<PAGE>
As filed with the Securities and Exchange Commission on November 2, 1998
Registration No. 333-63625
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO.1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PEOPLES BANKCORP, INC.
(Name of Small Business Issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
NEW YORK 6035 [TO BE APPLIED FOR]
- --------------------------------- ---- ---------------------
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification number)
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
- ------------------------------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal place of business)
</TABLE>
ROBERT E. WILSON, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
-------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
COPIES TO:
Gary R. Bronstein, Esquire
Joan S. Guilfoyle, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
UP TO 198,375 SHARES OF COMMON STOCK
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
================================================================================
Ogdensburg Federal Savings and Loan Association is converting from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association. As part of the conversion, Ogdensburg
Federal Savings and Loan Association will become a wholly owned subsidiary of
Peoples Bankcorp, Inc. The Company was formed in September 1998 and upon
completion of the conversion will own all of the shares of Ogdensburg Federal
Savings and Loan Association. The common stock of the Company is being offered
to the public in accordance with a plan of conversion. The plan of conversion
must be approved by the Office of Thrift Supervision and by a majority of the
votes eligible to be cast by members of Ogdensburg Federal Savings and Loan
Association. The offering will not go forward if Ogdensburg Federal Savings and
Loan Association does not receive these approvals and the Company does not sell
at least the minimum number of shares.
The shares of common stock are first being offered pursuant to
nontransferable subscription rights in a Subscription Offering. Depositor and
borrower members as of certain eligibility dates will receive subscription
rights. Shares of common stock not subscribed for in the Subscription Offering
may be offered for sale in a community offering with preference given to
residents of St. Lawrence County, New York.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the converted
Ogdensburg Federal Savings and Loan Association to be between $1,275,000 and
$1,725,000, which establishes the number of shares to be offered at a price of
$10 per share. Subject to Office of Thrift Supervision approval, up to 198,375
shares, an additional 15% above the maximum number of shares, may be offered.
Based on these estimates, we are making the following offering of shares of
common stock:
<TABLE>
<CAPTION>
<S> <C> <C>
. Price Per Share: $10
. Number of Shares Minimum/
Maximum, as adjusted: 127,500 to 198,375
. Offering Expenses: $350,000
. Net Proceeds to the Company
Minimum/Maximum, as adjusted: $925,000 to $1,633,750
. Net Proceeds Per Share
Minimum/Maximum, as adjusted: $7.25 to $8.24
</TABLE>
PLEASE REFER TO RISK FACTORS BEGINNING ON PAGE 1 OF THIS DOCUMENT.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE STOCK INFORMATION CENTER AT (315)
___-____.
TRIDENT SECURITIES, INC.
The date of this Prospectus is November ___, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
Questions and Answers About the Stock Offering......................... (i)
Summary................................................................ (iv)
Selected Financial and Other Data...................................... (vii)
Recent Developments.................................................... (ix)
Risk Factors........................................................... 1
Proposed Purchases by Directors and Officers........................... 6
The Company............................................................ 7
Ogdensburg Federal Savings and Loan Association........................ 7
Use of Proceeds........................................................ 7
Dividends.............................................................. 9
Market for the Common Stock............................................ 10
Capitalization......................................................... 11
Historical and Pro Forma Capital Compliance............................ 12
Pro Forma Data......................................................... 13
The Conversion......................................................... 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 32
Business of Peoples Bankcorp, Inc...................................... 44
Business of Ogdensburg Federal Savings and Loan Association............ 44
Regulation............................................................. 62
Taxation............................................................... 70
Management of the Company.............................................. 72
Management of Ogdensburg Federal Savings and Loan Association.......... 72
Restrictions on Acquisitions of the Company............................ 79
Description of Capital Stock........................................... 83
Legal and Tax Matters.................................................. 85
Experts................................................................ 85
Additional Information................................................. 85
Ogdensburg Federal Savings and Loan Association Index to
Financial Statements.................................................. F-1
Glossary............................................................... A-1
This document contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" beginning on page 1 of this document.
Please see the Glossary beginning on page A-1 for the meaning of
capitalized terms that are not defined in this document.
<PAGE>
[MAP TO BE INSERTED HERE]
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: WHAT IS A MUTUAL TO STOCK CONVERSION?
A: The conversion is a change in our form of organization. Currently, we
operate as a federally chartered mutual savings and loan association with
no stockholders. As a result of the conversion, we will become a federally
chartered stock savings and loan association. As part of our conversion,
the Company is offering for sale shares of its common stock.
Q: WHAT IS THE PURPOSE OF THE CONVERSION AND THE OFFERING?
A: As a stock savings association operating through a holding company
structure, we will have the ability to plan and develop long-term growth
and improve our future access to the capital markets. The stock offering
will increase our capital and the amount of funds available to us for
lending and investment activities. This will give us greater flexibility
to diversify operations and expand into other geographic markets if we
choose to do so. If the Company's earnings are sufficient in the future,
you might also receive dividends and benefit from the long-term
appreciation of our stock price.
Q: HOW MANY SHARES OF STOCK WILL BE SOLD?
A: Between 127,500 and 172,500 shares of common stock will be sold. The
number of shares to be sold may be increased to 198,375 shares without
further notice to you, subject to receipt of approval of the Office of
Thrift Supervision, if market or financial conditions change prior to
completion of the conversion or if additional shares are needed to fill the
order of our employee stock ownership plan (the "ESOP").
Q: AT WHAT PRICE WILL THE SHARES BE SOLD?
The shares will be sold at $10.00 per share. This price was determined by
our board of directors and is the price most commonly used in stock
offerings involving conversions of mutual savings institutions. In
addition, the board believed that the price was such that many of our
depositors and borrowers would be able to participate in the Offering.
Q: HOW DO I PURCHASE THE STOCK?
A: You must complete and return the Stock Order Form to us together with your
payment or your authorization for withdrawal of the payment amount from an
account you have with us, on or before noon on December 14, 1998. See
pages 18 to 31.
(i)
<PAGE>
Q: HOW MUCH STOCK MAY I PURCHASE?
A: The minimum purchase is 25 shares (or $250). The maximum purchase per
eligible depositor in the subscription offering is 5,000 shares (or
$50,000). We may decrease or increase the maximum purchase limitation
without notifying you.
If shares are sold in a Community Offering, the maximum number of shares
that may be purchased by any party in the Community Offering, when combined
with the number of shares purchased by other parties with whom your shares
may be aggregated is 5,000 shares ($50,000). See pages 24 to 26.
In certain instances, your purchase might be grouped together with
purchases by persons with other accounts with whom you are affiliated or
related and in that event the aggregate purchases may not exceed 8,000
shares ($80,000).
Q: WHAT HAPPENS IF THERE ARE NOT ENOUGH SHARES TO FILL ALL ORDERS?
A: You might not receive any or all of the shares you want to purchase. If we
receive offers for more shares than we have available to sell, the stock
will be offered on a priority basis to the following persons:
. ELIGIBLE ACCOUNT HOLDERS - Persons who had a deposit account with us on
June 30, 1997 with a balance of at least $50.00. Any remaining shares will
be offered to:
. OUR ESOP. Any remaining shares will be offered to:
. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS - Persons who had a deposit account
with us on September 30, 1998 with a balance of at least $50.00. Any
remaining shares will be offered to:
. OTHER MEMBERS - Other depositors and certain borrowers of ours, as of
November , 1998.
--
If the above persons do not subscribe for all of the shares, the remaining
shares will be offered to certain members of the general public with
preference given to people who live in St. Lawrence County, New York. See
pages ___ to ___.
Q: WHAT PARTICULAR FACTORS SHOULD I CONSIDER WHEN DECIDING WHETHER OR NOT TO
BUY THE STOCK?
A: Because of the small size of the offering, there may not be an active market
for the shares, which may make it difficult to resell any shares you may
own. Before you decide to purchase stock, you should also read the Risk
Factors section beginning on page 1 of this document.
(ii)
<PAGE>
Q: AS A DEPOSITOR OR BORROWER MEMBER OF OGDENSBURG FEDERAL SAVINGS AND LOAN
ASSOCIATION, WHAT WILL HAPPEN IF I DO NOT PURCHASE ANY STOCK?
A: You presently have voting rights while we are in the mutual form; however,
once we convert to the stock form you will lose your voting rights unless
you purchase stock. You are not required to purchase stock. Your deposit
account, certificate accounts and any loans you may have with us will be
not be affected. See pages 19 to 21.
Q: WHO CAN HELP ANSWER ANY OTHER QUESTIONS I MAY HAVE ABOUT THE STOCK
OFFERING?
A: In order to make an informed investment decision, you should read this
entire document. In addition, you should contact:
STOCK INFORMATION CENTER
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK
(315) ___-____
(iii)
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the stock
offering fully, you should read carefully this entire document, including the
financial statements and the notes to the financial statements of Ogdensburg
Federal Savings and Loan Association. References in this document to "we,"
"us," and "our" refer to Ogdensburg Federal Savings and Loan Association. In
certain instances where appropriate, "us" or "our" refers collectively to
Peoples Bankcorp, Inc. and Ogdensburg Federal Savings and Loan Association.
References in this document to "the Company" refer to Peoples Bankcorp, Inc.
PEOPLES BANKCORP, INC.
Peoples Bankcorp, Inc. was formed in September 1998 as a New York
corporation to be the holding company for Ogdensburg Federal Savings and Loan
Association. The Company is not an operating company and has not engaged in
any significant business to date. The holding company structure will provide
greater flexibility in terms of operations, expansion and diversification. See
page 44.
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
We are a community and customer-oriented federal mutual savings association
with one office located in Ogdensburg, New York. We were originally founded in
1888 as a New York-chartered savings association and converted to a federally
chartered savings and loan association in 1982. Our primary market area
consists of the City of Ogdensburg and the surrounding townships of Lisbon,
Oswegatchie, Madrid, Morristown, Heuvelton, Hammond, Depeyster, Macomb and
Waddington and the village of Rennsselaer Falls in St. Lawrence County, New
York. Historically, we have emphasized residential mortgage lending, primarily
originating one- to four-family mortgage loans. We also make consumer loans and
a limited number of commercial real estate loans and commercial business loans.
At June 30, 1998, we had total assets of $24.2 million, deposits of $22.4
million, and total equity of $1.6 million. See page 44.
THE STOCK OFFERING
The Company is offering between 127,500 and 172,500 shares of common stock
at $10.00 per share. Subject to approval by the Office of Thrift Supervision,
the number of shares to be sold may be increased to 198,375 shares without
further notice to you if market or financial conditions change prior to
completion of the conversion or if additional shares are needed to fill the
order of our ESOP.
(iv)
<PAGE>
STOCK PURCHASES
The Company is first offering its shares of common stock in a Subscription
Offering to depositor and borrower members as of certain eligibility dates. The
shares of common stock will be offered on the basis of priorities. Any
remaining shares may be offered in a Community Offering or in a Syndicated
Community Offering. See pages 21 to 24.
SUBSCRIPTION RIGHTS
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law. All persons exercising their
subscription rights will be required to certify that they are purchasing shares
solely for their own account and that they have no agreement or understanding
regarding the sale or transfer of the shares they are purchasing. We intend to
pursue any and all remedies in the event that we become aware of the transfer of
any subscription rights. We will reject orders that we determine to involve the
transfer of such rights.
THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE
The offering range is based on an independent appraisal of the pro forma
market value of the common stock by Feldman Financial Advisors, Inc.
("Feldman"), an appraisal firm experienced in appraisals of savings
institutions. The pro forma market value of the shares is our market value
after giving effect to the sale of shares in this offering. Feldman has
estimated that in its opinion as of September 4, 1998 such value ranged between
$1.3 million and $1.7 million (with a midpoint of $1.5 million) (the "Estimated
Valuation Range"). The appraisal was based in part upon our financial condition
and operations and the effect of the additional capital raised by the sale of
common stock in this offering. The $10.00 price per share was determined by our
board of directors and is the price most commonly used in stock offerings
involving conversions of mutual savings institutions. The appraisal will be
updated prior to the consummation of the conversion. If the updated pro forma
market value of the common stock is either below $1.3 million or above $2.0
million, we will notify you and you will have the opportunity to modify or
cancel your order. See pages 29 to 30.
TERMINATION OF THE OFFERING
The Subscription Offering will terminate at 12:00 p.m., Eastern Time, on
December 14, 1998. The Community Offering, if any, may terminate at any time
without notice but no later than _________ __, 1999, without approval by the
OTS.
BENEFITS TO MANAGEMENT FROM THE OFFERING
ESOP. Our full-time employees will participate in the offering through
purchases of stock by our ESOP, which is a form of retirement plan. We expect
that the ESOP will purchase 8% of the shares sold in the offering. The purchase
price will be funded by a loan from the Company. As the ESOP loan is repaid,
shares will be allocated to accounts of the ESOP participants.
EMPLOYMENT AGREEMENTS. We intend to enter into employment agreements with
Robert E. Wilson, President and Chief Executive Officer, and Todd R. Mashaw,
Vice President. The employment agreements will provide for three-year terms
with initial base salaries equal to their current base salaries.
(v)
<PAGE>
MANAGEMENT RECOGNITION PLAN. Following the conversion, we also intend to
implement a management recogonition plan ("MRP") under which certain officers
and directors will be entitled to receive awards of restricted stock at no cost
to them. We anticipate that shares equal to 4% of the number of shares to be
sold in the offering will be awarded under the MRP. The MRP would require
stockholder approval before it can be implemented.
STOCK OPTION PLAN. We also intend to implement a stock option plan and
incentive plan (the "Option Plan"), which will benefit our officers and
directors. We expect that the option plan will provide that options for up to
10% of the number of shares of stock sold in the offering may be granted.
USE OF THE PROCEEDS FROM THE SALE OF COMMON STOCK
The Company will use a portion of the net proceeds from the stock offering
to make a loan to our ESOP to fund its purchase of 8% of the common stock issued
in the conversion. The Company will use at least 50% of the net proceeds to
purchase all the capital stock to be issued by us in the conversion. The Company
will retain the balance of the funds as its initial capitalization. These funds
will serve as a possible source of funds for the payment of dividends to
stockholders or to repurchase shares of common stock in the future and for
general corporate purposes. See page 7.
DIVIDENDS
Management of the Company does not anticipate paying a cash dividend in the
first year following the conversion. Following that period, Management intends
to review periodically the possible adoption of a dividend policy. We cannot
assure you, however, when, or if, we will ultimately decide to establish a cash
dividend policy. See page 1.
MARKET FOR THE COMMON STOCK
The Company intends to list the common stock over-the-counter through the
OTC "Electronic Bulletin Board." The Company has requested that Trident
Securities, Inc. agree to match offers to buy and sell the common stock. Trident
Securities has no obligation to match offers to buy and sell and may cease doing
so at any time. Since the size of the offering is small, it is unlikely that an
active and liquid trading market for the shares will develop and be maintained.
Investors should therefore have a long-term investment intent. Persons
purchasing shares may not be able to sell their shares when they desire or to
sell them at a price equal to or above $10.00. See page 10.
IMPORTANT RISKS IN OWNING THE COMPANY'S COMMON STOCK
Before you decide to purchase stock in the offering, you should read the
"Risk Factors" section beginning on page one of this document.
(vi)
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The selected data presented below under the captions "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of
December 31, 1997 and 1996, are derived from the audited financial statements of
Ogdensburg Federal Savings and Loan Association. The financial statements as of
December 31, 1997 and 1996 and for the years then ended are included elsewhere
in this Prospectus. The selected data presented below as of and for the six
month periods ended June 30, 1998 and 1997 are derived from the unaudited
financial statements of Ogdensburg Federal Savings and Loan Association included
elsewhere in this Prospectus. The data at June 30, 1998, and for the six months
ended June 30, 1998 and 1997 is unaudited, but in the opinion of our management
reflects all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation. Results for the six month period ended June
30, 1998 do not necessarily indicate the results that may be expected for the
year ended December 31, 1998.
SELECTED FINANCIAL CONDITION DATA
The following table sets forth certain information concerning our financial
position at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ------------------
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total assets............................................ $24,247 $ 23,402 $21,998
Loans, net.............................................. 18,698 16,668 15,359
Cash and cash equivalents............................... 1,239 1,227 1,571
Securities:
Available-for-sale..................................... -- 737 804
Held-to-maturity....................................... 3,546 4,031 3,561
Total deposits.......................................... 22,356 21,765 20,489
Total equity............................................ 1,648 1,577 1,477
</TABLE>
SELECTED OPERATIONS DATA
The following table sets forth certain information concerning our results of
operations for the periods shown.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
June 30, DECEMBER 31,
----------------- ---------------
1998 1997 1997 1996 (1)
------- ------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income..................................................... $ 882 $ 812 $1,662 $ 1,592
Interest expense.................................................... 522 477 998 955
Net interest income................................................. 360 335 664 637
Provision for loan losses........................................... 3 -- 57 --
Net interest income after provision for loan losses................. 357 335 607 637
Non-interest income................................................. 22 20 44 30
Non-interest expenses............................................... 281 250 525 656
Income before income tax expense.................................... 98 105 126 11
Income tax expense.................................................. 26 28 38 3
------- ----- ------ -------
Net income........................................................ $ 72 $ 77 $ 88 $ 8
======= ===== ====== =======
</TABLE>
- -------------------------
(1) Our results of operations for the year ended December 31, 1996 include a
special assessment of $128,000 which we were required to pay to
recapitalize the SAIF.
(vii)
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
The table below sets forth certain performance ratios for us for the periods
indicated.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- -----------------------
1998 1997 1997 1996
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income divided
by average total assets)....................................... 0.61% 0.69% 0.39% 0.04%
Return on average equity (net income divided
by average equity)............................................. 9.04 10.42 5.82 0.53
Net interest rate spread (combined weighted
average interest rate earned less combined
weighted average interest rate cost)........................... 2.97 2.96 2.86 2.90
Average interest-earning assets to
average interest-bearing liabilities........................... 105.36 104.73 104.62 104.15
Noninterest expense to average total assets..................... 1.18 1.12 2.30 3.00
ASSET QUALITY RATIOS:
Nonperforming assets to total assets............................ 1.41 0.11 1.42 0.04
Nonperforming loans to total loans.............................. 1.61 0.16 1.74 0.06
Allowance for loan losses to total loans........................ 0.87 0.72 0.97 0.75
Allowance for loan losses to nonperforming loans................ 54.46 438.46 55.97 1288.89
Provision for loan losses to loans, net......................... 0.02 -- 0.34 --
Net charge-offs to average loans outstanding.................... 0.01 0.01 0.06 --
CAPITAL RATIOS:
Equity to total assets.......................................... 6.80 6.80 6.74 6.71
Average equity to average total assets.......................... 6.72 6.64 6.64 6.96
</TABLE>
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ---------------------------
1998 1997 1996
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER DATA:
Real estate loans outstanding............................................. 548 565 554
Deposit accounts.......................................................... 2,576 2,637 2,757
Offices open.............................................................. 1 1 1
</TABLE>
(viii)
<PAGE>
RECENT DEVELOPMENTS
The tables below set forth certain selected financial data for the Bank at
the dates and for the periods indicated. The data at September 30, 1998, and
for the nine months ended September 30, 1998 and 1997 is unaudited, but in the
opinion of management reflects all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation. This information at
December 31, 1997 is derived in part from, and is qualified in its entirety by
reference to, the Financial Statements and Notes thereto included elsewhere
herein. The financial data for the nine months ended September 30, 1998 is not
necessarily indicative of the operating results to be expected for the entire
fiscal year.
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
FINANCIAL CONDITION DATA:
Total assets........................... $24,522 $23,402
Loans, net............................. 19,868 16,668
Cash and cash equivalents.............. 1,319 1,227
Securities:
Available-for-sale.................. -- 737
Held-to-maturity.................... 2,482 4,031
Total deposits......................... 22,774 21,765
Total equity........................... 1,681 1,577
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING DATA:
Interest income...................... $ 1,337 $ 1,235
Interest expense..................... 790 735
Net interest income.................. 547 500
Provision for loan losses............ 8 1
Net interest income after provision
for loan losses.................... 539 499
Non-interest income.................. 39 36
Non-interest expenses................ 432 380
Income before income tax expense..... 146 155
Income tax expense................... 38 39
------- -------
Net income........................... $ 108 $ 116
======= =======
</TABLE>
(ix)
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
1998 1997
------ --------
(IN THOUSANDS)
<S> <C> <C>
SELECTED RATIOS:
Interest rate spread........... 2.96% 2.94%
Interest rate margin (1)....... 3.23 3.14
REGULATORY CAPITAL RATIOS:
Tangible capital............... 6.86 6.86
Core capital................... 6.86 6.86
Total risk-based capital....... 11.28 14.83
- ----------
</TABLE>
(1) Annualized.
RESULTS OF OPERATIONS
We earned net income of $108,000 for the nine months ended September 30,
1998 as compared to net income of $116,000 for the nine month period ended
September 30, 1997. The $8,000 reduction in our net income for the first nine
months of fiscal year 1998 as compared to the first nine months of fiscal year
1997 was due primarily to the $52,000 increase in non-interest expenses during
the most recent period, partially offset by the $47,000 increase in net interest
income. The primary components of the increase in non-interest expense were
increases in compensation and related expenses, deposit insurance and postage,
supplies and other miscellaneous expenses. In addition, during the quarter
ended September 30, 1998, we sold a piece of real estate owned which resulted in
a loss of $10,000.
Net interest income during the nine months ended September 30, 1998
increased by $47,000 as compared to the same period in 1997. During the nine
months ended September 30, 1998, net loans averaged $17.9 million for the period
as compared to $15.6 million during the first nine months of fiscal year 1997.
FINANCIAL CONDITION
Our total assets at September 30, 1998 were $24.5 million, an increase of
$1.1 million from December 31, 1997's level of $23.4 million. The increase was
due to a growth in our loan portfolio. Net loans receivable increased by $3.2
million, or 19.2%, which reflected our continued marketing efforts. The $104,000
increase in equity reflected our earnings for the period. At September 30, 1998,
we were in compliance with all applicable regulatory capital requirements with
total core and tangible capital equal to 6.86% of adjusted total assets and
risk-based capital equal to 11.28% of risk-weighted assets.
(x)
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should consider
carefully the following risk factors in deciding whether to invest in the common
stock.
LACK OF ACTIVE MARKET FOR COMMON STOCK
Due to the small size of the offering, it is highly unlikely that an active
trading market will develop and be maintained. If an active market does not
develop, you may not be able to sell your shares promptly or perhaps at all, or
sell your shares at a price equal to or above the price you paid for the shares.
The common stock may not be appropriate as a short-term investment. See "Market
for the Common Stock."
BELOW AVERAGE RETURN ON AVERAGE EQUITY AND INCREASED EXPENSES IMMEDIATELY AFTER
CONVERSION
Return on average equity (net income divided by average equity) is a ratio
used by many investors to compare the performance of a savings institution to
its peers. As a result of the conversion, our equity will increase
substantially. Our expenses also will increase because of the compensation
expense associated with our ESOP, MRP, and the costs of being a public company.
Because of the increases in our equity and expenses, our return on equity may
decrease as compared to our performance in previous years. Initially, we intend
to invest the net proceeds in short term investments which generally have lower
yields than residential mortgage loans. At June 30, 1998 and December 31, 1997,
our return on average equity was 9.04% and 5.82%, respectively. A lower return
on equity could reduce the trading price of our shares.
IMPACT OF TECHNOLOGICAL ADVANCES; YEAR 2000 COMPLIANCE
Our industry is experiencing rapid changes in technology. Products and
services that are dependent upon technological devices such as computers are
frequently introduced. In addition to improving customer services, effective use
of technology increases efficiency and enables financial institutions to reduce
costs. Our future success will thus depend partly on our ability to address our
customers' needs by using technology. Many of our competitors have far greater
resources than we have to invest in technology. There can be no assurance that
we will be able to effectively develop new technology-driven products and
services or be successful in marketing these products to our customers.
Our operations are also dependent on computers and computer systems,
whether we maintain them internally or they are maintained by a third party. We
have taken steps to ensure that our computer systems will properly recognize
information when the year changes to 2000. Systems that do not properly
recognize the correct year could produce faulty data or cause a system to fail.
We have also taken steps to ensure that we are in compliance with regulatory
directives in this area. There can be no assurance, however, that we and our
third party providers will be successful in
1
<PAGE>
making all necessary changes to avoid computer system failure related to the
year 2000. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."
RISKS ASSOCIATED WITH NONRESIDENTIAL LENDING
Although our primary lending activity is the origination of one- to four-
family mortgage loans, approximately $6.5 million, or 34.46%, of our gross loan
portfolio at June 30, 1998 consisted of loans other than one- to four-family
mortgage loans. Such loans included $5.4 million in consumer loans, $726,000 in
commercial real estate loans and $200,000 in commercial business loans.
Following the conversion, we intend to continue to originate nonresidential
loans particularly consumer loans. Although these loans generally provide for
higher interest rates and shorter terms than one- to four-family residential
real estate loans, these loans generally have a higher degree of credit and
other risks. Consumer loans also entail greater risk than one- to four-family
residential loans, particularly in the case of consumer loans which are
unsecured or secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. Commercial business
loans involve a greater degree of risk than other types of lending as payments
on such loans are often dependent on the successful operation of the business
involved which may be subject, to a greater extent, to adverse conditions in the
economy.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST RATE
ENVIRONMENT
Our ability to make a profit, like that of most financial institutions, is
substantially dependent on our net interest income. Net interest income is the
difference between the interest income we earn on our interest-earning assets
(such as mortgage loans and investments) and the interest expense we pay on our
interest-bearing liabilities (such as deposits). Because a portion of the loans
we originate have fixed rates of interest and have longer effective maturities
than our interest-bearing liabilities, the yield on our interest-earning assets
generally will adjust more slowly to changes in interest rates than the cost of
our interest-bearing liabilities. As a result, our net interest income will be
adversely affected by material and prolonged increases in interest rates since
our interest expense would increase at a faster rate than our interest income.
Our earnings may also be adversely affected by rising interest rates due to
decreased customer demand. Although we attempt to reduce this risk by primarily
originating adjustable-rate loans ("ARMs"), the rates on such loans are fixed
for set periods of time (e.g., one year). In addition, the terms of such loans
do not permit us to increase the rate more than 2.0% at each rate adjustment or
above a fixed "ceiling rate." We may also experience an increase in
delinquencies on our ARMs when interest rates rise since the payments that
borrowers are then required to pay will increase.
2
<PAGE>
The average life of loans and mortgage-backed securities can also be
affected by changes in interest rates. As interest rates decline, borrowers tend
to refinance higher-rate, fixed rate loans at lower rates. We also experience an
increase in prepayments on mortgage-backed securities as the loans underlying
such securities are prepaid. Since rates will have declined, we will not be able
to reinvest such prepayments in assets earning interest rates as high as the
rates on the prepaid loans or mortgage-backed securities. As a result our
interest income could decline.
MARKET AREA AND RESOURCE LIMITATIONS
Our primary market area consists of St. Lawrence County, New York.
Population growth in St. Lawrence County is below that of the state of New York
and the United States as a whole. This trend is expected to continue in the
future. Our ability to make new loans in our market area may be limited to the
extent that the rate of population growth is flat or even declines. Further, on
average, the household income within our market area is substantially below the
average for New York as a whole and the United States. Within our market area,
we compete for loans and deposits with several other financial institutions.
Many competing institutions may have resources substantially greater than ours
and may therefore be able to offer a greater variety of loan and deposit
accounts which could give them a competitive advantage over us. Such competition
could adversely affect us in the future. See "Business of Ogdensburg Federal
Savings and Loan Association -- Competition."
DEPENDENCE ON PRESIDENT
Our successful operations depend to a considerable degree on our President,
Robert Wilson. The loss of his services could adversely affect us. We have
attempted to provide for his continued employment with us by entering into a
three-year employment agreement with Mr. Wilson. Mr. Wilson could terminate his
employment at any time, however. We do not maintain key man life insurance on
Mr. Wilson. See "Management of Ogdensburg Federal Savings and Loan Association"
and " -- Executive Compensation -- Employment Agreement."
ANTI-TAKEOVER PROVISIONS AND STATUTORY PROVISIONS THAT COULD DISCOURAGE HOSTILE
ACQUISITIONS OF CONTROL
Provisions in the Company's certificate of incorporation and bylaws, the
Business Corporation Law of the State of New York, and certain federal
regulations may make it difficult, and expensive, to pursue a tender offer,
change in control or takeover attempt which we oppose. 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. In
addition, these provisions may reduce the trading price of our stock. These
provisions include: restrictions on the acquisition of the Company's equity
securities and limitations on voting rights; the classification of the terms of
the members of the board of directors; certain provisions relating to meetings
of stockholders; denial of cumulative voting by stockholders in the election of
directors; the issuance of preferred stock and additional shares of
3
<PAGE>
common stock without shareholder approval; and super-majority provisions for the
approval of certain business combinations. See "Restrictions on Acquisitions of
the Company."
POSSIBLE LIABILITY OF LARGE STOCKHOLDERS
Under New York law, the ten largest stockholders of a New York corporation,
as determined by the fair value of their stock, are jointly and severally liable
for any unpaid wages due to the corporation's laborers, servants or other
employees. Corporations whose stock is either listed on a national securities
exchange or regularly quoted in an over-the-counter market by one or more
members of a national or any affiliated securities association are exempt from
this provision. Upon completion of the Offering, the Company intends to list the
common stock over-the-counter. Trident Securities, Inc., a member of the
National Association of Securities Dealers has indicated that it will make a
market in the common stock. Trident Securities, Inc. is not obligated to do so,
however, and may stop doing so at any time. If the common stock of the Company
is not either listed on a national securities exchange or regularly quoted in an
over-the-counter market, the ten largest stockholders of the Company would be
personally liable in the event the Company failed to pay wages due to laborers,
servants or employees.
INTENTION TO REMAIN INDEPENDENT
We have operated as an independent, community oriented savings association
since 1888. It is our intention to continue to operate as an independent
community oriented financial institution following the Conversion. Accordingly,
you are urged not to subscribe for shares of our Common Stock if you are
anticipating a rapid sale by us to a third party. See "Business of the Company."
Also due to our intention to remain independent, we have included certain
provisions in our certificate of incorporation and bylaws which will assist us
in maintaining our status as an independent, publicly owned corporation. These
provisions as well as the New York general corporation law and certain federal
regulations may have certain anti-takeover effects which include: restrictions
on the acquisition of the Company's equity securities and limitations on voting
rights; the classification of the terms of the members of the Board of
Directors; certain provisions relating to the meeting of stockholders; denial of
cumulative voting by stockholders in the election of directors; the issuance of
preferred stock and additional shares of Common Stock without shareholder
approval; and super majority provisions for the approval of certain business
combinations. See "Restrictions on Acquisitions of the Company." As a result,
stockholders who might wish to participate in a change of control transaction
may not have an opportunity to do so.
POSSIBLE VOTING CONTROL BY DIRECTORS AND OFFICERS
The proposed purchases of the common stock by our directors, officers
(estimated to be approximately 51,800 shares, or 30.03% of the shares to be
outstanding assuming 172,500 shares are sold), as well as the potential
acquisition of common stock through the Option Plan and
4
<PAGE>
MRP, could make it difficult to obtain majority support for stockholder
proposals which are opposed by us. In addition, the voting of those shares could
enable us to block the approval of transactions (i.e., business combinations and
amendment to our certificate of incorporation and bylaws) requiring the approval
of 80% of the stockholders under the Company's certificate of incorporation. See
"Management of Ogdensburg Federal Savings and Loan Association -- Executive
Compensation -- Employee Stock Ownership Plan," " -- Proposed Future Stock
Benefit Plans -- Stock Option Plan," " -- Management Recognition Plan,"
"Description of Capital Stock," and "Restrictions on Acquisitions of the
Company."
POSSIBLE DILUTIVE EFFECT OF MRP AND STOCK OPTIONS
If the conversion is completed and stockholders subsequently approve the
MRP and Option Plan, we will issue stock to our officers and directors through
these plans. If the shares for the MRP and Option Plan are issued from our
authorized but unissued stock, your ownership percentage could be diluted by up
to approximately ___% and the trading price of our stock may be reduced. See
"Pro Forma Data," "Management of Ogdensburg Federal Savings and Loan
Association --Proposed Future Stock Benefit Plans -- Stock Option Plan," and
" -- Management Recognition Plan."
FINANCIAL INSTITUTION REGULATION OF THE THRIFT INDUSTRY
We are subject to extensive regulation, supervision, and examination by the
OTS and the Federal Deposit Insurance Corporation ("FDIC"). In the most recently
completed Congress, the House of Representatives passed legislation which called
for the modernization of the banking system and which, in enacted, would
significantly affect the operations and regulatory structure of financial
services industry, including savings institutions like us. While this proposed
legislation preserved the thrift charter, it would have limited the powers and
activities of new unitary thrift holding companies such as the Company. While
such legislation was never acted upon by the Senate, it is likely that similar
legislation will be introduced in the future. At this time, we do not know what
form the final legislation might take, but if enacted into law, the legislation
could affect our competitive environment as well as our business and operations.
NO MODIFICATION OR CANCELLATION OF SUBSCRIPTIONS
The offering is being conducted as a minimum/maximum best efforts
offering. Therefore, once investors have submitted their subscription orders,
such orders may not be modified or canceled without our consent, unless the
conversion is not completed within 45 days of the Expiration Date. See "The
Conversion -- Payment for Shares".
MANAGEMENT'S DISCRETION IN ALLOCATING NET PROCEEDS
While there are certain limits under federal law regarding the allocation
of the net proceeds, management has broad discretion in determining the manner
of use of the net proceeds retained by the Company. Such proceeds will initially
be invested in short-term investments and will be available for a variety of
corporate purposes, including future acquisitions and diversification of
5
<PAGE>
business, additional capital contributions and dividends to stockholders to the
extent permitted by applicable regulations. However, there can be no assurance
that management in the future will apply the net proceeds or any other purposes.
POSSIBLE ADVERSE TAX CONSEQUENCES OF THE SUBSCRIPTION RIGHTS
We have received the opinion of Feldman that the subscription rights
granted to eligible members in connection with the conversion have no value.
This opinion is not binding on the Internal Revenue Service ("IRS"), however.
Should the IRS determine that the subscription rights do have ascertainable
value, you could be taxed as a result of your exercise of such rights in an
amount equal to such value.
RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the conversion, the Company may
not repurchase its shares. During each of the second and third years following
the conversion, the Company may generally repurchase up to 5% of its outstanding
shares as long as we give notice to the OTS of our plans and the OTS does not
object. During those periods, if we decide that additional repurchases would be
a good use of funds, we would not be able to do so, without obtaining OTS
approval. There is no assurance that OTS approval would be given. See "The
Conversion -- Restrictions on Repurchase of Shares."
PROPOSED PURCHASES BY DIRECTORS AND OFFICERS
The following table sets forth the approximate purchases of common stock by
each director and executive officer and their associates in the conversion. The
table assumes that 172,500 shares (the maximum of the Estimated Valuation
Range) of the common stock will be sold at $10.00 per share and that sufficient
shares will be available to satisfy their subscriptions.
<TABLE>
<CAPTION>
AGGREGATE
TOTAL PRICE OF PERCENT
SHARES SHARES OF SHARES
Name POSITION PURCHASED PURCHASED PURCHASED
- ---- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Robert E. Hentschel Chairman 7,000 $ 70,000 4.06%
Anthony P. LeBarge, Sr. Director 8,000 $ 80,000 4.64%
George E. Silver Director 8,000 $ 80,000 4.64%
Wesley L. Stitt Director 7,000 $ 70,000 4.06%
Robert E. Wilson President and Chief 8,000 $ 80,000 4.64%
Executive Officer; Director
All directors and executive
officers as a group (5 persons) 38,000 $380,000 22.03%
</TABLE>
6
<PAGE>
THE COMPANY
The Company was formed as a New York corporation in September 1998 at our
direction for the purpose of serving as our holding company after the
conversion. Prior to the conversion, it has not engaged and is not expected to
engage in any material operations. The Company has received the approval of the
OTS to acquire control of us upon completion of the conversion. Upon
consummation of the conversion, the only assets the Company is expected to own
are the capital stock we will issue in the conversion, a note receivable from
our ESOP and any proceeds from the offering it retains.
As a holding company, the Company will have greater flexibility than we
would have to diversify its business activities through the formation of
subsidiaries or through acquisition. The Company will be classified as a unitary
savings and loan holding company after the conversion and will be required to
comply with OTS regulations and be subject to examination.
The Company's executive offices are located at 825 State Street,
Ogdensburg, New York, and its main telephone number is (315) 393-4340.
OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
We are a federal mutual savings and loan association operating through one
office in Ogdensburg, New York. We were founded in 1888. We are a member of
the FHLB System. Our deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC") under the SAIF. At June 30,
1998, we had total assets of $24.2 million, total deposits of $22.4 million and
total equity of $1.6 million.
Our principal business consists of attracting deposits from the general
public and originating residential mortgage loans. We also offer various types
of consumer loans and a limited number of commercial real estate and commercial
business loans.
Our executive offices are located at 825 State Street, Ogdensburg, New York
and our main telephone number is (315) 393-4340.
USE OF PROCEEDS
The Company will retain 50% of the net proceeds from the offering. The
balance will be used to purchase all of the capital stock we will issue in
connection with the conversion. A portion of the net proceeds to be retained by
the Company will be lent to our ESOP to fund its purchase of 8% of the shares
sold in the conversion. On a short-term basis, the balance of the net proceeds
retained by the Company initially will be invested in short-term investments.
The net proceeds subsequently may be used to fund acquisitions of other
financial services institutions or to diversify into non-banking activities,
although we have no current plans or agreements to do so. Subject to applicable
regulatory restrictions, the net proceeds may also serve as a source of funds
for the repurchase of shares or for the payment of dividends to stockholders,
although the Company has not yet adopted a dividend policy. A portion of the net
proceeds may also be used to fund the purchase of 4.0% of the shares for the
MRP, which is anticipated to be adopted following the conversion. See "Pro Forma
Data."
7
<PAGE>
The funds we receive from the sale of our capital stock to the Company will
be added to our general funds and be used for general corporate purposes
including: (i) investment in mortgages and other loans, (ii) U.S. Government
and federal agency securities, (iii) mortgage-backed securities, or (iv) funding
loan commitments. However, initially, we intend to invest the proceeds in
short-term investments until we can deploy the proceeds into higher yielding
loans. The funds added to our capital will further strengthen our capital
position.
Set forth below is our estimate of net proceeds from the offering along
with our estimate of the portion of the net proceeds to be retained by the
Company. The net proceeds may vary because the total expenses of the conversion
may be more or less than those estimated. We expect our estimated expenses to be
$350,000.
<TABLE>
<CAPTION>
GROSS OFFERING ESTIMATED OFFERING NET OFFERING NET PROCEEDS
PROCEEDS EXPENSES PROCEEDS TO COMPANY(1)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Minimum............................. $1,275,000 $350,000 $ 925,000 $462,500
(127,500 shares at $10.00 per share)
Maximum, as adjusted................ 1,983,750 350,000 1,633,750 816,875
(198,375 shares at $10.00 per share)
- -----------------------------------
</TABLE>
(1) Represents 50% of net offering proceeds retained by the Company.
The net proceeds will also vary if the number of shares to be issued in the
conversion is adjusted to reflect a change in our estimated pro forma market
value. Payments for shares made through withdrawals from existing deposit
accounts with us will not result in the receipt of new funds for investment by
us but will result in a reduction of our liabilities and interest expense as
funds are transferred from interest-bearing certificates or accounts.
For a period of one year following the completion of the conversion, we
will not pay any dividends that would be construed as a return of capital nor
take any actions to pursue or propose such dividends.
DIVIDENDS
The Company does not anticipate paying cash dividends during the first year
following the conversion. After such period, the Company will periodically
review the possible adoption of a dividend policy. However, declarations of
dividends by the board of directors will depend upon a number of factors,
including: (i) the amount of the net proceeds retained by the Company in the
conversion, (ii) investment opportunities available, (iii) capital
requirements, (iv) regulatory limitations, (v) results of operations and
financial condition, (vi) tax considerations, and (vii) general economic
conditions. Upon review of such considerations, the board may authorize future
dividends if it deems such payment appropriate and in compliance with applicable
law and regulation. In addition, from time to time in an effort to manage
capital at a desirable level, the board may determine to pay special cash
dividends. Special cash dividends may be paid in addition to, or in lieu of,
regular cash dividends. In addition, there can be no assurance that regular or
special dividends will be paid, or, if paid, will continue to be paid. See
"Historical and Pro Forma Capital Compliance," "The Conversion -- Effects of
Conversion to Stock Form on Depositors and Borrowers of Ogdensburg Federal
Savings and Loan Association -- Liquidation Account" and "Regulation -- Dividend
and Other Capital Distribution Limitations."
8
<PAGE>
The Company is not subject to OTS regulatory restrictions on the payment of
dividends to its stockholders although the source of such dividends will be
dependent in part upon the receipt of dividends from us. The Company is
subject, however, to the requirements of New York law. Under New York Law, the
Company may declare and pay dividends or make other distributions which may
include cash, its bonds, its property, or shares and bonds of other
corporations, on its outstanding shares, except when (i) the Company is
insolvent or would be made insolvent, and (ii) when declaration, payment or
distribution would be contrary to any restrictions contained in the Company=s
certificate of incorporation. Dividends may be declared and paid out of the
Company's surplus only, so that the net assets remaining after such declaration,
payment or distribution will at least equal the amount of its stated capital.
In addition to the foregoing, the portion of our earnings which have been
appropriated for bad debt reserves and deducted for federal income tax purposes
cannot be used by us to pay cash dividends to the Company without the payment of
federal income taxes by us at the then current income tax rate on the amount
deemed distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Taxation --Federal Taxation" and Note 9
to the Financial Statements. The Company does not contemplate any distribution
by us that would result in a recapture of our bad debt reserve or otherwise
create federal tax liabilities.
MARKET FOR THE COMMON STOCK
The Company has never issued common stock to the public. Consequently,
there is no established market for the common stock. Following completion of
the Offering, the Company intends to list the common stock over-the-counter
through the OTC "Electronic Bulletin Board" and the Company intends to request
that Trident Securities Inc. undertake to match offers to buy and offers to sell
the common stock. Trident Securities has no obligation to match offers to buy
and offers to sell and may cease doing so at any time. In addition, the
existence of a public trading market will depend upon the presence in the market
of both willing buyers and willing sellers at any given time. The presence of a
sufficient number of buyers and sellers at any given time is a factor over which
neither the Company nor any broker or dealer has control. Due to the relatively
small number of shares of common stock being offered in the conversion and the
concentration of ownership, it is unlikely that an active or liquid trading
market will develop or be maintained. The absence of an active and liquid
trading market may make it difficult for you to sell your common stock and may
have an adverse effect on the price of the common stock. Purchasers should
consider the potentially illiquid and long-term nature of their investment in
the shares offered hereby.
The aggregate price of the common stock is based upon an independent
appraisal of the pro forma market value of the common stock. However, there can
be no assurance that you will be able to sell the common stock you purchase in
the conversion at or above the price you paid for your shares.
9
<PAGE>
CAPITALIZATION
The following table presents our historical capitalization as of June 30,
1998 and the pro forma consolidated capitalization of the Company after giving
effect to the conversion, based upon the sale of the number of shares shown
below and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION OF
THE COMPANY BASED ON THE SALE OF
------------------------------------------------------------------
MAXIMUM,
MINIMUM OF MIDPOINT OF MAXIMUM OF AS ADJUSTED,
HISTORICAL AT 127,500 SHARES 150,000 SHARES 172,500 SHARES 198,375 SHARES
JUNE 30, AT $10.00 AT $10.00 AT $10.00 AT $10.00
1998 PER SHARE PER SHARE PER SHARE PER SHARE
------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (1)..................................... $22,356 $22,356 $22,356 $22,356 $22,356
Borrowings....................................... -- -- -- -- --
------------- ------- ------- ------- -------
Total deposits and borrowed funds............. $22,356 $22,356 $22,356 $22,356 $22,356
============= ======= ======= ======= =======
Capital stock:
Preferred stock, $0.01 par value per share:
authorized - 500,000 shares;
assumed outstanding - none................... $ -- $ -- $ -- $ -- $ --
Common stock, $0.01 par value per share
authorized - 3,000,000 shares;
shares to be outstanding - as shown.......... -- 1 2 2 2
Additional paid-in capital (2)................. -- 924 1,148 1,373 1,632
Less: Common stock acquired by ESOP (3)........ -- (102) (120) (138) (159)
Common stock acquired by MRP (4)......... -- (51) (60) (69) (79)
Retained earnings.............................. 1,648 1,648 1,648 1,648 1,648
Plus: Accumulated other comprehensive income.. -- -- -- -- --
------------- ------- ------- ------- -------
Total stockholders' equity................... $ 1,648 $ 2,420 $ 2,618 $ 2,816 $ 3,044
============= ======= ======= ======= =======
- -------------------------
</TABLE>
(1) Withdrawals from savings accounts for the purchase of stock have not been
reflected in these adjustments. Any withdrawals will reduce pro forma
capitalization by the amount of such withdrawals.
(2) Based upon the estimated net proceeds from the sale of capital stock less
the par value of shares sold.
(3) Assumes 8% of the shares of common stock to be sold in the conversion are
purchased by the ESOP and that the funds used to purchase such shares are
borrowed from the Company. See "Pro Forma Data" for additional details.
(4) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price for the shares purchased by the MRP was equal to
the purchase price of $10 per share. If the MRP were funded by
authorized but unissued shares, stockholders' interests would be diluted
by approximately 3.8%. Implementation of the MRP within one year of
conversion would require regulatory and stockholder approval at a meeting
of our stockholders to be held no earlier than six months after the
conversion.
10
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The following table shows our historical capital position relative to our
regulatory capital requirements as of June 30, 1998 and on a pro forma basis
after giving effect to the conversion and based upon the sale of the number of
shares shown below and the other assumptions set forth under "Pro Forma Data."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the OTS. For a discussion of the capital standards
applicable to us, see "Regulation -- Regulation of the Association -- Regulatory
Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1998 BASED ON THE SALE OF (1):
--------------------------------------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED
127,500 SHARES 150,000 SHARES 172,500 SHARES 198,375 SHARES
HISTORICAL AT AT $10.00 AT $10.00 AT $10.00 AT $10.00
JUNE 30, 1998 PER SHARE PER SHARE PER SHARE PER SHARE
------------------- ------------------- ------------------- ------------------ -------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2)
------ ----------- ------ ----------- ------ ----------- ------ ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted
accounting principles... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Tangible capital........... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
Tangible capital
requirement............... 364 1.50 370 1.50 371 1.50 373 1.50 375 1.50
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $1,284 5.30% $1,588 6.44% $1,622 6.75% $1,756 7.06% $1,852 7.41%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Core capital............... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
Core capital requirement... 727 3.00 740 3.00 743 3.00 746 3.00 750 3.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $ 921 5.80% $1,218 4.94% $1,300 5.25% $1,383 5.56% $1,477 5.91%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Risk-based capital......... $1,813 13.19% $2,123 15.19% $2,208 15.73% $2,294 16.27% $2,392 16.89%
Risk-based capital
requirement............... 1,100 8.00 1,118 8.00 1,123 8.00 1,128 8.00 1,133 8.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $ 713 5.19% $1,005 7.19% $1,085 7.73% $1,166 8.27% $1,259 8.89%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
- -------------------------
</TABLE>
(1) Assumes that the Company will retain 50% of the net proceeds at the
minimum, midpoint, maximum and maximum, as adjusted, with the remainder to
be used by the Company to purchase all of our capital stock to be issued
upon conversion. Assumes net proceeds distributed to the Company or to us
initially are invested in short-term securities that carry a risk-weight
equal to the ratio of risk-weighted assets to total assets at June 30,
1998. Assumes the ESOP purchases 8% of the shares to be sold in the
conversion and borrows the funds needed to purchase such shares from the
Company. Although repayment of such debt will be secured solely by the
shares purchased by the ESOP, we expect to make discretionary contributions
to the ESOP in an amount at least equal to the principal and interest
payments on the ESOP debt. The approximate amount expected to be borrowed
by the ESOP is not reflected in this table as borrowed funds but is
reflected as a reduction of capital. Assumes a number of issued and
outstanding shares of common stock equal to 4% of the common stock to be
sold in the conversion will be purchased by the MRP after the conversion.
The dollar amount of the common stock possibly to be purchased by the MRP
is based on the price per share in the conversion and represents unearned
compensation and is reflected as a reduction of capital. Such amounts do
not reflect possible increases or decreases in the value of such stock
relative to the price per share in the conversion. As we accrue
compensation expense to reflect the vesting of such shares pursuant to the
MRP, the charge against capital will be reduced accordingly. Does not
reflect a possible increase in capital upon the exercise of options by
participants in the Option Plan, under which directors, executive officers
and other employees could be granted options to purchase an aggregate
amount of common stock equal to 10% of the shares issued in the conversion
(15,000 shares at the midpoint of the Estimated Valuation Range) at
exercise prices equal to the market price of the common stock on the date
of grant. Under the MRP and the Option Plan, shares issued to participants
could be newly issued shares or, subject to regulatory restrictions, shares
repurchased in the market. The MRP and the Option Plan are required to be
approved by the Company's stockholders and will not be implemented until at
least six months after the conversion. See "Management of Ogdensburg
Federal Savings and Loan Association -- Proposed Future Stock Benefit
Plans."
(2) Based on our total assets determined under generally accepted accounting
principles for equity purposes, adjusted total assets for the purposes of
the tangible and core capital requirements ($24.2 million, $24.7 million,
$24.8 million, $24.9 million and $25.1 million, respectively, at June 30,
1998 and on a pro forma basis at the minimum, midpoint, maximum and
maximum, as adjusted, of the Estimated Valuation Range) and risk-weighted
assets for the purpose of the risk-based capital requirement ($13.8
million, $14.0 million, $14.0 million, $14.1 million and $14.2 million,
respectively, at June 30, 1998 and on a pro forma basis at the minimum,
midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range).
11
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the common stock cannot be
determined until the conversion is completed. However, net proceeds are
currently estimated to be between $925,000 and $1.6 million at the minimum and
maximum, as adjusted, of the Estimated Valuation Range, based upon the following
assumptions: (i) all of the shares will be sold in the Subscription or Community
Offering; (ii) expenses, including the marketing fee to be paid to Trident
Securities, printing costs, legal and accounting fees, appraisal fees and other
miscellaneous expenses will amount to $350,000. Actual conversion expenses may
vary from this assumption.
The following table sets forth our historical net earnings and
stockholders' equity prior to the conversion and the pro forma consolidated net
income and stockholders' equity of the Company following the conversion. Pro
forma consolidated net income and stockholders' equity have been calculated as
if the common stock to be issued in the conversion had been sold at January 1,
1997, and the estimated net proceeds had been invested at 5.37%, which was
approximately equal to the one-year U.S. Treasury bill rate at June 30, 1998.
The one-year U.S. Treasury bill rate, rather than an arithmetic average of the
average yield on interest-earning assets and average rate paid on deposits, has
been used to estimate income on net proceeds because it is believed that it is a
more accurate estimate of the rate that would be obtained on an investment of
net proceeds from the offering. In calculating pro forma income, an effective
state and federal income tax rate of 38% has been assumed, resulting in an after
tax yield of 3.33%. Withdrawals from deposit accounts for the purchase of
shares are not reflected in the pro forma adjustments. As discussed under "Use
of Proceeds," the Company expects to retain 50% of the net conversion proceeds,
part of which will be lent to the ESOP to fund its purchase of 8.0% of the
shares issued in the conversion. No effect has been given in the pro forma
stockholders' equity calculation for the assumed earnings on the net proceeds.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares.
THE STOCKHOLDERS' EQUITY INFORMATION IS NOT INTENDED TO REPRESENT THE FAIR
MARKET VALUE OF THE COMMON STOCK, OR THE CURRENT VALUE OF OUR ASSETS OR
LIABILITIES, OR THE AMOUNTS, IF ANY, THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION. FOR ADDITIONAL INFORMATION REGARDING
THE LIQUIDATION ACCOUNT, SEE "THE CONVERSION -- EFFECTS OF CONVERSION TO STOCK
FORM ON DEPOSITORS AND BORROWERS OF OGDENSBURG FEDERAL SAVINGS AND LOAN
ASSOCIATION -- LIQUIDATION ACCOUNT." THE PRO FORMA INCOME DERIVED FROM THE
ASSUMPTIONS SET FORTH ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL
RESULTS OF OUR OPERATIONS FOR ANY PERIOD. SUCH PRO FORMA DATA MAY BE MATERIALLY
AFFECTED BY A CHANGE IN THE PRICE PER SHARE OR NUMBER OF SHARES TO BE ISSUED IN
THE CONVERSION AND BY OTHER FACTORS.
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
127,500 150,000 172,500 198,375
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds.................................... $ 1,275 $ 1,500 $ 1,725 $ 1,984
Less estimated offering expenses.................. (350) (350) (350) (350)
-------- -------- -------- --------
Estimated net conversion proceeds................ $ 925 $ 1,150 $ 1,375 $ 1,634
======== ======== ======== ========
Less: Common stock acquired by ESOP.............. $ (102) $ (120) $ (138) $ (159)
Common stock acquired by MRP................ (51) (60) (69) (79)
-------- -------- -------- --------
Estimated investable net proceeds................ $ 772 $ 970 $ 1,168 $ 1,396
======== ======== ======== ========
Net income:
Historical net income............................ $ 72 $ 72 $ 72 $ 72
Pro forma adjustments:
Net income on net proceeds...................... 13 16 19 23
ESOP (1)........................................ (3) (4) (4) (5)
MRP (2)......................................... (3) (4) (4) (5)
-------- -------- -------- --------
Pro forma net income........................ $ 79 $ 80 $ 83 $ 85
======== ======== ======== ========
Net income per share:(3)
Historical net income............................ $ 0.61 $ 0.52 $ 0.45 $ 0.39
Pro forma adjustments:
Net income on net proceeds...................... 0.11 0.12 0.12 0.13
ESOP (1)........................................ (0.03) (0.03) (0.03) (0.03)
MRP (2)......................................... (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- --------
Pro forma net income per share (3).......... $ 0.66 $ 0.58 $ 0.51 $ 0.46
======== ======== ======== ========
Number of shares.................................. 117,810 138,600 159,390 183,299
======== ======== ======== ========
Stockholders' equity (book value): (4)
Historical....................................... $ 1,648 $ 1,648 $ 1,648 $ 1,648
Estimated net conversion proceeds (2)............ 925 1,150 1,375 1,634
Less: Common stock acquired by ESOP (1)....... (102) (120) (138) (159)
Common stock acquired by MRP (2)........ (51) (60) (69) (79)
-------- -------- -------- --------
Total......................................... $ 2,420 $ 2,618 $ 2,816 $ 3,044
======== ======== ======== ========
Stockholders' equity per share:(3)(4)
Historical....................................... $ 12.93 $ 10.99 $ 9.55 $ 8.31
Estimated net conversion proceeds................ 7.25 7.67 7.97 8.24
Less: Common stock acquired by ESOP (1)....... (0.80) (0.80) (0.80) (0.80)
Common stock acquired by MRP (2)........ (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma..................................... $ 18.98 $ 17.45 $ 16.32 $ 15.34
======== ======== ======== ========
Price to pro forma earnings multiple.............. 7.58% 8.62% 9.80% 10.87%
======== ======== ======== ========
Price to pro forma book value per share(4)........ 52.69% 57.30% 61.26% 65.17%
======== ======== ======== ========
(Footnotes on succeeding page)
</TABLE>
13
<PAGE>
(footnotes continued from preceding page)
- -------------------------
(1) Assumes the ESOP purchases 8% of the shares sold in the conversion and the
Company lends the ESOP the funds to do so. The approximate amount expected
to be borrowed by the ESOP from the Company is reflected as a reduction of
stockholders' equity. We intend to make annual contributions to the ESOP
over a 10 year period in an amount at least equal to the principal and
interest requirement of the debt. The pro forma net income assumes: (i)
the ESOP loan is payable over 10 years, (ii) the average fair value of the
ESOP shares is $10.00 per share in accordance with Statement of Position
("SOP") 93-6 of the American Institute of Certified Public Accountants
("AICPA"), and (iii) the effective tax rate was 38% for such period. The
pro forma stockholders' equity per share calculation assumes all ESOP
shares were outstanding, regardless of whether such shares would have been
released. ESOP expense is based upon generally accepted accounting
principles as described in accounting SOP 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. The ESOP loan is assumed to have a term of ten years.
It is therefore assumed that one-tenth of the Common Stock acquired by the
ESOP is committed to be released from the lien of the ESOP loan each year,
and one-fortieth each calendar quarter. ESOP expense shown is equal to the
number of shares so committed to be released for the period, multiplied by
the per share fair value at that time, which is assumed to be $10.00 per
share. All shares committed to be released during the period are assumed to
be outstanding for the entire period for the purpose of calculating
earnings per share. Shares not yet committed to be released are not deemed
to be outstanding for calculating earnings per share.
(2) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price for the shares purchased by the MRP was equal to
the purchase price of $10 per share and 10% of the amount contributed was
an amortized expense during such period. As we accrue compensation expense
to reflect the five-year vesting period of such shares pursuant to the MRP,
the charge against capital will be reduced accordingly. In calculating the
pro forma effect of the MRP, an effective state and federal income tax rate
of 38% has been assumed. Implementation of the MRP within one year of
conversion would require regulatory and stockholder approval at a meeting
of our stockholders to be held no earlier than six months after the
conversion. For purposes of this table, it is assumed that the MRP will be
adopted by the board of directors, reviewed by the OTS, and approved by the
stockholders, and that the MRP will purchase the shares in the open market
within the year following the conversion. If the shares to be purchased by
the MRP are assumed at January 1, 1998, to be newly issued shares purchased
from the Company at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Valuation Range, pro forma stockholders' equity
per share would have been $18.63, $17.17, $16.08, and $15.14 at June 30,
1998, respectively. As a result of the MRP, stockholders' interests will
be diluted by approximately 3.8%. See "Management of Ogdensburg Federal
Savings and Loan Association -- Proposed Future Stock Benefit Plans --
Management Recognition Plan."
(3) Per share data has been computed based on the assumed numbers of shares
sold in the conversion less ESOP shares. This treatment is in accordance
with SOP 93-6. No effect has been given to shares to be reserved for
issuance pursuant to the Option Plan. Accordingly, 9,690, 11,400, 13,110
and 15,076 shares have been subtracted from the shares assumed to be sold
at the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, and 117,810, 138,600, 159,390 and
183,299 shares are assumed to be outstanding at the minimum, midpoint,
maximum, and maximum, as adjusted of the Estimated Valuation Range.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets over its liabilities. The amounts shown do not
reflect the federal income tax consequences of the potential restoration to
income of the tax bad debt reserves for income tax purposes, which would be
required in the event of liquidation. The amounts shown also do not
reflect the amounts required to be distributed in the event of liquidation
to eligible depositors from the liquidation account which will be
established upon the consummation of the conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the shares, the current value of our assets or liabilities
or the amounts, if any, that would be available for distribution to
stockholders in the event of liquidation. Such pro forma data may be
materially affected by a change in the number of shares to be sold in the
conversion and by other factors.
14
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
127,500 150,000 172,500 198,375
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $ 1,275 $ 1,500 $ 1,725 $ 1,984
Less estimated offering expenses............ (350) (350) (350) (350)
-------- -------- -------- --------
Estimated net conversion proceeds.......... $ 925 $ 1,150 $ 1,375 $ 1,634
======== ======== ======== ========
Less: Common stock acquired by ESOP........ $ (102) $ (120) $ (138) $ (159)
Common stock acquired by MRP......... (51) (60) (69) (79)
-------- -------- -------- --------
Estimated investable net proceeds.......... $ 772 $ 970 $ 1,168 $ 1,396
======== ======== ======== ========
Net income:
Historical net income...................... $ 88 $ 88 $ 88 $ 88
Pro forma adjustments:
Net income on net proceeds................ 26 33 40 47
ESOP (1).................................. (6) (7) (9) (10)
MRP (2)................................... (6) (7) (9) (10)
-------- -------- -------- --------
Pro forma net income................. $ 102 $ 107 $ 110 $ 115
======== ======== ======== ========
Net income per share:(3)
Historical net income...................... $ 0.74 $ 0.63 $ 0.55 $ 0.48
Pro forma adjustments:
Net income on net proceeds................ 0.22 0.24 0.25 0.26
ESOP (1).................................. (0.05) (0.05) (0.06) (0.05)
MRP (2)................................... (0.05) (0.05) (0.06) (0.05)
-------- -------- -------- --------
Pro forma net income per share (3).... $ 0.86 $ 0.77 $ 0.68 $ 0.64
======== ======== ======== ========
Number of shares............................ 118,320 139,200 160,080 184,092
======== ======== ======== ========
Stockholders' equity (book value): (4)
Historical................................. $ 1,577 $ 1,577 $ 1,577 $ 1,577
Estimated net conversion proceeds (2)...... 925 1,150 1,375 1,634
Less: Common stock acquired by ESOP (1). (102) (120) (138) (159)
Common stock acquired by MRP (2).. (51) (60) (69) (79)
-------- -------- -------- --------
Total................................... $ 2,349 $ 2,547 $ 2,745 $ 2,973
======== ======== ======== ========
Stockholders' equity per share:(3)(4)
Historical................................. $ 12.36 $ 10.51 $ 9.14 $ 7.95
Estimated net conversion proceeds.......... 7.25 7.67 7.97 8.24
Less: Common stock acquired by ESOP (1). (0.80) (0.80) (0.80) (0.80)
Common stock acquired by MRP (2).. (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma............................... $ 18.42 $ 16.97 $ 15.91 $ 14.99
======== ======== ======== ========
Price to pro forma earnings multiple........ 11.63% 12.99% 14.71% 15.63%
======== ======== ======== ========
Price to pro forma book value per share(4).. 54.30% 58.92% 62.86% 66.75%
======== ======== ======== ========
(Footnotes on succeeding page)
</TABLE>
15
<PAGE>
(footnotes continued from preceding page)
- -------------------------
(1) Assumes the ESOP purchases 8% of the shares sold in the conversion and the
Company lends the ESOP the funds to do so. The approximate amount expected
to be borrowed by the ESOP from the Company is reflected as a reduction of
stockholders' equity. We intend to make annual contributions to the ESOP
over a 10 year period in an amount at least equal to the principal and
interest requirement of the debt. The pro forma net income assumes:
(i) the ESOP loan is payable over 10 years, (ii) the average fair value of
the ESOP shares is $10.00 per share in accordance with SOP 93-6 of the
AICPA, and (iii) the effective tax rate was 38% for such period. The pro
forma stockholders' equity per share calculation assumes all ESOP shares
were outstanding, regardless of whether such shares would have been
released. ESOP expense is based upon generally accepted accounting
principles as described in accounting SOP 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. The ESOP loan is assumed to have a term of ten years.
It is therefore assumed that one-tenth of the Common Stock acquired by the
ESOP is committed to be released from the lien of the ESOP loan each year,
and one-fortieth each calendar quarter. ESOP expense shown is equal to the
number of shares so committed to be released for the period, multiplied by
the per share fair value at that time, which is assumed to be $10.00 per
share. All shares committed to be released during the period are assumed to
be outstanding for the entire period for the purpose of calculating
earnings per share. Shares not yet committed to be released are not deemed
to be outstanding for calculating earnings per share.
(2) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price of $10 per share and 20% of the amount
contributed was an amortized expense during such period. As we accrue
compensation expense to reflect the five-year vesting period of such shares
pursuant to the MRP, the charge against capital will be reduced
accordingly. In calculating the pro forma effect of the MRP, an effective
state and federal income tax rate of 38% has been assumed. Implementation
of the MRP within one year of conversion would require regulatory and
stockholder approval at a meeting of our stockholders to be held no earlier
than six months after the conversion. For purposes of this table, it is
assumed that the MRP will be adopted by the board of directors, reviewed by
the OTS, and approved by the stockholders, and that the MRP will purchase
the shares in the open market within the year following the conversion. If
the shares to be purchased by the MRP are assumed at January 1, 1997, to be
newly issued shares purchased from the Company at the minimum, midpoint,
maximum and maximum, as adjusted, of the Estimated Valuation Range, pro
forma stockholders' equity per share would have been $18.09, $16.71,
$15.68, and $14.79 at June 30, 1998, respectively. As a result of the MRP,
stockholders' interests will be diluted by approximately 3.8%. See
"Management of Ogdensburg Federal Savings and Loan Association -- Proposed
Future Stock Benefit Plans --Management Recognition Plan."
(3) Per share data has been computed based on the assumed numbers of shares
sold in the conversion less ESOP shares that have not been committed for
release. This treatment is in accordance with SOP 93-6. No effect has
been given to shares to be reserved for issuance pursuant to the Option
Plan. Pro forma net loss per share calculations include the number of
shares assumed to be sold in the conversion and, in accordance with
SOP 93-6, exclude ESOP shares which would not have been released during the
period. Accordingly, 9,180, 10,800, 12,420 and 14,283 shares have been
subtracted from the shares assumed to be sold at the minimum, midpoint,
maximum, and maximum, as adjusted, of the Estimated Valuation Range,
respectively, and 118,320, 139,200, 160,080 and 184,092 shares are assumed
to be outstanding at the minimum, midpoint, maximum, and maximum, as
adjusted of the Estimated Valuation Range. See Note 1 above.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets over its liabilities. The calculations are
based upon the number of shares issued in the conversion, without giving
effect to SOP 93-6. The amounts shown do not reflect the federal income
tax consequences of the potential restoration to income of the tax bad debt
reserves for income tax purposes, which would be required in the event of
liquidation. The amounts shown also do not reflect the amounts required to
be distributed in the event of liquidation to eligible depositors from the
liquidation account which will be established upon the consummation of the
conversion. Pro forma stockholders' equity information is not intended to
represent the fair market value of the shares, the current value of our
assets or liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by a change in the number of shares to be
sold in the conversion and by other factors.
16
<PAGE>
THE CONVERSION
THE OTS HAS APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS
AT A SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN
OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER,
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
GENERAL
On July 23, 1998, our board of directors adopted a plan of conversion,
pursuant to which we will convert from a federally chartered mutual savings and
loan association to a federally chartered stock savings and loan association and
become a wholly owned subsidiary of the Company. The conversion will include
adoption of the proposed Federal Stock Charter and Bylaws which will authorize
the issuance of capital stock by us. Under the Plan, our capital stock is being
sold to the Company and the common stock of the Company is being offered to our
customers and then to the public.
The OTS has approved the Company's application to become a savings and loan
holding company and to acquire all of our capital stock to be issued in the
conversion. Pursuant to such OTS approval, the Company plans to retain a
portion of the net proceeds from the sale of shares of common stock and to use
the remainder to purchase all of the capital stock we will issue in the
conversion.
The shares are first being offered in a Subscription Offering to holders of
subscription rights. To the extent shares of common stock remain available
after the Subscription Offering, we may offer shares of common stock in a
Community Offering. The Community Offering, if any, may begin anytime
subsequent to the beginning of the Subscription Offering. Shares not subscribed
for in the Subscription and Community Offerings may be offered for sale by the
Company in a Syndicated Community Offering. We have the right, in our sole
discretion, to accept or reject, in whole or in part, any orders to purchase
shares of common stock received in the Community and Syndicated Community
Offering. See " -- Community Offering" and " -- Syndicated Community
Offering."
We must sell common stock in an amount equal to our pro forma market value
as a stock savings institution in order for the conversion to become effective.
The Subscription Offering is scheduled to end on December 14, 1998 but may be
extended in the discretion of management to December __, 1998. We must complete
the Community Offering within 45 days after the last day of the Subscription
Offering (January __, 1999), unless we extend such period and obtain the
approval of the OTS to do so. If the Company sells any shares of stock in a
Syndicated Community Offering, that offering must be completed by January __,
1999. The Plan provides that the conversion must be completed within 24 months
after the date of the approval of the Plan by our members.
In the event that we are unable to complete the sale of common stock and
effect the conversion within 45 days after the end of the Subscription Offering,
we may request an extension of the period by the OTS. We cannot assure you that
the extension would be granted if requested, nor can we assure you that our
valuation would not substantially change during any such extension. If the
Estimated Valuation Range of the shares must be amended, we cannot assure that
the OTS
17
<PAGE>
would approve such amended Estimated Valuation Range. Therefore, it is
possible that if the conversion cannot be completed within the requisite period
of time, we may not be permitted to complete the conversion. A substantial
delay caused by an extension of the period may also significantly increase the
expense of the conversion. We cannot sell any shares of common stock unless the
Plan is approved by our members.
The completion of the offering is subject to market conditions and other
factors beyond our control. We cannot give you any assurances as to the length
of time following approval of the Plan at the meeting of our members that will
be required to complete the Community Offering or other sale of the shares being
offered in the conversion. If we experience delays, our estimated pro forma
market value upon conversion could change significantly, together with
corresponding changes in the offering price and the net proceeds to be realized
by us from the sale of the shares. In the event we terminate the conversion, we
would be required to charge all conversion expenses against current income and
promptly return any funds collected by us in the offering to each potential
investor, plus interest at the prescribed rate.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF OGDENSBURG
FEDERAL SAVINGS AND LOAN ASSOCIATION
VOTING RIGHTS. Currently in our mutual form, our depositor and borrower
members have voting rights and may vote for the election of directors.
Following the conversion, depositors and borrower members will cease to have
voting rights.
SAVINGS ACCOUNTS AND LOANS. The conversion will not affect the balances,
terms and FDIC insurance coverage of savings accounts, nor will the amounts and
terms of loans and obligations of the borrowers under their individual
contractual arrangements with us be affected.
TAX EFFECTS. We have received an opinion from our counsel, Housley
Kantarian & Bronstein, P.C. on the material federal tax consequences of the
conversion. We have filed the opinion as an exhibit to the registration
statement of which this prospectus is a part. The opinion provides, in part,
that,: (i) the conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Code, and we will not recognize any taxable gain in either
our mutual form or our stock form as a result of the proposed conversion; (ii)
we will not recognize any taxable gain upon the receipt of money from the
Company for our stock, nor will the Company recognize any gain upon the receipt
of money for the common stock; (iii) our assets in either our mutual or our
stock form will have the same basis before and after the conversion; (iv) the
holding period of our assets will include the period during which the assets
were held by us in our mutual form prior to conversion; (v) no gain or loss will
be recognized by the Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members upon the issuance to them of withdrawable savings
accounts in us in the stock form in the same dollar amount as their savings
accounts in us in the mutual form plus an interest in the liquidation account of
us in the stock form in exchange for their savings accounts in us in the mutual
form; (vi) depositors will recognize gain or loss upon the receipt of
liquidation rights and the receipt of subscription rights in the conversion, to
the extent such liquidation rights
18
<PAGE>
and subscription rights are deemed to have value, as discussed below; (vii) the
basis of each account holder's savings accounts in us after the conversion will
be the same as the basis of his savings accounts in us prior to the conversion,
decreased by the fair market value of the nontransferable subscription rights
received and increased by the amount, if any, of gain recognized on the
exchange; (viii) the basis of each account holder's interest in the liquidation
account will be zero; and (ix) 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.
With respect to the subscription rights, we have received an opinion of
Feldman which, based on certain assumptions, concludes that the subscription
rights to be received by Eligible Account Holders and other eligible subscribers
do not have any economic value at the time of distribution or at the time the
subscription rights are exercised, whether or not a public offering takes place.
Such opinion is based on the fact that such rights are: (i) acquired by the
recipients without payment therefor, (ii) non-transferable, (iii) of short
duration, and (iv) afford the recipients the right only to purchase shares at a
price equal to their estimated fair market value, which will be the same price
at which shares for which no subscription right is received in the Subscription
Offering will be offered in the Community Offering. If the subscription rights
granted to Eligible Account Holders or other eligible subscribers are deemed to
have an ascertainable value, receipt of such rights would be taxable only to
those Eligible Account Holders or other eligible subscribers who exercise the
subscription rights in an amount equal to such value (either as a capital gain
or ordinary income), and we could recognize gain on such distribution.
We are also subject to New York income taxes and have received an opinion
from Silver and Silver 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 opinions of Housley Kantarian &
Bronstein, P.C., Feldman and Silver and Silver have no binding effect or
official status, and we cannot give you any assurance that a court would sustain
the conclusions reached in any of those opinions if contested by the IRS or the
New York tax authorities. WE ENCOURAGE ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS, AND OTHER MEMBERS TO CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE TAX CONSEQUENCES IN THE EVENT THE SUBSCRIPTION RIGHTS ARE
DEEMED TO HAVE AN ASCERTAINABLE VALUE.
LIQUIDATION ACCOUNT. In the unlikely event of our complete liquidation in
our present mutual form, each depositor is entitled to equal distribution of any
of our assets, pro rata to the value of his accounts, remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the conversion, each depositor would have
a claim, as a creditor, of the same general priority as the claims of all other
general creditors of ours. Therefore, except as described below, a depositor's
claim would be solely in the amount of the balance in his
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deposit account plus accrued interest. A depositor would not have an interest in
the residual value of our assets above that amount if any.
The Plan provides for the establishment, upon the completion of the
conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
our net worth as reflected in the latest statement of financial condition in the
Prospectus. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he continues to maintain his deposit account with us, would be
entitled on a complete liquidation of us after conversion, to an interest in the
liquidation account prior to any payment to stockholders. Each Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account held in us on the qualifying date, June 30, 1997. Each
Supplemental Eligible Account Holder would have a similar interest as of the
qualifying date, September 30, 1998. The interest as to each deposit account
would be in the same proportion of the total liquidation account as the balance
of the deposit account on the qualifying dates was to the aggregate balance in
all the deposit accounts of Eligible Account Holders and Supplemental Eligible
Account Holders on such qualifying dates. However, if the amount in the deposit
account on any annual closing date of ours is less than the amount in such
account on the respective qualifying dates, then the interest in this special
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction, and the interest would cease to exist if
such deposit account were closed. The interest in the special liquidation
account will never be increased despite any increase in the related deposit
account after the respective qualifying dates.
No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we, in our converted form, are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
SUBSCRIPTION RIGHTS AND THE SUBSCRIPTION OFFERING
In accordance with OTS regulations, non-transferable subscription rights to
purchase shares of the common stock have been granted to all persons and
entities entitled to purchase shares in the Subscription Offering under the
Plan. The number of shares which these parties may purchase will be determined,
in part, by the total number of shares to be issued and by the availability of
the shares for purchase under the categories set forth in the Plan. If the
Community Offering, as described below, extends beyond 45 days following the
completion of the Subscription Offering, we will resolicit subscribers and
permit them to increase, decrease or rescind their orders. Subscription
priorities have been established for the allocation of stock to the extent that
shares are available after satisfaction of all subscriptions of all persons
having prior rights and subject to the maximum and minimum purchase limitations
set forth in the Plan and as described below under " -- Limitations on Purchases
of Shares." The following priorities have been established:
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS AT JUNE 30, 1997. Each Eligible
Account Holder (which collectively encompasses all names on a joint account)
will receive non-transferable
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subscription rights on a priority basis to purchase up to 5,000 shares
($50,000). A minimum of 25 shares must be subscribed for by any subscriber. If
there are insufficient shares to satisfy the orders of all Eligible Account
Holders, shares shall be allocated among subscribing Eligible Account Holders so
as to permit each such account holder, to the extent possible, to purchase the
lesser of 100 shares or the total amount of his subscription. Any shares
remaining shall be allocated among the subscribing Eligible Account Holders on
an equitable basis, related to the amounts of their respective qualifying
deposits as compared to the total qualifying deposits of all subscribing
Eligible Account Holders. Subscription rights received by officers and directors
in this category based on their increased deposits in us in the one-year period
preceding June 30, 1997, are subordinated to the subscription rights of other
Eligible Account Holders. See " -- Limitations on Purchases and Transfer of
Shares."
CATEGORY 2: ESOP. The ESOP has been granted subscription rights to purchase
up to 10% of the total shares issued in the conversion.
Although the right of the ESOP to subscribe for shares is subordinate to
the right of the Eligible Account Holders, in the event the offering results in
the issuance of shares above the maximum of the Estimated Valuation Range (i.e.,
more than 172,500 shares), the ESOP has a priority right to fill its
subscription. The ESOP currently intends to purchase up to 8.0% of the common
stock issued in the conversion. The ESOP may, however, determine to purchase
some or all of the shares covered by its subscription after the conversion in
the open market or, if approved by the OTS, out of authorized but unissued
shares in the event of an over subscription.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS AT SEPTEMBER 30, 1998.
Each Supplemental Eligible Account Holder (which collectively encompasses all
names on a joint account) who is not an Eligible Account Holder will receive
non-transferable subscription rights to purchase up to 5,000 shares ($50,000).
A minimum of 25 shares must be subscribed for by any subscriber. If the
allocation made in this paragraph results in an over subscription, shares shall
be allocated among subscribing Supplemental Eligible Account Holders so as to
permit each such account holder, to the extent possible, to purchase the lesser
of 100 shares or the total amount of his subscription. Any shares not so
allocated shall be allocated among the subscribing Supplemental Eligible Account
Holders on an equitable basis, related to the amounts of their respective
qualifying deposits as compared to the total qualifying deposits of all
subscribing Supplemental Eligible Account Holders. See " -- Limitations on
Purchases and Transfer of Shares."
The right of Supplemental Eligible Account Holders to subscribe for shares
is subordinate to the rights of the Eligible Account Holders and the ESOP to
subscribe for shares.
CATEGORY 4: OTHER MEMBERS AT NOVEMBER __, 1998. Each Other Member (which
collectively encompasses all names on a joint account) who is not an Eligible
Account Holder or Supplemental Eligible Account Holder, will receive non-
transferable subscription rights to purchase up to 5,000 shares ($50,000) to the
extent such shares are available following subscriptions by Eligible Account
Holders, the ESOP, and Supplemental Eligible Account Holders. In the event
there are not enough shares to fill the orders of the Other Members, the
subscriptions of the Other Members will be
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allocated so that each subscribing Other Member will be entitled to purchase the
lesser of 100 shares or the number of shares ordered. Any remaining shares will
be allocated among Other Members whose subscriptions remain unsatisfied on a
reasonable basis. See " --Limitations on Purchases and Transfer of Shares."
MEMBERS IN NON-QUALIFIED STATES. We 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 shares pursuant to the Plan reside. However, no
person will be offered or allowed to purchase any shares under the Plan if he
resides in a foreign country or in a state 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 that state or foreign country; (ii) the
granting of subscription rights or offer or sale of shares of common stock to
those persons would require either us, or our employees to register, under the
securities laws of that state or foreign country, as a broker or dealer or to
register or otherwise qualify our securities for sale in that state or foreign
country; or (iii) such registration or qualification would be impracticable for
reasons of cost or otherwise. We will not make any payment in lieu of the
granting of subscription rights to any person.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES. Persons are
prohibited from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of their subscription rights. Only
the person to whom they are granted may exercise subscription rights and only
for his account. Each person subscribing for shares will be required to certify
that he is purchasing shares solely for his own account and has not entered into
an agreement or understanding regarding the sale or transfer of those shares.
The regulations also prohibit any person from offering or making an announcement
of an offer or intent to make an offer to purchase subscription rights or shares
of common stock prior to the completion of the conversion.
We will pursue any and all legal and equitable remedies in the event we
become aware of the transfer of subscription rights and will not honor orders
believed by us to involve the transfer of subscription rights.
EXPIRATION DATE. The Subscription Offering will expire at 12:00 p.m.,
Eastern Time, on December 14, 1998. Subscription rights will become void if
not exercised prior to the Expiration Date.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of common
stock to certain members of the general public residing in New York and certain
other states with a preference to natural persons and trusts of natural persons
residing in St. Lawrence County, New York under such terms and conditions as may
be established by the board of directors. In the Community Offering, the
minimum purchase is 25 shares, and no person, together with associates of and
persons acting in concert with such persons, may purchase more than 5,000 shares
($50,000).
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WE MAY BEGIN THE COMMUNITY OFFERING AT ANY TIME AFTER THE SUBSCRIPTION
OFFERING HAS BEGUN. THE COMMUNITY OFFERING ONCE COMMENCED, MAY EXPIRE AT ANY
TIME WITHOUT NOTICE BUT NO LATER THAN 12:00 P.M., EASTERN TIME, ON DECEMBER 14,
1998 UNLESS WE EXTEND IT WITH THE PERMISSION OF THE OTS. PURCHASES OF SHARES IN
THE COMMUNITY OFFERING ARE SUBJECT TO OUR RIGHT IN OUR SOLE DISCRETION, TO
ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART EITHER AT THE TIME AND
RECEIPT OF AN ORDER, OR AS SOON AS PRACTICABLE FOLLOWING THE COMPLETION OF THE
COMMUNITY OFFERING.
In the event Community Offering orders are not filled, we will promptly
refund funds received by us with interest at our passbook rate. In the event an
insufficient number of shares are available to fill all orders in the Community
Offering, the available shares will be allocated on an equitable basis
determined by the board of directors, provided however that a preference will be
given to natural persons residing in St. Lawrence County, New York. If
regulatory approval is received to extend the Community Offering beyond 45 days
following the completion of the Subscription Offering, subscribers will be
resolicited. Shares sold in the Community Offering will be sold at $10.00 per
share.
SYNDICATED COMMUNITY OFFERING
The Plan provides that, if necessary, we may offer shares of common stock
not purchased in the Subscription and Community Offerings for sale to the
general public in a Syndicated Community Offering through a syndicate of
selected dealers to be formed and managed by Trident Securities. No individual
purchaser together with any associate or group of persons acting in concert may
purchase more than 5,000 shares ($50,000). Neither Trident Securities nor any
registered broker-dealer will be obligated to take or purchase any shares in the
Syndicated Community Offering, although Trident Securities has agreed to use its
best efforts in the sales of shares in any Syndicated Community Offering.
Shares sold in the Syndicated Community Offering will be sold at the Purchase
Price. See " -- Stock Pricing."
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless the Company extends it with the approval
of the OTS.
LIMITATIONS ON PURCHASES AND TRANSFER OF SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of the shares in the conversion. The minimum purchase is 25 shares.
No persons, together with associates, or group of persons acting in concert, may
purchase more than 8,000 shares ($80,000), except for the ESOP which may
purchase up to 10% of the shares sold. The OTS regulations governing the
conversion provide that officers and directors and their associates may not
purchase, in the aggregate, more than 35% of the shares issued pursuant to the
conversion.
Depending on market conditions and the results of the offering, the board
of directors may increase or decrease any of the purchase limitations without
the approval of our members and
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without resoliciting subscribers. If the maximum purchase limitation is
increased, persons who ordered the maximum amount will be given the first
opportunity to increase their orders. In doing so the preference categories in
the offerings will be followed.
In the event of an increase in the total number of shares offered in the
conversion due to an increase in the Estimated Valuation Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
order of priority: (i) to fill the ESOP's subscription of up to 8% of the
Adjusted Maximum number of shares (the ESOP currently intends to subscribe for
8%); (ii) in the event that there is an over subscription by Eligible Account
Holders, to fill unfulfilled subscriptions of Eligible Account Holders exclusive
of the Adjusted Maximum; (iii) in the event that there is an over subscription
by Supplemental Eligible Account Holders, to fill unfulfilled subscriptions to
Supplemental Eligible Account Holders exclusive of the Adjusted Maximum; (iv) in
the event that there is an over subscription by Other Members, to fill
unfulfilled subscriptions of Other Members exclusive of the Adjusted Maximum;
and (v) to fill unfulfilled subscriptions in the Community Offering to the
extent possible, exclusive of the Adjusted Maximum.
The term "acting in concert" means (i) knowing participation in a joint
activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. We may presume that certain
persons are acting in concert based upon, among other things, joint account
relationships, common account and/or addresses and the fact that such persons
have filed joint Schedule 13Ds with the SEC with respect to other companies.
The term "associate" of a person means (i) any corporation or organization
(other than us or a majority-owned subsidiary of ours) 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 director or in a similar fiduciary capacity (excluding tax-
qualified employee stock benefit plans and non tax-qualified employee stock
benefit plans), 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 us, or any of our subsidiaries. For example, a corporation of which a
person serves as an officer would be an associate of that person, and therefore
all shares purchased by that corporation would be included with the number of
shares which that person individually could purchase under the above
limitations.
The term "officer" may include our chairman of the board, president, vice
presidents in charge of principal business functions, Secretary and Treasurer
and any other person performing similar functions. All references herein to an
officer have the same meaning as used for an officer in the Plan.
The term "residing," as used in relation to the preference afforded natural
persons in St. Lawrence County, New York, means any natural person who occupies
a dwelling within St. Lawrence County, has an intention to remain within
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St. Lawrence County (manifested by establishing a physical, on-going, non-
transitory presence within St. Lawrence County), and continues to reside in St.
Lawrence County at the time of the offering. We may utilize deposit or loan
records or such other evidence provided to us to make the determination whether
a person is residing in St. Lawrence County. Such determination will be in our
sole discretion.
TO ORDER SHARES IN THE CONVERSION, PERSONS MUST CERTIFY THAT THEIR PURCHASE
DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS. IN THE EVENT THAT THE PURCHASE
LIMITATIONS ARE VIOLATED BY ANY PERSON (INCLUDING ANY ASSOCIATE OR GROUP OF
PERSONS AFFILIATED OR OTHERWISE ACTING IN CONCERT WITH SUCH PERSONS), WE WILL
HAVE THE RIGHT TO PURCHASE FROM THAT PERSON AT $10.00 PER SHARE ALL SHARES
ACQUIRED BY THAT PERSON IN EXCESS OF THE PURCHASE LIMITATIONS. IF THE EXCESS
SHARES HAVE BEEN SOLD BY THAT PERSON, WE MAY RECOVER THE PROFIT FROM THE SALE OF
THE SHARES BY THAT PERSON. WE MAY ASSIGN OUR RIGHT EITHER TO PURCHASE THE
EXCESS SHARES OR TO RECOVER THE PROFITS FROM THEIR SALE.
Shares of common stock purchased pursuant to the conversion will be freely
transferable, except for shares purchased by our directors and officers. For
certain restrictions on the shares purchased by directors and officers, see " --
Restrictions on Sales and Purchases of Shares by Directors and Officers." In
addition, under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with subscription rights and to certain reporting requirements upon
purchase of such securities.
ORDERING AND RECEIVING SHARES
USE OF ORDER FORMS. Subscription rights to subscribe may only be exercised
by completion of an original order form. Facsimiles of order forms will not be
accepted. Persons ordering shares in the Subscription Offering must deliver by
mail or in person a properly completed and executed original order form to us
prior to the Expiration Date. Order forms must be accompanied by full payment
for all shares ordered. See " -- Payment for Shares." No wire transfers will
be accepted. Subscription rights under the Plan will expire on the Expiration
Date, whether or not we have been able to locate each person entitled to
subscription rights. ONCE SUBMITTED, SUBSCRIPTION ORDERS CANNOT BE REVOKED
WITHOUT OUR CONSENT UNLESS THE CONVERSION IS NOT COMPLETED WITHIN 45 DAYS OF THE
EXPIRATION DATE.
Persons and entities not purchasing shares in the Subscription Offering
may, subject to availability, purchase shares in the Community Offering by
returning to us a completed and properly executed order form along with full
payment for the shares ordered.
In the event an order form (i) is not delivered and is returned to us by
the United States Postal Service or we are unable to locate the addressee, (ii)
is not received or is received after the Expiration Date, (iii) is defectively
completed or executed, or (iv) is not accompanied by full payment for the shares
subscribed for (including instances where a savings account or certificate
balance from which withdrawal is authorized is insufficient to fund the amount
of such required payment), the
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subscription rights for the person to whom such rights have been granted will
lapse as though that person failed to return the completed order form within the
time period specified. We 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 we
specify. The waiver of an irregularity on an order form in no way obligates us
to waive any other irregularity on that, or any irregularity on any other, order
form. Waivers will be considered on a case by case basis. Photocopies of order
forms, payments from private third parties, or electronic transfers of funds
will not be accepted. Our interpretation of the terms and conditions of the Plan
and of the acceptability of the order forms will be final. We have the right to
investigate any irregularity on any order form.
To ensure that each purchaser receives a prospectus at least 48 hours before
the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act, no
prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
forms will only be distributed with a prospectus.
PAYMENT FOR SHARES. Payment for shares of common stock may be made (i) in
cash, if delivered in person, (ii) by check or money order, or (iii) by
authorization of withdrawal from savings accounts (including time certificates)
maintained with us or (iv) by an IRA not held by us. Appropriate means by which
such withdrawals may be authorized are provided in the order form. Once such a
withdrawal has been authorized, none of the designated withdrawal amount may be
used by the subscriber for any purpose other than to purchase the shares. Where
payment has been authorized to be made through withdrawal from a savings
account, the sum authorized for withdrawal will continue to earn interest at the
contract rate until the conversion has been completed or terminated. Interest
penalties for early withdrawal applicable to certificate accounts will not apply
to withdrawals authorized for the purchase of shares; however, if a partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the passbook savings account rate subsequent to
the withdrawal. Payments made in cash or by check or money order, will be
placed in a segregated saving account and interest will be paid by us at our
passbook savings account rate from the date payment is received until the
conversion is completed or terminated. An executed order form, once received by
us, may not be modified, amended, or rescinded without our consent, unless the
conversion is not completed within 45 days after the conclusion of the
Subscription Offering, in which case subscribers may be given an opportunity to
increase, decrease, or rescind their order. In the event that the conversion is
not consummated, all funds submitted pursuant to the offering will be refunded
promptly with interest.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares in the offering, provided that such IRAs are not maintained on deposit
with us. Persons with IRAs maintained with us must have their accounts
transferred to an unaffiliated institution or broker to purchase shares in the
offering. The Stock Information Center can assist you in transferring your self-
directed IRA. Because of the paperwork involved, persons owning IRAs with us who
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wish to use their IRA account to purchase stock in the Offering, must contact
the Stock Information Center no later than December __, 1998.
DELIVERY OF STOCK CERTIFICATES. Certificates representing shares of common
stock issued in the conversion will be mailed to the person(s) at the address
noted on the order form, as soon as practicable following consummation of the
conversion. Any certificates returned as undeliverable will be held until
properly claimed or otherwise disposed. Persons ordering shares might not be
able to sell their shares until they receive their stock certificates.
FEDERAL REGULATIONS PROHIBIT US FROM LENDING FUNDS OR EXTENDING CREDIT TO
ANY PERSON TO PURCHASE SHARES IN THE CONVERSION.
MARKETING ARRANGEMENTS
We have engaged Trident Securities as our financial advisor in connection
with the offering. Trident Securities has agreed to exercise its best efforts
to assist us in the sale of the shares in the offering. As compensation,
Trident Securities will receive a management fee in the amount of $60,000. If
shares are offered for sale in a Syndicated Community Offering, Trident
Securities will organize and manage the syndicate of selected broker-dealers.
The commission to be paid to any such selected broker-dealers will be at a rate
to be agreed to jointly by Trident Securities and us. Fees paid to Trident
Securities and to any other broker-dealer may be deemed to be underwriting fees,
and Trident Securities and such broker-dealers may be deemed to be underwriters.
Trident Securities will also be reimbursed for allocable expenses incurred by
them, including legal fees. Trident Securities' reimbursable out-of-pocket
expenses other than legal fees will not exceed $10,500 and its reimbursable
legal fees will not exceed $20,000. We have agreed to indemnify Trident
Securities for reasonable costs and expenses in connection with certain claims
or liabilities which might be asserted against Trident Securities. This
indemnification covers the investigation, preparation of defense and defense of
any action, proceeding or claim relating to misrepresentation or breach of
warranty of the written agreement among Trident Securities and us or the
omission or alleged omission of a material fact required to be stated or
necessary in the prospectus or other documents.
The shares will be offered principally by the distribution of this document
and through activities conducted at a Stock Information Center located at our
office. The Stock Information Center is expected to operate during our normal
business hours throughout the offering. A registered representative employed by
Trident Securities will be working at, and supervising the operation of, the
Stock Information Center. Trident Securities will assist us in responding to
questions regarding the conversion and the offering and processing order forms.
Our personnel will be present in the Stock Information Center to assist Trident
Securities with clerical matters and to answer questions related solely to our
business.
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STOCK PRICING
We have retained Feldman, an independent economic consulting and appraisal
firm, which is experienced in the evaluation and appraisal of business entities,
including savings institutions involved in the conversion process to prepare an
appraisal of our estimated pro forma market value. We will pay Feldman a fee of
$17,000 for preparing the appraisal and other services and will reimburse
Feldman up to $2,000 for reasonable out-of-pocket expenses. We have agreed to
indemnify Feldman under certain circumstances against liabilities and expenses
arising out of or based on any misstatement or untrue statement of a material
fact contained in the information supplied by us to Feldman.
Feldman prepared the appraisal in reliance upon the information contained
herein, including the financial statements. The appraisal contains an analysis
of a number of factors including, but not limited to, our financial condition
and operating trends, the competitive environment within which we operate,
operating trends of certain savings institutions and savings and loan holding
companies, relevant economic conditions, both nationally and in the state of New
York which affect the operations of savings institutions, and stock market
values of certain savings institutions. In addition, Feldman has advised us
that it has considered the effect of the additional capital raised by the sale
of the shares on our estimated aggregate pro forma market value.
On the basis of the above, Feldman has determined, in its opinion, that as
of September 4, 1998 our estimated aggregate pro forma market value was
$1,500,000. OTS regulations require, however, that the appraiser establish a
range of value for the stock to allow for fluctuations in the aggregate value of
the stock due to changing market conditions and other factors. Accordingly,
Feldman has established the Estimated Valuation Range from $1,275,000 to
$1,725,000 for the offering. The Estimated Valuation Range will be updated
prior to consummation of the conversion and the Estimated Valuation Range may
increase to $1,983,750.
The board of directors has reviewed the independent appraisal, including
the stated methodology of the independent appraiser and the assumptions used in
the preparation of the independent appraisal. The board of directors is relying
upon the expertise, experience and independence of the appraiser and is not
qualified to determine the appropriateness of the assumptions.
In order for stock sales to take place, Feldman must confirm to the OTS
that, to the best of Feldman's knowledge and judgment, nothing of a material
nature has occurred which would cause Feldman to conclude that the Purchase
Price on an aggregate basis was incompatible with Feldman's estimate of our pro
forma market value of us in converted form at the time of the sale. If,
however, the facts do not justify such a statement, an amended Estimated
Valuation Range may be established.
THE APPRAISAL IS NOT A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF
PURCHASING THESE SHARES. IN PREPARING THE APPRAISAL, FELDMAN HAS RELIED UPON
AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND STATISTICAL
INFORMATION PROVIDED BY US. FELDMAN DID NOT
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INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED BY
US, NOR DID FELDMAN VALUE INDEPENDENTLY OUR ASSETS AND LIABILITIES. THE
APPRAISAL CONSIDERS US ONLY AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS
OUR LIQUIDATION VALUE. MOREOVER, BECAUSE THE APPRAISAL IS BASED UPON ESTIMATES
AND PROJECTIONS OF A NUMBER OF MATTERS WHICH ARE SUBJECT TO CHANGE, THE MARKET
PRICE OF THE COMMON STOCK COULD DECLINE BELOW $10.00.
CHANGE IN NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
Depending on market and financial conditions at the time of the completion
of the Subscription and Community Offerings, we may significantly increase or
decrease the number of shares to be issued in the conversion. In the event of
an increase in the valuation, we may increase the total number of shares to be
issued in the conversion. An increase in the total number of shares to be
issued in the conversion would decrease a subscriber's percentage ownership
interest and the pro forma net worth (book value) per share and increase the
pro forma net income and net worth (book value) on an aggregate basis. In the
event of a material reduction in the valuation, we may decrease the number of
shares to be issued to reflect the reduced valuation. A decrease in the number
of shares to be issued in the conversion would increase a subscriber's
percentage ownership interest and the pro forma net worth (book value) per share
and decrease pro forma net income and net worth on an aggregate basis.
Persons ordering shares will not be permitted to modify or cancel their
orders unless the change in the number of shares to be issued in the conversion
results in an offering which is either less than $1,275,000 or more than
$1,983,750.
RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the conversion, the Company may
not repurchase its shares and during each of the second and third years
following the conversion, the Company may repurchase five percent of the
outstanding shares provided they are purchased in open-market transactions.
Repurchases must not cause us to become undercapitalized and at least 10 days
prior notice of the repurchase must be provided to the OTS. The OTS may
disapprove a repurchase program upon a determination that (1) the repurchase
program would adversely affect our financial condition, (2) the information
submitted is insufficient upon which to base a conclusion as to whether the
financial condition would be adversely affected, or (3) a valid business purpose
was not demonstrated. In addition, SEC rules also govern 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 stock are liberalized, the Company may utilize the
rules and regulations then in effect.
RESTRICTIONS ON SALES AND PURCHASES OF SHARES BY DIRECTORS AND OFFICERS
Shares purchased by directors and officers of the Company may not be sold
for one year following completion of the conversion. An exception to this rule
is a disposition of shares in the
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<PAGE>
event of the death of the director or officer. 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 following the conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
INTERPRETATION AND AMENDMENT OF THE PLAN
We are authorized to interpret and amend the Plan. Our interpretations are
final. Amendments to the Plan after the receipt of member approval will not
need further member approval unless required by the OTS.
CONDITIONS AND TERMINATION
Completion of the conversion requires (i) the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes
eligible to be cast by our members; and (ii) completion of the sale of shares
within 24 months following approval of the Plan by our members. If these
conditions are not satisfied, the Plan will be terminated and we will continue
our business in the mutual form of organization. We may terminate the Plan at
any time prior to the meeting of members to vote on the Plan or at any time
thereafter with the approval of the OTS.
OTHER
ALL STATEMENTS MADE IN THIS DOCUMENT ARE HEREBY QUALIFIED BY THE CONTENTS
OF THE PLAN OF CONVERSION, THE MATERIAL TERMS OF WHICH ARE SET FORTH HEREIN.
tHE PLAN OF CONVERSION IS ATTACHED TO THE PROXY STATEMENT. COPIES OF THE PLAN
ARE AVAILABLE FROM US AND WE SHOULD BE CONSULTED FOR FURTHER INFORMATION.
ADOPTION OF THE PLAN BY OUR MEMBERS AUTHORIZES US TO INTERPRET, AMEND OR
TERMINATE THE PLAN.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Financial Statements and Notes to the Financial Statements which are
included elsewhere in this document.
The Company has recently been formed and accordingly, has no results of
operations. The following discussion relates only to our financial condition
and results of operations
Our results of operations depend primarily on net interest income, which is
determined by (i) the difference between rates of interest we earn on our
interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. Our results of operations are also affected
by non-interest expense, including primarily compensation and employee benefits,
federal deposit insurance premiums and office occupancy costs. Our results of
operations also are affected significantly by general and economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities, all of which are
beyond our control.
Following the conversion, we believe there will be sufficient demand in our
market area to continue our policy of emphasizing lending in the one- to four-
family real estate loan area. In addition, we hope to experience continued
growth in our consumer loan portfolio; however, there is no assurance that we
will be able to do so. See "Business of Ogdensburg Federal Savings and Loan
Association-- Lending Activities."
YEAR 2000 COMPLIANCE
A great deal of information has been disseminated about the global computer
problem that may occur in the year 2000 which would affect the speed and
accuracy of the data processing that is essential to our operations. We are
conducting a thorough review of our internal systems as well as the efforts of
our outside data processing service provider. The progress of the plan is
monitored by our board of directors. We do not expect to incur significant
costs to replace existing hardware or software. The greatest potential for
problems, however, concerns the data processing provided by our third party
service bureau. The service bureau with which we operate is providing us with
periodic updates of its compliance progress. We have participated in the first
phase of testing with the provider satisfactorily with the second phase to be
completed prior to December 31, 1998. The service bureau has indicated that it
will be compliant by such date. With respect to our teller/platform computer
system, we are converting to a new system that is year 2000 compliant which will
be completed by April 30, 1999. We are in the process of developing a
contingency plan to deal with the potential that our service bureau is unable to
bring its systems into compliance by September 30, 1998. We believe that we
would use manual systems as a contingency plan if our current provider is unable
to resolve this problem in time. There can be no assurance in this regard,
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<PAGE>
however, and it is possible that as a result we could experience data processing
delays, errors or failures, all of which could have a material adverse impact on
our financial condition and results of operations. We estimate that our expenses
related to year 2000 compliance will be approximately $5,000.
We have also evaluated our non-information technology systems (for example,
our alarm system, our heating and air conditioning system) to determine if such
systems may have embedded technology that could also be affected by the year
2000 problem. We have determined that the only system of this type that could be
affected is our alarm system. We have been informed, however, by the vendor that
the system is year 2000 compliant and has been fully tested.
We are in the process of installing a new teller/platform computer system.
The costs of the new system will be approximately $50,000. The installation of
the new system is not a result of Year 2000 compliance. As a result, such costs
will be capitalized.
Computer problems experienced by our commercial borrowers could have an
adverse effect on their business operations and their ability to repay their
loans when due. The Company has recently begun evaluating Year 2000 readiness of
its commercial loan applicants as part of the loan underwriting process and is
calling upon major existing borrowers to assess their readiness and identify
potential problems.
MARKET/INTEREST RATE RISK DISCLOSURE
QUALITATIVE DISCLOSURE. Our assets and liabilities may be analyzed by
examining the extent to which our assets and liabilities are interest-rate
sensitive and by monitoring the expected effects of interest rate changes on our
net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates. Our policy has been to mitigate the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by pursuing certain
strategies designed to decrease the vulnerability of our earnings to material
and prolonged changes in interest rates.
Our primary method of managing interest rate is to emphasize the origination
of ARM loans. Our ARM loans provide that the interest rate will adjust every
year. The terms of these loans generally limit the amount of any rate change to
a maximum of 2% and also provide that the rate may not increase above a
"ceiling" rate established at the time the loan is made, nor below a floor rate
which is the initial rate on the loan. At June 30, 1998, approximately 55% of
our mortgage loan portfolio had adjustable rates. We also purchase investment
securities with relatively short maturities, normally three years or less. At
June 30, 1998, approximately 99% of our investment portfolio had a maturity of
five years or less. We also seek to cushion ourselves against interest rate
fluctuations by preserving a loyal depositor base whose accounts that are less
likely to switch to institutions that may be offering higher rates. We do
monitor our deposit rates on a weekly basis to ensure that we remain
competitive.
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<PAGE>
QUANTITATIVE DISCLOSURE. In recent years, we have measured our interest rate
sensitivity by computing the "gap" between the assets and liabilities which were
expected to mature or reprice within certain time periods, based on assumptions
regarding loan prepayment and the rates at which deposits will be withdrawn by
depositors over time formerly provided by the OTS. However, the OTS now measures
an institution's interest rate risk by computing the amount by which the net
present value of cash flow from assets, liabilities and off balance sheet items
(the institution's net portfolio value or "NPV") would change in the event of a
range of assumed changes in market interest rates. These computations estimate
the effect on an institution's NPV from instantaneous and permanent 1% to 4%
(100 to 400 basis points) increases and decreases in market interest rates. The
following table presents the interest rate sensitivity of our NPV at June 30,
1998, as calculated by the OTS, which is based upon quarterly information that
we voluntarily provided to the OTS.
<TABLE>
<CAPTION>
NPV AS % OF
NET PORTFOLIO VALUE PORTFOLIO VALUE OF ASSETS
CHANGE --------------------------------- ------------------------------
IN RATES $ AMOUNT $ CHANGE % CHANGE NPV RATIO BASIS POINT CHANGE
- --------- -------- --------- -------- --------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+ 400 bp 1,433 (530) (27)% 6.06% (192) bp
+ 300 bp 1,618 (345) (18) 6.76 (122) bp
+ 200 bp 1,774 (188) (10) 7.33 (65) bp
+ 100 bp 1,891 (71) (4) 7.74 (23) bp
0 bp 1,962 -- -- 7.98
- - 100 bp 2,076 114 6 8.36 (39) bp
- - 200 bp 2,232 269 14 8.89 (92) bp
- - 300 bp 2,409 447 23 9.49 (151) bp
- - 400 bp 2,642 680 35 10.27 (229) bp
</TABLE>
The board of directors has established a policy setting forth maximum NPV
variances as a result of such instantaneous and permanent changes in interest
rates. At June 30, 1998, our interest rate sensitivity was within the policy
established by the board.
While we cannot predict future interest rates or their effects on our NPV
or net interest income, we do not expect current interest rates to have a
material adverse effect on our NPV or net interest income in the near future.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, prepayments and deposit runoff and should not be relied upon as
indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing, they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as ARM loans,
generally have features which restrict changes in interest rates on a short-term
basis and over the life of the loan. In the event of a change in interest
rates, prepayments and early withdrawal levels could deviate significantly from
those assumed in making calculations set forth above. Additionally, an
increased credit risk may result as the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase.
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<PAGE>
The board of directors reviews our asset and liability policies. The board
of directors meets regularly to review interest rate risk and trends, as well as
liquidity and capital ratios and requirements. Management administers the
policies and determinations of the board of directors with respect to our asset
and liability goals and strategies. We expect that our asset and liability
policies and strategies will continue as described so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.
34
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
The following table sets forth certain information relating to our average
balance sheet and reflects the average yield on assets and average cost of
liabilities for the periods indicated and the average yields earned and rates
paid at the date and for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average daily balance of assets or
liabilities, respectively, for the periods presented. Average balances are
derived from daily balances.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------
AT JUNE 30, 1998 1997
1998 ------------------------- -------------------------
-------------------- AVERAGE AVERAGE
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST BALANCE INTEREST COST
----------- -------- ------- -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest-earning assets:
Loans (1)............................... $18,698 8.11% $17,151 $727 8.55% $15,341 $645 8.48%
Securities (2).......................... 3,546 5.69 4,498 127 5.69 4,683 132 5.68
Other short-term investments............ 756 5.78 769 28 7.34 1,123 35 6.28
------- ------- ---- ------- ----
Total interest-earning assets.......... 23,000 7.66 22,418 882 7.93 21,147 812 7.74
Non-interest-earning assets............... 1,247 1,373 1,177
------- ------- -------
Total assets........................... $24,247 $23,791 $22,324
======= ======= =======
Interest-bearing liabilities:
Savings and club accounts............... $ 3,131 3.09 $ 2,997 $ 40 2.69 $ 2,739 $ 39 2.87
Time certificates....................... 16,519 5.80 16,218 465 5.78 15,450 420 5.48
NOW and money market accounts........... 1,971 1.74 2,062 17 1.66 2,002 18 1.81
Borrowings.............................. -- -- -- -- -- -- -- --
------- ------- ---- ------- ----
Total interest-bearing liabilities..... 21,621 5.04 21,277 522 4.92 20,191 477 4.76
Non-interest-bearing liabilities.......... 978 916 651
------- ------- -------
Total liabilities...................... 22,599 22,193 20,842
Total equity.............................. 1,648 1,598 1,482
------- ------- -------
Total liabilities and equity........... $24,247 $23,791 $22,324
======= ======= =======
Net interest income....................... $360 $335
==== ====
Net interest rate spread.................. 2.62% 3.01% 2.98%
==== ==== ====
Net yield on interest-earning assets...... 3.24% 3.19%
==== ====
Average interest-earning assets
to average interest-bearing liabilities.. 1.06x 1.05x 1.05x
==== ==== ====
- -------------------------
</TABLE>
(1) Non-accrual loans are included in average balances, less allowance for loan
losses and deferred fees.
(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.
35
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996
--------------------------- -------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- -------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1)................................ $15,824 $1,330 8.40% $15,001 $1,266 8.44%
Securities (2)........................... 4,887 277 5.67 4,593 260 5.66
Other short-term investments............. 835 55 6.59 1,024 66 6.45
------- ------ ------- ------
Total interest-earning assets......... 21,546 1,662 7.71 20,618 1,592 7.72
Non-interest-earning assets................. 1,234 1,256
------- -------
Total assets.......................... $22,780 $21,874
======= =======
Interest-bearing liabilities:
Savings and club accounts................ $ 2,747 $ 79 2.88 $ 2,908 $ 86 2.96
Time certificates........................ 15,824 883 5.58 14,867 832 5.60
NOW accounts and money market accounts... 2,024 36 1.78 2,016 36 1.79
Borrowings.................................. -- -- -- 5 1 5.96
------- ------ ------- ------
Total interest-bearing liabilities..... 20,595 998 4.85 19,796 955 4.82
Non-interest-bearing liabilities............ 672 555
------- -------
Total liabilities...................... 21,267 20,352
Total equity................................ $ 1,502 $ 1,523
------- -------
Total liabilities and equity........... $22,769 $21,874
======= =======
Net interest income......................... $ 664 $ 637
------ ------
Net interest rate spread.................... 2.86 2.90%
==== ====
Net yield on interest-earning assets........ 3.08% 3.09%
==== ====
Average interest-earning assets
to average interest-bearing liabilities.. 1.05x 1.04x
==== ====
(Footnotes on preceding page)
</TABLE>
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<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to: (i) changes in volume (changes in volume
multiplied by old rate); and (ii) changes in rate (change in rate multiplied by
old volume), and the net change in net interest income. The net change
attributable to the combined impact of volume and rate has been allocated
proportionately to the absolute dollar amounts of change in each.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- -----------------------------------------------------
1998 vs. 1997 1997 VS. 1996 1996 VS. 1995
--------------------------- --------------------------- ------------------------
INCREASE (DECREASE) INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO DUE TO
--------------------------- --------------------------- ------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
--------- ----- --------- --------- ----- --------- --------- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans.............................. $ 77 $ 5 $ 82 $ 70 $(6) $ 64 $ (15) $ 20 $ 5
Securities......................... (5) -- (5) 17 1 17 27 (9) 18
Other short-term investments....... (12) 5 (7) (12) 1 (11) 18 (12) 6
----- --- ----- ----- --- ----- ----- ---- -----
Total interest-earning assets.... 60 10 70 75 (5) 70 30 (1) 29
----- --- ----- ----- --- ----- ----- ---- -----
Interest expense:
Savings and club accounts.......... 4 (3) 1 (5) (2) (7) (12) (3) (15)
Time certificates.................. 21 24 45 54 (3) 51 55 11 66
NOW and money market accounts...... 1 (2) (1) -- -- -- (5) 2 (3)
Borrowings........................ -- -- -- (1) (1) (1) -- 1 1
----- --- ----- ----- --- ----- ----- ---- -----
Total interest-bearing
liabilities.................... 26 19 45 48 (6) 43 38 11 49
----- --- ----- ----- --- ----- ----- ---- -----
Change in net interest income....... $ 34 $(9) $ 25 $ 27 $-- $ 27 $ (8) $(12) $ (20)
===== === ===== ===== === ===== ===== ==== =====
</TABLE>
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<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND DECEMBER 31, 1997
Total assets increased by $845,000, or 3.61%, from $23.4 million at
December 31, 1997 to $24.2 million at June 30, 1998. The increase in assets for
the period was attributable to the growth in our loan portfolio (net of
allowance for loan losses) of $2.0 million, or 12.18%, which was the result of
our capitalizing on strong loan demand in our market area, partially offset by
declines in the level of our securities designated as available for sale and
securities designated as held to maturity. Loan growth was partially funded by
the proceeds of the sale of securities designated as available for sale during
the period which amounted to $712,000, and principal repayments on held to
maturity investments. Deposits also served as a funding source. Total
liabilities increased by $774,000, or 3.55%, from $21.8 million at December 31,
1997 to $22.6 million at June 30, 1998. At June 30, 1998, our total deposits
amounted to $22.4 million, an increase of $591,000, or 2.72%, from December 31,
1998's level of $21.8 million. The deposit growth consisted primarily of
savings and club accounts and time certificates.
Total equity increased by $71,000, or 4.50%, due to net income from the
period. At June 30, 1998, we were in compliance with all applicable regulatory
capital requirements with total core and tangible capital of $1.6 million (6.8%
of adjusted total assets) and total risk-based capital of $1.8 million (13.2% of
risk-weighted assets).
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997
NET INCOME. Our net income for the six months ended June 30, 1998 was
relatively flat as compared to the six months ended June 30, 1997, decreasing by
$5,000, from $77,000 for the six months ended June 30, 1997 to $72,000 for the
six months ended June 30, 1998. The decrease in net income was due primarily to
an increased level of non-interest expenses, partially offset by an increased
level of net interest income.
NET INTEREST INCOME. Our net interest income, which is the difference
between our interest income and our interest expense, increased $25,000, or
7.46%, from $335,000 for the six months ended June 30, 1997 to $360,000 for the
six months ended June 30, 1998. The increase is due mainly to the growth in our
loan portfolio. The average balance of loans outstanding during the six months
ended June 30, 1998 was $17.2 million as compared to $15.3 million during the
first six months of 1997. Interest expense also increased over these six-month
periods due primarily to an increase in both the average balance of deposits
during the period and the average cost of our deposits. For the first six
months of 1998, our total deposits averaged $21.3 million as compared to $20.2
million for the first six months of 1997. The average cost of such deposits
amounted to 4.92% for the 1998 period, a 16 basis point increase from 4.76% for
the first half of 1997.
PROVISION FOR LOAN LOSSES. Financial institutions are required to
establish an allowance for loan losses. The balance of such allowance depends
on the risk in the institution's loan portfolio, its level of problem loans and
general economic conditions, among other factors. Loans which cannot be
collected are charged against the allowance and thereby reduce its balance.
An institution
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<PAGE>
adds to the allowance by making a provision for loan losses which is an expense
item. During the six months ended June 30, 1998 we made a $3,000 provision for
loan losses compared to no provision for the comparable period in fiscal year
1997. We determined, based on our analysis of all pertinent information
available to us concerning the Bank's loan portfolio, that such addition to the
loan loss allowance was necessary for this period. Net charge-offs for the six
months ended June 30, 1998 amounted to $2,000. At June 30, 1998, our allowance
for loan losses amounted to $165,000 and represented 54.46% of total
nonperforming loans and 0.87% of total gross loans.
NONINTEREST INCOME. Noninterest income (e.g., gains or losses on the sale
of securities, loan and deposit account fees) increased $2,000 over the
comparative six-month periods due to increases in the fees earned on loans and
net gain on sale of securities offset by a decrease in other noninterest income.
NONINTEREST EXPENSE. Our noninterest expenses consist mainly of salaries
and employee benefits, directors' fees, office and equipment expense, federal
deposit insurance premiums, data processing fees and other miscellaneous
expenses. Noninterest expenses increased by $31,000, or 12.40%, for the six
months ended June 30, 1998 compared to the same period in fiscal year 1997 due
to increases in compensation and related expenses, deposit insurance, postage
and supplies and other expenses, offset by decreases in building, occupancy and
equipment expense and insurance.
Our noninterest expense will increase following the conversion due to
several factors. First, we will see added expense associated with the ESOP and,
later on, the MRP. Further, we will experience the costs of being a public
company.
INCOME TAX EXPENSE. Our provision for income tax decreased $2,000 over the
comparable period due to the decrease in our pre-tax income. Our effective tax
rates for the six months ended June 30, 1998 and 1997 were 26.5% and 26.7%,
respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996
NET INCOME. Our net income increased $80,000 from $8,000 for the fiscal
year ended December 31, 1996 to $88,000 for the fiscal year ended December 31,
1997. The primary reason for the increase was due to the absence of any SAIF
special assessment during the 1997 fiscal year. During the year ended December
31, 1996, all thrift institutions were required to pay a special assessment in
order to recapitalize the SAIF, the FDIC fund that insures our deposits. The
special assessment amounted to $128,000 for us and was paid during the quarter
ended December 31, 1996.
NET INTEREST INCOME. Our net interest income increased from $637,000 for
fiscal year 1996 to $664,000 for fiscal year 1997. The $27,000 increase was
primarily due to an increase in the average balance of our loan and securities
portfolios. During the year ended December 31, 1997, the average balance of our
loan portfolio increased by $823,000, or 5.49%, and the average balance of our
securities portfolio increased by $294,000, or 6.40%, as compared to the year
ended December 31, 1996. Total interest expense also increased during the fiscal
year by $43,000 due to
39
<PAGE>
an increase in the volume of our deposits, primarily our time certificates,
which are the most costly component.
PROVISION FOR LOAN LOSSES. During fiscal year 1997, we decided to pursue
increases in our automobile loan portfolio which are believed to have greater
risk than one- to four-family mortgage lending. For this reason, we recorded a
$57,000 provision for loan losses as compared to no provision during the
previous fiscal year. Future additions to the loan loss allowance will be based
on the analysis of the loan portfolio as described above, and, accordingly, are
not predictable. During fiscal year 1997, we charged off a total of $9,000 in
loans as compared to no charge-offs during fiscal year 1996.
NONINTEREST INCOME. Noninterest income increased from $30,000 for fiscal
year 1996 to $44,000 for fiscal year 1997 due primarily to a $16,000 increase in
fees earned on deposit accounts.
NONINTEREST EXPENSE. For fiscal year 1997, total noninterest expenses were
$525,000 as compared to $656,000 for fiscal year 1996. The decline in this
expense level was due mainly to the absence of any special SAIF assessment in
the 1997 period. During fiscal year 1996, we were required to pay a special
assessment of $128,000 to help recapitalize the SAIF, the fund that insures our
deposits. This decline was offset by increases of $14,000 in building, occupancy
and equipment expense and $7,000 in other miscellaneous expenses. As a result
of the recapitalization of the SAIF, our deposit insurance premiums declined
significantly, resulting in a reduction of $163,000 from 1996 to 1997. We
expect our annual deposit insurance premium to remain at the current level,
.064% of total assessable deposits, in future periods though there can be no
assurance in this regard.
INCOME TAX EXPENSE. Our income tax expense for fiscal year 1997 amounted
to $38,000 as compared to $3,000 for fiscal year 1996. The $35,000 increase was
directly attributable to the increased level of pre-tax income in 1997 as
compared to 1996. Our effective tax rates for fiscal years 1997 and 1996 were
30.1% and 27.3%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We are required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which varies from time to time (currently
4%) depending upon economic conditions and deposit flows, is based upon a
percentage of our deposits and short-term borrowings. The required ratio at
June 30, 1998 was 4% and our actual liquidity ratio at June 30, 1998 was 23.35%.
It is our belief that upon completion of the conversion our liquidity ratio will
increase due to the additional funds we will receive.
Our primary sources of funds are deposits, repayment of loans and mortgage-
backed securities, maturities of investments and interest-bearing deposits and
funds provided from operations. We are also able to obtain advances from the
FHLB of New York, although historically we have done this rarely. While
scheduled repayments of loans and mortgage-backed securities and maturities of
investment securities are predictable sources of funds, deposit flows and loan
40
<PAGE>
prepayments are greatly influenced by the general level of interest rates,
economic conditions and competition. We use our liquidity resources principally
to fund existing and future loan commitments, to fund maturing time certificates
and demand deposit withdrawals, to invest in other interest-earning assets, to
maintain liquidity, and to meet operating expenses.
Liquidity may be adversely affected by unexpected deposit outflows, higher
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desirable, based in part on our commitments to
make loans and management's assessment of our ability to generate funds.
A major portion of our liquidity consists of cash and cash equivalents,
which include cash and interest-bearing deposits in other banks. The level of
these assets is dependent upon our operating, investing, lending and financing
activities during any given period. At June 30, 1998, cash and cash equivalents
totaled $1.2 million.
Our primary investing activities include origination of loans and purchases
of investment and mortgage-backed securities. During the six months ended June
30, 1998 and the years ended December 31, 1997 and 1996, purchases of investment
and mortgage-backed securities totaled $3.0 million, $ 8.8 million and $7.0
million, respectively, while loan originations totaled $4.1 million, $4.3
million and $3.9 million, respectively. These investments were funded in part
by loan and securities and mortgage-backed securities repayments and maturities
and an increase in time certificates received for the six months ended June 30,
1998 and the years ended December 31, 1997 and 1996.
At June 30, 1998, we had $82,000 in outstanding commitments to originate
fixed-rate loans with rates that ranged from 7% to 8.99%. We anticipate that we
will have sufficient funds available to meet our current loan origination
commitments. Time certificates which are scheduled to mature in one year or
less totaled $12.3 million at June 30, 1998. Based on historical experience
management believes that a significant portion of such deposits will remain with
us.
We are subject to federal regulations that impose certain minimum capital
requirements. For a discussion on such capital levels, see "Historical and Pro
Forma Capital Compliance" and "Regulation -- Regulation of the Bank --
Regulatory Capital Requirements."
IMPACT OF INFLATION AND CHANGING PRICES
Our financial statements and the accompanying notes presented elsewhere in
this document, have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the change
in the relative purchasing power of money over time and due to inflation. The
impact of inflation is reflected in the increased cost of our operations. As a
result, interest rates have a greater impact on our performance than do the
effects of general levels of inflation. Interest
41
<PAGE>
rates do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 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, 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 our 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 (loss) for the six months ended June 30, 1998 was $71,000
and was $100,000 for 1997 and ($4,000) for 1996.
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.
In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends existing disclosure
rules regarding pension and other post-retirement benefits to standardize the
disclosure formats effective for fiscal years beginning after December 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.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes comprehensive accounting
and reporting requirements for derivative instruments and hedging activities.
The statement requires companies to recognize all derivatives as either assets
or liabilities, with the instruments measured at fair value. The accounting
42
<PAGE>
for gains and losses resulting from changes in fair value depends on the
intended use of the derivative and the type of risk being hedged. SFAS 133 is
effective for the Company and the Bank for all fiscal quarters beginning January
1, 2000. Earlier adoption is permitted although we do not expect to do so.
SFAS No. 133 also permits certain reclassifications of securities among the
trading, available for sale and held to maturity classifications. We have no
current intention to reclassify any securities pursuant to SFAS 133. We do not
presently use derivatives and the adoption of SFAS 133 is not expected to have a
material impact on the Company's financial statements.
BUSINESS OF PEOPLES BANKCORP, INC.
The Company is not an operating company and has not engaged in any
significant business to date. It was formed in September 1998 as a New York-
chartered corporation to be the holding company for Ogdensburg Federal Savings
and Loan Association. The holding company structure and retention of proceeds
will facilitate: (i) diversification into non-banking activities, (ii)
acquisitions of other financial institutions, such as savings institutions,
(iii) expansion within existing and into new market areas and (iv) stock
repurchases without adverse tax consequences. There are no present plans
regarding diversification, acquisitions or expansion or stock repurchases.
Ogdensburg Federal has operated as an independent community oriented
savings institution since 1888. It is our intention to continue to operate as
an independent community oriented savings association following the conversion.
Since the Company will own only one savings association, it generally will
not be restricted in the types of business activities in which it may engage,
provided that we retain a specified percentage of our assets in housing-related
investments. The Company initially will not conduct any active business and
does not intend to employ any persons other than officers but will utilize our
support staff from time to time.
BUSINESS OF OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
The principal sources of funds for our activities are deposits and payments
on loans. We are also able to borrow from the FHLB of New York, although
historically we have done this rarely. Our deposits totaled $22.4 million at
June 30, 1998. Funds are used principally for the origination of loans secured
by first mortgages on one- to four-family residences which are located in our
market area. Such loans totaled $12.4 million, or 65.55%, of our total loans
receivable portfolio at June 30, 1998. We also originate other types of loans,
including loans secured by commercial real estate and consumer loans, and
purchase investment and mortgage-backed securities. Our principal source of
revenue is interest received on loans and investments and our principal expense
is interest paid on deposits.
43
<PAGE>
MARKET AREA
We consider our primary market area to be the City of Ogdensburg, and the
surrounding townships of Lisbon, Oswegatchie, Madrid, Morristown, Heuvelton,
Hammond, Depeyster, Macomb and Waddington and the village of Rennsselaer Falls,
all of which are located in St. Lawrence County, New York. St. Lawrence County
is the largest county east of the Mississippi in terms of total acreage.
Ogdensburg is the eastern most United States port on the Great Lakes and the
northern most port in New York and is adjacent to the Montreal-Ottawa-Toronto
corridor. Although Ogdensburg is fairly rural with only approximately 13,000
residents, it is within a two hour drive of over 15 million people.
The largest employers in Ogdensburg and the surrounding communities include
the Ogdensburg Bridge and Port Authority, local government offices, U.S. Customs
Office, Mater Dei College and Wadhams Hall Seminary College, Ogdensburg School
District, Mitel Corporation, CompAS, and several local hospitals. By industry,
the largest sectors of the Ogdensburg economy are retail, services and
manufacturing. The average household income of $28,806 in 1997 for Ogdensburg
was significantly below that of New York as a whole of $57,084 and the average
for the United States of $50,540. The overall population of Ogdensburg has
declined by approximately 5% from 1990 to 1997 as compared to marginal growth of
1% for New York State and a 7.5% growth rate for the United States.
BUSINESS STRATEGY
Historically, our principal business strategy has been that of operating a
community-oriented institution which emphasizes residential real estate loans.
Our loans have typically been secured by properties located within our market
area. In recent years we have increased our originations of consumer loans,
particularly automobile loans, and have engaged in a limited amount of
commercial real estate and commercial business lending. The proceeds from the
conversion will enable us to continue growing and continue to meet the needs of
the market in which we do business. We do not anticipate that the mix of loans
that we will originate will change after conversion although we will consider
adding to our products and services as the competition within our market
demands.
LENDING ACTIVITIES
Most of our loans are mortgage loans which are secured by one- to four-
family residences. We also make consumer, residential construction and
commercial real estate and commercial business loans. Following the
conversion, we believe there will be sufficient demand in our market area to
continue our policy of emphasizing lending in the one- to four- family real
estate loan area and continue originating various types of consumer loans.
44
<PAGE>
At June 30, 1998, our gross loans totaled $18.9 million of which $12.4
million were mortgage loans secured by one-to four-family residences. We
originate both fixed rate mortgage and ARM loans. Generally, all of the
consumer loans we originate have fixed rates, with the exception of home equity
lines of credit.
The following table sets forth information concerning the types of loans
held by us at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ----------------------------------
1998 1997 1996
--------------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
------------ ------- -------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Type of Loan:
- ----------------------------------
Real estate loans:
One- to four-family residential.. $12,377 65.55% $11,893 70.56% $11,838 76.37%
Commercial....................... 726 3.84 706 4.19 553 3.57
Construction..................... 199 1.05 67 0.40 115 0.74
Other loans:
Automobile....................... 3,299 17.47 2,121 12.58 1,400 9.03
Home equity...................... 1,061 5.62 1,226 7.27 903 5.83
Passbook......................... 219 1.16 217 1.29 270 1.74
Commercial....................... 200 1.06 100 0.59 -- --
Other consumer................... 803 4.25 526 3.12 422 2.72
------- ------ ------- ------ ------- ------
18,884 100.00% 16,856 100.00% 15,501 100.00%
====== ====== ======
Less:
Deferred fees.................... 21 24 26
Allowance for loan losses........ 165 164 116
------- ------- -------
Total........................... $18,698 $16,668 $15,359
======= ======= =======
</TABLE>
45
<PAGE>
The following table sets forth the estimated maturity of our loan portfolio
at December 31, 1997. The table does not include the effects of possible
prepayments or scheduled repayments. One- to four-family mortgage loans,
commercial real estate loans and home equity loans are shown as maturing
based on the earlier of the date of repricing or the date of the last payment
required by the loan agreement.
<TABLE>
<CAPTION>
DUE AFTER DUE AFTER
DUE DURING THE YEAR ENDING 3 THROUGH 5 THROUGH DUE OVER 10
DECEMBER 31, 5 YEARS AFTER 10 YEARS AFTER YEARS AFTER
--------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000 1997 1997 1997 TOTAL
------ ----- ----- ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to four-family residential.. $7,703 $ 51 $ 27 $ 398 $ 937 $2,777 $11,893
Commercial....................... 348 -- -- 271 -- 87 706
Construction..................... 31 -- -- -- -- 36 67
Automobile and other.............. 51 214 437 1,726 219 -- 2,647
Home equity....................... 1,226 -- -- -- -- -- 1,226
Passbook.......................... 89 33 55 22 18 -- 217
Commercial........................ 100 -- -- -- -- -- 100
------ ----- ----- ------ ------ ------ -------
Total........................... $9,548 $ 298 $ 519 $2,417 $1,174 $2,900 $16,856
====== ===== ===== ====== ====== ====== =======
</TABLE>
46
<PAGE>
The next table shows at December 31, 1997, the dollar amount of all our
loans which have fixed interest rates and have floating or adjustable interest
rates.
<TABLE>
<CAPTION>
PREDETERMINED FLOATING OR
RATES ADJUSTABLE RATES
------------- ----------------
<S> <C> <C>
(IN THOUSANDS)
Real Estate:
One- to four-family residential.. $3,553 $ 8,340
Commercial....................... 87 619
Construction..................... 36 31
Automobile and other.............. 2,647 --
Home equity....................... -- 1,226
Passbook.......................... 217 --
Commercial........................ -- 100
------ -------
Total........................... $6,540 $10,316
====== =======
</TABLE>
ONE- TO FOUR-FAMILY RESIDENTIAL LOANS. Our primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in our primary market area. We generally originate
one- to four-family residential mortgage loans in amounts up to 80% of the
lesser of the appraised value or purchase price with a maximum loan amount of
$200,000 and a maximum term of 30 years. We also offer a first-time homebuyer
program pursuant to which loans may be made in amounts up to 90% of the lesser
of the appraised value or purchase price with the same maximum loan amount and
terms as our other mortgage loans.
We also offer ARM loans. The interest rate on ARM loans is based on an
index plus a stated margin. ARM loans provide for periodic interest rate
adjustments upward or downward of up to 2% per year. The interest rate may not
increase above a "ceiling rate" established at the time the loan is originated
and may not decrease below the original interest rate. Generally, ARM loans
typically reprice every year and provide for terms of up to 30 years with most
loans having terms of between 10 and 20 years.
ARM loans decrease the risk associated with changes in interest rates by
periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing the
potential for default by the borrower. At the same time, the marketability of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
maximum periodic and lifetime interest rate adjustment permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates. At June 30, 1998, approximately 55% of the
one- to four-family residential loans we held had adjustable rates of interest.
Mortgage loans originated and held by us generally include due-on-sale
clauses. This gives us the right to deem the loan immediately due and payable
in the event the borrower transfers ownership of the property securing the
mortgage loan without our consent.
47
<PAGE>
RESIDENTIAL CONSTRUCTION LOANS. We make a limited number of residential
construction loans on one- to four-family residential properties to the
individuals who will be the owners and occupants upon completion of
construction. Borrowers are required to pay interest during the construction
period which may not last beyond 12 months. Upon completion of the
construction, the loan converts to a fully amortizing mortgage loan. Loan
proceeds are disbursed according to a draw schedule and we inspect the progress
of the construction before additional funds are disbursed. Construction loans
are offered on either a fixed or adjustable basis.
Construction lending is generally considered to involve a higher degree of
credit risk than long term financing of residential properties. Our risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction and the
estimated cost of construction. If the estimate of construction cost and the
marketability of the property upon completion of the project prove to be
inaccurate, we may be compelled to advance additional funds to complete the
construction. Furthermore, if the final value of the completed property is less
than the estimated amount, the value of the property might not be sufficient to
assure the repayment of the loan.
COMMERCIAL REAL ESTATE LOANS. We offer limited commercial real estate loans
secured by small apartment buildings, office buildings, and other commercial
properties. Loan amounts do not exceed 75% of the appraised value of the
property. At June 30, 1998, we had a participation interest in a commercial
real estate loan originated by the Thrift Associations Service Corporation
("TASCO"), a service corporation owned by various thrift institutions operating
in New York State. Our interest in this loan amounted to $269,000 and was
secured by an office building. This loan was on nonaccrual status at June 30,
1998 due to a prior history of late payments. At June 30, 1998, the borrower
had resumed making payments but due to the prior history of delinquent payments,
such loan remained on nonaccrual status.
Commercial real estate lending entails significant additional risks compared
to residential property lending. These loans typically involve large loan
balances to single borrowers or groups of related borrowers. The repayment of
these loans typically is dependent on the successful operation of the real
estate project securing the loan. These risks can be significantly affected by
supply and demand conditions in the market for office and retail space and may
also be subject to adverse conditions in the economy. To minimize these risks,
we generally limit this type of lending to our market area and to borrowers who
are otherwise well known to us.
COMMERCIAL BUSINESS LOANS. We engage in a limited amount of commercial
business lending to benefit from the higher fees and interest rates and the
shorter term to maturity. Our commercial business loans consist of equipment,
lines of credit and other business purpose loans, which generally are secured by
either the underlying properties or by the personal guarantees of the borrower.
Our largest commercial business loan at June 30, 1998 had a balance of $200,000
and was made to a local auto dealer.
48
<PAGE>
Unlike residential mortgage loans, which generally are made on the basis of
the borrower's ability to make repayment from his or her employment and other
income and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself and the general economic environment.
CONSUMER LOANS. We offer various types of consumer loans in order to
provide a wider range of financial services to our customers. Consumer loans
totaled $5.4 million, or 28.50%, of our total loans at June 30, 1998. Our
consumer loans consist of automobile, home equity lines of credit, passbook,
personal unsecured loans, boat loans, home improvement loans and equipment
loans. Home equity lines of credit have a maximum draw period of ten years with
a maximum term of 20 years. Passbook and certificate of deposit secured loans
are offered up to the maximum of the deposit balance and are due on demand.
We offer loans for both new and used automobiles with maximum terms of five
years and maximum loan amounts of $30,000.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
LOAN APPROVAL AUTHORITY AND UNDERWRITING. Our President may approve all
consumer loans up to $30,000. All other loans require the approval of our board
of directors.
Upon receipt of a completed loan application from a prospective borrower, a
credit report is ordered. Income and certain other information is verified. If
necessary, additional financial information may be requested. An appraisal or
other estimate of value of the real estate intended to be used as security for
the proposed loan is obtained. Appraisals are prepared by outside fee
appraisers who are approved by the board of directors.
Either title insurance or a title opinion is generally required on all real
estate loans. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property which is located in a
flood zone.
49
<PAGE>
LOAN ORIGINATIONS. The following table sets forth certain information with
respect to our loan originations and purchases for the periods indicated. We
have not purchased or sold any loans in the secondary market in recent years.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------ -------------------
1998 1997 1997 1996
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans originated:
Real estate loans:
One- to four-family residential.. $1,708 $ 697 $1,501 $1,953
Commercial....................... 35 90 104 115
Automobile........................ 1,726 677 1,674 908
Home equity....................... 30 249 473 472
Passbook.......................... 36 28 64 199
Commercial........................ 100 -- 100 --
Other consumer.................... 430 152 425 224
------ ------ ------ ------
Total loans originated.......... $4,065 $1,893 $4,341 $3,871
====== ====== ====== ======
</TABLE>
LOAN COMMITMENTS. Written commitments are given to prospective borrowers
on all approved real estate loans. Generally, the commitment requires
acceptance within 30 days of the date of issuance. At June 30, 1998,
commitments to cover originations of mortgage loans were $302,000. We believe
that virtually all of our commitments will be funded.
LOANS TO ONE BORROWER. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000, or 15%, of our
unimpaired capital and unimpaired surplus. We may lend an additional 10% of our
unimpaired capital and unimpaired surplus if the loan is fully secured by
readily marketable collateral. Our maximum loan-to-one borrower limit was
$500,000 at June 30, 1998. At June 30, 1998, our largest loan concentration
outstanding had a balance of $385,000.
NONPERFORMING AND PROBLEM ASSETS
LOAN DELINQUENCIES. Generally when a mortgage loan becomes 15 days past
due, a notice of nonpayment is sent to the borrower. If after 30 days payment
is still delinquent, the borrower will receive a formal delinquency notice. The
borrower will be contacted by telephone or visited personally if the loan
remains delinquent after 45 days. If the loan continues in a delinquent status
for 120 days past due and no repayment plan is in effect, the loan will be
referred to an attorney for collection, with foreclosure commenced no later than
180 days. The customer will be notified when foreclosure is commenced. At June
30, 1998, our loans past due between 30 and 89 days totaled $370,000.
Loans are reviewed on a monthly basis and are generally placed on a non-
accrual status when the loan becomes more than 90 days delinquent or when, in
our opinion, the collection of additional
50
<PAGE>
interest is doubtful. Interest accrued and unpaid at the time a loan is placed
on nonaccrual status is charged against interest income. Subsequent interest
payments, if any, are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan.
NONPERFORMING ASSETS. The following table sets forth information regarding
nonaccrual loans and real estate owned. As of the dates indicated, we had no
loans categorized as troubled debt restructurings within the meaning of SFAS 114
and no loans which were 90 days or more past due and still accruing interest.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -----------------
1998 1997 1996
--------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis: (1)
Real estate:
One- to four-family residence................. $ 31 $ 22 $ --
Commercial.................................... 269 271 --
Construction.................................. -- -- --
Automobile..................................... 3 -- --
Home equity.................................... -- -- --
Passbook....................................... -- -- --
Commercial..................................... -- -- --
Other.......................................... -- -- 9
----- ----- ------
Total......................................... $ 303 $ 293 $ 9
===== ===== ======
Accruing loans which are contractually
past due 90 days or more:
Real estate:
One- to four-family residence................. $ -- $ -- $ --
Commercial.................................... -- -- --
Construction.................................. -- -- --
Automobile..................................... -- -- --
Home equity.................................... -- -- --
Passbook....................................... -- -- --
Commercial..................................... -- -- --
Other.......................................... -- -- --
----- ----- ------
Total......................................... $ -- $ -- $ --
===== ===== ======
Total nonperforming loans..................... $ 303 $ 293 $ 9
===== ===== ======
Percentage of total loans....................... 1.61% 1.74% 0.06%
===== ===== ======
Other non-performing assets (2)................. $ 40 $ 40 $ --
===== ===== ======
Loans modified in troubled debt restructurings.. $ -- $ -- $ --
===== ===== ======
- -------------------------
</TABLE>
(1) Non-accrual status denotes loans on which, in the opinion of management,
the collection of additional interest is unlikely. Payments received on a
nonaccrual loan are either applied to the outstanding principal balance or
recorded as interest income, depending on management's assessment of the
collectibility of the loan.
(2) Other nonperforming assets represents property acquired by us through
foreclosure or repossession. This property is carried at its fair value
less costs to sell.
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<PAGE>
At June 30, 1998, our largest nonaccrual loan consisted of our $269,000
participation interest in a $3.2 million loan originated by TASCO. The borrower
on such loan was making payments at such date but, due to a prior delinquency
history, the loan remained on nonaccrual status. See " -- Commercial Real Estate
Loans."
During the six months ended June 30, 1998 and the year ended December 31,
1997, we would have recorded additional interest income of approximately $1,000
and $8,000, respectively, on nonaccrual loans if such loans had been current
throughout the period. During the six months ended June 30, 1998, we recorded
income on the TASCO loan on the cash basis as payments were received. We did
not include any income on nonaccrual loans during such periods with the
exception that payments on the TASCO loan were recorded on a cash basis as they
were received during the six months ended June 30, 1998. At June 30, 1998, we
did not have any loans which were not classified as nonaccrual, 90 days past due
or restructured, but where known information causes us to have serious concerns
as to the ability of these borrowers to comply with their current loan terms.
CLASSIFIED ASSETS. OTS regulations provide for a classification system for
problem assets of savings associations which covers all problem assets. Under
this classification system, problem assets of savings associations such as ours
are classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the borrower or of the collateral pledged, if any. Substandard
assets include those characterized by the "distinct possibility" that the
savings association will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full, on the basis of currently
existing facts, conditions, and, values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When a savings association classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management. General allowances represent loss allowances
which have been established to recognize the inherent risk associated with
lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings association's determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS, which may order the establishment of additional general or specific
loss allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may be
included in determining a savings association's regulatory capital. Specific
valuation allowances for loan losses generally do not qualify as regulatory
capital.
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<PAGE>
At June 30, 1998, none of our assets were classified as special mention,
doubtful or loss but we had $74,000 in loans classified as substandard.
FORECLOSED REAL ESTATE. 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.
At June 30, 1998, we had one property which we received in lieu of foreclosure.
The property was carried on our books at $40,000 and has an appraised value in
excess of its carrying value. Subsequent to June 30, 1998, the property was
sold for $30,000.
ALLOWANCE FOR LOAN LOSSES. Our policy is to provide for losses on
unidentified loans in our loan portfolio. A provision for loan losses is
charged to operations based on management's evaluation of the potential losses
that may be incurred in our loan portfolio. The evaluation, including a review
of all loans on which full collectibility of interest and principal may not be
reasonably assured, considers: (i) our past loan loss experience, (ii) known and
inherent risks in our portfolio, (iii) adverse situations that may affect the
borrower's ability to repay, (iv) the estimated value of any underlying
collateral, and (v) current economic conditions.
We monitor our allowance for loan losses and make additions to the
allowance as economic conditions dictate. Although we maintain our allowance
for loan losses at a level that we consider adequate for the inherent risk of
loss in our loan portfolio, actual losses could exceed the balance of the
allowance for loan losses and additional provisions for loan losses could be
required. In addition, our determination as to the amount of its allowance for
loan losses is subject to review by the OTS, as part of its examination process.
After a review of the information available, the OTS might require the
establishment of an additional allowance.
53
<PAGE>
The following table sets forth an analysis of our allowance for loan losses
for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
June 30, DECEMBER 31,
------------------- --------------
1998 1997 1997 1996
---------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period........ $ 164 $ 116 $ 116 $ 116
Loans charged off:
Real estate mortgage:
One- to four-family residential..... -- -- -- --
Commercial.......................... -- -- 3 --
Construction........................ -- -- -- --
Automobile........................... 3 -- 3 --
Home equity.......................... -- -- -- --
Passbook............................. -- -- -- --
Commercial........................... -- -- -- --
Other................................ -- 2 3 --
----- ------ ----- -----
Total charge-offs..................... 3 2 9 --
----- ------ ----- -----
Recoveries:
Real estate mortgage:
One- to four-family residential..... -- -- -- --
Commercial.......................... -- -- -- --
Construction....................... -- -- -- --
Automobile........................... -- -- -- --
Home equity.......................... -- -- -- --
Passbook............................. -- -- -- --
Commercial........................... -- -- -- --
Other................................ 1 -- -- --
----- ------ ----- -----
Total recoveries...................... 1 -- -- --
----- ------ ----- -----
Net loans charged off................. 2 2 9 --
----- ------ ----- -----
Provision for loan losses............. 3 -- 57 --
----- ------ ----- -----
Balance at end of period.............. $ 165 $ 114 $ 164 $ 116
===== ====== ===== =====
Ratio of net charge-offs to average
loans outstanding during the period.. 0.01% 0.01% 0.06% 0.00%
===== ====== ===== =====
</TABLE>
54
<PAGE>
The following table illustrates the allocation of the allowance for loan
losses for each category of loan. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict our use of the allowance to absorb losses in other loan
categories.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
AT JUNE 30, 1998 1997 1996
------------------------------ ---------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
---------------- -------------- ------ -------------- ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage:
One- to four-family residential... $ 32 19.39% $ 32 19.51% $ 41 35.34%
Commercial........................ 12 7.27 47 28.66 11 9.48
Construction...................... 1 0.61 1 0.61 3 2.59
Automobile......................... 85 51.52 53 32.32 29 25.00
Home equity........................ 16 9.70 18 10.97 19 16.38
Passbook........................... -- -- -- -- -- --
Commercial......................... -- -- -- -- -- --
Other.............................. 19 11.51 13 7.93 13 11.21
---- ------ ---- ------ ---- ------
Total allowance for loan losses.. $165 100.00% $164 100.00% $116 100.00%
==== ====== ==== ====== ==== ======
</TABLE>
INVESTMENT ACTIVITIES
SECURITIES. We are required under federal regulations to maintain a minimum
amount of liquid assets which may be invested in specified short-term securities
and certain other investments. See "Regulation -- Regulation of the Association
- -- Federal Home Loan Bank System" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The level of liquid assets varies depending upon several factors,
including: (i) the yields on investment alternatives, (ii) our judgment as to
the attractiveness of the yields then available in relation to other
opportunities, (iii) expectation of future yield levels, and (iv) our
projections as to the short-term demand for funds to be used in loan origination
and other activities. At June 30, 1998, our investment portfolio policy allowed
investments in instruments such as: (i) U.S. Treasury obligations, (ii) U.S.
federal agency or federally sponsored agency obligations, (iii) local municipal
obligations, (iv) mortgage-backed securities, (v) bankers' acceptances, (vi)
time certificates, (vii) federal funds, including FHLB overnight and term
deposits (up to six months), and (viii) investment grade corporate bonds,
commercial paper and mortgage derivative products. See " -- Mortgage-Backed
Securities." The board of directors may authorize additional investments.
Our securities at June 30, 1998 did not contain securities of any issuer
with an aggregate book value in excess of 10% of our equity, excluding those
issued by the United States Government or its agencies.
55
<PAGE>
MORTGAGE-BACKED SECURITIES. To supplement lending activities, we have
invested in residential mortgage-backed securities. Mortgage-backed securities
can serve as collateral for borrowings and, through repayments, as a source of
liquidity. Mortgage-backed securities represent a participation interest in a
pool of one- to four-family or other type of mortgages. Principal and interest
payments are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as us. Our
mortgage-backed securities portfolio consists of participations or pass-through
certificates issued by the Government National Mortgage Association ("GNMA").
GNMA certificates are guaranteed as to principal and interest by the full faith
and credit of the United States. Our mortgage-backed securities portfolio was
classified as "held to maturity" at June 30, 1998.
Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable
mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed-rate
or adjustable-rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the
life of the underlying mortgages.
The following table sets forth the carrying value (i.e., amortized cost) of
our investment securities and mortgage-backed securities, at the dates
indicated. At June 30, 1998, the market value of our investment and mortgage-
backed securities portfolio, designated held to maturity, was $3.6 million.
The following table sets forth the carrying value of our investment
securities and mortgage-backed portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ---------------
1998 1997 1996
-------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities - GNMA.. $ -- $ 737 $ 804
Securities held to maturity :
U.S. Government securities......... 3,482 3,962 3,470
Mortgage-backed securities - GNMA.. 64 69 91
------ ------ ------
Total investments................. $3,546 $4,768 $4,365
====== ====== ======
</TABLE>
56
<PAGE>
The following table sets forth the scheduled maturities, carrying values,
market values and average yields for our investment portfolio at June 30, 1998.
<TABLE>
<CAPTION>
MORE THAN TEN
ONE YEAR OR LESS ONE TO FIVE YEARS FIVE TO TEN YEARS YEARS TOTAL INVESTMENT PORTFOLIO
------------------ ----------------- ----------------- ------------------ -------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE VALUE YIELD
-------- -------- -------- -------- -------- ------- -------- -------- -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
held-to-maturity:
U.S. Government and
agency securities........ $1,482 5.26% 2,000 5.87% -- -- $-- --% $3,482 $3,481 5.59%
Mortgage-backed
securities - GNMA........ -- -- -- -- 64 11.00 64 71 11.00
-------- -------- -------- -------- -------- ------
Total.................... $1,482 $2,000 $-- $64 $3,546 $3,552
======== ======== ======== ======== ======== ======
</TABLE>
57
<PAGE>
SOURCES OF FUNDS
Deposits are our major external source of funds for lending and other
investment purposes. Funds are also derived from the receipt of payments on
loans and prepayment of loans and, to a much lesser extent, maturities of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and market conditions.
DEPOSITS. Consumer and commercial deposits are attracted principally from
within our primary market area through the offering of a selection of deposit
instruments including regular savings accounts, money market accounts, and term
certificate accounts. Deposit account terms vary according to the minimum
balance required, the time period the funds must remain on deposit, and the
interest rate. The interest rates paid by us on deposits are set weekly at the
direction of our senior management. Interest rates are determined based on our
liquidity requirements, interest rates paid by our competitors, and our growth
goals and applicable regulatory restrictions and requirements.
At June 30, 1998, time certificates in amounts of $100,000 or more
constituted $1.7 million, or 7.51%, of the deposit portfolio. The majority of
these certificates represent deposits from long-standing customers.
At June 30, 1998, our deposits were represented by the various types of
savings programs described below.
<TABLE>
<CAPTION>
INTEREST MINIMUM BALANCES IN PERCENTAGE OF
RATE CATEGORY AMOUNT THOUSANDS TOTAL DEPOSITS
- ------------ ----------------------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
-- % Demand accounts $ 100 $ 735 3.29%
3.09% Savings and club accounts 100 3,131 14.00
1.01%-2.57% NOW and money market accounts 100 to 2,500 1,971 8.82
<CAPTION>
TIME CERTIFICATES
-----------------------------
<S> <C> <C> <C> <C>
4.00-4.99% Fixed-term, fixed-rate 1,000 114 0.51%
5.00-5.99% Fixed-term, fixed-rate 1,000 15,727 70.35
6.00-6.99% Fixed-term, fixed-rate 1,000 675 3.03
------- ------
$22,356 100.00%
======= ======
</TABLE>
58
<PAGE>
The following table sets forth our time certificates classified by interest
rate at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
4.00 - 4.99%................ $ 114 $ 111 $ 2,205
5.00 - 5.99%................ 13,748 10,928 9,396
6.00 - 6.99%................ 2,657 5,267 3,757
------- ------- -------
$16,519 $16,306 $15,358
======= ======= =======
</TABLE>
The following table sets forth the amount and maturities of our time
certificates at June 30, 1998. Approximately 83.23% of such time certificates
has interest rates from 5.00% to 5.99%.
<TABLE>
<CAPTION>
AMOUNT DUE
---------------------------------------------------------------
WITHIN
ONE YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS TOTAL
-------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$12,267 $3,658 $420 $160 $14 $16,519
======= ====== ==== ==== === =======
</TABLE>
The following table sets forth our deposit activity for the periods
indicated:
<TABLE>
<CAPTION>
INCREASE INCREASE
(DECREASE) (DECREASE)
BALANCE AT FROM BALANCE AT FROM BALANCE AT
JUNE 30, % OF DECEMBER 31, DECEMBER 31, % OF DECEMBER 31, DECEMBER 31, % OF
1998 DEPOSITS 1997 1997 DEPOSITS 1996 1996 DEPOSITS
---------- -------- ------------ ------------ -------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand accounts............ $ 735 3.29% $ 97 $ 638 2.93% $ 168 $ 470 2.29%
Savings and club accounts.. 3,131 14.00 398 2,733 12.56 46 2,687 13.12
Time certificates.......... 16,519 73.89 213 16,306 74.92 948 15,358 74.96
NOW and money market
accounts.................. 1,971 8.82 (117) 2,088 9.59 114 1,974 9.63
------- ------ --------- ------- ------ --------- ------- ------
Total.................... $22,356 100.00% $ 591 $21,765 100.00% $ 1,276 $20,489 100.00%
======= ====== ========= ======= ====== ========= ======= ======
</TABLE>
59
<PAGE>
The following table indicates the amount of our time certificates of
$100,000 or more by original maturity as of June 30, 1998.
<TABLE>
<CAPTION>
CERTIFICATES
ORIGINAL MATURITY OF DEPOSIT
----------------- ------------
(IN THOUSANDS)
<S> <C>
Three months or less.............. $ --
Over three through six months..... 264
Over six through 12 months........ 873
Over 12 months.................... 543
------
Total.......................... $1,680
======
</TABLE>
BORROWINGS. Advances (borrowings) may be obtained from the FHLB of New
York to supplement our supply of lendable funds. Advances from the FHLB of New
York are typically secured by a pledge of our stock in the FHLB of New York, a
portion of our first mortgage loans and other assets. Each FHLB credit program
has its own interest rate, which may be fixed or adjustable, and range of
maturities. At June 30, 1998, we did not have any borrowings outstanding.
COMPETITION
We compete for deposits with other insured financial institutions such as
commercial banks, thrift institutions, credit unions, finance companies, and
multi-state regional banks in our market area. We also compete for funds with
insurance products sold by local agents and investment products such as mutual
funds and other securities sold by local and regional brokers. Loan competition
varies depending upon market conditions. Our competition comes from commercial
banks, thrift institutions, credit unions and mortgage bankers, many of whom
have greater resources than we have.
PROPERTIES
The following table sets forth certain information regarding our main office
which is our only location.
<TABLE>
<CAPTION>
BOOK VALUE AT DEPOSITS AT
YEAR OWNED OR JUNE 30, APPROXIMATE JUNE 30,
OPENED LEASED 1998 (1) SQUARE FOOTAGE 1998
------ --------- ------------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MAIN OFFICE: 1987 Owned $ 425 2,800 $ 22,356
825 State Street
Ogdensburg, NY 13669
</TABLE>
_____________
(1) Cost less accumulated depreciation and amortization.
60
<PAGE>
PERSONNEL
At June 30, 1998, we had six full-time and one part-time employees. None
of our employees are represented by a collective bargaining group. We believe
that our relationship with our employees is good.
LEGAL PROCEEDINGS
We are, from time to time, a party to legal proceedings arising in the
ordinary course of our business, including legal proceedings to enforce our
rights against borrowers. We are not currently a party to any legal proceedings
which are expected to have a material adverse effect on our financial
statements.
REGULATION
Set forth below is a brief description of certain laws which relate to us.
The description is not complete and is qualified in its entirety by references
to applicable laws and regulations.
GENERAL
As a federally chartered, SAIF-insured savings institution, we are subject
to extensive regulation by the OTS and the FDIC. Our lending activities and
other investments must comply with various federal and state statutory and
regulatory requirements, and the OTS periodically examines us for compliance
with various regulatory requirements. The FDIC also has authority to conduct
periodic examinations of us. We must file reports with the OTS describing our
activities and our financial condition and we must obtain approvals from
regulatory authorities before entering into certain transactions such as the
conversion or mergers with other financial institutions. We are also subject to
certain reserve requirements promulgated by the Board of Governors of the
Federal Reserve System ("Federal Reserve System"). Our relationship with our
depositors and borrowers is also regulated to a great extent by federal and
state law, especially in such matters as the ownership of savings accounts and
the form and content of our mortgage documents. This supervision and regulation
are primarily intended to protect depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in regulations,
whether by the OTS, the FDIC or any other government agency, could have a
material adverse impact on our operations.
In addition, from time to time, there have been various legislature efforts
that, if enacted, could have a material impact on us. As of the date of the
prospectus, no formal legislative proposal of this type is pending.
61
<PAGE>
REGULATION OF THE ASSOCIATION
INSURANCE OF DEPOSIT ACCOUNTS. The FDIC maintains two separate funds for
the insurance of deposits up to prescribed statutory limits. The Bank Insurance
Fund ("BIF") insures the deposits of commercial banks and the SAIF insures the
deposits of savings associations. We are a member of the SAIF. The FDIC is
authorized to establish separate annual assessment rates for deposit insurance
for members of the BIF and the SAIF. The FDIC may increase assessment rates for
either fund if necessary to restore the fund's ratio of reserves to insured
deposits to its target level within a reasonable time and may decrease such
assessment rates if such target level has been met. The FDIC has established a
risk-based assessment system for both SAIF and BIF members. Under this system,
assessments are set within a range, based on the risk the institution poses to
its deposit insurance fund. This risk level is determined based on the
institution's capital level and the FDIC's level of supervisory concern about
the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level required by law. The
BIF, however, met its required reserve level during the third calendar quarter
of 1995. As a result, deposit insurance premiums for deposits insured by the
BIF were substantially less than premiums for deposits such as ours which are
insured by the SAIF. On September 30, 1996, President Clinton signed into law
legislation which included provisions designed to recapitalize the SAIF and to
eliminate the significant premium disparity between the BIF and the SAIF. Under
this law, institutions with deposits insured by the SAIF were required to pay a
special assessment equal to $0.657 per $100 of SAIF-assessable deposits held at
March 31, 1995. We recognized this special assessment of $128,000 during the
quarter ended September 30, 1996 and were required to pay the assessment on
November 27, 1996.
Beginning January 1, 1997, our annual deposit insurance premium was reduced
from 0.23% to 0.0644% of total assessable deposits. BIF institutions still pay
lower assessments than comparable SAIF institutions because BIF institutions pay
only 20% of the rate being paid by SAIF institutions on their deposits with
respect to obligations issued by the Financing Corp., a federally chartered
corporation which provided some of the financing required to resolve the thrift
crisis in the 1980s.
The recapitalization plan also provides for the merger of the SAIF and BIF
effective January 1, 1999, assuming there are no savings institutions under
federal law.
REGULATORY CAPITAL REQUIREMENTS. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to at
least 1.5 % of total adjusted assets, (2) core capital equal to at least 3.0% of
total adjusted assets, and (3) risk-based capital equal to at least 8.0% of
total risk-weighted assets. In addition, the OTS may require that a savings
institution that has a risk-based capital ratio less than 8.0%, a ratio of Tier
1 capital to risk-weighted assets of less than 4.0% or a ratio of Tier 1 capital
to adjusted total assets of less than 4.0% (3.0% if the institution
62
<PAGE>
has received the highest rating on its most recent examination) take certain
actions to increase its capital ratios. If the institution's capital is
significantly below the minimum required levels or if it is unsuccessful in
increasing its capital ratios, the OTS may significantly restrict its
activities.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders'
equity (including retained earnings), non-cumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
certain non-withdrawable accounts and pledged deposits of mutual savings
associations and qualifying supervisory goodwill, less non-qualifying intangible
assets, certain mortgage servicing rights and certain investments. Tier 1 has
the same definition as core capital.
Risk-based capital equals the sum of core capital plus supplementary
capital. The components of supplementary capital include, among other items,
cumulative perpetual preferred stock, perpetual subordinated debt, mandatory
convertible subordinated debt, intermediate-term preferred stock, and the
portion of the allowance for loan losses not designated for specific loan
losses. Overall, supplementary capital is limited to 100% of core capital. A
savings institution must calculate its risk-weighted assets by multiplying each
asset and off-balance sheet item by various risk factors as determined by the
OTS, which range from 0% for cash to 100% for delinquent loans, property
acquired through foreclosure, commercial loans, and other assets. At June 30,
1998, we were in compliance with all regulatory capital requirements as is shown
on the table below.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT ASSETS (1)
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible capital................ $1,648 6.8%
Tangible capital requirement.... 364 1.5
------ ----
Excess....................... $1,284 5.3%
====== ====
Core capital (2)................ $1,648 6.8%
Core capital requirement........ 727 3.0
------ ----
Excess....................... $ 921 3.8%
====== ====
Risk-based capital.............. $1,813 13.2%
Risk-based capital requirement.. 1,100 8.0
------ ----
Excess....................... $ 713 5.2%
====== ====
</TABLE>
- -------------------------
(1) Based on adjusted total assets for purposes of the tangible capital and
core capital requirements and risk-weighted assets for purpose of the risk-
based capital requirement.
(2) Reflects the capital requirement which the Bank must satisfy to avoid
regulatory restrictions that may be imposed pursuant to prompt corrective
action regulations. The core requirement applicable to the Bank may
increase if the OTS amends its capital regulations, as it has proposed, in
response to the more stringent leverage ratio adopted by the Office of the
Comptroller of the Currency for national banks.
63
<PAGE>
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A
savings institution will be considered to have a "normal" level of interest rate
risk exposure if the decline in its net portfolio value after an immediate 200
basis point increase or decrease in market interest rates (whichever results in
the greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of an institution's net portfolio value
based on data submitted by the institution in a schedule to its quarterly Thrift
Financial Report and using the interest rate risk measurement model adopted by
the OTS. The amount of the interest rate risk component, if any, to be deducted
from an institution's total capital will be based on the institution's Thrift
Financial Report filed two quarters earlier. Savings institutions with less
than $300 million in assets and a risk-based capital ratio above 12% are
generally exempt from filing the interest rate risk schedule with their Thrift
Financial Reports. However, the OTS may require any exempt institution that it
determines may have a high level of interest rate risk exposure to file such
schedule on a quarterly basis and may be subject to an additional capital
requirement based upon its level of interest rate risk as compared to its peers.
Due to our size and risk-based capital level, we are exempt from the interest
rate risk component.
DIVIDEND AND OTHER CAPITAL DISTRIBUTION LIMITATIONS. OTS regulations
require us to give the OTS 30 days advance notice of any proposed declaration of
dividends to the Company. The OTS may prohibit the payment of dividends by us to
the Company. In addition, we may not declare or pay a cash dividend on our
capital stock if the effect would be to reduce our regulatory capital below the
amount required for the liquidation account to be established at the time of the
conversion. See "The Conversion -- Effects of Conversion to Stock Form on
Depositors and Borrowers of Ogdensburg Federal Savings and Loan Association --
Liquidation Account."
OTS regulations limit upon all capital distributions by savings
institutions, such as cash dividends, payments to repurchase or otherwise
acquire its shares, payments to stockholders of another institution in a cash-
out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all of its fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100.0% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess
64
<PAGE>
capital over its fully phased-in capital requirements) at the beginning of the
calendar year, or (ii) 75% of its net income over the most recent four quarter
period. Any additional capital distributions require prior regulatory notice. As
of June 30, 1998, we qualified as a Tier 1 institution.
In the event our capital falls below our fully phased-in requirement or the
OTS notifies us that we are in need of more than normal supervision, we would
become a Tier 2 or Tier 3 institution and as a result, our ability to make
capital distributions could be restricted. Tier 2 institutions, which are
institutions that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four quarter period. Tier 3 institutions,
which are institutions that do not meet current minimum capital requirements and
propose to make a capital distribution, and Tier 2 institutions that propose to
make a capital distribution in excess of the noted safe harbor level, must
obtain OTS approval prior to making such distribution. In addition, the OTS
could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice. The OTS has
proposed rules relaxing certain approval and notice requirements for well-
capitalized institutions.
A savings institution is prohibited from making a capital distribution if,
after making the distribution, the savings institution would be undercapitalized
(i.e., not meet any one of its minimum regulatory capital requirements).
Further, a savings institution cannot distribute regulatory capital that is
needed for its liquidation account.
QUALIFIED THRIFT LENDER TEST. Savings institutions must meet a Qualified
Thrift Lender test. We must maintain at least 65.0% of our portfolio assets
(total assets less intangible assets, property we use in conducting our business
and liquid assets in an amount not exceeding 20.0% of total assets) in Qualified
Thrift Investments to satisfy the test. Qualified Thrift Investments consist
primarily of residential mortgage loans and mortgage-backed and other securities
related to domestic, residential real estate or manufactured housing. The
shares of stock we own in the FHLB of New York also qualify as Qualified Thrift
Investments. Subject to an aggregate limit of 20.0% of portfolio assets, we may
also count the following as Qualified Thrift Investments: (i) 50.0% of the
dollar amount of residential mortgage loans originated for sale, (ii)
investments in the capital stock or obligations of any service corporation or
operating subsidiary as long as such subsidiary derives at least 80% of its
revenues from domestic housing related activities, (iii) 200% of the dollar
amount of loans and investments to purchase, construct or develop "starter
homes," subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase, construction or development of domestic residential
housing or community centers in "credit needy" areas or loans for small
businesses located in such areas, (v) loans for the purchase, construction or
development of community centers, (vi) loans for personal, family, household or
educational purposes, subject to a maximum of 10% of portfolio assets, and (vii)
shares of the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association stock.
If we satisfy the test, we will continue to enjoy full borrowing privileges
from the FHLB of New York. If we do not satisfy the test we may lose our
borrowing restrictions and be subject to
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activities and branching restrictions applicable to national banks. Compliance
with the Qualified Thrift Lender test is determined on a monthly basis in nine
out of every 12 months. As of June 30, 1998, we were in compliance with our
Qualified Thrift Lender requirement with approximately 92.63% of our assets
invested in Qualified Thrift Investments.
TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
institution and its affiliates are subject to certain limitations. Such
transactions must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, certain of these
transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. Our
affiliates include the Company and any company which would be under common
control with us. In addition, a savings institution may not extend credit to
any affiliate engaged in activities not permissible for a bank holding company
or acquire the securities of any affiliate that is not a subsidiary. The OTS has
the discretion to treat subsidiaries of savings institution as affiliates on a
case-by-case basis.
LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS. Loans
from us to our directors, executive officers and, subsequent to the conversion,
our principal stockholders may not be made on terms more favorable than those
afforded to other borrowers. In addition, we cannot make loans in excess of
certain levels to directors, executive officers or 10% or greater stockholders
(or any of their affiliates) unless the loan is approved in advance by a
majority of our board of directors with any "interested" director not voting.
We are also prohibited from paying any overdraft of any of our executive
officers or directors. We are also subject to certain other restrictions on the
amount and type of loans to executive officers and directors and must annually
report such loans to our regulators.
LIQUIDITY REQUIREMENTS. All savings institutions are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At June 30, 1998, our required liquid asset
ratio was 4% and our actual ratio was 23.35%. Monetary penalties may be imposed
upon institutions for violations of liquidity requirements.
FEDERAL HOME LOAN BANK SYSTEM. We are a member of the FHLB of New York,
which is one of 12 regional FHLBs. Each FHLB serves as a reserve or central
bank for its members within its assigned region. It is funded primarily from
funds deposited by savings institutions and proceeds derived from the sale of
consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB.
As a member, we are required to purchase and maintain stock in the FHLB of
New York in an amount equal to at least 1% of our aggregate unpaid residential
mortgage loans, home purchase
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contracts or similar obligations at the beginning of each year, or 1/20 of our
advances from the FHLB of New York, whichever is greater. At June 30, 1998, we
had $139,000 in FHLB stock, at cost, which was in compliance with this
requirement.
FEDERAL RESERVE SYSTEM. The Federal Reserve System requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time certificates. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve System may be
used to satisfy the liquidity requirements that are imposed by the OTS. At June
30, 1998, our reserve met the minimum level required by the Federal Reserve
System.
HOLDING COMPANY REGULATION
GENERAL. The Company will be required to register and file reports with the
OTS and will be subject to regulation and examination by the OTS. In addition,
the OTS will have enforcement authority over the Company and any non-savings
institution subsidiaries. This will permit the OTS to restrict or prohibit
activities that it determines to be a serious risk to us. This regulation is
intended primarily for the protection of our depositors and not for the benefit
of you, as stockholders of the Company.
The Company will also be required to file certain reports with, and comply
with the rules and regulations of the SEC under the federal securities laws.
ACTIVITIES RESTRICTIONS. Since the Company will only own one savings
institution, it will be able to diversify its operations into activities not
related to banking, but only so long as we satisfy the Qualified Thrift Lender
Test. If the Company controls more than one savings institution, it would lose
the ability to diversify its operations into non-banking related activities,
unless such other savings institutions each also qualify as a Qualified Thrift
Lender and were acquired in a supervised acquisition. See " -- Qualified Thrift
Lender Test."
RESTRICTIONS ON ACQUISITIONS. The Company must obtain approval from the
OTS before acquiring control of any other savings institution or savings and
loan holding company, substantially all the assets thereof or in excess of 5% of
the outstanding shares of another savings institution or savings and loan
holding company. The Company's directors and officers or persons owning or
controlling more than 25% of the Company's stock, must also obtain approval of
the OTS before acquiring control of any savings institution or savings and loan
holding company.
The OTS may only approve acquisitions that will result in the formation of
a multiple savings and loan holding company which controls savings institutions
in more than one state if: (i) the multiple savings and loan holding company
involved controls a savings institution which operated a home or branch office
in the state of the institution to be acquired as of March 5, 1987; (ii) the
acquiror is authorized to acquire control of the savings institution pursuant to
the emergency acquisition provisions of the Federal Deposit Insurance Act; or
(iii) the statutes of the state in which
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the institution to be acquired is located specifically permit institutions to be
acquired by state-chartered institutions or savings and loan holding companies
located in the state where the acquiring entity is located (or by a holding
company that controls such state-chartered savings institutions).
FEDERAL SECURITIES LAW. The Company has filed with the SEC a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
for the registration of the common stock. Upon completion of the conversion,
the common stock will be registered with the SEC under the Exchange Act and,
under OTS regulations, generally may not be deregistered for at least three
years thereafter. The Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the
Exchange Act.
The registration under the Securities Act of the common stock does not
cover the resale of such shares. Shares of the common stock purchased by
persons who are not affiliates of the Company may generally be resold without
registration. Shares purchased by an affiliate of the Company will be subject
to certain resale restrictions. As long as the Company meets the current public
information requirements, each affiliate of the Company who complies with the
other conditions would be able to sell a limited number of shares based upon the
number of shares outstanding and the average trading volume for the common
stock.
TAXATION
FEDERAL TAXATION
We are subject to the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), in the same general manner as other corporations.
However, prior to August 1996, savings institutions such as us, which met
certain definitional tests and certain other conditions prescribed by the Code
could benefit from certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. The amount of
the bad debt deduction that a qualifying savings institution could claim for tax
purposes with respect to additions to its reserve for bad debts for "qualifying
real property loans" could be based upon our actual loss experience (the
"experience method") or as a percentage of our taxable income (the "percentage
of taxable income method"). Historically, we used the method that would allow
us to take the largest deduction.
In August 1996, the Code was revised to equalize the taxation of savings
institutions and banks. Savings institutions, such as us, no longer have a
choice between the percentage of taxable income method and the experience method
in determining additions to bad debt reserves. Thrifts with $500 million of
assets or less may still use the experience method, which is generally available
to small banks currently. Larger thrifts may only take a tax deduction when a
loan is actually charged off. Any reserve amounts added after 1987 will be
taxed over a six year period beginning in 1996; however, bad debt reserves set
aside through 1987 are generally not taxed. A savings institution may delay
recapturing into income its post-1987 bad debt reserves for an additional two
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years if it meets a residential-lending test. This law is not expected to have
a material impact on us. At June 30, 1998, we had $426,000 of post-1987 bad-
debt reserves.
Earnings appropriated to our bad debt reserve and claimed as a tax
deduction including our supplemental reserves for losses will not be available
for the payment of cash dividends or for distribution (including distributions
made on dissolution or liquidation), unless we include the amount in income,
along with the amount deemed necessary to pay the resulting federal income tax.
If such amount is used for any purpose other than bad debt losses, including a
dividend distribution or a distribution in liquidation, it will be subject to
federal income tax at the then current rate.
The Code imposes a tax ("AMT") on alternative minimum taxable income
("AMTI") at a rate of 20%. AMTI is increased by certain preference items,
including the excess of the tax bad debt reserve deduction using the percentage
of taxable income method over the deduction that would have been allowable under
the experience method. Only 90% of AMTI can be offset by net operating loss
carryovers of which we currently have none. AMTI is also adjusted by determining
the tax treatment of certain items in a manner that negates the deferral of
income resulting from the regular tax treatment of those items. Thus, our AMTI
is increased by an amount equal to 75% of the amount by which our adjusted
current earnings exceeds our AMTI (determined without regard to this adjustment
and prior to reduction for net operating losses). In tax years beginning after
December 31, 1997, a "small" corporation will not be subject to the AMT because
its tentative minimum tax will be treated as zero. For a tax year beginning in
1988, a corporation that has had average annual gross receipts of $5,000,000 or
less for its 1995-1997 tax years will be a small corporation. Once a corporation
is recognized as a small corporation, it will continue to be exempt from AMT as
long as its average annual gross receipts for the prior 3-year period is not in
excess of $7,500,000. If a corporation ceases to be a small corporation, the AMT
will apply prospectively only.
The Company may exclude from its income 100% of dividends received from us
as a member of the same affiliated group of corporations. A 70% dividends
received deduction generally applies with respect to dividends received from
corporations that are not members of such affiliated group, except that an 80%
dividends received deduction applies if the Company owns more than 20% of the
stock of a corporation paying a dividend. The above exclusion amounts, with the
exception of the affiliated group figure, were reduced in years in which we
availed our self of the percentage of taxable income bad debt deduction method.
Our federal income tax returns have not been audited by the IRS.
STATE TAXATION
We and the Company will report income on a combined basis to New York
State. We are subject to the New York State franchise tax on banking
corporations. The New York State tax on banking corporations is imposed in an
annual amount of the greater (i) 9% of our "Entire Net Income" allocable to New
York State during the taxable year, or (ii) the applicable alternative minimum
tax. The applicable alternative minimum tax is generally the greater of (i) a
percentage
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(0.01%, 0.004% or 0.002%, depending upon the nature and mix of our assets and on
the ratio of its net worth to the value of its assets) of the value of our
assets allocable to New York State with certain modifications, (ii) 3 1/2% of
our "Alternative Entire Net Income" allocable to New York State or (iii)
$325.00.
For purposes of the New York State tax on banking corporations, "Entire Net
Income" is similar to federal taxable income, subject to certain modifications
(including the fact that net operating losses cannot be carried back or carried
forward), and "Alternative Entire Net Income" is similar to "Entire Net Income,"
subject to certain further modifications.
MANAGEMENT OF THE COMPANY
Our board of directors consists of the same individuals who serve as
directors of Ogdensburg Federal Savings and Loan Association. Our certificate
of incorporation and bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Each class of directors serves
for a three-year period, with approximately one-third of the directors elected
each year. Our officers will be elected annually by the board and serve at the
board's discretion.
The following individuals will serve as executive officers of the Company.
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
---- ----------------------------
<S> <C>
Robert E. Wilson President and Chief Executive Officer
Todd R. Mashaw Vice President, Secretary/Treasurer
</TABLE>
MANAGEMENT OF OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
DIRECTORS AND EXECUTIVE OFFICERS
Our board of directors is composed of five members, each of whom serves for
a term of three years. Our proposed stock charter and bylaws require that
directors be divided into three classes, as nearly equal in number as possible.
Each class of directors serves for a three-year period, with approximately one-
third of the directors elected each year. Our officers are elected annually by
our board and serve at the board's discretion.
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The following table sets forth information with respect to our directors,
all of whom will continue to serve in the same capacities after the conversion.
We have no other executive officers.
<TABLE>
<CAPTION>
AGE AS OF POSITION(S)WITH DIRECTOR TERM
NAME JUNE 30, 1998 THE ASSOCIATION SINCE EXPIRES
- ----------------------- ------------- ----------------------------- -------- -------
<S> <C> <C> <C> <C>
Anthony P. LeBarge, Sr. 49 Director 1991 2001
Robert E. Hentschel 63 Chairman 1992 1999
Wesley L. Stitt 68 Director 1980 1999
Robert E. Wilson 60 President and Chief Executive
Officer; Director 1966 2000
George E. Silver 58 Director 1989 2001
Todd R. Mashaw 35 Vice President N/A N/A
</TABLE>
The business experience for the past five years of each of the directors
and executive officers is as follows:
ANTHONY P. LEBARGE served as our Chairman of the Board until January 1998.
He is the general manger of Noco Energy Corp. He is a member of S.U.N.Y. Canton
College Council and the Masonic Lodge No. 128.
ROBERT E. HENTSCHEL serves as our Chairman of the Board of Directors. He
is a general surgeon in private practice and has been the Regional Medical
Director of the New York State Department of Corrections, Riverview Corrections
Facility, since 1984. He is a Board member and past president of the Remington
Art Museum and is a Board member of AAA Automobile Travel Club.
WESLEY L. STITT has been retired since 1990. Prior to his retirement, he
was the Superintendent of Schools of the Ogdensburg City Schools. He is Vice
President of Remington Endowment Board, a Trustee of the Remington Art Museum,
Chairman of S.U.N.Y. Canton College Council and Vice President of Augsbury
Institute. He is also a member of Heuvelton Development Committee, Rural
Rehabilitation Committee and the Institute of Ethical Behavior.
ROBERT E. WILSON has served as our President and Chief Executive Officer
since 1963. He is a former member of the Ogdensburg City School Board having
served 15 years with two terms as President and two terms as Vice President. He
was a member of Kiwanis International for 15 years and served on their Board of
Directors. For 25 years he participated in the Kiwanis youth activity programs.
GEORGE E. SILVER is an attorney for the law firm of Silver and Silver, and
a judge for the Office of Court Administration. He served as Chairman of the
Board from 1994 to 1995. He is a member of the Board of Directors of A. Barton
Hepburn Hospital and the Board of Directors of
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Ogdensburg Rescue Squad. He is also President Emeritus of the Board of Trustees
of the Remington Art Museum.
TODD R. MASHAW has served as our Vice President since 1989. He has been a
member of the Board of Assessment and Review for the City of Ogdensburg since
1995 and has been a member of S.U.N.Y. Canton College Business Administration
Advisory Committee since 1991. He has also coached Kiwanis Baseball and is
active in bringing a community-built playground to the City of Ogdensburg.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors conducts its business through meetings of the board
and through activities of its committees. During the year ended December 31,
1997, the board of directors held 12 regular meetings and two special meetings.
No director attended fewer than 75% of the total meetings of the board of
directors and committees on which such director served during the year ended
December 31, 1997.
DIRECTOR COMPENSATION
Each of the directors is paid a fee of $550 ($575 for the Chairman) per
regular monthly meeting and annual meeting of members attended and are paid for
one missed regular or annual meeting. In addition, they receive a fee of $100
per executive committee meeting attended. Total aggregate fees paid to the
current directors for the year ended December 31, 1997 were $39,000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
non-cash compensation awarded to or earned by our chief executive officer at
December 31, 1997. No other employee earned in excess of $100,000 for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL ------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
------------------ ------ ---------- ------- ---------------
<S> <C> <C> <C> <C>
Robert E. Wilson 1997 $74,685 $3,650 $12,107
</TABLE>
- ----------
(1) Consists of board fees ($7,800) and matching contributions to the 401(k)
plan.
EMPLOYMENT AGREEMENT. We have entered into an employment agreement with our
President, Robert Wilson and our Vice President, Todd R. Mashaw. Mr. Wilson's
base salary under the employment agreement is $78,000 and Mr. Mashaw's base
salary is $42,500. Each employment agreement has a term of three years. Each
agreement is terminable by us for "just cause" as defined in the agreement. If
we terminate Mr. Wilson or Mr. Mashaw without just cause or if Mr. Wilson or Mr.
Mashaw terminates his employment for "good reason", he will be entitled to a
continuation
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of his salary from the date of termination through the remaining term of the
agreement, plus an additional 12 months. The employment agreements also contain
a provision stating that in the event of the termination of employment in
connection with any change in control of the Company or us, Mr. Wilson and Mr.
Mashaw will be paid a lump sum amount equal to 2.99 times their respective five
year average annual taxable cash compensation. If such payments had been made
under the agreement as of June 30, 1998, such payments would have equaled
approximately $221,000 and $114,000, respectively. The aggregate payments that
would have been made to them would be an expense to us, thereby reducing our net
income and our capital by that amount. The agreements may be renewed annually by
our board of directors upon a determination of satisfactory performance within
the board's sole discretion. If Mr. Wilson or Mr. Mashaw shall become disabled
during the term of his respective agreement, he shall continue to receive
payment of 100% of the base salary for a period of up to 180 days. Such payments
shall not be reduced by any other benefit payments made under other disability
program in effect for our employees. If Mr. Wilson's or Mr. Mashaw's employment
terminates for a reason other than just cause, he will be entitled to purchase
from us family medical insurance through any group health plan maintained by us.
We do not hold key man life insurance policies on either of Mr. Wilson or Mr.
Mashaw.
EMPLOYEE STOCK OWNERSHIP PLAN. We have established the ESOP for the
exclusive benefit of participating employees of ours, to be implemented upon the
completion of the conversion. Participating employees are employees who have
completed one year of service with us (including at least 1,000 hours of
service) and have attained the age of 21. An application for a letter of
determination as to the tax-qualified status of the ESOP will be submitted to
the IRS. Although no assurances can be given, we expect that the ESOP will
receive a favorable letter of determination from the IRS.
The ESOP is to be funded by contributions made by us in cash or common
stock. Benefits may be paid either in shares of the common stock or in cash.
In accordance with the Plan, the ESOP may borrow funds with which to acquire up
to 8.0% of the common stock to be issued in the conversion. The ESOP intends to
borrow funds from the Company. The loan is expected to be for a term of ten
years at an annual interest rate equal to the prime rate as published in The
---
Wall Street Journal. Presently it is anticipated that the ESOP will purchase up
- --------------------
to 8.0% of the common stock to be issued in the offering (12,000 shares based on
the midpoint of the Estimated Valuation Range). The loan will be secured by the
shares purchased and earnings of ESOP assets. Shares purchased with such loan
proceeds will be held in a suspense account for allocation among participants as
the loan is repaid. We anticipate contributing approximately $______ annually
(based on a 12,000 shares purchase) to the ESOP to meet principal obligations
under the ESOP loan, as proposed. It is anticipated that all such contributions
will be tax-deductible. This loan is expected to be fully repaid in
approximately 10 years. ESOP expense is based upon generally accepted
accounting principles as described in accounting SOP 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.
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Shares sold above the maximum of the Estimated Valuation Range (i.e., more
than 172,500 shares) may be sold to the ESOP before satisfying remaining
unfilled orders of Eligible Account Holders to fill the ESOP's subscription or
the ESOP may purchase some or all of the shares covered by its subscription
after the conversion in the open market.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of total compensation,
excluding bonuses. All participants must be employed at least 500 hours in a
plan year in order to receive an allocation. Participants will become 20%
vested in their ESOP account balances for each year of service beginning with
the second year of service, up to a maximum of 100% for six years of service.
Up to five years of service prior to the adoption of the ESOP shall be credited
for the purposes of vesting. Vesting will be accelerated upon retirement,
death, disability, change in control of the Company, or termination of the ESOP.
Forfeitures will be reallocated to participants on the same basis as other
contributions in the plan year. Benefits may be payable in the form of a lump
sum upon retirement, death, disability or separation from service. Our
contributions to the ESOP are discretionary and may cause a reduction in other
forms of compensation. Therefore, benefits payable under the ESOP cannot be
estimated.
In the event of a change in control of us, the outstanding balance of any
loans used to finance the purchase of shares by the ESOP will be payed off
through a transfer or sale of shares held as collateral under such loan, with
any remaining shares allocated to participant accounts pro rata based on their
account balances. Participants terminating employment on or after the change in
control will be entitled to receive a cash payment from the Company equal to the
amount, if any, which would have been allocated to the participant's account
immediately following the change in control but was precluded from allocation
based on allocation limits applicable under federal tax laws.
The board of directors has appointed non-employee directors to the ESOP
Committee to administer the ESOP and to serve as the initial ESOP Trustees. The
board of directors or the ESOP Committee may instruct the ESOP Trustees
regarding investments of funds contributed to the ESOP. The ESOP Trustees must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Unallocated shares and allocated shares for
which no timely direction is received will be voted by the ESOP Trustees in the
same proportion as participants vote allocated shares. In the absence of any
voting direction, the Company's board of directors may direct the Trustee as to
how the shares should be voted. In the absence of such direction, the Trustee
shall have sole discretion as to how the shares are voted.
Certain provisions of the ESOP, particularly the provision accelerating
vesting and requiring termination upon a change in control may be deemed to have
an anti-takeover effect in that they would increase the cost of an acquisition
of the Company.
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<PAGE>
PROPOSED FUTURE STOCK BENEFIT PLANS
STOCK OPTION PLAN. We intend to adopt a stock option plan (the Option
Plan) following the conversion, subject to approval by you and the Company's
stockholders, at a stockholders= meeting to be held no sooner than six months
after the conversion. If the Option Plan is adopted during the first year
following the conversion, the Option Plan would be in compliance with the OTS
conversion regulations in effect. See "-- Restrictions on Stock Benefit
Plans." If the Option Plan is implemented more than one year after the
conversion, the Option Plan will comply with OTS regulations and policies that
are applicable at such time. If the Option Plan is implemented within one year
after the conversion, in accordance with OTS regulations, a number of shares
equal to 10% of the aggregate shares of common stock to be issued in the
offering (i.e., 15,000 shares based upon the sale of 150,000 shares at the
midpoint of the Estimated Valuation Range) would be reserved for issuance by the
Company upon exercise of stock options or stock appreciation rights ("SARs") to
be granted to our officers, directors and employees from time to time under the
Option Plan. The purpose of the Option Plan would be to provide additional
performance and retention incentives to certain officers, directors and
employees by facilitating their purchase of a stock interest in the Company.
Under the OTS conversion regulations, the Option Plan, would provide for a term
of 10 years, after which no awards could be made, unless earlier terminated by
the board of directors pursuant to the Option Plan and the options would vest
over a five year period (i.e., 20% per year), beginning one year after the date
of grant of the option. Options would expire no later than 10 years from the
date granted and would expire earlier if the Option Committee so determines or
in the event of termination of employment. Options would be granted based upon
several factors, including seniority, job duties and responsibilities, job
performance, our financial performance and a comparison of awards given by other
savings institutions converting from mutual to stock form.
The Company would receive no monetary consideration for the granting of
stock options or SARs under the Option Plan. It would receive the option price
for each share issued to optionees upon the exercise of such options. Shares
issued as a result of the exercise of options will be either authorized but
unissued shares or shares purchased in the open market by the Company. However,
no purchases in the open market will be made that would violate applicable
regulations restricting purchases by the Company. The exercise of options and
payment for the shares received would contribute to the equity of the Company.
MANAGEMENT RECOGNITION PLAN. We intend to adopt the MRP following the
conversion, the objective of which is to enable us to retain personnel and
directors of experience and ability in key positions of responsibility. The
Company expects to hold a stockholders' meeting no sooner than six months after
the conversion in order for stockholders to vote to approve the MRP. If the MRP
is implemented within one year after the conversion, in accordance with
applicable OTS regulations, the shares granted under the MRP will be in the form
of restricted stock vesting over a five year period (i.e., 20% per year)
beginning one year after the date of grant of the award. Additionally, the
number of shares to be granted could not exceed 3% of the shares sold in the
conversion (4% if we had tangible capital of 10% or more) if the MRP is adopted
during the first year following conversion. If the MRP is implemented more than
one year after the conversion, the MRP will
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<PAGE>
comply with such OTS regulations and policies that are applicable at such time.
Compensation expense in the amount of the fair market value of the common stock
granted will be recognized pro rata over the years during which the shares are
payable. Until they have vested, such shares may not be sold, pledged or
otherwise disposed of and are required to be held in escrow. Any shares not so
allocated would be voted by the MRP Trustees. Awards would be granted based upon
a number of factors, including seniority, job duties and responsibilities, job
performance, our performance and a comparison of awards given by other
institutions converting from mutual to stock form. The MRP would be managed by a
committee of non-employee directors (the "MRP Trustees"). The MRP Trustees would
have the responsibility to invest all funds contributed by us to the trust
created for the MRP (the "MRP Trust").
We expect to contribute sufficient funds to the MRP so that the MRP Trust
can purchase, in the aggregate, up to 4% of the amount of common stock that is
sold in the conversion. The shares purchased by the MRP would be authorized but
unissued shares or would be purchased in the open market. In the event the
market price of the common stock is greater than $10.00 per share, our
contribution of funds will be increased. Likewise, in the event the market
price is lower than $10.00 per share, our contribution will be decreased. In
recognition of their prior and expected services to us and the Company, as the
case may be, the officers, other employees and directors responsible for
implementation of the policies adopted by the board of directors and our
profitable operation will, without cost to them, be awarded stock under the MRP.
Based upon the sale of 150,000 shares of common stock in the offering at the
midpoint of the Estimated Valuation Range, the MRP Trust is expected to purchase
up to 6,000 shares of common stock.
RESTRICTIONS ON STOCK BENEFIT PLANS. OTS regulations provide that in the
event we implement stock option or management and/or employee stock benefit
plans within one year from the date of conversion, such plans must comply with
the following restrictions: (1) the plans must be fully disclosed in the
prospectus, (2) for stock option plans, the total number of shares for which
options may be granted may not exceed 10% of the shares issued in the
conversion, (3) for restricted stock plans such as the MRP, the shares may not
exceed 3% of the shares issued in the conversion (4% for institutions with 10%
or greater tangible capital), (4) the aggregate amount of stock purchased by the
ESOP in the conversion may not exceed 10% (12% for well-capitalized institutions
utilizing a 4% management recognition plan), (5) no individual employee may
receive more than 25% of the available awards under the Option Plan or the MRP,
(6) directors who are not employees may not receive more than 5% individually or
30% in the aggregate of the awards under any plan, (7) all plans must be
approved by a majority of the total votes eligible to be cast at any duly called
meeting of the Company's stockholders held no earlier than six months following
the conversion, (8) for stock option plans, the exercise price must be at least
equal to the market price of the stock at the time of grant, (9) for restricted
stock plans such as the MRP, no stock issued in a conversion may be used to fund
the plan, (10) neither stock option awards nor restricted stock awards may vest
earlier than 20% as of one year after the date of stockholder approval and 20%
per year thereafter, and vesting may be accelerated only in the case of
disability or death (or if not inconsistent with applicable OTS regulations in
effect at such time, in the event of a change in control), (11) the proxy
material must clearly state that the OTS in no way endorses or approves of the
plans, and (12) prior
76
<PAGE>
to implementing the plans, all plans must be submitted to the Regional Director
of the OTS within five days after stockholder approval with a certification that
the plans approved by the stockholders are the same plans that were filed with
and disclosed in the proxy materials relating to the meeting at which
stockholder approval was received.
We have not yet decided whether the Option Plan or the MRP will be
implemented during the first year after the conversion. If they are implemented
after the first anniversary of the conversion, the above-described limitations
and provisions will not apply and the stock benefit plans could include
provisions accelerating vesting upon a change in control or allowing for
benefits to vest over shorter periods of time. If such provisions are included,
the plans may have an anti-takeover effect in that the cost of any such takeover
attempt would be increased. Further, the potential acquisition by management of
stock under these plans could make it more difficult to obtain majority support
for stockholder proposals or transactions which are opposed by management.
CERTAIN RELATED TRANSACTIONS
During the year ended December 31, 1997, certain of our officers and
directors had loans from us in amounts exceeding $60,000. All of such loans
were made in the ordinary course of business, were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
RESTRICTIONS ON ACQUISITIONS OF THE COMPANY
The following discussion is a general summary of the material provisions of
the certificate of incorporation and bylaws of the Company and certain other New
York corporate law and regulatory provisions, which may be deemed to have such
an anti-takeover effect. The description of these provisions is necessarily
general and we refer you, in each case, to the certificate of incorporation and
bylaws of the Company which are incorporated herein by reference. See
"Available Information" as to how to obtain a copy of these documents.
While the board of directors is not aware of any effort that might be made
to obtain control of the Company after conversion, the board of directors
believes that it is appropriate to include certain provisions as part of the
Company's certificate of incorporation and bylaws to protect the interests of
the Company and its stockholders from hostile takeovers ("anti-takeover"
provisions) which the board of directors might conclude are not in the best
interests of us or our stockholders. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the board of
directors but which individual stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over the 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.
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<PAGE>
PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
RESTRICTION ON ACQUISITION OF COMMON STOCK; LIMITATIONS ON VOTING RIGHTS.
The certificate of incorporation of the Company provides that, for a period of
five years after completion of the conversion, no person may directly or
indirectly, acquire or offer to acquire beneficial ownership of more than 10% of
any class of equity security outstanding of the Company (the "Limit"), unless
the "continuing" board of directors has first approved by a two-thirds vote the
offer or acquisition. Any shares acquired in violation of this restriction will
not be counted as shares outstanding for voting purposes, nor will the holder be
entitled to vote such shares. After five years from the date of conversion,
should any party acquire the beneficial ownership of shares in excess of 10%,
the record holders of more than 10% of any outstanding class of equity security
of the Company who obtained such shares without the requisite approval would be
entitled to cast only one-hundredth (1/100) of a vote for each share owned in
excess of 10%, and the aggregate voting power of such holders shall be allocated
proportionately among such record holders. A person is a beneficial owner of a
security if he has the power to vote or direct the voting of all or part of the
voting rights of the security, or has the power to dispose of or direct the
disposition of the security. The certificate of incorporation of the Company
further provides that this provision limiting voting rights may only be amended
upon the vote of 80% of the outstanding shares of voting stock.
ELECTION OF DIRECTORS. The Company's certificate of incorporation provides
that the board of directors of the Company will be divided into three staggered
classes, with directors in each class elected for three-year terms. As a result
of this provision, it would take two annual elections to replace a majority of
the Company's board. The Company's bylaws provide that the size of the board of
directors may be increased or decreased only if two-thirds of the directors then
in office concur in such action. The certificate of incorporation also provides
that any vacancy occurring in the board of directors, including a vacancy
created by an increase in the number of directors, shall be filled by the board.
Finally, the bylaws impose certain notice and information requirements in
connection with the nomination by stockholders of candidates for election to the
board of directors or the proposal by stockholders of business to be acted upon
at an annual meeting of stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of at least 80% of the shares of the
Company entitled to vote generally in an election of directors cast at a meeting
of stockholders called for that purpose.
RESTRICTIONS ON CALL OF SPECIAL MEETING. The certificate of incorporation
of the Company provides that a special meeting of stockholders may be called
only pursuant to a resolution adopted by a majority of the board of directors,
or a Committee of the board.
ABSENCE OF CUMULATIVE VOTING. The Company's certificate of incorporation
provides that stockholders may not cumulate their votes in the election of
directors.
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<PAGE>
AUTHORIZED SHARES. The certificate of incorporation authorizes the issuance
of 3,000,000 shares of common stock and 500,000 shares of preferred stock. The
shares of common stock and preferred stock were authorized in an amount greater
than that to be issued in the conversion to provide the Company's board of
directors with as much flexibility as possible to effect, among other
transactions, financings, acquisitions, stock dividends, stock splits and the
exercise of stock options. However, these additional authorized shares may also
be used by the board of directors consistent with its fiduciary duty to deter
future attempts to gain control of the Company. The board of directors also has
sole authority to determine the terms of any one or more series of Preferred
Stock, including voting rights, conversion rates, and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the board has the power, to the extent consistent with its fiduciary duty, to
issue a series of Preferred Stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's board currently has no plans for the issuance of additional
shares, other than the possible issuance of additional shares pursuant to stock
benefit plans .
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. The certificate of
incorporation requires the affirmative vote of at least 80% of the outstanding
shares of the Company entitled to vote in the election of director in order for
the Company to engage in or enter into certain "Business Combinations," as
defined therein, with any "Interested Shareholder" (as defined below) or any
affiliates of the "Interested Shareholder", unless the proposed transaction has
been approved in advance by the Company's board of directors, excluding those
who were not directors prior to the time the "Interested Shareholder" became the
"Interested Shareholder." Absent this provision, only the approval of a
majority of the shares outstanding would be required.
The term "Interested Shareholder" is defined to include any person and the
affiliates and associates of the person (other than the Company or its
subsidiary) who beneficially owns, directly or indirectly, 10% or more of the
outstanding shares of voting stock of the Company. Any amendment to this
provision requires the affirmative vote of at least 80% of the shares of the
Company entitled to vote generally in an election of directors.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Company's certificate of incorporation must be approved by the Company's board
of directors and also by a majority of the outstanding shares of the Company's
voting stock, provided, however, that approval by at least 80% of the
outstanding voting stock is generally required for certain provisions (i.e.,
provisions relating to restrictions on the acquisition and voting of greater
than 10% of the common stock; number, classification, election and removal of
directors; amendment of Bylaws; call of special stockholder meetings; director
liability; certain business combinations; power of indemnification; and
amendments to provisions relating to the foregoing in the certificate of
incorporation).
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The bylaws may be amended by a majority vote of the board of directors or
the affirmative vote of the holders of at least 80% of the outstanding shares of
the Company entitled to vote in the election of directors cast at a meeting
called for that purpose.
NEW YORK BUSINESS CORPORATION ACT
The New York Business Corporation Law contains two provisions described
below which will be applicable to the Company upon completion of the
conversion.
BUSINESS COMBINATION STATUTE. The New York Business Corporation Law
restricts for a period of five years a domestic corporation from engaging in a
business combination with an "interested shareholder" of the corporation unless
such business combination or the stock acquisition that resulted in the
interested shareholder achieving such status was approved by the board of
directors of such corporation prior to the subject stockholder's stock
acquisition date. The statute also restricts a corporation from engaging in a
business combination with an interested shareholder at any time other than (i) a
business combination approved by the board of directors prior to the interested
shareholder's stock acquisition date, (ii) a business combination approved by
the majority of the outstanding shares not owned by such stockholder but no
earlier than five years after the date of such stockholder's stock acquisition
date, or (iii) a business combination that satisfies certain "fair price"
provisions and other requirements. Under New York law, this statute is
applicable to all New York corporations with a class of securities registered
pursuant to the Exchange Act unless the corporation adopts a specific bylaw
provision opting out of its coverage. The common stock will be registered
pursuant to the Exchange Act and the bylaws do not contain any provision opting
out of its coverage.
ANTI-GREENMAIL PROVISION. Pursuant to New York law, the Company will be
prohibited from repurchasing ten percent or more of its shares from a
stockholder for more than the market value thereof unless such repurchase has
been approved by a majority vote of the outstanding shares or such stockholder
has held such shares for more than two years.
BENEFIT PLANS
In addition to the provisions of the Company's certificate of incorporation
and bylaws described above, certain benefit plans of ours adopted in connection
with the conversion contain provisions which also may discourage hostile
takeover attempts which the boards of directors might conclude are not in the
best interests for us or our stockholders. For a description of the benefit
plans and the provisions of such plans relating to changes in control, see
"Management of Ogdensburg Federal Savings and Loan Association -- Proposed
Future Stock Benefit Plans."
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REGULATORY RESTRICTIONS
For three years following conversion, OTS regulations prohibit any person,
without the prior approval of the OTS, from acquiring or making an offer to
acquire more than 10% of the stock of any converted savings institution if such
person is, or after consummation of such acquisition would be, the beneficial
owner of more than 10% of such stock. In the event that any person, directly or
indirectly, violates this regulation, the securities beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matter submitted to a vote of stockholders.
Federal law provides that no company, "directly or indirectly or acting in
concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition, any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Control in this context means ownership of, control of, or
holding proxies representing more than 25% of the voting shares of a savings
association or the power to control in any manner the election of a majority of
the directors of such institution.
Federal law also provides that no "person," acting directly or indirectly
or through or in concert with one or more other persons, may acquire control of
a savings association unless at least 60 days prior written notice has been
given to the OTS and the OTS has not objected to the proposed acquisition.
Control is defined for this purpose as the power, directly or indirectly, to
direct the management or policies of a savings association or to vote more than
25% of any class of voting securities of a savings association. Under federal
law (as well as the regulations referred to below) the term "savings
association" includes state-chartered and federally chartered SAIF-insured
institutions, federally chartered savings and loans and savings banks whose
accounts are insured by the FDIC and holding companies thereof.
Federal regulations require that, prior to obtaining control of an insured
institution, a person, other than a company, must give 60 days notice to the OTS
and have received no OTS objection to such acquisition of control, and a company
must apply for and receive OTS approval of the acquisition. Control, involves a
25% voting stock test, control in any manner of the election of a majority of
the institution's directors, or a determination by the OTS that the acquiror has
the power to direct, or directly or indirectly to exercise a controlling
influence over, the management or policies of the institution. Acquisition of
more than 10% of an institution's voting stock, if the acquiror also is subject
to any one of either "control factors," constitutes a rebuttable determination
of control under the regulations. The determination of control may be rebutted
by submission to the OTS, prior to the acquisition of stock or the occurrence of
any other circumstances giving rise to such determination, of a statement
setting forth facts and circumstances which would support a finding that no
control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock after the
effective date of the regulations must file with the OTS a
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<PAGE>
certification that the holder is not in control of such institution, is not
subject to a rebuttable determination of control and will take no action which
would result in a determination or rebuttable determination of control without
prior notice to or approval of the OTS, as applicable.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 3,000,000 shares of the common stock,
$0.01 par value per share, and 500,000 shares of preferred stock, $0.01 par
value per share. The Company currently expects to issue up to 198,375 shares of
common stock in the conversion. The Company does not intend to issue any shares
of preferred stock in the conversion, nor are there any present plans to issue
such preferred stock following the conversion. Each share of common stock will
have the same relative rights as, and will be identical in all respects with,
each other share of common stock. THE COMMON STOCK OF THE COMPANY WILL
REPRESENT NONWITHDRAWABLE CAPITAL AND WILL NOT BE INSURED BY US, THE FDIC, OR
ANY OTHER GOVERNMENT AGENCY.
COMMON STOCK
VOTING RIGHTS. Each share of the common stock will have the same relative
rights and will be identical in all respects with every other share of the
common stock. The holders of the common stock will possess exclusive voting
rights in the Company, except to the extent that shares of Preferred Stock
issued in the future may have voting rights, if any. Each holder of the common
stock will be entitled to only one vote for each share held of record on all
matters submitted to a vote of holders of the common stock and will not be
permitted to cumulate their votes in the election of the Company's directors.
LIQUIDATION. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the common stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities of the
Company (including all deposits with us and accrued interest thereon); (ii) any
accrued dividend claims; (iii) liquidation preferences of any preferred stock
which may be issued in the future; and (iv) any interests in the liquidation
account established upon the conversion for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who continue to have their
deposits with us.
DIVIDENDS. From time to time, dividends may be declared and paid to the
holders of the common stock, who will share equally in any such dividends. For
information about cash dividends, see "Dividends" and "Taxation."
RESTRICTIONS ON ACQUISITION OF THE COMMON STOCK. See "Restrictions on
Acquisition of the Company" for a discussion of the limitations on acquisition
of shares of the common stock.
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OTHER CHARACTERISTICS. Holders of the common stock will not have preemptive
rights with respect to any additional shares of the common stock which may be
issued. Therefore, the board of directors may sell shares of capital stock of
the Company without first offering such shares to existing stockholders of the
Company. The common stock is not subject to call for redemption, and the
outstanding shares of common stock when issued and upon receipt by the Company
of the full purchase price therefor will be fully paid and non-assessable,
except as set forth under "-- Possible Liability of Large Stockholders" below.
POSSIBLE LIABILITY OF LARGE STOCKHOLDERS. Under New York law, the ten
largest stockholders of a New York corporation, as determined by the fair value
of their stock, are jointly and severally liable for any unpaid wages due to the
corporation's laborers, servants or other employees. Corporations whose stock
is either listed on a national securities exchange or regularly quoted in an
over-the-counter market by one or more members of a national or any affiliated
securities association are exempt from this provision. Upon completion of the
Offering, the Company intends to list the common stock over-the-counter.
Trident Securities, Inc., a member of the National Association of Securities
Dealers has indicated that it will make a market in the common stock. Trident
Securities, Inc. is not obligated to do so, however, and may stop doing so at
any time. If the common stock of the Company is not either listed on a national
securities exchange or regularly quoted in an over-the-counter market, the ten
largest stockholders of the Company would be personally liable in the event the
Company failed to pay wages due to laborers, servants or employees.
SERIAL PREFERRED STOCK
None of the 500,000 authorized shares of preferred stock of the Company will
be issued in the conversion. After the conversion is completed, the board of
directors of the Company will be authorized to issue serial preferred stock and
to fix and state voting powers, designations, preferences or other special
rights of such shares and the qualifications, limitations and restrictions
thereof, subject to regulatory approval but without stockholder approval. If
and when issued, the serial preferred stock is likely to rank prior to the
common stock as to dividend rights, liquidation preferences, or both, and may
have full or limited voting rights. The board of directors, without stockholder
approval, can issue serial preferred stock with voting and conversion rights
which could adversely affect the voting power of the holders of the common
stock. The board of directors has no present intention to issue any of the
serial preferred stock.
LEGAL AND TAX MATTERS
The legality of the common stock has been passed upon for us by Housley
Kantarian & Bronstein, P.C., Washington, D.C. Certain legal matters for
Trident Securities may be passed upon by Malizia, Spidi, Sloane & Fisch, P.C.,
Washington, D.C. The federal income tax consequences of the conversion have
been passed upon for us by Housley Kantarian & Bronstein, P.C., Washington, D.C.
The New York income tax consequences of the conversion have been passed upon for
us by Silver and Silver, Morristown, New York.
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<PAGE>
EXPERTS
The financial statements of Ogdensburg Federal Savings and Loan Association
as of December 31, 1997 and 1996, and for the years then ended, have been
included herein and 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.
Feldman has consented to the publication herein of a summary of its letters
to us setting forth its opinion as to the estimated pro forma market value of us
in the converted form and its opinion setting forth the value of subscription
rights and to the use of its name and statements with respect to it appearing in
this document.
ADDITIONAL INFORMATION
The Company has filed with the SEC a registration statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the common stock
offered in this document. As permitted by the rules and regulations of the SEC,
this document does not contain all the information set forth in the registration
statement. Such information 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. The SEC also maintains an internet address ("Web site") that
contains reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
SEC. The address for this Web site is "http: //www. sec. gov." The statements
contained in this document as to the contents of any contract or other document
filed as an exhibit to the Form SB-2 describe the material features of such
contract or document but are, of necessity, brief descriptions and are not
necessarily complete; each such statement is qualified by reference to such
contract or document.
Ogdensburg Federal Savings and Loan Association has filed an Application for
conversion with the OTS with respect to the conversion. Pursuant to the rules
and regulations of the OTS, this document omits certain information contained in
that Application. The Application may be examined at the principal office of
the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the Northeast
Regional Office of the OTS, 10 Exchange Place, 18th Floor, Jersey City, New
Jersey 07302 without charge.
A copy of the certificate of incorporation and the bylaws of the Company
are available without charge from Ogdensburg Federal Savings and Loan
Association.
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OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Statements of Financial Condition as of June 30, 1998 (unaudited) and
December 31, 1997 and 1996 F-3
Statements of Income for the Six Months Ended June 30, 1998 and 1997
(unaudited) and the Years Ended December 31, 1997 and 1996 F-4
Statements of Equity for the Six Months Ended June 30, 1998 (unaudited)
and the Years Ended December 31, 1997 and 1996 F-5
Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997
(unaudited) and the Years Ended December 31, 1997 and 1996 F-6
Notes to Financial Statements F-8
</TABLE>
All financial statement schedules are omitted because the required information
is either not applicable or is included in the financial statements or related
notes.
Separate financial statements for the Company have not been included since it
will not engage in material transactions until after the conversion. The
Company, which has been inactive to date, has no significant assets,
liabilities, revenues, expenses or contingent liabilities.
F-1
<PAGE>
[LETTERHEAD OF PEAT MARWICK LLP APPEARS HERE]
Independent Auditors' Report
The Board of Directors
Ogdensburg Federal Savings and Loan Association:
We have audited the accompanying statements of financial condition of Ogdensburg
Federal Savings and Loan Association as of December 31, 1997 and 1996, and the
related statements of income, equity and cash flows for the years then ended.
These financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ogdensburg Federal Savings and
Loan Association as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
July 24, 1998
F-2
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
December 31,
June 30, --------------------
Assets 1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 622 674 671
Interest-bearing deposits with other banks 617 553 900
Securities available-for-sale, at fair value -- 737 804
Securities held-to-maturity (fair value of $3,552 (unaudited)
in 1998, $4,038 in 1997 and $3,572 in 1996) 3,546 4,031 3,561
Loans, net of deferred fees 18,863 16,832 15,475
Less allowance for loan losses 165 164 116
------- ------- -------
Net loans 18,698 16,668 15,359
Premises and equipment, net 426 434 455
Federal Home Loan Bank stock, at cost 139 137 136
Accrued interest receivable 150 125 92
Real estate owned 40 40 --
Other assets 9 3 20
------- ------- -------
Total assets $ 24,247 23,402 21,998
======= ======= =======
Liabilities and Equity
Liabilities:
Deposits:
Demand accounts 735 638 470
Savings and club accounts 3,131 2,733 2,687
Time certificates 16,519 16,306 15,358
NOW and money market accounts 1,971 2,088 1,974
------- ------- -------
Total deposits 22,356 21,765 20,489
Advance payments by borrowers for property
taxes and insurance 3 3 5
Other liabilities 240 57 27
------- ------- -------
Total liabilities 22,599 21,825 20,521
------- ------- -------
Commitments and contingencies (note 11)
Equity:
Retained earnings 1,648 1,576 1,488
Accumulated other comprehensive income -- 1 (11)
------- ------- -------
Total equity 1,648 1,577 1,477
------- ------- -------
Total liabilities and equity $ 24,247 23,402 21,998
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Income
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
------------ -------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 727 645 1,330 1,266
Securities 127 132 277 260
Other short-term investments 28 35 55 66
----- --- ----- -----
Total interest income 882 812 1,662 1,592
----- --- ----- -----
Interest expense:
Deposits 522 477 998 954
Borrowings -- -- -- 1
----- --- ----- -----
Total interest expense 522 477 998 955
----- --- ----- -----
Net interest income 360 335 664 637
Provision for loan losses 3 -- 57 --
----- --- ----- -----
Net interest income after provision
for loan losses 357 335 607 637
----- --- ----- -----
Non-interest income:
Service charges 14 11 30 14
Net gain on sale of securities 1 -- -- --
Other 7 9 14 16
----- --- ----- -----
Total non-interest income 22 20 44 30
----- --- ----- -----
Non-interest expenses:
Salaries and employee benefits 140 128 258 258
Directors fees 22 20 39 36
Building, occupancy and equipment 27 32 73 59
Data processing 15 14 28 27
Postage and supplies 12 8 25 23
Deposit insurance premium 7 4 11 174
Insurance 5 7 17 14
Other 53 37 74 65
----- --- ----- -----
Total non-interest expenses 281 250 525 656
----- --- ----- -----
Income before income tax expense 98 105 126 11
Income tax expense 26 28 38 3
----- --- ----- -----
Net income $ 72 77 88 8
===== === ===== =====
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Equity
Six-months ended June 30, 1998 and
years ended December 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Retained Comprehensive
Earnings Income Total
-------- ------ -----
<S> <C> <C> <C>
Balance at December 31, 1995 $1,480 1 1,481
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment -- (12) (12)
Net income 8 -- 8
------ ------ -----
Comprehensive income 8 (12) (4)
------ ------ -----
Balance at December 31, 1996 1,488 (11) 1,477
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment -- 12 12
Net income 88 -- 88
------ ------ -----
Comprehensive income 88 12 100
------ ------ -----
Balance at December 31, 1997 1,576 1 1,577
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment (unaudited) -- (1) (1)
Net income (unaudited) 72 -- 72
------ ------ -----
Comprehensive income 72 (1) 71
------ ------ -----
Balance at June 30, 1998 (unaudited) $1,648 -- 1,648
====== ====== =====
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
-------------------- -------------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 72 77 88 8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8 10 21 22
(Increase) decrease in accrued interest receivable (25) -- (33) 3
Provision for loan losses 3 -- 57 --
Net gains on sales of securities (1) -- -- --
Net amortization (accretion) of
premiums/discounts (56) (99) (196) (186)
Increase in other liabilities 177 32 39 25
Deferred income taxes 6 5 (14) (10)
(Increase) decrease in other assets (6) 13 17 (16)
------- ------ ------ ------
Net cash provided (used) by operating
activities 178 38 (21) (154)
------- ------ ------ ------
Cash flows from investing activities:
Net increase in loans (2,033) (447) (1,406) (498)
Proceeds from sales of securities available-for-sale 712 -- -- --
Proceeds from maturities and principal
reductions of securities available-for-sale 18 19 83 87
Purchases of securities held-to-maturity (2,957) (3,882) (8,796) (6,952)
Proceeds from maturities and principal
reductions of securities held-to-maturity 3,505 3,513 8,523 8,007
Purchase of FHLB stock (2) (1) (1) (5)
------- ------ ------ ------
Net cash provided (used) by
investing activities (757) (798) (1,597) 639
------- ------ ------ ------
Cash flows from financing activities:
Increase in deposits 591 738 1,276 922
Decrease in advance payments by
borrowers for property taxes and insurance -- (2) (2) (31)
Borrowing from FHLB -- -- -- 200
Repayment to FHLB -- -- -- (200)
------- ------ ------ ------
Net cash provided by financing activities 591 736 1,274 891
------- ------ ------ ------
Net increase (decrease) in cash and cash equivalents 12 (24) (344) 1,376
Cash and cash equivalents at beginning of period 1,227 1,571 1,571 195
------- ------ ------ ------
Cash and cash equivalents at end of period $ 1,239 1,547 1,227 1,571
======= ====== ====== ======
</TABLE>
F-6
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
-------------- -------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Non-cash investing activities:
Additions to real estate owned $ - - 40 -
Cash paid during the period for:
Interest 522 477 998 955
Income taxes 24 - - 28
==== === === ===
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
Six-Months Ended June 30, 1998 and 1997 (unaudited) and
years ended December 31, 1997 and 1996
(1) Business
Ogdensburg Federal Savings and Loan Association (the "Bank") is organized
under the laws of the United States. The Bank is subject to regulation by
the Office of Thrift Supervision (OTS) as a mutual savings and loan
association. The Bank's lending activity is concentrated in St. Lawrence
County and surrounding areas.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The statements of financial condition as of June 30, 1998 and the
related statements of income and cash flows for the six-month periods
ended June 30, 1998 and 1997 and changes in equity for the six-month
period ended June 30, 1998 are unaudited and, in the opinion of
management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation as of June 30, 1998 and for the
results for the unaudited periods have been made.
The 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 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
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. 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 equity until realized. Transfers of
securities between categories are recorded at fair value at the date
of transfer.
F-8
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(c) Securities, 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
contractual lives of the loans. Management has the ability and intent
to hold its loans to maturity.
Interest on loans is accrued and included in income at contractual
rates applied to the principal outstanding. The accrual of interest on
loans (including impaired loans) is generally discontinued and
previously accrued interest is reversed or an allowance is established
when loan payments are 90 days or more past due or when, by the
judgment of management, collectibility becomes uncertain. The
allowance is established by a charge to interest income equal to all
interest previously accrued. 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'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.
F-9
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(e) Allowance for Loan Losses, Continued
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 and home equity
lines of credit 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
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 and
amortization. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets (10-36 years for
building and improvements; 5-7 years for furniture and equipment).
(h) Employee Benefit Plans
The Bank has a non-contributory multiemployer pension plan which
participates in the Financial Institutions Retirement Fund. All full
time employees are covered by the plan.
The Bank has a defined contribution 401(k) Plan (the Plan) for all
eligible salaried employees. Employees are permitted to contribute up
to 15% of base pay to the Plan, subject to certain limitations. The
Bank matches each employee's contribution up to 5%.
F-10
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(i) 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.
(j) 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
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 equity, 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 six-month periods ended June 30, 1998 and
1997 (unaudited) was $71,000 and $81,000, respectively.
The following summarizes the components of other comprehensive income
(in thousands):
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
------------ ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Other comprehensive income, before tax:
Net unrealized holding gain (loss) on
securities $ -- -- 17 (17)
Reclassification adjustment for (gains)
losses included in net income (1) -- -- --
----- ----- ----- -----
Other comprehensive income, before tax (1) -- 17 (17)
Income tax expense related to items of
other comprehensive income -- -- 5 (5)
----- ----- ----- -----
Other comprehensive income,
net of tax $ (1) -- 12 (12)
===== ===== ===== =====
</TABLE>
F-11
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(k) 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.
(l) 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.
(3) Securities
Securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1998
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(unaudited)
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. Government securities $ 3,482 3 4 3,481
Mortgage-backed securities - GNMA 64 7 -- 71
------- ------ ------- -------
$ 3,546 10 4 3,552
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities - GNMA $ 736 1 -- 737
------- ----- ------ -----
$ 736 1 -- 737
======= ===== ====== =====
Held-to-maturity:
U.S. Government securities $ 3,962 3 3 3,962
Mortgage-backed securities - GNMA 69 7 -- 76
------- ----- ------ -----
$ 4,031 10 3 4,038
======= ===== ====== =====
</TABLE>
F-12
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(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:
Mortgage-backed securities - GNMA $ 820 -- 16 804
-------- ----- ----- ------
$ 820 -- 16 804
======== ===== ===== ======
Held-to-maturity:
U.S. Government securities $ 3,470 -- 1 3,469
Mortgage-backed securities - GNMA 91 12 -- 103
-------- ----- ----- ------
$ 3,561 12 1 3,572
======== ===== ===== ======
</TABLE>
The following table presents the carrying value and fair value of securities
based on the earlier of call or maturity date at June 30, 1998 (unaudited):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Held-to-maturity:
Due within one year $ 1,482 1,482
Due after one year through five years 2,000 1,999
Due after ten years 64 71
------ -------
$ 3,546 3,552
====== =======
</TABLE>
The following table presents the carrying value and fair value of securities
based on the earlier of call or maturity date at December 31, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Available-for-sale:
Due after ten years $ 736 737
------ -------
$ 736 737
====== =======
Held-to-maturity:
Due within one year 2,962 2,959
Due after one year through five years 1,000 1,003
Due after ten years 69 76
------ -------
$ 4,031 4,038
====== =======
</TABLE>
F-13
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(3) Securities, Continued
The amortized cost and fair value of mortgage-backed securities are
presented by contractual maturity in the preceding table. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations without call or prepayment
penalties.
Gross gains of $1,000 were realized on sales of available-for-sale
securities during the six months ended June 30, 1998 (unaudited). There
were no sales of securities during the six months ended June 30, 1997
(unaudited) or the years ended December 31, 1997 and 1996.
(4) Loans Receivable
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Mortgages:
One to four family residential $ 12,377 11,893 11,838
Commercial 726 706 553
Construction 199 67 115
------- ------- -------
13,302 12,666 12,506
Other loans:
Automobile 3,299 2,121 1,400
Home equity 1,061 1,226 903
Passbook 219 217 270
Commercial 200 100 --
Other 803 526 422
------- ------- -------
5,582 4,190 2,995
------- ------- -------
Total loans 18,884 16,856 15,501
Less:
Net deferred fees 21 24 26
------- ------- -------
$ 18,863 16,832 15,475
======= ======= =======
</TABLE>
Changes in the allowance for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
-------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period $164 116 116 116
Provision charged to operations 3 -- 57 --
Recoveries 1 -- -- --
Loans charged off 3 2 9 --
---- ---- ---- ----
Balance at end of period $165 114 164 116
==== ==== ==== ====
</TABLE>
F-14
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(4) Loans Receivable, Continued
At June 30, 1998 (unaudited) and December 31, 1997, impaired loans totaled
$269,000 and $271,000, respectively with no related allowance for loan
losses as a result of cash flow analysis. Management believes it has no
impaired loans at December 31, 1996. The average recorded investment in
impaired loans was $270,000 and $0 during the six months ended June 30,
1998 and 1997 (unaudited), respectively and $23,000 and $0 during the years
ended December 31, 1997 and 1996, respectively. Interest income recognized
on impaired loans was $20,000 and $0 during the six months ended June 30,
1998 and 1997 (unaudited), respectively and $0 during the years ended
December 31, 1997 and 1996.
The principal balances of loans not accruing interest amounted to
approximately $303,000 (unaudited), $293,000 and $9,000 at June 30, 1998,
December 31, 1997 and 1996, respectively. The interest income foregone for
non-accruing loans was approximately $1,000 during the six months ended
June 30, 1998 and 1997 (unaudited) and $8,000 and $1,000 during the years
ended December 31, 1997 and 1996, respectively.
In the ordinary course of business, the Bank has and expects to continue to
have transactions, including borrowings, with its officers and directors.
In the opinion of management, such transactions were on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time of comparable transactions with other persons and did not involve
more than a normal risk of collectibility or present any other unfavorable
features to the Bank. The following table presents a summary of the
activity with respect to loans to directors and executive officers at
June 30, 1998 and December 31, 1997 and 1996.
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------------------
1998 1997 1996
-------- -------- --------
(unaudited)
<S> <C> <C> <C>
Balance outstanding - beginning of year $209,552 308,989 310,965
New loans 477,000 14,500 34,800
Principal repayments 108,036 113,937 36,776
-------- -------- --------
Balance outstanding - end of year $578,516 209,552 308,989
======== ======== ========
</TABLE>
(5) Premises and Equipment
Premises and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Land $ 125 125 125
Buildings and improvements 429 429 429
Furniture and equipment 63 63 125
----- ---- -----
617 617 679
Less accumulated depreciation and amortization 191 183 224
----- ---- -----
$ 426 434 455
===== ==== =====
</TABLE>
Depreciation and amortization expense amounted to $8,000 and $10,000 during
the six months ended June 30, 1998 and 1997 (unaudited), respectively and
$21,000 and $22,000 during the years ended December 31, 1997 and 1996,
respectively.
F-15
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(6) Accrued Interest Receivable
Accrued interest receivable is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
June 30, ---------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Loans $ 101 91 86
Securities 49 34 6
------ ----- -----
$ 150 125 92
====== ===== =====
</TABLE>
(7) Deposits
At June 30, 1998, December 31, 1997 and 1996, the aggregate amounts of time
deposits in denominations of $100,000 or more were approximately $1,680,000
(unaudited), $1,677,000 and $1,405,000, respectively. Deposit balances in
excess of $100,000 are not insured by the FDIC.
Contractual maturities of time certificates are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Within one year $ 12,267 14,427
One through two years 3,658 1,339
Two through three years 420 381
Three through four years 160 155
Four through five years 14 4
------- -------
Total time certificates $ 16,519 16,306
======= =======
</TABLE>
Interest expense on deposits is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
------------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Savings, club, and escrow accounts $ 40 39 79 86
Time certificates 465 420 883 832
NOW accounts and money
market accounts 17 18 36 36
---- ---- ---- ----
$ 522 477 998 954
==== ==== ==== ====
</TABLE>
F-16
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(8) Borrowings
The Bank is a member of the Federal Home Loan Bank of New York (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 June 30, 1998
(unaudited) and December 31, 1997 the Bank may borrow up to 30 percent of
total assets.
During the six-month period ended June 30, 1998 (unaudited) and 1997 the
Bank did not hold borrowings with the FHLB. During 1996 the Bank borrowed
$200,000 which was repaid prior to December 31, 1996.
(9) Income Taxes
Income taxes were allocated as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
------------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Income before income tax
expense $ 26 28 38 3
Changes in equity, for
changes in unrealized gains
on securities -- -- 5 (5)
---- --- --- ----
$ 26 28 43 (2)
==== === === ====
</TABLE>
The components of income tax expense attributable to income from operations
are (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
--------------- ----------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 15 20 46 7
State 5 3 6 6
--- --- --- ---
20 23 52 13
--- --- --- ---
Deferred:
Federal 4 3 (12) (6)
State 2 2 (2) (4)
--- --- --- ---
6 5 (14) (10)
--- --- --- ---
$ 26 28 38 3
=== === === ===
</TABLE>
F-17
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(9) Income Taxes, Continued
Actual tax expense attributable to income before income taxes differed from
"expected" tax expense, computed by applying the U.S. Federal statutory tax
rate of 34% to income before income tax as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
--------------- ---------------
1998 1997 1997 1996
---- ----- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Computed "expected" tax expense $ 33 36 43 4
Increase (decrease) in income
taxes resulting from:
State taxes, net of
Federal tax benefits 5 5 3 1
Benefit of Federal tax rates
below statutory rates (14) (13) (7) (2)
Other items, net 2 -- (1) --
------ ------ ----- ----
$ 26 28 38 3
====== ====== ===== ======
Effective tax rate 26.5% 26.7% 30.1% 27.3%
====== ====== ===== ======
</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,
June 30, -----------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 60 60 42
Net deferred loan fees 8 8 10
Accrued expenses 8 2 4
Unrealized losses on available-for-sale securities -- -- 5
Other 4 4 4
------ ----- -----
Total gross deferred tax assets 80 74 65
------ ----- -----
Deferred tax liabilities:
Accumulated depreciation on premises
and equipment 6 7 10
Accrued interest receivable 68 55 49
Prepaid expenses 1 -- --
Bad debt reserves in excess of base year reserve 14 15 18
------ ----- -----
Total gross deferred tax liabilities 89 77 77
------ ----- -----
Net deferred tax assets (liabilities) $ (9) (3) (12)
====== ===== =====
</TABLE>
F-18
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(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 retained earnings at June 30, 1998 (unaudited) and December 31,
1997 is approximately $426,000 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) Pension Plan
The Bank has a non-contributory multiemployer pension plan.
The Bank participates in the Financial Institutions Retirement Fund. The
Fund is a tax-qualified pension trust covering 319 participating employers.
Separate actuarial valuations are not made with respect to each employer.
All full-time employees of the Bank are covered by the plan. Statement of
Financial Accounting Standards (SFAS) No. 87, Employers' Accounting for
Pensions requires that in multiemployer plans, pension expense is equal to
contributions required each accounting period. During the six-months ended
June 30, 1998 (unaudited) and the years ended December 31, 1997 and 1996
the Bank was not required to make contributions to the plan and the expense
was $0.
The plan uses the projected unit credit cost method as its funding method.
The maximum number of years in which the initial past service liability
would be required to be paid off by any participating employer is 15.
Actuarial gains and losses are spread as a part of the valuation method.
The Bank adopted a 401(k) Plan effective January 1, 1994 covering all
full-time employees. The Bank matches an employee's contribution up to a
maximum of 5%. The expense for this Plan was $5,000 (unaudited) for the
six-months ended June 30, 1998 and 1997 and $10,000 and $8,000 for the
years ended December 31, 1997 and 1996, respectively.
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 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.
F-19
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(11) Commitments and Contingencies
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.
Commitments to originate fixed and adjustable rate loans are as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Fixed rate
7.00 - 7.99% $ 56 --
8.00 - 8.99% 26 --
------ ------
Total fixed rate 82 --
Adjustable rate 220 15
------ ------
Total commitments to originate loans $ 302 15
====== ======
</TABLE>
Unused lines of credit, which includes home equity, consumer and
commercial, amounted to $326,000 (unaudited) and $345,000 at June 30, 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.
F-20
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(12) Concentrations of Credit
A substantial portion of the Bank's loans are mortgages in Northern New
York State. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's loan portfolio is 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.
(13) Regulatory Matters
In 1996 the Government mandated a one-time assessment related to the
recapitalization of the Savings Association Insurance Fund (SAIF). Of the
total deposit insurance premium in 1996, the SAIF assessment amounted to
$128,000.
The Bank is subject to various regulatory capital requirements administered
by its primary Federal regulator, the Office of Thrift Supervision (OTS).
Failure to meet the minimum regulatory capital requirements can initiate
certain mandatory, and possible additional discretionary actions by
regulators, that if undertaken, could have a direct material affect on the
Bank and the financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines involving quantitative measures
of the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification under the prompt corrective action guidelines
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of: total
risk-based capital and Tier I capital to risk-weighted assets (as defined
in the regulations), Tier I capital to adjusted tangible assets (as
defined), and tangible capital to tangible assets (as defined). As
discussed in greater detail below, as of December 31, 1997, the Bank met
all of the capital adequacy requirements to which it is subject.
As of March 31, 1997, the most recent notification from the OTS, the Bank
was categorized as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank
has to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as disclosed in the table below. There are no conditions or
events since the most recent notification that management believes have
changed the Bank's prompt corrective action category.
F-21
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13) Regulatory Matters, Continued
The following is a reconciliation of the Bank's GAAP and Regulatory capital
at June 30, 1998 (unaudited), December 31, 1997 and December 31, 1996 (in
thousands):
<TABLE>
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998 (unaudited) $ 1,648 1,648 1,648 1,648
- -------------------------
Regulatory capital adjustments:
General allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 165
------ -------- --------
Total regulatory capital 1,648 6.8% 1,648 6.8% 1,813 13.2%
Regulatory capital requirement 364 1.5% 727 3.0% 1,100 8.0%
------ -------- --------
Regulatory capital excess $ 1,284 921 713
====== ======== ========
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 1,577 1,577 1,577 1,577
- -----------------
Regulatory capital adjustments:
General allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 150
Net unrealized gain on
securities available for sale (1) (1) (1)
------- ------- -------
Total regulatory capital 1,576 6.7% 1,576 6.7% 1,726 14.4%
Regulatory capital requirement 351 1.5% 702 3.0% 958 8.0%
------- ------- -------
Regulatory capital excess $ 1,225 874 768
======= ======= =======
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $ 1,477 1,477 1,477 1,477
- -----------------
Regulatory capital adjustments:
General allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 116
Net unrealized gain on
securities available for sale 11 11 11
------- ------- -------
Total regulatory capital 1,488 6.8% 1,488 6.8% 1,604 15.4%
Regulatory capital requirement 330 1.5% 660 3.0% 836 8.0%
------- ------- -------
Regulatory capital excess $ 1,158 828 768
======= ======= =======
</TABLE>
F-22
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13) Regulatory Matters, Continued
The following is a summary of the Bank's actual capital amounts and ratios
compared to the OTS minimum capital adequacy requirements and the OTS
requirements for classification as a well capitalized institution under
prompt corrective action provisions (in thousands):
<TABLE>
<CAPTION>
To be classified as
well-capitalized under
Minimum capital prompt corrective
Actual adequacy requirements action provisions
------------------- --------------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998
- -------------------
(unaudited)
Total capital (to risk greater than greater than
weighted assets) $ 1,813 13.2% 1,100 or equal to 8.0% 1,375 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,648 12.0 550 or equal to 4.0 825 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,648 6.8 727 or equal to 3.0 1,212 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,648 6.8 364 or equal to 1.5 -- N/A
As of December 31, 1997
- -----------------------
Total capital (to risk greater than greater than
weighted assets) $ 1,726 14.4% 958 or equal to 8.0% 1,198 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,576 13.2 479 or equal to 4.0 719 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,576 6.7 702 or equal to 3.0 1,170 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,576 6.7 351 or equal to 1.5 -- N/A
As of December 31, 1996
- -----------------------
Total capital (to risk greater than greater than
weighted assets) $ 1,604 15.4% 836 or equal to 8.0% 1,045 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,488 14.2 418 or equal to 4.0 627 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,488 6.8 660 or equal to 3.0 1,101 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,488 6.8 330 or equal to 1.5 -- N/A
</TABLE>
F-23
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(14) 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: 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, savings, club, NOW 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 time certificates 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-24
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(14) 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,
June 30, ----------------------------------------------
1998 1997 1996
-------------------- ------------------- --------------------
(unaudited)
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Financial assets:
Cash, cash equivalents $ 1,239 1,239 1,227 1,227 1,571 1,571
Securities 3,546 3,552 4,768 4,775 4,365 4,376
Loans, net 18,698 18,888 16,668 16,306 15,359 14,687
FHLB stock 139 139 137 137 136 136
Financial liabilities:
Deposits:
Demand accounts 735 735 638 638 470 470
Savings and club accounts 3,131 3,131 2,733 2,733 2,687 2,687
Time certificates 16,519 16,544 16,306 16,329 15,358 15,397
NOW and money
market accounts 1,971 1,971 2,088 2,088 1,974 1,974
</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.
(15) Plan of Conversion
On July 23, 1998, the Board of Directors of Ogdensburg Federal Savings and
Loan Association (the "Bank"), subject to regulatory approval and approval
by the depositors of the Bank, unanimously adopted a plan to convert from a
Federally-chartered mutual savings and loan association to a
Federally-chartered stock savings and loan association with the concurrent
formation of a holding company. It is anticipated that upon consummation of
the conversion, the holding company will own 100% of the stock of the Bank.
It is contemplated that stock in the holding company will be offered to
certain depositors of the Bank, an employee stock ownership plan for the
Bank and, if shares remain unsold, to the general public with a preference
to persons residing in St. Lawrence County, New York. 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 its latest balance
sheet appearing in the final prospectus. The liquidation account will be
maintained for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their accounts at the
Bank after conversion. The liquidation account will be reduced
annually to the extent that Eligible Account Holders and Supplemental
Eligible Account Holders reduce their qualifying deposits. Subsequent
increases will not restore an eligible depositor'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 based on the proportionate share of the then total remaining
qualifying deposits. The Bank may not pay dividends that would reduce
stockholders' equity below the required liquidity account balance.
Upon consummation of the conversion, each depositor of the Bank will have a
deposit account in the resulting Bank.
The costs of the conversion will be deferred and reduce the proceeds from
the sale of the common stock of the holding company. If the conversion is
not completed, all costs will be charged to expense. The Bank has not
incurred any conversion costs as of June 30, 1998 (unaudited).
F-25
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
ARM Loan Adjustable-rate mortgage loan.
BIF Bank Insurance Fund of the FDIC
Common Stock The common stock, $.01 par value per share, of Peoples
Bankcorp, Inc.
Community Offering Offering for sale to certain members of the general public
of any shares of common stock not subscribed for in the
Subscription Offering, including the possible offering of
common stock in a Syndicated Community Offering
Company Peoples Bankcorp, Inc.
Conversion Simultaneous conversion of Ogdensburg Federal Savings and
Loan Association, to stock form, the issuance of the
Ogdensburg Federal Savings and Loan Association's
outstanding capital stock to the Company and the Company's
offer and sale of common stock
Eligible Account
Holders Savings account holders of Ogdensburg Federal Savings and
Loan Association with account balances of at least $50 as
of the close of business on June 30, 1997
ERISA Employee Retirement Income Security of 1974, as amended
ESOP Employee Stock Ownership Plan
Estimated
Valuation Range Estimated pro forma market value of the common stock
ranging from $1,275,000 to $1,725,000
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Date 12:00 p.m., Eastern time, on December 14, 1998
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Federal Reserve
System The Board of Governors of the Federal Reserve System
Feldman Feldman Financial Advisors
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
MRP Management recognition plan to be adopted no earlier than
six months after the conversion
NASD National Association of Securities Dealers, Inc.
NOW account Negotiable order of withdrawal account
NPV Net portfolio value
Offering Subscription, Community and Syndicated Community
offerings, collectively
Option Plan Stock option plan to be adopted within one year of the
conversion
Order Form Form for ordering stock accompanied by a certification
concerning certain matters
Other Members Savings account holders (other than eligible account
holders and supplemental eligible account holders) and
certain borrowers (borrowers whose loans were outstanding
on November __, 1998 and continue to be outstanding) who
are entitled to vote at the Special Meeting due to the
existence of a savings account or a borrowing,
respectively, on the Voting Record Date for the Special
Meeting
OTS Office of Thrift Supervision
Plan of Conversion Plan of Ogdensburg Federal Savings and Loan Association to
convert from a federally chartered mutual savings bank to
a federally chartered stock savings bank and the issuance
of all of Ogdensburg
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
Federal Savings and Loan Association's outstanding capital
stock to the Company and the issuance of the Company's
stock to the public
Purchase Price $10.00 per share price of the common stock
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
SFAS Statement of Financial Accounting Standards adopted by
FASB
Special Meeting Special Meeting of members of Ogdensburg Federal Savings
and Loan Association called for the purpose of approving
the Plan
Subscription
Offering Offering of non-transferable rights to subscribe for the
common stock, in order of priority, to Eligible Account
Holders, tax-qualified employee plans, Supplemental
Eligible Account Holders and Other Members
Supplemental Eligible
Account Holders Depositors, who are not Eligible Account Holders of
Ogdensburg Federal Savings and Loan Association, with
account balances of at least $50 on September 30, 1998.
Syndicated Community
Offering Offering of shares of common stock remaining after the
Subscription Offering and undertaken prior to the end and
as part of the Community Offering, and which may, at our
discretion be made to the general public on a best efforts
basis by a selling group of broker-dealers.
Trident Securities Trident Securities, Inc.
Voting Record Date The close of business on November __, 1998, the date for
determining members entitled to vote at the Special
Meeting.
</TABLE>
A-3
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this document in connection with
the offering made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by Ogdensburg
Federal Savings and Loan Association, the Company, or Trident Securities. This
document does not constitute an offer to sell, or the solicitation of an offer
to buy, any of the securities offered hereby to any person in any jurisdiction
in which such offer or solicitation would be unlawful. Neither the delivery of
this document by Ogdensburg Federal Savings and Loan Association, the Company,
or Trident Securities nor any sale made hereunder shall in any circumstances
create an implication that there has been no change in the of Ogdensburg Federal
Savings and Loan Association or the Company, since any of the dates as of which
information is furnished herein or since the date hereof.
PEOPLES BANKCORP, INC.
UP TO 198,375 SHARES
COMMON STOCK
PROSPECTUS
TRIDENT SECURITIES, INC.
DATED __________, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
UNTIL ________ __, 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALER OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
* Legal Fees and Expenses......................... $ 50,000
* Printing, Word Processing, Postage and Mailing.. 40,000
* Appraisal and Business Plan Fees and Expenses... 19,000
* Accounting Fees and Expenses.................... 75,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)...................... 10,000
* Transfer Agent Fees............................. 3,000
* Conversion Agent Fees........................... 6,000
* Federal Filing Fees (OTS and SEC)............... 9,000
* Other Expenses.................................. 8,000
--------
Total........................................... $220,000
========
</TABLE>
- -------------
* Estimated
** Does not include $90,500 in estimated underwriting fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF OGDENSBURG FEDERAL SAVINGS AND
LOAN ASSOCIATION
Federal Regulations clearly define areas for indemnity coverage by Ogdensburg
Federal Savings and Loan Association (the "Association"), as follows:
(a) Any person against whom any action is brought by reason of the fact
that such person is or was a director or officer of the Association shall be
indemnified by the Association for:
(i) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred by such person in connection with
proceedings related to the defense or settlement of such action;
(ii) Any amount for which such person becomes liable by reason of any
judgment in such action;
(iii) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred in any action to enforce his rights
under this section, if the person attains a final judgment in favor of
such person in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to such
officer or director only if the requirements of this subparagraph are met:
(i) The Association shall make the indemnification provided by
subparagraph (a) in connection with any such action which results in a
final judgment on the merits in favor of such officer or director.
(ii) The Association shall make the indemnification provided by
subparagraph (a) in case of settlement of such action, final judgment
against such director or officer or final judgment in favor of such
director or officer other than on the merits except in relation to
matters as to which he shall be adjudged to be liable for negligence
or misconduct in the performance of his duty, only if a majority of
the directors of the Association determines that such a director or
officer was acting in good faith within what he was reasonably
entitled to believe under the circumstances was the scope of his
employment or authority and for a purpose which he was reasonably
entitled to believe under the circumstances was in the best interest
of the Association or their members or stockholders.
II-1
<PAGE>
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for
review;
(ii) "Court" includes, without limitation, any court to which or in
which any appeal or any proceeding for review is brought;
(iii) "Final Judgment" means a judgment, decree, or order which is
appealable and as to which the period for appeal has expired and no
appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent or by
confession or upon a plea of guilty or of nolo contendere.
Ogdensburg Federal has a directors and officers liability policy providing
for insurance against certain liabilities incurred by directors and officers of
Ogdensburg Federal while serving in their capacities as such.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF PEOPLES BANKCORP, INC.
Under the New York Business Corporation Law ("NYBCL"), a corporation may
indemnify its directors and officers made, or threatened to be made, a party to
any action or proceeding, except for stockholder derivative suits, if such
director or officer acted in good faith, for a purpose which he or she
reasonably believed to be in or, in the case of service to another corporation
or enterprise, not opposed to, the best interests of the corporation, and, in
criminal proceedings, had no reasonable cause to believe his or her conduct was
unlawful. In the case of stockholder derivative suits, the corporation may
indemnify a director or officer if he or she acted in good faith for a purpose
which he or she reasonably believed to be in or, in the case of service to
another corporation or enterprise, not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of (i) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (ii) any claim, issue or matter as to which such person has been adjudged
to be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered
by a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant
to the above paragraph may be made only if authorized in the specific case and
after a finding that the director or officer met the requisite standard of
conduct by (i) the disinterested directors if a quorum is available, (ii) the
board upon the written opinion of independent legal counsel or (iii) the
stockholders.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or bylaws or when
authorized by (i) such certificate of incorporation or bylaws, (ii) a resolution
of stockholders, (iii) a resolution of directors, or (iv) an agreement providing
for such indemnification, provided that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled.
The foregoing statement is qualified in its entirety by reference to
Section 715, 717, 721 through 725 of the NYBCL.
II-2
<PAGE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Pursuant to its Certificate of Incorporation and New York law, the Company
is permitted to purchase and maintain insurance on behalf of an individual who
is or was a director, officer, employee, or agent of the Company. The
Association currently maintains such a policy and it is intended that the
Company will become a party to such policy.
ELEVENTH:
A. RIGHT TO INDEMNIFICATION. 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:
(1) that he or she is or was a director or officer of the
Corporation, or
(2) that he or she, being at the time a director or officer of
the Corporation, is or was serving at the request of the Corporation
as a director, trustee, 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
(collectively, "another enterprise" or "other enterprise"), whether
either in case (i) or in case (ii) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director
or officer of the Corporation, or as a director, trustee, officer,
employee or agent of such other enterprise, or (y) in any other
capacity related to the Corporation or such other enterprise while so
serving as a director, trustee, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Business Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, with
respect to actions taken prior to such amendment, only to the extent
that such amendment does not prohibit the Corporation from providing
broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
person in connection therewith. The persons indemnified by this
Article Eleventh are hereinafter referred to as "indemnitees." Such
indemnification as to such alleged action or inaction shall continue
as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director,
officer, employee or agent of another enterprise; and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
The right to indemnification conferred in this Article Eleventh:
(i) shall be a contract right; (ii) shall not be affected adversely as
to any indemnitee by any amendment of this Certificate of
Incorporation with respect to any action or inaction occurring prior
to such amendment; and (iii) shall, subject to any requirements
imposed by law and the Bylaws, include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition.
B. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
------------------------------------------------------
INDEMNIFICATION. The rights to indemnification and to the advancement of
---------------
expenses conferred in this Article Eleventh shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, this Certificate of Incorporation, Bylaws, agreement (including
any agreement between such person and any of the Corporation's affiliates,
predecessor or subsidiary corporations or any constituent corporation
absorbed by the Corporation in a consolidation or merger), vote of
shareholders or disinterested directors or otherwise. The Bylaws may
contain such other provisions concerning indemnification, including
provisions specifying reasonable procedures relating to and conditions to
the receipt by indemnitees of indemnification, provided that such
provisions are not inconsistent with the provisions of this Article
Eleventh.
C. AGENTS AND EMPLOYEES. The Corporation may, to the extent
---------------------
authorized from time to time by the Board of Directors and to the fullest
extent authorized by the Business Corporation Law, as the same exists or
may hereafter be amended, grant rights to indemnification, and to the
advancement of expenses, to any employee or agent of the Corporation (or
any person, other than a director or officer of the Corporation,
II-3
<PAGE>
serving at the Corporation's request as a director, trustee, officer,
employee or agent of another enterprise) or to persons who are or were a
director, officer, employee or agent of any of the Corporation's
affiliates, predecessor or subsidiary corporations or of a constituent
corporation absorbed by the Corporation in a consolidation or merger or who
is or was serving at the request of such affiliate, predecessor or
subsidiary corporation or of such constituent corporation as a director,
officer, employee or agent of another enterprise, in each case as
determined by the Board of Directors to the fullest extent of the
provisions of this Article Eleventh in cases of the indemnification and
advancement of expenses of directors and officers of the Corporation, or to
any lesser extent (or greater extent, if permitted by law) determined by
the Board of Directors. Nothing in this Article Eleventh C. shall limit the
indemnification provided in Article Eleventh A. hereof to any officer or
director of the Corporation who was or is made a party or is threatened to
be made a party to or is otherwise involved in any proceeding by reason of
the fact that he or she is or was serving at the request of the Corporation
as a director, officer, trustee, employee or agent of any subsidiary of the
Corporation or any other enterprise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as a part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
* 1 Agency Agreement with Trident Securities, Inc.
* 2 Plan of Conversion (Exhibit A to Proxy Statement filed
as Exhibit 99.2)
* 3.1 Certificate of Incorporation of Peoples Bankcorp, Inc.
* 3.2 Bylaws of People's Bankcorp, Inc.
* 4 Form of Common Stock Certificate of Peoples Bankcorp,
Inc.
* 5 Opinion of Housley Kantarian & Bronstein, P.C. regarding
legality of securities being registered
** 8.1 Federal Tax Opinion of Housley Kantarian & Bronstein,
P.C.
** 8.2 State Tax Opinion of Silver & Silver
* 8.3 Opinion of Feldman Financial Advisors as to the value of
subscription rights for tax purposes
* 10.1 Proposed People's Bankcorp, Inc. 1999 Stock Option and
Incentive Plan
* 10.2 Proposed People's Bankcorp, Inc. Management Recognition
Plan and Trust Agreement
* 10.3 Employment Agreement between Ogdensburg Federal Savings
and Loan Association and Robert E. Wilson
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
* 10.4 Guaranty Agreement between People's Bankcorp, Inc. and
Robert E. Wilson
* 10.5 Employment Agreement between Ogdensburg Federal Savings
and Loan Association and Todd R. Mashaw
* 10.6 Grantor Trust Agreement
* 23.1 Consent of Housley Kantarian & Bronstein, P.C. (in
opinions filed as Exhibits 5 and 8.1)
23.2 Consent of KPMG Peat Marwick LLP
* 23.3 Consent of Feldman Financial Advisors
* 24 Power of Attorney (reference is made to the signature
page of the Form SB-2)
* 27 Financial Data Schedule
99.1 Proposed Stock Order Form and Form of Certification
* 99.2 Proxy Statement for Special Meeting of Members of
Ogdensburg Federal Savings and Loan Association; Form of
Proxy
99.3 Form of Miscellaneous Solicitation and Marketing
Materials
99.4 Appraisal Report
</TABLE>
- ------------------
* Previously filed.
** To be filed.
(b) FINANCIAL STATEMENT SCHEDULES.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
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;
(iii) To include any additional or changed material information on
the plan of distribution.
II-5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement of the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment or remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this amended
registration statement to be signed on its behalf by the undersigned, in the
City of Ogdensburg, State of New York, on October 29, 1998.
PEOPLES BANKCORP, INC.
By: /s/ Robert E. Wilson
----------------------------------------
Robert E. Wilson
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, this
amended registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Robert E. Wilson President, Chief Executive October 29, 1998
- ----------------------------------- Officer and Director
Robert E. Wilson (Principal Executive, Accounting
and Financial Officer)
*/s/ Robert E. Hentschel Chairman of the Board
- -----------------------------------
Robert E. Hentschel
*/s/ Anthony P. LeBarge, Sr. Director
- -----------------------------------
Anthony P. LeBarge, Sr.
*/s/ Wesley L. Stitt Director
- -----------------------------------
Wesley L. Stitt
*/s/ George E. Silver Director
- -----------------------------------
George E. Silver
*By: /s/ Robert E. Wilson October 29, 1998
- -----------------------------------
Robert E. Wilson
Attorney-in-Fact
</TABLE>
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ogdensburg Federal Savings and Loan Association
We consent to the inclusion in the Registration Statement on Form SB-2 of
Peoples Bankcorp, Inc. of our audit report dated July 24, 1998 on the statements
of financial condition of Ogdensburg Federal Savings and Loan Association as of
December 31, 1997 and 1996, and the related statements of income, equity and
cash flows for each of the years in the two year period ended December 31, 1997.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
October 30, 1998
Syracuse, New York
<PAGE>
EXHIBIT 99.1
Peoples Bankcorp, Inc.
Stock Order Form
--------------------------------------------------
STOCK INFORMATION CENTER EXPIRATION DATE
825 STATE STREET FOR STOCK ORDER FORM:
OGDENSBURG, NY 13669
- --------------------------------------------------------------------------------
IMPORTANT--PLEASE NOTE: A properly completed original stock order form must be
used to subscribe for common stock. Faxes or copies of this form will not be
accepted.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
(1) NUMBER OF SHARES SUBSCRIPTION PRICE (2) TOTAL PAYMENT DUE OFFICE USE ONLY
______________ X $10.00 = $ ______________ _______________ _______________ _______________
Date Received Batch # Order #
The minimum purchase is 25 shares. The maximum number --------------------------------------------------
of shares that any person may purchase generally (6) PURCHASER INFORMATION
cannot exceed 5,000 shares, and the maximum A.[_] Eligible Account Holder - Check here if you
number that any person, together with associates were a depositor of at least $50.00 at the
of and persons acting in concert with such person, Association on June 30, 1997.
may purchase cannot exceed 10,000 shares (subject to B.[_] Supplemental Eligible Account Holder - Check
adjustment). here if you were a depositor of at least
- ---------------------------------------------------------------- $50.00 at the Association on September 30, 1998.
[_](3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION C.[_] Other Member - Check here if you were a depositor
Check here if you are a director, officer or employee of of or mortgage loan borrower from the Association on
Ogdensburg Federal Savings or a member of such person's November , 1998.
immediate family. D.[_] Check here if you are a permanent resident of
- ---------------------------------------------------------------- St. Lawrence County, New York.
[_] (4) METHOD OF PAYMENT/CHECK
Enclosed is a check or money order made payable to Peoples Enter information for all accounts that you had
Bankcorp, Inc. (the "Company") in the amount of: $____________ at the Association as of the dates specified
CASH CAN BE USED ONLY IF PRESENTED IN PERSON AT THE above for which you checked the appropriate box.
ASSOCIATION'S OFFICE. -----------------------------------------------------
- ---------------------------------------------------------------- Account Title (Names on Accounts) Account Number(s)
[_] (5) METHOD OF PAYMENT/WITHDRAWAL ---------------------------------- -----------------
The undersigned authorizes withdrawal from the following ---------------------------------- -----------------
account(s) at the Association. There is no penalty for early ---------------------------------- -----------------
withdrawal used for this payment. ---------------------------------- -----------------
- ---------------------------------------------------------------- PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY
Account Number(s) Withdrawal Amount(s) RESULT IN THE LOSS OF PART OR ALL OF YOUR SUBSCRIPTION
- ------------------------------ -------------------------------- RIGHTS. IF ADDITIONAL SPACE IS NEEDED, PLEASE UTILIZE
$ THE BACK OF THIS STOCK ORDER FORM.
- ------------------------------ -------------------------------- -----------------------------------------------------
- ------------------------------ --------------------------------
- ------------------------------ --------------------------------
Total Withdrawal Amount $
--------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
(7) FORM OF STOCK OWNERSHIP
[_] Individual [_] Joint Tenants [_] UTMA [_] Fiduciary (i.e., trust, estate, etc.)
[_] Individual Retirement Account [_] Tenants in Common [_] Corporation or partnership [_] Other _______
- ---------------------------------------------------------------------------------------------------------------------------------
(8) NAME(S) IN WHICH YOUR STOCK IS TO BE REGISTERED (PLEASE PRINT CLEARLY) Social Security No. or Tax ID No.
- ----------------------------------------------------------------------------------- -----------------------------------------
Name(s) continued
- ----------------------------------------------------------------------------------- -----------------------------------------
Street Address County of Residence
- ----------------------------------------------------------------------------------- -----------------------------------------
(9) TELEPHONE INFORMATION (Daytime) City State Zip Code
( )
- ---------------------------------------------------- ---------------------------- ----------------------- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
[_] (10) NASD OR GROUP AFFILIATION [_] (11) ASSOCIATE--ACTING IN CONCERT
Check here if you are a member of the National Association of Securities Dealers, Check here, and complete the reverse
Inc. ("NASD"), a person associated with an NASD member, a member of the immediate side of this Form, if you or any
family of any such person to whose support such person contributes, defined on the associate (as reverse side of this Form)
directly or indirectly, or the holder of an account in which an NASD member or or persons acting in concert with you have
person associated with an NASD member has a beneficial interest. To comply with submitted other orders for shares in the
conditions under which an exemption from the NASD's Interpretation With Respect Subscription and/or Community Offerings.
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD Affiliation box, (i) not to sell, transfer or hypothecate the stock for a
period of 90 days following issuance, and (ii) to report this subscription in
writing to the applicable NASD member within one day of payment therefor.
- ---------------------------------------------------------------------------------------------------------------------------------
(12) ACKNOWLEDGMENT
To be effective, this fully completed Stock Order Form must be actually received by Ogdensburg Federal Savings no later than 12:00
Noon, Eastern Time, on , 1998, unless extended; otherwise this Stock Order Form and all subscription rights will be void. Completed
Stock Order Forms, together with the required payment or withdrawal authorization, may be delivered to Ogdensburg Federal Savings
or may be mailed to the Post Office Box indicated on the enclosed business reply envelope. All subscription rights exercisable
hereunder are not transferable and shares purchased upon exercise of such rights must be purchased for the account of the person
exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance with, and subject to, the terms and conditions of the
Plan of Conversion of Ogdensburg Federal Savings described in the accompanying Prospectus. If the Plan or Conversion is not
approved by the depositors of Ogdensburg Federal Savings at a Special Meeting to be held on , 1998, or any adjournment thereof, all
orders will be cancelled and funds received as payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Ogdensburg Federal Savings, this Stock Order Form may not be modified, withdrawn or
cancelled (unless the Conversion is not completed within 45 days after the completion of the Subscription Offering) without the
Association's consent, and if authorization to withdraw from deposit accounts at Ogdensburg Federal Savings has been given as
payment for shares, the amount authorized for withdrawal shall not otherwise be available for withdrawal by the undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID Number and the other information provided under number 8 of
this Stock Order Form are true, correct and complete, that I am not subject to back-up withholding, that I am purchasing for my own
account and that there is no agreement or understanding regarding the transfer of my subscription rights or the sale or transfer of
these shares.
Applicable Regulations prohibit any person from transferring or entering into any agreement directly or indirectly to transfer, the
legal or beneficial ownership of subscription rights, or the underlying securities to the account of another. Ogdensburg Federal
Savings and Peoples Bankcorp, Inc. may pursue any and all legal and equitable remedies in the event they become aware of the
transfer of subscription rights and will not honor orders known by them to involve such transfer.
I acknowledge that the common stock offered is not a savings or deposit account and is not federally insured or guaranteed.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED TWICE: BELOW AND ON THE FORM OF CERTIFICATION ON THE REVERSE HEREOF.
SIGNATURE DATE SIGNATURE DATE
- --------------------------------------------------------- ---------------------------------------------------------
A SIGNED FORM OF CERTIFICATION MUST ACCOMPANY ALL STOCK ORDER FORMS (SEE REVERSE SIDE)
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ITEMS (5)A, B AND C--(CONTINUED)
Account Title (Names on Account Account Title (Names on Account
Accounts) Number(s) Accounts) Number(s)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
ITEM (10)--(CONTINUED)
List below all other orders "Associate" is defined as: (i) any
submitted by you or your corporation or organization (other than the
Associates (as defined) or by Association, Peoples Bankcorp, Inc. or a
persons acting in concert with majority-owned subsidiary of the
you. Association) of which such person is a
director, officer or a partner or is,
directly or indirectly, the beneficial owner
Number of of 10% or more of any class of equity
Name(s) listed on Shares securities; (ii) any trust or other estate
other Stock Order Ordered in which such person has a substantial
Forms beneficial interest or as to which such
- -------------------------------- person serves as a trustee or in a similar
- -------------------------------- fiduciary capacity; provided, however, such
- -------------------------------- term shall not include Peoples Bankcorp,
- -------------------------------- Inc's or the Association's employee benefit
- -------------------------------- plans in which such person has a substantial
beneficial interest or serves as a trustee
or in a similar fiduciary capacity; and
(iii) any relative or spouse of such person,
or any relative of such spouse, who either
has the same home as such person or who is a
director or officer of Peoples Bankcorp,
Inc. or the Association. Directors of
Peoples Bankcorp, Inc. or the Association
are not treated as associates solely because
of their Board membership.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW AND ON THE
FRONT OF THIS FORM.
CERTIFICATION FORM
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE
("COMMON STOCK"), OF PEOPLES BANKCORP, INC. (THE "COMPANY"), THE PROPOSED
HOLDING COMPANY FOR OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION (THE
"ASSOCIATION"), ARE NOT A DEPOSIT ACCOUNT, ARE NOT FEDERALLY INSURED, AND
ARE NOT GUARANTEED BY THE COMPANY, THE ASSOCIATION OR THE FEDERAL
GOVERNMENT.
If anyone asserts that the shares of Common Stock are federally insured or
guaranteed, or is as safe as an insured deposit, I should call the Office
of Thrift Supervision.
I further certify that, before purchasing the shares of Common Stock of the
Company, I received a copy of the Prospectus dated November , 1998 which
discloses the nature of the shares of Common Stock being offered thereby
and describes the following risks involved in an investment in the Common
Stock under the heading "Risk Factors" beginning on page 1 of the
Prospectus:
1. Lack of Active Market for Common Stock
2. Below Average Return on Average Equity and Increased Expenses
Immediately After Conversion
3. Impact of Technological Advances; Year 2000 Compliance
4. Risks Associated with Nonresidential Lending
5. Potential Impact of Changes in Interest Rates and the Current
Interest Rate Environment
6. Market Area and Resource Limitations
7. Dependence on President
8. Anti-Takeover Provisions and Statutory Provisions That Could
Discourage Hostile Acquisitions of Control
9. Possible Liability of Large Stockholders
10. Intention to Remain Independent
11. Possible Voting Control by Directors and Officers
12. Possible Dilutive Effect of MRP and Stock Options
13. Financial Institution Regulation of the Thrift Industry
14. No Modification or Cancellation of Subscriptions
15. Management's Discretion in Allocating Net Proceeds
16. Possible Adverse Tax Consequences of the Subscription Rights
17. Restrictions on Repurchase of Shares
Signature Date Signature Date
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
Name (Please Print) Name (Please Print)
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
<PAGE>
PEOPLES BANKCORP, INC.
- -------------------------------------------------------------------------------
STOCK OWNERSHIP GUIDE AND STOCK
ORDER FORM INSTRUCTIONS
- -------------------------------------------------------------------------------
STOCK OWNERSHIP GUIDE
- ---------------------
INDIVIDUAL
Include the first name, middle initial and last name of the stockholder. Avoid
the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS
For joint tenants with right of survivorship may be specified to identify two
or more owners. When stock is held by joint tenants with right of
survivorship, ownership is intended to pass automatically to the surviving
joint tenant(s) upon the death of any joint tenant. All parties must agree to
the transfer or sale of shares held by joint tenants.
TENANTS IN COMMON
For tenants in common may also be specified to identify two or more owners.
When stock is held by tenants in common, upon the death of one co-tenant,
ownership of the stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or
sale of shares held by tenants in common.
UNIFORM TRANSFER TO MINORS ACT ("UTMA")
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of the individual states. There may be only one
custodian and one minor designated on a stock certificate. The standard
abbreviation of custodian is "CUST", while the Uniform Transfer to Minors Act
is abbreviated "UTMA". Standard U.S. Postal Service state abbreviations should
be used to describe the appropriate state. For example, stock held by John P.
Jones under the Uniform Transfer to Minors Act will be abbreviated: JOHN P.
JONES, CUST SUSAN A. JONES, UTMA, NY.
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
* The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
* The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
* A description of the document governing the fiduciary relationship, such as
a trust agreement or court order. Without documentation establishing a
fiduciary relationship, your stock may not be registered in a fiduciary
capacity.
* The date of the document governing the relationship, except that the date
of a trust created by a will need not be included in the description.
* The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership: John D. Smith, Trustee Under Agreement
Dated 10-1-92 for Tom A. Smith.
STOCK ORDER FORM INSTRUCTIONS
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price of $10.00 per share. The minimum number of shares that may
be subscribed for is 25. Peoples Bankcorp, Inc. has reserved the right to
reject any order received in any Community Offering, in whole or in part.
ITEM 3--
Payment for shares may be made in cash (only if delivered by you in person to
the Association's office) or by check or money order made payable to Peoples
Bankcorp, Inc.
Your funds will earn interest at the Association's passbook rate until the
conversion is completed or terminated. DO NOT MAIL CASH! Please check this box
if your method of payment is by check or money order.
ITEM 4--
If you wish to pay for your stock by a withdrawal from a deposit account at
the Association, please check this box and insert the account number(s) and
the amount of your withdrawal authorization for each account. There will be no
penalty assessed for early withdrawals from certificate accounts used for
stock purchases. This form of payment may not be used if your account is an
Individual Retirement Account. Please contact the Stock Information Center for
information regarding purchase from an Individual Retirement Account.
ITEM 5--
a, b and c. If you were a depositor on the Eligibility Record Date June 30, 1997
ERD, the Supplemental Eligibility Record Date September 30, 1998 SRD and/or
the voting record date for Other Members, you must list all names on the
account(s) and all account number(s) of accounts you had at those dates in
order to ensure proper identification of your purchase rights.
If you were a borrower from the Association with mortgage loan(s)
outstanding on VRD , you must list each loan number in order to ensure
proper identification of your purchase rights.
d. Please check this box if you are a director, officer or employee of
Ogdensburg Federal Savings and Loan Association or a member of such person's
immediate family.
ITEMS 6, 7 AND 8--
The stock transfer industry has developed a uniform system of stockholder
registration that we will use in the issuance of your IBL Bancorp, Inc. common
stock. Please complete Items 6,7 and 8 as fully and accurately as possible,
and be certain to supply the social security or tax ID number of the person
who is subscribing for shares. Failure to provide the social security or tax
ID number may result in the loss of your purchase priority. In addition,
please list your daytime phone number. We will need to call you if we cannot
execute your order as given. If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock
Ownership Guide" above.
ITEM 9--
Please check this box if you are a member of the NASD or if this item
otherwise applies to you.
ITEM 10--
Please check this box if you or any associate or person acting in concert with
you has submitted another order for shares and complete Item 10 on the back of
the Stock Order Form. "Associate" is defined as: (i) any corporation or
organization (other than the Association or a majority-owned subsidiary of the
Association) of which such person is a director, officer or a partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as a trustee
or in a similar fiduciary capacity; provided, however, such term shall not
include Peoples Bankcorp, Inc.'s or the Association's employee benefit plans
in which such person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity; and (iii) any relative or spouse
of such person, or any relative of such spouse, who either has the same home
as such person or who is a director or officer of Peoples Bankcorp, Inc. or
the Association. Directors of Peoples Bankcorp, Inc. or the Association are
not treated as associates solely because of their Board membership.
ITEMS 11 AND 12--
Please sign and date the Stock Order Form where indicated. Review the Stock
Order Form carefully before you sign, including the Acknowledgment. Normally,
one signature is required. An additional signature is required only when
payment is to be made by withdrawal from a deposit account that requires
multiple signatures to withdraw funds. You may mail your completed Stock Order
Form in the envelope that has been provided, or you may deliver your Stock
Order Form to Ogdensburg. Your Stock Order Form, properly completed, and
payment in full (or withdrawal authorization) must be received by the
Association no later than 12:00 noon, Eastern time, on September 15, 1998 or
it will become void. If you need further assistance, please call the Stock
Information Center at (___) ___-____ between 9:00 a.m. and 4:00 p.m., Eastern
time, Monday through Friday.
<PAGE>
EXHIBIT 99.3
PEOPLES BANKCORP, INC.
PROPOSED HOLDING COMPANY FOR
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
OGDENSBURG, NEW YORK
PROPOSED MARKETING MATERIALS
<PAGE>
Marketing Materials
Peoples Bankcorp, Inc.
Ogdensburg, New York
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
IV. Individual Letters and Community Meeting Invitations
V. IRA Mailing
A. Explanation
B. Quantity
C. IRA Mailing Example
VI. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VII. Proxy Reminder
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises the Association to
forward press releases to area newspapers, radio stations, etc. at various
points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
<PAGE>
C. Distribution List
National Distribution List
--------------------------
<TABLE>
<S> <C>
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Association 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
</TABLE>
<PAGE>
Local Media List
----------------
(To be provided)
Newspaper
- ---------
Radio
- -----
<PAGE>
D. Press Release Examples
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Robert E. Wilson, President
(315) 393-4340
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
-----------------------------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Ogdensburg, New York (__________, 1998) - Robert E. Wilson, President of
Ogdensburg Federal Savings and Loan Association ("Ogdensburg Federal"),
Ogdensburg, New York, announced that Ogdensburg Federal has received approval
from the Office of Thrift Supervision to convert from a federally-chartered
mutual Association to a federally-chartered stock Association. In connection
with the Conversion, Ogdensburg Federal has formed a holding company, Peoples
Bankcorp, Inc., to hold all of the outstanding capital stock of Ogdensburg
Federal Savings and Loan Association.
Peoples Bankcorp, Inc. is offering up to 198,375 shares of its common
stock, subject to adjustment, at a price of $10.00 per share. Certain account
holders and borrowers of Ogdensburg Federal will have an opportunity to
subscribe for stock through a Subscription Offering that closes on _________,
1998. Shares that are not subscribed for during the Subscription Offering may
be offered subsequently to the general public in a Direct Community Offering,
with first preference given to natural persons and trusts of natural persons
residing in St. Lawrence County, New York. The Subscription Offering and
Community Offering, will be managed by Trident Securities, Inc. of Raleigh,
North Carolina. Copies of the Prospectus relating to the offerings and
describing the Plan of Conversion will be mailed to customers on ____________,
1998.
As a result of the Conversion, Ogdensburg Federal Savings and Loan
Association will be structured in the stock form as are all commercial banks and
an increasing number of savings
<PAGE>
institutions and will be a wholly-owned subsidiary of Peoples Bankcorp, Inc.
According to Mr. Wilson, "Our day to day operations will not change as a result
of the Conversion and deposits will continue to be insured by the FDIC up to the
applicable legal limits."
Customers with questions concerning the stock offering should call
Ogdensburg Federal's Stock Information Center at (315)____________, or visit
Ogdensburg Federal's office.
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Robert E. Wilson, President & CEO
(315) 393-4340
PEOPLES BANKCORP, INC. COMPLETES INITIAL STOCK OFFERING
-------------------------------------------------------
Ogdensburg, New York - (__________, 1998) Robert E. Wilson, President of
Ogdensburg Federal Savings and Loan Association ("Ogdensburg Federal" or the
"Association"), announced today that Peoples Bankcorp, Inc., the proposed
holding company for Ogdensburg Federal, has completed its initial stock offering
in connection with the Association's conversion from mutual to stock form. A
total of ________ shares were sold at the price of $10.00 per share.
On ____________, 1998, Ogdensburg Federal's Plan of Conversion was approved
by the Association's voting members at a special meeting of members.
Mr. Wilson said that the officers and boards of directors of Peoples
Bankcorp, Inc. and the Association wished to express their thanks for the
response to the stock offering and that Ogdensburg Federal looks forward to
serving the needs of its customers and new stockholders as a community-based
stock institution. The stock commenced trading on _________, 1998 on the OTC
Electronic Bulletin Board under the symbol "______". Trident Securities, Inc.
of Raleigh, North Carolina managed the stock offering.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify Ogdensburg
Federal's customers and members of the local community that the conversion
offering is underway.
The intended use of advertisement "B" is to remind Ogdensburg Federal's
customers of the closing date of the Subscription Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and
possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of the Subscription Offering and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the customer
base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
<PAGE>
This announcement is neither an offer to sell nor a solicitation of an offer to
buy these securities. The offer is made only by the prospectus. These shares
have not been approved or disapproved by the Securities and Exchange Commission,
the Office of Thrift Supervision or the Federal Deposit Insurance Corporation,
nor has such commission, office or corporation passed upon the accuracy or
adequacy of the prospectus. Any representation to the contrary is unlawful.
NEW ISSUE ____________, 1998
198,375 SHARES
These shares are being offered pursuant
to a Plan of Conversion whereby
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Ogdensburg, New York, will
convert from a federal mutual Association
to a federal capital stock Association
and become a wholly owned subsidiary of
PEOPLES BANKCORP, INC.
COMMON STOCK
---------------
PRICE $10.00 PER SHARE
---------------
TRIDENT SECURITIES, INC.
For a copy of the prospectus call (315) 263-4243.
Copies of the prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
Advertisement (B)
OGDENSBURG FEDERAL
__________, 1998 IS THE DEADLINE TO
ORDER STOCK OF PEOPLES BANKCORP, INC.
Customers of Ogdensburg Federal Savings and Loan Association
have the opportunity
to invest in Ogdensburg Federal Savings and Loan Association
by subscribing
for common stock in its proposed holding company
PEOPLES BANKCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (315) 263-4243.
This announcement is neither an offer to sell nor a
solicitation of an offer to buy the stock of
Peoples Bankcorp, Inc. The offer is made only by the
Prospectus. The shares of common stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer some of the most commonly
asked questions in "plain, everyday language"; and b) to highlight in
brochure form the purchase commitments of the Association's officers and
directors shown in the Prospectus. Although most of the answers are taken
verbatim from the Prospectus, it saves the individual from searching for
the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of the Association.
2. Question and Answer brochures are available in Ogdensburg Federal's
office.
3. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
<TABLE>
<CAPTION>
PROPOSED OFFICER AND DIRECTOR PURCHASES
Total Shares Aggregate Price of Percent of Shares
Name and Position Purchased Shares Purchased Purchased
- ----------------- ------------ ------------------ -----------------
<S> <C> <C> <C>
Robert E. Hentschel, Chairman 7,000 $ 70,000 _____%
Anthony P. LeBarge, Sr., Director 10,000 $100,000 _____%
George Silver, Director 10,000 $100,000 _____%
Wesley L. Stitt, Director 7,000 $ 70,000 _____%
Robert E. Wilson, President 10,000 $100,000 _____%
and CEO, Director
All Directors and Executive Officers
as a group (5 persons) 44,000 $440,000 _____%
</TABLE>
<PAGE>
Ogdensburg Federal Savings and Loan Association
Ogdensburg, New York
Questions and Answers Regarding the Subscription and Community Offering
MUTUAL TO STOCK CONVERSION
--------------------------
Ogdensburg's Board of Directors has unanimously voted to convert Ogdensburg
Federal Savings and Loan Association ("Ogdensburg Federal") from its present
mutual form to a stock institution, subject to approval of the conversion by
Ogdensburg Federal's members and regulatory authorities. Complete details on
the conversion, including reasons for conversion, are contained in the
Prospectus and Proxy Statement. We urge you to read them carefully.
This brochure is provided to answer basic questions you might have about the
conversion. Remember, the conversion will not affect the rate on any of your
savings accounts, deposit certificates, or loans.
1. Q. What is a "Conversion"?
A. Conversion is a change in the legal form of organization. Ogdensburg
Federal currently operates as a federally-chartered mutual savings and
loan association with no shareholders. Through the conversion,
Ogdensburg Federal will form a holding company, Peoples Bankcorp, Inc.
("Peoples Bankcorp"), which will ultimately own all of the outstanding
stock of Ogdensburg Federal. Peoples Bankcorp will issue common stock
in the conversion, as described below, and will be a publicly-owned
company.
2. Q. Why is Ogdensburg Federal converting?
A. As a federally-chartered mutual savings and loan association,
Ogdensburg Federal does not have stockholders and has no authority to
issue stock. By converting to the stock form of organization,
Ogdensburg Federal will be structured in the form used by all
commercial Banks, most business entities and a growing number of
savings institutions. The Conversion will be important to the future
growth and performance of Ogdensburg Federal by providing a larger
capital base on which it may operate, enhance future access to capital
markets and, if desired, enhance Ogdensburg Federal's ability to
diversify into other financial service-related activities. Currently,
Ogdensburg Federal has no specific plans, agreements, arrangements or
understandings regarding such diversification.
<PAGE>
3. Q. Will the conversion have any effect on savings accounts,
certificates of deposit or loans with Ogdensburg Federal?
A. No. The conversion will not change the amount, interest rate or
withdrawal rights of any savings and checking accounts or certificates
of deposit. The rights and obligations of borrowers under their loan
agreements will not be affected. However, upon consummation of the
conversion, Ogdensburg Federal 's deposit account holders and
borrowers will no longer have voting rights unless they purchase
common stock in Peoples Bankcorp.
4. Q. Will the conversion cause any changes in personnel or management?
A. No. The conversion will not cause any changes in personnel or
management. The normal day-to-day operations will continue as before.
5. Q. Did the Board of Directors of Ogdensburg Federal approve the
conversion?
A. Yes. The Board of Directors unanimously adopted the Plan of
Conversion on _______, 1998.
THE SUBSCRIPTION AND COMMUNITY OFFERING
---------------------------------------
6. Q. Who is entitled to subscribe Peoples Bankcorp common stock?
A. Rights to subscribe for common stock will be given in order of
priority to (i) depositors of Ogdensburg Federal as of June 30, 1997
with a $50.00 minimum deposit at that date (the "Eligible Account
Holders"); (ii) Ogdensburg Federal Savings and Loan Association's
employee stock ownership plan (the "ESOP"), a tax qualified employee
stock benefit plan; (iii) depositors of Ogdensburg Federal Savings and
Loan Association, who are not Eligible Account Holders, with $50.00 or
more on deposit as of September 30, 1998 (the "Supplemental Eligible
Account Holders"); and (iv) certain depositors and borrowers of
Ogdensburg Federal as of _______, 1998, the Voting Record Date ("Other
Members"), subject to the purchase limitations set forth in the Plan
of Conversion.
Shares that are not subscribed for during the subscription offering,
if any, may be offered to the general public through a community
offering with preference given to natural persons and trusts of
natural persons who are permanent residents of St. Lawrence County,
New York (the "Local Community"). It is anticipated that any shares
not subscribed for in the Subscription and Community Offerings will be
offered to certain members of the general public through a syndicate
of registered broker dealers pursuant to selected dealers agreements
in a Syndicated Community Offering.
<PAGE>
7. Q. How do I subscribe for shares of stock?
A. Eligible customers wishing to exercise their subscription rights must
return the enclosed Stock Order Form to Ogdensburg Federal. The Stock
Order Form must be completed and returned along with full payment or
appropriate instructions authorizing a withdrawal from a deposit
account at Ogdensburg Federal on or prior to the close of the
Subscription Offering which is 12:00 noon, Eastern time, on December
___, 1998, unless extended.
8. Q. How can I pay for my subscription stock order?
A. First, you may pay for your stock in cash (if delivered in person to
Ogdensburg Federal) or by check or money order. Subscription funds will
earn interest at Ogdensburg Federal's passbook rate from the day we
receive them until the completion or termination of the conversion.
Second, you may authorize us to withdraw funds from your Ogdensburg
Federal savings account or certificate of deposit without early
withdrawal penalty. These funds will continue to earn interest at the
rate in effect for your account until completion of the offering at
which time your funds will be withdrawn for your purchase. Funds
remaining in this account (if any) will continue at the contractual
rate unless the withdrawal reduces the account balance below the
applicable minimum in which case you will receive interest at the
passbook rate. A hold will be placed on your account for the amount you
specify for stock payment. You will not have access to these funds from
the day we receive your order until the completion or termination of
the conversion.
If you want to use Individual Retirement Account deposits held at
Ogdensburg Federal to purchase stock, call our Stock Information
Center at (315) __________ for assistance. There will be no early
withdrawal or IRS penalties incurred by these transactions, but
additional paperwork is necessary.
9. Q. When must I place my order for shares of stock?
A. To exercise subscription rights in the subscription offering, a Stock
Order Form must be received by Ogdensburg Federal with full payment for
all shares subscribed for not later than 12:00 noon, Eastern time, on
December ___, 1998.
Non-customers desiring to order shares through the community offering,
if any, must order shares before the close of the community offering,
if any, which will be no sooner than 12:00 noon, Eastern time on
December __, 1998, unless extended.
<PAGE>
10. Q. How many shares of stock are being offered?
A. Peoples Bankcorp, Inc. is offering up to 198,375 shares of common
stock at a price of $10.00 per share. The number of shares may be
decreased to 127,500 or increased to 198,375 in response to the
independent appraiser's final determination of the consolidated pro
forma market value of Peoples Bankcorp and Ogdensburg Federal, as
converted.
11. Q. What is the minimum and maximum number of shares that I can purchase
during the offering period?
A. The minimum number of shares that may be purchased is 25 shares. No
Stock Order Form will be accepted for less than $250. The maximum
number of shares that may be purchased per eligible depositor in the
subscription offering is 5,000 shares (or $50,000). We may decrease or
increase the maximum purchase limitation without notifying you. In
certain, instances, your purchase might be grouped together with
purchases by persons with other accounts with whom you are affiliated
or related and in that event the aggregate purchases may not exceed
10,000 shares ($100,000).
12. Q. How was it determined that between 127,500 shares and 198,375
shares of stock would be issued at $10.00 per share?
A. The share range was determined through an appraisal of Peoples
Bankcorp and Ogdensburg Federal, as converted, by Feldman Financial
Advisors, Inc., an independent appraisal firm specializing in the
thrift industry.
13. Q. Must I pay a commission on the stock for which I subscribe?
A. No. You will not pay a commission on stock purchased in the
Subscription Offering, the Community Offering, if any, or Syndicated
Community Offering, if any.
14. Q. Will I receive interest on funds I submit for stock purchases?
A. Yes. Ogdensburg Federal will pay its current passbook rate from the
date funds are received (with a completed Stock Order Form) during the
subscription and community offerings until completion of the
conversion.
15. Q. If I have misplaced my Stock Order Form, what should I do?
A. Ogdensburg Federal will mail you another order form or you may
obtain one from Ogdensburg Federal's main office. If you need
assistance in obtaining or completing a Stock Order Form, please call
or visit the Stock Information Center.
<PAGE>
16. Q. Will there be any dividends paid on the stock?
A. The Company does not intend to initially pay dividends on the
common stock in the first year following the conversion. After the
first year, management will review the adoption of a dividend policy.
No assurance can be given that any dividends (regular or special) will
be paid on the Common Stock or that, if paid, such dividends will not
be reduced or eliminated in future periods.
17. Q. How much stock do the directors and officers of Ogdensburg Federal
intend to purchase through the Subscription Offering?
A. Directors and executive officers intend to purchase 44,000 shares
($440,000). The purchase price paid by directors and officers will be
the same as that paid by customers and the general public.
18. Q. Are the subscription rights transferable to another party?
A. No. Pursuant to federal regulations, subscription rights granted to
Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members may be exercised only by the person(s) to whom they are
granted. Any person found to be transferring or selling subscription
rights will be subject to forfeiture of such rights and other
penalties.
19. Q. I closed my account several months ago. Someone told me that I am still
eligible to buy stock. Is that true?
A. If you were an account holder on the Eligibility Record Date, June 30,
1997, or the Supplemental Eligibility Record Date, September 30, 1998,
you are entitled to purchase stock regardless of whether or not you
continue to hold your Ogdensburg Federal.
20. Q. May I obtain a loan from Ogdensburg Federal using stock as collateral
to pay for my shares?
A. No. Federal regulations do not allow Ogdensburg Federal Savings and
Loan Association to make loans for this purpose, but other financial
institutions may make a loan for this purpose.
21. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure the shares
of stock?
A. No. The shares will not be insured by the FDIC or any other government
agency. However, the Savings Bank Insurance Fund of the FDIC will
continue to insure savings accounts and certificates of deposit up to
the applicable limits allowed by law.
<PAGE>
22. Q. Will there be a market for the stock following the conversion?
A. Peoples Bankcorp has never issued stock before, and consequently there
is no established market for its common stock. Peoples Bankcorp has
received conditional approval to have the common stock listed on the
Over The Counter Bulletin Board under a symbol that has yet to be
determined. Trident Securities, Inc. intends to make a market in the
common stock . However, purchasers of common stock should recognize
that no assurance can be given than an active and liquid trading
market will develop or, if developed, will be maintained.
23. Q. Can I purchase stock using funds in a Ogdensburg Federal IRA
account?
A. Yes. Contact the Stock Information Center for the additional
information. It takes several days to process the necessary IRA forms
and, therefore, it is necessary that you make arrangements by
__________ 1998, to accommodate your order.
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
24. Q. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
A. At the Special Meeting of Members to be held on December ___, 1998,
you are eligible to vote if you are one of the "Voting Members," who
are holders of Ogdensburg Federal's deposits or other authorized
accounts or loans as of ________, 1998 (the "Voting Record Date") for
the Special Meeting. However, members of record as of the close of
business on the Voting Record Date who cease to be depositors or
borrowers prior to the date of the Special Meeting are no longer
members and will not be entitled to vote at the Special Meeting. If
you are a Voting Member, you should have received a proxy statement
and proxy card with which to vote.
25. Q. How many votes do I have as a Voting Member?
A. Each account holder is entitled to one vote for each $100, or fraction
thereof, on deposit in such account. Each borrower who holds eligible
borrowings is entitled to cast one vote in addition to the number of
votes, if any, he or she is entitled to cast as an account holder. No
member may cast more than 1,000 votes.
26. Q. If I vote "against" the Plan of Conversion and it is approved, will I
be prohibited from buying stock during the subscription offering?
A. No. Voting against the Plan of Conversion in no way restricts you from
purchasing stock in either the subscription offering or the community
offering.
<PAGE>
27. Q. What happens if Ogdensburg Federal does not get enough votes to
approve the Plan of Conversion?
A. Ogdensburg Federal's Conversion would not take place and Ogdensburg
Federal Savings and Loan Association would remain a mutual savings and
loan association.
28. Q. As a qualifying depositor or borrower of Ogdensburg Federal, am I
required to vote?
A. No. However, failure to return your proxy card will have the same
effect as a vote "Against" the Plan of Conversion.
29. Q. What is a Proxy Card?
A. A Proxy Card gives you the ability to vote without attending the
Special Meeting in person. However, you may attend the meeting and
vote in person, even if you have returned your proxy card, if you
choose to do so.
30. Q. How does the conversion affect me?
A. The conversion is intended, among other things, to assist Ogdensburg
Federal in maintaining and expanding its many services to Ogdensburg
Federal's customers and community. By purchasing stock, you will also
have the opportunity to invest in Peoples Bankcorp., the proposed
holding company for Ogdensburg Federal. However, there is no
obligation to purchase stock; the purchase of stock is strictly
optional.
31. Q. How can I get further information concerning the stock offering?
A. You may call the Stock Information Center, at (315) _________ for
further information or a copy of the Prospectus, Stock Order Form,
Proxy Statement and Proxy Card.
THIS BROCHURE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS. A PROSPECTUS CAN BE
OBTAINED AT THE OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION OFFICE OR BY
CALLING THE STOCK INFORMATION CENTER. THERE SHALL BE NO SOLICITATION OF AN
OFFER OR SALE OF STOCK IN ANY JURISDICTION IN WHICH ANY OFFER, SOLICITATION OF
AN OFFER OR SALE OF STOCK WOULD BE UNLAWFUL.
THE COMMON STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
FOR YOUR CONVENIENCE
In order to assist you during the stock offering period, we have established a
Stock Information Center to answer your questions. Please call:
<PAGE>
( ) __________
IV. Individual Letters and Community Meeting Invitations
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding community meetings in various locations. In an effort to target a group
of interested investors, Trident requests that each Director of the Association
submit a list of acquaintances that he or she would like to invite to a
community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects. Invitations are sent to each
Director's prospects through the mail. All invitations are preceded by a
Prospectus and all attendees are given a Prospectus at the meeting. Letters
will be sent to prospects to thank them for their attendance and to remind them
of closing dates.
C. Examples enclosed.
<PAGE>
Example
(Introductory Letter)
(Ogdensburg Federal Savings and Loan Association Letterhead)
_______, 1998
Name
Address
City, State, Zip
Dear ______________:
You have probably read recently in the newspaper that Ogdensburg Federal
Savings and Loan Association is converting from mutual to stock form. This
conversion is the biggest step in the history of Ogdensburg Federal Savings and
Loan Association in that it allows customers, community members, employees and
directors the opportunity to subscribe for common stock in our new holding
company, Peoples Bankcorp, Inc.
I have enclosed a Prospectus and a stock order form which will allow you to
subscribe for shares and possibly become a charter stockholder of Peoples
Bankcorp, Inc. In addition, we will be holding several presentations for friends
of Ogdensburg Federal Savings and Loan Association in order to explain the
Conversion and review the merits of possibly becoming a charter stockholder of
Peoples Bankcorp, Inc. You will receive an invitation shortly.
I hope that if you have any questions you will feel free to call our Stock
Information Center at ( ) ___________. I look forward to seeing you at our
presentation.
Sincerely,
Director
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
Example
(Final Reminder Letter)
(Ogdensburg Federal Savings and Loan Association Letterhead)
________, 1998
Name
Address
City, State, Zip
Dear ________________:
Just a quick note to remind you that the deadline is quickly approaching
for purchasing stock in Peoples Bankcorp, Inc., the proposed holding company for
Ogdensburg Federal Savings and Loan Association. I hope you will join me in
becoming a charter stockholder in what will be New York's newest publicly owned
financial institution holding company.
The deadline for subscribing for shares in the Subscription Offering is
December __, 1998. If you have any questions, I hope you will call our Stock
Information Center at (315) _______________.
Once again, I look forward to having you join me as a stockholder of
Peoples Bankcorp, Inc.
Sincerely,
Robert E. Wilson
President & CEO
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
Ogdensburg Federal Savings and Loan Association Letterhead
________, 1998
Dear Individual Retirement Account Participant:
As you know, Ogdensburg Federal Savings and Loan Association is in the
process of converting from a federally chartered mutual Association to a
federally chartered stock Association and has formed Peoples Bankcorp, Inc. to
hold all of the stock of Ogdensburg Federal Savings and Loan Association (the
"Conversion"). Through the Conversion, certain current and former depositors
and borrowers of Ogdensburg Federal Savings and Loan Association have the
opportunity to purchase shares of common stock of Peoples Bankcorp, Inc. in a
Subscription Offering. Peoples Bankcorp, Inc. currently is offering up to
152,000 shares of common stock, subject to adjustment, at a price of $10.00 per
share.
As the holder of an individual retirement account ("IRA") at Ogdensburg
Federal Savings and Loan Association, you may use your IRA funds to subscribe
for stock. If you desire to purchase shares of common stock of Peoples
Bankcorp, Inc. through your IRA, Ogdensburg Federal Savings and Loan Association
can assist you in self-directing those funds. This process can be done without
an early withdrawal penalty and generally without a negative tax consequence to
your IRA.
If you are interested in receiving more information on self-directing your
IRA, please contact our Stock Information Center at (315) __________. Because
it takes several days to process the necessary IRA forms, a response must be
received by ________, 1998 to accommodate your interest.
Sincerely,
Robert E. Wilson
President & CEO
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
(Ogdensburg Federal Savings and Loan Association Letterhead)
___________, 1998
Dear Valued Customer:
Ogdensburg Federal Savings and Loan Association is pleased to announce that
we have received regulatory approval to proceed with our plan to convert to a
federally chartered stock savings and loan association, conditioned upon receipt
of approval by Ogdensburg Federal Savings and Loan Association's members, among
other things. This stock conversion is the most significant event in the
history of Ogdensburg Federal Savings and Loan Association in that it allows
customers, community members, directors and employees an opportunity to
subscribe for stock in Peoples Bankcorp, Inc., the proposed holding company for
Ogdensburg Federal Savings and Loan Association.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
Ogdensburg Federal Savings and Loan Association, or the terms or conditions of
any loans to existing borrowers under their individual contract arrangements
with Ogdensburg Federal Savings and Loan Association. Let us also assure you
that the stock Conversion will not result in any changes in the management,
personnel or the Board of Directors of Ogdensburg Federal Savings and Loan
Association.
A special meeting of the members of Ogdensburg Federal Savings and Loan
Association will be held on ___________ at _________, Eastern Time, at
Ogdensburg Federal Savings and Loan Association's main office, 825 State Street,
Ogdensburg, New York, to consider and vote upon Ogdensburg Federal Savings and
Loan Association's Plan of Conversion. Enclosed is a proxy card. Your Board of
Directors solicits your vote "FOR" Ogdensburg Federal Savings and Loan
Association's Plan of Conversion. A vote in favor of the Plan of Conversion
does not obligate you to purchase stock. If you do not plan to attend the
special meeting, please sign and return your proxy card promptly; your vote is
important to us.
As one of our valued members, you have the opportunity to invest in
Ogdensburg Federal Savings and Loan Association's future by purchasing stock in
Peoples Bankcorp, Inc. during the Subscription Offering, without paying a sales
commission.
If you decide to exercise your subscription rights to purchase shares, you
must return a properly completed stock order form together with full payment for
the subscribed shares so that it is received by Ogdensburg Federal Savings and
Loan Association not later than 12:00 Noon, Eastern Time on December __, 1998.
We also have enclosed a Prospectus and Proxy Statement which fully
describes the conversion and provides financial and other information about
Peoples Bankcorp, Inc. and Ogdensburg Federal Savings and Loan Association.
Please review these materials carefully
<PAGE>
before you vote or invest. For your convenience we have established a Stock
Information Center. If you have any questions, please call the Stock Information
Center at (315) _________.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Robert E. Wilson
President & CEO
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
(Ogdensburg Federal Savings and Loan Association Letterhead)
____________, 1998
Dear Interested Investor:
Ogdensburg Federal Savings and Loan Association is pleased to announce that
we have received regulatory approval to proceed with our plan to convert to a
federally chartered stock Association, conditioned upon receipt of approval by
Ogdensburg Federal Savings and Loan Association's members, among other things.
This stock conversion is the most significant event in the history of Ogdensburg
Federal Savings and Loan Association in that it allows customers, community
members, directors and employees an opportunity to subscribe stock in Peoples
Bankcorp, Inc., the proposed holding company for Ogdensburg Federal Savings and
Loan Association.
We want to assure you that the Conversion will not result in any changes in
the management, personnel or the Board of Directors of Ogdensburg Federal
Savings and Loan Association.
Enclosed is a Prospectus which fully describes Ogdensburg Federal Savings
and Loan Association, its management, board and financial condition. Please
review it carefully before you make an investment decision. If you decide to
invest, please return to Ogdensburg Federal Savings and Loan Association a
properly completed stock order form together with full payment for shares at
your earliest convenience. For your convenience we have established a Stock
Information Center. If you have any questions, please call the Stock
Information Center at (315) ___________.
Sincerely,
Robert E. Wilson
President & CEO
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
(Ogdensburg Federal Savings and Loan Association Letterhead)
____________, 1998
Dear Friend:
Ogdensburg Federal Savings and Loan Association is pleased to announce that
we have received regulatory approval to proceed with our plan to convert to a
federally chartered stock savings and loan association, conditioned upon receipt
of approval by Ogdensburg Federal Savings and Loan Association's members, among
other things. This stock conversion is the most significant event in the history
of Ogdensburg Federal Savings and Loan Association in that it allows customers,
community members, directors and employees an opportunity to subscribe stock in
Peoples Bankcorp, Inc., the proposed holding company for Ogdensburg Federal
Savings and Loan Association.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
Ogdensburg Federal Savings and Loan Association, or the terms or conditions of
any loans to existing borrowers under their individual contract arrangements
with Ogdensburg Federal Savings and Loan Association. Let us also assure you
that the Conversion will not result in any changes in the management, personnel
or the Board of Directors of Ogdensburg Federal Savings and Loan Association.
Our records indicate that you were a depositor of Ogdensburg Federal
Savings and Loan Association on June 30, 1997. Therefore, under applicable law,
you are entitled to subscribe for Common Stock in Ogdensburg Federal Savings and
Loan Association's Subscription Offering. Orders submitted by you and others in
the Subscription Offering are contingent upon the current members' approval of
the Plan of Conversion at a special meeting of members to be held on ___________
and upon receipt of all required regulatory approvals.
If you decide to exercise your subscription rights to purchase shares, you
must return a properly completed stock order form together with full payment for
the subscribed shares so that it is received at Ogdensburg Federal Savings and
Loan Association not later than 12:00 Noon, Eastern Time on December ___, 1998.
Enclosed is a Prospectus which fully describes Ogdensburg Federal Savings
and Loan Association, its management, board and financial condition. Please
review it carefully before you invest. For your convenience, we have
established a Stock Information Center. If you have any questions, please call
the Stock Information Center at (315) __________.
Sincerely,
Robert E. Wilson
President & CEO
Enclosures
<PAGE>
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
<PAGE>
- --------------------------------------------------------------------------------
The Directors and Officers
of
Ogdensburg Federal Savings and Loan Association
cordially invite you to attend a brief
presentation regarding the stock offering of
Peoples Bankcorp, Inc., our proposed holding company
Please join us at the
______________
_____________________
___________________________
____________
____________
for refreshments
YOU MUST RESPOND BY ____________ TO RESERVE A SEAT
R.S.V.P. (315) 263-4243
- --------------------------------------------------------------------------------
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Association in order to alert the customers that funds held in an IRA can
be used to purchase stock. Since this transaction is not as simple as
designating funds from a certificate of deposit like a normal stock
purchase, this letter informs the customer that this process is slightly
more detailed and involves a personal visit to the Association.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the
Association. These letters would be mailed following OTS approval for the
conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - See following page.
<PAGE>
(Ogdensburg Federal Savings and Loan Association Letterhead)
__________ __, 1998
Dear Individual Retirement Account Participant:
As you know, Ogdensburg Federal Savings and Loan Association is in the process
of converting from a federally-chartered mutual Association to a federally-
chartered stock Association and has formed Peoples Bankcorp, Inc. to hold all of
the stock of Ogdensburg Federal Savings and Loan Association (the "Conversion").
Through the Conversion, certain current and former depositors and borrowers of
Ogdensburg Federal have the opportunity to purchase shares of common stock of
Peoples Bankcorp, Inc. in a Subscription Offering. Peoples Bankcorp, Inc.
currently is offering up to _______ shares, subject to adjustment, of Peoples
Bankcorp, Inc. at a price of $10.00 per share.
As the holder of an individual retirement account ("IRA") at Ogdensburg
Federal Savings and Loan Association, you have an opportunity to become a
shareholder in Peoples Bankcorp, Inc. using funds being held in your IRA. If
you desire to purchase shares of common stock of Peoples Bankcorp, Inc. through
your IRA, Ogdensburg Federal can assist you in self-directing those funds. This
process can be done without an early withdrawal penalty and generally without a
negative tax consequence to your retirement account.
If you are interested in ordering Peoples Bankcorp, Inc. common stock
utilizing IRA funds, you must contact our Conversion Center at (315) 263-4243 by
__________________________.
Sincerely,
Robert E. Wilson
President
This letter is neither an offer to sell nor a solicitation of an offer to buy
Peoples Bankcorp, Inc. common stock. The offer is made only by the Prospectus,
which was recently mailed to you.
THE SHARES OF PEOPLES BANKCORP, INC. COMMON STOCK ARE NOT DEPOSITS AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
- ---
GOVERNMENT AGENCY.
<PAGE>
VI. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Ogdensburg Federal Savings and Loan Association's customers and members of
the local community that the stock sale is underway and (2) to remind the
customers of the end of the Subscription Offering. Trident has learned in
the past that many people forget the deadline for subscribing and therefore
we suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk. Approximately 1 - 2 Lobby posters
will be used at Ogdensburg Federal Savings and Loan Association's office.
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
<PAGE>
C.
POSTER OR COUNTER CARD
================================================================================
"TAKE STOCK IN OUR FUTURE"
"PEOPLES BANKCORP, INC.
STOCK OFFERING MATERIALS
AVAILABLE HERE"
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
================================================================================
<PAGE>
VII. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the Plan
of Conversion is still outstanding. The proxy reminder is mailed to those
"target vote" depositors who have not previously returned their signed
proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
<PAGE>
B. Example
_________________________________________________________________
P R O X Y R E M I N D E R
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
YOUR VOTE ON OUR STOCK CONVERSION PLAN HAS NOT BEEN RECEIVED.
- --------- ---------------------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
- ---------------------------
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNTS.
DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE APPLICABLE
LIMITS.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
----------------------------
PROXY CARD TO OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION TODAY.
PLEASE VOTE ALL PROXY CARDS RECEIVED.
---
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
_________________________________________________________________
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (315) 263-4243.
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Peoples Bankcorp, Inc. common stock offered in the conversion,
nor does it constitute the solicitation of a proxy in connection with the
conversion. Such offers and solicitations of proxies are made only by means of
the Prospectus and the Summary Proxy Statement, respectively. There shall be no
sale of stock in any state in which any offer, solicitation of an offer or sale
of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
<PAGE>
Exhibit 99.4
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------------------------------------------------------
1725 K STREET, NW * SUITE 205
WASHINGTON, DC 20006
(202) 467-6862 * FAX (202) 467-6963
================================================================================
OGDENSBURG FEDERAL SAVINGS
AND LOAN ASSOCIATION
OGDENSBURG, NEW YORK
CONVERSION VALUATION APPRAISAL REPORT
VALUED AS OF SEPTEMBER 4, 1998
PREPARED BY
FELDMAN FINANCIAL ADVISORS, INC.
WASHINGTON, D.C.
================================================================================
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
1725 K. STREET, NW SUITE 205
WASHINGTON, DC 20006
(202)467-6862 FAX (202)467-6963
September 4, 1998
Board of Directors
Ogdensburg Federal Savings and Loan Association
825 State Street
Ogdensburg, New York 13669
Gentlemen:
At your request, we have completed and provide an independent appraisal of
the estimated pro forma market value of Ogdensburg Federal Savings and Loan
("Ogdensburg Federal" or the "Association") in connection with the simultaneous
conversion of the Association from the mutual to stock form of organization, the
issuance of the Association's capital stock to Peoples Bankcorp, Inc. (the
"Holding Company"), and the offering of shares of common stock of the Holding
Company (collectively referred to herein as the "Conversion"). This appraisal
report is furnished pursuant to the Association's regulatory filing of the
Application for Approval of Conversion ("Form AC") with the Office of Thrift
Supervision ("OTS").
The valuation is prepared utilizing the guidelines for the valuation of
mutual to stock conversions issued by the OTS. These guidelines require, among
other things, that the appraiser consider the impact of the Conversion on the
financial condition of the Association, the trading valuation characteristics of
comparable institutions, recent conversion offerings, acquisitions in the
Association's market area, and the likely trading price of the newly issued
stock.
Feldman Financial Advisors, Inc. ("Feldman Financial") is a financial
consulting and economic research firm that specializes in financial valuations
and analyses of business enterprises and securities in the thrift, banking, and
mortgage industries. The background of Feldman Financial is presented in
Exhibit I.
In preparing our appraisal, we conducted an analysis of the Association
that included discussions with the Association's management, the Association's
independent auditors, KPMG Peat Marwick LLP, the Association's legal counsel,
Housley Kantarian & Bronstein, P.C., and the Association's offering manager,
Trident Securities, Inc. In addition, where appropriate, we considered
information based on other available published sources that we believe are
reliable; however, we cannot guarantee the accuracy and completeness of such
information.
We also reviewed, among other factors, the economy in the Association's
primary market area and compared the Association's financial condition and
operating performance with that of selected publicly traded thrift institutions.
We reviewed conditions in the securities markets in general and in the market
for thrift institution common stocks in particular.
<PAGE>
FEDERAL FINANCIAL ADVISORS, INC.
Board of Directors
Ogdensburg Federal Savings and Loan Association
September 4, 1998
Page Two
Our appraisal is based on the Association's representation that the
information contained in the Form AC and additional evidence furnished to us by
the Association and its independent auditors are truthful, accurate, and
complete. We did not independently verify the financial statements and other
information provided by the Association and its independent auditors, nor did we
independently value the assets or liabilities of the Association. The valuation
considers the Association only as a going concern and should not be considered
as an indication of the liquidation value of the Association.
It is our opinion that, as of September 4, 1998, the aggregate estimated
pro forma market value of the Association was within the valuation range of
$1,275,000 to $1,725,000 with a midpoint of $1,500,000. The valuation range was
based upon a 15 percent decrease from the midpoint to determine the minimum and
a 15 percent increase to establish the maximum. Assuming an additional 15
percent increase above the maximum valuation would result in an adjusted maximum
of $1,983,750.
Our valuation is not intended, and must not be construed, to be a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the Conversion. Moreover, because the 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 stock in the Conversion will thereafter be able to sell such shares at
prices related to the foregoing estimate of the Association's pro forma market
value. Feldman Financial is not a seller of securities within the meaning of
any federal or state securities laws and any report prepared by Feldman
Financial shall not be used as an offer or solicitation with respect to the
purchase or sale of any securities.
The valuation reported herein will be updated as appropriate. These
updates will consider, among other factors, any developments or changes in the
Association's operating performance, financial condition, or management
policies, and current conditions in the securities markets for thrift
institution common stocks. Should any such new developments or changes be
material, in our opinion, to the Conversion valuation of the Association,
appropriate adjustments to the estimated pro forma market value will be made.
The reasons for any such adjustments will be explained in detail at that time.
Respectfully,
FELDMAN FINANCIAL ADVISORS, INC.
By: /s/ Trent R. Feldman
-----------------------------
Trent R. Feldman
President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TAB PAGE
- ---- ------
<S> <C> <C>
INTRODUCTION...................................................... 1
I. CHAPTER ONE -- BUSINESS OF OGDENSBURG FEDERAL
General........................................................... 4
Financial Condition............................................... 8
Income and Expense Trends......................................... 17
Asset and Liability Management.................................... 23
Asset Quality..................................................... 26
Properties........................................................ 31
Subsidiaries...................................................... 32
Market Area....................................................... 33
Summary........................................................... 37
II. CHAPTER TWO COMPARISONS WITH PUBLICLY HELD COMPANIES
General........................................................... 38
Selection Criteria................................................ 39
Recent Financial Comparisons...................................... 43
III. CHAPTER THREE -- MARKET VALUE ADJUSTMENTS
Earnings Prospects................................................ 54
Market Area....................................................... 55
Management........................................................ 55
Dividend Policy................................................... 56
Liquidity of the Issue............................................ 56
Subscription Interest............................................. 57
Stock Market Conditions........................................... 57
Recent Acquisition Activity....................................... 61
New Issue Discount................................................ 63
Adjustments Conclusion............................................ 65
Valuation Approach................................................ 66
Valuation Conclusion.............................................. 67
IV. APPENDIX -- EXHIBITS
I Description of Feldman Financial Advisors, Inc.............. I-1
II-1 Statement of Financial Condition............................ II-1
II-2 Statement of Income......................................... II-2
II-3 Loan Portfolio Composition.................................. II-3
II-4 Net Lending Activity........................................ II-4
II-5 Investment Securities Portfolio............................. II-5
II-6 Deposit Account Distribution................................ II-6
II-7 Borrowing Activity.......................................... II-7
III Market Valuation and Financial Data for All Public Thrifts.. III-1
IV-1 Pro Forma Conversion Assumptions............................ IV-1
IV-2 Pro Forma Valuation Range................................... IV-2
IV-3 Pro Forma Analysis at Midpoint Value........................ IV-3
</TABLE>
<PAGE>
LIST OF TABLES
<TABLE>
<CAPTION>
TAB PAGE
- ---- ------
<S> <C> <C>
I. CHAPTER ONE -- BUSINESS OF OGDENSBURG FEDERAL
Table 1 -- Selected Financial Condition Data...................... 8
Table 2 -- Selected Operations Data............................... 9
Table 3 -- Selected Financial Ratios.............................. 10
Table 4 -- Income Statement Summary............................... 18
Table 5 -- Yield and Cost Summary -- June 30, 1998 and 1997....... 21
Table 6 -- Yield and Cost Summary -- December 31, 1997 and 1996... 22
Table 7 -- NPV Calculation........................................ 24
Table 8 -- Nonperforming Asset Summary............................ 28
Table 9 -- Allowance for Loan Losses.............................. 29
Table 10 -- Allowance for Loan Allocation by Loan Type............. 30
Table 11 -- Key Economic Indicators................................ 35
Table 12 -- Deposit Trends for Ogdensburg and St. Lawrence County.. 36
Table 13 -- Deposit Market Share for St. Lawrence County........... 36
II. CHAPTER TWO -- COMPARISONS WITH PUBLICLY HELD COMPANIES
Table 14 -- Comparative Group Operating Summary.................... 42
Table 15 -- Key Financial Comparisons.............................. 46
Table 16 -- General Financial Performance Ratios................... 48
Table 17 -- Income and Expense Analysis............................ 49
Table 18 -- Yield-Cost Structure and Growth Rates.................. 50
Table 19 -- Balance Sheet Composition.............................. 51
Table 20 -- Regulatory Capital and Credit Risk Ratios.............. 52
III. CHAPTER THREE MARKET VALUE ADJUSTMENTS
Table 21 -- Comparative Stock Market Performance................... 59
Table 22 -- Selected Interest Rate Benchmarks...................... 60
Table 23 -- Recent North Carolina Acquisition Activity............. 62
Table 24 -- Recent Thrift Conversion Activity...................... 64
Table 25 -- Comparative Market Valuation Analysis.................. 68
Table 26 -- Comparative Discount and Premium Analysis.............. 69
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
INTRODUCTION
As requested, Feldman Financial Advisors, Inc. ("Feldman Financial") has
prepared an independent appraisal of the aggregate estimated pro forma market
value of Ogdensburg Federal Savings and Loan Association ("Ogdensburg Federal"
or the "Association") in connection with its mutual to stock conversion (the
"Conversion"). The transaction structure will include the formation of the New
York-chartered corporation, Peoples Bankcorp (the "Stock Company"), to be the
holding company for Ogdensburg Federal. The Stock Company will offer shares of
its common stock for sale (the "Stock Offering") to eligible depositors and to
the Association's and Stock Company's employee stock benefit plans in a
Subscription Offering. Shares not subscribed for in the Subscription Offering
will be offered for sale to certain members of the general public in a Community
Offering.
In the course of preparing this appraisal report, we reviewed and discussed
with the Association's management, and with the Association's independent
auditors, KPMG Peat Marwick LLP, the audited financial statements of the
Association's operations for the years ended December 31, 1996 and 1997 and the
unaudited financial statements for the six months ended June 30, 1997 and 1998.
We also discussed matters related to the Conversion with the Association's legal
counsel, Housley Kantarian & Bronstein, P.C., and with the Association's
offering manager, Trident Securities, Inc. We also reviewed and discussed with
management other financial matters of the Association.
Where appropriate, we considered information based upon other available
public sources, which we believe to be reliable; however, we cannot guarantee
the accuracy or completeness of such information. We visited the Association's
primary market area and examined the prevailing
-1-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
economic conditions. We also examined the competitive environment within which
the Association operates and assessed the Association's relative strengths and
weaknesses.
We examined and compared the Association's financial performance with
selected segments of the thrift industry and selected publicly traded thrifts.
We reviewed conditions in the securities markets in general and the market for
thrift institution common stocks in particular. We included in our analysis an
examination of the potential effects of the Conversion on the Association's
operating characteristics and financial performance as they relate to the
estimated pro forma market value of the Association.
In preparing our valuation, we have relied upon and assumed the accuracy
and completeness of financial and statistical information provided by the
Association and its independent auditors. We did not independently verify the
financial statements and other information provided by the Association and its
independent auditors, nor did we independently value the assets or liabilities
of the Association. The valuation considers the Association only as a going
concern and should not be considered as an indication of the liquidation value
of the Association.
OUR VALUATION IS NOT INTENDED, AND MUST NOT BE CONSTRUED, TO BE A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SHARES OF COMMON
STOCK IN THE CONVERSION. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED
ON 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 REORGANIZATION WILL THEREAFTER BE ABLE TO SELL
SUCH SHARES AT PRICES RELATED TO THE FOREGOING VALUATION OF THE PRO FORMA MARKET
VALUE THEREOF. FELDMAN FINANCIAL IS NOT A SELLER OF SECURITIES WITHIN THE
MEANING OF ANY FEDERAL AND STATE SECURITIES LAWS AND ANY REPORT PREPARED BY
FELDMAN
-2-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
FINANCIAL SHALL NOT BE USED AS AN OFFER OR SOLICITATION WITH RESPECT TO THE
PURCHASE OR SALE OF ANY SECURITIES.
The valuation reported herein will be updated as appropriate. These
updates will consider, among other factors, any developments or changes in the
Association's financial performance or management policies, and current
conditions in the securities market for thrift institution common stocks.
Should any such developments or changes be material, in our opinion, to the
Conversion valuation of the Association, appropriate adjustments to the
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained in detail at that time.
-3-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
I. BUSINESS OF OGDENSBURG FEDERAL
GENERAL
Ogdensburg Federal was organized originally in 1888. The Association
currently conducts its business from one full-service banking office located in
Ogdensburg, New York. The Association is subject to regulation by the Office of
Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation
("FDIC"), the insurer of its deposit accounts up to applicable limits through
the Savings Association Insurance Fund ("SAIF"). The Association is a member of
the Federal Home Loan Association ("FHLB") of New York. As of June 30, 1998,
the Association had total assets of $24.2 million, total deposits of $22.4
million, and total equity of $1.6 million or 6.80% of total assets.
Ogdensburg Federal is a community and customer oriented financial
institution chartered to profitably provide financial services to individuals,
families and small businesses. The Association has historically placed an
emphasis on residential mortgage lending, primarily originating high quality
one-to-four family fixed and adjustable rate mortgage loans. The Association
offers conforming residential loans for portfolio retention. In addition, the
Association offers consumer auto loans on one to two year old cars and home
equity loans. To a lesser degree, it also originates commercial real estate
loans, deposit account loans, and commercial business loans. Ogdensburg Federal
has funded its lending and investment activity primarily with deposit accounts
and has not utilized borrowed funds in recent years.
Of the Association's loan portfolio at June 30, 1998, 65.5% consisted of
loans secured by one-to-four family residential properties, 4.9% were secured by
non-residential real estate, and 29.6% were commercial and consumer loans,
primarily consumer auto loans. The Association also invests in securities and
other short-term investments. At June 30, 1998, investment
-4-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
securities and short-term investments amounted to $4.8 million or 19.7% of the
Association's assets.
The Association offers traditional deposit accounts consisting of savings
and club accounts, certificates of deposit, money market accounts, NOW accounts,
and demand accounts. The Association operates one full-service banking office
in Ogdensburg and the majority of the Association's deposits are gathered from
Ogdensburg and the surrounding communities. The Association's primary lending
area is Ogdensburg, and the surrounding communities of Lisbon, Oswegatchie,
Madrid, Morristown, Heuvelton, Hammond, Depeyster, Macomb, and Waddington and
the village of Rennsselaer Falls, all of which are located within St. Lawrence
County. Because a significant concentration of the Association's assets are
secured by residential real estate located in its primary lending territory, the
Association's asset quality is highly dependent upon the real estate market
conditions in the local economy. As the economic environment of Ogdensburg has
remained relatively constant through the 1990's, the Association's level of non-
performing loans has continued to remain relatively low and manageable and was
1.41% of total assets as of June 30. 1998.
Ogdensburg Federal has generated relatively low profitability returns over
the past few years. Net income for six months ended June 30, 1998, net income
was $72,000, or 0.61% of average assets and for fiscal 1997 was $88,000, or
0.39% of average assets. Net income of $88,000 for fiscal 1998 was an
improvement compared to net income of $8,000 for fiscal 1996. Included in
earnings for fiscal 1996 was a one-time charge of $128,000 ($94,000 after-taxes)
for the special SAIF assessment. Adjusting for this expense, the Association
would have earned approximately $102,000, or 0.51% of average assets.
-5-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The return for the six months ended June 30, 1998 was relatively flat as
compared to the six months ended June 30, 1997, decreasing by $5,000, from the
$77,000 recorded for the six months ended June 30, 1997. The decrease in net
income was due primarily to an increased level of non-interest expenses,
partially offset by an increased level of noninterest income.
The Association's capital has substantially exceeded all applicable
regulatory capital requirements and has increased from $1.48 million, or 6.71%
of assets, at December 31, 1997, to $1.65 million, or 6.80% of assets, at
June 30, 1998.
The Association seeks to generate future earnings growth through continued
emphasis on residential real estate lending. Management intends to monitor
economic conditions in the Association's market area and adjust the mix of its
lending activities in response to changing conditions in order to maintain sound
asset quality and profitability. Management believes opportunities for growth
exist in its market area and plans to manage growth to ensure compliance with
regulatory capital requirements and to achieve overall strategic objectives,
without unduly increasing the risk profile of the balance sheet. Management
believes that the Association can continue to meet its financial and strategic
objectives by seeking business primarily within its market area.
The Board of Directors of Ogdensburg Federal has determined that the
Conversion is in the best interest of the Association and its customers, and has
discerned several business purposes for effecting the proposed Conversion. The
Conversion will structure the Association in the stock form, which is used by
commercial banks, most major business corporations, and an increasing majority
of savings institutions. Formation of the Stock Company will permit the
Association to issue common stock, which is a source of capital not available to
mutual institutions.
-6-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The ability to issue common stock will enable the Association to establish
stock benefit plans for management and employees, thereby improving the
Association's capacity to attract and retain qualified personnel. The
additional capital, along with the holding company organizational structure,
will help to facilitate expansion through mergers and acquisitions.
The increased capital resulting from the Stock Offering will enable the
Association to take advantage of additional lending opportunities within its
market area. Based on the Association's expanded capital base, the Association
will be able to increase its lending limits and borrower concentrations without
jeopardizing credit risk management. Management does not anticipate that the
mix of loans that will be originated will change after Conversion although the
Association will consider adding products and services as the competition within
the market demands. The Association will implement any such growth and
expansion plans with a disciplined and deliberate approach.
The remainder of Chapter I examines in more detail the trends addressed in
this section, including the impact of changes in the Association's economic and
competitive environment, and recent management initiatives. The discussion is
supplemented by the exhibits in the Appendix. Exhibit II-1 summarizes the
Association's statements of financial condition as of June 30, 1997 and 1998 and
for the fiscal years ending December 31, 1996 and 1997. Exhibit II-2 presents
the Association's statements of income for the six-months ended June 30, 1997
and 1998 and the fiscal years ended December 31, 1996 and 1997.
-7-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
FINANCIAL CONDITION
Table 1 presents selected data concerning Ogdensburg Federal's financial
position as of the six-month period ended June 30, 1998 and the fiscal years
ended December 31, 1996 and 1997. Table 2 displays information concerning
results of operations for the six month periods ending June 30, 1998 and 1997
and for the fiscal years ended December 31, 1997 and 1996 and Table 3 displays
selected ratios for the same periods as Table 2.
Table 1
SELECTED FINANCIAL CONDITION DATA
At June 30, 1998 and December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
=================================================================================================
At At December 31,
June 30, ----------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets $24,247 $23,402 $21,998
Loans, net 18,698 16,668 15,359
Cash and cash equivalents 1,239 1,227 1,571
Securities:
Available-for-sale --- 737 804
Held-to-maturity 3,546 4,031 3,561
Total deposits 22,356 21,765 20,489
Total equity 1,648 1,577 1,477
=================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
-8-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 2
SELECTED OPERATIONS DATA
Six Months Ended June 30, 1998 and 1997
and Years Ended December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
=====================================================================================================
Six Months Ended Year Ended
June 30, December 31,
----------------------- -----------------------
1998 1997 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $882 $812 $1,662 $1,592
Interest expense 522 477 998 955
---- ---- ------ ------
Net interest income 360 335 664 637
Provision for loan losses 3 --- 57 ---
Net interest income after
provision for loan losses 357 335 607 637
Non-interest income 22 20 44 30
Non-interest expense 281 250 525 656
---- ---- ------ ------
Income before income tax expense 98 105 126 11
Income tax expense 26 28 38 3
---- ---- ------ ------
Net income $ 72 $ 77 $ 88 $ 11
==== ==== ====== ======
=====================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
-9-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 3
SELECTED FINANCIAL RATIOS
Six Months Ended June 30, 1998 and 1997
and Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
=========================================================================================================
Six Months Ended Year Ended
June 30, December 31,
---------------------------- ----------------------------
1998 1997 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net
income divided by average
total assets) 0.61% 0.69% 0.39% 0.04%
Return on average equity (net
income divided by average
total assets) 9.04 10.42 5.82 0.53
Net interest rate spread
(combined weighted average interest
rate earned less combined weighted
average interest rate cost) 2.97 2.96 2.86 2.90
Average interest-earning assets
to average interest-bearing
liabilities 105.36 104.73 104.62 104.15
Noninterest expense to average
total assets 1.18 1.12 2.30 3.00
ASSET QUALITY RATIOS:
Nonperforming assets to total
assets 1.41 0.11 1.42 0.04
Nonperforming loans to total loans 1.61 0.16 1.74 0.06
Allowance for loan losses to
total loans 0.87 0.72 0.97 0.75
Allowance for loan losses to
nonperforming loans 54.46 438.46 55.97 1288.89
Provision for loan losses to
loans, net 0.02 --- 0.34 ---
Net charge-offs to average
loans outstanding 0.01 0.01 0.06 ---
CAPITAL RATIOS:
Equity to total assets 6.80 6.80 6.74 6.71
Average equity to average total
assets 6.72 6.64 6.64 6.96
=========================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
-10-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Asset Composition
- -----------------
The Association's asset base grew 10.2% between December 31, 1996 and
June 30, 1998. Total assets increased by $2.2 million over this one-and-a-half
year period, primarily as a result of the expanding loan portfolio. The
Association's growth was internally generated without augmentation from mergers
or acquisitions of other company operations. The ratio of net loans to assets
increased from 69.8% at December 31, 1996, to 77.1% at June 30, 1998. During the
same time period the ratio of cash and securities to assets decreased from 27.0%
to 19.7%.
The Association's loan portfolio is predominantly secured by real estate
properties. As displayed in Exhibit II-3, the Association's net loan portfolio
at June 30, 1996 totaled $18.7 million, of which 65.6% ($12.4 million) were
mortgage loans secured by one-to-four family residences, 3.8% ($726,000) were
secured by commercial real estate, 17.5% ($3.3 million) were automobile loans,
and 5.6% ($1.1 million) were home equity loans.
Between December 31, 1996, and June 30, 1998, the Association's one-to-four
family loans increased by $0.5 million and automobile loans by $1.9 million.
Exhibit II-4 summarizes the Association's net lending activity during recent
periods.
The Association originates both fixed rate and adjustable rate mortgage
loans. One-to-four family mortgage loans are generally originated in amounts up
to 80.0% of the lesser of appraised value or purchase price with a maximum loan
amount of $200,000 and a maximum term of 30 years. The Association also offers
a first-time homebuyer program pursuant to which loans may be made in amounts up
to 90.0% of the lesser of appraised value or purchase price with the same
maximum loan amount and term as other mortgage loans.
Adjustable rate loans originated by the Association are based upon an index
plus a stated margin and provide for periodic interest rate adjustments upward
or downward of up to 2.0% per
-11-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
year. Generally, adjustable rate loans reprice very year and provide for terms
up to 30 years with most loans having terms of between 10 and 20 years.
Adjustable rate loans decrease the risk associated with changes in interest
rates by periodically repricing, but involve other risks because as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. Upward adjustment of the
contractual interest rate is also limited by the maximum periodic and lifetime
interest rate adjustment permitted by the loan documents, and, therefore is
potentially limited in effectiveness during periods of rapidly rising interest
rates.
The Association originates a limited number of residential construction
loans on one- to four-family residential properties to individuals who will be
the owner and occupant upon completion of the construction. Borrowers are
required to pay interest during the construction period which may not last
beyond twelve months. Upon completion of the construction, the loan converts to
a fully amortizing mortgage loans. Loan proceeds are disbursed according to a
draw schedule and the Association inspects the progress of the construction
before additional funds are disbursed. Construction loans may be fixed or
adjustable rate.
Construction lending is generally considered to involve a higher degree of
credit risk than long term financing of residential properties. Risk of loss on
a construction loan is dependent largely upon the accuracy of the initial
estimate of the property's value at completion of the construction and the
estimated cost of construction. If the estimate of construction cost and the
marketability of the property upon completion of the project prove to be
inaccurate, the Association may be compelled to advance additional funds to
complete the construction. Furthermore, if the final value of the completed
property is less than the estimated amount, the value of the property might be
insufficient to assure the repayment of the loan.
-12-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Association originates limited commercial real estate loans secured by
small apartment buildings, office buildings, and other commercial properties.
Loan amounts do not exceed 75% of the appraised value of the property.
Commercial real estate lending entails significant additional risks compared to
residential property lending. These loans typically involve large loan balances
to single borrowers or groups of related borrowers. The repayment of these
loans typically is dependent on the successful operation of the real estate
project securing the loan. These risks can be significantly affected by supply
and demand conditions in the market for office and retail space and may also be
subject to adverse conditions in the economy. To minimize these risks, the
Association generally limits this type of lending to its market area and to
borrowers who are known to the Association.
The Association engages in a limited amount of commercial business lending
to benefit from the higher fees and interest rates and the shorter term to
maturity. Commercial business loans consist of equipment, lines of credit and
other business purpose loans. The loans are generally secured by either the
underlying properties or by the personal guarantee of the borrower.
Unlike residential mortgage loans, which are generally made on the basis of
the borrower's ability to make repayment from his or her employment and other
income and which are secured by real property whose value tends to be more
readily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself and the general economic environment.
-13-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Association offers various types of consumer loans in order to provide
a wider range of financial services to their customers. Consumer loans consist
of automobile, home equity lines of credit, passbook and personal loans. Home
equity lines of credit have a maximum draw period of ten years with a maximum
term of 20 years. Passbook and certificate of deposit secured loans are offered
up to the maximum of the deposit balance and are due on demand. The Association
offers loans for both new and used automobiles with a maximum term of five years
and maximum loan amounts of $30,000.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
Exhibit II-5 displays the composition of the Association's investment
portfolio. The Association determines the level of investment securities
depending upon several factors, including: (1) the yields on investment
alternatives, (2) management's judgment as to the attractiveness of the yields
then available in relation to other opportunities, (3) expectation of future
yield levels, and (4) management's projections as to the short-term demand for
funds to be used in loan origination and other activities. As of June 30, 1998,
the Association's investment portfolio policy allowed investments in instruments
such as: (1) U.S. treasury obligations, (2) U.S. federal agency or federally
sponsored agency obligations, (3) local municipal obligations, (4) mortgage-
backed securities, (5) bankers' acceptances, (6) time certificates, (7) federal
funds, including FHLB overnight and term deposits (up to six months), and (8)
investment grade corporate bonds, commercial paper and mortgage derivative
products.
-14-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
To supplement lending activities, The Association invests in mortgage-
backed securities. Mortgage-backed securities can serve as collateral for
borrowings and, through repayments, as a source of liquidity. The Association's
mortgage-backed securities portfolio consists of participations or pass-through
certificates issued by the Government National Mortgage Association. The
mortgage-backed securities portfolio was classified as "held-to-maturity" at
June 30, 1998.
Source of Funds
- ---------------
Deposits are the primary source of the Association's funds for lending and
other investment purposes. Funds are also derived from the receipt of payments
on loans and prepayment of loans and, to a much lesser extent, maturities of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and market conditions.
As of June 30, 1998, deposits totaled $22.4 million, representing 98.9% of
total liabilities. Exhibit II-6 presents a summary of the Association's deposit
portfolio as of June 30, 1998.
Consumer and commercial deposits are attracted principally from within the
Association's market area through the offering of a selection of deposit
instruments including regular savings accounts, money market accounts, and term
certificate accounts. Deposit account terms vary according to the minimum
balance required, the time period the funds must remain on deposit, and the
interest rate. Interest rates paid on deposits are set weekly by the
Association's senior management. Interest rates are determined based upon
liquidity requirements, interest rates paid by the Association's competitors,
growth goals and applicable regulatory restrictions
-15-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
and requirements. Time certificates in amounts of $100,000 or more constituted
$1.5 million, or 6.51%, of the total deposit portfolio.
Advances (borrowings) may be obtained from the FHLB of New York to
supplement the Association's supply of lendable funds. Advances from the FHLB
of New York are typically secured by a pledge of the Association's stock in the
FHLB of New York, a portion of the first mortgage loan portfolio and other
assets. Each FHLB credit program has its own interest rate, which may be fixed
or adjustable, and a range of maturities. As of June 30, 1998, the Association
did not have any borrowings outstanding.
Equity Capital
- --------------
The Association's equity capital was $1.6 million, or 6.80% of total
assets, at June 30, 1998. Equity increased slightly from $1.5 million as of
December 31, 1996. For regulatory purposes at June 30, 1998, the Association's
core capital ratio measured 6.8% and its total risk-based capital ratio was
13.2%. The Association not only met its minimum regulatory capital requirements
but also surpassed the levels necessary to qualify for the designation of well
capitalized.
-16-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
INCOME AND EXPENSE TRENDS
Net income for the six months ended June 30, 1998 was relatively flat as
compared to the six months ended June 30, 1997, decreasing by $5,000 from
$77,000 for the six months ended June 30, 1997 to $72,000 for the six months
ended June 30, 1998. The decrease in net income was due primarily to an
increased level of non-interest expenses, partially offset by an increased level
of net interest income. Table 4 on page 18 details the Association's earnings
for the six month periods ending June 30, 1998 and 1997 and for the fiscal years
ended December 31, 1997 and 1996.
Net interest income increased $25,000, or 7.46%, from $335,000 for the six
months ended June 30, 1997 to $360,000 for the six months ended June 30, 1998.
The increase was due mainly from growth in the Association's loan portfolio.
The average balance of loans outstanding during the six months ended June 30,
1998 was $17.2 million as compared to $15.3 million during the first six months
of 1997. Interest expense also increased over these six-month periods due
primarily to an increase in both the average balance of deposits during the
period and the average cost of deposits. For the first six months of 1998,
total deposits averaged $21.3 million as compared to $20.2 million for the first
six months of 1997. The average costs of such deposits amounted to 4.92% for
the 1998 period, a 16 basis point increase from 4.76% for the first half of
1997.
During the six months ended June 30, 1998, the Association made a $3,000
provision for loan losses compared to no provision for the comparable period in
fiscal 1997. Net charge-offs for the six months ended June 30, 1998 amounted to
$2,000.
-17-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 4
INCOME STATEMENT SUMMARY
Six Months Ended June 30, 1998 and 1997
and Years Ended December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
======================================================================================================
Six Months Ended Year Ended
June 30, December 31,
--------------------------- ---------------------------
1998 1997 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $822 $812 $1,662 $1,592
Total interest expense 522 477 998 955
---- ---- ------ ------
Net interest income 360 335 664 637
Provision for loan losses 3 -- 57 --
---- ---- ------ ------
Net interest income after
provision 357 335 607 637
Service charges 14 11 30 14
Net gain on sale of securities 1 -- -- --
Other 7 9 14 16
---- ---- ------ ------
Total non-interest income 22 20 44 30
Salaries and benefits 140 128 258 258
Directors fees 31 32 59 54
Building, occupancy and equipment 27 32 73 59
Data processing 15 14 28 27
Postage and supplies 12 8 25 23
Deposit insurance premium 7 4 11 174
Insurance 5 7 17 14
Other 44 25 54 47
---- ---- ------ ------
Total non-interest expense 281 250 525 656
Income before taxes 98 105 126 11
Income tax expense 26 28 38 3
---- ---- ------ ------
Net income $ 72 $ 77 $ 88 $ 8
==== ==== ====== ======
=======================================================================================================
</TABLE>
Source: Ogdensburg Federal
-18-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Noninterest income increased $2,000 over the comparative six-months periods
due to increases in the fees earned on loans and other income offset by
adecrease in other noninterest income.
Noninterest expense increased by $31,000, or 12.40%, for the six months
ended June 30, 1998 compared to the same period in fiscal year 1997 due to
increases in compensation and related expenses, deposit insurance, postage and
supplies and other expenses, offset by decreases in building, occupancy and
equipment expense and insurance.
The provision for income tax decreased $2,000 over the comparable period
due to a decrease in pre-tax income. Effective tax rates for the six months
ended June 30, 1998 and 1997 were 26.5% and 26.7%, respectively.
Net income increased $80,000 from $8,000 for the fiscal year ended
December 31, 1996 to $88,000 for the fiscal year ended December 31, 1997. The
primary reason for the increase was due to the absence of any SAIF special
assessment during the fiscal 1997 year. During the year ended December 31, 1996,
all thrift institutions were required to pay a special assessment in order to
recapitalize the SAIF, the FDIC fund that insures the Association's deposits.
The special assessment amounted to $128,000 and was paid during the quarter
ended December 31, 1996.
Net interest income increased from $637,000 for fiscal year 1996 to
$664,000 for fiscal year 1997. The $27,000 increase was primarily due to an
increase in the average balance of the loan and securities portfolios. During
the year ended December 31, 1997, the average balance of the loan portfolio
increased by $823,000, or 5.49%, and the average balance of the securities
portfolio increased by $249,000, or 6.40%, as compared to the year ended
December 31, 1996.
-19-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Total interest expense also increased during the fiscal year by $43,000 due to
an increase in the volume of deposits, primarily time certificates.
During fiscal 1997, the Association decided to pursue increases in the
automobile loan portfolio which are believed to have greater risk than one- to
four-family mortgage lending. For this reason, the Association recorded a
$57,000 provision for loan losses as compared to no provision for the previous
fiscal year.
Noninterest income increased from $30,000 for fiscal year 1996 to $44,000
for fiscal year 1997 due primarily to a $16,000 increase in fees earned on
deposit accounts.
For fiscal 1997, noninterest expenses were $525,000 as compared to $656,000
for fiscal year 1996. The decline in this expense level was primarily due to
the absence of any special SAIF assessment in the 1997 period. During fiscal
year 1996, the Association was required to pay a special assessment of $128,000
to help recapitalize the SAIF. The decline was offset by increases of $14,000
in building, occupancy and equipment expense and $7,000 in other miscellaneous
expenses. As a result of the SAIF recapitalization, deposit insurance premiums
declined significantly, resulting in a reduction of $163,000 from 1996 to 1997.
Annual deposit insurance premiums are expected to remain at the current level,
0.064% of total assessable deposits, in future periods though there can be no
assurance in this regard.
Income tax expense for fiscal 1997 amounted to $38,000 as compared to
$3,000 for fiscal year 1996. The $35,000 increase was directly attributable to
the increased level of pre-tax income in 1997 as compared to 1996. Effective
tax rates for fiscal tears 1997 and 1996 were 30.1% and 27.3%, respectively.
Tables 5 and 6 details the Association's yield/cost information for the six
month periods ended June 30, 1998 and 1997 and for the fiscal years ended
December 31, 1997 and 1996.
-20-
<PAGE>
Table 5
YIELD AND COST SUMMARY
At June 30, 1998 and
Six Months Ended June 30, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
==================================================================================================================================
Six Months Ended June 30,
----------------------------------------------------------------
At June 30, 1998 1997
1998 ------------------------------- ------------------------------
------------------ Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
------- -------- ------- --------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $18,698 8.11% $17,151 $727 8.55% $15,341 $645 8.48%
Securities 3,546 5.69 4,498 127 5.69 4,683 132 5.68
Other short-term investments 756 5.78 769 28 7.34 1,123 35 6.28
------- ------- ---- ------- ----
Total interest-earning assets 23,000 7.66 22,418 882 7.93 21,147 812 7.74
Non-interest-earning assets 1,247 1,373 1,177
------- ------- -------
Total assets $24,247 $23,791 $22,324
======= ======= =======
Interest-bearing liabilities:
Savings and club accounts $ 3,131 3.09 $ 2,997 $ 40 2.69 $ 2,739 $ 39 2.87
Time certificates 16,519 5.80 16,218 465 5.78 15,450 420 5.48
NOW and money market accounts 1,971 1.74 2,062 17 1.66 2,002 18 1.81
Borrowings -- -- -- -- -- -- -- --
------- ------- ---- ------- ----
Total interest-bearing liabilities 21,621 5.04 21,277 522 4.92 20,191 477 4.76
Non-interest-bearing liabilities 978 916 651
------- ------- -------
Total liabilities 22,599 22,193 20,842
Total equity 1,648 1,598 1,482
------- ------- -------
Total liabilities and equity $24,247 $23,791 $22,324
======= ======= =======
Net interest income $360 $335
==== ====
Net interest rate spread 2.62% 3.01% 2.98%
==== ==== ====
Net yield on interest-earning assets 3.24% 3.19%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 1.06x 1.05x 1.05x
==== ==== ====
</TABLE>
================================================================================
Source: Ogdensburg Federal, preliminary prospectus.
- 21 -
<PAGE>
Table 6
YIELD AND COST SUMMARY
Years Ended December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
===============================================================================================================
Year Ended December 31,
---------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $15,824 $1,330 8.40% $15,001 $1,266 8.44%
Securities 4,887 277 5.67 4,593 260 5.66
Other short-term investments 835 55 6.59 1,024 66 6.45
------- ------ ------- ------
Total interest-earning assets 21,546 1,662 7.71 20,618 1,592 7.72
Non-interest-earning assets 1,234 1,256
------- -------
Total assets $22,780 $21,874
======= =======
Interest-bearing liabilities:
Savings and club accounts $ 2,747 $ 79 2.88 $ 2,908 $ 86 2.96
Time certificates 15,824 883 5.58 14,867 832 5.60
NOW and money market accounts 2,024 36 1.78 2,016 36 1.79
Borrowings -- -- -- 5 1 5.96
------- ------ ------- ------
Total interest-bearing liabilities 20,595 998 4.85 19,796 955 4.82
Non-interest-bearing liabilities 672 555
------- -------
Total liabilities 21,267 20,352
Total equity 1,502 1,523
------- -------
Total liabilities and equity $22,769 $21,874
======= =======
Net interest income $ 664 $ 637
====== ======
Net interest rate spread 2.86% 2.90%
==== ====
Net yield on interest-earning assets 3.08% 3.09%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 1.05x 1.04x
==== ====
</TABLE>
================================================================================
Source: Ogdensburg Federal, preliminary prospectus.
- 22 -
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
ASSET AND LIABILITY MANAGEMENT
Assets and liabilities may be analyzed by examining the extent to which
assets and liabilities are interest-rate sensitive and by monitoring the
expected effects of interest rate changes on the Association's net portfolio
value.
An asset is interest-rate sensitive within a specific time period if it
will mature or reprice within that time period. If assets mature more quickly
or to a greater extent than liabilities, the Association's net portfolio value
and net interest income would tend to increase during periods of rising interest
rates but decrease during periods of falling interest rates. Conversely, if
assets mature or reprice more slowly or to a lesser extent than liabilities, the
Association's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates. The Association's policy has been to mitigate interest rate
risk inherent in the historical savings association business of originating
long-term loans funded by short-term deposits by pursuing certain strategies
designed to decrease the vulnerability of earnings to material and prolonged
changes in interest rates.
To manage interest rate risk, the Association stresses the origination of
adjustable rate loans. At June 30, 1998, the average weighted term to maturity
of the mortgage loan portfolio was approximately 13.6 years and the weighted
average term of time certificates was slightly less than one year.
In recent years, the Association has measured interest rate sensitivity by
computing the "gap" between the assets and liabilities which were expected to
mature or reprice within certain time periods, based upon assumptions regarding
loan prepayment and deposit decay rates formerly provided by the OTS. However,
the OTS now measures an institution's interest rate risk by computing the amount
by which the net present value of cash flows from assets, liabilities
23
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
and off balance sheet items (the institution's net portfolio value or "NPV")
would change in the event of a range of assumed changes in market interest
rates. These computations estimate the effect on an institution's NPV from
instantaneous and permanent 1% to 4% (100 to 400 basis points) increases and
decreases in market interest rates
Table 7 presents the Association's NPV at June 30, 1998 as calculated by
the OTS. As shown by the table, the Association's current NPV position is more
sensitive to decreases in interest rates than to increases in interest rates due
to the shorter maturities of its liability portfolio.
Table 7
NPV CALCULATION
At June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
==========================================================================================================
NPV as % of
Change Portfolio Value of Assets
In Net Portfolio Value -----------------------------------
Rates ----------------------------------- Basis
$ Amount $ Change % Change NPV Ratio Point Change
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
+400 bp 1,433 (530) (27)% 6.06% (192) bp
+300 bp 1,618 (345) (18) 6.76 (122) bp
+200 bp 1,774 (188) (10) 7.33 (65) bp
+100 bp 1,891 (71) (4) 7.74 (23) bp
0 bp 1,962 -- -- 7.98 -- bp
-100 bp 2,076 114 6 8.36 (39) bp
-200 bp 2,232 269 14 8.89 (92) bp
-300 bp 2,409 447 23 9.49 (151) bp
-400 bp 2,642 680 35 10.27 (229) bp
==========================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus
24
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Board of Directors has established a policy setting forth the maximum
NPV variances as a result of such instantaneous and permanent changes in
interest rates. At June 30, 1998, the Association's interest rate sensitivity
was within the policy established by the Board.
The Board of Directors reviews asset and liability management policies.
The Board of Directors meets regularly to review interest rate risk and trends,
as well as liquidity and capital ratios and requirements. Management
administers the policies and determinations of the Board of Directors with
respect to the Association's asset and liability goals and strategies. The
Association expects asset and liability policies and strategies will continue as
described so long as competitive and regulatory conditions in the financial
institution industry and market interest rates continue as they have in recent
years.
25
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
ASSET QUALITY
In order to effectively monitor problem loans, the Board of Directors
is informed on a monthly basis. Problem loans are generally placed on non-
accrual status when the loan becomes more than 90 days delinquent or when the
collection of additional interest is doubtful.
The Association's ratio of nonperforming assets to total assets
increased from 0.04% at December 31, 1996 to 1.41% at June 30, 1998. The
increase in nonperforming assets was attributable to the Association's $269,000
participation in a $3.2 million loan originated by TASCO being placed on
nonaccrual status during fiscal year 1997. Total nonperforming assets were
$343,000 as of June 30, 1998. The Association's real estate owned ("REO") was
$40,000 as of the same date. Subsequent to June 30, 1998, this property was
sold for $30,000.
The Association's allowance for loan losses totaled $165,000, or 0.87%
of net loans and 54.5% of nonperforming loans at June 30, 1998. The balance of
the allowance for loan losses increased by $49,00 since December 31, 1996.
OTS regulations provide for a classification system for problem assets of
savings associations which covers all problem assets. Under this classification
system, problem assets are classified as "substandard," "doubtful," or "loss."
An asset is qualified as substandard if it is inadequately protected by the
current net worth and paying capacity of the borrower or the collateral pledged,
if any. Substandard assets include those characterized by the "distinct
possibility" that the Association will sustain "some loss" if the deficiency is
not corrected. Assets classified as doubtful have all the weaknesses inherent
in those classified as substandard, with the added characteristic that the
weakness present make "collection or liquidation in full, on the basis of
currently existing facts, conditions, and, values "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible" and
of such little
26
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
value that their continuance as assets without the establishment of a specific
loss reserve is not warranted. Based on its internal asset quality rating system
pursuant to OTS regulations, the Association had designated as of June 30, 1998
outstanding loans of $74,000 as substandard and no assets were classified as
special mention, doubtful or loss. Assets may be designated as "special mention"
because of a potential weakness that does not currently warrant classification
in one of the aforementioned categories.
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 allowance for loan loss. Subsequent write-downs to fair value, net
of disposal costs, are charged to other expenses.
Table 8 on page 28 sets forth information regarding nonaccrual loans and
real estate owned. As of the dates indicated, no loans were categorized as
troubled debt restructurings within the meaning of SFAS 114.
Table 9 on page 29 sets forth an analysis of the Association's allowance
for loan losses for the periods indicated and Table 10 on page 30 details the
Association's allowance for loan loss allocation by loan type.
27
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 8
NONPERFORMING ASSET SUMMARY
At June 30, 1998 and December 31, 1997and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
=================================================================================================
At At December 31,
June 30, ------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Real estate:
One- to Four-family residence $ 31 $ 22 $ --
Commercial 269 271 --
Construction -- -- --
Automobile 3 -- --
Home equity -- -- --
Passbook -- -- --
Commercial -- -- --
Other -- -- 9
----- ----- -----
Total $ 303 $ 293 $ 9
===== ===== =====
Accruing loans which are contractually
past due 90 days or more:
Real estate:
One- to four-family residence $ -- $ -- $ --
Commercial -- -- --
Construction -- -- --
Automobile -- -- --
Home equity -- -- --
Passbook -- -- --
Commercial -- -- --
Other -- -- --
----- ----- -----
Total $ -- $ -- $ --
----- ----- -----
Total nonperforming loans $ 303 $ 293 $ 9
===== ===== =====
Percentage of total loans 1.61% 1.74% 0.06%
Other nonperforming assets $ 40 $ 40 $ --
Loans modified in troubled debt
restructurings $ -- $ -- $ --
==================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
28
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 9
ALLOWANCE FOR LOAN LOSSES
Six Months Ended June 30, 1998 and 1997
and Years Ended December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
=========================================================================================================
Six Months Ended Year Ended
June 30, December 31,
------------------------------ ------------------------------
1998 1997 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 164 $ 116 $ 116 $ 116
Loans charged off:
Real estate mortgage:
One- to four-family residence -- -- -- --
Commercial -- -- 3 --
Construction -- -- -- --
Automobile 3 -- 3 --
Home equity -- -- -- --
Passbook -- -- -- --
Commercial -- -- -- --
Other -- 2 3 --
----- ----- ----- -----
Total charge-offs 3 2 9 --
----- ----- ----- -----
Recoveries:
Real estate mortgage:
One- to four-family residence -- -- -- --
Commercial -- -- -- --
Construction -- -- -- --
Automobile -- -- -- --
Home equity -- -- -- --
Passbook -- -- -- --
Commercial -- -- -- --
Other 1 - -- --
----- ----- ----- -----
Total recoveries 1 -- -- --
----- ----- ----- -----
Net loans charged off 2 2 9 --
----- ----- ----- -----
Provision for loan losses 3 -- 57 --
----- ----- ----- -----
Balance at end of period $ 165 $ 114 $ 164 $ 116
----- ----- ----- -----
Ratio of net charge-offs to
average loans outstanding during
the period 0.01% 0.01% 0.06% 0.00%
===== ===== ===== =====
=========================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
29
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 10
ALLOWANCE FOR LOAN LOSS ALLOCATION BY LOAN TYPE
At June 30, 1998 and
At December 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
======================================================================================================================
At December 31,
----------------------------------------------------------
At June 30, 1998 1997 1996
--------------------------- -------------------------- -----------------------------
Percent of Percent of Percent of
Loans in Each Loans in Each Loans in Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage:
One- to four-family
residential $ 32 19.39% $ 32 19.51% $ 41 35.34%
Commercial 12 7.27 47 28.66 11 9.48
Construction 1 0.61 1 0.61 3 2.59
Automobile 85 51.52 53 32.32 29 25.00
Home equity 16 9.70 18 10.97 19 16.38
Passbook -- -- -- -- -- --
Commercial -- -- -- -- -- --
Other 19 11.51 13 7.93 13 11.21
---- ------ ---- ------ ---- ------
Total allowance
for loan losses $165 100.00% $164 100.00% $116 100.00%
==== ====== ==== ====== ==== ======
======================================================================================================================
</TABLE>
Source: Ogdensburg Federal, preliminary prospectus.
30
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
PROPERTIES
The Association conducts its business through one full-service banking
office located in Ogdensburg, New York. The Association owns its office
facility. The net book value of the Association's premises at June 30, 1998
totaled $425,000. The office was opened in 1987.
The Association does not operate an automated teller machine at the
branch location. The Association expects to continue its ongoing analysis to
determine the efficiency and effectiveness of its branches in delivering
services and products to the local community. The Association's branch is
generally characterized as a modest but efficient office facility with a
favorable location and convenience. The Association currently has no plans to
add additional branch facilities, but will monitor feasible expansion
opportunities.
31
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
SUBSIDIARIES
The Association has no subsidiary corporations.
32
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
MARKET AREA
The Association's office is located in Ogdensburg, New York and the
primary market consists of the City of Ogdensburg, and the surrounding townships
of Lisbon, Oswegatchie, Madrid, Morristown, Heuvelton, Hammond, Depeyster,
Macomb and Waddington and the village of Rennsselaer Falls, all of which are
located in St. Lawrence County, New York. St. Lawrence County is the largest
county east of the Mississippi River in terms of total acreage. Ogdensburg is
the eastern most United States port on the Great Lakes and the northern most
port in New York and is adjacent to the Montreal-Ottawa-Toronto corridor.
Although Ogdensburg is fairly rural with only approximately 13,000 residents, it
is within a two-hour drive of over 15 million people.
The largest employers in Ogdensburg and the surrounding communities
include the Ogdensburg Bridge and Port Authority, local government offices, U.S.
Customs Office, Mater Dei College and Wadhams Hall Seminary College, Ogdensburg
School District, Mitel Corporation, CompAS, and several local hospitals. By
industry, the largest sectors of the Ogdensburg economy are retail, services and
manufacturing. The average household income of $28,806 in 1997 for Ogdensburg
was significantly below that of New York as a whole of $57,084 and for the
average for the United States of $50,5540. The overall population of Ogdensburg
has declined by approximately 5% from 1990 to 1997 as compared to marginal
growth of 1% for New York State and 7.5% growth rate for the United States.
Table 11 displays selected demographic data for the United States, the
state of New York, St. Lawrence County and the City of Ogdensburg.
Table 12 shows deposit trends for the city of Ogdensburg and St. Lawrence
County. Table 13 shows deposit concentrations within St. Lawrence County. As of
June 30, 1998,
33
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Ogdensburg Federal had a 2.4% market share and ranked 10 out of the twelve
financial institutions in St. Lawrence County. From 1995 to 1997, Ogdensburg
Federal's deposits grew 3.2% compared to the overall growth of 0.6% in total
deposits in St. Lawrence County and 1.1% for the city of Ogdensburg.
34
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 11
KEY ECONOMIC INDICATORS
United States, New York, Saint Lawrence County and Ogdensburg
<TABLE>
<CAPTION>
==============================================================================================================================
United Saint Lawrence
Key Economic Indicators States New York County Ogdensburg
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Population
- ------------------------------------------
Total Population - 1997 267,240,272 18,177,296 114,537 12,791
5-year projection percent change 4.5% (0.1)% (0.7)% (5.4)%
1990 - 1997 percent change 7.5% 1.0 % 2.3 % (5.4)%
Households
- ------------------------------------------
Total Households - 1997 98,741,200 6,684,831 38,684 4,049
5-year projection percent change 4.9% 0.0 % (0.2)% (5.5)%
1990 - 1997 percent change 7.4% 0.7 % 1.9 % (7.3)%
Per Capita Income
- ------------------------------------------
Per Capita Income - 1997 $18,885 $21,221 $13,615 $15,279
5-year projection percent change 21.7% 19.7 % 21.5 % 23.5 %
1990 - 1997 percent change 31.2% 28.8 % 31.2 % 34.9 %
Average Household Income
- ------------------------------------------
Average Household Income - 1997 $50,540 $57,084 $38,075 $38,469
5-year projection percent change 20.7% 18.3 % 20.6 % 21.8 %
1990 - 1997 percent change 31.3% 29.1 % 30.7 % 32.2 %
Median Household Income
- ------------------------------------------
Median Household Income - 1997 $37,079 $39,912 $29,315 $28,806
5-year projection percent change 13.1% 9.7 % 11.4 % 11.7 %
1990 - 1997 percent change 23.2% 20.7 % 22.1 % 22.0 %
Household Income Distribution - 1997
- ------------------------------------------
$ 0 - 24 K 33.5% 32.0 % 43.0 % 44.5 %
$25 - 49K 30.9% 28.2 % 32.4 % 30.6 %
$50K + 35.6% 39.8 % 24.7 % 24.9 %
Household Income Distribution - proj. 2002
- ------------------------------------------
$ 0 - 24 K 29.4% 29.6 % 38.2 % 38.4 %
$25 - 49K 28.3% 26.0 % 30.5 % 30.3 %
$50K + 42.3% 44.4 % 31.4 % 31.4 %
==============================================================================================================================
</TABLE>
Source: SNL Securities and Claritas
-35-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 12
DEPOSIT TRENDS FOR OGDENSBURG, AND SAINT LAWRENCE COUNTY
For All Banks, and Thrifts
Deposit Data as of June 30th Date
(Dollars in Thousands)
<TABLE>
<CAPTION>
================================================================================
1997 1995-97
No. of 1997 1996 1995 Growth
Area Offices Deposits Deposits Deposits Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ogdensburg 6 $154,698 $150,056 $151,459 1.1%
St. Lawrence County 43 $902,173 $899,667 $890,969 0.6%
================================================================================
</TABLE>
Table 13
DEPOSIT MARKET SHARE FOR SAINT LAWRENCE COUNTY
For All Banks and Thrifts
June 30, 1995 to June 30, 1997
<TABLE>
<CAPTION>
===========================================================================================================
1997 1996 1995
1997 ---------------- ---------------- ---------------- 1995-97
No. of Deposits % of Deposits % of Deposits % of Growth
Institution Offices Type ($000s) Total ($000s) Total ($000s) Total Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Bank 18 B $304,598 33.8% $299,041 33.2% $292,615 32.8% 2.0%
KeyCorp 7 B 139,581 15.5% 149,151 16.6% 159,673 17.9% (6.5)%
Canton FS&LA 1 T 80,454 8.9% 84,218 9.4% 85,307 9.6% (2.9)%
HSBC Holding PLC 2 B 79,558 8.8% 86,709 9.6% 79,591 8.9% 0.0%
North Country SB 3 SB 74,776 8.3% 73,952 8.2% 73,132 8.2% 1.1%
First National 4 B 73,700 8.2% 70,406 7.8% 78,353 8.8% (3.0)%
Gouverneur S&LA 1 T 43,433 4.8% 44,797 5.0% 43,708 4.9% (0.3)%
Massena S&LA 1 T 39,136 4.3% 34,671 3.9% 31,087 3.5% 12.2%
K&Z Company LLC 2 B 31,003 3.4% 22,615 2.5% 14,824 1.7% 44.6%
- -----------------------------------------------------------------------------------------------------------
Ogdensburg FS&LA 1 T 21,227 2.4% 20,577 2.3% 19,912 2.2% 3.2%
- -----------------------------------------------------------------------------------------------------------
Citizens NB of Hammond 2 B 9,632 1.1% 7,975 0.9% 7,019 0.8% 17.1%
Citizens NB of Mac 1 B 5,075 0.6% 5,555 0.6% 5,748 0.6% (6.1)%
-------- ----- -------- ----- -------- ----- ----
Total in Count 43 $902,173 100.0% $899,667 100.0% $890,969 100.0% 0.6%
===========================================================================================================
</TABLE>
Source: SNL Securities
-36-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
SUMMARY
Ogdensburg Federal has historically operated as a community-oriented
institution which emphasizes residential real estate loans. In recent years,
the Association has increased the origination of consumer loans, particularly
automobile loans, and has engaged in a limited amount of commercial real estate
and commercial business lending. Going forward, the Association will continue
growing and continue to meet the needs of the Association's market area.
37
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
II. COMPARISONS WITH PUBLICLY HELD COMPANIES
GENERAL
The comparative market approach provides a sound basis for determining
estimates of going-concern valuations where a regular and active market exists
for the stocks of peer institutions. The comparative market approach was
utilized in determining the estimated aggregate pro forma market value of
Ogdensburg Federal because: (i) reliable market and financial data are readily
available for comparable institutions; (ii) the comparative market method is
required by the applicable regulatory guidelines; and (iii) other alternative
valuation methods (such as income capitalization, liquidation analysis, or
discounted cash flow) are unlikely to produce a valuation relevant to the future
trading patterns of the related equity interest. The generally employed
valuation method in initial public offerings, where possible, is the comparative
market approach, which also can be relied upon to determine pro forma market
value in an initial thrift stock offering.
The comparative market approach derives valuation benchmarks from the
trading patterns of selected peer institutions which due to certain factors,
such as financial performance and operating strategies, enable the appraiser to
estimate the potential value of the subject institution in a stock conversion
offering. The pricing and trading history of recent initial public offerings of
thrifts also are examined to provide any evidence of the new issue discount that
must be considered. In Chapter II, our valuation analysis focuses on the
selection and comparison of Ogdensburg Federal with a comparable group of
publicly held thrifts (the "Comparative Group"). Chapter III details any
additional discounts or premiums we believe are appropriate to the Association's
pro forma conversion valuation.
-38-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
SELECTION CRITERIA
Selected market price and financial performance data for thrifts listed on
the New York and American Stock Exchanges and those thrifts traded on the over-
the-counter markets listed on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") are shown in Exhibit III. Several
criteria were used to select the individual members of the Comparative Group
from the overall universe of publicly held thrifts.
. Operating characteristics - An institution's operating characteristics
-------------------------
are the most important factors because they affect investors' expected
rates of return on a company's stock under various business/economic
scenarios, and they influence the market's general perception of the
quality and attractiveness of a given company. Operating
characteristics, which may vary in importance during the business cycle,
include financial variables such as profitability, balance sheet growth,
capitalization, asset quality, and other factors such as lines of
business and management strategies.
. Degree of marketability and liquidity - Marketability of a stock
-------------------------------------
reflects the relative ease and promptness with which a security may be
sold when desired, at a representative current price, without material
concession in price merely because of the necessity of sale.
Marketability also connotes the existence of buying interest as well as
selling interest and is usually indicated by trading volumes and the
spread between the bid and asked price for a security. Liquidity of the
stock issue refers to the organized market exchange process whereby the
security can be converted into cash. We attempted to limit our selection
to companies that have access to a regular trading market. We eliminated
from the comparative group companies with market prices that were
materially influenced by publicly announced or widely rumored
acquisitions. However, the expectation of continued industry
consolidation is currently embedded in thrift and bank stock valuations.
. Geographic Location - The region of the country where a company operates
-------------------
is also of importance in selecting the comparative group. The operating
environment for savings institutions varies from region to region with
respect to business and economic environments, real estate market
conditions, speculative takeover activity, and investment climates.
Economic and investor climates can also vary greatly within a region,
particularly due to takeover activity.
-39-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Association's lending operations conform to the typical lending profile
of a traditional thrift institution. The balance sheet of Ogdensburg Federal is
concentrated in residential mortgage loans. The Association's modest earnings
are lower than the average thrift. In determining the Comparative Group
composition, we focused on the Association's level of earnings, asset size and
capital as well as its residential real estate lending activities. As with any
composition of a group of comparable companies, the identification process was
broadened sufficiently to assemble a meaningful number of candidates.
Specifically, we initiated a search for companies by applying the selection
criteria identified below. Companies that met a majority of the following
parameters were considered for inclusion in the Comparative Group:
. Asset size total assets ranging between $25 million and $75 million.
----------
. Capital level regulatory capital ratios that would generally qualify
-------------
for well capitalized designation.
. Profitability return on average assets ("ROAA") less than 100 basis
-------------
points.
. Balance sheet composition level of loans to assets greater than 60% and
-------------------------
lower than 95%, accompanied by modest concentration of non-earning
assets with reliance upon deposits as the chief funding source.
. Loan concentration more than 50% of loans are residential mortgage
------------------
loans.
. Asset quality ratio of nonperforming assets to total assets less than
-------------
2.50%.
. Geographic location additional consideration given to companies located
-------------------
in New York and surrounding states.
Our search for comparable publicly held thrifts initially targeted well-
capitalized, profitable thrifts with significant residential real estate lending
activities. Many public thrifts exhibited all of these distinct operating and
financial characteristics.
As a result of applying the aforementioned criteria and analyzing the
screening results, the selection process has produced a reliable representation
of publicly traded thrifts with
-40-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
operations comparable to those of Ogdensburg Federal. A general overview of the
14 members selected for the Comparative Group is presented in Table 14. The
asset sizes of the Comparative Group companies range from $29.7 million at West
Town Bancorporation to $74.1 million at Albion Banc Corp., with an overall
average size of $56.5 million. While some differences inevitably exist between
the Association and the individual companies, we believe that the chosen
Comparative Group on the whole provides a meaningful basis of comparison for
valuation purposes.
-41-
<PAGE>
Table 14
Comparative Group Operating Summary
As of June 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Total Equity/
Number Assets Assets
Company Name City State of Office IPO Date ($000) (%)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Ogdensburg Federal Ogdensburg NY 1 24,247 6.80
Comparative Group Averages 2 56,467 10.73
Albion Banc Corp. Albion NY 2 07/26/1993 74,118 8.49
AmTrust Capital Corp. Peru IN 2 03/28/1995 65,270 11.52
Cecil Bancorp, Incorporated Elkton MD 2 11/10/1994 67,987 11.47
Home Building Bancorp, Inc. Washington IN 2 02/08/1995 44,662 13.76
Kenwood Bancorp, Incorporated Cincinnati OH 1 07/01/1996 47,624 9.54
Lenox Bancorp, Incorporated Saint Bernard OH 3 07/18/1996 54,589 12.86
MCM Savings Bank, FSB Hannibal MO 6 12/29/1992 65,464 6.50
Mid-Central Financial Corporation Wadena MN 3 04/25/1994 62,873 9.12
Mid-Coast Bancorp, Inc. Waldoboro ME 3 11/02/1989 65,309 8.02
Midwest Savings Bank Bolingbrook IL 2 09/23/1996 43,310 7.28
Mutual Community Savings Bank, Inc., SSB Durham NC 3 06/29/1993 63,537 12.63
St. Landry Financial Corporation Opelousas LA 1 04/05/1995 62,902 11.01
Vermilion Bancorp, Inc. Danville IL 1 03/26/1997 43,197 14.29
West Town Bancorp, Incorporated Cicero IL 1 03/01/1995 29,699 13.70
</TABLE>
-42-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
RECENT FINANCIAL COMPARISONS
Table 15 summarizes certain key financial comparisons between Ogdensburg
Federal and the Comparative Group. Tables 16 through 20 contain detailed
financial comparisons of the Association with the individual Comparative Group
companies based on measures of profitability, income and expense components,
yield-cost structure, capital levels, credit risk, balance sheet composition,
and growth rates. Comparative financial data for both Ogdensburg Federal and
the Comparative Group companies were utilized as of or for the last twelve
months ("LTM") ended June 30, 1998.
Ogdensburg Federal's ROAA was 0.35% as compared to the Comparative Group's
average ROAA of 0.59%. The Association's negative 0.35% core ROAA (excluding
gains on sale and other non-recurring items) also trailed the Comparative
Group's average core ROAA of 0.59%. In contrast to the Comparative Group, the
Association's profitability was restrained due to a higher level of loan loss
provisions, lower interest income and lower noninterest income. Two of the
fifteen members of the Comparative Group reported lower or equal levels of
profitability than the Association.
The Association's net interest income of 2.93% relative to average assets
was positioned below the Comparative Group's average of 3.17%. The
Association's relatively low level of net interest income is attributable to its
high deposit to loan ratio and its comparatively lower capital base.
The Association's net interest rate spread was 3.12% over the observed
period, measuring below the Comparative Group's average of 3.27%. The
Association's cost of funds at 4.93% was only slightly higher than the
Comparative Group's average of 4.86%. The Association's
-43-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
yield on interest-earning assets measured 7.81%, slightly higher than the
Comparative Group's average of 7.64%.
The Association's net interest-earning asset balance averaged 4.55% of
total assets and was positioned well below the Comparative Group's average of
9.81%. This disadvantage primarily reflected the Association's lower capital
level compared to the Comparative Group. The Association's 6.80% ratio of
equity to assets was below the Comparative Group's average equity ratio of
10.73%.
The Association's non-interest operating income totaled 0.20% in relation
to average assets, lower than the Comparative Group's average of 0.55% primarily
due to the Association's low level of fee income.
The Association increased its level of provision for loan losses, as
explained in Chapter 1, in reaction to expansion of the consumer automobile loan
portfolio. The Comparative Group exhibited varying levels of provisions, with
an overall average of 0.07% relative to average assets compared to the
Association's 0.25%. The Association had non-earning assets equal to 1.41% of
average assets in comparison to 0.73% for the Comparative Group on the whole.
Ogdensburg Federal's reserves to total loans, at 0.87% of total loans was higher
than the Comparative Group's average of 0.51%. However, the Comparative Groups
ratio of reserves to nonperforming loans, at 78.91% was higher than the
Association's ratio of 40.81%, due to the Association's higher level of
nonperforming loans.
The Association's 2.36% ratio of operating expense to average assets was
lower the Comparative Group average of 2.73%.
Total net loans at the Association amounted to 77.11% of assets at
Ogdensburg Federal, slightly above the Comparative Group's average concentration
of 76.02%. The Association's
-44-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
holdings of cash and investment securities were 19.73% of total assets, just
below the Comparative Group's average of 20.83%. The Association's 65.6%
proportion of one-to-four family residential mortgages to total loans was lower
than the Comparable Group's average of 81.1%, while the Association's ratio of
other mortgage loans to loans, at 4.89%, is lower than the Comparable Group's
average of 7.2%. The Association had nonmortgage loans of 29.6%, well above the
Comparable Group's average of 11.7% of loans.
The Association's asset and deposit growth rates, at 6.14% and 5.32%
respectively, exceeded the Comparative Group's averages of 5.66% and 4.05%,
while its 18.6% loan growth rate significantly exceeded the Comparative Group's
rate of 7.71%. The Association's recent loan growth has been internally
generated with a high emphasis on selective origination of assets at attractive
yields and with prudent credit risk considerations.
In summary, the Association's earnings performance trailed that of the
Comparative Group. The Comparative Group's higher capital base provided
substantial source of interest-free funds not available to the Association. In
addition, the Comparative Group's net interest margin is higher than the
Association's and its asset quality is stronger. The Association has a higher
ratio of residential mortgages to loans and a higher ratio of total loans to
assets.
-45-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 15
KEY FINANCIAL COMPARISONS
OGDENSBURG FEDERAL AND THE COMPARATIVE GROUP
As of the Twelve Months Ended June 30, 1998
<TABLE>
<CAPTION>
Comp.
Ogdensburg Group
Federal Average
------------ -----------
<S>
PROFITABILITY <C> <C>
- -------------
LTM Return on Average Assets 0.35 % 0.59 %
Core Return on Average Assets 0.35 0.59
LTM Return on Average Equity 5.13 5.78
Core Return on Average Equity 5.13 5.69
INCOME AND EXPENSE (% of avg. assets)
- ------------------
Total Interest Income 7.10 7.41
Total Interest Expense 4.43 4.24
Net Interest Income 2.67 3.17
Provision for Loan Losses 0.25 0.07
Other Operating Income 0.20 0.55
Net Gains & Nonrecurring Income 0.00 0.15
General & Administrative Expense 2.36 2.73
Real Estate Expense (Income) 0.00 (0.01)
Nonrecurring Expense 0.00 0.00
YIELD-COST DATA
- ---------------
Yield on Earning Assets 7.81 7.64
Cost of Funds 4.93 4.86
---- ----
Net Interest Spread 2.88 2.78
ASSET UTILIZATION (% of avg. assets)
- -----------------
Avg. Interest-earning Assets 94.34 96.94
Avg. Interest-bearing Liabilities 89.79 87.13
----- -----
Net Interest-earning Assets 4.55 9.81
</TABLE>
-46-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 15 (continued)
KEY FINANCIAL COMPARISONS
OGDENSBURG FEDERAL AND THE COMPARATIVE GROUP
As of the Twelve Months Ended June 30, 1998
<TABLE>
<CAPTION>
Comp.
Ogdensburg Group
Federal Average
------------ -----------
<S> <C> <C>
BALANCE SHEET COMPOSITION (% of assets)
- -------------------------
Cash and Securities 19.73 % 20.83 %
Loans Receivable, net 77.11 76.02
Real Estate 0.16 0.11
Intangible Assets 0.00 0.08
Other Assets 2.99 2.93
Total Deposits 92.20 75.65
Borrowed Funds 0.00 12.17
Other Liabilities 1.00 1.45
Total Equity 6.80 10.73
LOAN PORTFOLIO (% of total loans)
- --------------
Residential Mortgage Loans 65.55 81.11
Other Real Estate Mortgage Loans 4.89 7.22
Nonmortgage Loans 29.56 11.67
GROWTH RATES
- ------------
Total Assets 6.14 5.66
Total Loans 18.59 7.71
Total Deposits 5.32 4.05
CREDIT RISK RATIOS
- ------------------
Nonperforming Loans / Total Loans 1.61 0.70
Nonperforming Assets / Total Assets 1.41 0.73
Reserves / Loans 0.87 0.51
Reserves / NPAs 48.10 78.91
</TABLE>
-47-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 16
GENERAL FINANCIAL PERFORMANCE RATIOS
AS OF OR FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Tang. Net LTM LTM
Total Total Equity/ Equity/ NPAs/ Interest ROAA ROAE Core Core
Assets Deposits Assets Assets Assets Margin LTM LTM ROAA ROAE
Company Name ($000) ($000) (%) (%) (%) (%) (%) (%) (%) (%)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ogdensburg Federal 24,247 22,356 6.80 6.80 1.41 3.12 0.35 5.13 0.35 5.13
Comparative Group Averages 56,467 42,718 10.73 10.66 0.73 3.27 0.59 5.78 0.59 5.69
Albion Banc Corp. 74,118 55,977 8.49 8.49 0.47 3.39 0.53 6.18 0.53 6.18
AmTrust Capital Corp. 65,270 48,297 11.52 11.42 2.04 2.79 0.34 3.18 0.34 3.18
Cecil Bancorp, Incorporated 67,987 56,430 11.47 11.47 0.56 4.21 0.95 8.28 0.95 8.28
Home Building Bancorp, Inc. 44,662 31,643 13.76 13.76 0.30 3.47 0.71 5.16 0.70 5.07
Kenwood Bancorp, Incorporated 47,624 41,575 9.54 9.54 0.13 2.32 0.65 7.01 0.63 6.79
Lenox Bancorp, Incorporated 54,589 33,078 12.86 12.86 0.23 2.98 0.35 2.52 0.35 2.52
MCM Savings Bank, FSB 65,464 53,752 6.50 6.50 0.98 2.60 0.47 7.37 0.47 7.37
Mid-Central Financial Corporation 62,873 48,432 9.12 9.12 0.28 3.53 0.97 10.61 0.96 10.51
Mid-Coast Bancorp, Inc. 65,309 47,096 8.02 8.02 0.38 3.90 0.69 8.30 0.69 8.30
Midwest Savings Bank 43,310 30,350 7.28 7.28 NA 3.34 0.40 5.63 0.35 4.82
Mutual Community Savings Bank, Inc., SSB 63,537 50,848 12.63 11.72 2.42 4.69 0.63 4.77 0.62 4.66
St. Landry Financial Corporation 62,902 45,505 11.01 11.01 1.30 2.73 0.41 3.63 0.41 3.65
Vermilion Bancorp, Inc. 43,197 29,720 14.29 14.29 0.00 3.15 0.71 4.62 0.71 4.61
West Town Bancorp, Incorporated 29,699 25,352 13.70 13.70 0.35 2.72 0.51 3.66 0.51 3.66
</TABLE>
48
<PAGE>
Table 17
Income and Expense Analysis
For the Twelve Months Ended June 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
As a Percentage of Average Assets
--------------------------------------------------------------------------------------------------
Net Other Gains & Gen. & Real
Interest Interest Interest Operating Non-rec. Loan Loss Admin. Estate Non-rec. Core
Company Name Income Expense Income Income Income Provisions Expense Expense Expense Earnings
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ogdensburg Federal 7.10 4.43 2.93 0.20 0.00 0.25 2.36 0.00 0.00 0.35
Comparative Group Averages 7.41 4.24 3.17 0.55 0.15 0.07 2.73 (0.01) 0.00 0.59
Albion Banc Corp. 7.46 4.20 3.27 0.54 0.05 0.05 2.90 0.00 0.00 0.53
AmTrust Capital Corp. 6.97 4.31 2.66 1.02 0.39 0.19 2.92 0.00 0.00 0.34
Cecil Bancorp, Incorporated 8.04 3.91 4.13 0.62 0.09 0.15 2.95 0.00 0.00 0.95
Home Building Bancorp, Inc. 7.50 4.13 3.37 0.38 0.00 0.04 2.64 (0.02) 0.00 0.70
Kenwood Bancorp, Incorporated 7.29 5.00 2.29 0.97 0.92 0.00 2.38 (0.03) 0.00 0.63
Lenox Bancorp, Incorporated 7.24 4.31 2.93 0.38 0.10 0.02 2.73 0.00 0.00 0.35
MCM Savings Bank, FSB 7.22 4.68 2.55 0.86 0.30 0.08 2.58 0.00 0.00 0.47
Mid-Central Financial Corporation 7.65 4.27 3.38 0.35 0.00 0.11 2.03 0.00 0.00 0.96
Mid-Coast Bancorp, Inc. 8.02 4.30 3.72 0.54 0.13 0.11 3.09 0.02 0.00 0.69
Midwest Savings Bank 7.14 3.87 3.27 0.75 0.00 0.02 3.70 (0.02) 0.00 0.35
Mutual Community Savings
Bank, Inc., SSB 7.50 3.13 4.37 0.86 NA 0.02 4.13 0.01 0.00 0.62
St. Landry Financial Corporation 7.27 4.57 2.70 0.10 0.00 0.00 2.24 (0.05) 0.00 0.41
Vermilion Bancorp, Inc. 7.56 4.48 3.09 0.14 0.00 0.13 2.05 0.00 0.00 0.71
West Town Bancorp, Incorporated 6.81 4.20 2.61 0.14 0.00 0.02 1.93 0.00 0.00 0.51
</TABLE>
-49-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 18
YIELD-COST STRUCTURE AND GROWTH RATES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
As a % of Average Assets
----------------------------
Average Average Net Yield on Net Asset Loan Deposit
Earning Costing Earning Earning Cost of Interest Growth Growth Growth
Company Name Assets Libilities Assets Assets Funds Spread Rate Rate Rate
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ogdensburg Federal 94.34 89.79 4.55 7.81 4.93 2.88 6.14 18.59 5.32
Comparative Group Averages 96.94 87.13 9.81 7.64 4.86 2.78 5.66 7.71 4.05
Albion Banc Corp. 96.32 89.84 6.49 7.75 4.67 3.08 8.00 17.90 6.99
AmTrust Capital Corp. 95.41 87.79 7.62 7.30 4.91 2.39 -8.11 -8.00 -5.45
Cecil Bancorp, Incorporated 98.11 86.63 11.48 8.20 4.52 3.68 6.41 10.84 6.48
Home Building Bancorp, Inc. 97.11 86.75 10.36 7.72 4.76 2.96 -0.89 17.38 -10.14
Kenwood Bancorp, Incorporated 98.81 88.84 9.97 7.38 5.63 1.75 -2.90 6.95 2.63
Lenox Bancorp, Incorporated 98.31 86.70 11.61 7.37 4.98 2.39 13.44 -2.10 7.63
MCM Savings Bank, FSB 97.75 91.82 5.93 7.39 5.10 2.29 2.50 -3.78 3.38
Mid-Central Financial Corporation 95.90 89.26 6.64 7.98 4.78 3.20 12.80 19.79 3.66
Mid-Coast Bancorp, Inc. 95.46 89.07 6.39 8.40 4.83 3.57 9.32 2.01 11.10
Midwest Savings Bank 97.85 91.02 6.83 7.30 4.25 3.05 1.81 NA 13.75
Mutual Community Savings Bank, Inc., SSB 93.20 72.96 20.23 8.05 4.29 3.76 6.57 NA 0.41
St. Landry Financial Corporation 99.00 88.08 10.92 7.34 5.19 2.15 7.23 4.59 6.68
Vermilion Bancorp, Inc. 98.01 85.75 12.26 7.72 5.22 2.50 15.53 17.96 1.07
West Town Bancorp, Incorporated 95.94 85.28 10.66 7.10 4.93 2.17 7.50 8.94 8.52
</TABLE>
50
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 19
BALANCE SHEET COMPOSITION
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Cash & Net Real Intang. Other Total
Company Name Securities Loans Estate Assets Assets Deposits
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Ogdensburg Federal 19.73 77.11 0.16 0.00 2.99 92.20
Comparative Group Averages 20.83 76.02 0.11 0.08 2.93 75.65
Albion Banc Corp. 19.31 76.99 0.00 0.00 3.69 75.52
AmTrust Capital Corp. 22.06 71.78 0.00 0.11 5.91 74.00
Cecil Bancorp, Incorporated 12.10 86.00 0.00 0.00 1.73 83.00
Home Building Bancorp, Inc. 22.76 74.22 0.00 0.00 3.02 70.85
Kenwood Bancorp, Incorporated 17.88 80.67 0.00 0.00 1.45 87.30
Lenox Bancorp, Incorporated 28.44 69.65 0.00 0.00 1.92 60.59
MCM Savings Bank, FSB 30.20 67.03 0.01 0.00 2.74 82.11
Mid-Central Financial Corporation 10.33 87.74 0.15 0.00 1.78 77.03
Mid-Coast Bancorp, Inc. 17.71 78.30 0.24 0.00 3.75 72.11
Midwest Savings Bank 6.37 91.51 0.13 0.00 1.99 70.08
Mutual Community Savings Bank, Inc., SSB 23.13 70.33 0.85 1.03 4.67 80.03
St. Landry Financial Corporation 29.71 68.42 0.21 0.00 1.66 72.34
Vermilion Bancorp, Inc. 18.72 78.06 0.00 0.00 3.22 68.80
West Town Bancorp, Incorporated 32.90 63.56 0.00 0.00 3.54 85.36
<CAPTION>
- -------------------------------------------------------------------------------------------------
Total Total Other Total Total
Company Name Deposits Borrowings Liabilities Liabilities Equity
=================================================================================================
<S> <C> <C> <C> <C> <C>
Ogdensburg Federal 92.20 0.00 1.00 93.20 6.80
Comparative Group Averages 75.65 12.17 1.45 89.27 10.73
Albion Banc Corp. 75.52 13.74 2.24 91.51 8.49
AmTrust Capital Corp. 74.00 12.89 1.60 88.48 11.52
Cecil Bancorp, Incorporated 83.00 3.34 2.19 88.53 11.47
Home Building Bancorp, Inc. 70.85 14.55 0.84 86.24 13.76
Kenwood Bancorp, Incorporated 87.30 2.00 1.16 90.46 9.54
Lenox Bancorp, Incorporated 60.59 25.97 0.57 87.14 12.86
MCM Savings Bank, FSB 82.11 9.32 2.07 93.50 6.50
Mid-Central Financial Corporation 77.03 12.72 1.13 90.88 9.12
Mid-Coast Bancorp, Inc. 72.11 19.05 0.81 91.98 8.02
Midwest Savings Bank 70.08 19.85 2.79 92.72 7.28
Mutual Community Savings Bank, Inc., SSB 80.03 5.15 2.19 87.37 12.63
St. Landry Financial Corporation 72.34 15.61 1.04 88.99 11.01
Vermilion Bancorp, Inc. 68.80 16.20 0.71 85.71 14.29
West Town Bancorp, Incorporated 85.36 0.00 0.93 86.30 13.70
</TABLE>
51
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 20
REGULATORY CAPITAL AND CREDIT RISK RATIOS
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Core Tier 1
Tang. Capital/ Capital/
Capital/ Risk Adj. Risk Adj. NPLs/ NPAs/
Company Name Assets Assets Assets Loans Assets
==========================================================================================
<S> <C> <C> <C> <C> <C>
Ogdensburg Federal 6.80 12.00 12.00 1.61 1.41
Comparative Group Averages 9.63 17.70 17.12 0.70 0.73
Albion Banc Corp. NA NA NA 0.61 0.47
AmTrust Capital Corp. 10.70 16.77 16.77 2.33 2.04
Cecil Bancorp, Incorporated 11.11 17.86 17.86 0.67 0.56
Home Building Bancorp, Inc. 10.45 19.84 19.84 0.41 0.30
Kenwood Bancorp, Incorporated 9.3 19.82 19.82 0.16 0.13
Lenox Bancorp, Incorporated 10.95 NA NA 0.33 0.23
MCM Savings Bank, FSB 6.5 14.58 14.58 1.45 0.98
Mid-Central Financial Corporation 8.11 12.92 12.92 0.15 0.28
Mid-Coast Bancorp, Inc. 7.97 13.74 13.74 0.18 0.38
Midwest Savings Bank 7.28 13.58 13.58 NA NA
Mutual Community Savings Bank, Inc., SSB NA NA NA NA 2.42
St. Landry Financial Corporation 9.49 17.28 17.28 1.5 1.30
Vermilion Bancorp, Inc. 12.88 23.47 NA 0.00 0.00
West Town Bancorp, Incorporated 10.78 24.79 24.79 0.55 0.35
<CAPTION>
- -----------------------------------------------------------------------------------------
Resid. Other Nonmtg.
Reserves/ Reserves/ Mtgs./ Mtgs./ Loans/
Company Name Loans NPAs Loans Loans Loans
=========================================================================================
<S> <C> <C> <C> <C> <C>
Ogdensburg Federal 0.87 48.10 65.55 4.89 29.56
Comparative Group Averages 0.51 78.91 81.11 7.22 11.67
Albion Banc Corp. 0.45 72.86 88.49 4.16 7.35
AmTrust Capital Corp. 1.13 39.49 52.90 5.27 41.83
Cecil Bancorp, Incorporated 0.35 51.18 78.06 12.78 9.16
Home Building Bancorp, Inc. 0.25 62.22 80.23 1.75 18.02
Kenwood Bancorp, Incorporated 0.25 155.74 87.84 11.57 0.59
Lenox Bancorp, Incorporated 0.15 46.83 91.71 3.00 5.29
MCM Savings Bank, FSB 0.42 28.93 85.00 5.25 9.75
Mid-Central Financial Corporation 0.49 154.8 65.86 5.46 28.68
Mid-Coast Bancorp, Inc. 0.70 143.03 69.73 18.72 11.55
Midwest Savings Bank NA NA 98.32 1.31 0.37
Mutual Community Savings Bank, Inc., SSB NA NA 84.56 8.09 7.35
St. Landry Financial Corporation 1.26 67.2 89.27 8.73 2.00
Vermilion Bancorp, Inc. 0.46 NM 84.05 8.95 7.00
West Town Bancorp, Incorporated 0.25 45.71 79.47 6.07 14.46
</TABLE>
52
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
III. MARKET VALUE ADJUSTMENTS
This concluding chapter of the appraisal identifies certain additional
adjustments to Ogdensburg Federal's estimated pro forma market value relative to
the comparative group selected in Chapter II. Adjustments are also necessary to
reflect the equity market's likely reception of a new thrift stock offering
under current conditions. The adjustments discussed in this chapter are made
from the viewpoints of potential investors, which include depositors holding
subscription rights and unrelated parties who may purchase stock in the
community offering. It is assumed that these potential investors are aware of
all relevant and necessary facts as they pertain to the value of the Association
relative to other publicly held thrift institutions and relative to alternative
investments.
The market value adjustments are based on certain financial and other
criteria, which include, among other factors:
(1) Earnings Prospects
(2) Market Area
(3) Management
(4) Dividend Policy
(5) Liquidity
(6) Subscription Interest
(7) Stock Market Conditions
(8) New Issue Discount
The final section of this chapter identifies Ogdensburg Federal's estimated
pro forma market value and compares the resulting company with members of the
comparative group and selected public thrift aggregate with respect to market
valuation ratios.
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<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
EARNINGS PROSPECTS
- ------------------
Earnings prospects are dependent upon the sensitivity of asset yields and
liability costs to changes in market interest rates, the credit quality of
assets, the stability of non-interest components of income and expense, and the
ability to leverage the balance sheet. Each of the foregoing is an important
factor to investors in assessing earnings prospects. The Association's core
earnings profitability in recent years has been hindered by low levels of
noninterest income and below average net interest income. While economic
conditions in the Association's market area are anticipated to remain stable, an
unexpected business downturn or dramatic interest rate increases could suppress
the Association's ability to grow, disrupt asset quality, and strain core
earnings.
As the Association seeks to generate loan growth to spur earnings momentum,
operating expenses and funding requirements become pivotal factors. The
Association's operating expense ratio was below the comparative group's average
but is likely to increase after the Conversion with the addition of costs
associated with being a public company and with compensation-related stock
benefit plans. The Association's funding requirements face pressure in the form
of continued intense competition for retail deposits from other financial
institutions and alternative investments.
Overall, the Association's recent trailing twelve-months core return on
average assets of 0.35% was well below the comparative group average of 0.59%.
The Association's annualized core return of 0.61% for the first six months of
1998 reflected a more normalized level of loan loss provisions. While the
Association's net interest spread should remain relatively flat in the current
interest rate environment, the Association's earnings stream is vulnerable to
rising interest rates due to retention of fixed-rate residential loans. The
infusion of capital proceeds
-54-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
should assist the Association in further implementing its operating goals and
stabilize its earnings stream, which has been erratic in recent periods due to
certain nonrecurring items and charges. As the Association attempts to improve
returns compared to past returns, investors will be closely watching the
Association's core earnings results for signs of improvement. Generally, the
comparative group companies have reported moderate earnings, but show a more
sustained record of core profitability. Based on these considerations, we
believe a slight valuation discount to the Association's pro forma value is
warranted.
MARKET AREA
- -----------
The members of the comparative group were selected from the entire United
States. The thirteen companies collectively have operations in New York,
Maryland, Indiana, Louisiana, Ohio, Missouri, Minnesota, Maine, North Carolina
and Illinois. Most of the comparative group companies are based in smaller
communities. We do not believe that, on the whole, the market area conditions
of the comparative group are conspicuously different from those facing the
Association. Accordingly, we believe that no adjustment is warranted for market
area considerations.
MANAGEMENT
- ----------
Management's principal challenge is to generate profitable results, monitor
credit risks, and control operating costs while the Association competes in an
increasingly competitive financial services environment. Ogdensburg Federal's
management has demonstrated its effectiveness in steering the Association
through difficult operating periods, and can now turn its full attention to
enhancing the Association's competitive position and financial performance.
-55-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Accordingly, we assume that the Association has sufficient managerial resources
in place to implement its operating goals and objectives. Therefore, we believe
that no additional adjustment is warranted for this factor.
DIVIDEND POLICY
- ---------------
Management does not intend to pay cash dividends in the first year after
the Conversion. Management intends to review periodically the possible adoption
of a dividend policy. Possible future declarations and payments of dividends
will depend upon a number of factors, including the amount of the net proceeds
retained by the Stock Company, capital requirements, regulatory limitations, and
operating results. All members of the comparative group currently pay
dividends. As a result, we believe a downward adjustment is warranted for
dividends.
LIQUIDITY OF THE ISSUE
- ----------------------
Following the completion of the Conversion, the Association anticipates
that its common stock will be listed over-the-counter through the OTC
"Electronic Bulletin Board." The Association's subscription marketing agent
intends to make a post-conversion market in the common stock but is under no
obligation to match offers to buy and sell and may cease doing so at any time.
Furthermore, due to the relatively small market capitalization, it is
questionable whether an active and liquid trading market will develop or be
maintained. The liquidity of thrift stocks, as with all securities, has a
significant impact on their market valuation. Of the comparative group, two
companies are listed on Nasdaq, eight companies are listed on the OTC and four
companies are pink sheeted. While many small-cap thrift and bank stocks have
moved from pure pink sheet status to the OTC electronic bulletin board in
pursuit of increased liquidity,
-56-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
discounts to exchange-listed stocks are still apparent as well as volatile
bid-ask spreads. Given the trading volumes exhibited by a majority of the
comparative group members, we believe the Association's estimated pro forma
value should be discounted marginally to reflect the possible lack of stock
liquidity following the Conversion.
SUBSCRIPTION INTEREST
- ---------------------
In recent years, initial public offerings of thrift stocks have attracted a
great deal of investor interest and this interest has continued through the
first half of 1998. Contributing to this huge demand is the growing scarcity
factor of mutual candidates for thrift stock conversions and the favorable
pricing for financial institutions in the market.
The demand for thrift conversion offerings continued through the first six
months of 1998 led by the conversions of Independence Community Bancorp in New
York and Brookline Bancorp in Massachusetts. Notwithstanding the demand for
thrift stocks in initial offerings, subscription interest does not always
indicate that the valuation range should be increased/decreased or the offering
should be priced in the upper/lower end of the valuation range. Many conversion
investors do not routinely purchase in the aftermarket, particularly at higher
stock prices or involving stock issues with limited liquidity. As such, absent
actual results of the Association's subscription offering, we do not believe any
adjustment is warranted at this time.
STOCK MARKET CONDITIONS
- -----------------------
Table 21 graphically displays the performance of the SNL Thrift Index of
all publicly traded thrifts as compared to the Standard & Poor's 500-Stock Index
("S&P 500") over the past
-57-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
one and three-quarter years. The SNL Thrift Index substantially outperformed the
S&P 500 through April, 1998, advancing by 82.4% since year-end 1996 as compared
to the broader market index up 50.1%. The index of smaller public thrifts (less
than $250 million in assets) trailed the overall thrift performance, increasing
by 43.2%. Since April 1998, stocks for thrift institutions have trended downward
with the SNL Thrift Index declining 29.4% through September 4, 1998, while the
Small Thrift Index has fared almost as poorly, declining 23.3% over this period.
This compared to a 12.4% decline in the S&P 500 Index.
Table 22 graphically depicts selected interest rates over the past two and
three-quarter years. Interest rates turned upward through the first half of
1997, responding to concerns about inflationary pressures. Since that point,
interest rates have trended downward with the FNMA Fixed Mortgage Rate Yield
falling below 7.00% and the One-Year Treasury once again falling below 5.00% for
the first time since the first quarter of 1996. Speculation is that rates will
continue to drop over the near term as the Federal Reserve considers lowering
rates in response to the turmoil regarding most international markets, including
Asia, Russia and Latin America
The uncertainty facing most of the world's financial markets has led to the
Dow Jones Industrial Index losing approximately 17.0% of its value since
crossing the 9300 barrier in the first half of 1998. The adjustment in stock
valuations has hit all segments of the economy including bank and thrift stocks,
with stocks of major money center banks feeling the effects of the problems that
continue regarding Japanese banks. While the fundamentals of the U.S economy
remain relatively strong, with low unemployment, low interest rates and strong
corporate earnings, problems facing economies in other parts of the world and
the uncertainty facing the current Presidential administration, many believe the
U.S. markets are headed for continued periods of uncertainty and wide
fluctuations.
-58-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 21
COMPARATIVE STOCK MARKET PERFORMANCE
MONTH-END INDEX DATA, YEAR-END 1996 = 100
[PERFORMANCE GRAPH APPEARS HERE]
-59-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 22
SELECTED INTEREST RATE BENCHMARKS
MONTH-END INDICATORS
[PERFORMANCE GRAPH APPEARS HERE]
-60-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
RECENT ACQUISITION ACTIVITY
- ---------------------------
Acquisition speculation is one factor impacting the prices of newly
converted thrifts in the aftermarket. Table 23 summarizes recent acquisition
activity involving thrifts and banks based in New York. Overall acquisition
premiums for New York institutions have been similar to the ratios reported
nationwide. During 1998 year-to-date, there were 11 acquisitions involving New
York banks and thrifts. The most prominent acquisition was the purchase of
Citicorp, a $310.9 billion-asset commercial bank, by Travelers Financial Group.
The state's financial institution marketplace comprises a large number of
banks and thrifts of all sizes, from small, regional banks and thrifts to the
large money center banks. Larger thrift institutions, such as Long Island
Bancorp, TR Financial and ALBANK Financial were absorbed in 1998. Thrift
acquisition activity in New York has been fueled by the number of available
institutions of significant size to attract acquisition interest. Several of
the state's larger thrifts are currently (or were until recently) organized as
mutual holding companies. The Association aims to maintain a strong community-
based focus and has indicated no desire to seek a sale of the institution in the
near future. Therefore, given these considerations, we do not believe
acquisition premiums are a significant factor to consider in determining the
Association's estimated pro forma market value.
-61-
<PAGE>
Table 23
Selected Transaction Information
for Pending and Completed Transactions
of Institutions Headquartered in the State of New York
Since January 1, 1998
(Dollars in Thousands; Ratios in Percent)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Seller Financial Data
--------------------------------------------------------
Tang
B/ B/ Announce Total Equity/ Equity/ YTD YTD NPAs
Buyer ST T Seller T Date Status Assets Assets Assets ROAA ROAE Assets
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages 29,742,548 9.88 9.69 0.95 10.89 1.06
Medians 310,368 9.04 9.00 0.95 10.47 0.72
Acquisitions of Thrifts - Averages 2,134,330 10.75 10.47 0.86 9.00 0.93
Acquisitions of Thrifts - Medians 310,368 9.18 9.10 0.87 9.59 0.72
Banknorth Group VT B Evergreen Bancorp B 07/31/98 P 1,048,307 8.19 8.18 1.16 13.72 0.52
Cohoes Savings Bank NY T SFS Bancorp Inc. T 07/31/98 P 175,420 12.36 12.36 0.62 5.11 0.71
Dime Community Bncsh NY T Financial Bancorp T 07/20/98 P 310,368 9.04 9.00 0.95 10.47 2.19
Cortland First Finl NY B Oneida Valley Banc B 07/13/98 P 227,819 11.00 11.00 0.95 8.27 0.21
Charter One Fin'l OH T ALBANK Finl Corp. T 06/15/98 P 4,089,428 8.97 7.16 0.96 10.81 0.72
Roslyn Bancorp Inc. NY T TR Financial Corp. T 05/26/98 P 4,005,695 6.15 6.15 0.99 16.05 0.51
Ambanc Holding Co. NY T AFSALA Bancorp Inc T 04/23/98 P 160,408 12.52 12.52 0.78 6.19 0.30
K&Z Company LLC NY N First Natl Bk Lisb B 04/14/98 P 54,589 7.43 7.36 1.18 17.67 3.23
Travelers Group Inc NY N Citicorp B 04/06/98 P 310,897,000 6.82 6.73 1.21 17.10 1.22
Astoria Financial Cp NY T Long Island Bancor T 04/03/98 P 6,072,524 9.18 9.10 0.87 9.59 0.89
USB Holding Company NY B Tappan Zee Financi T 03/06/98 C 126,470 17.02 17.02 0.82 4.78 1.19
<CAPTION>
- ---------------------------------------------------------------------------------------
Announced Deal Values
------------------------------------------------------
Deal Price/ Price/ Tang.
Value Price/ Tang. LTM Prem/
Buyer ($M) Book Book EPS(1) Deps
=======================================================================================
<S> <C> <C> <C> <C> <C>
Averages 8,699.56 264.78 275.69 24.83 25.49
Medians 73.60 151.10 151.10 22.58 14.19
Acquisitions of Thrifts-Average 682.17 250.36 262.97 24.32 24.86
Acquisitions of Thrifts-Medians 73.60 246.50 247.56 23.06 22.22
Banknorth Group 313.10 351.28 351.99 26.89 29.28
Cohoes Savings Bank NA NA NA NA NA
Dime Community Bncsh 73.60 246.50 247.56 24.40 22.22
Cortland First Finl 50.60 NA NA NA NA
Charter One Fin'l 1,075.80 257.80 329.64 23.06 24.87
Roslyn Bancorp Inc. 1,114.10 403.07 403.07 27.23 43.83
Ambanc Holding Co. 30.00 144.62 144.62 22.58 8.48
K&Z Company LLC 2.70 NA NA NA NA
Travelers Group Inc 82,536.20 NA NA NA NA
Astoria Financial Cp 1,765.70 299.09 301.83 32.11 35.57
USB Holding Company 33.80 151.10 151.10 30.56 14.19
</TABLE>
(1) Excludes P/E ratios greater than 30.0x.
-62-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
NEW ISSUE DISCOUNT
- ------------------
A "new issue" discount that reflects investor concerns and investment risks
inherent in all initial stock offerings is a factor to be considered in
valuations of initial thrift stock offerings. The magnitude of the new issue
discount typically expands during periods of declining thrift stock prices as
investors require larger inducements, and narrows during strong market
conditions.
The thrift conversion market continues to respond to the aftermarket
performance of recent offerings. Table 24 presents a summary of publicly traded
thrifts that have completed standard conversions since December 31, 1997. The
aftermarket performance of thrift conversions was more robust through the first
half of 1998, similar to the thrift stock market overall as opposed to the most
recent conversions and thrift stock market as a whole. As the thrift market
gained momentum during the second half of 1996 and 1997, aftermarket performance
improved through the first six months of 1998 even as pro forma valuations were
increased.
During 1998, the thrift conversion market has proven to be strong with the
typical offering selling out in the subscription phase and being priced at or
near the adjusted maximum of the valuation range. With valuations increasing to
reflect the strength of recent offerings, it is uncertain when the market will
reach its tolerance for higher valuations accompanied by the prospect of
companies generating lackluster returns on equity. The average price-to-book
ratio for the 23 publicly traded conversions completed thus far in 1998 was
76.4%.
Following the drop in stock prices over the past few months of 1998, the
performance of recently converted thrifts has followed this trend. While
thrifts converting during 1998 have experienced on average a one-day price
increase of 45.5%, the average price increase has
-63-
<PAGE>
Table 24
Summary of Recent Publicly Traded Thrift Conversions
<TABLE>
<CAPTION>
Pre-Conversion
-------------------
Total Tan.Eq./ Gross
Assets Assets Proceeds
Company Exchange State IPO Date ($mil.) (%) ($mil.)
- ------------------------------------ -------- ----- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------ -------- ----- -------- ------- -------- --------
FULL CONVERSION AVERAGE 367 9.71 77.6
- ------------------------------------ -------- ----- -------- ------- -------- --------
MHC OFFERING AVERAGE 444 12.56 74.7
- ------------------------------------ -------- ----- -------- ------- -------- --------
CFS Bancorp Inc. NASDAQ IN 07/24/98 NA 8.80 NA
PCB Holding Company OTC IN 07/02/98 22 9.51 4.0
Hudson River Bancorp Inc. NASDAQ NY 07/01/98 665 10.13 173.3
First Kansas Financial Corporation NASDAQ KS 06/29/98 96 6.91 15.5
Anson Bancorp, Inc. OTC NC 06/22/98 20 19.04 5.9
Columbia Financial of Kentucky, Inc. NASDAQ KY 04/15/98 104 12.59 26.7
Adirondack Financial Services
Bancorp BOTC NY 04/07/98 61 5.38 6.6
EFC Bancorp, Inc. AMSE IL 04/07/98 316 9.92 69.4
Quitman Bancorp, Inc. OTC GA 04/07/98 39 7.55 6.6
Heritage Bancorp, Inc. NASDAQ SC 04/06/98 247 11.81 69.4
Northeast Pennsylvania Financial
Corporation AMSE PA 04/01/98 369 7.73 59.5
Bay State Bancorp, Inc. AMSE MA 03/30/98 233 8.19 46.9
Home Loan Financial Corp. NASDAQ OH 03/26/98 60 17.16 22.5
Cavalry Bancorp, Inc. NASDAQ TN 03/17/98 276 10.69 75.4
Independence Community Bank
Corp. NASDAQ NY 03/17/98 3,733 6.77 704.1
SFSB Holding Company OTC PA 02/27/98 38 9.20 7.3
Richmond County Financial Corp. NASDAQ NY 02/18/98 993 10.15 244.7
HopFed Bancorp, Inc. NASDAQ KY 02/09/98 202 9.02 40.3
Timberland Bancorp, Inc. NASDAQ WA 01/13/98 206 11.57 66.1
Mystic Financial, Inc. NASDAQ MA 01/09/98 150 7.98 27.1
Wyman Park Bancorporation, Inc. OTC MD 01/07/98 62 7.63 10.1
Delaware First Financial Corporation OTC DE 01/05/98 113 5.41 11.6
United Tennessee Bankshares, Inc. NASDAQ TN 01/05/98 64 10.08 14.5
BCSB Bankcorp, Inc. (MHC) NASDAQ MD 07/08/98 NA 9.48 NA
Liberty Bancorp, Inc. (MHC) NASDAQ NJ 07/01/98 217 7.61 18.3
Niagara Bancorp, Inc. (MHC) NASDAQ NY 04/20/98 1,176 10.77 135.0
Gaston Federal Bancorp, Inc. (MHC) NASDAQ NC 04/13/98 NA 12.03 NA
Mid-Southern Savings Bank, FSB (MHC) OTC IN 04/09/98 94 12.92 NA
Brookline Bancorp, Inc. (MHC) NASDAQ MA 03/25/98 667 17.08 136.7
Marquette Savings Bank (MHC) OTC WI 01/22/98 67 18.05 8.5
<CAPTION>
Pro Forma Ratios After-Market
----------------------------- ------------------
Price/ Price/ Price/ IPO One Through
Book EPS Assets Price Day 09/04/98
Company (%) (x) (%) ($) (%) (%)
- ------------------------------------ -------- ------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------ -------- ------- ------ ------ ------ --------
FULL CONVERSION AVERAGE 76.4 17.2 17.6 10.00 45.5 15.2
- ------------------------------------ -------- ------- ------ ------ ------ --------
MHC OFFERING AVERAGE 123.0 25.4 10.3 10.00 50.7 7.1
- ------------------------------------ -------- ------- ------ ------ ------ --------
CFS Bancorp Inc. 71.7 18.2 19.3 10.00 14.4 (8.8)
PCB Holding Company 71.0 17.6 15.3 10.00 15.0 (10.0)
Hudson River Bancorp Inc. 80.1 22.3 20.7 10.00 25.6 5.6
First Kansas Financial Corporation 78.5 14.0 14.0 10.00 23.1 1.3
Anson Bancorp, Inc. 65.3 21.9 22.4 10.00 NA 13.7
Columbia Financial of Kentucky, Inc. 74.5 19.6 20.4 10.00 71.3 20.0
Adirondack Financial Services
Bancorp 77.0 NA 9.8 10.00 20.0 15.0
EFC Bancorp, Inc. 76.6 13.5 18.0 10.00 47.5 2.5
Quitman Bancorp, Inc. 78.7 14.6 14.4 10.00 26.3 (5.0)
Heritage Bancorp, Inc. 78.0 16.1 21.9 15.00 NA 7.5
Northeast Pennsylvania Financial
Corporation 75.4 18.7 13.9 10.00 55.0 6.3
Bay State Bancorp, Inc. 78.7 20.9 16.8 20.00 46.9 (1.3)
Home Loan Financial Corp. 76.0 17.0 27.1 10.00 52.5 33.8
Cavalry Bancorp, Inc. 79.8 14.3 21.5 10.00 105.6 88.8
Independence Community Bank
Corp. 77.2 17.9 15.9 10.00 72.5 28.1
SFSB Holding Company 76.1 NA 16.1 10.00 28.1 0.0
Richmond County Financial Corp. 79.6 14.0 19.8 10.00 63.1 35.6
HopFed Bancorp, Inc. 75.4 12.4 16.6 10.00 68.1 66.3
Timberland Bancorp, Inc. 81.5 10.5 24.3 10.00 45.0 23.8
Mystic Financial, Inc. 77.8 17.5 15.3 10.00 44.4 15.0
Wyman Park Bancorporation, Inc. 76.7 23.3 14.0 10.00 37.5 8.7
Delaware First Financial Corporation 73.7 20.6 9.3 10.00 NA (13.2)
United Tennessee Bankshares, Inc. 78.4 16.1 18.5 10.00 47.5 16.9
BCSB Bankcorp, Inc. (MHC) 142.3 26.1 8.3 10.00 25.6 4.4
Liberty Bancorp, Inc. (MHC) 121.6 20.4 7.8 10.00 14.4 1.9
Niagara Bancorp, Inc. (MHC) 122.1 20.7 10.3 10.00 63.1 12.5
Gaston Federal Bancorp, Inc. (MHC) 116.8 24.5 10.9 10.00 80.0 12.5
Mid-Southern Savings Bank, FSB (MHC) 135.3 19.5 6.6 10.00 56.3 10.0
Brookline Bancorp, Inc. (MHC) 122.5 19.4 17.0 10.00 65.6 8.7
Marquette Savings Bank (MHC) 100.6 47.4 11.3 8.00 50.0 0.0
</TABLE>
- 64 -
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
declined to 15.2% since conversion, with several thrifts, including the two most
recent conversions, now trading below their conversion price. The volatility
and uncertainty facing the overall market will effect the thrift conversion
market.
Thrift conversions continue to be priced at discounts to publicly traded
companies. This is due to the relatively high equity ratios, low returns on
equity, and the uncertainty regarding the ability of an institution to leverage
the balance sheet. Based upon the price/book ratio measure, standard thrift
conversions are being discounted by 30% to 40% relative to the overall market.
ADJUSTMENTS CONCLUSION
- ----------------------
The Association's pro forma valuation should be discounted relative to the
comparative group because of unproven earnings prospects, the possible lack of
liquidity, and the new issue discount. Individual discounts and premiums are
not necessarily additive and may, to some extent, offset or overlay each other.
Currently, conversions are often priced at substantial discounts to peer
institutions relative to price/book ratios, but at lesser discounts to the
comparable institutions' price/earnings ratios. It is the role of the appraiser
to balance the relative dynamics of price/book and price/earnings discounts and
premiums. We believe that relative to the comparative group, the Association's
pro forma valuation measures should be discounted.
-65-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
VALUATION APPROACH
- ------------------
Table 25 displays the market price and valuation data of the comparative
group as of September 4, 1998. Table 26 compares the Association's valuation
ratios with the comparative group average, all public thrift aggregate, and all
New York public thrift aggregate. Exhibit IV-2 displays the pro forma
conversion calculations utilized in analyzing the Association's valuation
ratios.
Investors continue to make decisions to purchase thrift conversion stocks
and more seasoned thrift issues based upon consideration of core earnings
profitability and price/book comparisons. Utilizing a discount of approximately
38% to the corresponding comparative group average, the Association's resulting
pro forma price/book ratio at the midpoint is 57.3%, reflecting a maximum
price/book valuation of 61.3% at the high end of the range and an adjusted
maximum of 65.2%. As shown on Table 26, the Association's pro forma price/book
ratio of 65.2% at the adjusted maximum represents a 29% discount to the
comparative group's average. The Association's pro forma price/book ratios
reflect greater discounts to the all public and New York thrift aggregates.
The price/earnings ratio is also important and was examined in deriving our
estimate of pro forma market value. Given the variability in earnings,
investors often encounter some difficulty in evaluating thrift offerings based
upon price/earnings multiples. Recently, the special SAIF assessment depressed
the earnings of most thrifts. Therefore, we have evaluated core earnings for
the last twelve months ("LTM"), which attempts to exclude extraordinary items.
Based on the Association's LTM core earnings and the net conversion-related
returns and adjustments, the Association is valued at a midpoint price/earnings
ratio of 14.1x. This pro forma ratio represents a 7% discount to the
comparative group average of 15.1x. At the
-66-
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
maximum of the Association's pro forma valuation range, the valuation repesents
an 8% discount from 8% to 1% with respect to the comparative group's average
price/earnings ratio for the LTM and a 2% premium with respect to the
comparative group's average price/core earnings ratio for the LTM.
In contrast to the aggregates, the Association's lower price/assets ratio
was largely related to its lower capital level. Based on the midpoint offering,
the Holding Company's pro forma equity/assets ratio is projected at 10.38% and
increases to 11.08% at the maximum offering and 11.87% at the adjusted maximum.
VALUATION CONCLUSION
- --------------------
It is our opinion that, as of September 4, 1998, the aggregate estimated
pro forma market value of the Association was within the valuation range of
$1,275,000 to $1,725,000 with a midpoint of $1,500,000. The valuation range was
based upon a 15 percent decrease from the midpoint to determine the minimum and
a 15 percent increase to establish the maximum. Assuming an additional 15
percent increase above the maximum valuation would result in an adjusted maximum
of $1,983,750. Exhibit IV-3 displays the conversion calculations and assumptions
utilized in determining the Association's estimated pro forma market value.
-67-
<PAGE>
Table 25
Comparative Valuation Analysis
Peoples Bankcorp and the Comparative Group
Market Price Data as of September 4, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Current Total Price/ Price/ Price/ Price/ Price/ Tang. Current
Stock Market LTM Core Book Tang. Total Equity/ Dividend
Price Value EPS(1) EPS(1) Value Book Assets Assets Yield
Company State ($) ($M) (x) (x) (%) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Peoples Bankcorp
Pro Forma Minimum NA 1.28 12.3 12.5 52.7 52.7 5.10 9.67 NA
Pro Forma Midpoint NA 1.50 13.9 14.1 57.3 57.3 5.95 10.38 NA
Pro Forma Maximum NA 1.73 15.3 15.4 61.3 61.3 6.79 11.08 NA
Pro Forma Super Maximum NA 1.98 16.8 16.9 65.2 65.2 7.74 11.87 NA
Comparative Group Average NA 5.58 16.7 15.1 92.1 92.6 9.82 10.66 1.23
All Public Thrift Average (2) NA 165.86 16.2 17.9 124.3 129.1 15.37 12.89 1.90
New York Thrift Average (3) NA 429.94 16.6 16.6 118.6 131.0 15.63 12.90 1.80
Comparative Group
- --------------------------------
Albion Banc Corp. NY 8.63 6.49 16.9 18.0 103.1 103.1 8.76 8.49 1.39
AmTrust Capital Corp. IN 13.56 6.92 28.9 67.8 92.1 92.9 10.60 11.42 1.47
Cecil Bancorp, Incorporated MD 24.12 11.34 17.2 14.0 145.4 145.4 16.68 11.47 1.66
Home Building Bancorp, Inc. IN 20.00 6.23 19.2 19.2 95.0 95.0 13.96 13.76 1.50
Kenwood Bancorp, Incorporated OH 13.13 3.87 11.9 8.9 85.3 85.3 8.13 9.54 2.13
Lenox Bancorp, Incorporated OH 16.00 6.47 34.8 30.8 90.4 90.4 11.63 12.86 1.25
MCM Savings Bank, FSB MO 20.00 3.65 12.4 10.2 85.1 85.1 5.56 6.50 1.00
Mid-Central Financial
Corporation MN 26.50 5.90 10.6 10.5 102.9 102.9 9.38 9.12 1.13
Mid-Coast Bancorp, Inc. ME 7.5 5.35 12.3 18.8 102.0 102.0 8.19 8.02 2.67
Midwest Savings Bank IL 14.25 2.73 15.2 35.6 86.6 86.6 6.31 7.28 0.00
Mutual Community Savings
Bank, NC 14.50 5.26 13.6 13.4 65.5 71.3 8.27 11.72 2.48
St. Landry Financial
Corporation LA 17.25 6.92 25.4 22.7 99.9 99.9 11.00 11.01 0.58
Vermilion Bancorp, Inc. IL 11.25 4.16 15.2 40.2 67.5 67.5 9.64 14.29 0.00
West Town Bancorp,
Incorporate IL 12.50 2.78 18.1 15.6 68.4 68.4 9.37 13.70 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Price/earnings ratios greater than 30.0 are excluded from averages.
(2) Includes 380 non-MHC thrifts not under contract to be acquired.
(3) Includes 26 non-MHC thrifts not under contract to be acquired.
- 68 -
<PAGE>
Table 26
Comparative Discount and Premium Analysis
Market Price Data as of September 4, 1998
<TABLE>
<CAPTION>
Relative Premiums (Discounts)
-------------------------------
Comp. All All
Valuation Peoples Group Public New York
Ratio Symbol Bankcorp Average Thrifts(1) Thrifts(2)
--------- ------ -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Price / LTM EPS(3) P/E 16.7 16.2 16.6
Minimum (x) 12.3 -26% -24% -26%
Midpoint 13.9 -17% -15% -17%
Maximum 15.3 -8% -6% -8%
Super Maximum 16.8 1% 3% 1%
Price / Core EPS(3) P/E 15.1 17.9 16.6
Minimum (x) 12.5 -18% -30% -25%
Midpoint 14.1 -7% -21% -15%
Maximum 15.4 2% -14% -7%
Super Maximum 16.9 12% -5% 2%
Price / Book Value P/B 92.1 124.3 118.6
Minimum (%) 52.7 -43% -58% -56%
Midpoint 57.3 -38% -54% -52%
Maximum 61.3 -33% -51% -48%
Super Maximum 65.2 -29% -48% -45%
Price / Tangible Book P/B 92.6 129.1 131.0
Minimum (%) 52.7 -43% -59% -60%
Midpoint 57.3 -38% -56% -56%
Maximum 61.3 -34% -53% -53%
Super Maximum 65.2 -30% -50% -50%
Price / Total Asset P/A 9.82 12.89 12.90
Minimum (%) 5.10 -48% -60% -60%
Midpoint 5.95 -39% -54% -54%
Maximum 6.79 -31% -47% -47%
Super Maximum 7.74 -21% -40% -40%
</TABLE>
- -------------
(1) Includes 380 publicly traded thrifts nationwide.
(2) Includes 25 publicly traded thrifts based in New York.
(3) Price/earnings ratio averages exclude values greater than 30.
- 69 -
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
EXHIBIT I
DESCRIPTION OF FELDMAN FINANCIAL ADVISORS AND SENIOR PROFESSIONAL STAFF
OVERVIEW OF FIRM
- ----------------
FELDMAN FINANCIAL ADVISORS provides consulting services to financial
institutions and mortgage companies in the areas of corporate valuations,
mergers and acquisitions, strategic planning, branch sales and purchases,
developing and implementing regulatory business and capital plans, enhancing
franchise value, portfolio analysis and restructuring, advising on retail branch
strategies, evaluating bank management, regulatory analysis, and expert witness
testimony and analysis.
FELDMAN FINANCIAL ADVISORS was incorporated in February 1996 by a group of
consultants who were previously associated with Kaplan Associates. Each of the
principals at Feldman Financial Advisors has more than 10 years experience in
consulting and all were officers of their former employer. Our principals
collectively have worked with more than 1,000 banks, thrifts and mortgage
companies nationwide. The firm's office is located in downtown Washington, D.C.
BACKGROUND OF SENIOR PROFESSIONAL STAFF
- ---------------------------------------
TRENT FELDMAN, President--Trent is a nationally recognized expert in valuing
financial institutions, providing strategic advice to financial institutions,
and advising on mergers and acquisitions for banks and thrifts of all sizes.
Trent was with Kaplan Associates for 14 years and was one of three founding
principals at that firm. Trent also has worked in the Chairman's Office of the
Federal Home Loan Bank Board, the Federal Savings and Loan Insurance
Corporation, and with the California state legislature. Trent holds Bachelors
and Masters degrees from the University of California at Los Angeles.
PETER WILLIAMS, Principal--Peter specializes in merger and acquisition analysis,
corporate valuations, strategic business plans and retail branch analysis. Peter
was with Kaplan Associates for 13 years. Peter also served as a Corporate
Planning Analyst with the Wilmington Trust Company in Delaware. Peter holds a BA
in Economics from Yale University and an MBA in Finance from George Washington
University.
MICHAEL GREEN, Principal--Mike is an expert in mergers and acquisition analysis,
financial institution valuations, and business plans. During Mike's 10 years at
Kaplan Associates, his experience also included mark-to-market analysis,
goodwill valuations and core deposit studies. Mike holds a BS in Finance and
Economics from Rutgers College.
LINDA FARRELL, Principal--Linda is nationally known for her expertise in branch
purchases and sales, and she specializes in small bank mergers and acquisitions,
retail banking analysis, business plans and management reviews. Linda was with
Kaplan Associates for 12 years. Linda also was a Senior Vice President of Retail
Banking at Western Savings in Salt Lake City and a consultant with both Arthur
Young & Company and Richard T. Pratt Associates. Linda holds a BA in English
from Oklahoma State University and an MBA from the University of Utah.
GREG IZYDORCZYK, Vice President--Greg specializes in merger and acquisition
analysis and corporate valuations and also has experience in mark-to-market
analysis and business plans. Greg was with Kaplan Associates for three years.
Greg also has four years experience as a Senior Auditor in the commercial
banking industry for First Virginia and Integra Financial. Greg worked as a
Financial Analyst with Airbus Industrie of North America for two years
performing analysis on the airline industry and airline capital markets (debt
and leasing) in North America, preparing financial proposals in conjunction with
commercial sales proposals and analyzing the Company's current and potential
financing portfolio. Greg holds a BS in Finance from Pennsylvania State
University and an MBA in Finance from the Katz Graduate School, University of
Pittsburgh.
70
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-1
STATEMENT OF FINANCIAL CONDITION
As of December 31, 1997 and 1998 and June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
- ------
Cash and due form banks $ 622 $ 674 $ 671
Interest-bearing deposits with other banks 617 553 900
Securities available-for-sale -- 737 804
Securities held-to-maturity 3,546 4,031 3,561
Loans, net of deferred fees 18,863 16,832 15,475
Less allowance for loan losses 165 164 116
------------ ------------ ------------
Loans receivable, net 18,698 16,668 15,359
Premises and equipment 426 434 455
Federal Home Loan Bank stock, at cost 139 137 136
Accrued interest receivable 150 125 92
Real estate owned 40 40 --
Other assets 9 3 20
------------ ------------ ------------
TOTAL ASSETS $ 24,247 $ 23,402 $ 21,998
============ ============ ============
LIABILITIES
- -----------
Deposits:
Demand accounts 735 638 470
Savings and club accounts 3,131 2,733 2,687
Time certificates 16,519 16,306 15,358
NOW and money market accounts 1,971 2,088 1,974
------------ ------------ ------------
Total deposits 22,356 21,756 20,489
Advances by borrowers for taxes/insurance 3 3 5
Other liabilities 240 57 27
------------ ------------ ------------
TOTAL LIABILITIES 22,599 21,825 98,992,034
------------ ------------ ------------
EQUITY
Retained earnings 1,648 1,576 1,488
Accumulated other comprehensive income -- 1 (1)
------------ ------------ ------------
Total equity 1,648 1,577 1,487
------------ ------------ ------------
TOTAL LIABILITIES AND
RETAINED EARNINGS $ 24,247 $ 23,402 $ 21,998
============ ============ ============
</TABLE>
II-1
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-2
STATEMENT OF INCOME
For the Year Ended December 31, 1996 and 1997
And the Six Months Ended June 30, 1997 and 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, March 31,
---------------- ---------------
1998 1997 1997 1996
------- ------ ------- ------
<S> <C> <C> <C> <C>
Interest income
Loans $727 645 1,330 1,266
Securities 127 132 277 260
Other short-term investments 28 35 55 66
Total interest income 882 812 1,662 1,592
Interest expense
Deposits 522 477 998 954
Borrowings - - - 1
----- ----- ----- -----
Total interest expense 522 477 998 955
Net interest income 360 335 664 637
Provision for loan losses 3 - 57 -
----- ----- ----- -----
Net interest income after prov. 357 335 607 637
Noninterest income:
Service charges 14 11 30 14
Net gain on sale of securities 1 - - -
Other 7 9 14 16
----- ----- ----- -----
Total noninterest income 22 20 44 30
Noninterest expense:
Salaries and employee benfits 140 128 258 258
Directors fees 31 32 59 54
Building, occupance and equipment 27 32 73 59
Data processing 15 14 28 27
Postage and supplies 12 8 25 23
Deposit insurance premium 7 4 11 174
Insurance 5 7 17 14
Other 44 25 54 47
----- ----- ----- -----
Total noninterest expense 281 250 525 656
Income before taxes 98 105 126 11
Income tax expense 26 28 38 3
----- ----- ----- -----
Net income (loss) $72 77 88 8
===== ===== ===== =====
</TABLE>
II-2
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-3
LOAN PORTFOLIO COMPOSITION
As of December 31, 1996 and 1997 and June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
At June 30, At December 31,
------------------------- ----------------------------------------------------------
1998 1997 1996
------------------------- -------------------------- ---------------------------
Amount Percent Amount Percent Amount Percent
----------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential $12,377 65.62% $11,893 70.66% $11,838 76.50%
Commercial 726 3.85 706 4.19 553 3.57
Construction 199 1.05 67 0.40 115 0.74
------- ------ ------- ------ ------- ------
Total mortgage loans 13,302 70.52 12,666 75.25 12,506 80.81
Other loans:
Commercial 200 1.06 100 0.59 -- 0.00
Automobile 3,299 17.49 2,121 12.60 1,400 9.05
Home equity 1,061 5.62 1,226 7.28 903 5.84
Passbook 219 1.16 217 1.29 207 1.74
Other 803 4.26 526 3.13 422 2.73
------- ------ ------- ------ ------- ------
5,582 29.59 4,190 24.89 2,995 19.35
Total loans 18,884 100.11 16,856 100.14 15,501 100.17
Less:
Net deferred fees 21 -0.11 24 -0.14 26 -0.17
------- ------ ------- ------ ------- ------
Loans receivable, net $18,863 100.00% $16,832 100.00% $15,475 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
II-3
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-4
NET LENDING ACTIVITY
For the Year Ended December 31, 1996 and 1997
and Six Months Ended June 30, 1997 and 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, December 31,
------------------------ ------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Loans originated:
Real estae loans:
One- to four-family residential $1,708 $ 697 $1,501 $1,953
Commercial 35 90 104 115
Automobile 1,726 677 1,674 908
Home equity 30 249 473 472
Passbook 36 28 64 199
Commercial 100 -- 100 --
Other 430 152 25 24
------ ------ ------ ------
Total loans originated $4,065 $1,893 $4,341 $3,871
====== ====== ====== ======
</TABLE>
II-4
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-5
INVESTMENT SECURITIES PORTFOLIO
As of December 31, 1996 and 1997
and June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
At June 30, At December 31,
---------------------------- --------------------------------------------------------
1998 1997 1996
---------------------------- ------------------------- --------------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
----------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES
Available-for-sale
Mortgage-backed securities $ -- 0.00% $ 737 18.28% $ 804 22.58%
MORTGAGE-BACKED SECURITIES
Held to maturity:
U.S. Government securities 3,482 98.20 3,962 98.29 3,470 97.44
Mortgage-backed securities 64 1.80 69 1.71 91 2.56
------ ------ ------ ------ ------ ------
Total investments $3,546 100.00% $4,768 100.00% $4,365 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
II-5
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-6
DEPOSIT ACCOUNT DISTRIBUTION
As June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
INTEREST MINIMUM BALANCES IN PERCENTAGE OF
RATE CATEGORY AMOUNT THOUSANDS TOTAL DEPOSITS
- --------------- --------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
--% Demand accounts $ 100 $ 735 3.29%
3.09% Savings and club accounts 100 3,131 14.00
1.01%-2.57% NOW and money market 100 - 2,500 1,971 8.82
TIME CERTIFICATES
4.00-4.99% Fixed-term, fixed-rate 1,000 114 0.51%
5.00-5.99% Fixed-term, fixed-rate 1,000 15,727 70.35
6.00-6.99% Fixed-term, fixed-rate 1,000 675 3.03
------- ------
$22,356 100.00%
======= ======
</TABLE>
II-6
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-7
BORROWING ACTIVITY
Year Ended March 31, 1996 and 1997
and Five Months Ended August 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Five Months
Ended Year Ended
August 31, March 31,
---------- ----------------
1997 1997 1996
----- ----- -----
<S> <C> <C> <C>
Maximum amount of borrowings
outstanding at any month end
during the period:
FHLB advances $ 0 $ 0 $ 0
Average amount of borrowings
outstanding during the period:
FHLB advances 0 0 0
Approximate weighted average
interest rate during the period:
FHLB advances 0.00% 0.00% 0.00%
</TABLE>
II-7
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-MHC, Not Under Acquisition
- ------------------------------
1st Bergen Bancorp FBER NASDAQ NJ 300,755 11.60 0.72 5.490 42.01
Abington Bancorp, Inc. ABBK NASDAQ MA 546,208 5.84 0.69 10.310 52.97
Acadiana Bancshares, Inc. ANA AMSE LA 298,148 14.72 1.01 6.250 35.32
Access Anytime Bancorp, Inc. AABC NASDAQ NM 116,921 7.93 1.37 16.610 8.52
Adirondack Financial Services Bancorp AFSB OTC NY 66,028 13.52 NA NA 7.60
Advance Financial Bancorp AFBC NASDAQ WV 110,668 14.09 0.90 5.920 15.43
Albion Banc Corp. ALBC NASDAQ NY 74,118 8.49 0.53 6.180 6.49
Algiers Bancorp, Incorporated ALGC Pinks LA 46,386 19.71 0.27 1.310 6.56
Alliance Bancorp ABCL NASDAQ IL 2,068,197 8.67 0.91 9.900 197.24
Alliance Bancorp of New England ANE AMSE CT 252,287 7.65 0.46 6.200 25.07
AMB Financial Corp. AMFC NASDAQ IN 111,338 12.68 0.53 3.770 13.28
Ambanc Holding Co., Inc. AHCI NASDAQ NY 565,387 10.32 0.41 3.510 53.37
Ameriana Bancorp ASBI NASDAQ IN 375,297 11.97 0.98 8.590 58.55
American Bank of Connecticut BKC AMSE CT 685,545 8.41 1.15 13.620 96.96
AmTrust Capital Corp. ATSB OTC IN 65,270 11.42 0.34 3.180 6.92
Anchor BanCorp Wisconsin, Inc. ABCW NASDAQ WI 2,057,635 6.27 1.12 16.940 394.50
Andover Bancorp, Inc. ANDB NASDAQ MA 1,392,342 8.20 1.17 14.780 178.22
Anson Bancorp, Inc. ANSN OTC NC 21,240 18.54 NA NA 6.65
Argo Bancorp, Incorporated ARGO Pinks IL 259,758 7.17 NA NA 17.67
ASB Financial Corp. ASBP NASDAQ OH 116,437 12.44 0.94 6.670 19.03
Astoria Financial Corporation ASFC NASDAQ NY 11,575,551 6.09 0.79 9.490 1,007.23
Avondale Financial Corp. AVND NASDAQ IL 520,132 8.36 (1.06) (12.650) 36.06
Bancorp Connecticut, Inc. BKCT NASDAQ CT 495,178 9.89 1.24 12.020 83.12
Bank Plus Corporation BPLS NASDAQ CA 4,286,237 3.98 0.27 6.360 140.58
Bank United Corporation BNKU NASDAQ TX 13,095,947 4.67 0.88 17.510 1,119.74
Bank West Financial Corporation BWFC NASDAQ MI 181,512 12.84 0.51 3.730 29.19
BankAtlantic Bancorp, Inc. BANC NASDAQ FL 3,756,571 5.34 0.56 9.370 323.70
BankPlus, FSB BNKP OTC IL 209,989 6.55 0.65 9.940 19.77
BankUnited Financial Corporation BKUNA NASDAQ FL 3,584,123 4.64 0.29 5.620 168.96
Baxley Federal Savings Bank Pinks GA 100,754 14.40 1.43 10.200 9.93
Bay State Bancorp, Inc. BYS AMSE MA 287,617 22.28 0.34 2.440 50.07
Bay View Capital Corporation BVCC NASDAQ CA 5,720,109 4.58 0.58 8.570 344.75
Bedford Bancshares, Inc. BFSB NASDAQ VA 156,509 13.25 1.23 8.800 26.43
Big Foot Financial Corporation BFFC NASDAQ IL 220,604 17.27 NA NA 35.18
Blue River Bancshares, Inc. BRBI NASDAQ IN 350,208 (44.58) NA NA 12.19
BostonFed Bancorp, Inc. BFD AMSE MA 1,058,207 7.55 0.72 8.470 90.34
Broadway Financial Corporation BYFC NASDAQ CA 137,642 9.90 0.26 2.430 7.69
Calumet Bancorp, Inc. CBCI NASDAQ IL 491,961 17.74 1.99 12.010 83.35
Camco Financial Corporation CAFI NASDAQ OH 588,220 9.36 1.26 13.020 87.58
Cameron Financial Corporation CMRN NASDAQ MO 220,784 19.86 1.14 5.450 38.94
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Non-MHC, Not Under Acquisition
- ------------------------------
1st Bergen Bancorp 16.25 19.35 19.35 120.46 120.46 13.97 1.72
Abington Bancorp, Inc. 15.13 12.93 16.09 153.55 168.43 9.78 1.32
Acadiana Bancshares, Inc. 15.50 12.70 13.25 88.47 88.47 13.02 2.84
Access Anytime Bancorp, Inc. 7.00 5.69 5.69 91.98 91.98 7.29 -
Adirondack Financial Services Bancorp 11.50 NA NA 85.19 85.19 11.52 -
Advance Financial Bancorp 14.38 15.13 15.13 99.00 99.00 13.95 2.23
Albion Banc Corp. 8.63 16.91 16.91 103.05 103.05 8.76 1.39
Algiers Bancorp, Incorporated 11.22 40.08 48.79 71.80 71.80 14.15 1.78
Alliance Bancorp 17.25 13.48 11.58 109.18 110.08 9.54 2.55
Alliance Bancorp of New England 10.94 12.15 24.86 138.46 141.50 10.81 1.83
AMB Financial Corp. 14.50 15.26 23.77 94.03 94.03 11.92 1.93
Ambanc Holding Co., Inc. 13.00 24.53 23.21 91.42 91.42 9.44 1.85
Ameriana Bancorp 18.00 15.52 15.38 128.30 130.62 15.60 3.56
American Bank of Connecticut 20.69 11.56 13.70 163.54 168.61 14.14 3.87
AmTrust Capital Corp. 13.56 28.85 28.85 92.06 92.94 10.60 1.47
Anchor BanCorp Wisconsin, Inc. 22.19 19.29 19.29 301.88 306.46 19.24 0.90
Andover Bancorp, Inc. 27.50 11.70 11.90 156.16 156.16 12.80 2.62
Anson Bancorp, Inc. 11.37 NA NA 168.95 168.95 31.32 -
Argo Bancorp, Incorporated 35.50 NA NA 94.34 94.92 6.80 2.03
ASB Financial Corp. 11.50 16.91 16.91 131.28 131.28 16.34 3.48
Astoria Financial Corporation 37.88 11.55 12.22 112.59 157.16 8.68 2.11
Avondale Financial Corp. 12.25 NM NM 86.21 86.21 7.21 -
Bancorp Connecticut, Inc. 16.25 14.13 16.41 169.62 169.62 16.78 3.32
Bank Plus Corporation 7.25 19.59 13.18 75.92 82.76 3.28 -
Bank United Corporation BNKU 35.44 10.36 10.52 167.24 184.09 8.55 1.81
Bank West Financial Corporation 11.13 29.28 33.71 125.28 125.28 16.08 2.16
BankAtlantic Bancorp, Inc. 9.31 13.90 20.70 133.81 173.10 9.09 1.07
BankPlus, FSB 26.00 16.56 16.56 154.95 154.95 9.42 -
BankUnited Financial Corporation 9.50 20.21 20.21 92.32 110.47 4.71 -
Baxley Federal Savings Bank 18.00 6.69 6.69 68.39 68.39 9.85 4.50
Bay State Bancorp, Inc. 19.75 NA NA 72.50 72.50 17.41 -
Bay View Capital Corporation 17.00 20.99 11.81 87.49 134.92 6.03 2.35
Bedford Bancshares, Inc. 11.50 15.13 15.13 127.49 127.49 16.88 2.78
Big Foot Financial Corporation 14.00 28.57 38.89 92.35 92.35 15.95 -
Blue River Bancshares, Inc. 8.13 NA NA NA NA NA -
BostonFed Bancorp, Inc. 16.75 12.98 12.98 103.52 107.23 8.54 2.39
Broadway Financial Corporation 8.25 13.52 25.00 58.84 58.84 5.59 2.24
Calumet Bancorp, Inc. 26.50 9.50 9.30 95.53 95.53 16.94 -
Camco Financial Corporation 16.00 13.68 13.56 150.80 160.32 14.91 2.42
Cameron Financial Corporation 16.00 15.84 15.84 88.79 88.79 17.64 1.75
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carnegie Financial Corporation CAFN OTC PA 20,163 5.74 NA NA 2.38
Carolina Fincorp, Inc. CFNC NASDAQ NC 113,911 13.51 1.11 6.140 17.03
Carver Bancorp, Inc. CNY AMSE NY 427,371 8.14 0.22 2.650 21.99
Cascade Financial Corporation CASB NASDAQ WA 444,155 7.07 0.85 12.220 54.39
Catskill Financial Corporation CATB NASDAQ NY 309,566 22.04 1.30 5.390 56.56
Cavalry Bancorp, Inc. CAVB NASDAQ TN 339,846 29.65 NA NA 142.28
CBES Bancorp, Inc. CBES NASDAQ MO 123,710 13.63 0.94 6.090 17.85
CCF Holding Company CCFH NASDAQ GA 158,539 7.28 (0.01) (0.140) 18.79
Cecil Bancorp, Incorporated CECB OTC MD 67,987 11.47 0.95 8.280 11.34
CENIT Bancorp, Inc. CNIT NASDAQ VA 651,857 7.37 0.91 12.570 89.07
Central Co-operative Bank CEBK NASDAQ MA 381,857 8.96 0.63 6.450 38.32
Century Bancorp, Inc. CENB NASDAQ NC 96,866 19.34 1.21 4.880 16.52
CFS Bancorp Inc. CITZ NASDAQ IN 1,098,105 NA NA NA 204.35
CFSB Bancorp, Inc. CFSB NASDAQ MI 847,769 7.78 1.33 17.070 177.63
Charter One Financial, Inc. COFI NASDAQ OH 19,813,254 7.06 1.17 16.220 3,393.60
Chester Valley Bancorp Inc. CVAL NASDAQ PA 377,012 8.45 0.98 11.680 63.54
Citizens Bancorp, Inc. CIBC OTC IN 55,607 28.11 1.61 6.890 11.76
Citizens First Financial Corp. CBK AMSE IL 281,068 13.95 0.59 4.250 36.31
CKF Bancorp, Inc. CKFB NASDAQ KY 62,759 21.57 1.34 5.970 13.92
Classic Bancshares, Inc. CLAS NASDAQ KY 137,984 13.06 0.56 3.710 18.36
CNS Bancorp, Inc. CNSB NASDAQ MO 97,988 24.78 0.89 3.620 24.87
Coastal Bancorp, Inc. CBSA NASDAQ TX 2,980,528 3.37 0.54 15.000 121.05
Coastal Financial Corporation CFCP NASDAQ SC 616,887 5.90 1.14 18.540 118.86
Coddle Creek Financial Corp. CDLC OTC NC 133,559 32.94 NA NA 41.82
Columbia Financial of Kentucky, Inc. CFKY NASDAQ KY 118,968 31.49 NA NA 32.06
Commercial Federal Corporation CFB NYSE NE 8,852,640 6.49 0.97 14.410 1,401.31
Commonwealth Bancorp, Inc. CMSB NASDAQ PA 2,368,247 6.77 0.64 6.910 229.11
Community Federal Bancorp, Inc. CFTP NASDAQ MS 263,246 22.27 1.07 4.280 65.97
Community Financial Corporation CFFC NASDAQ VA 183,230 14.04 0.96 7.040 32.13
Community Investors Bancorp, Inc. CIBI NASDAQ OH 101,734 10.99 0.95 8.170 16.38
Cooperative Bankshares, Inc. COOP NASDAQ NC 381,054 7.95 0.65 8.360 40.49
Crazy Woman Creek Bancorp, Incorporated CRZY NASDAQ WY 61,478 23.43 1.22 5.140 12.44
Crusader Holding Corporation CRSB NASDAQ PA 202,034 10.96 2.34 28.610 48.86
CSB Financial Group, Inc. CSBF NASDAQ IL 47,218 22.18 0.61 2.580 8.31
Cumberland Mountain Bancshares, Inc. CMBN OTC KY 139,915 6.53 0.63 8.920 9.48
D & N Financial Corporation DNFC NASDAQ MI 1,898,004 5.53 0.84 15.350 160.25
Delaware First Financial Corporation DFFN OTC DE 104,050 15.43 NA NA 10.04
Delphos Citizens Bancorp, Inc. DCBI NASDAQ OH 113,585 24.15 1.45 5.560 34.25
Dime Bancorp, Incorporated DME NYSE NY 20,913,891 5.29 0.86 14.770 2,582.88
Dime Community Bancshares, Inc. DCOM NASDAQ NY 1,623,926 10.15 0.86 6.790 219.18
Downey Financial Corp. DSL NYSE CA 5,832,102 7.79 0.88 12.010 655.20
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Carnegie Financial Corporation 10.00 NA NA NA NA NA -
Carolina Fincorp, Inc. 8.94 14.65 12.41 110.62 110.62 14.95 2.69
Carver Bancorp, Inc. 9.50 19.79 22.62 61.25 63.38 5.14 -
Cascade Financial Corporation 12.75 17.00 16.78 173.00 173.00 12.24 -
Catskill Financial Corporation 12.75 14.01 14.33 81.11 81.11 18.48 2.90
Cavalry Bancorp, Inc. 18.88 NA NA 141.17 141.17 41.87 1.06
CBES Bancorp, Inc. 19.00 17.12 17.12 105.91 105.91 14.43 2.53
CCF Holding Company 21.00 100.00 NM 162.79 162.79 11.85 3.05
Cecil Bancorp, Incorporated 24.12 17.23 17.23 145.39 145.39 16.68 1.66
CENIT Bancorp, Inc. 17.75 13.65 13.76 163.75 176.79 13.61 2.25
Central Co-operative Bank 19.50 12.26 16.39 102.96 113.04 10.03 1.64
Century Bancorp, Inc. 13.00 12.26 12.38 88.20 88.20 17.06 5.23
CFS Bancorp Inc. 9.13 NA NA NA NA NA -
CFSB Bancorp, Inc. 21.75 16.23 16.60 269.18 269.18 20.95 2.39
Charter One Financial, Inc. 26.63 20.17 15.75 229.72 244.04 17.15 2.10
Chester Valley Bancorp Inc. 26.00 17.57 18.57 199.54 199.54 16.85 1.61
Citizens Bancorp, Inc. 11.12 NA NA 75.24 75.24 21.16 -
Citizens First Financial Corp. 14.38 18.67 22.82 92.56 92.56 12.92 -
CKF Bancorp, Inc. 16.50 16.50 16.50 95.43 95.43 22.17 3.27
Classic Bancshares, Inc. 14.13 17.88 23.54 89.46 104.01 13.30 2.27
CNS Bancorp, Inc. 15.13 28.54 28.54 102.47 102.47 25.39 1.98
Coastal Bancorp, Inc. 16.00 8.08 7.88 106.67 122.42 4.06 2.00
Coastal Financial Corporation 19.00 18.45 19.79 326.46 326.46 19.27 1.47
Coddle Creek Financial Corp. 62.00 NA NA 95.06 95.06 31.31 1.61
Columbia Financial of Kentucky, Inc. 12.00 NA NA 85.59 85.59 26.95 2.33
Commercial Federal Corporation 23.06 14.24 11.25 150.84 170.21 10.96 0.95
Commonwealth Bancorp, Inc. 15.00 17.44 15.63 116.19 147.49 9.80 2.13
Community Federal Bancorp, Inc. 15.00 22.39 25.86 101.01 101.01 25.06 2.13
Community Financial Corporation 12.50 18.12 18.66 124.38 124.88 17.53 2.24
Community Investors Bancorp, Inc. 12.94 19.03 18.48 154.58 154.58 16.98 1.86
Cooperative Bankshares, Inc. 13.38 18.07 18.07 133.75 133.75 10.63 -
Crazy Woman Creek Bancorp, Incorporated 13.25 15.96 15.96 86.32 86.32 20.23 3.02
Crusader Holding Corporation 12.75 10.04 10.04 210.40 222.13 24.19 -
CSB Financial Group, Inc. 10.13 27.36 28.93 75.90 80.42 17.60 -
Cumberland Mountain Bancshares, Inc. 14.00 NA NA 103.86 103.86 6.78 -
D & N Financial Corporation 17.50 10.74 11.01 151.52 152.71 8.44 1.14
Delaware First Financial Corporation 8.68 NA NA 62.54 62.54 9.65 -
Delphos Citizens Bancorp, Inc. 18.53 20.59 20.59 124.87 124.87 30.16 1.30
Dime Bancorp, Incorporated 22.75 14.68 14.13 194.11 236.00 12.35 0.88
Dime Community Bancshares, Inc. 18.00 16.51 17.14 117.65 135.03 13.50 2.22
Downey Financial Corp. 23.31 11.54 12.74 142.76 144.26 11.23 1.37
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eagle BancGroup, Inc. EGLB NASDAQ IL 174,085 12.05 0.36 3.070 18.54
Eagle Bancshares, Inc. EBSI NASDAQ GA 1,120,232 6.92 0.89 11.510 98.77
East Side Financial, Incorporated ESDF OTC IL 79,143 15.87 0.69 4.300 8.76
East Texas Financial Services, Inc. ETFS NASDAQ TX 122,594 17.28 0.53 3.010 19.40
EFC Bancorp, Inc. EFC AMSE IL 397,644 23.67 0.84 7.760 76.79
Elmira Savings Bank, FSB ESBK NASDAQ NY 231,725 6.27 0.39 6.240 17.44
Emerald Financial Corporation EMLD NASDAQ OH 617,369 8.41 1.13 14.020 123.29
Empire Federal Bancorp, Inc. EFBC NASDAQ MT 106,940 36.22 1.45 3.940 32.56
Enterprise Federal Bancorp, Inc. EFBI NASDAQ OH 406,893 8.83 0.66 6.300 60.53
Equality Bancorp, Inc. EBI AMSE MO 273,361 9.58 0.59 6.760 32.92
Equitable Federal Savings Bank EQSB NASDAQ MD 350,555 5.12 0.70 13.600 28.14
ESB Financial Corp. ESBF NASDAQ PA 956,146 6.31 0.66 8.610 84.88
Essex Bancorp, Inc. ESX AMSE VA 214,391 6.97 (0.24) (3.130) 2.32
Falmouth Bancorp, Inc. FCB AMSE MA 110,523 21.38 0.84 3.590 24.37
FCB Financial Corp. FCBF NASDAQ WI 515,516 14.62 1.32 9.290 105.11
Federal Trust Corporation FDTR NASDAQ FL 151,934 8.45 NA NA 13.59
FFBS BanCorp, Inc. FFBS OTC MS 150,806 15.42 1.13 6.890 39.49
FFD Financial Corporation FFDF NASDAQ OH 100,104 22.28 0.79 3.300 24.57
FFLC Bancorp, Inc. FFLC NASDAQ FL 412,443 12.80 0.95 7.230 65.49
FFW Corporation FFWC NASDAQ IN 203,311 8.72 0.90 9.390 21.87
FFY Financial Corp. FFYF NASDAQ OH 651,746 12.92 1.21 9.100 118.32
Fidelity Bancorp, Inc. FSBI NASDAQ PA 396,180 7.09 0.72 10.530 36.52
Fidelity Bancorp, Inc. FBCI NASDAQ IL 501,708 10.59 0.58 5.510 59.86
Fidelity Federal Bancorp FFED NASDAQ IN 197,436 6.78 (0.15) (2.420) 11.34
Fidelity Financial of Ohio, Inc. FFOH NASDAQ OH 531,926 11.19 0.87 7.000 72.79
First Allen Parish Bancorp, Incorporated FALN Pinks LA 34,128 13.77 0.58 4.220 6.35
First Bancshares, Inc. FBSI NASDAQ MO 172,173 13.65 1.09 7.860 28.22
First Bell Bancorp, Inc. FBBC NASDAQ PA 756,638 10.16 1.09 10.260 103.96
First Citizens Corporation FSTC NASDAQ GA 379,694 8.34 1.46 14.620 71.33
First Coastal Bankshares, Inc. FCBK NASDAQ VA 603,753 7.50 0.69 9.770 71.03
First Coastal Corporation FCME NASDAQ ME 171,719 8.95 0.73 7.520 15.99
First Defiance Financial Corp. FDEF NASDAQ OH 582,124 17.74 0.92 4.900 96.87
First Essex Bancorp, Inc. FESX NASDAQ MA 1,314,752 5.28 0.81 10.950 121.00
First Federal Bancorp, Inc. FFBZ NASDAQ OH 207,381 7.95 0.82 10.730 31.51
First Federal Bancorporation BDJI NASDAQ MN 121,315 10.45 0.71 6.720 14.72
First Federal Bancshares of Arkansas, Inc. FFBH NASDAQ AR 578,142 14.71 1.00 6.710 91.55
First Federal Capital Corp. FTFC NASDAQ WI 1,584,405 7.17 1.22 17.530 264.10
First Federal Financial Bancorp, Incorporated FFFB OTC OH 61,472 16.40 0.35 2.040 9.86
First Federal Financial Corporation of Kentucky FFKY NASDAQ KY 409,651 12.76 1.53 11.380 97.56
First Federal Savings & Loan of East Hartford FFES NASDAQ CT 980,415 7.20 0.64 9.390 69.02
First Financial Holdings Inc. FFCH NASDAQ SC 1,874,198 6.49 0.89 14.040 252.26
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Eagle BancGroup, Inc. 15.75 28.64 28.13 88.38 88.38 10.65 -
Eagle Bancshares, Inc. 17.00 11.56 11.89 127.25 127.25 8.81 3.76
East Side Financial, Incorporated 27.63 16.54 17.48 69.76 69.76 11.07 2.39
East Texas Financial Services, Inc. 13.25 30.81 30.81 96.29 96.29 16.64 1.51
EFC Bancorp, Inc. 10.25 NA NA 81.61 81.61 19.31 -
Elmira Savings Bank, FSB 24.00 16.00 19.05 117.94 117.94 7.53 2.67
Emerald Financial Corporation 12.00 18.75 18.75 234.83 237.62 19.97 1.17
Empire Federal Bancorp, Inc. 13.13 19.59 19.59 84.03 84.03 30.44 2.44
Enterprise Federal Bancorp, Inc. 27.38 23.60 27.65 165.21 168.77 14.88 3.65
Equality Bancorp, Inc. 13.06 NA NA 125.61 125.61 12.03 1.84
Equitable Federal Savings Bank 23.00 13.22 13.22 156.78 156.78 8.03 -
ESB Financial Corp. 15.75 15.14 15.29 133.02 149.01 9.33 2.29
Essex Bancorp, Inc. 2.19 NM NM NM 31.44 1.08 -
Falmouth Bancorp, Inc. 16.75 20.68 27.92 103.14 103.14 22.05 1.43
FCB Financial Corp. 27.25 15.14 15.14 139.46 139.46 20.39 3.23
Federal Trust Corporation 2.75 NA NA 105.77 105.77 8.94 -
FFBS BanCorp, Inc. 25.06 24.33 24.33 163.90 163.90 26.18 2.39
FFD Financial Corporation 17.00 23.29 32.69 110.17 110.17 24.55 1.76
FFLC Bancorp, Inc. 17.50 16.83 17.68 124.03 124.03 15.88 2.06
FFW Corporation 15.00 11.36 12.50 114.33 124.28 10.76 2.80
FFY Financial Corp. 29.50 14.90 15.21 140.48 140.48 18.15 2.71
Fidelity Bancorp, Inc. 18.50 13.03 13.31 130.01 130.01 9.22 1.95
Fidelity Bancorp, Inc. 21.13 72.84 21.13 112.55 112.73 11.93 1.89
Fidelity Federal Bancorp 3.63 NM NM 84.70 84.70 5.74 5.52
Fidelity Financial of Ohio, Inc. 13.00 14.77 15.29 110.26 123.93 13.68 2.46
First Allen Parish Bancorp, Incorporate 24.00 30.38 30.77 135.06 135.06 18.60 1.25
First Bancshares, Inc. 12.75 15.00 15.18 115.80 120.74 16.39 0.94
First Bell Bancorp, Inc. 16.00 12.50 12.50 135.82 135.82 13.80 2.50
First Citizens Corporation 25.50 14.33 14.66 188.05 229.11 18.77 1.25
First Coastal Bankshares, Inc. 14.25 16.96 16.96 156.94 156.94 11.76 1.68
First Coastal Corporation 11.75 13.35 14.69 103.98 103.98 9.31 -
First Defiance Financial Corp. 11.88 17.99 17.99 93.80 93.80 16.64 3.03
First Essex Bancorp, Inc. 16.00 12.03 12.60 128.93 177.58 9.20 3.50
First Federal Bancorp, Inc. 10.00 20.00 20.00 191.20 191.20 15.19 1.40
First Federal Bancorporation 14.75 15.21 15.05 116.14 116.14 12.14 -
First Federal Bancshares of Arkansas, I 19.00 15.83 15.83 108.82 108.82 16.01 1.47
First Federal Capital Corp. 14.25 14.84 14.69 221.96 233.22 16.66 1.96
First Federal Financial Bancorp, Incorp 16.75 41.88 47.86 102.01 102.01 16.73 1.67
First Federal Financial Corporation of K 23.63 15.44 16.07 178.44 187.95 23.82 2.54
First Federal Savings & Loan of East Har 25.13 12.02 11.12 97.65 97.65 7.03 2.71
First Financial Holdings Inc. 18.50 16.09 16.23 207.40 207.40 13.46 2.27
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Franklin Corporation FFHS NASDAQ OH 237,679 9.09 0.77 8.400 25.85
First Georgia Holding, Inc. FGHC NASDAQ GA 180,806 7.67 1.16 14.150 49.19
First Independence Corporation FFSL NASDAQ KS 123,366 9.58 0.72 7.310 11.01
First Indiana Corporation FISB NASDAQ IN 1,750,819 9.06 1.15 12.020 252.43
First Kansas Financial Corporation FKAN NASDAQ KS 106,001 19.52 0.68 7.960 15.73
First Keystone Financial, Inc. FKFS NASDAQ PA 390,970 6.50 0.74 10.980 28.96
First Lancaster Bancshares, Inc. FLKY NASDAQ KY 53,002 26.65 1.04 3.460 13.12
First Liberty Financial Corp. FLFC NASDAQ GA 1,511,776 7.15 0.94 12.570 267.38
First Midwest Financial, Inc. CASH NASDAQ IA 421,258 9.19 0.64 5.950 47.23
First Mutual Bancorp, Inc. FMBD NASDAQ IL 379,534 11.76 0.34 2.480 58.70
First Mutual Savings Bank FMSB NASDAQ WA 470,866 7.23 0.90 13.010 54.11
First Northern Capital Corporation FNGB NASDAQ WI 690,372 10.89 0.98 8.810 95.24
First Savings Bancorp, Inc. SOPN NASDAQ NC 304,088 22.86 1.76 7.640 78.85
First SecurityFed Financial, Inc. FSFF NASDAQ IL 331,044 27.14 NA NA 78.50
First Source Bancorp, Inc. FSLA NASDAQ NJ 1,221,038 20.69 1.03 8.210 254.00
First Washington Bancorp, Inc. FWWB NASDAQ WA 1,362,063 10.62 1.16 8.580 234.39
FirstBank Corporation FBNW NASDAQ ID 194,432 15.63 1.12 7.620 30.00
FIRSTFED AMERICA BANCORP, INC. FAB AMSE MA 1,315,743 8.86 0.59 5.380 112.47
FirstFed Bancorp, Incorporated FFDB NASDAQ AL 179,893 9.21 0.89 9.220 30.43
FirstFed Financial Corp. FED NYSE CA 4,010,381 5.96 0.72 13.220 315.57
FirstSpartan Financial Corp. FSPT NASDAQ SC 517,433 24.30 1.51 5.920 138.23
FLAG Financial Corporation FLAG NASDAQ GA 442,879 8.71 0.95 10.810 68.58
Flagstar Bancorp, Inc. FLGS NASDAQ MI 2,573,280 5.41 1.37 23.460 287.07
Flushing Financial Corporation FFIC NASDAQ NY 1,091,908 12.39 0.96 7.240 171.83
FMS Financial Corporation FMCO NASDAQ NJ 673,699 6.04 0.85 13.580 81.23
Fort Bend Holding Corp. FBHC NASDAQ TX 318,348 6.79 0.66 10.000 30.20
Fort Thomas Financial Corporation FTSB NASDAQ KY 101,352 16.07 1.18 7.390 19.53
Foundation Bancorp, Incorporated FOUN Pinks OH 37,011 19.15 0.80 4.170 7.71
Frankfort First Bancorp, Inc. FKKY NASDAQ KY 134,485 16.88 1.19 7.010 23.07
FSF Financial Corp. FFHH NASDAQ MN 414,072 10.44 0.79 7.290 42.09
Fulton Bancorp, Inc. FTNB NASDAQ MO 109,622 23.37 1.23 5.010 28.68
GA Financial, Inc. GAF AMSE PA 838,272 12.77 0.97 6.780 96.57
GFSB Bancorp, Inc. GUPB NASDAQ NM 118,175 12.33 0.90 6.670 15.39
Gilmer Financial Services, Inc. GLMR OTC TX 42,243 9.10 (0.05) (0.570) 3.41
Glenway Financial Corp. GFCO NASDAQ OH 300,448 9.49 0.87 9.260 43.39
Golden West Financial Corporation GDW NYSE CA 39,067,229 7.48 1.00 14.640 4,438.80
Great American Bancorp, Inc. GTPS NASDAQ IL 148,342 18.28 0.70 3.600 26.61
Great Pee Dee Bancorp PEDE NASDAQ SC 69,262 45.12 NA NA 26.43
Green Street Financial Corp. GSFC NASDAQ NC 173,265 34.90 1.58 4.460 51.04
GreenPoint Financial Corporation GPT NYSE NY 12,853,902 5.87 1.14 11.840 2,412.94
GS Financial Corp. GSLA NASDAQ LA 145,151 36.04 1.01 2.410 39.20
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
First Franklin Corporation 14.50 13.94 14.65 119.24 119.74 10.88 2.07
First Georgia Holding, Inc. 10.25 26.97 26.97 333.88 357.14 27.21 -
First Independence Corporation 11.50 13.53 13.53 93.19 93.19 8.92 2.61
First Indiana Corporation 19.75 13.91 14.11 157.50 159.15 14.42 2.43
First Kansas Financial Corporation 10.13 NA NA 75.22 76.19 14.84 -
First Keystone Financial, Inc. 12.00 9.92 10.00 113.96 113.96 7.41 1.67
First Lancaster Bancshares, Inc. 13.69 25.83 25.83 91.74 91.74 24.44 4.38
First Liberty Financial Corp. 20.00 27.40 31.25 227.79 248.76 17.69 1.50
First Midwest Financial, Inc. 18.13 17.43 19.49 110.52 123.72 11.25 2.65
First Mutual Bancorp, Inc. 16.63 39.58 39.58 105.76 135.83 15.47 1.92
First Mutual Savings Bank 12.75 11.28 13.42 158.98 158.98 11.49 1.57
First Northern Capital Corporation 10.75 14.93 14.93 126.62 126.62 13.79 3.35
First Savings Bancorp, Inc. 21.25 16.35 16.35 113.45 113.45 25.93 4.71
First SecurityFed Financial, Inc. 12.25 NA NA 87.19 87.44 23.71 -
First Source Bancorp, Inc. 8.00 NA NA 97.92 101.14 20.80 2.25
First Washington Bancorp, Inc. 20.13 15.85 15.85 123.09 148.96 17.29 1.79
FirstBank Corporation 15.13 14.27 14.27 91.50 91.50 15.43 2.12
FIRSTFED AMERICA BANCORP, INC. 14.31 16.64 16.84 90.82 90.82 9.00 1.40
FirstFed Bancorp, Incorporated 12.50 18.94 18.94 171.00 185.19 16.92 2.24
FirstFed Financial Corp. 14.88 10.86 10.86 131.29 132.10 7.87 -
FirstSpartan Financial Corp. 32.50 NA NA 109.91 109.91 26.71 1.85
FLAG Financial Corporation 13.25 19.49 18.66 177.61 177.61 15.48 1.81
Flagstar Bancorp, Inc. 21.00 9.77 9.77 201.15 206.69 11.16 1.33
Flushing Financial Corporation 22.00 16.79 16.30 122.91 127.61 15.74 1.64
FMS Financial Corporation 11.25 15.85 15.85 197.72 199.12 12.03 1.07
Fort Bend Holding Corp. 16.63 17.69 17.69 132.79 140.41 9.49 2.41
Fort Thomas Financial Corporation 13.25 16.36 16.36 119.91 119.91 19.27 1.89
Foundation Bancorp, Incorporated 16.65 25.23 25.23 108.75 108.75 20.82 2.40
Frankfort First Bancorp, Inc. 14.25 14.84 14.84 101.64 101.64 17.16 5.61
FSF Financial Corp. 14.38 13.07 13.07 87.81 87.81 10.18 3.48
Fulton Bancorp, Inc. 16.88 24.11 21.09 112.05 112.05 26.18 1.42
GA Financial, Inc. 13.38 11.63 12.27 89.52 90.37 11.52 4.19
GFSB Bancorp, Inc. 14.00 15.38 17.72 115.32 115.32 14.23 2.14
Gilmer Financial Services, Inc. 17.81 NM NM 88.67 88.67 8.06 -
Glenway Financial Corp. 19.00 15.97 17.27 150.79 152.12 14.43 2.32
Golden West Financial Corporation 77.06 11.09 11.07 151.82 151.82 11.36 0.65
Great American Bancorp, Inc. 16.75 27.46 27.46 98.13 98.13 17.94 2.63
Great Pee Dee Bancorp 12.00 NM NA 84.57 84.57 38.15 3.00
Green Street Financial Corp. 12.50 18.38 18.38 84.40 84.40 29.46 3.84
GreenPoint Financial Corporation 28.94 14.76 14.47 163.95 289.96 18.77 2.21
GS Financial Corp. 12.00 24.49 27.91 74.95 74.95 27.01 2.33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GSB Financial Corporation GOSB NASDAQ NY 129,087 24.91 0.71 2.870 26.42
Guaranty Federal
Bancshares, Inc. GFED NASDAQ MO 260,043 27.18 1.25 5.090 65.39
Guthrie Savings, Incorporated GTSV OTC OK 48,769 15.58 1.06 6.880 7.04
Hallmark Capital Corp. HALL NASDAQ WI 438,374 7.63 0.67 8.910 34.47
Harbor Federal Bancorp, Inc. HRBF NASDAQ MD 235,733 12.60 0.78 6.090 33.53
Harbor Florida Bancshares, Inc. HARB NASDAQ FL 318,792 19.44 1.31 10.730 322.76
Hardin Bancorp, Inc. HFSA NASDAQ MO 133,326 10.11 0.65 5.800 13.67
Harleysville Savings Bank HARL NASDAQ PA 395,383 6.41 0.97 14.710 49.63
Harrington Financial
Group, Inc. HFGI NASDAQ IN 484,397 4.68 (0.13)( 2.800) 31.53
Harrodsburg First Financial
Bancorp, Inc. HFFB NASDAQ KY 109,033 26.54 1.35 5.060 29.38
Harvest Home Financial
Corporation HHFC NASDAQ OH 96,085 10.71 0.56 4.980 10.99
Haven Bancorp, Inc. HAVN NASDAQ NY 2,265,248 4.99 0.48 8.320 127.21
Hawthorne Financial Corporation HTHR NASDAQ CA 1,201,331 3.97 1.18 23.830 73.92
Haywood Bancshares, Inc. HBS AMSE NC 151,718 14.17 1.44 9.970 23.76
HCB Bancshares, Inc. HCBB NASDAQ AR 221,631 17.08 0.33 1.850 29.10
Hemlock Federal Financial
Corporation HMLK NASDAQ IL 192,271 15.14 0.92 5.280 28.50
Heritage Bancorp, Inc. HBSC NASDAQ SC 300,868 31.47 NA NA 74.64
Heritage Financial Corporation HFWA NASDAQ WA 322,806 28.80 NA NA 108.62
HF Bancorp, Inc. HEMT NASDAQ CA 1,045,837 6.93 0.07 0.880 89.96
HF Financial Corp. HFFC NASDAQ SD 570,060 9.93 1.10 11.460 68.13
HFB Financial Corporation HFBA OTC KY 175,870 10.00 0.86 8.280 20.63
HFS Bank, FSB HFSK Pinks IN 167,714 7.62 0.92 12.100 18.17
High Country Bancorp, Inc. HCBC NASDAQ CO 92,258 19.56 NA NA 15.87
Highland Bancorp, Inc. HBNK NASDAQ CA 573,412 7.87 1.24 16.210 88.52
Hingham Institution for Savings HIFS NASDAQ MA 239,148 9.43 1.27 13.110 29.79
HMN Financial, Inc. HMNF NASDAQ MN 725,180 9.03 0.67 5.260 74.43
Home Bancorp HBFW NASDAQ IN 360,286 11.92 0.83 6.680 63.48
Home Building Bancorp, Inc. HBBI OTC IN 44,662 13.76 0.70 5.070 6.23
Home City Financial Corporation HCFC NASDAQ OH 78,042 13.87 1.29 6.930 10.86
Home Federal Bancorp HOMF NASDAQ IN 719,549 9.09 1.47 16.650 125.91
Home Financial Bancorp HWEN NASDAQ IN 42,560 17.64 0.71 4.090 7.20
Home Loan Financial Corp. HLFC NASDAQ OH 81,915 38.53 1.38 5.400 30.07
Home Port Bancorp, Inc. HPBC NASDAQ MA 260,456 8.71 1.59 16.020 36.38
Home Savings Bank of
Siler City, Inc.S HSSC Pinks NC 58,813 16.70 0.69 4.070 11.07
Homestead Bancorp, Inc. HSTD NASDAQ LA 82,198 7.21 0.53 5.670 10.95
HopFed Bancorp, Inc. HFBC NASDAQ KY 217,837 26.77 1.11 7.580 67.06
Horizon Financial Corp. HRZB NASDAQ WA 553,063 15.44 1.52 9.650 104.83
Horizon Financial Services
Corporation HZFS NASDAQ IA 89,947 9.44 0.79 8.260 13.64
Hudson River Bancorp Inc. HRBT NASDAQ NY 994,055 6.95 NA NA 188.59
Independence Community
Bank Corp. ICBC NASDAQ NY 4,786,156 19.16 NA NA 974.35
Independence Federal
Savings Bank IFSB NASDAQ DC 265,940 7.32 0.43 5.950 16.65
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
GSB Financial Corporation 11.75 NA NA 82.17 82.17 20.46 1.02
Guaranty Federal Bancshares, Inc. 10.75 NA NA 87.43 87.43 25.15 3.05
Guthrie Savings, Incorporated 17.00 13.08 13.08 92.69 92.69 14.44 -
Hallmark Capital Corp. 11.75 12.63 12.63 97.59 97.59 7.86 -
Harbor Federal Bancorp, Inc. 18.00 18.37 18.37 112.92 112.92 14.22 2.63
Harbor Florida Bancshares, Inc. 10.50 NA NA 124.85 126.20 24.47 2.48
Hardin Bancorp, Inc. 16.75 16.26 17.27 101.45 101.45 10.26 3.34
Harleysville Savings Bank 29.63 14.67 14.67 195.67 195.67 12.55 1.49
Harrington Financial Group, Inc. 9.63 NM NM 139.09 139.09 6.51 1.25
Harrodsburg First Financial
Bancorp, Inc. 15.25 18.83 18.83 94.25 94.25 27.00 2.62
Harvest Home Financial
Corporation 12.50 20.83 21.93 106.84 106.84 11.44 3.52
Haven Bancorp, Inc. 14.38 14.67 13.96 107.84 112.83 5.62 2.09
Hawthorne Financial Corporation 14.25 9.31 5.70 94.56 94.56 3.76 -
Haywood Bancshares, Inc. 19.00 16.81 10.73 107.47 110.98 15.66 3.16
HCB Bancshares, Inc. 11.00 NA NA 76.12 77.03 13.13 1.82
Hemlock Federal Financial
Corporation 14.50 16.67 16.86 97.91 97.91 14.82 2.21
Heritage Bancorp, Inc. 16.13 NA NA 78.81 78.81 24.81 1.86
Heritage Financial Corporation 11.13 NM NA 116.74 116.74 33.62 1.44
HF Bancorp, Inc. 14.13 NM 100.89 107.41 125.56 8.60 -
HF Financial Corp. 15.50 10.92 11.15 120.34 120.34 11.95 1.81
HFB Financial Corporation 19.00 13.10 14.84 117.28 117.28 11.73 -
HFS Bank, FSB 20.00 12.50 12.50 142.15 142.15 10.83 2.40
High Country Bancorp, Inc. 12.00 NA NA 87.91 87.91 17.20 2.50
Highland Bancorp, Inc. 38.00 12.54 13.67 196.28 196.28 15.44 1.32
Hingham Institution for Savings 22.75 10.83 10.78 131.58 131.58 12.40 2.46
HMN Financial, Inc. 13.75 15.63 18.58 105.44 114.87 10.30 1.75
Home Bancorp 27.00 21.09 21.60 147.78 147.78 17.62 1.19
Home Building Bancorp, Inc. 20.00 19.23 19.61 95.01 95.01 13.96 1.50
Home City Financial Corporation 12.00 11.76 11.76 100.25 100.25 13.91 3.00
Home Federal Bancorp 24.50 12.89 12.89 188.03 192.91 17.50 1.63
Home Financial Bancorp 7.75 16.49 21.53 95.92 95.92 16.92 1.29
Home Loan Financial Corp. 13.38 NA NA 95.26 95.26 36.71 0.37
Home Port Bancorp, Inc. 19.75 11.55 10.45 160.31 160.31 13.97 4.05
Home Savings Bank of
Siler City, Inc. SSB 12.00 44.44 27.27 112.78 112.78 18.83 3.33
Homestead Bancorp, Inc. 7.44 NA NA NA NA NA -
HopFed Bancorp, Inc. 16.63 NA NA 114.97 114.97 30.78 -
Horizon Financial Corp. 14.00 12.50 12.96 122.81 122.81 18.95 3.14
Horizon Financial Services
Corporation 15.50 22.46 18.90 160.62 160.62 15.16 1.16
Hudson River Bancorp Inc. 10.56 NA NA NA NA NA -
Independence Community Bank Corp. 12.81 NA NA 101.45 107.49 20.36 -
Independence Federal Savings Bank 13.00 5.06 14.77 78.69 86.15 6.26 1.92
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
==================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial Bancorp, Inc. INBI NASDAQ OH 382,841 15.97 1.47 8.810 84.00
InterWest Bancorp, Inc. IWBK NASDAQ WA 2,351,248 6.94 1.03 15.080 397.58
Ipswich Savings Bank IPSW NASDAQ MA 233,662 5.58 1.18 21.920 28.68
ITLA Capital Corporation ITLA NASDAQ CA 1,021,343 10.41 1.44 13.740 121.28
Jacksonville Bancorp, Inc. JXVL NASDAQ TX 242,673 14.46 1.33 9.130 36.63
Jefferson Savings Bancorp, Inc. JSBA NASDAQ MO 1,248,923 8.01 0.70 7.510 170.65
JSB Financial, Inc. JSB NYSE NY 1,563,460 24.31 2.52 10.730 461.28
Kankakee Bancorp, Inc. KNK AMSE IL 401,934 8.46 0.78 7.450 33.81
Kentucky First Bancorp, Inc. KYF AMSE KY 82,046 17.56 1.06 6.230 16.91
Kenwood Bancorp, Incorporated KNWP Pinks OH 47,624 9.54 0.63 6.790 3.87
Klamath First Bancorp, Inc. KFBI NASDAQ OR 1,008,688 12.96 0.91 6.030 138.83
KS Bancorp, Inc. KSAV Pinks NC 128,180 11.70 0.99 7.860 16.00
KSB Bancorp, Inc. KSBK NASDAQ ME 157,745 7.06 1.14 15.000 21.72
Lakeview Financial Corp. LVSB NASDAQ NJ 619,638 6.85 0.86 8.200 107.02
Landmark Bancshares, Inc. LARK NASDAQ KS 229,337 13.07 1.00 7.180 32.84
Laurel Capital Group, Inc. LARL NASDAQ PA 220,986 10.64 1.47 14.020 36.16
Lawrence Savings Bank LSBX NASDAQ MA 344,874 12.07 2.58 25.270 51.95
Lenox Bancorp, Incorporated Pinks OH 54,589 12.86 0.35 2.520 6.47
Lexington B&L Financial Corp. LXMO NASDAQ MO 95,301 15.14 0.77 3.800 14.12
Local Financial Corporation LO AMSE OK 1,904,315 5.02 NA NA 182.27
Logansport Financial Corp. LOGN NASDAQ IN 90,264 18.82 1.50 7.890 18.61
London Financial Corporation LONF OTC OH 36,502 13.22 0.95 5.870 6.71
LSB Financial Corp. LSBI NASDAQ IN 218,633 8.40 0.84 9.900 29.00
MAF Bancorp, Inc. MAFB NASDAQ IL 3,569,656 7.06 1.07 13.790 499.51
Marion Capital Holdings, Inc. MARN NASDAQ IN 193,963 19.08 1.25 5.940 39.20
Market Financial Corporation MRKF NASDAQ OH 53,653 29.33 1.09 3.150 14.69
MASSBANK Corp. MASB NASDAQ MA 929,672 11.63 1.00 8.980 143.11
Mayflower Co-operative Bank MFLR NASDAQ MA 142,965 9.12 1.00 10.390 16.19
MBLA Financial Corp. MBLF NASDAQ MO 207,453 13.50 0.86 6.760 24.63
MCM Savings Bank, FSB MCMS Pinks MO 65,464 6.50 0.47 7.370 3.65
MECH Financial, Inc. MECH NASDAQ CT 954,671 9.71 0.97 9.700 126.42
Medford Bancorp, Inc. MDBK NASDAQ MA 1,135,299 8.52 1.04 11.440 155.91
Metropolitan Financial Corp. METF NASDAQ OH 1,058,887 3.47 0.74 18.680 82.85
MetroWest Bank MWBX NASDAQ MA 658,462 7.34 1.27 17.130 90.85
MFB Corp. MFBC NASDAQ IN 290,936 11.38 0.80 6.420 28.62
Mid-Central Financial Corporation MCFC OTC MN 62,873 9.12 0.96 10.510 5.90
Mid-Coast Bancorp, Inc. MCBN NASDAQ ME 65,309 8.02 0.69 8.300 5.35
Midland Capital Holdings Corp. MCPH OTC IL 117,366 7.47 0.52 7.110 10.19
Midwest Bancshares, Inc. MWBI NASDAQ IA 159,460 7.15 0.76 10.900 11.56
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang Total Div
09/04/98 EPS EPS Value Book Assets Yield
Company $ (X) (X) (%) (%) (%) (%)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Industrial Bancorp, Inc. 16.75 15.23 15.23 137.41 137.41 21.94 3.58
InterWest Bancorp, Inc. 25.38 18.13 16.06 236.71 244.23 16.91 2.10
Ipswich Savings Bank 12.00 11.54 11.54 219.78 219.78 12.27 1.33
ITLA Capital Corporation 15.75 9.16 9.16 113.72 114.05 11.87 -
Jacksonville Bancorp, Inc. 15.13 12.00 12.00 104.45 104.45 15.09 3.31
Jefferson Savings Bancorp, Inc. 17.00 18.89 19.54 130.47 161.14 13.65 1.65
JSB Financial, Inc. 46.81 10.31 12.22 121.12 121.12 29.44 3.42
Kankakee Bancorp, Inc. 24.50 12.63 12.69 86.18 100.86 8.41 1.96
Kentucky First Bancorp, Inc. 13.63 18.17 18.41 117.36 117.36 20.61 3.67
Kenwood Bancorp, Incorporated 13.13 11.93 12.38 85.28 85.28 8.13 2.13
Klamath First Bancorp, Inc. 14.00 15.05 15.22 87.39 95.43 13.76 2.57
KS Bancorp, Inc. 18.00 14.88 14.88 106.70 106.70 12.48 4.44
KSB Bancorp, Inc. 17.25 12.23 12.23 173.02 196.92 13.77 0.58
Lakeview Financial Corp. 21.50 9.43 21.29 177.54 260.29 17.27 1.16
Landmark Bancshares, Inc. 22.00 15.60 16.67 113.75 113.75 14.86 2.73
Laurel Capital Group, Inc. 16.50 12.50 12.13 153.77 153.77 16.36 3.64
Lawrence Savings Bank 12.00 5.91 5.91 124.74 124.74 15.06 -
Lenox Bancorp, Incorporated 16.00 34.78 34.78 90.40 90.40 11.63 1.25
Lexington B&L Financial Corp. 14.00 22.58 22.58 92.29 98.94 14.82 2.14
Local Financial Corporation 8.88 NA NA 177.15 191.68 9.57 -
Logansport Financial Corp. 14.75 14.75 14.46 109.58 109.58 20.62 2.98
London Financial Corporation 14.00 15.73 18.92 139.03 139.03 18.39 1.71
LSB Financial Corp. 30.50 16.14 16.14 149.07 149.07 13.30 1.31
MAF Bancorp, Inc. 22.13 13.92 14.18 178.43 199.86 13.99 1.27
Marion Capital Holdings, Inc. 23.00 18.11 18.11 104.12 106.38 20.21 3.83
Market Financial Corporation 11.00 22.00 22.00 93.38 93.38 27.39 2.55
MASSBANK Corp. 39.75 13.61 15.77 130.58 132.32 15.36 2.52
Mayflower Co-operative Bank 18.00 11.04 12.50 122.70 124.48 11.33 4.44
MBLA Financial Corp. 19.75 13.62 13.72 88.25 88.25 11.91 3.04
MCM Savings Bank, FSB 20.00 12.35 12.35 85.07 85.07 5.56 1.00
MECH Financial, Inc. 23.88 14.74 14.83 136.35 136.35 13.24 2.51
Medford Bancorp, Inc. 35.00 13.94 14.40 153.64 161.89 13.73 2.29
Metropolitan Financial Corp. 11.75 12.63 11.75 209.45 225.96 7.82 -
MetroWest Bank 6.38 11.81 11.81 188.05 188.05 13.80 3.14
MFB Corp. 18.00 13.95 13.95 86.50 86.50 9.84 1.89
Mid-Central Financial Corporation 26.50 10.56 10.64 102.91 102.91 9.38 1.13
Mid-Coast Bancorp, Inc. 7.50 12.30 12.30 102.04 102.04 8.19 2.67
Midland Capital Holdings Corp. 28.00 16.87 16.87 116.23 116.23 8.68 1.07
Midwest Bancshares, Inc. 11.00 8.40 10.48 101.38 101.38 7.25 2.91
Midwest Savings Bank 14.25 15.16 17.59 86.63 86.63 6.31 -
Milton Federal Financial Corporation 12.75 17.96 19.62 101.35 101.35 12.13 4.71
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
===================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mississippi View Holding Company MIVI OTC MN 66,070 12.32 1.05 6.490 10.22
Monterey Bay Bancorp, Inc. MBBC NASDAQ CA 436,193 9.94 0.32 2.840 62.77
Montgomery Financial Corp. MONT NASDAQ IN 117,163 17.13 0.89 4.980 17.15
MSB Financial, Inc. MSBF NASDAQ MI 79,967 16.65 1.57 9.390 19.07
Mutual Community Savings Bank,
Incorporated, SSB MTUC Pinks NC 63,537 11.72 0.62 4.660 5.26
Mutual Savings Bank, FSB MSBK NASDAQ MI 613,798 5.55 (0.29) (5.250) 28.96
Mystic Financial, Inc. MYST NASDAQ MA 199,049 18.15 0.82 6.060 29.60
NASB Financial, Inc. NASB OTC MO 726,707 9.00 1.83 21.630 132.18
Net.B@nk, Inc. NTBK NASDAQ GA 246,714 15.01 0.65 2.500 119.11
New Hampshire Thrift Bancshares, Inc. NHTB NASDAQ NH 324,320 7.19 0.86 10.970 29.32
NewMil Bancorp, Inc. NMSB NASDAQ CT 367,569 9.09 0.93 9.570 41.22
North Arkansas Bancshares, Inc. NARK OTC AR 44,007 11.87 NA NA 3.70
North Bancshares, Inc. NBSI NASDAQ IL 123,311 10.82 0.34 2.670 15.11
North Central Bancshares, Inc. FFFD NASDAQ IA 331,124 13.13 1.49 8.170 50.23
Northeast Bancorp NBN AMSE ME 310,623 7.05 0.76 9.760 27.07
Northeast Indiana Bancorp, Inc. NEIB NASDAQ IN 203,263 13.04 1.18 8.550 29.62
Northeast Pennsylvania Financial
Corporation NEP AMSE PA 477,807 17.78 0.52 4.250 68.29
Northwest Equity Corporation NWEQ NASDAQ WI 96,452 12.19 1.24 10.620 14.44
NorthWest Indiana Bancorp NWIN OTC IN 323,462 9.36 1.12 12.040 58.72
NS&L Bancorp, Inc. NSLB NASDAQ MO 62,648 18.37 0.67 3.480 10.38
Nutmeg Federal Savings &
Loan Association NTMG NASDAQ CT 112,113 8.30 0.99 11.990 12.92
Ocean Financial Corp. OCFC NASDAQ NJ 1,538,264 13.65 0.93 6.420 224.99
Ocwen Financial Corporation OCN NYSE FL 3,505,579 11.27 2.37 19.640 877.42
Ohio State Financial Services, Inc. OSFS OTC OH 36,645 28.09 0.89 3.350 8.56
OHSL Financial Corp. OHSL NASDAQ OH 247,853 10.83 0.86 7.940 36.51
Oregon Trail Financial Corp. OTFC NASDAQ OR 256,460 26.50 1.15 5.180 56.93
Ottawa Financial Corporation OFCP NASDAQ MI 919,865 6.84 0.89 10.490 135.00
Pamrapo Bancorp, Inc. PBCI NASDAQ NJ 394,271 12.42 1.21 9.360 68.59
Park Bancorp, Inc. PFED NASDAQ IL 196,812 20.34 0.93 4.360 33.85
Parkvale Financial Corporation PVSA NASDAQ PA 1,095,373 7.64 1.08 14.590 155.18
PBOC Holdings, Inc. PBOC NASDAQ CA 3,201,513 5.76 NA NA 229.70
PCB Holding Company PCBH OTC IN 29,085 7.29 NA NA 3.57
Peekskill Financial Corporation PEEK NASDAQ NY 200,341 21.57 1.01 4.110 42.71
PennFed Financial Services, Inc. PFSB NASDAQ NJ 1,551,938 5.86 0.78 10.960 122.02
Pennwood Bancorp, Inc. PWBK NASDAQ PA 46,080 17.28 0.53 2.910 7.67
Peoples Bancorp PFDC NASDAQ IN 304,320 14.97 1.45 9.560 69.19
Peoples Bancorp, Inc. TSBS NASDAQ NJ 873,466 38.36 1.04 5.270 301.97
People's Bancshares, Inc. PBKB NASDAQ MA 858,377 3.63 0.74 17.980 55.54
Peoples Financial Corporation PFFC NASDAQ OH 84,906 17.34 0.59 3.000 14.36
Peoples Heritage Financial
Group, Inc. PHBK NASDAQ ME 9,768,079 6.23 1.20 16.110 1,469.18
Peoples Savings Bank of Troy PESV OTC OH 138,273 10.32 1.34 12.960 53.19
<CAPTION>
====================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Mississippi View Holding Company 17.87 18.23 18.23 125.58 125.58 15.47 0.90
Monterey Bay Bancorp, Inc. 16.00 50.00 50.00 125.10 136.64 14.39 0.75
Montgomery Financial Corp. 10.38 16.21 16.21 85.46 85.46 14.64 2.12
MSB Financial, Inc. 14.25 15.16 15.16 143.22 143.22 23.84 2.11
Mutual Community Savings Bank,
Incorporated, SSB 14.50 13.55 13.94 65.49 71.29 8.27 2.48
Mutual Savings Bank, FSB 6.75 NM NM 84.91 84.91 4.72 --
Mystic Financial, Inc. 1.50 NA NA 86.27 86.27 15.66 1.74
NASB Financial, Inc. 59.25 10.47 9.92 197.30 202.56 18.19 1.69
Net.B@nk, Inc. 19.38 NM NM 319.19 322.38 48.27 --
New Hampshire Thrift Bancshares, Inc. 14.00 10.29 11.11 111.11 127.16 9.04 4.29
NewMil Bancorp, Inc. 10.75 14.53 13.78 123.42 123.42 11.21 2.98
North Arkansas Bancshares, Inc. 10.00 NA NA 69.88 71.07 8.41 --
North Bancshares, Inc. 11.88 35.98 39.58 112.56 112.56 12.18 3.37
North Central Bancshares, Inc. 16.19 12.17 12.75 102.91 118.77 15.28 1.98
Northeast Bancorp 11.00 14.10 13.58 113.17 124.58 7.92 1.93
Northeast Indiana Bancorp, Inc. 18.25 12.85 12.85 113.57 113.57 14.81 1.86
Northeast Pennsylvania Financial
Corporation 10.63 NA NA 73.94 73.94 14.29 --
Northwest Equity Corporation 17.50 11.82 11.67 122.89 122.89 14.97 3.66
NorthWest Indiana Bancorp 42.50 16.67 16.67 193.89 193.89 18.15 3.48
NS&L Bancorp, Inc. 16.00 23.88 24.62 94.79 95.47 17.52 3.13
Nutmeg Federal Savings &
Loan Association 12.00 21.82 23.08 189.87 189.87 11.52 1.67
Ocean Financial Corp. 14.63 15.23 15.08 107.77 108.33 14.77 3.28
Ocwen Financial Corporation 14.44 31.39 11.28 205.38 224.54 25.03 --
Ohio State Financial Services, Inc. 13.50 NA NA 83.18 83.18 23.36 1.48
OHSL Financial Corp. 14.63 17.21 17.21 132.71 132.71 14.73 3.42
Oregon Trail Financial Corp. 12.13 NA NA 76.31 76.31 22.20 1.65
Ottawa Financial Corporation 23.75 18.70 18.70 179.52 219.10 14.76 1.68
Pamrapo Bancorp, Inc. 24.13 14.53 15.08 139.45 140.18 17.40 4.64
Park Bancorp, Inc. 14.00 18.42 17.95 84.59 84.59 17.20 --
Parkvale Financial Corporation 30.00 14.29 14.29 184.62 185.53 14.17 2.00
PBOC Holdings, Inc. 10.50 NA NA 124.56 124.56 7.17 --
PCB Holding Company 9.00 NA NA NA NA NA --
Peekskill Financial Corporation 14.75 22.35 22.01 98.86 98.86 21.32 2.44
PennFed Financial Services, Inc. 13.00 11.21 11.21 109.52 125.85 7.86 1.08
Pennwood Bancorp, Inc. 11.00 26.83 29.73 89.14 89.14 16.65 2.55
Peoples Bancorp 20.50 16.27 16.27 151.07 151.07 22.61 2.15
Peoples Bancorp, Inc. 8.31 NA NA 88.44 91.15 34.57 1.20
People's Bancshares, Inc. 16.75 10.21 10.21 171.09 178.57 6.47 3.34
Peoples Financial Corporation 10.63 16.60 28.72 97.57 97.57 16.91 5.65
Peoples Heritage Financial
Group, Inc. 16.75 15.51 12.88 202.78 244.17 15.02 2.63
Peoples Savings Bank of Troy 14.50 31.52 31.52 372.75 372.75 38.47 0.28
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peoples-Sidney Financial Corporation PSFC NASDAQ OH 105,903 18.53 1.18 5.440 33.03
Permanent Bancorp, Inc. PERM NASDAQ IN 506,725 7.11 0.60 6.120 54.18
Perpetual Federal Savings Bank PFOH OTC OH 239,820 15.87 1.67 10.480 57.02
Perry County Financial Corporation PCBC NASDAQ MO 89,761 18.47 0.97 5.110 17.80
PFF Bancorp, Inc. PFFB NASDAQ CA 3,007,845 7.97 0.58 6.210 221.95
Piedmont Bancorp, Inc. PDB AMSE NC 130,541 16.55 1.27 7.730 26.31
Pittsburgh Home Financial Corp. PHFC NASDAQ PA 372,533 6.87 0.62 7.190 25.66
Pocahontas Bancorp, Inc. PFSL NASDAQ AR 404,606 14.05 0.70 7.380 45.13
Potters Financial Corporation PTRS NASDAQ OH 128,149 8.53 0.70 7.860 13.32
Prestige Bancorp, Inc. PRBC NASDAQ PA 164,656 9.67 0.45 4.290 13.81
Progress Financial Corporation PFNC NASDAQ PA 602,326 6.22 0.74 13.010 68.77
Progressive Bancorp, Inc. PEKS Pinks IL 86,542 7.50 0.81 9.610 8.36
Provident Financial Holdings, Inc. PROV NASDAQ CA 815,970 10.62 0.71 5.980 68.22
PS Financial, Inc. PSFI NASDAQ IL 85,000 26.78 1.72 5.520 21.67
PSB Bancorp Inc. PSBI NASDAQ PA 148,841 10.35 0.55 4.820 22.10
PVF Capital Corp. PVFC NASDAQ OH 418,928 7.20 1.34 18.690 39.90
QCF Bancorp, Inc. QCFB NASDAQ MN 154,089 17.70 1.66 9.550 38.22
Quaker City Bancorp, Inc. QCBC NASDAQ CA 887,480 8.71 0.78 8.960 85.95
Queens County Bancorp, Inc. QCSB NASDAQ NY 1,715,164 9.89 1.51 14.340 587.02
Quitman Bancorp, Inc. QTMB OTC GA 44,430 21.08 NA NA 6.28
Raritan Bancorp, Inc. RARB NASDAQ NJ 434,606 7.25 0.98 12.820 60.51
Redwood Financial, Incorporated REDW OTC MN 69,688 16.97 0.65 3.490 11.07
Reliance Bancorp, Inc. RELY NASDAQ NY 2,485,729 5.60 0.82 9.660 248.69
Richmond County Financial Corp. RCBK NASDAQ NY 1,595,844 20.53 1.38 9.150 358.38
River Valley Bancorp RIVR NASDAQ IN 135,683 13.48 0.94 7.140 17.85
Riverview Bancorp, Inc. RVSB NASDAQ WA 268,608 22.51 1.66 8.260 74.23
Rocky Ford Financial, Inc. RFFC Pinks CO 22,879 29.15 0.96 3.380 5.92
Roslyn Bancorp, Inc. RSLN NASDAQ NY 3,853,282 15.37 1.26 7.280 688.27
Security Bancorp, Inc. SCYT OTC TN 54,192 13.08 1.13 8.920 7.42
SFB Bancorp, Inc. SFBK OTC TN 53,238 23.10 1.03 4.490 12.42
SFSB Holding Company SFSH OTC PA 47,310 20.79 NA NA 7.26
SGV Bancorp, Inc. SGVB NASDAQ CA 408,346 7.81 0.36 4.690 27.59
SHS Bancorp, Inc. SHSB OTC PA 87,143 14.20 0.69 5.440 8.20
Sistersville Bancorp, Inc. SVBC OTC WV 31,375 33.73 1.24 3.740 8.17
Skaneateles Bancorp Inc. SKAN NASDAQ NY 266,730 6.73 0.62 8.920 21.13
Sobieski Bancorp, Inc. SOBI NASDAQ IN 89,848 14.10 0.57 3.890 11.73
South Carolina Community Bancshares, Inc. SCCB NASDAQ SC 46,305 20.38 1.01 4.190 11.88
South Street Financial Corp. SSFC NASDAQ NC 203,673 16.93 0.53 2.650 40.04
SouthBanc Shares, Inc. SBAN NASDAQ SC 367,666 20.75 0.92 7.800 69.98
Southern Banc Company, Inc. (The) SRN AMSE AL 105,719 17.29 0.49 2.840 17.22
Southern Community Bancshares, Inc. SCBS NASDAQ AL 67,920 17.34 1.22 6.490 16.78
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Peoples-Sidney Financial Corporation 18.50 25.00 25.00 151.76 151.76 31.19 1.51
Permanent Bancorp, Inc. 12.75 20.90 21.61 121.20 148.60 10.69 1.88
Perpetual Federal Savings Bank 25.00 15.15 15.15 149.79 149.79 23.78 2.16
Perry County Financial Corporation 21.50 20.09 20.09 107.39 107.39 19.83 2.33
PFF Bancorp, Inc. 14.38 14.23 14.67 96.35 97.39 7.75 -
Piedmont Bancorp, Inc. 9.56 15.68 15.68 121.82 121.82 20.15 5.02
Pittsburgh Home Financial Corp. 13.50 11.64 12.98 102.90 104.01 7.14 1.78
Pocahontas Bancorp, Inc. 6.75 NA NA 77.23 79.79 11.15 3.56
Potters Financial Corporation 14.00 14.43 15.73 121.85 121.85 10.39 1.71
Prestige Bancorp, Inc. 13.13 17.98 18.75 86.69 86.69 8.39 1.33
Progress Financial Corporation 13.75 16.57 18.84 172.96 193.94 11.98 1.11
Progressive Bancorp, Inc. 56.00 13.49 13.90 128.91 128.91 9.67 1.79
Provident Financial Holdings, Inc. 14.75 13.29 13.29 82.63 82.63 8.77 -
PS Financial, Inc. 11.13 24.18 16.36 98.63 98.63 26.42 4.31
PSB Bancorp Inc. 7.13 NA NA NA NA NA -
PVF Capital Corp. 10.00 8.33 8.00 132.28 132.28 9.52 -
QCF Bancorp, Inc. 28.00 12.79 12.96 140.14 140.14 24.80 -
Quaker City Bancorp, Inc. 14.75 12.94 12.94 111.24 111.24 9.68 -
Queens County Bancorp, Inc. 39.75 23.11 23.11 304.13 304.13 34.63 2.52
Quitman Bancorp, Inc. 9.50 NA NA 67.09 67.09 14.14 -
Raritan Bancorp, Inc. 25.50 16.24 16.24 190.01 192.31 13.92 2.35
Redwood Financial, Incorporated 12.75 26.02 27.72 93.61 93.61 15.88 -
Reliance Bancorp, Inc. 26.00 13.07 13.76 127.64 182.97 10.00 2.77
Richmond County Financial Corp. 13.56 NA NA 109.03 109.38 22.46 1.77
River Valley Bancorp 15.00 13.04 13.04 96.59 97.78 13.16 1.47
Riverview Bancorp, Inc. 12.00 NA NA 113.10 116.73 27.64 2.00
Rocky Ford Financial, Inc. 14.00 25.93 25.93 88.83 88.83 25.90 2.14
Roslyn Bancorp, Inc. 16.63 14.09 14.58 115.77 116.26 17.86 2.41
Security Bancorp, Inc. 17.00 12.23 12.23 104.68 104.68 13.69 1.47
SFB Bancorp, Inc. 16.50 21.71 21.71 102.93 102.93 23.77 1.21
SFSB Holding Company 10.00 NA NA 73.80 73.80 15.35 -
SGV Bancorp, Inc. 11.75 19.58 19.92 85.58 86.59 6.76 -
SHS Bancorp, Inc. 10.00 NA NA 66.27 66.27 9.41 2.60
Sistersville Bancorp, Inc. 13.00 19.70 19.70 77.20 77.20 26.04 2.46
Skaneateles Bancorp Inc. 14.63 13.80 13.80 115.16 117.94 7.92 1.91
Sobieski Bancorp, Inc. 15.00 23.08 23.44 84.08 84.08 12.76 2.13
South Carolina Community Bancshares, Inc. 20.50 29.29 27.70 125.92 125.92 25.66 3.12
South Street Financial Corp. 8.56 NA NA 100.74 100.74 19.66 4.67
SouthBanc Shares, Inc. 16.25 NA NA 91.70 91.70 19.03 2.95
Southern Banc Company, Inc. (The) 14.00 32.56 32.56 93.65 94.34 16.29 2.50
Southern Community Bancshares, Inc. 14.75 16.39 16.21 142.37 142.37 24.70 2.03
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
MARKET VALUATION AND FINANCIAL DATA FOR ALL PUBLIC THRIFTS
======================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Southern Missouri Bancorp, Inc. SMBC NASDAQ MO 155,924 15.46 0.69 4.230 23.75
SouthFirst Bancshares, Inc. SZB AMSE AL 162,975 9.72 0.52 4.730 16.08
Sovereign Bancorp, Inc. SVRN NASDAQ PA 18,847,318 4.88 0.78 14.050 2,082.92
St. Francis Capital Corporation STFR NASDAQ WI 1,754,803 6.73 0.83 10.520 198.68
St. Landry Financial Corporation SLAN OTC LA 62,902 11.01 0.41 3.650 6.92
St. Paul Bancorp, Inc. SPBC NASDAQ IL 4,564,869 9.56 1.08 11.810 806.29
StateFed Financial Corporation SFFC NASDAQ IA 89,802 17.91 1.16 6.490 15.66
Staten Island Bancorp, Inc. SIB NYSE NY 3,018,685 23.09 1.63 9.180 758.78
Statewide Financial Corp. SFIN NASDAQ NJ 656,635 9.71 0.75 7.850 73.03
Sterling Financial Corporation STSA NASDAQ WA 2,076,759 2.07 0.44 8.040 120.74
Stone Street Bancorp, Inc. SSM AMSE NC 112,253 27.33 1.40 4.840 28.40
Sturgis Bank & Trust Company, FSB STUR OTC MI 208,005 6.95 0.89 10.890 31.99
SWVA Bancshares, Incorporated SWVB OTC VA 81,464 10.30 0.86 7.590 8.73
Teche Holding Co. TSH AMSE LA 412,426 13.84 0.93 6.840 49.86
Telebanc Financial Corporation TBFC NASDAQ VA 1,209,466 3.59 0.12 2.660 171.55
Texarkana First Financial Corporation FTF AMSE AR 189,557 14.88 1.74 11.410 39.97
TF Financial Corporation THRD NASDAQ PA 689,284 6.43 0.61 6.910 51.45
Thistle Group Holdings, Co. THTL NASDAQ PA 343,956 8.58 NA NA 76.50
Three Rivers Financial Corp. THR AMSE MI 98,063 13.49 0.88 6.450 12.73
Timberland Bancorp, Inc. TSBK NASDAQ WA 263,112 32.36 1.84 8.400 81.83
Towne Financial Corporation TOFI OTC OH 116,407 6.99 0.80 10.960 6.31
Tri-County Bancorp, Inc. TRIC NASDAQ WY 86,549 16.44 1.06 6.800 13.43
Twin City Bancorp, Inc. TWIN NASDAQ TN 110,610 12.67 0.98 7.590 16.14
Union Community Bancorp UCBC NASDAQ IN 108,088 40.28 NA NA 33.46
Union Financial Bancshares, Inc. UFBS NASDAQ SC 183,066 NA 0.87 10.970 21.05
United Community Financial Corp. UCFC NASDAQ OH 1,692,707 8.71 NA NA 472.70
United Financial Corporation UBMT NASDAQ MT 205,345 14.32 NA NA 39.91
United PanAm Financial Corp. UPFC NASDAQ CA 411,798 19.85 NA NA 138.20
United Tennessee Bankshares, Inc. UTBI NASDAQ TN 74,442 27.03 NA NA 17.00
USABancshares, Inc. USAB NASDAQ PA 134,688 9.68 0.73 7.790 17.02
Vermilion Bancorp, Inc. VBAS OTC IL 43,197 14.29 0.71 4.610 4.16
Warren Bancorp, Inc. WRNB NASDAQ MA 378,137 10.49 1.58 14.680 80.09
Warwick Community Bancorp, Inc. WSBI NASDAQ NY 410,394 20.99 0.92 5.630 76.80
Washington Bancorp WBIO Pinks IA 93,248 10.43 1.10 7.040 11.28
Washington Federal, Inc. WFSL NASDAQ WA 5,558,970 13.04 1.92 14.69 1,167.20
Washington Mutual Inc. WAMU NASDAQ WA 103,396,952 5.15 0.97 17.640 12,052.68
Washington Savings Bank, FSB WSB AMSE MD 273,549 8.42 0.56 6.580 21.55
Webster Financial Corporation WBST NASDAQ CT 9,189,143 5.11 0.76 13.980 876.55
Wells Financial Corp. WEFC NASDAQ MN 188,677 15.37 1.19 8.190 30.75
West Town Bancorp, Incorporated WTWN OTC IL 29,699 13.70 0.51 3.660 2.78
Westcorp WES NYSE CA 3,663,771 9.05 0.21 2.340 237.58
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Southern Missouri Bancorp, Inc. 16.00 23.88 22.86 98.52 98.52 15.23 3.13
SouthFirst Bancshares, Inc. 16.63 22.77 19.79 99.25 101.81 9.87 3.61
Sovereign Bancorp, Inc. 13.13 21.88 14.42 186.97 212.04 10.61 0.61
St. Francis Capital Corporation 38.88 14.51 14.73 150.80 168.58 11.32 1.44
St. Landry Financial Corporation 17.25 25.37 25.37 99.88 99.88 11.00 0.58
St. Paul Bancorp, Inc. 19.88 14.00 14.00 155.88 156.50 14.96 3.02
StateFed Financial Corporation 10.00 15.15 15.15 97.37 97.37 17.44 2.00
Staten Island Bancorp, Inc. 16.81 NA NA 106.75 109.46 25.14 1.90
Statewide Financial Corp. 16.75 13.29 13.96 115.44 115.60 11.22 3.10
Sterling Financial Corporation 15.88 18.04 14.98 114.21 290.22 5.81 -
Stone Street Bancorp, Inc. 15.75 19.69 19.69 94.65 94.65 25.87 2.92
Sturgis Bank & Trust Company, FSB 13.00 17.81 17.81 184.66 224.91 15.38 1.23
SWVA Bancshares, Incorporated 17.25 13.27 13.07 104.17 104.17 10.72 1.74
Teche Holding Co. 14.50 12.39 12.61 87.35 87.35 12.09 3.45
Telebanc Financial Corporation 13.88 NA NA 206.78 222.00 5.16 -
Texarkana First Financial Corporation 23.00 12.50 12.50 141.71 141.71 21.08 2.43
TF Financial Corporation 17.75 14.20 16.14 99.50 117.24 8.22 2.70
Thistle Group Holdings, Co. 8.50 NA NA NA NA NA -
Three Rivers Financial Corp. 16.25 15.19 14.64 101.06 101.37 13.66 2.71
Timberland Bancorp, Inc. 12.38 NA NA 96.08 96.08 31.10 1.94
Towne Financial Corporation 30.25 7.60 7.76 74.56 77.70 5.42 -
Tri-County Bancorp, Inc. 11.50 15.97 15.13 94.34 94.34 15.51 3.83
Twin City Bancorp, Inc. 13.00 14.61 15.29 115.15 115.15 14.59 3.08
Union Community Bancorp 11.00 NA NA 76.87 76.87 30.96 3.09
Union Financial Bancshares, Inc. 16.50 14.10 14.22 142.73 NA 11.50 2.25
United Community Financial Corp. 14.13 NA NA NA NA NA -
United Financial Corporation 23.50 NA NA 131.80 136.39 19.44 4.26
United PanAm Financial Corp. 8.00 NA NA 168.42 169.13 33.56 -
United Tennessee Bankshares, Inc. 11.69 NA NA 84.51 84.51 22.84 10.27
USABancshares, Inc. 8.50 85.00 38.64 136.88 137.76 12.64 -
Vermilion Bancorp, Inc. 11.25 15.20 15.20 67.45 67.45 9.64 -
Warren Bancorp, Inc. 10.13 12.82 13.87 201.69 201.69 21.17 3.56
Warwick Community Bancorp, Inc. 11.63 NA NA 89.15 89.15 18.71 1.38
Washington Bancorp 17.63 14.45 14.45 103.74 118.85 12.22 2.72
Washington Federal, Inc. 22.25 10.60 10.91 151.05 162.65 20.99 4.13
Washington Mutual Inc. 31.13 18.98 12.40 209.03 222.16 11.65 2.66
Washington Savings Bank, FSB 4.88 11.34 14.77 93.57 93.57 7.88 2.05
Webster Financial Corporation 22.88 13.70 12.17 159.85 188.58 9.54 1.92
Wells Financial Corp. 16.75 13.40 13.40 108.55 108.55 16.68 3.58
West Town Bancorp, Incorporated 12.50 18.12 18.12 68.38 68.38 9.37 -
Westcorp 9.00 32.14 31.03 71.43 71.60 6.48 2.22
</TABLE>
<PAGE>
FELDMAN FINANCIAL ADVISORS. INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
MARKET VALUATION AND FINANCIAL DATA FOR ALL PUBLIC THRIFTS
===================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WesterFed Financial Corporation WSTR NASDAQ MT 1,022,136 8.93 0.78 7.310 103.33
Western Ohio Financial Corporation WOFC NASDAQ OH 357,295 13.71 0.11 0.760 47.67
Westwood Homestead Financial Corporation WEHO NASDAQ OH 126,339 20.59 0.97 3.840 27.19
WHG Bancshares Corporation WHGB NASDAQ MD 131,967 15.29 0.59 3.210 15.28
Winton Financial Corp. WFI AMSE OH 358,573 7.15 1.17 16.060 46.16
Wood Bancorp, Inc. FFWD NASDAQ OH 166,150 13.57 1.43 11.080 40.03
WSB Holding Company WSBH OTC PA 36,980 12.90 NA NA 4.79
WSFSH Financial Corporation WSFS NASDAQ DE 1,551,631 6.12 1.11 18.960 200.40
WVS Financial Corporation WVFC NASDAQ PA 297,054 11.10 1.29 11.270 55.39
Wyman Park Bancorporation, Inc. WPBC OTC MD 69,817 20.04 NA NA 11.00
Yonkers Financial Corporation YFCB NASDAQ NY 401,565 10.30 0.86 6.570 42.26
York Financial Corp. YFED NASDAQ PA 1,229,268 8.89 0.75 8.490 163.67
AVERAGE 1,276,994 12.89 0.92 8.26 165.86
MEDIAN 260,250 10.93 0.89 7.52 36.45
</TABLE>
Note: average and median price/earnings ratios exclude values grater than 30.
<TABLE>
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
WesterFed Financial Corporation 18.50 14.34 13.21 94.20 115.55 10.11 2.70
Western Ohio Financial Corporation 20.75 159.62 98.81 91.90 98.25 13.34 4.82
Westwood Homestead Financial Corporation 10.63 NA NA 104.58 104.58 21.52 3.76
WHG Bancshares Corporation 11.00 22.92 22.45 75.76 75.76 11.58 2.91
Winton Financial Corp. 11.50 12.23 12.23 177.20 179.97 12.87 2.17
Wood Bancorp, Inc. 15.00 17.44 17.44 177.51 177.51 24.09 2.40
WSB Holding Company 14.50 NM NA 100.49 100.49 12.96 -
WSFS Financial Corporation 16.00 11.85 11.94 209.97 211.08 12.92 0.75
WVS Financial Corporation 15.31 15.63 14.45 167.91 167.91 18.65 3.92
Wyman Park Bancorporation, Inc. 10.87 NM NA 78.60 78.60 15.75 -
Yonkers Financial Corporation 15.50 14.35 14.90 103.96 103.96 10.70 1.81
York Financial Corp. 18.25 17.22 19.41 149.84 149.84 13.31 2.85
AVERAGE 16.24 17.87 124.26 129.07 15.37 1.90
MEDIAN 15.19 15.66 111.65 115.06 14.22 1.93
</TABLE>
Note: average and median price/earnings ratios exclude values greater than 30.
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
MARKET VALUATION AND FINANCIAL DATA FOR ALL PUBLIC THRIFTS
=====================================================================================================================
Tang. LTM LTM Total Stock Price/
Total Equity/ Core Core Market Price LTM
Assets Assets ROAA ROAE Value 09/04/98 EPS
Company Ticker Exchange St. ($000) (%) (%) (%) ($M) ($) (x)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THRIFTS UNDER ACQUISITION
- -------------------------
1ST Bancorp FBCV NASDAQ IN 260,149 9.01 0.71 7.770 46.12 42.25 24.42
AFSALA Bancorp, Inc. AFED NASDAQ NY 167,301 11.40 0.48 4.080 17.81 13.50 17.31
Ahmanson & Company (H.F.) AHM NYSE CA 52,826,336 5.18 1.02 16.470 6,144.75 54.50 14.27
ALBANK Financial Corporation ALBK NASDAQ NY 4,130,868 7.41 1.00 11.070 796.91 60.00 18.52
Bayonne Bancshares, Inc. FSNJ NASDAQ NJ 700,293 13.70 0.68 4.610 127.32 14.00 NA
Big Sky Bancorp, Incorporated FFLN OTC MT 64,023 12.59 0.82 6.490 8.64 28.00 18.42
Fed One Bancorp, Inc. FOBC NASDAQ WV 373,837 10.82 0.73 6.530 94.86 39.50 31.35
Financial Bancorp, Inc. FIBC NASDAQ NY 340,999 8.39 0.96 10.640 56.32 33.00 19.19
First FS&LA of San Bernardino FSSB OTC CA 106,083 4.36 0.35 8.070 4.96 15.12 65.74
First Palm Beach Bancorp, Inc. FFPB NASDAQ FL 1,764,026 6.72 0.12 1.790 164.67 32.00 20.51
Golden State Bancorp Inc. GSB NYSE CA 18,116,737 5.90 0.94 13.010 1,085.46 19.56 10.99
HFNC Financial Corp. HFNC NASDAQ NC 1,007,913 16.96 1.16 6.760 180.52 10.50 12.80
Home Bancorp of Elgin, Inc. HBEI NASDAQ IL 367,656 26.11 0.75 2.890 89.13 13.00 33.33
Life Financial Corp. LFCO NASDAQ CA 472,437 12.64 1.03 7.780 34.42 5.25 2.61
Little Falls Bancorp, Inc. LFBI NASDAQ NJ 351,347 9.82 0.56 5.390 37.16 15.00 18.75
Long Island Bancorp, Inc. LISB NASDAQ NY 6,483,887 8.84 0.98 11.100 1,085.20 44.88 18.70
Maryland Federal Bancorp, Inc. MFSL NASDAQ MD 1,188,121 8.97 0.82 9.190 236.84 36.00 27.27
Mid-Iowa Financial Corp. MIFC NASDAQ IA 135,040 9.92 0.99 10.600 22.98 13.25 17.21
Mitchell Bancorp, Inc. MBSP NASDAQ NC 37,306 39.22 0.68 1.730 14.89 16.00 32.00
NSS Bancorp, Inc. NSSY NASDAQ CT 651,825 8.27 0.64 7.550 98.99 41.63 17.79
Peoples Bancorp, Inc. TSBS NASDAQ NJ 873,466 38.36 1.57 6.120 337.14 9.28 NA
Pulse Bancorp, Inc. PULS NASDAQ NJ 544,102 8.44 1.04 12.320 76.45 24.50 14.24
Reliance Bancshares, Inc. RELI NASDAQ WI 44,174 49.96 1.33 2.670 21.93 9.25 44.05
Sandwich Bancorp, Inc. SWCB NASDAQ MA 531,013 8.18 0.88 10.980 120.57 59.00 23.89
Scotland Bancorp, Inc. SSB AMSE NC 61,082 24.93 0.91 3.660 21.29 11.13 22.25
Security First Corp. SFSL NASDAQ OH 696,462 9.78 1.50 15.650 158.24 20.06 17.30
SFS Bancorp, Inc. SFED NASDAQ NY 178,093 12.31 0.68 5.580 32.63 27.00 27.00
SIS Bancorp, Inc. SISB NASDAQ MA 1,841,662 7.14 0.94 13.190 270.16 38.50 20.92
TR Financial Corp. ROSE NASDAQ NY 4,115,800 6.23 0.84 13.710 511.22 29.00 13.06
United Federal Savings Bank UFRM NASDAQ NC 301,924 7.75 0.79 10.460 52.53 16.00 28.07
Wayne Bancorp, Inc. WYNE NASDAQ NJ 275,335 12.77 0.72 5.640 60.39 30.00 30.00
Westco Bancorp, Inc. WCBI NASDAQ IL 320,295 15.66 1.40 8.980 71.33 28.69 16.30
Average 3,104,050 13.68 0.88 8.203 377.56 - 18.94
Median 423,137 9.80 0.86 7.775 82.79 - 18.75
<CAPTION>
===========================================================================================
Price/ Price/ Price/ Price/
Core Book Total Total Div.
EPS Value Assets Assets Yield
Company (x) (%) (%) (%) (%)
===========================================================================================
<S> <C> <C> <C> <C> <C>
THRIFTS UNDER ACQUISITION
- -------------------------
1ST Bancorp 24.71 193.36 197.15 17.73 0.63
AFSALA Bancorp, Inc. 15.88 83.18 83.18 10.64 2.07
Ahmanson & Company (H.F.) 13.76 190.23 249.54 11.63 1.61
ALBANK Financial Corporation 18.58 209.06 264.08 19.20 1.40
Bayonne Bancshares, Inc. NA 132.70 132.70 18.18 1.79
Big Sky Bancorp, Incorporated 16.97 107.24 107.24 13.50 -
Fed One Bancorp, Inc. 32.11 219.69 228.32 25.37 1.57
Financial Bancorp, Inc. 19.76 196.08 196.90 16.52 1.52
First FS&LA of San Bernardino 21.91 106.40 107.31 4.68 -
First Palm Beach Bancorp, Inc. 24.43 136.05 138.89 9.32 2.19
Golden State Bancorp Inc. 9.83 96.66 115.14 5.99 -
HFNC Financial Corp. 18.75 105.63 105.63 17.91 3.05
Home Bancorp of Elgin, Inc. 33.33 92.86 92.86 24.24 3.08
Life Financial Corp. 2.51 57.63 57.63 7.29 -
Little Falls Bancorp, Inc. 18.75 100.60 108.46 10.58 1.60
Long Island Bancorp, Inc. 20.97 187.92 189.51 16.74 1.78
Maryland Federal Bancorp, Inc. 26.47 220.32 222.22 19.91 1.25
Mid-Iowa Financial Corp. 17.43 171.41 171.63 17.02 0.60
Mitchell Bancorp, Inc. 32.00 101.78 101.78 39.93 2.50
NSS Bancorp, Inc. 20.71 179.50 184.02 15.19 1.25
Peoples Bancorp, Inc. NA 98.73 101.77 38.60 1.08
Pulse Bancorp, Inc. 14.24 166.55 166.55 14.05 3.27
Reliance Bancshares, Inc. 46.25 99.36 99.36 49.65 -
Sandwich Bancorp, Inc. 24.08 270.52 278.30 22.70 2.37
Scotland Bancorp, Inc. 22.25 139.76 139.76 34.85 1.80
Security First Corp. 17.30 228.77 231.67 22.65 1.79
SFS Bancorp, Inc. 27.84 148.92 148.92 18.32 1.19
SIS Bancorp, Inc. 16.18 207.32 207.32 14.55 1.66
TR Financial Corp. 15.26 188.07 188.07 12.35 2.76
United Federal Savings Bank 27.59 224.40 224.40 17.40 1.50
Wayne Bancorp, Inc. 30.93 171.72 171.72 21.93 0.67
Westco Bancorp, Inc. 17.28 142.16 142.16 22.27 2.37
Average 21.60 155.46 161.07 19.09 1.51
Median 20.24 157.74 157.74 17.57 1.59
</TABLE>
Note: average and median price/earnings ratios exclude values greater than 30.
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
=====================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUTUAL HOLDING COMPANIES
- ------------------------
AF Bankshares, Inc. (MHC) ASFE Pinks NC 94,108 11.65 0.52 4.120 NA
Alliance Bank (MHC) ALLB NASDAQ PA 277,490 10.68 0.76 6.880 49.92
BCSB Bankcorp, Inc. (MHC) BCSB NASDAQ MD 320,627 8.00 0.68 7.250 63.84
Brookline Bancorp, Inc. (MHC) BRKL NASDAQ MA 835,329 32.99 1.99 8.060 316.41
Community Savings Bankshares, Inc. (MHC) CMSV NASDAQ FL 765,488 10.85 0.65 5.830 112.20
Fidelity Bankshares Inc. (MHC) FFFL NASDAQ FL 1,468,351 5.99 0.62 8.550 163.26
Finger Lakes Financial Corp. (MHC) SBFL NASDAQ NY 258,394 8.46 NA NA 51.77
First Carnegie Deposit (MHC) SKBO NASDAQ PA 145,590 16.80 0.45 2.690 25.30
First Federal Savings & Loan Assn.
of Alpena (MHC) FFAL Pinks MI 227,554 6.14 0.50 6.730 24.61
First Federal Savings Bank of
Siouxland (MHC) FFSX NASDAQ IA 551,593 6.23 0.72 8.540 79.52
Gaston Federal Bancorp, Inc. (MHC) GBNK NASDAQ NC 202,615 20.29 NA NA 50.59
Harris Financial, Inc. (MHC) HARS NASDAQ PA 2,325,602 7.40 0.65 8.100 471.26
Jacksonville Savings Bank (MHC) JXSB NASDAQ IL 169,745 10.54 0.60 5.710 29.10
Jefferson FS&LA of Morristown (MHC) JFSB Pinks TN 184,404 12.46 1.28 10.400 28.85
Leeds Federal Bankshares, Inc. (MHC) LFED NASDAQ MD 298,997 16.49 1.19 7.220 81.62
Liberty Bancorp, Inc. (MHC) LIBB NASDAQ NJ 255,357 13.13 0.62 7.960 39.75
Liberty Savings Bank, FSB (MHC) LBTM OTC MO 163,519 10.76 0.72 6.930 29.29
Marquette Savings Bank (MHC) MRQT OTC WI 78,388 25.50 0.84 4.330 18.98
Mid-Southern Savings Bank, FSB (MHC) MSVB OTC IN 60,655 18.63 NA NA 15.81
Niagara Bancorp, Inc. (MHC) NBCP NASDAQ NY 1,345,187 19.03 0.96 7.510 334.76
Northwest Bancorp, Inc. (MHC) NWSB NASDAQ PA 2,547,412 7.75 0.90 9.820 509.40
Pathfinder Bancorp, Inc. (MHC) PBHC NASDAQ NY 198,091 10.33 0.58 4.960 37.52
People's Bank (MHC) PBCT NASDAQ CT 9,105,200 8.22 0.80 8.870 1,487.30
Peoples Home Savings Bank (MHC) PHSB NASDAQ PA 226,742 12.67 0.75 5.810 40.71
Pulaski Bank, A Federal Savings
Bank (MHC) PULB NASDAQ MO 186,917 13.37 1.09 8.210 50.28
Pulaski Savings Bank (MHC) PLSK NASDAQ NJ 187,776 11.83 0.58 4.890 27.41
Roebling Bank (MHC) ROEB OTC NJ 42,763 10.70 NA NA 8.94
Wake Forest FS&LA (MHC) WAKE OTC NC 73,416 17.28 1.42 7.890 19.91
Wayne Savings Bancshares, Inc. (MHC) WAYN NASDAQ OH 259,402 9.53 0.72 7.530 52.84
Webster City Federal Savings Bank (MHC) WCFB NASDAQ IA 97,096 23.41 1.40 5.960 32.24
AVERAGE 765,127 13.24 0.85 6.952 146.67
MEDIAN 227,148 11.25 0.72 7.235 49.92
<CAPTION>
======================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
MUTUAL HOLDING COMPANIES
- ------------------------
AF Bankshares, Inc. (MHC) 19.00 NA NA NA NA NA NA
Alliance Bank (MHC) 15.25 24.60 24.60 168.32 168.32 17.99 2.36
BCSB Bankcorp, Inc. (MHC) 10.44 NA NA NA NA NA --
Brookline Bancorp, Inc. (MHC) 10.88 NA NA 114.84 114.84 37.88 1.84
Community Savings Bankshares, Inc. (MHC) 22.00 21.78 23.66 132.05 132.05 14.66 4.09
Fidelity Bankshares Inc. (MHC) 24.00 20.87 21.82 180.72 186.05 11.12 4.17
Finger Lakes Financial Corp. (MHC) 14.50 NA NA 236.93 236.93 20.03 --
First Carnegie Deposit (MHC) 11.00 29.73 36.67 103.48 103.48 17.38 2.73
First Federal Savings & Loan Assn.
of Alpena (MHC) 15.00 30.61 30.61 149.70 178.15 10.82 --
First Federal Savings Bank of
Siouxland (MHC) 28.00 23.53 23.14 189.19 234.70 14.42 1.71
Gaston Federal Bancorp, Inc. (MHC) 11.25 NA NA 123.09 123.09 24.97 1.78
Harris Financial, Inc. (MHC) 13.88 25.69 32.27 249.55 275.84 20.26 1.59
Jacksonville Savings Bank (MHC) 15.25 29.33 29.33 162.58 162.58 17.14 1.97
Jefferson FS&LA of Morristown (MHC) 15.50 12.30 12.70 125.61 125.61 15.65 3.23
Leeds Federal Bankshares, Inc. (MHC) 15.75 24.61 23.86 165.44 165.44 27.30 3.56
Liberty Bancorp, Inc. (MHC) 10.19 NA NA 118.60 118.60 15.57 --
Liberty Savings Bank, FSB (MHC) 22.00 23.91 23.91 165.54 165.54 17.88 3.64
Marquette Savings Bank (MHC) 8.00 NA NA 91.53 91.53 24.21 --
Mid-Southern Savings Bank, FSB (MHC) 11.00 NA NA 139.95 139.95 26.07 2.47
Niagara Bancorp, Inc. (MHC) 11.25 NA NA 130.81 130.81 24.89 --
Northwest Bancorp, Inc. (MHC) 10.88 24.17 25.29 233.87 260.17 20.00 1.47
Pathfinder Bancorp, Inc. (MHC) 13.25 25.98 33.13 156.43 183.26 18.94 1.51
People's Bank (MHC) 23.19 14.05 21.88 173.43 201.28 16.33 3.62
Peoples Home Savings Bank (MHC) 14.75 23.41 25.00 141.83 141.83 17.95 1.90
Pulaski Bank, A Federal Savings
Bank (MHC) 23.88 25.95 25.67 201.14 201.14 26.90 4.61
Pulaski Savings Bank (MHC) 13.00 26.53 25.00 123.46 123.46 14.59 2.31
Roebling Bank (MHC) 21.00 NA NA 188.68 188.85 20.90 --
Wake Forest FS&LA (MHC) 16.38 20.47 20.47 157.00 157.00 27.12 2.93
Wayne Savings Bancshares, Inc. (MHC) 21.25 29.51 29.51 213.78 213.78 20.37 2.65
Webster City Federal Savings Bank (MHC) 15.25 23.83 23.83 141.86 141.86 33.20 5.25
AVERAGE 23.73 25.62 159.98 166.65 20.52 2.12
MEDIAN 23,89 24.80 156.72 164.01 19.47 1.97
</TABLE>
Note: average and median price/earnings ratios exclude values greater than 30.
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- -------------------------------
<TABLE>
<CAPTION>
Exhibit III
Market Valuation and Financial Data for All Public Thrifts
====================================================================================================================================
Tang. LTM LTM Total
Total Equity/ Core Core Market
Assets Assets ROAA ROAE Value
Company Ticker Exchange St. ($000) (%) (%) (%) ($M)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEW YORK THRIFTS
- ----------------
Adirondack Financial Services Bancorp AFSB OTC NY 66,028 13.52 NA NA 7.60
Albion Banc Corp. ALBC NASDAQ NY 74,118 8.49 0.53 6.180 6.49
Ambanc Holding Co., Inc. AHCI NASDAQ NY 565,387 10.32 0.41 3.510 53.37
Astoria Financial Corporation ASFC NASDAQ NY 11,575,551 6.09 0.79 9.490 1,007.23
Carver Bancorp, Inc. CNY AMSE NY 427,371 8.14 0.22 2.650 21.99
Catskill Financial Corporation CATB NASDAQ NY 309,566 22.04 1.30 5.390 56.56
Dime Bancorp, Incorporated DME NYSE NY 20,913,891 5.29 0.86 14.770 2,582.88
Dime Community Bancshares, Inc. DCOM NASDAQ NY 1,623,926 10.15 0.86 6.790 219.18
Elmira Savings Bank, FSB ESBK NASDAQ NY 231,725 6.27 0.39 6.240 17.44
Flushing Financial Corporation FFIC NASDAQ NY 1,091,908 12.39 0.96 7.240 171.83
GreenPoint Financial Corporation GPT NYSE NY 12,853,902 5.87 1.14 11.840 2,412.94
GSB Financial Corporation GOSB NASDAQ NY 129,087 24.91 0.71 2.870 26.42
Haven Bancorp, Inc. HAVN NASDAQ NY 2,265,248 4.99 0.48 8.320 127.21
Hudson River Bancorp Inc. HRBT NASDAQ NY 994,055 6.95 NA NA 188.59
Independence Community Bank Corp. ICBC NASDAQ NY 4,786,156 19.16 NA NA 974.35
JSB Financial, Inc. JSB NYSE NY 1,563,460 24.31 2.52 10.730 461.28
Peekskill Financial Corporation PEEK NASDAQ NY 200,341 21.57 1.01 4.110 42.71
Queens County Bancorp, Inc. QCSB NASDAQ NY 1,715,164 9.89 1.51 14.340 587.02
Reliance Bancorp, Inc. RELY NASDAQ NY 2,485,729 5.60 0.82 9.660 248.69
Richmond County Financial Corp. RCBK NASDAQ NY 1,595,844 20.53 1.38 9.150 358.38
Roslyn Bancorp, Inc. RSLN NASDAQ NY 3,853,282 15.37 1.26 7.280 688.27
Skaneateles Bancorp Inc. SKAN NASDAQ NY 266,730 6.73 0.62 8.920 21.13
Staten Island Bancorp, Inc. SIB NYSE NY 3,018,685 23.09 1.63 9.180 758.78
Warwick Community Bancorp, Inc. WSBI NASDAQ NY 410,394 20.99 0.92 5.630 76.80
Yonkers Financial Corporation YFCB NASDAQ NY 401,565 10.30 0.86 6.570 42.26
ASB Financial Corp. ASBP NASDAQ OH 116,437 12.44 0.94 6.670 19.03
AVERAGE 2,828,290 12.90 0.96 7.719 429.94
MEDIAN 1,042,982 10.31 0.86 7.240 149.52
<CAPTION>
====================================================================================================================================
Stock Price/ Price/ Price/ Price/ Price/
Price LTM Core Book Tang. Total Div.
09/04/98 EPS EPS Value Book Assets Yield
Company ($) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
NEW YORK THRIFTS
- ----------------
Adirondack Financial Services Bancorp 11.50 NA NA 85.19 85.19 11.52 -
Albion Banc Corp. 8.63 16.91 16.91 103.05 103.05 8.76 1.39
Ambanc Holding Co., Inc. 13.00 24.53 23.21 91.42 91.42 9.44 1.85
Astoria Financial Corporation 37.88 11.55 12.22 112.59 157.16 8.68 2.11
Carver Bancorp, Inc. 9.50 19.79 22.62 61.25 63.38 5.14 -
Catskill Financial Corporation 12.75 14.01 14.33 81.11 81.11 18.48 2.90
Dime Bancorp, Incorporated 22.75 14.68 14.13 194.11 236.00 12.35 0.88
Dime Community Bancshares, Inc. 18.00 16.51 17.14 117.65 135.03 13.50 2.22
Elmira Savings Bank, FSB 24.00 16.00 19.05 117.94 117.94 7.53 2.67
Flushing Financial Corporation 22.00 16.79 16.30 122.91 127.61 15.74 1.64
GreenPoint Financial Corporation 28.94 14.76 14.47 163.95 289.96 18.77 2.21
GSB Financial Corporation 11.75 NA NA 82.17 82.17 20.46 1.02
Haven Bancorp, Inc. 14.38 14.67 13.96 107.84 112.83 5.62 2.09
Hudson River Bancorp Inc. 10.56 NA NA NA NA NA -
Independence Community Bank Corp. 12.81 NA NA 101.45 107.49 20.36 -
JSB Financial, Inc. 46.81 10.31 12.22 121.12 121.12 29.44 3.42
Peekskill Financial Corporation 14.75 22.35 22.01 98.86 98.86 21.32 2.44
Queens County Bancorp, Inc. 39.75 23.11 23.11 304.13 304.13 34.63 2.52
Reliance Bancorp, Inc. 26.00 13.07 13.76 127.64 182.97 10.00 2.77
Richmond County Financial Corp. 13.56 NA NA 109.03 109.38 22.46 1.77
Roslyn Bancorp, Inc. 16.63 14.09 14.58 115.77 116.26 17.86 2.41
Skaneateles Bancorp Inc. 14.63 13.80 13.80 115.16 117.94 7.92 1.91
Staten Island Bancorp, Inc. 16.81 NA NA 106.75 109.46 25.14 1.90
Warwick Community Bancorp, Inc. 11.63 NA NA 89.15 89.15 18.71 1.38
Yonkers Financial Corporation 15.50 14.35 14.90 103.96 103.96 10.70 1.81
ASB Financial Corp. 11.50 16.91 16.91 131.28 131.28 16.34 3.48
AVERAGE 16.61 16.61 118.62 130.99 15.63 1.80
MEDIAN 14.90 14.90 109.03 112.83 15.74 1.91
</TABLE>
Note: average and median price/earnings ratios exclude values greater than 30.
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-1
PRO FORMA CONVERSION ASSUMPTIONS
1. The total amount of the net conversion proceeds was fully invested at the
beginning of the applicable period.
2. The net conversion proceeds are invested to yield a return of 5.37%, which
represents the one-year U.S. Treasury bill yield as of June 30, 1998. The
combined federal and state income tax rate was assumed to be 38.0%,
resulting in an after-tax yield of 3.33%.
3. It is assumed that 8.0% of the shares offered in the Conversion will be
purchased by the Association's Employee Stock Ownership Plan ("ESOP"). The
funds used to acquire such shares will be borrowed by the ESOP from the net
proceeds retained by the Holding Company. Pro forma adjustments have been
made to earnings and equity to reflect the impact of the ESOP. The annual
ESOP expense is estimated based on a 10-year debt amortization period. No
reinvestment is assumed on proceeds used to fund the ESOP.
4. It is assumed that 4.0% of the shares offered in the Conversion will be
purchased in the open market by the Association's Management Recognition
Plan and Trust ("MRP"). The MRP is subject to stockholder approval and is
expected to be adopted following the consummation of the Conversion. Pro
forma adjustments have been made to earnings and equity to reflect the
impact of the MRP. The annual MRP expense is estimated based on a 5-year
vesting period. No reinvestment is assumed on proceeds used to fund the
MRP.
5. Conversion expenses are estimated at $350,000 at the minimum, midpoint and
maximum valuation. Actual expenses may vary from this estimate and will
depend, among other factors, on the payment of marketing fees related to
the percentages and total number of shares sold in different phases of the
offering.
6. The number of shares outstanding for purposes of calculating earnings per
share is adjusted to reflect the shares assumed to held by the ESOP not
committed to be released within the first year following the Conversion.
7. No effect has been given to withdrawals from deposit accounts for the
purpose of purchasing common stock in the Conversion.
IV-1
<PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-2
PRO FORMA VALUATION RANGE
PEOPLES BANKCORP
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Super
Minimum Midpoint Maximum Maximum
==========================================================================================================
<S> <C> <C> <C> <C>
Shares offered 127,500 150,000 172,500 198,375
Offering price example $10.00 $10.00 $10.00 $10.00
==========================================================================================================
Gross proceeds $1,275 $1,500 $1,725 $1,984
Less: estimated expenses (350) (350) (350) (350)
-------- -------- -------- --------
Net offering proceeds $925 $1,150 $1,375 $1,634
==========================================================================================================
NET INCOME:
Net Income LTM June 30, 1998 $83 $83 $83 $83
Pro forma income on net proceeds 26 32 39 46
Pro forma ESOP adjustment (6) (7) (9) (10)
Pro forma MRP adjustment (6) (7) (9) (10)
-------- -------- -------- --------
Pro forma core income $96 $100 $105 $110
-------- -------- -------- --------
Pro forma core income per share $0.81 $0.72 $0.65 $0.60
==========================================================================================================
NET INCOME:
Core Income LTM June 30, 1998 $82 $82 $82 $82
Pro forma income on net proceeds 26 32 39 46
Pro forma ESOP adjustment (6) (7) (9) (10)
Pro forma MRP adjustment (6) (7) (9) (10)
-------- -------- -------- --------
Pro forma core income $95 $99 $104 $109
-------- -------- -------- --------
Pro forma core income per share $0.80 $0.71 $0.65 $0.59
==========================================================================================================
TOTAL EQUITY AT JUNE 30, 1998 $1,648 $1,648 $1,648 $1,648
Net proceeds 925 1,150 1,375 1,634
Less: ESOP purchase (102) (120) (138) (159)
Less: MRP purchase (51) (60) (69) (79)
-------- -------- -------- --------
Pro forma total equity $2,420 $2,618 $2,816 $3,044
-------- -------- -------- --------
Pro forma book value $18.98 $17.45 $16.32 $15.34
==========================================================================================================
TANGIBLE EQUITY AT JUNE 30, 1998 $1,648 $1,648 $1,648 $1,648
Net proceeds 925 1,150 1,375 1,634
Less: ESOP purchase (102) (120) (138) (159)
Less: MRP purchase (51) (60) (69) (79)
-------- -------- -------- --------
Pro forma tangible equity $2,420 $2,618 $2,816 $3,044
-------- -------- -------- --------
Pro forma tangible book value $18.98 $17.45 $16.32 $15.34
==========================================================================================================
TOTAL ASSETS AT JUNE 30, 1998 $24,247 $24,247 $24,247 $24,247
Net proceeds 925 1,150 1,375 1,634
Less: ESOP purchase (102) (120) (138) (159)
Less: MRP purchase (51) (60) (69) (79)
-------- -------- -------- --------
Pro forma total assets $25,019 $25,217 $25,415 $25,643
==========================================================================================================
PRO FORMA VALUATION RATIOS:
Net Worth / Total Assets 9.67% 10.38% 11.08% 11.87%
PRICE / LTM EPS 12.33 13.86 15.28 16.77
PRICE / LTM CORE EPS 12.45 14.06 15.39 16.89
PRICE / BOOK VALUE 52.69% 57.30% 61.26% 65.17%
PRICE / TANGIBLE BOOK 52.69% 57.30% 61.26% 65.17%
PRICE / ASSETS 5.10% 5.95% 6.79% 7.74%
==========================================================================================================
</TABLE>
IV-2
<PAGE>
PAGE>
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-3
PRO FORMA ANALYSIS AT MIDPOINT VALUE
PEOPLES BANKCORP
Financial Data as of June 30, 1998
<TABLE>
<CAPTION>
VALUATION PARAMETERS SYMBOL DATA
- -------------------- ------ -----------
<S> <C> <C>
Net income -- LTM Y $ 83,000
Net income -- LTM Core Y 82,000
Net worth B 1,648,000
Tangible net worth B 1,648,000
Total assets A 24,247,000
Expenses in conversion X 350,000
Other proceeds not reinvest O 180,000
ESOP purchase E 8.0% 120,000
ESOP expense (pre-tax) F 10.0% 12,000
MRP purchase M 4.0% 60,000
MRP expense (pre-tax) N 20.0% 12,000
Re-investment rate (after-t R 3.33%
Tax rate T 38.00%
Shares for EPS S 92.80%
<CAPTION>
PRO FORMA RATIOS AT MIDPOINT VALUE
- ----------------------------------
<S> <C> <C>
Price / earnings -- LTM P/E 13.86x
Price / earnings -- LTM Cor P/E 14.06x
Price / book value P/B 57.30%
Price / tangible book P/B 57.30%
Price / assets P/A 5.95%
<CAPTION>
PRO FORMA CALCULATION AT MIDPOINT VALUE BASED ON
- --------------------------------------- --------------
<S> <C> <C>
V = (P/E / S)*((Y-R*(O+X)-(F+N)*(1-T))) = $1,500,000 [LTM earnings]
----------------------------------
1 - (P/E / S) * R
V = (P/E / S)*((Y-R*(O+X)-(F+N)*(1-T))) = $1,512,875 [LTM Core Earni
-----------------------------------
1 - (P/E / S) * R
V = P/B * (B - X - E - M) = $1,500,000 [Book value]
---------------------
1 - P/B
V = P/B * (B - X - E - M) = $1,500,000 [Tangible book]
---------------------
1 - P/B
V = P/A * (B - X - E - M) = $1,500,000 [Total assets]
---------------------
1 - P/A
<CAPTION>
PRO FORMA VALUATION RANGE
- -------------------------
<S> <C> <C> <C> <C>
MINIMUM = $1,500,000 X 0.85 $1,275,000
MIDPOINT = $1,500,000 X 1.00 $1,500,000
MAXIMUM = $1,500,000 X 1.15 $1,725,000
SUPER MAX = $1,725,000 X 1.15 $1,983,750
</TABLE>
IV-3
