 156.87 0.47
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SHEN First Shenango Bancorp of PA(8) 19.64 176.74 21.17 176.74 19.28 0.60 1.45 28.57
FSLA First Source Bancorp of NJ 24.39 129.53 26.62 129.53 24.39 0.12 1.20 29.27
SOPN First Svgs Bancorp of NC 16.61 124.93 28.77 124.93 16.61 1.00 4.30 71.43
FBNW FirstBank Corp of Clarkston WA 24.13 137.14 22.43 137.14 NM 0.32 1.54 37.21
FFDB FirstFed Bancorp, Inc. of AL 16.89 166.67 16.15 181.55 16.89 0.50 2.00 33.78
FSPT FirstSpartan Fin. Corp. of SC 29.28 148.98 39.17 148.98 29.47 0.60 1.35 39.47
FLAG Flag Financial Corp of GA NM NM 34.12 NM NM 0.23 1.24 52.27
FLGS Flagstar Bancorp, Inc of MI 13.08 245.04 12.76 253.07 13.08 0.28 1.17 15.30
FFIC Flushing Fin. Corp. of NY* 23.45 151.26 19.23 157.27 23.25 0.32 1.21 28.32
FBHC Fort Bend Holding Corp. of TX(8) 16.84 193.25 13.09 206.16 22.84 0.40 1.68 28.37
FTSB Fort Thomas Fin. Corp. of KY 18.29 137.99 21.76 137.99 18.29 0.25 1.67 30.49
FKKY Frankfort First Bancorp of KY NM 116.40 19.74 116.40 25.00 0.80 4.92 NM
FTNB Fulton Bancorp, Inc. of MO 26.33 131.14 30.64 131.14 NM 0.24 1.22 32.00
GUPB GFSB Bancorp, Inc of Gallup NM 19.62 127.68 15.75 127.68 19.62 0.27 1.74 34.18
GSLA GS Financial Corp. of LA NM 108.08 44.99 108.08 NM 0.28 1.61 50.00
GOSB GSB Financial Corp. of NY* NM 115.12 32.40 115.12 NM 0.00 0.00 0.00
GBNK Gaston Fed Bncp MHC of NC(47.0 NM 184.00 41.37 184.00 NM 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 21.62 190.48 18.23 192.15 21.82 0.44 1.83 39.64
GTPS Great American Bancorp of IL NM 129.62 23.76 129.62 NM 0.44 2.01 NM
PEDE Great Pee Dee Bancorp of SC 27.68 114.73 43.44 114.73 27.68 0.30 1.94 53.57
GSBC Great Southern Bancorp of MO 14.45 300.84 24.65 303.03 16.13 0.44 1.76 25.43
GSFC Green Street Fin. Corp. of NC 24.82 110.60 39.57 110.60 24.82 0.44 2.69 66.67
GFED Guaranty Fed Bancshares of MO NM 115.43 32.71 115.43 NM 0.60 4.64 NM
HCBB HCB Bancshares of Camden AR NM 104.71 19.53 108.54 NM 0.20 1.32 NM
HEMT HF Bancorp of Hemet CA NM 126.22 9.92 148.76 NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 16.84 188.49 18.33 188.49 18.13 0.28 1.18 19.86
HFNC HFNC Financial Corp. of NC(8) 17.59 125.36 21.61 125.36 25.65 0.32 2.60 45.71
HMNF HMN Financial, Inc. of MN 19.35 131.77 15.29 141.62 27.27 0.16 0.89 17.20
HALL Hallmark Capital Corp. of WI 15.79 136.12 10.46 136.12 16.67 0.00 0.00 0.00
HRBF Harbor Federal Bancorp of MD 21.72 124.13 15.75 124.13 22.63 0.52 2.42 52.53
HARB Harbor Florida Bancshrs of FL 25.40 144.03 28.54 145.61 26.53 0.26 2.18 55.32
HFSA Hardin Bancorp of Hardin MO 18.28 118.46 13.18 118.46 21.30 0.52 2.68 49.06
HARL Harleysville SB of PA 15.57 220.87 14.73 220.87 15.57 0.44 1.36 21.15
HFGI Harrington Fin. Group of IN NM 153.99 6.81 153.99 NM 0.12 1.05 NM
HARS Harris Fin. MHC of PA (24.3) NM NM 36.51 NM NM 0.22 0.90 40.00
HFFB Harrodsburg 1st Fin Bcrp of KY 21.38 109.87 29.07 109.87 21.38 0.40 2.46 52.63
HHFC Harvest Home Fin. Corp. of OH 19.74 129.09 14.35 129.09 22.73 0.44 2.93 57.89
HAVN Haven Bancorp of Woodhaven NY 24.00 208.21 11.77 208.70 24.22 0.30 1.12 26.79
HTHR Hawthorne Fin. Corp. of CA 6.14 122.60 5.21 122.60 5.24 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL 21.62 118.81 19.24 118.81 21.62 0.28 1.52 32.94
HBSC Heritage Bancorp, Inc of SC 26.28 105.62 30.40 105.62 26.28 0.00 0.00 0.00
HFWA Heritage Financial Corp of WA NM 156.14 44.97 156.14 NM 0.14 0.94 37.84
HCBC High Country Bancorp of CO 28.30 109.97 21.51 109.97 28.30 0.30 2.00 56.60
HBNK Highland Bancorp of CA 14.69 227.88 17.87 227.88 16.90 1.00 2.34 34.36
HIFS Hingham Inst. for Sav. of MA* 16.67 207.84 19.70 207.84 16.67 0.52 1.49 24.76
HBEI Home Bancorp of Elgin IL(8) NM 114.70 29.73 114.70 NM 0.40 2.50 NM
HBFW Home Bancorp of Fort Wayne IN 25.50 176.82 21.27 176.82 26.13 0.20 0.63 16.00
HCFC Home City Fin. Corp. of OH 14.46 94.07 17.48 94.07 14.46 0.36 2.44 35.29
HOMF Home Fed Bancorp of Seymour IN 15.38 237.15 21.81 243.70 18.99 0.40 1.33 20.51
HWEN Home Financial Bancorp of IN 21.74 113.70 20.45 113.70 27.67 0.10 1.10 23.81
HLFC Home Loan Financial Corp of OH NM 112.16 43.67 112.16 NM 0.00 0.00 0.00
HPBC Home Port Bancorp, Inc. of MA* 16.41 223.29 21.83 223.29 14.78 0.80 2.99 49.08
HFBC HopFed Bancorp of KY NM 142.92 37.13 142.92 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 18.76 175.83 16.02 175.83 24.46 0.18 1.07 20.00
HRZB Horizon Financial Corp. of WA* 15.91 155.97 23.92 155.97 16.06 0.44 2.51 40.00
IBSF IBS Financial Corp. of NJ(8) NM 151.64 26.32 151.64 NM 0.40 2.21 72.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ITLA ITLA Capital Corp of CA* 10.18 10.14 1.43 13.51 7.68 1.43 13.51 1.31 102.95 1.63
ICBC Independence Comm Bnk Cp of NY 21.70 20.32 0.64 2.95 2.20 0.85 3.90 0.70 126.32 1.24
IFSB Independence FSB of DC 7.25 6.45 0.54 8.04 5.97 0.22 3.32 1.41 16.50 0.40
INBI Industrial Bancorp of OH 16.48 16.48 1.48 8.53 5.35 1.48 8.53 0.25 188.24 0.54
IWBK Interwest Bancorp of WA 6.76 6.66 1.04 15.60 5.11 0.88 13.20 0.66 66.76 0.76
IPSW Ipswich SB of Ipswich MA* 5.28 5.28 1.24 22.32 6.19 0.94 16.84 0.79 90.70 0.89
JXVL Jacksonville Bancorp of TX 14.73 14.73 1.45 9.79 6.60 1.45 9.79 0.75 65.39 0.64
JXSB Jcksnville SB,MHC of IL (45.6) 10.38 10.38 0.59 5.64 2.37 0.38 3.65 0.86 54.02 0.61
JSBA Jefferson Svgs Bancorp of MO 9.39 7.46 0.82 9.53 3.37 0.76 8.88 0.66 96.80 0.88
JOAC Joachim Bancorp, Inc. of MO(8) 28.92 28.92 0.76 2.64 2.18 0.76 2.64 0.25 89.29 0.30
KSBK KSB Bancorp of Kingfield ME* 7.36 7.00 1.07 14.93 6.32 1.07 14.93 NA NA 1.10
KFBI Klamath First Bancorp of OR 15.01 13.78 0.97 5.86 4.39 0.97 5.86 0.02 765.13 0.25
LSBI LSB Fin. Corp. of Lafayette IN 8.41 8.41 0.82 9.46 5.73 0.74 8.47 1.69 41.16 0.81
LVSB Lakeview Financial of NJ 9.65 7.92 1.44 13.78 7.51 0.90 8.63 1.27 57.56 1.42
LARK Landmark Bancshares, Inc of KS 14.12 14.12 1.08 7.66 5.49 0.95 6.73 0.21 217.31 0.63
LARL Laurel Capital Group of PA 10.63 10.63 1.43 13.75 6.78 1.40 13.45 0.37 226.91 1.24
LSBX Lawrence Savings Bank of MA* 11.13 11.13 2.47 25.38 12.99 2.43 25.00 0.40 218.48 1.79
LFED Leeds Fed Bksr MHC of MD (36.3 16.50 16.50 1.18 7.20 3.34 1.18 7.20 0.03 560.82 0.29
LXMO Lexington B&L Fin. Corp. of MO 18.02 16.90 0.95 4.19 3.90 0.95 4.19 0.47 135.29 0.95
LFCO Life Financial Corp of CA(8) 15.12 15.12 4.91 32.88 10.15 5.09 34.09 2.43 43.86 1.76
LFBI Little Falls Bancorp of NJ 10.20 9.42 0.58 4.85 3.85 0.55 4.66 0.43 78.51 0.81
LOGN Logansport Fin. Corp. of IN 18.86 18.86 1.49 7.78 5.80 1.52 7.93 0.57 46.97 0.37
LISB Long Island Bancorp, Inc of NY(8) 8.95 8.88 0.87 9.63 3.56 0.71 7.78 0.86 62.70 0.91
MAFB MAF Bancorp, Inc. of IL 7.74 6.87 1.12 14.44 6.61 1.09 14.04 0.55 80.77 0.56
MBLF MBLA Financial Corp. of MO 12.68 12.68 0.81 6.30 5.93 0.83 6.43 0.55 59.37 0.50
MECH MECH Financial Inc of CT* 9.59 9.59 1.54 15.45 8.62 1.54 15.45 0.56 258.21 2.28
MFBC MFB Corp. of Mishawaka IN 11.77 11.77 0.84 6.40 4.94 0.82 6.30 0.02 645.16 0.18
MSBF MSB Financial, Inc of MI 16.70 16.70 1.55 9.28 5.71 1.38 8.23 0.74 60.27 0.49
MARN Marion Capital Holdings of IN 20.55 20.11 1.33 6.13 4.85 1.33 6.13 1.00 106.41 1.26
MRKF Market Fin. Corp. of OH 35.28 35.28 1.13 3.21 3.46 1.13 3.21 0.33 27.08 0.17
MFSL Maryland Fed. Bancorp of MD(8) 8.76 8.68 0.62 7.09 2.92 0.87 9.96 0.66 60.90 0.48
MASB MassBank Corp. of Reading MA* 11.52 11.36 1.15 10.59 5.76 1.03 9.55 0.17 152.27 0.86
MFLR Mayflower Co-Op. Bank of MA* 9.75 9.61 1.11 11.52 6.57 1.05 10.93 0.69 124.95 1.49
MDBK Medford Bancorp, Inc. of MA* 9.24 8.73 1.08 11.95 6.25 1.01 11.26 0.13 481.96 1.17
MWBX MetroWest Bank of MA* 7.21 7.21 1.30 17.59 6.97 1.27 17.26 0.70 208.27 2.01
METF Metropolitan Fin. Corp. of OH 3.86 3.57 0.74 18.94 6.20 0.66 16.70 0.92 64.73 0.78
MIFC Mid Iowa Financial Corp. of IA 8.85 8.84 1.16 12.64 7.49 1.25 13.64 0.07 275.00 0.41
MCBN Mid-Coast Bancorp of ME 8.47 8.47 0.78 9.15 5.58 0.72 8.47 0.58 95.07 0.68
MWBI Midwest Bancshares, Inc. of IA 6.89 6.89 0.89 12.81 8.19 0.78 11.22 0.66 43.60 0.50
MFFC Milton Fed. Fin. Corp. of OH 11.35 11.35 0.68 5.39 3.91 0.61 4.79 0.28 85.06 0.36
MBSP Mitchell Bancorp, Inc. of NC 39.32 39.32 1.44 3.47 3.22 1.44 3.47 1.56 33.74 0.68
MBBC Monterey Bay Bancorp of CA 11.68 10.92 0.42 3.72 2.57 0.39 3.45 0.35 131.09 0.67
MONT Montgomery Fin. Corp. of IN 18.25 18.25 0.80 4.71 3.94 0.80 4.71 NA NA 0.19
MSBK Mutual SB, FSB of Bay City MI 5.07 5.07 -1.31 -22.89 -17.11 -0.46 -8.09 0.07 427.08 0.63
MYST Mystic Financial of MA* 19.06 19.06 0.73 5.82 3.41 0.67 5.38 0.25 254.55 0.91
NHTB NH Thrift Bancshares of NH 8.09 7.03 0.90 11.47 6.97 0.83 10.62 0.76 126.05 1.20
NSLB NS&L Bancorp, Inc of Neosho MO 18.78 18.65 0.68 3.49 3.35 0.68 3.49 0.11 73.53 0.14
NSSY NSS Bancorp of CT* 8.12 7.90 1.00 12.37 6.54 1.14 13.99 NA NA 1.31
NMSB Newmil Bancorp, Inc. of CT* 8.91 8.91 0.84 8.78 5.58 0.83 8.66 0.63 215.34 2.87
NBCP Niagara Bancorp of NY MHC(45.4* 12.03 12.03 0.55 4.56 3.98 0.55 4.56 0.25 217.16 1.10
NBSI North Bancshares of Chicago IL 11.45 11.45 0.47 3.48 2.71 0.44 3.24 NA NA 0.27
FFFD North Central Bancshares of IA 15.43 13.42 1.14 7.38 5.24 1.14 7.38 0.16 472.78 1.02
NEIB Northeast Indiana Bncrp of IN 13.34 13.34 1.20 8.36 6.19 1.20 8.36 0.18 352.92 0.72
NWSB Northwest Bcrp MHC of PA (30.7 8.85 7.91 0.95 10.14 2.75 0.95 10.14 0.69 89.55 0.83
NWEQ Northwest Equity Corp. of WI 11.60 11.60 1.06 9.03 5.99 1.01 8.66 1.35 35.37 0.58
NTMG Nutmeg FS&LA of CT 5.83 5.83 0.51 8.66 5.24 0.35 6.08 NA NA 0.55
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ITLA ITLA Capital Corp of CA* 13.02 165.64 16.85 166.14 13.02 0.00 0.00 0.00
ICBC Independence Comm Bnk Cp of NY NM 133.94 29.07 143.06 NM 0.00 0.00 0.00
IFSB Independence FSB of DC 16.74 128.25 9.29 144.04 NM 0.25 1.37 22.94
INBI Industrial Bancorp of OH 18.69 158.57 26.13 158.57 18.69 0.60 3.12 58.25
IWBK Interwest Bancorp of WA 19.58 279.93 18.92 284.33 23.15 0.76 1.62 31.67
IPSW Ipswich SB of Ipswich MA* 16.16 326.29 17.23 326.29 21.41 0.16 0.93 15.09
JXVL Jacksonville Bancorp of TX 15.15 145.21 21.39 145.21 15.15 0.50 2.41 36.50
JXSB Jcksnville SB,MHC of IL (45.6) NM 232.94 24.18 232.94 NM 0.30 1.40 58.82
JSBA Jefferson Svgs Bancorp of MO 29.66 260.78 24.48 328.09 NM 0.28 0.93 27.45
JOAC Joachim Bancorp, Inc. of MO(8) NM 124.00 35.86 124.00 NM 0.50 2.94 NM
KSBK KSB Bancorp of Kingfield ME* 15.83 217.14 15.98 228.37 15.83 0.10 0.53 8.33
KFBI Klamath First Bancorp of OR 22.80 129.46 19.43 141.05 22.80 0.34 1.75 40.00
LSBI LSB Fin. Corp. of Lafayette IN 17.44 158.73 13.36 158.73 19.48 0.38 1.27 22.09
LVSB Lakeview Financial of NJ 13.32 206.38 19.92 251.56 21.27 0.25 1.03 13.74
LARK Landmark Bancshares, Inc of KS 18.21 138.35 19.53 138.35 20.71 0.60 2.21 40.27
LARL Laurel Capital Group of PA 14.75 194.50 20.68 194.50 15.07 0.52 2.54 37.41
LSBX Lawrence Savings Bank of MA* 7.70 170.63 19.00 170.63 7.82 0.00 0.00 0.00
LFED Leeds Fed Bksr MHC of MD (36.3 29.92 207.46 34.23 207.46 29.92 0.56 2.84 NM
LXMO Lexington B&L Fin. Corp. of MO 25.61 104.54 18.84 111.44 25.61 0.30 1.89 48.39
LFCO Life Financial Corp of CA(8) 9.85 239.15 36.15 239.15 9.50 0.00 0.00 0.00
LFBI Little Falls Bancorp of NJ 26.00 133.29 13.59 144.34 27.08 0.20 1.03 26.67
LOGN Logansport Fin. Corp. of IN 17.25 129.60 24.44 129.60 16.91 0.40 2.32 40.00
LISB Long Island Bancorp, Inc of NY(8) 28.08 261.15 23.38 263.38 NM 0.60 0.98 27.40
MAFB MAF Bancorp, Inc. of IL 15.13 210.90 16.32 237.72 15.56 0.42 1.10 16.67
MBLF MBLA Financial Corp. of MO 16.87 106.49 13.50 106.49 16.53 0.40 1.66 27.97
MECH MECH Financial Inc of CT* 11.60 168.49 16.16 168.49 11.60 0.60 2.08 24.10
MFBC MFB Corp. of Mishawaka IN 20.23 127.96 15.06 127.96 20.54 0.34 1.28 25.95
MSBF MSB Financial, Inc of MI 17.53 157.85 26.35 157.85 19.77 0.30 1.76 30.93
MARN Marion Capital Holdings of IN 20.62 126.68 26.03 129.41 20.62 0.88 3.12 64.23
MRKF Market Fin. Corp. of OH 28.92 91.02 32.11 91.02 28.92 0.28 2.02 58.33
MFSL Maryland Fed. Bancorp of MD(8) NM 242.69 21.27 245.13 24.38 0.45 1.15 39.47
MASB MassBank Corp. of Reading MA* 17.35 170.85 19.68 173.23 19.25 1.00 1.96 34.01
MFLR Mayflower Co-Op. Bank of MA* 15.22 165.97 16.19 168.44 16.05 0.80 3.37 51.28
MDBK Medford Bancorp, Inc. of MA* 16.01 182.67 16.87 193.27 16.99 0.80 1.92 30.77
MWBX MetroWest Bank of MA* 14.35 236.28 17.04 236.28 14.62 0.12 1.55 22.22
METF Metropolitan Fin. Corp. of OH 16.13 276.75 10.69 299.40 18.29 0.00 0.00 0.00
MIFC Mid Iowa Financial Corp. of IA 13.35 157.35 13.93 157.56 12.38 0.08 0.67 8.99
MCBN Mid-Coast Bancorp of ME 17.91 160.00 13.56 160.00 19.35 0.17 1.42 25.37
MWBI Midwest Bancshares, Inc. of IA 12.21 148.03 10.20 148.03 13.94 0.28 1.78 21.71
MFFC Milton Fed. Fin. Corp. of OH 25.60 140.26 15.92 140.26 28.80 0.60 3.72 NM
MBSP Mitchell Bancorp, Inc. of NC NM 107.37 42.22 107.37 NM 0.40 2.39 74.07
MBBC Monterey Bay Bancorp of CA NM 143.78 16.79 153.70 NM 0.14 0.65 25.45
MONT Montgomery Fin. Corp. of IN 25.38 105.31 19.22 105.31 25.38 0.22 1.73 44.00
MSBK Mutual SB, FSB of Bay City MI NM 151.42 7.68 151.42 NM 0.00 0.00 NM
MYST Mystic Financial of MA* 29.33 115.53 22.02 115.53 NM 0.20 1.31 38.46
NHTB NH Thrift Bancshares of NH 14.34 157.13 12.72 180.89 15.48 0.60 3.08 44.12
NSLB NS&L Bancorp, Inc of Neosho MO 29.81 105.08 19.74 105.84 29.81 0.50 2.84 NM
NSSY NSS Bancorp of CT* 15.28 189.11 15.35 194.29 13.52 0.52 1.20 18.37
NMSB Newmil Bancorp, Inc. of CT* 17.91 154.25 13.74 154.25 18.15 0.32 2.42 43.24
NBCP Niagara Bancorp of NY MHC(45.4* 25.10 114.56 13.78 114.56 25.10 0.00 0.00 0.00
NBSI North Bancshares of Chicago IL NM 153.30 17.56 153.30 NM 0.40 2.46 NM
FFFD North Central Bancshares of IA 19.08 140.78 21.72 161.77 19.08 0.32 1.45 27.59
NEIB Northeast Indiana Bncrp of IN 16.17 135.90 18.13 135.90 16.17 0.34 1.58 25.56
NWSB Northwest Bcrp MHC of PA (30.7 NM NM 31.10 NM NM 0.16 1.00 36.36
NWEQ Northwest Equity Corp. of WI 16.70 148.00 17.18 148.00 17.42 0.64 3.14 52.46
NTMG Nutmeg FS&LA of CT 19.09 165.35 9.65 165.35 27.20 0.20 1.84 35.09
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
OHSL OHSL Financial Corp. of OH 10.55 10.55 0.86 7.92 4.75 0.80 7.34 0.17 126.00 0.32
OCFC Ocean Fin. Corp. of NJ 14.22 14.22 0.95 6.13 4.62 0.95 6.13 0.48 92.94 0.82
OTFC Oregon Trail Fin. Corp. of OR 25.86 25.86 1.12 9.47 4.09 1.14 9.61 0.18 180.70 0.55
OFCP Ottawa Financial Corp. of MI 8.45 6.92 0.87 10.06 4.97 0.81 9.29 0.36 104.99 0.44
PFFB PFF Bancorp of Pomona CA 9.04 8.95 0.60 6.06 4.84 0.56 5.68 1.33 69.73 1.40
PSFI PS Financial of Chicago IL 27.81 27.81 1.10 3.19 3.35 1.85 5.37 2.36 8.79 0.42
PVFC PVF Capital Corp. of OH 7.20 7.20 1.34 18.73 7.32 1.26 17.66 0.69 95.38 0.74
PBCI Pamrapo Bancorp, Inc. of NJ 12.82 12.75 1.32 10.26 6.12 1.27 9.91 1.94 32.66 1.11
PFED Park Bancorp of Chicago IL 19.91 19.91 0.89 4.10 3.68 0.96 4.39 0.10 253.81 0.69
PVSA Parkvale Financial Corp of PA 7.82 7.78 1.08 13.98 6.65 1.08 13.98 0.52 262.03 1.79
PBHC Pathfinder BC MHC of NY (46.1)* 11.76 9.97 0.91 7.74 2.79 0.73 6.24 1.33 34.08 0.70
PEEK Peekskill Fin. Corp. of NY 22.99 22.99 1.03 4.09 3.50 1.06 4.22 0.89 38.25 1.39
PFSB PennFed Fin. Services of NJ 7.20 6.24 0.81 11.10 6.76 0.78 10.81 0.50 36.37 0.26
PWBK Pennwood Bancorp, Inc. of PA 18.34 18.34 0.77 4.19 3.57 0.92 5.03 1.60 44.68 1.09
PBKB People's Bancshares of MA* 3.67 3.54 0.76 16.93 6.07 0.33 7.45 0.42 119.36 0.86
TSBS Peoples Bancorp Inc of NJ* 12.60 11.41 1.06 6.69 2.00 0.79 5.02 0.64 63.09 0.86
PFDC Peoples Bancorp of Auburn IN 15.09 15.09 1.50 9.85 5.67 1.50 9.85 0.21 144.43 0.36
PBCT Peoples Bank, MHC of CT (40.1)* 9.23 7.91 1.18 13.44 3.91 0.63 7.21 0.66 166.94 1.76
PFFC Peoples Fin. Corp. of OH 19.15 19.15 1.29 6.79 5.50 0.50 2.63 0.01 NA 0.30
PHBK Peoples Heritage Fin Grp of ME* 6.72 5.11 1.22 16.61 5.81 1.21 16.48 0.91 99.98 1.26
PSFC Peoples Sidney Fin. Corp of OH 25.15 25.15 1.24 5.56 2.91 1.24 5.56 1.10 35.55 0.44
PERM Permanent Bancorp, Inc. of IN 10.00 9.88 0.62 6.56 3.94 0.61 6.46 0.70 70.95 0.97
PCBC Perry Co. Fin. Corp. of MO 18.94 18.94 1.03 5.46 4.45 1.02 5.41 NA NA 0.16
PHFC Pittsburgh Home Fin Corp of PA 7.43 7.34 0.79 8.24 6.35 0.67 6.99 1.37 34.44 0.79
PFSL Pocahontas Bancorp of AR 14.51 14.51 0.62 7.74 3.64 0.61 7.53 0.25 168.15 0.96
PTRS Potters Financial Corp of OH 8.71 8.71 0.80 9.05 5.39 0.78 8.78 0.13 NA 2.65
PHSB Ppls Home SB, MHC of PA (45.0) 12.76 12.76 0.81 7.30 3.13 0.72 6.49 0.36 164.84 1.32
PRBC Prestige Bancorp of PA 9.83 9.83 0.52 4.79 3.41 0.51 4.66 0.40 65.18 0.40
PFNC Progress Financial Corp. of PA 5.52 4.90 0.84 15.84 4.56 0.75 14.23 1.31 65.06 1.19
PSBK Progressive Bank, Inc. of NY(8)* 8.90 8.12 0.97 11.15 5.29 0.97 11.20 0.76 142.41 1.70
PROV Provident Fin. Holdings of CA 11.09 11.09 0.74 5.81 4.66 0.36 2.85 1.34 61.50 0.96
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 13.41 13.41 1.07 8.15 2.01 0.92 6.99 NA NA 0.45
PLSK Pulaski SB, MHC of NJ (46.0) 11.54 11.54 0.63 5.86 3.01 0.63 5.86 0.73 67.79 0.93
PULS Pulse Bancorp of S. River NJ 8.34 8.34 1.07 13.13 6.55 1.08 13.27 0.60 61.50 1.41
QCFB QCF Bancorp of Virginia MN 17.57 17.57 1.63 9.26 6.02 1.63 9.26 1.22 67.47 1.92
QCBC Quaker City Bancorp of CA 8.76 8.76 0.76 8.74 6.14 0.74 8.48 1.25 74.34 1.17
QCSB Queens County Bancorp of NY* 10.45 10.45 1.47 12.54 3.38 1.45 12.37 0.55 106.38 0.67
RARB Raritan Bancorp of Raritan NJ* 7.54 7.44 0.99 13.02 5.50 0.97 12.79 0.34 234.10 1.20
REDF RedFed Bancorp of Redlands CA(8) 8.58 8.55 1.17 13.96 7.53 1.21 14.42 1.81 40.07 0.81
RELY Reliance Bancorp, Inc. of NY 8.89 6.14 0.90 10.66 4.92 0.95 11.27 NA NA 0.90
RELI Reliance Bancshares Inc of WI 49.97 49.97 1.03 2.11 2.35 1.03 2.11 NA NA 0.60
RCBK Richmond County Fin Corp of NY 22.04 21.95 0.19 1.11 0.49 1.53 9.09 0.47 96.51 1.17
RIVR River Valley Bancorp of IN 13.13 12.95 0.94 7.53 5.79 0.78 6.30 NA NA 1.00
RVSB Riverview Bancorp of WA 22.37 21.63 1.55 8.56 3.82 1.47 8.16 0.19 186.36 0.60
RSLN Roslyn Bancorp, Inc. of NY* 16.76 16.68 1.31 7.08 4.65 1.26 6.81 0.25 264.59 2.23
SCCB S. Carolina Comm. Bnshrs of SC 20.38 20.38 1.01 4.23 3.68 1.01 4.23 1.26 50.34 0.82
SBFL SB Fngr Lakes MHC of NY (33.1) 8.68 8.68 0.40 4.39 1.32 0.34 3.72 0.27 170.49 0.94
SFED SFS Bancorp of Schenectady NY 12.36 12.36 0.64 5.13 4.18 0.62 4.96 0.72 66.56 0.61
SGVB SGV Bancorp of W. Covina CA 7.89 7.78 0.38 5.10 3.64 0.43 5.79 1.45 24.47 0.46
SISB SIS Bancorp, Inc. of MA* 7.15 7.15 0.69 9.56 3.77 0.89 12.33 0.43 300.83 2.70
SWCB Sandwich Bancorp of MA(8)* 8.08 7.83 0.99 12.24 4.02 0.95 11.77 0.34 228.40 1.12
SFSL Security First Corp. of OH(8) 9.43 9.30 1.39 14.89 4.92 1.39 14.89 0.42 178.44 0.82
SKAN Skaneateles Bancorp Inc of NY* 6.98 6.80 0.64 9.32 6.40 0.63 9.07 2.01 49.89 1.21
SOBI Sobieski Bancorp of S. Bend IN 14.10 14.10 0.58 3.93 3.28 0.58 3.93 0.29 77.82 0.28
SOSA Somerset Savings Bank of MA(8)* 7.25 7.25 1.46 22.33 9.09 1.40 21.36 4.58 32.38 1.90
SSFC South Street Fin. Corp. of NC* 15.88 15.88 0.64 2.97 3.28 0.66 3.06 0.22 88.30 0.39
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
OHSL OHSL Financial Corp. of OH 21.04 162.12 17.10 162.12 22.70 0.50 2.90 60.98
OCFC Ocean Fin. Corp. of NJ 21.67 140.29 19.95 140.29 21.67 0.48 2.46 53.33
OTFC Oregon Trail Fin. Corp. of OR 24.46 108.41 28.03 108.41 24.10 0.20 1.20 29.41
OFCP Ottawa Financial Corp. of MI 20.14 199.31 16.84 243.29 21.80 0.40 1.38 27.78
PFFB PFF Bancorp of Pomona CA 20.68 130.47 11.80 131.80 22.09 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 29.84 116.81 32.48 116.81 17.74 0.48 3.66 NM
PVFC PVF Capital Corp. of OH 13.66 233.69 16.83 233.69 14.48 0.00 0.00 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 16.33 164.24 21.06 165.11 16.92 1.12 3.96 64.74
PFED Park Bancorp of Chicago IL 27.17 111.34 22.17 111.34 25.34 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 15.05 198.19 15.49 199.18 15.05 0.60 1.89 28.44
PBHC Pathfinder BC MHC of NY (46.1)* NM 273.01 32.11 322.00 NM 0.20 0.90 32.26
PEEK Peekskill Fin. Corp. of NY 28.57 120.64 27.73 120.64 27.69 0.36 2.00 57.14
PFSB PennFed Fin. Services of NJ 14.78 155.11 11.16 178.95 15.18 0.14 0.82 12.17
PWBK Pennwood Bancorp, Inc. of PA 28.00 120.79 22.15 120.79 23.33 0.27 1.93 54.00
PBKB People's Bancshares of MA* 16.47 273.95 10.05 283.75 NM 0.52 1.99 32.70
TSBS Peoples Bancorp Inc of NJ* NM 323.62 40.77 NM NM 0.10 1.00 50.00
PFDC Peoples Bancorp of Auburn IN 17.64 169.40 25.56 169.40 17.64 0.44 1.93 34.11
PBCT Peoples Bank, MHC of CT (40.1)* 25.54 288.77 26.66 337.11 NM 0.84 2.21 56.38
PFFC Peoples Fin. Corp. of OH 18.17 122.68 23.49 122.68 NM 0.60 4.40 NM
PHBK Peoples Heritage Fin Grp of ME* 17.20 267.12 17.94 NM 17.32 0.44 1.87 32.12
PSFC Peoples Sidney Fin. Corp of OH NM 163.95 41.24 163.95 NM 0.28 1.15 39.44
PERM Permanent Bancorp, Inc. of IN 25.40 160.32 16.03 162.27 25.81 0.22 1.38 34.92
PCBC Perry Co. Fin. Corp. of MO 22.48 118.74 22.49 118.74 22.70 0.50 2.14 48.08
PHFC Pittsburgh Home Fin Corp of PA 15.74 138.06 10.26 139.70 18.56 0.24 1.36 21.43
PFSL Pocahontas Bancorp of AR 27.44 113.30 16.44 113.30 28.23 0.24 2.43 66.67
PTRS Potters Financial Corp of OH 18.56 164.47 14.32 164.47 19.13 0.24 1.28 23.76
PHSB Ppls Home SB, MHC of PA (45.0) NM 194.87 24.87 194.87 NM 0.24 1.19 38.10
PRBC Prestige Bancorp of PA 29.29 136.67 13.43 136.67 NM 0.17 0.83 24.29
PFNC Progress Financial Corp. of PA 21.91 306.12 16.90 345.13 24.38 0.12 0.62 13.48
PSBK Progressive Bank, Inc. of NY(8)* 18.92 203.09 18.07 222.58 18.83 0.80 1.90 36.04
PROV Provident Fin. Holdings of CA 21.46 125.28 13.89 125.28 NM 0.00 0.00 0.00
PULB Pulaski Bk,SB MHC of MO (29.8)(8) NM NM 52.80 NM NM 1.10 2.43 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 174.81 20.17 174.81 NM 0.30 1.64 54.55
PULS Pulse Bancorp of S. River NJ 15.27 190.95 15.92 190.95 15.10 0.80 2.90 44.20
QCFB QCF Bancorp of Virginia MN 16.62 153.94 27.05 153.94 16.62 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 16.30 136.31 11.93 136.31 16.79 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 29.63 NM 40.87 NM NM 1.00 2.25 66.67
RARB Raritan Bancorp of Raritan NJ* 18.18 226.93 17.11 229.89 18.52 0.60 2.00 36.36
REDF RedFed Bancorp of Redlands CA(8) 13.27 169.25 14.52 169.82 12.85 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 20.34 194.98 17.34 282.58 19.24 0.72 1.83 37.31
RELI Reliance Bancshares Inc of WI NM 91.30 45.63 91.30 NM 0.00 0.00 0.00
RCBK Richmond County Fin Corp of NY NM 151.52 33.39 152.14 25.00 0.20 1.08 NM
RIVR River Valley Bancorp of IN 17.27 125.66 16.50 127.43 20.65 0.20 1.05 18.18
RVSB Riverview Bancorp of WA 26.17 168.68 37.73 174.48 27.46 0.14 0.84 21.88
RSLN Roslyn Bancorp, Inc. of NY* 21.49 152.52 25.57 153.25 22.35 0.34 1.54 33.01
SCCB S. Carolina Comm. Bnshrs of SC 27.19 133.68 27.24 133.68 27.19 0.64 2.94 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 321.80 27.94 321.80 NM 0.24 1.22 NM
SFED SFS Bancorp of Schenectady NY 23.91 122.56 15.15 122.56 24.72 0.32 1.45 34.78
SGVB SGV Bancorp of W. Covina CA 27.47 134.40 10.60 136.21 24.17 0.00 0.00 0.00
SISB SIS Bancorp, Inc. of MA* 26.54 223.65 15.98 223.65 20.57 0.64 1.56 41.29
SWCB Sandwich Bancorp of MA(8)* 24.90 292.64 23.65 302.17 25.91 1.40 2.19 54.47
SFSL Security First Corp. of OH(8) 20.33 292.06 27.55 296.21 20.33 0.36 1.44 29.27
SKAN Skaneateles Bancorp Inc of NY* 15.63 140.22 9.78 143.91 16.06 0.28 1.60 25.00
SOBI Sobieski Bancorp of S. Bend IN NM 117.61 16.58 117.61 NM 0.32 1.64 50.00
SOSA Somerset Savings Bank of MA(8)* 11.00 219.05 15.88 219.05 11.50 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 132.29 21.01 132.29 29.55 0.40 4.10 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 5, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SBAN SouthBanc Shares Inc. of SC 21.85 21.85 0.94 4.29 3.73 0.94 4.29 NA NA 1.02
SCBS Southern Commun. Bncshrs of AL 20.42 20.42 1.15 5.98 4.06 1.15 5.98 0.36 308.46 1.70
SMBC Southern Missouri Bncrp of MO 16.77 16.77 0.70 4.27 3.26 0.66 4.02 0.63 89.98 0.76
SWBI Southwest Bancshares of IL(8) 11.62 11.62 1.14 10.03 4.85 1.12 9.84 0.16 122.22 0.28
SVRN Sovereign Bancorp, Inc. of PA 4.92 4.22 0.45 9.96 2.65 0.68 15.15 0.63 98.91 1.05
STFR St. Francis Cap. Corp. of WI 8.00 7.15 0.80 9.96 5.87 0.77 9.60 0.21 215.62 0.95
SPBC St. Paul Bancorp, Inc. of IL 9.34 9.31 1.08 12.09 5.79 1.06 11.84 0.20 367.36 1.02
SFFC StateFed Financial Corp. of IA 17.73 17.73 1.25 7.09 4.87 1.25 7.09 1.70 15.32 0.33
SFIN Statewide Fin. Corp. of NJ 9.83 9.81 0.81 8.48 5.48 0.80 8.41 0.51 84.18 0.87
STSA Sterling Financial Corp. of WA 5.60 5.22 0.54 10.92 4.87 0.47 9.53 0.72 68.74 0.83
SFSB SuburbFed Fin. Corp. of IL(8) 6.73 6.71 0.63 9.57 4.55 0.48 7.30 1.00 19.60 0.30
ROSE T R Financial Corp. of NY* 6.15 6.15 0.99 15.97 4.95 0.88 14.13 0.57 65.67 0.69
THRD TF Financial Corp. of PA 7.97 6.71 0.74 7.44 5.65 0.63 6.28 0.30 106.83 0.84
TPNZ Tappan Zee Fin., Inc. of NY(8) 17.02 17.02 0.84 4.86 3.48 0.81 4.65 1.24 43.88 1.20
TSBK Timberland Bancorp of WA 32.13 32.13 1.63 10.61 3.73 1.55 10.10 3.67 18.18 0.93
TRIC Tri-County Bancorp of WY 15.73 15.73 1.01 6.58 5.22 1.05 6.84 NA NA 0.98
TWIN Twin City Bancorp, Inc. of TN 12.75 12.75 1.03 8.01 6.40 0.86 6.64 0.10 102.83 0.14
USAB USABancshares, Inc of PA* 12.49 12.42 0.20 2.00 0.62 0.35 3.56 0.22 265.63 0.99
UCBC Union Community Bancorp of IN 40.02 40.02 1.44 5.52 3.16 1.44 5.52 0.45 51.96 0.30
UFRM United FSB of Rocky Mount NC(8) 7.49 7.49 0.61 8.23 3.00 0.40 5.34 0.64 137.38 1.02
UBMT United Fin. Corp. of MT 25.61 25.61 1.31 5.53 2.87 1.31 5.53 0.60 101.19 1.07
UTBI United Tenn. Bancshares of TN 26.99 26.99 1.01 6.08 3.83 1.01 6.08 0.59 142.44 1.31
WHGB WHG Bancshares of MD 19.66 19.66 0.76 3.59 3.38 0.77 3.65 1.06 24.18 0.39
WSFS WSFS Financial Corp. of DE* 5.73 5.69 1.11 20.40 6.16 1.10 20.25 1.38 117.99 3.31
WVFC WVS Financial Corp. of PA 10.66 10.66 1.31 11.04 5.57 1.32 11.15 0.20 310.17 1.14
WRNB Warren Bancorp of Peabody MA* 10.78 10.78 2.01 19.47 7.92 1.80 17.42 1.01 107.31 1.63
WSBI Warwick Community Bncrp of NY* 23.76 23.76 1.04 4.37 3.26 1.04 4.37 0.52 75.47 0.79
WFSL Washington Federal, Inc. of WA 12.90 11.90 1.87 15.50 7.29 1.85 15.35 0.75 55.29 0.56
WAMU Washington Mutual, Inc. of WA* 5.35 4.99 0.52 9.97 1.91 0.93 17.81 0.78 83.87 0.97
WYNE Wayne Bancorp, Inc. of NJ 12.57 12.57 0.76 5.59 3.09 0.76 5.59 0.90 91.95 1.18
WAYN Wayne Svgs Bks MHC of OH (47.8 9.48 9.48 0.75 8.03 2.71 0.70 7.51 NA NA NA
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.49 23.49 1.46 6.23 3.44 1.46 6.23 0.12 353.21 0.70
WBST Webster Financial Corp. of CT 5.44 4.75 0.54 10.34 3.50 0.82 15.74 0.59 114.77 1.33
WEFC Wells Fin. Corp. of Wells MN 14.71 14.71 1.09 7.67 5.26 1.07 7.46 0.14 279.23 0.44
WCBI WestCo Bancorp, Inc. of IL 15.37 15.37 1.51 9.79 6.26 1.41 9.12 0.45 62.71 0.37
WSTR WesterFed Fin. Corp. of MT 10.40 8.45 0.81 7.26 5.23 0.78 7.04 0.64 76.69 0.75
WOFC Western Ohio Fin. Corp. of OH 14.68 13.71 0.04 0.26 0.24 0.08 0.61 0.91 115.97 1.44
WEHO Westwood Hmstd Fin Corp of OH 22.45 22.45 0.67 2.33 2.43 1.05 3.68 0.12 178.06 0.23
FFWD Wood Bancorp of OH 13.20 13.20 1.44 11.31 5.09 1.23 9.66 0.35 110.31 0.46
YFCB Yonkers Fin. Corp. of NY 13.54 13.54 1.05 7.10 5.44 1.03 6.96 0.41 87.23 0.77
YFED York Financial Corp. of PA 8.86 8.86 0.96 11.17 5.75 0.80 9.29 2.37 28.49 0.81
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ------- ------ -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SBAN SouthBanc Shares Inc. of SC 26.79 114.99 25.13 114.99 26.79 1.40 7.16 NM
SCBS Southern Commun. Bncshrs of AL 24.64 135.51 27.67 135.51 24.64 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO NM 130.70 21.92 130.70 NM 0.50 2.33 71.43
SWBI Southwest Bancshares of IL(8) 20.62 193.83 22.53 193.83 21.03 0.80 2.52 51.95
SVRN Sovereign Bancorp, Inc. of PA NM 259.40 12.77 302.26 24.83 0.08 0.46 17.39
STFR St. Francis Cap. Corp. of WI 17.04 167.33 13.39 187.28 17.68 0.56 1.33 22.58
SPBC St. Paul Bancorp, Inc. of IL 17.28 199.36 18.63 200.16 17.65 0.40 1.61 27.78
SFFC StateFed Financial Corp. of IA 20.54 141.54 25.09 141.54 20.54 0.20 1.39 28.57
SFIN Statewide Fin. Corp. of NJ 18.24 152.50 14.99 152.82 18.39 0.44 1.98 36.07
STSA Sterling Financial Corp. of WA 20.54 185.79 10.41 199.38 23.53 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 21.98 199.79 13.44 200.38 28.81 0.32 0.68 14.88
ROSE T R Financial Corp. of NY* 20.22 300.71 18.49 300.71 22.84 0.72 1.70 34.45
THRD TF Financial Corp. of PA 17.69 162.60 12.97 193.16 20.97 0.48 1.85 32.65
TPNZ Tappan Zee Fin., Inc. of NY(8) 28.76 138.26 23.52 138.26 NM 0.28 1.39 40.00
TSBK Timberland Bancorp of WA 26.79 122.41 39.33 122.41 28.13 0.24 1.42 38.10
TRIC Tri-County Bancorp of WY 19.16 122.61 19.28 122.61 18.44 0.44 2.98 57.14
TWIN Twin City Bancorp, Inc. of TN 15.63 123.10 15.70 123.10 18.84 0.40 2.91 45.45
USAB USABancshares, Inc of PA* NM 169.99 21.24 170.99 NM 0.00 0.00 0.00
UCBC Union Community Bancorp of IN NM 104.64 41.88 104.64 NM 0.30 2.02 63.83
UFRM United FSB of Rocky Mount NC(8) NM 256.41 19.22 256.41 NM 0.24 1.33 44.44
UBMT United Fin. Corp. of MT NM 192.01 49.18 192.01 NM 1.00 3.59 NM
UTBI United Tenn. Bancshares of TN 26.11 106.90 28.85 106.90 26.11 1.20 8.06 NM
WHGB WHG Bancshares of MD 29.63 111.58 21.93 111.58 29.09 0.32 2.00 59.26
WSFS WSFS Financial Corp. of DE* 16.22 305.32 17.48 307.08 16.35 0.12 0.56 9.16
WVFC WVS Financial Corp. of PA 17.96 214.87 22.91 214.87 17.79 0.60 3.24 58.25
WRNB Warren Bancorp of Peabody MA* 12.63 229.89 24.79 229.89 14.12 0.36 3.00 37.89
WSBI Warwick Community Bncrp of NY* NM 133.97 31.84 133.97 NM 0.00 0.00 0.00
WFSL Washington Federal, Inc. of WA 13.71 200.92 25.91 217.81 13.85 0.88 3.12 42.72
WAMU Washington Mutual, Inc. of WA* NM 346.50 18.55 NM 29.25 0.80 1.72 NM
WYNE Wayne Bancorp, Inc. of NJ NM 186.12 23.39 186.12 NM 0.20 0.64 20.62
WAYN Wayne Svgs Bks MHC of OH (47.8 NM 287.47 27.26 287.47 NM 0.56 2.00 73.68
WCFB Wbstr Cty FSB MHC of IA (45.2) 29.05 178.45 41.92 178.45 29.05 0.80 4.24 NM
WBST Webster Financial Corp. of CT 28.59 235.87 12.84 270.39 18.79 0.44 1.34 38.26
WEFC Wells Fin. Corp. of Wells MN 19.03 142.10 20.91 142.10 19.55 0.60 2.79 53.10
WCBI WestCo Bancorp, Inc. of IL 15.97 154.59 23.77 154.59 17.13 0.68 2.23 35.60
WSTR WesterFed Fin. Corp. of MT 19.14 129.05 13.42 158.77 19.75 0.50 2.01 38.46
WOFC Western Ohio Fin. Corp. of OH NM 109.87 16.12 117.57 NM 1.00 3.92 NM
WEHO Westwood Hmstd Fin Corp of OH NM 120.28 27.00 120.28 26.02 0.36 2.82 NM
FFWD Wood Bancorp of OH 19.66 213.94 28.23 213.94 23.03 0.34 1.94 38.20
YFCB Yonkers Fin. Corp. of NY 18.39 127.11 17.22 127.11 18.75 0.28 1.48 27.18
YFED York Financial Corp. of PA 17.40 185.26 16.42 185.26 20.91 0.52 2.39 41.60
</TABLE>
<PAGE>
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
Quarter 3 7945.3 947.3 1,685.7 737.5 381.7
Quarter 4 7908.3 970.4 1,570.4 814.1 414.9
1998: Quarter 1 8799.8 1101.8 1,835.7 869.3 456.1
June 5, 1998 9037.7 1113.9 1,782.9 860.6 464.4
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Cortland Savings Bank
Historical Thrift Stock Indices
Index Values
<TABLE>
<CAPTION>
Index Values Percent Change Since
-------------------------------------------------- --------------------------------
04/30/98 1 Month YTD LTM 1 Month YTD LTM
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 882.1 869.3 814.1 537.2 1.46 8.35 64.19
MHC Index 1,263.7 1,252.7 1,179.9 587.7 0.88 7.10 115.04
Insurance Indices
- -------------------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 827.9 815.9 764.4 484.2 1.48 8.30 70.99
BIF Thrifts 1,067.4 1,052.3 984.4 689.7 1.44 8.44 54.77
Stock Exchange Indices
- -------------------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 272.9 264.6 255.4 166.7 3.14 6.86 63.71
NYSE Thrifts 566.1 549.2 521.3 314.7 3.09 8.59 79.86
OTC Thrifts 987.3 979.4 911.5 622.5 0.81 8.31 58.61
Geographic Indices
- -------------------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,911.2 1,833.2 1,735.2 1077.4 4.25 10.15 77.40
Midwestern Thrifts 1,971.0 1,948.7 1,832.9 1,234.5 1.14 7.53 59.65
New England Thrifts 821.0 809.8 778.3 458.4 1.37 5.48 79.10
Southeastern Thrifts 786.9 799.9 776.0 499.4 -1.63 1.40 57.57
Southwestern Thrifts 573.4 558.6 533.5 347.5 2.65 7.47 64.98
Western Thrifts 850.3 848.8 778.8 539.7 0.18 9.17 57.55
Asset Size Indices
- -------------------------------------------------------------------------------------------------------------------------------
Less than $250M 915.8 907.7 869.9 639.4 0.89 5.27 43.21
$250M to $500M 1,393.0 1,371.7 1,312.3 865.2 1.56 6.15 61.00
$500M to $1B 902.6 892.2 846.8 558.9 1.16 6.58 61.49
$1B to $5B 1,051.7 1,022.5 956.8 593.8 2.86 9.92 77.12
Over$5B 555.5 550.0 512.3 344.1 1.00 8.44 61.45
Comparative Indices
- -------------------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 9,063.4 8,799.6 7,908.3 7,009.0 3.00 14.61 29.31
S&P 500 1,111.8 1,101.8 970.4 801.3 0.91 14.56 38.74
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institutions market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR; Midwest: IA, IL, IN, KS, KY, MI, MN,
MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT; Southeast: AL, AR, FL, GA, MS, NC, SC, TN,
VA, WV;
Southwest: CO, LA, NM, OK, TX, UT; West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
<PAGE>
Exhibit IV-4
Cortland Savings Bank
New York Thrift Merger and Acquisition Activity 1996 to Present
<TABLE>
<CAPTION>
Seller's Financials
--------------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Annd Comp Assets Assets ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- ---- ---- ----- -- ------ -- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
04/03/98 Pending Astoria Financial Cp NY Long Island Bancorp NY 6,072,524 9.10 0.87 9.59 0.89 73.47
04/23/98 Pending Ambanc Holding Co. NY AFSALA Bancorp Inc. NY 160,408 12.52 0.78 6.19 0.30 250.44
12/16/97 Pending Hudson Chartered Bnp NY Progressive Bank NY 884,617 7.93 0.98 11.66 0.92 125.50
03/06/98 Pending USB Holding Company NY Tappan Zee Financial NY 126,470 17.02 0.82 4.78 1.19 45.98
05/26/98 Pending Roslyn Bancorp Inc. NY TR Financial Corp. NY 4,005,695 6.15 0.99 16.05 0.51 80.17
12/16/97 05/29/98 HUBCO, Inc NJ MSB Bancorp NY 773,991 6.23 0.54 6.02 NA NA
10/23/97 04/24/98 HUBCO, Inc NJ Poughkeepsie Finl NY 880,196 8.37 0.54 6.43 3.82 35.46
10/07/97 03/30/98 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
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
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
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 643,180 7.81 1.58 20.12 1.04 94.15
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 7,348,042 5.35 0.75 13.91 0.72 105.64
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 1,580,435 7.67 1.29 17.19 0.51 121.82
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 485,132 15.93 0.64 3.84 0.19 19.25
09/24/95 02/29/96 Republic New York NY Brooklyn Bancorp NY 4,139,215 8.79 1.00 11.83 13.63 18.75
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 611,933 10.90 1.11 10.07 0.50 65.45
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 587,904 17.42 1.60 9.42 3.87 64.35
Average 2,124,439 9.53 1.01 11.29 2.28 83.35
Median 882,407 8.31 0.97 9.83 0.92 73.47
<CAPTION>
Deal Terms and Pricing at Announcement
---------------------------------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBk Prm/
Annd Value Pr/Share Consider Pr/Bk Tg Bk 4-Qtr Assets CoreDeps
Date ($M) ($) Type (%) (%) EPS (x) (%) (%)
- ---- ---- --- ---- --- --- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/03/98 1765.7 69.360 Stock 299.09 301.83 32.11 29.08 35.57
04/23/98 30.0 20.999 Stock 144.62 144.62 22.58 18.70 8.48
12/16/97 158.7 39.585 Stock NA NA NA NA NA
03/06/98 33.8 22.000 Stock 151.10 151.10 30.56 26.73 14.19
05/26/98 1070.7 56.631 Stock 403.07 403.07 27.23 26.73 41.64
12/16/97 105.0 36.020 Stock 164.85 309.18 32.16 13.57 11.31
10/23/97 143.5 10.613 Stock 181.42 181.42 48.24 16.30 13.37
10/07/97 831.6 37.114 Stock 480.13 480.13 19.95 25.33 43.83
05/21/97 647.5 42.315 Stock 198.10 203.24 17.06 16.06 16.09
03/31/97 344.6 18.938 Mix 167.44 167.44 24.59 13.56 8.48
04/25/97 13.0 272.500 Cash 169.14 170.51 13.13 15.81 10.44
12/03/96 91.8 52.000 Cash 169.38 169.38 9.94 14.27 10.34
08/22/96 652.0 NA Cash 163.00 165.06 12.82 8.87 6.14
07/15/96 216.3 42.790 Stock 168.46 170.07 11.76 13.69 7.98
11/03/95 105.1 21.250 Cash 122.34 122.34 25.91 21.66 7.75
09/24/95 529.6 41.500 Cash 140.68 140.68 14.46 12.79 4.78
07/31/95 112.8 32.000 Cash 159.05 159.05 15.24 18.43 10.37
05/16/95 131.4 22.000 Cash 127.83 127.83 13.33 22.35 7.32
Average 388.0 49.271 200.57 209.82 21.83 18.47 15.18
Median 151.1 37.114 167.44 169.38 19.95 16.30 10.37
</TABLE>
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Cortland Savings Bank
Directors and Management Summary Resumes
WESLEY D. STISSER serves as President and Chief Executive Officer of the
Bank, a position he has held since 1983. Mr. Stisser has been with the Bank for
45 years. He is a graduate of the Graduate School of Savings Banking at Brown
University and the School for Executive Development sponsored by the Community
Bankers Association. An eagle scout and recipient of the Silver Beaver Award
B.S.A., Mr. Stisser is an active member of numerous professional, civic and
community service organizations. He is presently a member of the New York
Savings Bank Life Insurance Fund's Board of Directors and is Chairman of the
Cortland City Police Commission. He is a former member of the Board of Directors
for Cortland Memorial Hospital, serving as its Chairman, and was a member of
SUNY Cortland College Foundation.
EDWARD E. HATTER, Jr was a principal of Hatter Fuel Co., from which he
retired in 1987. Mr. Hatter was active in several community organizations,
serving as Chairman of the Easter Seals drive and holding various offices in the
New York State Jaycees, the Rotary Club and the University Club. He is currently
active in the March of Dimes drive, the Town and River Cruise Club and the Royal
Palm Yacht Club. He was district chairman of the Tioughnioga-Baden Powell
Council, B.S.A. Mr. Hatter resides part time in Florida.
JUDITH F. RIEHLMAN is the Cortland County Clerk. Mrs. Riehlman and her
husband own and operate a family run farm and Birch Farm Structures, a furniture
retailer. Active in numerous community organizations, Mrs. Riehlman currently
serves as Chairperson of the Cortland County Republican Committee, President of
the American Agricultural Foundation, Inc. and as a Director of Family
Counseling Services.
TERRANCE D. STALDER is the Associate Vice President for Finance and
Management at SUNY Cortland. Mr. Stalder is a member of various community
organizations and serves on the Village of Homer Planning Board, the Board of
Trustees of the Cortland YMCA and is a member of the Cortland Rotary Club.
HARVEY KAUFMAN retired as Superintendent of the Cortland City Schools
District in 19___and currently provides administrative consulting services in
the field of education. He was elected Chairman of the Board of Trustees of the
Bank in June of 1997. He is a former Cortland City Police Commissioner, past
president of the Cortland County Chamber of Commerce, past president of the New
York State Association of Small City School Districts, and was a member of the
New York State Assembly Task Force and Regents Action Plan. Mr. Kaufman is also
currently the Chairman of the J.M. Murray Center and Cortland Memorial Hospital
Services, a for profit affiliate of Cortland Memorial Hospital.
JOSEPH H. COMPAGNI is President of Economy Paving Co., Inc., which
constructs highways and bridges in New York State. He is currently a director of
the New York State Associated General Contractors and has been a Director of the
Cortland Memorial Hospital, J.M. Murray Center, Cortland Family Health Network,
Cortland Rotary Club and Cortland YMCA.
DONALD P. REED is the principal of Reed's Seeds, a business which sells
crop seeds, farm seeds, farm chemicals and fertilizer. He is also Chairman of
the Board of Dryden Mutual Insurance Company.
ROLAND FRAGNOLI is the President of the Homer Men & Boys clothing stores,
a local retailer with which he has been associated for 50 years. He is a member
of various service and community clubs and serves on the Tompkins Cortland
Community College Foundation Board.
PATRICK J. HAYES, M.D. is a practicing physician in Cortland. He is a past
president of the Cortland Memorial Hospital Medical Staff and currently serves
as Chief of Staff of Cortland Health Center. Dr. Hayes is a member of the
Board of the American Lung Association of Central New York, Inc.
ROBERT S. KASHDIN, C.P.A. has been a practicing certified public
accountant for over 30 years and is the present managing partner of the CPA firm
of Port, Kashdin and McSherry located in Cortland. Mr. Kashdin is a member in
numerous community and professional organizations including past chairman of the
New York State Society of CPA's Agri Business Committee and District Treasurer
of Rotary District 7170. He is a former Board member of the Jewish Homes of
Central New York and the United Way of Cortland County.
<PAGE>
Executive Officers Who Are Not Directors
STEVEN A. COVERT joined the Bank in June 1998. From August 1995 to June
1998, he was Executive Vice President and Chief Financial Officer of Success
Bancshares, Inc., a bank holding company in Chicago, Illinois. He was Senior
Vice President and Chief Financial Officer of Ithaca Bancorp, Inc., a savings
and loan holding company in Ithaca, New York, from July 1993 to December 1994
and was Vice President and Chief Financial Officer of Skaneateles Bancorp, Inc.,
a bank holding company in Skaneateles, New York, from January 1991 to July 1993.
Mr. Covert is a certified public accountant and prior to joining the banking
industry, he was employed by KPMG Peat Marwick LLP as an auditor. Mr. Covert has
been a member of various community organizations including the United Way and an
organization that provides food for the homeless.
KERRY D. MEEKER joined the Bank in 1996 as Senior Vice President and
Senior Loan Officer. Prior to joining the Bank, he held the position of Vice
President and Chief Loan Officer of Oneida Savings Bank since 1989. He
previously served as a Vice President and Commercial Loan Officer of Marine
Midland Bank and as a Senior Financial Analyst at Bankers Trust Company. He is a
member of the Rotary Club of Cortland; has served as President of the Greater
Oneida Chamber of Commerce, Inc.; Treasurer of the Oneida Improvement Committee,
Inc.; President of the Oneidas Club; President of the Sherrill - Kenwood
Community Chest, Inc.; and is a past member of the Rotary Club of Oneida.
F. MICHAEL STAPLETON joined the Bank in June 1998. From February 1986
through April 1998, Mr. Stapleton was with OnBank and Trust Co., rising to the
position of Regional President. He then continued with Manufacturers and Traders
Trust Company after it acquired OnBank. He is the Chairman of the Loretto
Foundation, which provides care for the elderly, and is a Director of Meals on
Wheels of Syracuse and the Mercy Health and Rehabilitation Center. Mr. Stapleton
is also the Chairman of the Cayuga County Economic Development Council, a
Director of the Industrial Development Foundation of Auburn and Cayuga County,
and a member of the Auburn Industrial Development Authority, all of which are
involved in fostering economic development in central New York.
<PAGE>
EXHIBIT IV-6
Cortland Savings Bank
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
Pro Forma Based Upon Net Proceeds at March 31, 1998
-----------------------------------------------------------------------------
5,206,250 Shares 6,125,000 Shares 7,043,750 Shares 8,100,312 Shares Sold
Historical at Sold (Minimum of Sold (Midpoint of Sold (Maximum of (15% Above Maximum
March 31, 1998 Valuation Range) Valuation Range) Valuation Range) of Valuation Range)
--------------- --------------- ---------------- --------------- ---------------------
Percent Percent Percent Percent Percent
of of of of of
Applicable Applicable Applicable Applicable Applicable
Amount Assets Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital(1) .... $31,394 13.51% $50,584 19.77% $54,125 20.81% $57,666 21.81% $61,694 22.91%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tier I Leverage:
Capital Level(2) ... $30,662 21.94% $49,852 34.51% $53,393 36.74% $56,934 38.95% $60,962 41.43%
Requirement(3) ..... 5,590 4.00% 5,778 4.00% 5,812 4.00% $ 5,847 4.00% 5,886 4.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ............. 25,072 17.94% $44,074 30.51% $47,581 32.74% $51,087 34.95% $55,076 37.43%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tier I Risk-based:
Capital Level(2) ... $32,408 23.19% $51,598 35.72% $55,139 37.95% $58,680 40.15% $62,708 42.62%
Requirement(3) ..... 11,181 8.00% 11,556 8.00% 11,625 8.00% 11,693 8.00% 11,772 8.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ............. $21,227 15.19% $40,042 27.72% $43,514 29.95% $46,986 32.15% $50,936 34.62%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Total Risk-based:(4)
Capital level(2) ... $30,662 13.26% $49,852 19.58% $53,393 20.62% $56,934 21.63% $60,962 22.74%
Requirement(3) ..... 9,246 4.00% 10,184 4.00% 10,355 4.00% 10,527 4.00% 10,722 4.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ............. $21,416 9.26% $39,668 15.58% $43,038 16.62% $46,407 17.63% $50,240 18.74%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
(1) Capital under generally accepted accounting principles includes the
net unrealized gain/loss, if any on available-for-sale securities, which
is not recognized as capital under the FDIC capital ratio rules. Total
risk-based capital includes the allowance for loan losses. See "Regulation
- Banking Regulation - Capital Requirements."
(2) Pro forma capital levels assume that one-half of the net proceeds from
the sale of the Common Stock is contributed by the Company to the Bank in
exchange for the stock of the Bank, but only after deducting from the
amount contributed to the Bank (i) the full amount of Common Stock
expected to be purchased by the ESOP and (ii) an additional amount
representing 4% of the Common Stock to be issued in the Conversion,
including Common Stock contributed to the Foundation, on account of the
anticipated PRRP.
(3) In order to be classified as "well-capitalized," the Bank must, in
addition to other requirements, have a Tier I risk-based capital ratio of
at least 6.00%, a total risk-based capital ratio of at least 10.00% and a
Tier I leverage ratio of at least 5.00%. See "Regulation Banking
Regulation - Capital Requirements" and " - Enforcement."
(4) Pro forma risk-based capital data assumes the net proceeds are
invested in assets that carry a risk-weighting equal to 20%, based on the
assumption that the net proceeds will initially be invested in government
and corporate debt securities.
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
Cortland Savings Bank
Prices as of June 5, 1998
<TABLE>
<CAPTION>
BIF-Insured
Peer Group New York Companies Institutions
Subject @ -------------------------- --------------------- --------------
Price Multiple Symbol Midpoint Mean Median Mean Median Mean
- -------------- ------ -------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price/Reported Earnings Multiple = P/E 46.08x 21.98x 21.79x 21.46x 21.04x 18.56x
Price/Core Earnings Multiple = P/CE 18.75x 22.48x 22.53x 22.15x 22.24x 19.53x
Price/Book Ratio = P/B 74.49% 131.31% 126.56% 161.11% 151.26% 193.05%
Price/Tangible Book Ratio = P/TB 74.49% 131.68% 126.56% 169.65% 152.14% 191.24%
Price/Assets Ratio = P/A 21.93% 23.87% 26.60% 21.52% 18.49% 20.50%
</TABLE>
Valuation Parameters
Pre-Conv. Reported Earnings (Y) $154,000
Pre-Conversion Core Earnings $2,130,000
Pre-Conversion Book Value (B) $31,394,000
Pre-Conv. Tang. Book Value (B) $31,394,000
Pre-Conversion Assets (A) $232,388,000
Reinvestment Rate (2)(R) 3.29%
Est. Conversion Expenses (3)(X) 2.86%
Tax rate (TAX) 39.00%
ESOP Stock Purchases (E) 8.00% (5)
Cost of ESOP Borrowings (S) 0.00% (4)
ESOP Amortization (T) 15.00 years
RRP Amount (M) 4.00%
RRP Vesting (N) 5.00 years (5)
Foundation (F) 2.00%
Tax Benefit (Z) 477,750
Percentage Sold (PCT) 100.00%
Calculation of Pro Forma Value After Conversion
1. V = P/E* (Y) V = $69,115,743
------------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F) * R-(1-TAX)* ET - (1-TAX) * M/N)
2. V = P/B * (B+Z) V = $62,764,487
--------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V = P/A * (A+Z) V = $62,514,463
--------------------------
1 - P/A * PCT * (1-X-E-M-F)
<TABLE>
<CAPTION>
Shares Aggregate
Shares Sold to Price Per Gross Offering Issued To Total Shares Market Value
Conclusion Public Share Proceeds Foundation Issued of Stock Issued
- ---------- ------ ----- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 5,206,250 10.00 $52,062,500 104,125 5,310,375 53,103,750
Midpoint 6,125,000 10.00 61,250,000 122,500 6,247,500 62,475,000
Maximum 7,043,750 10.00 70,437,500 140,875 7,184,625 71,846,250
Supermaximum 8,100,313 10.00 81,003,125 162,006 8,262,319 82,623,190
</TABLE>
- ----------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.39 percent, and a tax rate of
39.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 15 years and 5 years, respectively;
amortization expenses tax effected at 39.00 percent.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Cortland Savings Bank
At the Minimum
<TABLE>
<S> <C>
1. Offering Proceeds $52,062,500
Less: Estimated Offering Expenses 1,750,000
---------
Net Conversion Proceeds $50,312,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $50,312,500
Less: Non-Cash Stock Purchases(1) 6,372,450
---------
Net Proceeds Reinvested $43,940,050
Estimated net incremental rate of return 3.29%
----
Earnings Increase $ 1,444,705
Less: Estimated cost of ESOP borrowings(2) 0
Less: Amortization of ESOP borrowings(3) 172,764
Less: Recognition Plan Vesting(4) 259,146
-------
Net Earnings Increase $ 1,012,794
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
------------ ---------- -----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) $ 154,000 $1,012,794 $ 1,166,794
l2 Months ended March 31, 1998 (core) $ 2,130,000 $1,012,794 $ 3,142,794
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ------------
<S> <C> <C> <C> <C>
March 31, 1998 $ 31,394,000 $43,940,050 $ 406,088 $75,740,138
March 31, 1998 (Tangible) $ 31,394,000 $43,940,050 $ 406,088 $75,740,138
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
March 31, 1998 $232,388,000 $43,940,050 $ 406,088 $276,734,138
</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
Cortland Savings Bank
At the Midpoint
<TABLE>
<S> <C>
1. Offering Proceeds $61,250,000
Less: Estimated Offering Expenses 1,750,000
-----------
Net Conversion Proceeds $59,500,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $59,500,000
Less: Non-Cash Stock Purchases(1) 7,497,000
-----------
Net Proceeds Reinvested $52,003,000
Estimated net incremental rate of return 3.29%
-----------
Earnings Increase $ 1,709,807
Less: Estimated cost of ESOP borrowings(2) 0
Less: Amortization of ESOP borrowings(3) 203,252
Less: Recogntion Plan Vesting(4) 304,878
-----------
Net Earnings Increase $ 1,201,677
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
------------ ---------- -----------
<S> <C> <C> <C>
l2 Months ended March 31, 1998 (reported) $ 154,000 $1,201,677 $ 1,355,677
l2 Months ended March 31, 1998 (core) $ 2,130,000 $1,201,677 $ 3,331,677
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 $ 31,394,000 $52,003,000 $ 477,750 $83,874,750
March 31, 1998 (Tangible) $ 31,394,000 $52,003,000 $ 477,750 $83,874,750
Before Net Cash Tax Benefit(5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
March 31, 1998 $232,388,000 $52,003,000 $ 477,750 $284,868,750
</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
Cortland Savings Bank
At the Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Offering Proceeds $ 70,437,500
Less: Estimated Offering Expenses 1,750,000
---------
Net Conversion Proceeds $ 68,687,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $ 68,687,500
Less: Non-Cash Stock Purchases(1) 8,621,550
---------
Net Proceeds Reinvested $ 60,065,950
Estimated net incremental rate of return 3.29%
----
Earnings Increase $ 1,974,908
Less: Estimated cost of ESOP borrowings(2) 0
Less: Amortization of ESOP borrowings(3) 233,740
Less: Recognition Plan Vesting(4) 350,610
-------
Net Earnings Increase $ 1,390,559
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C> <C>
12 Months ended March 31, 1998 (reported) $ 154,000 $1,390,559 $ 1,544,559
12 Months ended March 31, 1998 (core) $ 2,130,000 $1,390,559 $ 3,520,559
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 $ 31,394,000 $60,065,950 $ 549,413 $ 92,009,363
March 31, 1998 (Tangible) $ 31,394,000 $60,065,950 $ 549,413 $ 92,009,363
Before Net Cash Tax Benefit(5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
March 31, 1998 $232,388,000 $60,065,950 $549,413 $293,003,363
</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
Cortland Savings Bank
At the Supermaximum Value
<TABLE>
<S> <C>
1. Offering Proceeds $81,003,125
Less: Estimated Offering Expenses 1,837,000
---------
Net Conversion Proceeds $79,166,125
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $79,166,125
Less: Non-Cash Stock Purchases(1) 9,914,783
---------
Net Proceeds Reinvested $69,251,342
Estimated net incremental rate of return 3.29%
-----
Earnings Increase $2,276,915
Less: Estimated cost of ESOP borrowings(2) 0
Less: Amortization of ESOP borrowings(3) 268,801
Less: Recognition Plan Vesting(4) 403,201
-------
Net Earnings Increase $1,604,913
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) $154,000 $1,604,913 $1,758,913
12 Months ended March 31, 1998 (core) $2,130,000 $1,604,913 $3,734,913
<CAPTION>
Before Net Cash Tax Benefit(5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31,1998 $31,394,000 $69,251,342 $631,824 $101,277,167
March 31,1998 (Tangible) $31,394,000 $69,251,342 $631,824 $101,277,167
<CAPTION>
Before Net Cash Tax Benefit(5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31,1998 $232,388,000 $69,251,342 $631,824 $302,271,167
</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>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
EXHIBIT IV-9
Cortland Savings Bank
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1998
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ----------- ------ ----------
($000) ($000) $000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
AHCI Ambanc Holding Co., Inc. of NY 2,554 -783 266 0 2,037 4,258 0.48
CATB Catskill Fin. Corp. of NY 3,828 -66 22 0 3,784 4,461 0.85
DCBI Delphos Citizens Bancorp of OH 1,726 0 0 0 1,726 1,904 0.91
ESBK Elmira Svgs Bank (The) of NY 1,013 84 -29 0 1,068 727 1.47
GOSB GSB Financial Corp. of NY 873 -71 24 0 826 2,248 0.37
PEEK Peekskill Fin. Corp. of NY 1,906 64 -22 0 1,948 3,017 0.65
PSFC Peoples Sidney Fin. Corp of OH 1,268 0 0 0 1,268 1,785 0.71
SFED SFS Bancorp of Schenectady NY 1,113 -56 19 0 1,076 1,208 0.89
SKAN Skaneateles Bancorp Inc of NY 1,607 -52 18 0 1,573 1,440 1.09
WEHO Westwood Hmstd Fin Corp of OH(1) 883 778 -265 0 1,396 2,843 0.49
</TABLE>
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (18)
William E. Pommerening, Managing Director (14)
Gregory E. Dunn, Senior Vice President (16)
James P. Hennessey, Senior Vice President (13)
James J. Oren, Senior Vice President (11)
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
