Registration No. 333-63373
Filed with the Securities and Exchange Commission on November 2, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pre-Effective Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LINCOLN BANCORP
(Exact name of registrant as specified in its charter)
Indiana 6712 35-2055553
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code No.) Identification No.)
incorporation
or organization)
1121 East Main Street T. Tim Unger
P.O. Box 510 Lincoln Federal
Plainfield, Indiana 46168-0510 Savings Bank
(317) 839-6539 1121 East Main Street
P.O. Box 510
Plainfield, Indiana 46168-0510
(317) 839-6539
Copy to:
Claudia V. Swhier, Esq.
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204
Approximate date of commencement of proposed sale to the public: As
promptly as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed Maximum Amount of
Title of each Class of Amount to be Maximum Offering Aggregate Offering Registration
Securities to be Registered Registered Price Per Unit Price (2) Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value (1) 8,926,875 $10.00 $89,268,750 $26,334.28(3)
==================================================================================================================
</TABLE>
(1) Includes 200,000 shares of Common Stock which may be issued to the Lincoln
Federal Charitable Foundation, Inc. for no cash consideration
(2) Estimated solely for the purpose of computing the registration fee.
(3) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Item in Form S-1 Caption in Prospectus
---------------- ---------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Forepart of Registration Statement and Outside
Front Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus
3. Summary Information, Risk Factors, and Ratio of "QUESTIONS AND ANSWERS ABOUT
Earnings to Fixed Charges THE STOCK OFFERING"; "SUMMARY"; "RISK
FACTORS"
4. Use of Proceeds "USE OF PROCEEDS"
5. Determination of Offering Price "THE CONVERSION - Stock Pricing"
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution "SUMMARY"; "THE CONVERSION - Subscription
Offering," "- Community Offering," "-Marketing
Arrangements," "- Selected Dealers"
9. Description of Securities to be Registered "DESCRIPTION OF CAPITAL STOCK"
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to Registrant
(a) Description of Business "LINCOLN BANCORP"; "LINCOLN FEDERAL
SAVINGS BANK", "BUSINESS OF LINCOLN FEDERAL
SAVINGS BANK"
(b) Description of Property "BUSINESS OF LINCOLN FEDERAL SAVINGS BANK
- Properties"
(c) Legal Proceedings "BUSINESS OF LINCOLN FEDERAL SAVINGS
BANK - Legal Proceedings"
(d) Market Price of and Dividends on the "MARKET FOR THE COMMON STOCK;"
Registrant's Common Equity and Related "DIVIDENDS;" "PROPOSED PURCHASES
Stockholder Matters BY DIRECTORS AND EXECUTIVE OFFICERS";
"DESCRIPTION OF CAPITAL STOCK"
(e) Financial Statements "CONSOLIDATED FINANCIAL STATEMENTS";
"PRO FORMA DATA"
(f) Selected Financial Data "SELECTED CONSOLIDATED FINANCIAL
DATA OF LINCOLN FEDERAL SAVINGS BANK
AND SUBSIDIARY"
(g) Supplementary Financial Information Not Applicable
(h) Management's Discussion and Analysis of "MANAGEMENT'S DISCUSSION AND
Financial Condition and Results of Operations ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF LINCOLN FEDERAL
SAVINGS BANK"
(i) Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosure
(j) Directors and Executive Officers "MANAGEMENT OF LINCOLN BANCORP";
"MANAGEMENT OF LINCOLN FEDERAL SAVINGS
BANK"
(k) Executive Compensation "EXECUTIVE COMPENSATION
AND RELATED TRANSACTIONS OF LINCOLN
FEDERAL"
(l) Security Ownership of Certain Beneficial "PROPOSED PURCHASES BY DIRECTORS AND
Owners and Management EXECUTIVE OFICERS"
(m) Certain Relationships and Related Transactions "EXECUTIVE COMPENSATION AND RELATED
TRANSACTIONS OF LINCOLN FEDERAL --
Transactions with Certain Related Persons"
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
Up to 6,809,250 Shares of Common Stock
Lincoln Bancorp
1121 East Main Street
Plainfield, Indiana 46168
(317) 839-6539
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Lincoln Federal Savings Bank based in Plainfield, Indiana is converting
from the mutual form to the stock form of organization. Upon completion of the
conversion, Lincoln Federal Savings Bank will become a wholly-owned subsidiary
of Lincoln Bancorp, which was formed in September, 1998. The common stock of
Lincoln Bancorp is being offered to the public under the terms of a Plan of
Conversion which must be approved by the Office of Thrift Supervision and by a
majority of the votes eligible to be cast by members of Lincoln Federal Savings
Bank. The offering will not go forward if Lincoln Federal Savings Bank does not
receive these approvals. Lincoln Bancorp has received conditional approval to
have its common stock listed for quotation on the Nasdaq National Market System
under the symbol "LNCB."
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the
converted Lincoln Federal Savings Bank to be between $43,050,000 and
$58,950,000, which establishes the number of shares to be offered based upon a
price of $10 per share. This estimate assumes a contribution by Lincoln Bancorp
of 200,000 shares of common stock to Lincoln Federal Charitable Foundation, Inc.
Subject to Office of Thrift Supervision approval, the maximum number of shares
to be offered may be increased to 6,809,250 shares. Based on these estimates, we
are making the following offering of shares of common stock.
<TABLE>
<CAPTION>
Minimum Maximum Supermaximum
<S> <C> <C> <C>
o Price Per Share: $10 $10 $10
o Number of Shares 4,305,000 5,895,000 6,809,250
o Conversion Expenses $1,208,048 $1,358,717 $1,445,350
o Net Proceeds to Lincoln Bancorp $41,841,952 $57,591,283 $66,647,150
o Net Proceeds per share to Lincoln Bancorp $9.72 $9.77 $9.79
(excluding the shares issued to Lincoln Federal
Charitable Foundation, Inc.)
</TABLE>
Please refer to Risk Factors beginning on page 16 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 regulator has approved or disapproved
these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Charles Webb and Company will use its best efforts to help Lincoln Bancorp sell
at least the minimum number of shares but does not guarantee this number will be
sold. All funds received from subscribers will be held in an escrow savings
account at Lincoln Federal Savings Bank earning interest at the passbook rate of
2.72% until the completion or termination of the Conversion.
For information on how to subscribe, call the Stock Information Center at (317)
837-5036.
CHARLES WEBB & COMPANY
A Division of Keefe, Bruyette & Woods, Inc.
Prospectus dated ________________, 1998
<PAGE>
TABLE OF CONTENTS
Page
Questions and Answers........................................................ 4
Summary...................................................................... 6
Selected Consolidated Financial Data of
Lincoln Federal Savings Bank and Subsidiary............................... 9
Recent Developments of Lincoln Federal Savings Bank.......................... 12
Risk Factors................................................................. 16
Proposed Purchases by Directors and Executive Officers....................... 21
Lincoln Bancorp.............................................................. 22
Lincoln Federal Savings Bank................................................. 22
Market Area.................................................................. 22
Lincoln Federal Charitable Foundation, Inc................................... 23
Use of Proceeds.............................................................. 25
Dividends.................................................................... 26
Market for the Common Stock.................................................. 27
Competition.................................................................. 27
Capitalization............................................................... 27
Pro Forma Data............................................................... 29
Comparison of Valuation and Pro Forma Information With No Foundation......... 36
Regulatory Capital Compliance................................................ 37
The Conversion............................................................... 38
Establishment of the Foundation....................................... 39
Offering of Common Stock.............................................. 45
Subscription Offering................................................. 46
Community Offering.................................................... 48
Limitations on Common Stock Purchases................................. 50
Management's Discussion and Analysis of Financial Condition
and Results of Operations of
Lincoln Federal Savings Bank.............................................. 54
Business of Lincoln Federal Savings Bank..................................... 74
Management of Lincoln Bancorp................................................ 95
Management of Lincoln Federal Savings Bank................................... 95
Executive Compensation and Related Transactions of
Lincoln Federal Savings Bank............................................ 97
Regulation...................................................................101
Taxation.....................................................................108
Restrictions on Acquisition of the Holding Company...........................109
Description of Capital Stock.................................................113
Transfer Agent...............................................................114
Registration Requirements....................................................114
Legal and Tax Matters........................................................115
Experts......................................................................115
Additional Information.......................................................115
Index to Consolidated Financial Statements...................................F-1
Glossary.....................................................................G-1
This document contains forward-looking statements which involve risks
and uncertainties. Lincoln Bancorp'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 11 of this Prospectus.
Please see the Glossary beginning on page G-1 for the meaning of
capitalized terms that are used in this Prospectus.
<PAGE>
[map of Indiana with Clinton, Hendricks and Montgomery Counties highlighted]
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: What is the purpose of the offering?
A: The offering means that you will have the opportunity to share in our
future as a shareholder of the newly formed holding company named
Lincoln Bancorp which will own Lincoln Federal Savings Bank. 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. 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. In addition, our shareholders might also receive
dividends and benefit from any long-term appreciation of our stock
price if our earnings are sufficient in the future.
Q: How do I purchase the stock?
A: You must complete and return the Stock Order Form to us, together with
your payment, on or before ___________, 1998.
Q: How much stock may I purchase?
A: The minimum purchase is 25 shares (or $250). Each person with
subscription rights, in his capacity as such, may purchase up to 25,000
shares (or $250,000) in the Subscription Offering, subject to an
overall maximum of 68,093 shares ($680,930). Joint account holders
ordering through a single account may not collectively exceed these
purchase limitations. Joint account holders ordering through more than
one account may each purchase up to 25,000 shares, subject to the
overall maximum of 68,093 shares.
For example, if you have more than one account at Lincoln Federal
Savings Bank, each in the same name, you may purchase up to 25,000
shares in the Subscription Offering. If you have only one account at
Lincoln Federal Savings Bank held jointly with your spouse, together
you and your spouse may only purchase up to 25,000 shares in the
Subscription Offering. If you and your spouse hold two or more joint
accounts, you may each purchase up to 25,000 shares, subject to the
overall maximum of 68,093 shares.
If we have a Community Offering, each purchaser may purchase up to
25,000 shares in that offering. However, your total purchases in the
Conversion may not exceed 68,093 shares (or $680,930).
In certain instances, your purchase may be grouped together with
purchases by other persons who are associated with you. We may increase
or decrease the maximum purchase limitation. If the offering is
oversubscribed, shares will be allocated based upon a formula.
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
there is an oversubscription, the stock will be offered on a priority
basis to the following persons:
o Persons who had a deposit account with us on June 30, 1997.
(Lincoln Bancorp's employee stock ownership plan will have
priority over such persons if more than 5,895,000 shares are
sold, to the extent of any shares sold over 5,895,500 and up
to the number of shares subscribed for by such plan). Any
remaining shares will be offered to:
o The employee stock ownership plan of Lincoln Bancorp. Any
remaining shares will be offered to:
o Persons who had a deposit account with us on September 30,
1998. Any remaining shares will be offered to:
o Other depositors of ours, as of ______________, 1998, and our
borrowers as of June 19, 1984 who remain borrowers on
______________, 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 in a Community Offering, with preference given to people who
live in Hendricks, Montgomery and Clinton Counties, Indiana.
Q: What particular factors should I consider when deciding whether or not
to buy the stock?
A: Before you decide to purchase stock, you should read this Prospectus.
In particular, you should read and consider the Risk Factors section on
pages 16 to 21 of this document.
Q: As a depositor of Lincoln Federal Savings Bank, 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. Even if you do purchase stock, your
voting rights will depend on the amount of stock that you own and not
on your deposit account at Lincoln Federal Savings Bank. You are not
required to purchase stock. Your deposit account, certificate accounts
and any loans you may have with us will not otherwise be affected by
the Conversion.
Q: Can I purchase stock on behalf of someone else who does not have an
account or is not a borrower at Lincoln Federal Savings Bank?
A: No. You may not transfer the subscription rights that you have as a
depositor or borrower at Lincoln Federal Savings Bank. You will be
required to certify that you are purchasing shares solely for your own
account and that you have no agreement or understanding with another
person involving the transfer of the shares that you purchase. We will
not honor orders for shares of the Common Stock by anyone known to us
to be a party to such an agreement and we will pursue all legal
remedies against any person who is a party to such an agreement.
Q: How may I pay for my shares of stock?
A: First, you may pay for stock by check, cash (only if presented in
person) or money order. Interest will be paid by Lincoln Federal
Savings Bank on these funds at its passbook rate, which is currently
2.72% per annum, from the day the funds are received until the
completion or termination of the Conversion. Second, you may authorize
us to withdraw funds from your savings account(s) or certificate(s) of
deposit at Lincoln Federal Savings Bank for the amount of funds you
specify for payment. You will not have access to these funds from the
day we receive your order until completion or termination of the
Conversion.
Q: Can I purchase shares using funds in any IRA accounts I hold?
A: Applicable regulations do not permit the purchase of common stock from
your existing Lincoln Federal Savings Bank IRA account. To accommodate
our depositors, however, we have made arrangements with an outside
trustee to allow such purchases. Please call our Stock Information
Center for additional information.
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. After reading this document, if you have questions or
need assistance, you should contact:
Stock Information Center
Lincoln Federal Savings Bank
P.O. Box 720
1121 East Main Street
Plainfield, Indiana 46168
(317) 837-5036
<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 consolidated financial statements and the notes to the consolidated
financial statements of Lincoln Federal Savings Bank. References in this
document to "we", "us", "our" and "Lincoln Federal" refer to Lincoln Federal
Savings Bank. In certain instances where appropriate, "us" or "our" refer
collectively to Lincoln Bancorp and Lincoln Federal Savings Bank. References in
this document to "the Holding Company" refer to Lincoln Bancorp.
The Companies
Lincoln Bancorp
1121 East Main Street
Plainfield, Indiana 46168
(317) 839-6539
Lincoln Bancorp is not currently an operating company and has not
engaged in any significant business to date. It was formed in September, 1998,
as an Indiana corporation to be the holding company for Lincoln Federal Savings
Bank. The holding company structure will provide greater flexibility in terms of
operations, expansion and diversification. See page 22.
Lincoln Federal Savings Bank
1121 East Main Street
Plainfield, Indiana 46168
(317) 839-6539
We are a community- and customer-oriented federal mutual savings bank.
We provide financial services to individuals, families and small business.
Historically, we have attracted deposits from the general public and have
emphasized residential mortgage lending, primarily one- to four-family mortgage
loans. We also offer commercial real estate loans, real estate construction
loans, land loans, multi-family residential loans, home equity loans and other
types of consumer loans, and commercial loans. On June 30, 1998, we had total
assets of $304.5 million, deposits of $211.2 million, and equity capital of
$42.8 million. See page 22.
The Stock Offering
Lincoln Bancorp is offering for sale between 4,305,000 and 5,895,000
shares of its Common Stock at $10 per share. This offering may be increased to
6,809,250 shares without further notice to you if market or financial conditions
change prior to the completion of this stock offering or if additional shares of
stock are needed to fill the order of our employee stock ownership plan.
Stock Purchases
Lincoln Bancorp will offer shares of its Common Stock to our depositors
who held deposit accounts as of certain dates and to our borrowers with
outstanding loans as of certain dates. The shares will be offered first in a
Subscription Offering and any remaining shares may be offered in a Community
Offering to members of the general public with preference given to residents of
Hendricks, Montgomery and Clinton Counties. See pages 44 to 51. We have engaged
Charles Webb & Company to assist in the marketing of the Common Stock.
Prohibition on Transfer of Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law. If you exercise your subscription
rights, you will be required to certify that you are purchasing shares solely
for your own account and that you have no agreement or understanding regarding
the sale or transfer of shares. We intend to 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 known by us to involve the transfer of such
rights. In addition, persons who violate the purchase limitations may be subject
to sanctions and penalties imposed by the Office of Thrift Supervision.
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 Keller & Company, Inc., an appraisal
firm experienced in appraisals of savings associations. Keller & Company, Inc.
has estimated that, in its opinion, as of August 14, 1998, and as updated as of
October 22, 1998, the aggregate pro forma market value of the Common Stock
ranged between $43,050,000 and $58,950,000 (with a mid-point of $51,000,000).
This appraisal assumes that the Holding Company issues 200,000 shares of Common
Stock to Lincoln Federal Charitable Foundation, Inc. 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
associations. If the pro forma market value of the Common Stock changes to
either below $43,050,000 or above $68,092,500, we will notify you and provide
you with the opportunity to modify or cancel your order. See pages 51 to 52.
Termination of the Offering
The Subscription Offering will terminate at 12:00 noon, Plainfield
time, on ___________, 1998. The Community Offering, if any, may terminate at any
time without notice but no later than ____________, without approval by the OTS.
Benefits to Management from the Offering
Our full-time employees will participate in our employee stock
ownership plan, which is a form of retirement plan that will purchase shares of
Lincoln Bancorp's Common Stock. We also intend to implement a management
recognition and retention plan and a stock option plan following completion of
the Conversion, which will benefit our officers and directors. If we adopt the
management recognition and retention plan, our executive officers and directors
will be awarded up to 280,370 shares of Common Stock at no cost to them,
assuming that we sell 6,809,250 shares of Common Stock in the Conversion and
issue an additional 200,000 shares to the Foundation. These shares would vest
over a five-year period. If we award shares under the recognition and retention
plan out of our authorized but unissued shares of Common Stock, your ownership
and voting interests would be diluted and net income per share and shareholders'
equity per share will decrease. However, the management recognition and
retention plan and stock option plan may not be adopted until at least six
months after the Conversion and are subject to shareholder approval and
compliance with OTS regulations. See page 99-101.
The following chart indicates the amount of Common Stock we expect will
be held by the recognition and retention plan, the employee stock ownership plan
and the stock option plan following the Conversion. The chart assumes that 4% of
the number of shares sold in the Conversion (including the 200,000 shares issued
to Lincoln Federal Charitalbe Foundation, Inc.) will be awarded under the
recognition and retention plan, 8% will be issued to the employee stock
ownership plan and 10% will be issued to the stock option plan.
Number of Shares (1) Value of Shares (2)
-------------------- -------------------
Recognition and Retention Plan 212,000 $2,120,000
Employee Stock Ownership Plan 424,000 $4,240,000 (3)
Stock Option Plan 530,000 N/A (4)
1 Assumes the sale of 5,100,000 shares of Common Stock, the midpoint of
the Estimated Valuation Range, and the issuance of 200,000 shares to
Lincoln Federal Charitable Foundation, Inc.
2 Assumes a value of $10 per share of Common Stock. Actual amounts will
depend upon the future market value of the Common Stock, which cannot
be determined at this time.
3 The Trustee of the ESOP will be required to vote nondirected shares and
the shares held in the suspense account to reflect the instructions it
has received fom participants in the ESOP regarding allocated shares.
4 The value of awards issued under the Stock Option Plan will depend upon
the exercise price of the stock options and the market value of the
Common Stock when the options are exercised, neither of which can be
determined at this time.
We also have entered into a three-year employment contract with T. Tim
Unger, our President and Chief Executive Officer, in connection with the
Conversion which provides for an annual salary of $135,000, subject to increases
by our board of directors. The employment contract also provides for severance
pay in an amount up to three times his annual salary in the event his employment
is terminated without cause following a change in control of the Holding
Company. See page 97. We also intend to issue 200,000 shares of stock to Lincoln
Federal Charitable Foundation, Inc. We expect, however, that as a condition to
its approval of the establishment of the Foundation, the OTS will require that
all shares of Common Stock held by the Foundation be voted in the same ratio as
all other shares of Common Stock on all proposals considered by the shareholders
of the Holding Company. See pages 23 to 25.
Lincoln Federal Charitable Foundation, Inc.
Our Plan of Conversion provides for the establishment of Lincoln
Federal Charitable Foundation, Inc. to provide grants or donations for
charitable activities in our market area. We have historically made donations to
charitable organizations in our primary market area. During the 12-month period
ended December 31, 1997, we made charitable donations of $31,900, and during the
nine-month period ended September 30, 1998 we made charitable donations of
$16,400. Lincoln Federal Charitable Foundation, Inc. is incorporated under
Indiana law as a nonprofit corporation without members and operates under the
guidance of its Board of Directors. Upon the completion of the Conversion, the
Board will initially consist of four members of the Board of Directors of
Lincoln Bancorp. Lincoln Bancorp intends to issue 200,000 shares of Common Stock
to Lincoln Federal Charitable Foundation, Inc. immediately following the
Conversion. This issuance of additional shares of Common Stock to Lincoln
Federal Charitable Foundation, Inc. will dilute the ownership and voting
interests of any shares you may purchase by 3.8%, assuming the sale of 5,100,000
shares of Common Stock. See pages 23 to 25.
Use of the Proceeds Raised from the Sale of Common Stock
Lincoln Bancorp intends to use a portion of the proceeds from the stock
offering to make a loan to our employee stock ownership plan to fund its
purchase of 8% of the Common Stock sold in the Conversion and issued to the
Foundation. Lincoln Bancorp will use 50% of the proceeds that remain after it
pays expenses incurred in connection with the Conversion to purchase all of the
capital stock to be issued by Lincoln Federal Savings Bank. Lincoln Bancorp will
retain the balance of the proceeds as a possible source of funds for the payment
of dividends, if any, to shareholders, to repurchase shares of Common Stock in
the future, to acquire one or more other financial institutions or assets of
other financial institutions, or for other general corporate purposes. The
Holding Company has no present plans, agreements or understandings to acquire
another financial institution or the assets of another financial institution or
to repurchase shares of Common Stock. Lincoln Federal intends to use the
proceeds it receives in the Conversion to support its lending activities, to
repay advances from the Federal Home Loan Bank of Indianapolis and to purchase
mortgage-backed securities and, possibly, loan participations from other
financial institutions. On a short-term basis, both the Holding Company and
Lincoln Federal may invest the net proceeds that they retain in short- or
intermediate-term investments. See pages 25 to 26.
Dividends
The Holding Company currently has not adopted a policy regarding the
payment of dividends, if any, on the Common Stock. Following consummation of the
Conversion, the Board of Directors of the Holding Company intends to implement a
policy of paying quarterly cash dividends on the Common Stock. Declarations of
dividends by the Holding Company's Board of Directors will depend upon a number
of factors, including the amount of the net proceeds retained by the Holding
Company in the Conversion, investment opportunities available to the Holding
Company or to Lincoln Federal, capital requirements, the Holding Company's and
Lincoln Federal's financial condition and results of operations, tax
considerations, statutory and regulatory limitations, and general economic
conditions. There can be no assurances that dividends will in fact be paid on
the Common Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods. See pages 26 to 27.
Market for the Common Stock
Lincoln Bancorp has received conditional approval to have its Common
Stock listed for quotation on the Nasdaq National Market System under the symbol
"LNCB." Even though we expect that the shares of Common Stock will be quoted on
the Nasdaq National Market System, there can be no guarantee that an active and
liquid trading market for the shares will develop and be maintained. The Common
Stock may not be appropriate as a short-term investment. If you purchase shares,
you may not be able to sell them when you want to at a price that is equal to or
more than the price you paid. See page 27.
Important Risks in Owning the Holding Company's Common Stock
Before you decide to purchase stock in the offering, you should read
the Risk Factors section on pages 16 to 21 of this document.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
The following selected consolidated financial data of Lincoln Federal
and its subsidiary is qualified in its entirety by, and should be read in
conjunction with, the consolidated financial statements, including notes
thereto, included elsewhere in this Prospectus. Information at June 30, 1998 and
for the six months ended June 30, 1998 and 1997 is unaudited but, in the opinion
of management, includes all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of the financial position and
results of operations as of and for such dates. The results of operations at and
for the six months ended June 30, 1998 are not necessarily indicative of the
results of operations for the entire year.
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(In thousands)
Summary of Financial Condition Data:
<S> <C> <C> <C> <C> <C> <C>
Total assets............................... $304,500 $321,391 $345,552 $319,777 $309,010 $225,500
Cash and interest bearing
deposits in other banks (1)........... 23,765 18,958 10,394 8,882 21,488 5,937
Investment securities available for sale... 58,940 29,399 118 116 114 115
Investment securities held to maturity..... 3,500 9,635 15,185 11,600 12,748 9,748
Mortgage loans held for sale............... 19,264(2) --- 24,200 15,534 16,141 8,779
Loans...................................... 184,850 249,996 282,813 270,933 245,159 190,131
Allowance for loan losses.................. (1,432) (1,361) (1,241) (1,121) (1,046) (1,056)
Net loans.................................. 183,418(3) 248,635 (3) 281,572 269,812 244,113 189,075
Investment in limited partnerships......... 2,633 2,706 3,187 3,583 5,019 5,432
Deposits................................... 211,160 203,852 210,823 196,117 185,219 177,498
Borrowings................................. 47,889 72,827 94,412 85,604 90,294 17,645
Equity capital - substantially restricted.. 42,795 41,978 37,919 34,930 31,546 28,165
</TABLE>
(1) Includes certificates of deposits in other financial institutions.
(2) Loans held for sale at June 30, 1998 consist of loans sold to a private
investor in a transaction that closed in July, 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations of Lincoln Federal Savings Bank and Subsidiary --
Asset/Liability Management."
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Lincoln Federal Savings Bank and Subsidiary --
Asset/Liability Management" for a discussion of the decline in our net
loans.
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(In thousands)
Summary of Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income............................... $11,413 $12,867 $25,297 $24,453 $22,065 $18,309 $15,713
Total interest expense.............................. 6,855 7,745 15,652 15,119 14,486 9,418 7,512
-------- ------ ------ ------ ------ ------ ------
Net interest income.............................. 4,558 5,122 9,645 9,334 7,579 8,891 8,201
Provision for loan losses........................... 410 50 298 120 100 (1) 369
-------- ------ ------ ------ ------ ------ ------
Net interest income after provision
for losses on loans............................ 4,148 5,072 9,347 9,214 7,479 8,892 7,832
-------- ------ ------ ------ ------ ------ ------
Other income (losses):
Net realized-and unrealized-gain (loss) on loans
held for sale.................................. (114) (18) 299 (160) 1,463 (1,380) 643
Net realized- and unrealized-gains on securities
available for sale............................. 105 --- 118 --- --- --- ---
Equity in losses of limited partnerships......... (268) (327) (681) (596) (1,595) (663) (450)
Other............................................ 378 285 674 503 473 529 684
-------- ------ ------ ------ ------ ------ ------
Total other income (loss)...................... 101 (60) 410 (253) 341 (1,514) 877
-------- ------ ------ ------ ------ ------ ------
Other expenses:
Salaries and employee benefits................... 1,318 1,022 2,247 1,719 1,529 1,360 1,156
Net occupancy expenses........................... 135 133 272 236 272 287 273
Equipment expenses............................... 300 249 526 361 176 174 156
Deposit insurance expense........................ 100 85 194 1,725 438 408 284
Data processing expense.......................... 369 268 581 313 228 201 180
Professional fees................................ 177 140 238 69 48 41 54
Mortgage servicing rights amortization........... 126 5 67 12 9 54 267
Other............................................ 570 546 960 668 544 375 232
-------- ------ ------ ------ ------ ------ ------
Total other expenses.......................... 3,095 2,448 5,085 5,103 3,244 2,900 2,602
-------- ------ ------ ------ ------ ------ ------
Income before income taxes, extraordinary item
and cumulative effect of change in
accounting principle........................... 1,154 2,564 4,672 3,858 4,576 4,478 6,107
Income taxes..................................... 187 701 1,159 870 1,193 1,095 2,287
-------- ------ ------ ------ ------ ------ ------
Income before extraordinary item and cumulative
effect of change in accounting principle......... 967 1,863 3,513 2,988 3,383 3,383 3,820
Extraordinary item-early extinguishment of debt,
net of income taxes of $99....................... 150 --- --- --- --- --- ---
Cumulative effect of change
in accounting principle........................ --- --- --- --- --- --- 356
-------- ------ ------ ------ ------ ------ ------
Net income.....................................$ 817 $1,863 $3,513 $2,988 $3,383 $3,383 $4,176
======== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Supplemental Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on assets (1) (2)........................ .53 1.07 1.02 .90 1.09 1.32 2.06
Return on equity (1) (3)........................ 3.81 9.52 8.71 8.08 9.92 11.08 15.84
Equity to assets (4)............................ 14.05 11.25 13.06 10.97 10.92 10.21 12.49
Interest rate spread during period (1) (5)...... 2.39% 2.53% 2.41% 2.36% 1.99% 3.24% 3.86%
Net yield on interest-earning assets (1) (6).... 3.06 3.05 2.92 2.91 2.55 3.67 4.34
Efficiency ratio (7)............................ 66.43 48.36 50.57 56.19 40.96 39.31 28.66
Other expenses to average assets (1)(8)......... 2.15 1.40 1.47 1.54 1.05 1.13 1.29
Average interest-earning assets to average
interest-bearing liabilities................. 114.59 111.21 110.88 111.80 111.31 111.18 112.05
Non-performing assets to total assets (4)....... .57 .99 1.14 .73 .75 .04 .13
Allowance for loan losses to total loans
outstanding (4) (9).......................... .70 .40 .54 .40 .39 .40 .53
Allowance for loan losses to
non-performing loans (4)..................... 87.16 36.91 37.56 50.80 46.81 780.60 350.08
Net charge-offs to average
total loans outstanding ..................... .15 --- .06 --- .01 --- .01
Number of full service offices (4).............. 4 4 4 4 4 4 4
</TABLE>
(1) Information for six months ended June 30, 1998 and 1997 has been
annualized. Interim results are not necessarily indicative of the
results of operations for an entire year.
(2) Net income divided by average total assets.
(3) Net income divided by average total equity.
(4) At end of period.
(5) Interest rate spread is calculated by substracting combined average
interest cost from combined average interest rate earned for the period
indicated.
(6) Net interest income divided by average interest-earning assets.
(7) Other expenses (excluding federal income tax expense) divided by the
sum of net interest income and noninterest income. Excluding the effect
of the one-time SAIF assessment, the efficiency ratio would have been
42.28% for the year ended December 31, 1996.
(8) Other expenses divided by average total assets.
(9) Total loans include loans held for sale.
<PAGE>
RECENT DEVELOPMENTS OF LINCOLN FEDERAL SAVINGS BANK
The following table sets forth selected consolidated financial
condition data for Lincoln Federal and its subsidiary at September 30, 1998, and
December 31, 1997, and selected consolidated operating data for Lincoln Federal
and its subsidiary for the three months and nine months ended September 30, 1998
and 1997. Information at September 30, 1998 and for the three and nine months
ended September 30, 1998 and 1997 is unaudited but, in the opinion of
management, includes all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial position and results of
operations as of and for such dates. The selected financial and other data of
Lincoln Federal set forth below does not purport to be complete and should be
read in conjunction with, and is qualified in its entirety by, the more detailed
information, including the consolidated financial statements and related notes
thereto, appearing elsewhere herein. The operating results for the three and
nine months ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
<TABLE>
<CAPTION>
At September 30, At December 31,
Summary of Financial Condition Data: 1998 1997
---------------- ---------------
(In Thousands)
<S> <C> <C>
Total assets $321,825 $321,391
Cash and interest bearing deposits in other banks (1) 42,765 18,958
Investment securities available for sale 74,843 29,399
Investment securities held to maturity 2,250 9,635
Mortgage loans held for sale -- --
Loans 187,497 249,996
Allowance for loan losses (1,482) (1,361)
Net loans 186,015 248,635
Investment in limited partnerships 2,454 2,706
Deposits 212,623 203,852
Borrowings 52,889 72,827
Equity capital - substantially restricted 43,239 41,978
</TABLE>
(1) Includes certificates of deposit in other financial institutions
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Summary of Operating Data: 1998 1997 1998 1997
-------- ------ -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Total interest income $ 5,564 $6,475 $16,977 $19,342
Total interest expense 3,384 4,145 10,239 11,890
-------- ------ -------- --------
Net interest income 2,180 2,330 6,738 7,452
Provision for loan losses 41 30 451 80
-------- ------ -------- --------
Net interest income after provision
for losses on loans 2,139 2,300 6,287 7,372
Other income 99 460 200 400
Other expenses 1,343 956 4,438 3,404
-------- ------ -------- --------
Income before income taxes and extraordinary item 895 1,804 2,049 4,368
Income taxes 214 632 401 1,333
-------- ------ -------- --------
Income before extraordinary item 681 1,172 1,648 3,035
Extraordinary item - early extinguishment
of debt, net of income taxes of $99 150
-------- ------ -------- --------
Net income $ 681 $1,172 $ 1,498 $ 3,035
======== ====== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At or for the At or for the
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
Supplemental Data:
<S> <C> <C> <C> <C>
Return on assets (ratio of net income to average
total assets (1).................................................. .88 % 1.32 % .65 % 1.15 %
Return on equity (ratio of net income to
average total equity (1).......................................... 6.32 11.37 4.65 10.11
Equity to assets at end of period.................................... 13.44 12.06 13.44 12.06
Interest rate spread during period (1) (2)........................... 2.26 2.43 2.33 2.50
Net yield on interest-earning assets (1) (3)......................... 2.96 2.83 3.02 2.98
Efficiency ratio (4)................................................. 58.93 34.27 63.97 43.35
Other expenses to average assets (1)................................. 1.75 1.08 1.91 1.29
Average interest-earning assets to average
interest-bearing liabilities...................................... 115.23 107.95 115.08 110.12
Non-performing assets to total assets at end of period............... .49 1.28 .49 1.28
Allowance for loan losses to total loans
outstanding at end of period (5).................................. .79 .53 .79 .53
Allowance for loan losses to
non-performing loans at end of period............................. 95.61 30.37 95.61 3.37
Net charge-offs to average
total loans outstanding .......................................... --- --- .15 % ---
</TABLE>
(1) Ratios have been annualized. Interim results are not necessarily
indicative of the results of operations for an entire year.
(2) Interest rate spread is calculated by substracting combined average
interest cost from combined average interest rate earned for the period
indicated.
(3) Net interest income divided by average interest-earning assets.
(4) Other expenses (excluding federal income tax expense) divided by the
sum of net interest income and noninterest income.
(5) Total loans include loans held for sale.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition at September 30, 1998 Compared to Financial Condition at
December 31, 1997
Our total assets increased by $434,000, or .14%, to $321.8 million at
September 30, 1998 from $321.4 million at December 31, 1997. Our loans
receivable decreased $62.5 million, or 25.0% due primarily to the securitization
of approximately $39.9 million of one- to four-family residential loans and the
sale of an additional $19.3 million of loans. Subsequent to the loan
securitization, we sold $21.1 million of these mortgage-backed securities
available for sale and retained the remaining $18.8 million in our
mortgage-backed securities available-for-sale portfolio. Cash and
interest-bearing deposits in other banks increased by $23.8 million and
mortgage-backed securities available for sale and other investment securities
available for sale and held to maturity increased by $38.1 million at September
30, 1998, compared to December 31, 1997. These increases were primarily due to
the loan securitization and the loan sale. Deposits increased by $8.8 million,
or 4.3% due primarily to a certificate of deposit promotion in February of 1998
that produced $4.3 million of new deposits. FHLB advances decreased $19.9
million, or 27.4%, at September 30, 1998 compared to December 31, 1997. Proceeds
from the sales of mortgage-backed securities available for sale were used to
repay a portion of the FHLB advances. Equity capital increased $1.3 million, or
3.0%, to $43.2 million. The increase was due to net income of $1.5 million
offset by a decrease in unrealized gains on securities available for sale.
Comparison of Operating Results for the Three Months Ended September 30, 1998
and 1997
Net Income. Net income decreased $491,000 to $681,000 for the
three-month period ended September 30, 1998 from $1.2 million for the same
period in 1997. The decrease was primarily a result of a decrease in net
interest income and other income and an increase in other expense.
Net Interest Income. Net interest income decreased $150,000, or 6.4%,
to $2.2 million for the three-month period ended September 30, 1998, from $2.3
million for the comparable period in 1997. Net interest income declined $8,000
due to a decrease in our volume of net interest earning assets and liabilities
and decreased $142,000 as a result of a reduction in interest rate spread. Our
interest rate spread was 2.26% and 2.43% for the 1998 and 1997 periods,
respectively. Our net yield on interest-earning assets was 2.96% and 2.83%, for
the 1998 and 1997 periods, respectively. Although our interest rate spread
decreased by 17 basis points during the 1998 period, our yield on
interest-earning assets increased 13 basis points because our average
interest-earning assets as a percentage of interest-bearing liabilities
increased from 108.0% for the 1997 period to 115.2% for the 1998 period.
Provision for Loan Losses. Our provisions for loan losses for the three
months ended September 30, 1998 and for the comparable period in 1997 were
$41,000 and $30,000 respectively, an increase of $11,000. During the 1998
period, we had net recoveries of $9,000. There were no charge-offs or recoveries
during the 1997 period.
Other Income. Our other income decreased $361,000 for the three-month
period ended September 30, 1998 as compared to the comparable period in 1997.
This decrease in other income was primarily due to the recovery of unrealized
losses on loans held for sale recorded during the third quarter in 1997 of
approximately $266,000.
Other Expenses. Our non-interest expense increased $387,000 to $1.3
million from $956,000 in 1997. A significant portion of the increase was
attributable to an increase in salaries and employee benefits. Salaries and
employee benefits were $683,000 for the three months ended September 30, 1998
compared to $502,000 for the three months ended September 30, 1997, an increase
of $181,000, or 36.1%. We have increased our number of employees and added
personnel with specialized skills to more effectively service our existing
customers and to position us for future customer and product growth. The
remaining increase resulted from increases in a variety of expense categories
and was not attributable to any one item.
Income Tax Expense. Income tax expense decreased $418,000, or 66.1%,
from the three months ended September 30, 1997 to the same period in 1998. This
variation in income tax expense was directly related to the decrease in our
taxable income and to the low income housing credits earned during those
periods.
Comparison of Operating Results for the Nine Months Ended September 30, 1998 and
1997
Net Income. Net income decreased $1.5 million to $1.5 million for the
nine-month period ended September 30, 1998 from $3.0 million for the same period
in 1997. The decrease was primarily a result of a decrease in net interest
income and an increase in our provision for loan losses and other expense.
Net Interest Income. Net interest income decreased $714,000, or 9.6%,
to $6.7 million for the nine-month period ended September 30, 1998, from $7.5
million for the comparable period in 1997. Net interest income declined $237,000
due to a decrease in our volume of net interest earning assets and liabilities
and decreased $477,000 as a result of a reduction in our net interest rate
spread. Our interest rate spread was 2.33% and 2.50% for the 1998 and 1997
periods, respectively. Our net yield on interest-earning assets was 3.02% and
2.98%, for the 1998 and 1997 periods, respectively. Although our interest rate
spread decreased by 17 basis points during the 1998 period, our yield on
interest-earning assets increased 4 basis points because our average
interest-earning assets as a percentage of interest-bearing liabilities
increased from 110.1% for the 1997 period to 115.1% for the 1998 period.
Provision for Loan Losses. Our provisions for loan losses for the nine
months ended September 30, 1998 and for the comparable period in 1997 were
$451,000 and $80,000 respectively, an increase of $371,000. We maintain an
allowance for loan losses based upon a quarterly evaluation of the size and
known inherent risk in the components of our loan portfolio, our past loan loss
experience, adverse situations which may affect borrowers' ability to repay
loans, estimated value of underlying loan collateral, current and, to a lesser
extent, expected future economic conditions and peer comparisons. We increased
our provision for loan losses in 1998 compared to 1997 primarily because of our
more aggressive collection efforts to reduce nonperforming and delinquent loans,
our higher concentration of delinquent loans in the remaining portfolio after
our securitization and loan sale, our higher mix of consumer and development
loans in our portfolio and our high level of nonperforming loans as compared to
our peer groups. While management estimates loan losses using the best available
information, no assurance can be given that future additions to the allowance
will not be necessary based on changes in economic and real estate market
conditions, further information obtained regarding problem loans, identification
of additional problem loans and other factors, both within and outside of
management's control.
Other Income. Our other income decreased $200,000 for the nine-month
period ended September 30, 1998 as compared to the comparable period in 1997.
This decrease in other income was primarily due to the recovery of unrealized
losses on loans held for sale recorded during 1997 of approximately $266,000
offset by an increase in loan servicing income of $131,000.
Other Expenses. Our non-interest expense increased $1.0 million to $4.4
million from $3.4 million in 1997. A significant portion of the increase was
attributable to an increase in salaries and employee benefits. Salaries and
employee benefits were $2.0 million for the nine months ended September 30, 1998
compared to $1.5 million for the nine months ended September 30, 1997, an
increase of approximately $500,000, or 33.3%. We have increased our number of
employees and added personnel with specialized skills to more effectively
service our existing customers and to position us for future customer and
product growth. In addition, mortgage servicing rights amortization increased
$153,000 due to increased servicing activity and the adoption of new accounting
standards. The remaining increase resulted from increases in a variety of
expense categories and was not attributable to any one item.
Income Tax Expense. Income tax expense decreased $932,000, or 69.9%,
from the nine months ended September 30, 1997 to the same period in 1998. This
variation in income tax expense was directly related to our decrease in taxable
income and to the low income housing credits earned during those periods.
Extraordinary Item - Early Extinguishment of Debt, Net of Income
Taxes. Prepayment penalties of $249,000 on FHLB advances were recorded during
the nine months ended September 30, 1998. Due to the securitization of loans and
loans held for sale and the subsequent sales of a portion of these
mortgage-backed securities, funds were available to prepay a portion of our FHLB
advances.
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should
consider carefully the following risk factors in evaluating an investment in the
Common Stock.
Commercial Real Estate and Multi-Family Lending
As of June 30, 1998, we had commercial real estate and multi-family
loans of $14.5 million and $1 million, or 7.0% and .5% of our total loan
portfolio. Although commercial real estate and multi-family loans provide higher
interest rates and shorter terms, these loans have higher credit risks than one-
to four-family residential loans. Commercial and multi-family real estate loans
often involve large loan balances to single borrowers or groups of related
borrowers. In addition, payment experience on loans secured by such properties
typically depends upon the successful operation of the properties and thus may
be subject to a greater extent to adverse conditions in the real estate market
or in the general economy. Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate. We have no commercial or
multi-family real estate loans that were non-performing as of June 30, 1998.
Although we believe that our current level of reserves is adequate, if a
significant number of borrowers under these types of loans develop problems, we
may be required to increase by a significant amount our allowance for loan
losses because of the relatively large size of these loans. This, in turn, would
reduce our net income. See "Business of Lincoln Federal Savings Bank - Lending
Activities," and "- Non-Performing and Problem Assets."
Risks Related to Construction Loans
As of June 30, 1998, we had 48 real estate construction loans in our
portfolio in an aggregate amount of $7.7 million, including loans in the
aggregate amount of $3.4 million to builders to acquire and develop residential
real estate projects, $4.0 million for the construction of one- to four-family
residential properties, a substantial portion of which were for the construction
of speculative projects, and $368,000 for the construction of commercial real
estate. Construction lending generally is considered riskier than one- to
four-family residential lending because construction loans may have larger loan
balances and, in the case of loans to developers, may depend upon the successful
completion of the project and the ability of the developer to sell the property.
In addition, risk of loss on a construction loan depends largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. If our appraisal of the value of the completed project proves to
be overstated, we may have inadequate security for the repayment of the loan
upon completion of construction of the project. As of June 30, 1998, we had
$808,000 of non-performing construction loans, all of which were loans for the
acquisition and development of residential real estate projects. We generally
intend to increase the amounts of real estate construction loans in our
portfolio following the Conversion. See "Business of Lincoln Federal Savings
Bank and Subsidiary - Asset Quality - Non-Performing Assets."
Geographic Concentration of Loans
All of our real estate mortgage loans are secured by properties located
in Indiana, mostly in Hendricks, Montgomery and Clinton Counties. The economy in
those counties is based on a mixture of agriculture and industry, as well as a
variety of service, wholesale and retail businesses. A weakening in the local
real estate market or in the local or national economy, or a reduction in the
workforce at the manufacturing facilities in our market area could result in an
increase in the number of borrowers who default on their loans and a reduction
in the value of the collateral securing the loans, which could reduce our
earnings.
Competition in Primary Market Area
We face strong competition in our primary market area from state and
national banks, state and federal savings associations, credit unions, and
certain nonbanking consumer lenders. We also face competition from mutual funds
and brokerage and investment banking firms operating locally and elsewhere. Many
of these competitors have substantially greater resources than are available to
us and may offer services that we do not or cannot provide. This competitive
environment for both loans and deposits may limit our ability to significantly
increase our market share in our primary market area.
Market for Common Stock
Because our income depends to a large extent upon the spread between
the interest rates we pay for deposits and the interest we earn on our loans,
our stream of earnings relies to a large extent upon overall trends in interest
rates. Due to uncertainty among investors as to interest rate trends and to the
recent volatility in the stock market, as well as to various recent proposals to
overhaul the federal banking statutes, many recent conversions of mutual savings
associations to the stock form of ownership have encountered inconsistent and
unpredictable subscription levels. In addition, the offering of Common Stock may
compete with similar stock offerings by other converting mutual savings
associations, which could reduce demand for the Common Stock. Because of these
uncertainties, there can be no assurance that there will be sufficient demand to
sell the minimum number of shares of Common Stock that we offer in the
Conversion.
Allowance for Loan Losses
We have maintained our allowance for loan losses based upon historical
practice and in accordance with generally accepted accounting principles. We
determine the adequacy of our allowance for loan losses based upon estimates
that are particularly susceptible to significant changes in the economic
environment and changes in market conditions. Thus, a weakening in the local or
national economy would likely require us to increase our allowance for loan
losses to account for the increased likelihood that we would experience losses
from our loan portfolio. At June 30, 1998, our allowance for loan losses was
$1.4 million, or .7% of total loans outstanding, which is near the levels
maintained by our peer group of savings associations. Our ratio of allowances
for loan losses to non-performing assets is 82.3%, however, which is below our
peer group level. Although this discrepancy between us and our peer group is
largely attributable to two non-performing loans in our portfolio, one of which
we recently partially charged-off, this ratio indicates we may be required to
increase our loan loss allowances in the future in light of our level of
non-performing assets. In addition, there can be no assurance that our allowance
for loan losses will be adequate in the event of a protracted economic decline
in our market area or that banking regulators, when reviewing our loan portfolio
in the future, will not require us to increase our allowance for loan losses. In
either event, any future increase in our allowance for loan losses would
adversely affect earnings.
Dependence on New Management
Our successful operations depend to a considerable degree upon our new
management, including T. Tim Unger, who became our President and Chief Executive
Officer in January, 1996, and John M. Baer, who became our Chief Financial
Officer in June, 1997. We have established several other key positions in the
past two years which have been filled by persons hired from outside Lincoln
Federal. These positions include our Accounting Supervisor, Branch Coordinator,
Loan Customer Service Supervisor, Secondary Marketing Manager, Compliance
Officer, Marketing Director and Auditor. In addition, we are currently in the
process of seeking to hire a Vice President to oversee our lending function. We
believe that the addition of these key personnel will allow us to provide
quality service to our customers in the future and will address concerns raised
by regulators regarding inadequate staffing levels in light of our growth over
the past several years. There can be no assurance, however, that our new
management will be successful in operating Lincoln Federal or that staffing
levels will be adequate once all of these positions are filled.
We have entered into a three-year employment agreement with Mr. Unger,
who is 58 years of age. The employment agreement requires certain payments to
Mr. Unger if he is terminated without "just cause" by us or by an entity that
acquires us, or if Mr. Unger terminates the employment agreement "for cause."
The loss of Mr. Unger's services could adversely affect us. While the board of
directors is seeking to attract and retain additional management either as a
successor or supplement to Mr. Unger, there is no assurance that such
individuals will be attracted or retained. If such individuals are retained,
their participation in our management could result in changes to our operating
strategy which could affect our profitability. We do not carry key-man insurance
on Mr. Unger. See "Management of Lincoln Federal Savings Bank" and "Executive
Compensation and Related Transactions of Lincoln Federal- Employment Contract."
Anti-Takeover Provisions and Statutory Provisions That Could Discourage Hostile
Acquisitions of Control
Provisions in the Holding Company's articles of incorporation and
bylaws, the corporation law of the state of Indiana, and certain federal
regulations may make it difficult and expensive to pursue a tender offer, change
in control or takeover attempt which our management opposes. As a result,
shareholders 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 Holding Company, or the
appointment of new directors to the Board, more difficult. For example, the
Holding Company's Bylaws provide that directors must be residents of Hendricks,
Montgomery or Clinton County, Indiana, must have maintained a deposit or loan
relationship with us for at least nine months and, with respect to a
non-employee director, must have served as a member of a civic or community
organization in Hendricks, Montgomery or Clinton County for at least 12 months
in the five-year period prior to being nominated to the Board (or in the case of
existing directors, prior to September 10, 1998). The Holding Company's Board
may waive one or more of these requirements for new directors appointed in
connection with the acquisition of another financial institution or the
acquisition or opening of a new branch. Further restrictions include:
restrictions on the acquisition of the Holding 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 shareholders;
denial of cumulative voting by shareholders 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. These provisions may adversely affect the trading price
of our stock. See "Restrictions on Acquisition of the Holding Company."
Lack of Active Market for Common Stock
Even though we expect that the Common Stock will be listed for
quotation on the Nasdaq National Market System, there can be no guarantee 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."
Decreased Return on Average Equity and Increased Expenses Immediately After
Conversion Which Could Adversely Affect Trading Price of Common Stock
Return on average equity (net income divided by average equity) is a
ratio commonly used to compare the performance of a savings association to its
peers. For the six-month periods ended June 30, 1998 and 1997, our returns on
average equity (on an annualized basis) were 3.81% and 9.52%, respectively. As a
result of the Conversion, our equity will increase substantially and our
expenses will likely increase because of the costs associated with our employee
stock ownership plan ("ESOP"), proposed management recognition and retention
plan ("RRP"), and the costs of being a public company. Initially, we intend to
invest the Conversion proceeds in short-term investments, which generally have
lower yields. Because of the increases in our equity and expenses, our return on
equity is likely to decrease as compared to our performance in previous years. A
lower return on equity could adversely affect the trading price of our shares.
Assuming that the market value of the shares of Common Stock remains at
$10 per share, that 5,300,000 shares of Common Stock are sold in the Conversion
and issued to the Foundation, that 4% of the shares issued in the Conversion are
awarded under the RRP and that 8% of the shares issued in the Conversion are
issued to the ESOP, we would incur expenses in connection with the RRP in the
aggregate amount of $2,120,000 over the 5-year period following shareholder
approval of the RRP. Using these assumptions, we would also incur expenses in
connection with the ESOP in the aggregate amount of $4,240,000 over the 20-year
period commencing upon the effective date of the Conversion. In each case, the
actual expense will depend on the actual number of awards made under the plans,
the number of shares issued in the Conversion and the actual market value of the
Common Stock. These factors cannot be determined at this time. We also expect to
incur additional costs as a public company for such matters as mailing material
to shareholders, holding an annual meeting and increased legal and accounting
fees. We cannot estimate the amount of these expenses at this time, however.
Because we expect the income we earn with the capital we receive in the
Conversion to exceed these increased expenses, we do not expect that these
additional expenses will cause a material decrease in our annual net income from
historical amounts.
Limited Growth Potential and Difficulty in Fully Leveraging Capital
We experience strong competition in our local market area in both
originating loans and attracting deposits, primarily from commercial banks,
thrifts and credit unions. We also face competition from other types of
financial service companies such as mortgage bankers and securities firms. See
"Competition." Management believes that we must grow in the future to leverage
the new capital raised in the Conversion. Due to strong competition in our
market area, we may be able to sustain future growth only at modest levels. As a
result, our ability to leverage quickly the net proceeds from the Conversion is
likely to be quite limited. Accordingly, for the near term, return on equity is
likely to be modest or could even decline from present levels due to the limited
growth prospects discussed above. In addition, we anticipate that the Conversion
proceeds will be invested initially in short- or intermediate-term investment
securities, which generally carry a lower yield than residential mortgage loans.
Any increase in the proportion of our assets consisting of these securities
would adversely affect our asset yield and interest rate spread.
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,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
mortgage loans) and the interest expense we pay on our interest-bearing
liabilities (such as deposits). As of June 30, 1998, approximately 63.2% of our
mortgage loans have rates of interest which are fixed for the term of the loan
("fixed rate") and which we generally originate with terms of up to 30 years,
while deposit accounts have significantly shorter terms to maturity. Because our
interest-earning assets generally had 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. In addition, rising interest rates may adversely affect our
earnings because there might be a lack of customer demand for loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Lincoln Federal Savings Bank and Subsidiary - Asset/Liability
Management."
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. Historically lower interest rates in recent periods
have resulted in increased prepayments of loans and mortgage-backed securities
as borrowers refinanced their mortgages in order to reduce their borrowing cost.
Under these circumstances, we are subject to reinvestment risk to the extent
that we are not able to reinvest such prepayments at rates which are comparable
to the rates on the prepaid loans or securities.
Possible Voting Control by Directors and Officers
Our directors and executive officers intend to subscribe for 362,000
shares of Common Stock which, at the midpoint of the Estimated Valuation Range,
would constitute 6.8% of the outstanding shares (including the shares to be
issued to the Foundation). When aggregated with the shares of Common Stock our
executive officers and directors expect to acquire through the Stock Option Plan
and RRP, subject to shareholder approval, our executive officers and directors
would own approximately 1,104,000 shares of Common Stock, or 18.9% of the
outstanding shares at the midpoint of the Estimated Valuation Range (including
the shares to be issued to the Foundation and assuming that shares issued
pursuant to the Stock Option Plan are issued from authorized but unissued
shares). This ownership of Common Stock by our management could make it
difficult to obtain majority support for shareholder proposals which are opposed
by management. See "Proposed Purchases by Directors and Executive Officers,"
"Executive Compensation and Related Transactions of Lincoln Federal,"
"Description of Capital Stock," "Restrictions on Acquisition of the Holding
Company," and "Lincoln Federal Charitable Foundation, Inc. - Potential
Anti-Takeover Effect."
Possible Dilutive Effect of RRP and Stock Options
If the Conversion is completed and shareholders approve the RRP and
Stock Option Plan, we intend to issue shares to our officers and directors
through these plans. If the shares for the RRP are issued from our authorized
but unissued stock, your voting control could be diluted by up to approximately
3.9% at the midpoint of the Estimated Valuation Range. If the shares for the
Stock Option Plan are issued from our authorized but unissued stock, your voting
control could be diluted by up to approximately 9.1% at the midpoint of the
Estimated Valuation Range. In either case, the trading price of our Common Stock
may be reduced. See "Pro Forma Data" and "Executive Compensation and Related
Transactions of Lincoln Federal."
Financial Institution Regulation and Future of the Thrift Industry
We are subject to extensive regulation, supervision, and examination by
the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). Several bills have been introduced in the Congress
that would consolidate the OTS with the Office of the Comptroller of the
Currency. If a version of one of these bills is approved, we may be required to
become a state or national commercial bank and become subject to regulation by a
different government agency. As a result of these bills, our investment
authority and the ability of the Holding Company to engage in diversified
activities may be limited or prohibited, which could affect our profitability.
It is impossible at this time to predict the impact of any such legislation on
our operations. See "Regulation."
Impact of Proposed Legislation on Holding Company Activities
Current law generally does not impose any restrictions on the
permissible business activities of a unitary savings and loan holding company.
See "Regulation - Savings and Loan Holding Company Regulation." The U.S. House
of Representatives recently approved a bill (H.R. 10) which includes a provision
that would generally prohibit a company that filed a holding company application
with the OTS after March 31, 1998 from engaging in diversified business
activities. If this provision were to become law, the Holding Company would not
be regulated as a unitary savings and loan holding company but, rather, would be
subject to the activities restrictions that apply to savings and loan holding
companies that control more than one savings association. Such restrictions, if
enacted, could adversely affect our ability to enter into new lines of business,
although we have no current intentions to do so.
Restrictions on Repurchase of Shares
During the first year following the Conversion, the Holding Company may
not generally repurchase its shares except in unusual circumstances as permitted
by the OTS. During each of the second and third years following the Conversion,
the Holding Company may repurchase up to 5% of its outstanding shares. During
those periods, if we decide that repurchases above those limits 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 Stock by the Holding Company."
Risk of Delayed Offering
Although we expect to complete the Conversion within the time periods
indicated in this Prospectus, it is possible that adverse market, economic or
other factors could significantly delay the completion of the Conversion, which
could significantly increase our Conversion costs. In this case, however, you
would have the right to modify or rescind your subscription and to have your
subscription funds returned to you promptly, with interest. In the event that
the Conversion is not completed, we will remain a mutual savings bank, and all
subscription funds will be promptly returned to subscribers, with interest. See
"The Conversion."
Income Tax Consequences of Subscription Rights
If the Internal Revenue Service were to determine that the subscription
rights offered to you in connection with the Conversion have an ascertainable
value, your exercise of your subscription rights could result in the recognition
of taxable income. In the opinion of Keller & Company, Inc. ("Keller"), however,
the subscription rights do not have an ascertainable fair market value. See "The
Conversion - Principal Effects of Conversion - Tax Effects."
Year 2000 Compliance
As the year 2000 approaches, concerns have been raised that existing
computer software programs and operating systems may not be able to process data
containing dates after December 31, 1999. Many existing software products were
designed to accommodate only a two digit year (e.g., 1998 is reflected as "98").
Our operating, processing and accounting operations are maintained on computers
and could be affected by Year 2000 issues. We also rely on third-party vendors
for data processing. We are currently working with our third-party vendors to
assess their Year 2000 readiness. While no assurance can be given that our third
party vendors will be Year 2000 compliant, we have been advised that our vendors
are taking appropriate steps to address the issues on a timely basis. Based on
certain preliminary estimates, we believe that our expenses related to upgrading
our systems and software for Year 2000 issues will not exceed $300,000. We also
believe that our testing for Year 2000 compliance should be completed by the
second quarter of 1999. While we currently have no reason to believe that the
cost of addressing these issues will materially affect our products, services or
our ability to compete effectively, no assurance can be made that we or our
third-party vendors will successfully and timely become Year 2000 compliant. We
do not believe, however, that the cost of addressing Year 2000 issues presents a
material event or uncertainty reasonably likely to affect our future financial
results.
Establishment of the Foundation
Consistent with our commitment to the communities we serve, the Plan of
Conversion provides for the establishment of Lincoln Federal Charitable
Foundation, Inc. (the "Foundation"), which has been incorporated under Indiana
law as a nonprofit corporation without members. The Foundation will provide
grants and donations to support not-for-profit community groups and other types
of organizations or projects. We expect that these activities by the Foundation
will enhance our visibility and reputation in the communities we serve and will
enhance the long-term value of our community banking franchise. Immediately
following the Conversion, we intend to fund the Foundation with 200,000
authorized but unissued shares of Common Stock. We will be unable to recover
these shares of Common Stock once they have been contributed to the Foundation.
We have received an opinion of our special counsel, Barnes & Thornburg,
Indianapolis, Indiana ("Barnes & Thornburg") that the Holding Company may deduct
this contribution of Common Stock to the Foundation from its income. We have
also received confirmation from the Internal Revenue Service (the "IRS") that
the Foundation qualifies as an exempt organization under section 501(c)(3) of
the Internal Revenue Code of 1986, as amended (the "Code"). There can be no
assurance, however, that in the event a challenge is made to the establishment
of the Foundation in connection with the Conversion, such a challenge would not
be successful or would not cause a delay in the consummation of the Conversion.
Assuming the sale of shares at the midpoint of the Estimated Valuation
Range and the issuance of shares to the Foundation, the Holding Company will
have 5,300,000 shares issued and outstanding, of which the Foundation will own
200,000 shares, or 3.8%. The issuance of additional shares of Common Stock to
the Foundation will dilute the value of any shares of Common Stock that you
purchase in the Conversion by 3.8% and will adversely affect the reported
earnings of the Holding Company in 1998, the year in which we expect the
Foundation will be established. In addition, under certain circumstances the
establishment of the Foundation may have an anti-takeover effect. See "Lincoln
Federal Charitable Foundation, Inc.," "Pro Forma Data" and "The Conversion -
Establishment of the Foundation."
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the intended purchases of Common Stock
by each director and executive officer of Lincoln Federal and their Associates
in the Conversion. All directors and executive officers will pay the same
Purchase Price as all subscribers and will be subject to the same terms and
conditions. In addition, directors and executive officers may not re-sell the
shares of Common Stock that they purchase in the Conversion for at least one
year from the date of the Conversion. All shares will be purchased for
investment purposes and not for purposes of resale. The table assumes that
5,100,000 shares (the midpoint of the Estimated Value Range) of the Common Stock
will be sold at $10.00 per share, 200,000 shares will be issued to the
Foundation and that sufficient shares will be available to satisfy
subscriptions.
<TABLE>
<CAPTION>
Aggregate Total
Price of Shares Proposed
Intended to be Subscribed Percent
Name Position Purchases For (1) of Shares (2)
- ---- -------- --------- ------- -------------
<S> <C> <C> <C> <C>
Lester N. Bergum Director $ 220,000 22,000 .41%
W. Thomas Harmon Director 500,000 50,000 .94
Jerry R. Holifield Director 200,000 20,000 .38
Wayne E. Kessler Director 100,000 10,000 .19
David E. Mansfield Director 200,000 20,000 .38
John C. Milholland Director 500,000 50,000 .94
T. Tim Unger Director, President and
Chief Executive Officer 500,000 50,000 .94
Edward E. Whalen Chairman 300,000 30,000 .57
John L. Wyatt Director 300,000 30,000 .57
Frank A. Beardsley Emeritus Director 300,000 30,000 .57
Charles Jones Emeritus Director 250,000 25,000 .47
All Other Executive
Officers 250,000 25,000 .47
All Directors and
Executive Officers
as a group (12 persons)(3) $3,620,000 362,000 6.83%
</TABLE>
(1) Does not include shares subject to stock options which may be granted
under the Stock Option Plan, or shares which may be awarded under the
RRP.
(2) Based upon the midpoint of the Estimated Valuation Range of 5,100,000
shares, plus the 200,000 shares expected to be issued to the
Foundation.
(3) Assuming that all shares awarded under the RRP are purchased on the
open market and all shares subject to stock options are issued from
authorized but unissued shares, and upon (i) the full vesting of the
restricted stock awards to directors and executive officers
contemplated under the RRP and (ii) the exercise in full of all options
expected to be granted to directors and executive officers under the
Stock Option Plan, all directors and executive officers as a group
would beneficially own 898,095 shares (18.4%), 992,700 shares (17.3%),
1,087,305 shares (16.4%), and 1,196,101 shares (15.7%) upon sales at
the minimum, midpoint, maximum, and 15% above the maximum of the
Estimated Valuation Range, respectively. These percentages take into
account shares expected to be issued to the Foundation. See "Executive
Compensation and Related Transactions of Lincoln Federal - RRP" and "-
Stock Option Plan."
LINCOLN BANCORP
The Holding Company was formed in September, 1998 as an Indiana
corporation to be the holding company for Lincoln Federal. The Holding Company
has not engaged in any significant business to date and, for that reason, its
financial statements are not included herein. The Holding Company has received
approval from the OTS to become a savings and loan holding company through the
acquisition of all of the capital stock of Lincoln Federal to be issued upon
completion of the Conversion.
The Holding Company will initially receive 50% of the net Conversion
proceeds after payment of expenses incurred in connection with the Conversion.
The holding company structure will provide the Holding Company with greater
flexibility than Lincoln Federal to diversify its business activities, either
through newly-formed subsidiaries or through acquisitions. The Holding Company
has no present plans regarding diversification, acquisitions or expansion,
however. The Holding Company initially will not conduct any active business and
does not intend to employ any persons other than its officers, although it may
utilize Lincoln Federal's support staff from time to time.
The office of the Holding Company is located at 1121 East Main Street,
P.O. Box 510, Plainfield, Indiana, 46168. The telephone number is (317)
839-6539.
LINCOLN FEDERAL SAVINGS BANK
We have operated for more than 110 years as an independent,
community-oriented savings association. We were originally organized in 1884 as
Ladoga Federal Savings and Loan Association, located in Ladoga, Indiana. In 1979
we merged with Plainfield First Federal Savings and Loan Association, a federal
savings and loan association located in Plainfield, Indiana which was originally
organized in 1896. Following the merger, we changed our name to Lincoln Federal
Savings and Loan Association and, in 1984, we changed our name to its current
form, Lincoln Federal Savings Bank. We currently conduct our business from four
full-service offices located in Hendricks, Montgomery and Clinton Counties,
Indiana, with our main office located in Plainfield. We expect to open a new
office in Avon, Indiana in January, 1999. We offer a variety of lending, deposit
and other financial services to our retail and commercial customers.
We attract deposits from the general public and originate mortgage
loans, most of which are secured by one- to four-family residential real
property in Hendricks, Montgomery and Clinton Counties. We also offer commercial
real estate loans, real estate construction loans, land loans, multi-family
residential loans, consumer loans (including home equity loans and automobile
loans) and commercial loans. We derive most of our funds for lending from
deposits of our customers, which consist primarily of certificates of deposit,
demand accounts and savings accounts.
We have attained our strong capital position by focusing primarily on
one- to four-family residential real estate mortgage lending in Hendricks,
Montgomery and Clinton Counties, Indiana and, to a limited extent, in other
nearby counties. At June 30, 1998, we had total assets of $304.5 million,
deposits of $211.2 million and equity capital of $42.8 million, or 14.1% of
assets. For the fiscal year ended December 31, 1997, we had net income of $3.5
million, a return on assets of 1.0% and a return on equity of 8.7%, and for the
six-month period ended June 30, 1998, we had net income of $817,000, a return on
assets of .5% and a return on equity of 3.8%, on an annualized basis.
MARKET AREA
Our primary market area is Hendricks, Montgomery and Clinton Counties,
Indiana. Our main office is located in Plainfield, which is located in Hendricks
County in central Indiana, approximately 15 miles west of Indianapolis. We also
have offices in Crawfordsville, the county seat of Montgomery County, which is
approximately 45 miles west of Indianapolis, in Frankfort, the county seat of
Clinton County, located approximately 50 miles northwest of Indianapolis, and in
Brownsburg, which is approximately 20 miles west of Indianapolis. In January,
1999, we intend to open our newest office in Avon, which is approximately 20
miles west of Indianapolis. Most of our deposits and lending activities come
from individuals residing in, and entities located in our three-county market
area.
Hendricks, Montgomery and Clinton counties had a combined population of
162,000 in 1997, representing growth of 15% from the 1990 population of 141,000.
The per capital income for those counties was $20,000 in 1997, compared to a per
capita income for all of Indiana of $17,700 and for the United States of
$18,100. The combined unemployment rate in the three counties was 2.4% in 1997,
compared to an unemployment rate in Indiana of 3.5% and a national unemployment
rate of 4.9%. The primary industries in our primary market area include
agriculture, manufacturing and services.
LINCOLN FEDERAL CHARITABLE FOUNDATION, INC.
Pursuant to the Plan, the Holding Company intends to establish a
charitable foundation in connection with the Conversion. The Plan provides that
Lincoln Federal and the Holding Company will establish the Foundation, which was
incorporated under Indiana law as a nonprofit corporation without members in
June, 1998, and which will be funded with shares of Common Stock contributed by
the Holding Company. The contribution of Common Stock to the Foundation will
dilute the interests of shareholders and will have an adverse impact on the
reported earnings of the Holding Company in 1998, the year in which we
anticipate the Foundation will be established.
Dilution of Shareholders' Interests. The Holding Company proposes to
fund the Foundation with 200,000 shares of Common Stock. Assuming the sale of
Common Stock at the midpoint of the Estimated Valuation Range, upon completion
of the Conversion and establishment of the Foundation, the Holding Company will
have 5,300,000 shares issued and outstanding of which the Foundation will own
200,000 shares of Common Stock, or 3.8%. Using these assumptions, persons
purchasing shares of Common Stock in the Conversion would have their ownership
and voting interests in the Holding Company diluted by 3.8%. See "Pro Forma
Data."
Impact on Earnings. The Holding Company will recognize as an expense
the full amount of its contribution of Common Stock to the Foundation during the
quarter in which the contribution is made. As a result, the Holding Company's
contribution of Common Stock to the Foundation will have an adverse impact on
its earnings for the quarter and the year in which the contribution is made. We
currently expect that the Holding Company will contribute 200,000 shares of
Common Stock to the Foundation in the fourth quarter of 1998. This $2.0 million
expense will be partially offset by the tax benefit related to the expense.
We have been advised by Barnes & Thornburg that the contribution to the
Foundation will be tax deductible, subject to an annual limitation based on 10%
of the Holding Company's annual taxable income. Assuming a contribution of $2.0
million in Common Stock, the Holding Company estimates a net tax effected
expense of $1.3 million (based on a 34% marginal tax rate). Management expects
that the establishment and funding of the Foundation will have an adverse impact
on the Holding Company's earnings for that year. In light of the expected
contribution of Common Stock to the Foundation, we expect that the direct
charitable contributions that we make in the future will be restricted to
nominal, tax-deductible donations to local charitable organizations. In
addition, we do not currently anticipate making additional contributions to the
Foundation within the first five years following the initial contribution.
Tax Considerations. We have been advised by Barnes & Thornburg that an
organization created for the above-described purposes would qualify as a Section
501(c)(3) exempt organization under the Code, and would be classified as a
private foundation. We have received confirmation from the IRS that the
Foundation will be recognized as an exempt organization. We have also received
the opinion of Barnes & Thornburg that the Foundation would qualify as a Section
501(c)(3) exempt organization under the Code, except that the opinion does not
consider the impact of the condition expected to be required by the OTS that the
Common Stock issued to the Foundation be voted in the same ratio as all other
shares of the Holding Company's Common Stock on all proposals considered by
shareholders of the Holding Company. See "The Conversion - Establishment of the
Foundation - Regulatory Conditions Imposed on the Foundation."
Barnes & Thornburg's opinion further provides that there is substantial
authority for the position that the Holding Company's contribution of its own
stock to the Foundation would not constitute an act of self-dealing, and that
the Holding Company would be entitled to a deduction in the amount of the fair
market value of the Common Stock at the time of the contribution, subject to an
annual limitation based on 10% of the Holding Company's annual taxable income.
The Holding Company, however, would be able to carry forward any unused portion
of the deduction for five years following the contribution. Thus, the Holding
Company expects to receive a tax benefit of approximately $680,000 in 1998
and/or over the subsequent five-year period based upon a contribution of $2.0
million of Common Stock to the Foundation.
Assuming the sale of Common Stock at the maximum of the Estimated
Valuation Range, the Holding Company estimates that for federal income tax
purposes, a substantial portion of the deduction should be deductible over the
six-year period. Although we have received the opinion of Barnes & Thornburg
that the Holding Company will be entitled to the deduction of the charitable
contribution, there can be no assurances that the IRS will permit such a
deduction. In such event, the Holding Company's tax benefit related to the
contribution of Common Stock to the Foundation would have to be fully expensed,
resulting in further reduction in earnings in the year in which the IRS makes
such a determination.
Comparison of Valuation and Other Factors Assuming the Foundation is
Not Established as Part of the Conversion. In making its independent appraisal
of the estimated pro forma market value of the Common Stock, Keller took into
account the establishment of the Foundation. The pro forma aggregate price of
the Common Stock being offered for sale in the Conversion, assuming the issuance
of 200,000 shares to the Foundation, is currently estimated to be between $43.1
million and $59.0 million, subject to increase to $68.1 million, with a midpoint
of $51 million. The pro forma price to book ratio and the pro forma price to
annualized earnings ratio, at and for the six months ended June 30, 1998, are
61.1% and 16.1x, respectively, at the midpoint of the Estimated Valuation Range.
In the event that the Foundation were not included in the Conversion,
Keller has estimated that the pro forma market value of the Common Stock would
be $55 million at the midpoint of the Estimated Valuation Range based on a pro
forma price to book ratio and the pro forma price to earnings ratio at 61.2% and
16.1x, respectively. Based upon this estimate, the $2,000,000 of Common Stock to
be contributed to the Foundation would reduce the amount of Common Stock to be
offered in the Conversion by 370,000 shares (or $3,700,000), 400,000 shares (or
$4,000,000), 430,000 shares (or $4,300,000) or 464,500 shares (or $4,645,000) at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, from the amount of Common Stock that would be
offered in the Conversion without the Foundation. Accordingly, certain of our
account holders who subscribe to purchase Common Stock in the Subscription
Offering would receive fewer shares depending on the size of the depositor's
stock order and the amount of his or her qualifying deposits with us and the
overall level of subscriptions. See "Comparison of Valuation and Pro Forma
Information with No Foundation" and "Pro Forma Data." This estimate by Keller
was prepared solely for purposes of providing Eligible Account Holders and
subscribers with information with which to make an informed decision on the
Conversion.
The decrease in the amount of Common Stock being offered as a result of
the issuance of Common Stock to the Foundation will not significantly affect our
capital position. Our regulatory capital currently exceeds applicable
requirements and will further exceed such requirements following the Conversion.
Our tangible, core and risk-based capital ratios at June 30, 1998 would be
19.0%, 19.0% and 34.5%, respectively, and our pro forma net earnings would be
$1.5 million at the midpoint of the Estimated Valuation Range, taking into
account the proceeds from the Conversion. On a consolidated basis, the Holding
Company's pro forma shareholders' equity would be $86.8 million, or
approximately 24.9% of pro forma consolidated assets, assuming the sale of
shares at the midpoint of the Estimated Valuation Range. Pro forma shareholders'
equity per share and pro forma net earnings per share would be $16.38 and $.31,
respectively. If the Foundation were not established in the Conversion, based on
the Keller estimate, the Holding Company's pro forma shareholders' equity would
be approximately $89.9 million, or approximately 25.6% of pro forma consolidated
assets at the midpoint of the Estimated Valuation Range, and pro forma net
earnings would be $1.6 million. Pro forma shareholders' equity per share and pro
forma net earnings per share would be substantially similar with or without the
establishment of the Foundation. See "Comparison of Valuation and Pro Forma
Information with No Foundation."
Potential Anti-Takeover Effect. Upon completion of the Conversion, the
Foundation will own 3.8% of the total shares of the Common Stock outstanding,
based upon the midpoint of the Estimated Valuation Range. We anticipate that the
OTS will require, as a condition to its approval of the Conversion, that the
shares of Common Stock held by the Foundation be voted in the same ratio as all
other shares of the Common Stock on all proposals considered by the shareholders
of the Holding Company. Because of this condition, we do not believe the
Foundation will have an anti-takeover effect on the Holding Company. However, in
the event that the OTS were to waive this voting restriction, the Foundation's
Board of Directors would exercise sole voting power over the shares of Common
Stock held by the Foundation and would no longer be subject to the restriction.
See "The Conversion-Establishment of the Foundation-Regulatory Conditions
Imposed on the Foundation."
As the Foundation's Board of Directors will initially consist of three
members of our Board of Directors, if the OTS were to waive this voting
restriction (although we do not currently anticipate that we will seek such a
waiver), our management may benefit to the extent that the Board of Directors of
the Foundation determines to vote the shares of Common Stock held by the
Foundation in favor of proposals supported by our management. In that case, the
shares held by the Foundation, when aggregated with shares purchased directly by
our officers and directors, shares expected to be held by the RRP and by the
ESOP, and shares subject to stock options assumed to be fully exercised by our
directors and officers, would exceed 20% of the outstanding Common Stock, which
could enable management to defeat shareholder proposals requiring 80% approval.
This potential voting control by management may preclude takeover
attempts that certain shareholders deem to be in their best interest and may
tend to perpetuate management. However, since the ESOP shares are allocated to
all of our eligible employees, and any unallocated shares will be voted by the
Trustee in the same proportions as allocated shares are voted, and because the
RRP and the Stock Option Plan must first be approved by shareholders no sooner
than six months following completion of the Conversion, management of the
Holding Company does not expect to have voting control of all shares covered by
the ESOP and other stock-based benefit plans. See "Executive Compensation and
Related Transactions of Lincoln Federal." Moreover, as the Foundation sells its
shares of Common Stock over time, its ownership interest and voting power in the
Holding Company is expected to decrease.
Potential Challenges. To date, there has been limited precedent with
respect to the establishment and funding of a charitable foundation as part of a
conversion of a mutual savings association to stock form. As such, the
Foundation and the OTS's non-objection to the Conversion may be subject to
potential challenges notwithstanding that the Boards of Directors of Lincoln
Federal and the Holding Company have carefully considered the various factors
involved in the establishment of the Foundation in reaching their determination
to establish the Foundation as part of the Conversion. See "The
Conversion-Establishment of the Charitable Foundation-Purpose of the
Foundation." If challenges were to be instituted seeking to require us to
eliminate establishment of the Foundation in connection with the Conversion, no
assurances can be made that the resolution of such challenges would not result
in a delay in the consummation of the Conversion or that any objecting persons
would not be ultimately successful in obtaining such removal or other relief
against Lincoln Federal and the Holding Company. In addition, if we are forced
to eliminate the Foundation, the Holding Company may be required to resolicit
subscribers in the offering of Common Stock.
Approval of Members. Establishment of the Foundation is subject to the
approval of a majority of the total outstanding votes of our members eligible to
be cast at the Special Meeting. The Foundation will be considered as a separate
matter from approval of the Plan of Conversion. If our members approve the Plan
of Conversion, but not the establishment of the Foundation, we intend to
complete the Conversion without the establishment of the Foundation. Failure to
approve the Foundation may materially increase the pro forma market value of the
Common Stock being offered for sale in the Offering since the Estimated
Valuation Range, as set forth herein, takes into account the proposed
contribution to the Foundation. If the pro forma market value of the Holding
Company without the Foundation is either greater than $68.1 million or less than
$43.1 million, or if the OTS otherwise requires a resolicitation of subscribers,
we will establish a new Estimated Valuation Range and commence a resolicitation
of subscribers (i.e., subscribers will be permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest.) Any change in the Estimated Valuation
Range must be approved by the OTS. See "The Conversion - Stock Pricing" and "-
Number of Shares to be Issued."
USE OF PROCEEDS
The Holding Company will retain 50% of the net proceeds from the
offering, after payment of expenses incurred in connection with the Conversion,
and will use the balance of the proceeds to purchase all of the capital stock
issued by Lincoln Federal in connection with the Conversion. A portion of the
net proceeds to be retained by the Holding Company will be loaned to our ESOP to
fund its purchase of 8% of the shares of the Holding Company sold in the
Conversion and issued to the Foundation. On a short-term basis, the balance of
the net proceeds retained by the Holding Company initially may be invested in
cash and short-term investments. The Holding Company may also use the proceeds
as a source of funds to acquire one or more other financial institutions, to
acquire assets from other financial institutions, to pay dividends, if any, to
shareholders or to repurchase shares of Common Stock. The Holding Company does
not, however, have any present plans, negotiations or agreements to acquire
another financial institution or to acquire assets from another financial
institution. The Holding Company will not take any action in furtherance of an
extraordinary capital distribution during the year following the Conversion. In
the event the Foundation is approved by our members, the Holding Company
proposes to fund the Foundation with 200,000 shares of the Holding Company's
Common Stock.
Lincoln Federal intends to use a portion of the net proceeds that it
receives from the Holding Company to support its lending activities and possibly
to acquire loan participations from other financial institutions. Lincoln
Federal may also use a portion of the net proceeds to fund the purchase of up to
4% of the shares for the RRP which we anticipate will be adopted by our Board
following the Conversion, subject to shareholder approval, and to repay
approximately $17.0 million in FHLB advances that mature in December, 1998. We
anticipate that the balance of the proceeds may be used to purchase
mortgage-backed securities in the secondary market or loan participations from
other financial institutions. On an interim basis, we may use some of the net
proceeds to invest in short- or intermediate-term U.S. government securities and
other federal agency securities. See "Business of Lincoln Federal Savings Bank -
Investments."
The following table shows estimated gross and net proceeds based upon
shares of Common Stock being sold in the Conversion at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range.
<TABLE>
<CAPTION>
15% Above
Minimum, Midpoint, Maximum, Maximum,
4,305,000 5,100,000 5,895,000 6,809,250
Shares Shares Shares Shares
Sold at Price Sold at Price Sold at Price Sold at Price
of $10.00 of $10.00 of $10.00 of $10.00(2)
---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Gross Proceeds.......................... $43,050 $51,000 $58,950 $68,093
Less:
Estimated Underwriting Commissions
and Other Expenses(1) (2)............ 1,208 1,283 1,359 1,445
Estimated net Conversion
proceeds(1).......................... 41,842 49,717 57,591 66,648
Purchase by Holding Company of
100% of Capital Stock of
Lincoln Federal...................... 20,921 24,859 28,796 33,324
Net proceeds retained by
Holding Company...................... $20,921 $24,858 $28,795 $33,324
</TABLE>
(1) In calculating estimated net Conversion proceeds, it has been assumed that
no sales will be made through selected dealers, that all shares are sold in
the Subscription Offering, that 70% of the shares of Common Stock are
acquired by residents of Indiana and 30% are acquired by residents of other
states, that executive officers and directors of Lincoln Federal and their
Associates purchase 362,000 shares of Common Stock, that the ESOP acquires
8% of the shares of Common Stock sold in the Conversion and issued to the
Foundation, and that 200,000 shares of Common Stock are issued to the
Foundation.
(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following the
commencement of the Subscription Offering and the Community Offering, if
any.
The actual net proceeds may differ from the estimated net proceeds
calculated above for various reasons, including variances in the actual amount
of legal and accounting expenses incurred in connection with the Conversion,
commissions paid for sales made through other dealers, and the actual number of
shares of Common Stock sold in the Conversion. Any variance in the actual net
proceeds from the estimates provided in the table above is not expected to be
material.
DIVIDENDS
Although the Holding Company has not established a dividend policy, the
Holding Company's management intends to implement a policy regarding the payment
of cash dividends on the Common Stock following the Conversion. Dividends, when
and if paid, will be subject to determination and declaration by the Board of
Directors in its discretion, which will take into account the Holding Company's
consolidated financial condition and results of operations, tax considerations,
industry standards, economic conditions, capital levels, regulatory restrictions
on dividend payments by us to the Holding Company, general business practices
and other factors. 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, but in no event will be paid within one year of the Conversion. In
any event, there can be no assurance that regular or special dividends will be
paid, or, if paid, will continue to be paid. See "Regulation - Savings
Association Regulatory Capital" and "- Dividend Limitations."
The Holding Company is not subject to OTS regulatory restrictions on
the payment of dividends to its shareholders although the source of such
dividends depend in part upon the receipt of dividends from Lincoln Federal. The
Holding Company is subject, however, to the requirements of Indiana law, which
generally limit the payment of dividends to amounts that will not affect the
ability of the Holding Company, after the dividend has been distributed, to pay
its debts in the ordinary course of business and that will not exceed the
difference between the Holding Company's total assets and total liabilities plus
preferential amounts payable to shareholders with rights superior to those of
the holders of Common Stock.
In addition to the foregoing, the portion of Lincoln Federal's earnings
which has been appropriated for bad debt reserves and deducted for federal
income tax purposes cannot be used to pay cash dividends to the Holding Company
without the payment of federal income taxes by Lincoln Federal 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 the Notes to the Consolidated Financial
Statements at page F-9. The Holding 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 Holding Company has never issued Common Stock to the public.
Consequently, there is no established market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed for
quotation on the Nasdaq National Market System under the symbol "LNCB" upon the
successful closing of the offering, subject to certain conditions which we
believe will be met. We have been advised that Keefe, Bruyette and Woods, Inc.
("Keefe, Bruyette") intends to act as a market maker for the Common Stock. In
order for the Common Stock to be traded on the Nasdaq National Market System,
there must be at least three market makers for the Common Stock. We anticipate
that we will be able to secure two other market makers to enable the stock to be
listed for quotation on the Nasdaq National Market System.
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 Holding Company nor any broker or dealer has
control. Although the shares issued in the Conversion are expected to be traded
on the Nasdaq National Market System, there can be no guarantee that an active
or liquid trading market for the Common Stock will be developed and be
maintained. Further, the absence of an active and liquid trading market may make
it difficult to sell the 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 an investor will be able to sell the Common Stock purchased
in the Conversion at or above the Purchase Price.
COMPETITION
We originate most of our loans to and accept most of our deposits from
residents of Hendricks, Montgomery and Clinton Counties, Indiana. We are subject
to competition from various financial institutions, including state and national
banks, state and federal savings associations, credit unions, and certain
nonbanking consumer lenders that provide similar services in those counties with
significantly larger resources than are available to us. We also compete with
money market funds with respect to deposit accounts and with insurance companies
with respect to individual retirement accounts.
The primary factors influencing competition for deposits are interest
rates, service and convenience of office locations. We compete for loan
originations primarily through the efficiency and quality of the services that
we provide borrowers and through interest rates and loan fees charged.
Competition is affected by, among other things, the general availability of
lendable funds, general and local economic conditions, current interest rate
levels, and other factors that we cannot readily predict.
CAPITALIZATION
The following table presents our historical capitalization at June 30,
1998, and the pro forma consolidated capitalization of the Holding Company as of
that date, giving effect to the sale of Common Stock offered by this Prospectus
based on the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range and to the expected issuance to the Foundation of
200,000 shares of Common Stock, and subject to the other assumptions set forth
below. The pro forma data set forth below may change significantly at the time
the Holding Company completes the Conversion due to, among other factors, a
change in the Estimated Valuation Range or a change in the current estimated
expenses of the Conversion. If the Estimated Valuation Range changes so that
between 4,305,000 and 6,809,250 shares are not sold in the Conversion,
subscriptions will be returned to subscribers who do not affirmatively elect to
continue their subscriptions during the offering at the revised Estimated
Valuation Range.
<TABLE>
<CAPTION>
At June 30, 1998
Pro Forma Holding Company
Capitalization Based on Sale of
4,305,000 5,100,000 5,895,000 6,809,250
Shares Shares Shares Shares
Sold at Sold at Sold at Sold at
Lincoln Federal Price of Price of Price of Price of
Historical $10.00 $10.00 $10.00 $10.00 (8)
---------- ------ ------ ------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)..................................... $211,160 $211,160 $211,160 $211,160 $211,160
Federal Home Loan Bank advances.................. $ 45,686 $ 45,686 $ 45,686 $ 45,686 $ 45,686
Note payable..................................... $ 2,203 $ 2,203 $ 2,203 $ 2,203 $ 2,203
Equity Capital:
Preferred stock, without par
value, 2,000,000 shares
authorized, none issued.......................
Common Stock, without par
value, 20,000,000 shares
authorized: sold in the Conversion(2) ....... $ 41,842 $ 49,717 $ 57,591 $ 66,648
Shares issued to Foundation (3)............. 2,000 2,000 2,000 2,000
Equity capital and net unrealized gain on
securities available for sale (4)............ $ 42,795 42,795 42,795 42,795 42,795
Expense of contribution to Foundation (5)........ (1,320) (1,320) (1,320) (1,320)
Common Stock acquired by ESOP(6) .............. (3,604) (4,240) (4,876) (5,607)
Common Stock acquired by the RRP (7)........... (1,802) (2,120) (2,438) (2,804)
--------- --------- --------- ------- --------
Equity Capital................................... $ 42,795 $ 79,911 $ 86,832 $93,752 $101,712
========= ========= ========= ======= ========
</TABLE>
(1) Excludes accrued interest. Withdrawals from deposit accounts for the
purchase of Common Stock are not reflected. Such withdrawals will
reduce pro forma deposits by the amount thereof.
(2) The number of shares to be issued in the Conversion may be increased or
decreased based on market and financial conditions prior to the
completion of the Conversion. Assumes estimated expenses of $1,208,000,
$1,283,000, $1,359,000 and $1,445,000 at the minimum, midpoint, maximum
and adjusted maximum of the Estimated Valuation Range, respectively.
See "Use of Proceeds."
(3) Reflects 200,000 shares to be issued to the Foundation at an assumed
value of $10.00 per share.
(4) Equity capital is substantially restricted. See Notes to Lincoln
Federal's Consolidated Financial Statements. See also "The Conversion -
Principal Effects of Conversion - Effect on Liquidation Rights." Equity
capital does not reflect the federal income tax consequences of the
restoration to income of Lincoln Federal's special bad debt reserve for
income tax purposes which would be required in the unlikely event of a
liquidation or if a substantial portion of equity capital were
otherwise used for a purpose other than absorption of bad debt losses
and will be required as to post-1987 reserves under a recently enacted
law. See "Taxation - Federal Taxation."
(5) Net of the tax effect of the contribution of Common Stock based upon a
34% marginal tax rate. The realization of the deferred tax benefit is
limited annually to 10% of the Holding Company's annual taxable income,
subject to the ability of the Holding Company to carry forward any
unused portion of the deduction for five years following the year in
which the contribution is made.
(6) Assumes purchases by the ESOP of a number of shares equal to 8% of the
shares sold in the Conversion and issued to the Foundation. The funds
used to acquire the ESOP shares will be borrowed from the Holding
Company. See "Use of Proceeds." Lincoln Federal intends to make
contributions to the ESOP sufficient to service and ultimately retire
its debt. The Common Stock acquired by the ESOP is reflected as a
reduction of shareholders' equity. See "Executive Compensation and
Related Transactions of Lincoln Federal - Employee Stock Ownership Plan
and Trust."
(7) Assuming the receipt of shareholder approval, the Holding Company
intends to implement the RRP. Assuming such implementation, the RRP
will purchase an amount of shares equal to 4% of the Common Stock sold
in the Conversion and issued to the Foundation for issuance to
directors and officers of the Holding Company and Lincoln Federal. Such
shares may be purchased from authorized but unissued shares or on the
open market. The Holding Company currently intends that the RRP will
purchase the shares on the open market. Under the terms of the RRP,
assuming it is adopted within one year of the Conversion, shares will
vest at the rate of 20% per year. The Common Stock to be purchased by
the RRP represents unearned compensation and is, accordingly, reflected
as a reduction to pro forma shareholders' equity. As shares of the
Common Stock granted pursuant to the RRP vest, a corresponding
reduction in the charge against capital will occur. In the event that
authorized but unissued shares are acquired, the interests of existing
shareholders will be diluted. Assuming that 5,100,000 shares of Common
Stock, the midpoint of the Estimated Valuation Range, are issued in the
Conversion, 200,000 shares are issued to the Foundation and that all
awards under the RRP are from authorized but unissued shares, the
Holding Company estimates that the per share book value for the Common
Stock would be diluted $.63 per share, or 3.9% on a pro forma basis as
of June 30, 1998 at the midpoint of the Estimated Valuation Range. The
dilution would be $.68 per share (3.8%) and $.59 per share (3.8%) at
the minimum and maximum levels, respectively, of the Estimated
Valuation Range on a pro forma basis at June 30, 1998.
(8) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
the commencement of the Subscription Offering and Community Offering,
if any.
PRO FORMA DATA
We estimate that we will receive net Conversion proceeds in an amount
ranging from $41.8 million to $66.6 million. This estimate assumes (i) that all
shares of Common Stock are sold in the Subscription Offering, (ii) that 70% of
the shares are acquired by residents of Indiana and 30% are acquired by
residents of other states, (iii) that our executive officers and directors and
their Associates purchase 362,000 shares of Common Stock, (iv) that 200,000
shares of common Stock are issued to the Foundation, and (v) that the ESOP
acquires 8% of the shares of Common Stock sold in the Conversion and issued to
the Foundation. The following tables set forth the pro forma combined
consolidated net income of the Holding Company for the six months ended June 30,
1998 and for the year ended December 31, 1997 as though the Conversion offering
had been consummated at the beginning of those periods, respectively, and the
investable net proceeds had been invested at 5.59% for the six months ended June
30, 1998 and 5.86% for the year ended December 31, 1997 (the yield on one-year
U.S. government securities). The actual net proceeds to the Holding Company from
the sale of Common Stock cannot be determined until the Conversion is completed.
OTS regulations specify that the pro forma yield on net proceeds be calculated
as the arithmetic average of the average yield on Lincoln Federal's
interest-earning assets and the average cost of deposits. Lincoln Federal did
not use this methodology to calculate pro forma yield, however, and instead
assumed a yield based on one-year U.S. government securities. This latter
methodology more accurately reflects Lincoln Federal's and the Holding Company's
intent to invest the net proceeds initially in U.S. government securities. The
pro forma after-tax return for the Holding Company on a consolidated basis is
assumed to be 3.35% for the six months ended June 30, 1998 and 3.52% for the
year ended December 31, 1997, after giving effect to (i) the yield on investable
net proceeds from the Conversion offering and (ii) adjusting for taxes using a
federal statutory tax rate of 34% and a net state statutory income tax rate of
6%. Historical and per share amounts have been calculated by dividing historical
amounts and pro forma amounts by the indicated number of shares of Common Stock,
as adjusted to give effect to the shares purchased by the ESOP and the effect of
the issuance of shares to the Foundation, assuming that such number of shares
had been outstanding during each of the entire periods.
Book value represents the difference between the stated amount of
consolidated assets and consolidated liabilities of the Holding Company computed
in accordance with generally accepted accounting principles. Book value does not
necessarily reflect current market value of assets and liabilities, or the
amounts, if any, that would be available for distribution to shareholders in the
event of liquidation. See "The Conversion - Principal Effects of Conversion -
Effect on Liquidation Rights." Book value also does not reflect the federal
income tax consequences of the restoration to income of our special bad debt
reserves for income tax purposes, which would be required in the unlikely event
of liquidation or if a substantial portion of retained earnings were otherwise
used for a purpose other than absorption of bad debt losses. See "Taxation -
Federal Taxation." Pro forma book value includes only net proceeds from the
Conversion offering as though it occurred as of the indicated dates and does not
include earnings on the proceeds for the periods then ended.
The following table gives effect to the issuance of authorized but
unissued shares of the Holding Company's Common Stock to the Foundation
concurrently with the completion of the Conversion. The pro forma book values at
the dates indicated should not be considered as reflecting the potential trading
value of the Holding Company's stock. There can be no assurance that an investor
will be able to sell the Common Stock purchased in the Conversion at prices
within the range of the pro forma book values of the Common Stock or at or above
the Purchase Price. The pro forma net income derived from the assumptions set
forth above should not be considered indicative of the actual results of
operations of the Holding Company that would have been attained for any period
if the Conversion had been actually consummated at the beginning of such periods
and the assumptions regarding investment yields should not be considered
indicative of the actual yield expected to be achieved during any future period.
Actual Conversion expenses may vary from the estimates set forth below. In
addition, the following tables do not reflect withdrawals from deposit accounts
for the purchase of Common Stock. Such withdrawals will reduce pro forma
deposits by the amount thereof.
<PAGE>
<TABLE>
<CAPTION>
At or for the Six Months Ended June 30, 1998
4,305,000 Shares 5,100,000 Shares 5,895,000 Shares 6,809,250 Shares (1)
Sold at Sold at Sold at Sold at
$10.00 Per Share $10.00 Per Share $10.00 Per Share $10.00 Per Share
---------------- ---------------- ---------------- ----------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Gross proceeds..................... $43,050 $51,000 $58,950 $68,093
Plus:
Shares contributed to Foundation
(200,000 shares)................ 2,000 2,000 2,000 2,000
Pro forma market capitalization.. $45,050 $53,000 $60,950 $70,093
Gross proceeds..................... $43,050 51,000 58,950 68,093
Less offering expenses............. (1,208) (1,283) (1,359) (1,445)
Estimated net conversion proceeds (2) 41,842 49,717 57,591 66,648
Less:
Common Stock acquired
by ESOP (3)................... (3,604) (4,240) (4,876) (5,607)
Common Stock acquired
by the RRP (4)................ (1,802) (2,120) (2,438) (2,804)
Investable net proceeds............ $36,436 $43,357 $50,277 $58,237
Consolidated net income (5):
Historical ...................... $967 $967 $967 $967
Pro forma income on investable
net proceeds (6)................ 610 726 842 975
Pro forma ESOP adjustment (3).... (54) (64) (73) (84)
Pro forma RRP adjustment (4) .... (108) (127) (146) (168)
Pro forma net income ............ $1,415 $1,502 $1,590 $1,690
Consolidated earnings per share (8)(9):
Historical ..................... $0.23 $0.20 $0.17 $0.15
Pro forma income on investable
net proceeds.................... 0.15 0.15 0.15 0.15
Pro forma ESOP adjustment (3).... (0.01) (0.01) (0.01) (0.01)
Pro forma RRP adjustment (4)..... (0.03) (0.03) (0.03) (0.03)
Pro forma earnings per share..... $0.34 $0.31 $0.28 $0.26
Consolidated book value (7) :
Historical....................... $42,795 $42,795 $42,795 $42,795
Estimated net conversion
proceeds (2)................... 41,842 49,717 57,591 66,648
Plus: Shares contributed
to Foundation................... 2,000 2,000 2,000 2,000
Less: Contribution to Foundation (2,000) (2,000) (2,000) (2,000)
Plus: Tax benefit of the contribution
to Foundation................... 680 680 680 680
Less:
Common Stock acquired
by ESOP (3)................... (3,604) (4,240) (4,876) (5,607)
Common Stock acquired
by the RRP (4)................ (1,802) (2,120) (2,438) (2,804)
Pro forma book value............. $79,911 $86,832 $93,752 $101,712
Consolidated book value per share (7)(9):
Historical ...................... $9.50 $8.07 $7.02 $6.11
Estimated net conversion proceeds 9.29 9.38 9.45 9.51
Plus: Shares contributed
to Foundation................... 0.44 0.38 0.33 0.29
Less: Contribution to Foundation (0.44) (0.38) (0.33) (0.29)
Plus: Tax benefit of the contribution
to Foundation................... 0.15 0.13 0.11 0.10
Less:
Common Stock acquired
by the ESOP (3)............... (0.80) (0.80) (0.80) (0.80)
Common Stock acquired
by the RRP (4)................ (0.40) (0.40) (0.40) (0.40)
Pro forma book value per share... $17.74 $16.38 $15.38 $14.52
Offering price as a percentage of pro
forma book value per share....... 56.37% 61.05% 65.02% 68.87%
Ratio of offering price to pro forma
earnings per share (annualized) . 14.71x 16.13x 17.86x 19.23x
Number of shares used in
calculating earnings per share (8) 4,162,620 4,897,200 5,631,780 6,476,585
========= ========= ========= =========
Number of shares used in
calculating book value........... 4,505,000 5,300,000 6,095,000 7,009,205
========= ========= ========= =========
</TABLE>
(Footnotes on following page.)
<PAGE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering,
if any.
(2) See "Use of Proceeds" for assumptions utilized to determine the
investable net proceeds of the sale of Common Stock.
(3) It is assumed that 8% of the shares of Common Stock sold in the
Conversion and issued to the Foundation will be purchased by the ESOP.
The funds used to acquire the ESOP shares will be borrowed by the ESOP
from the Holding Company (see "Use of Proceeds"). Lincoln Federal
intends to make annual contributions to the ESOP in an amount at least
equal to the principal and interest requirements on the debt. Lincoln
Federal's total annual expense in payment of the ESOP debt is based
upon 20 equal annual installments of principal with an assumed tax
benefit of 40%. The pro forma net income assumes: (i) Lincoln Federal's
total contributions are equivalent to the debt service requirement for
the year; (ii) that 18,020, 21,200, 24,380 and 28,035 shares at the
minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, were committed to be released during the six months ended
June 30, 1998 at an average fair value of $10.00 per share in
accordance with SOP 93-6; (iii) only the ESOP shares committed to be
released were considered outstanding for purposes of the net earnings
per share calculations; and (iv) the effective tax rate applicable to
the debt was 40%. Expense for the ESOP will be based on the number of
shares committed to be released to participants for the year at the
average market value of the shares during the year. Accordingly,
Lincoln Federal's total annual expense in payment of the ESOP for such
years may be higher than that discussed above. The loan to the ESOP is
reflected as a reduction of shareholders' equity.
(4) Assuming the receipt of shareholder approval, the Holding Company
intends to implement the RRP. Assuming such implementation, the RRP
will purchase an amount of shares equal to 4% of the Common Stock sold
in the Conversion and issued to the Foundation, or 180,200, 212,000,
243,800 and 280,400 shares of Common Stock at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Price Range,
respectively, for issuance to directors and officers of the Holding
Company and Lincoln Federal. Such shares may be purchased from
authorized but unissued shares or on the open market. The Holding
Company currently intends that the RRP will purchase the shares on the
open market, and the estimated net Conversion proceeds have been
reduced for the purchase of the shares in determining estimated
proceeds available for investment. Under the terms of the RRP, if it is
adopted within one year of the Conversion, shares will vest at the rate
of 20% per year. A tax benefit of 40% has been assumed. The Common
Stock to be purchased by the RRP represents unearned compensation and
is, accordingly, reflected as a reduction to pro forma shareholders'
equity. As shares of the Common Stock granted pursuant to the RRP vest,
a corresponding reduction in the charge against capital will occur. In
the event that authorized but unissued shares are acquired by the RRP,
the interests of existing shareholders will be diluted. Assuming that
5,100,000 shares of Common Stock are issued in the Conversion, the
midpoint of the Estimated Valuation Range, that 200,000 shares of
Common Stock are issued to the Foundation, and that all awards under
the RRP are from authorized but unissued shares, the Holding Company
estimates that the per share book value for the Common Stock would be
diluted $.63 per share, or 3.9% on a pro forma basis as of June 30,
1998, at the midpoint of the Estimated Valuation Range. The dilution
would be $.68 per share (3.8%) and $.59 per share (3.8%) at the minimum
and maximum levels, respectively, of the Estimated Valuation Range on a
pro forma basis as of June 30, 1998.
(5) Represents income from continuing operations before the extraordinary
item of $150,000 for early extinguishment of debt, net of tax. Does not
give effect to the non-recurring expense that will be recognized in
1998 as a result of the establishment of the Foundation. The Holding
Company will recognize an after-tax expense for the amount of the
contribution to the Foundation which is expected to be $1.3 million at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively. Assuming the issuance to the
Foundation was expensed during the six months ended June 30, 1998, pro
forma net earnings per share would be $.02, $.04, $.05, and $.06, at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively.
<PAGE>
(6) Assuming investable net proceeds had been invested since the beginning
of the period at 5.59% for the six months ended June 30, 1998 (the
yield on one-year U.S. government securities) and an assumed effective
tax rate of 40%.
(7) Book value represents the excess of assets over liabilities. The effect
of the liquidation account is not reflected in these computations. (For
additional information regarding the liquidation account, see "The
Conversion - Principal Effects of Conversion - Effect on Liquidation
Rights.")
(8) The number of shares used in calculating earnings per share was
calculated using the indicated number of shares sold and the shares
issued to the Foundation reduced by the assumed number of ESOP shares
that would be unallocated at the end of the first allocation period.
Allocation of ESOP shares is assumed to occur on the first day of the
fiscal year.
(9) Assuming the receipt of shareholder approval, the Holding Company
intends to implement the Stock Option Plan. Assuming such
implementation, Common Stock in an aggregate amount equal to 10% of the
shares sold in the Conversion and issued to the Foundation will be
reserved for issuance by the Holding Company upon the exercise of the
stock options granted under the Stock Option Plan. No effect has been
given to the shares of Common Stock reserved for issuance under the
Stock Option Plan. Upon the exercise of stock options granted under the
Stock Option Plan, the interest of existing shareholders will be
diluted. The Holding Company estimates that the per share book value
for the Common Stock would be diluted $.58 per share, or 3.5% on a pro
forma basis as of June 30, 1998, assuming the sale of 5.1 million
shares in the Conversion, the midpoint of the Estimated Valuation
Range, the issuance of 200,000 shares to the Foundation and the
exercise of 530,000 options at an exercise price of $10.00 per share.
This dilution further assumes that the shares will be issued from
authorized, but unissued, shares. The dilution would be $.71 per share
(4.0%) and $.49 per share (3.2%) at the minimum and maximum levels,
respectively, of the Estimated Valuation Range on a pro forma basis as
of June 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended December 31, 1997
4,305,000 Shares 5,100,000 Shares 5,895,000 Shares 6,809,250 Shares (1)
Sold at Sold at Sold at Sold at
$10.00 Per Share $10.00 Per Share $10.00 Per Share $10.00 Per Share
---------------- ---------------- ---------------- ----------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Gross proceeds..................... $43,050 $51,000 $58,950 $68,093
Plus:
Shares contributed to Foundation
(200,000 shares)................ 2,000 2,000 2,000 2,000
Pro forma market capitalization.. $45,050 $53,000 $60,950 $70,093
Gross proceeds..................... $43,050 $51,000 $58,950 $68,093
Less offering expenses............. (1,208) (1,283) (1,359) (1,445)
Estimated net conversion proceeds (2) 41,842 49,717 57,591 66,648
Less:
Common Stock acquired
by ESOP (3)................... (3,604) (4,240) (4,876) (5,607)
Common Stock acquired
by the RRP (4)................ (1,802) (2,120) (2,438) (2,804)
Investable net proceeds............ $36,436 $43,357 $50,277 $58,237
Consolidated net income (5):
Historical ...................... $3,513 $3,513 $3,513 $3,513
Pro forma income on investable
net proceeds (6)................ 1,283 1,526 1,770 2,050
Pro forma ESOP adjustment (3).... (108) (127) (146) (168)
Pro forma RRP adjustment (4) .... (216) (254) (293) (336)
Pro forma net income ............ $4,472 $4,658 $4,844 $5,059
Consolidated earnings per share (8)(9):
Historical ..................... $0.84 $0.72 $0.62 $0.54
Pro forma income on investable
net proceeds.................... 0.31 0.31 0.31 0.32
Pro forma ESOP adjustment (3).... (0.03) (0.03) (0.03) (0.03)
Pro forma RRP adjustment (4)..... (0.05) (0.05) (0.05) (0.05)
Pro forma earnings per share..... $1.07 $0.95 $0.85 $0.78
Consolidated book value (7) :
Historical....................... $41,978 $41,978 $41,978 $41,978
Estimated net conversion
proceeds (2)................... 41,842 49,717 57,591 66,648
Plus: Shares contributed
to Foundation................... 2,000 2,000 2,000 2,000
Less: Contribution to Foundation (2,000) (2,000) (2,000) (2,000)
Plus: Tax benefit of the contribution
to Foundation................... 680 680 680 680
Less:
Common Stock acquired
by ESOP (3)................... (3,604) (4,240) (4,876) (5,607)
Common Stock acquired
by the RRP (4)................ (1,802) (2,120) (2,438) (2,804)
Pro forma book value............. $79,094 $86,015 $92,935 $100,895
Consolidated book value per share (7)(9):
Historical ...................... $9.32 $7.92 $6.89 $5.99
Estimated net conversion proceeds 9.29 9.38 9.45 9.51
Plus: Shares contributed
to Foundation................... 0.44 0.38 0.33 0.29
Less: Contribution to Foundation (0.44) (0.38) (0.33) (0.29)
Plus: Tax benefit of the contribution
to Foundation................... 0.15 0.13 0.11 0.10
Less:
Common Stock acquired
by the ESOP (3)............... (0.80) (0.80) (0.80) (0.80)
Common Stock acquired
by the RRP (4)................ (0.40) (0.40) (0.40) (0.40)
Pro forma book value per share... $17.56 $16.23 $15.25 $14.40
Offering price as a percentage of pro
forma book value per share....... 56.95% 61.61% 65.57% 69.44%
Ratio of offering price to pro forma
earnings per share (annualized) . 9.35x 10.53x 11.76x 12.82x
Number of shares used in
calculating earnings per share (8) 4,162,620 4,897,200 5,631,780 6,476,585
========= ========= ========= =========
Number of shares used in
calculating book value........... 4,505,000 5,300,000 6,095,000 7,009,250
========= ========= ========= =========
</TABLE>
(Footnotes on following page.)
<PAGE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering,
if any.
(2) See "Use of Proceeds" for assumptions utilized to determine the
investable net proceeds of the sale of Common Stock.
(3) It is assumed that 8% of the shares of Common Stock sold in the
Conversion and issued to the Foundation will be purchased by the ESOP.
The funds used to acquire the ESOP shares will be borrowed by the ESOP
from the Holding Company (see "Use of Proceeds"). Lincoln Federal
intends to make annual contributions to the ESOP in an amount at least
equal to the principal and interest requirements on the debt. Lincoln
Federal's total annual expense in payment of the ESOP debt is based
upon 20 equal annual installments of principal with an assumed tax
benefit of 40%. The pro forma net income assumes: (i) Lincoln Federal's
total contributions are equivalent to the debt service requirement for
the year; (ii) that 18,020, 21,200, 24,380 and 28,035 shares at the
minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, were committed to be released during the year ended
December 31, 1997 at an average fair value of $10.00 per share in
accordance with SOP 93-6; (iii) only the ESOP shares committed to be
released were considered outstanding for purposes of the net earnings
per share calculations; and (iv) the effective tax rate applicable to
the debt was 40%. Expense for the ESOP will be based on the number of
shares committed to be released to participants for the year at the
average market value of the shares during the year. Accordingly,
Lincoln Federal's total annual expense in payment of the ESOP for such
years may be higher than that discussed above. The loan to the ESOP is
reflected as a reduction of shareholders' equity.
(4) Assuming the receipt of shareholder approval, the Holding Company
intends to implement the RRP. Assuming such implementation, the RRP
will purchase an amount of shares equal to 4% of the Common Stock sold
in the Conversion and issued to the Foundation, or 180,200, 212,000,
243,800 and 280,400 shares of Common Stock at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Price Range,
respectively, for issuance to directors and officers of the Holding
Company and Lincoln Federal. Such shares may be purchased from
authorized but unissued shares or on the open market. The Holding
Company currently intends that the RRP will purchase the shares on the
open market, and the estimated net Conversion proceeds have been
reduced for the purchase of the shares in determining estimated
proceeds available for investment. Under the terms of the RRP, if it is
adopted within one year of the Conversion, shares will vest at the rate
of 20% per year. A tax benefit of 40% has been assumed. The Common
Stock to be purchased by the RRP represents unearned compensation and
is, accordingly, reflected as a reduction to pro forma shareholders'
equity. As shares of the Common Stock granted pursuant to the RRP vest,
a corresponding reduction in the charge against capital will occur. In
the event that authorized but unissued shares are acquired by the RRP,
the interests of existing shareholders will be diluted. Assuming that
5,100,000 shares of Common Stock are issued in the Conversion, the
midpoint of the Estimated Valuation Range, that 200,000 shares of
Common Stock are contributed to the Foundation, and that all awards
under the RRP are from authorized but unissued shares, the Holding
Company estimates that the per share book value for the Common Stock
would be diluted $.62 per share, or 3.8% on a pro forma basis as of
December 31, 1997, at the midpoint of the Estimated Valuation Range.
The dilution would be $.68 per share (3.9%) and $.59 per share (3.9%)
at the minimum and maximum levels, respectively, of the Estimated
Valuation Range on a pro forma basis as of December 31, 1997.
(5) Does not give effect to the non-recurring expense that will be
recognized in 1998 as a result of the establishment of the Foundation.
The Holding Company will recognize an after-tax expense for the amount
of the contribution to the Foundation which is expected to be $1.3
million at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, respectively. Assuming the issuance to
the Foundation was expensed during the year ended December 31, 1997,
pro forma net earnings per share would be $.75, $.68, $.63, and $.58,
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively.
(6) Assuming investable net proceeds had been invested since the beginning
of the period at 5.86% for the year ended December 31, 1997 (the yield
on one-year U.S. government securities) and an assumed effective tax
rate of 40%.
(7) Book value represents the excess of assets over liabilities. The effect
of the liquidation account is not reflected in these computations. (For
additional information regarding the liquidation account, see "The
Conversion - Principal Effects of Conversion - Effect on Liquidation
Rights.")
(8) The number of shares used in calculating earnings per share was
calculated using the indicated number of shares sold and the shares
issued to the Foundation reduced by the assumed number of ESOP shares
that would be unallocated at the end of the first allocation period.
Allocation of ESOP shares is assumed to occur on the first day of the
fiscal year.
(9) Assuming the receipt of shareholder approval, the Holding Company
intends to implement the Stock Option Plan. Assuming such
implementation, Common Stock in an aggregate amount equal to 10% of the
shares sold in the Conversion and issued to the Foundation will be
reserved for issuance by the Holding Company upon the exercise of the
stock options granted under the Stock Option Plan. No effect has been
given to the shares of Common Stock reserved for issuance under the
Stock Option Plan. Upon the exercise of stock options granted under the
Stock Option Plan, the interest of existing shareholders will be
diluted. The Holding Company estimates that the per share book value
for the Common Stock would be diluted $.57 per share, or 3.5% on a pro
forma basis as of December 31, 1997, assuming the sale of 5.1 million
shares in the Conversion, the midpoint of the Estimated Valuation
Range, the issuance of 200,000 shares to the Foundation and the
exercise of 530,000 options at an exercise price of $10.00 per share.
This dilution further assumes that the shares will be issued from
authorized, but unissued, shares. The dilution would be $.69 per share
(3.9%) and $.48 per share (3.2%) at the minimum and maximum levels,
respectively, of the Estimated Valuation Range on a pro forma basis as
of December 31, 1997.
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION
In the event that the Foundation were not established as part of the
Conversion, Keller has estimated that the pro forma aggregate market
capitalization of the Holding Company would be approximately $55 million at the
midpoint, which is approximately $2.0 million greater than the pro forma
aggregate market capitalization of the Holding Company if the Foundation is
included, and would result in an approximately $4 million increase in the amount
of Common Stock offered for sale in the Conversion. The pro forma price to book
ratio and pro forma price to earnings ratio would be approximately the same
under both the current appraisal and the estimate of the value of the Holding
Company without the Foundation. Further, assuming the midpoint of the Estimated
Valuation Range, pro forma stockholders' equity per share and pro forma earnings
per share would be $16.38 and $.31, respectively and $16.34 and $.31,
respectively, with the Foundation or without the Foundation. The pro forma price
to book ratio at the midpoint of the Estimated Valuation Range with and without
the Foundation would be 61.1% and 61.2%, respectively. The pro forma price to
earnings ratio at the midpoint of the Estimated Valuation Range with and without
the Foundation would be, in each case, 16.13x. There is no assurance that, in
the event that the Foundation were not formed, the appraisal prepared at the
time would have concluded that the pro forma market value of the Holding Company
would be the same as the estimate herein. Any appraisals prepared at that time
would be based on the facts and circumstances existing at that time, including,
among other things, market and economic conditions.
For comparative purposes only, set forth below are certain pricing
ratios and financial data and ratios, at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, assuming the Conversion was
completed at June 30, 1998.
<TABLE>
<CAPTION>
15% Above
At the Minimum At the Midpoint At the Maximum the Maximum,
With No With No With No With No
Foundation Foundation Foundation Foundation Foundation Foundation Foundation Foundation
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per shares amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Estimated offering amount......$ 43,050 $46,750 $51,000 $55,000 $58,950 $63,250 $68,093 $72,738
Pro forma market
capitalization............ 45,050 46,750 53,000 55,000 60,950 63,250 70,093 72,738
Total assets................... 341,616 344,395 348,537 351,577 355,457 358,759 363,417 367,018
Total liabilities.............. 261,705 261,705 261,705 261,705 261,705 261,705 261,705 261,705
Pro forma book value........... 79,911 82,690 86,832 89,872 93,752 97,054 101,712 105,313
Pro forma consolidated
net income.................. 1,415 1,467 1,502 1,558 1,590 1,648 1,690 1,752
Pro forma book value per share. 17.74 17.68 16.38 16.34 15.38 15.35 14.52 14.48
Pro forma consolidated net
income per share............ 0.34 0.33 0.31 0.31 0.28 0.29 0.26 0.26
Pro forma pricing ratios:
Offering price as a percentage
of pro forma book value
per share................ 56.37% 56.56% 61.05% 61.20% 65.02% 65.15% 68.87% 69.06%
Offering price to pro forma
earnings per share
(annualized) (1).......... 14.71x 15.15x 16.13x 16.13x 17.86x 17.24x 19.23x 19.23x
Pro forma market
capitalization to assets.. 13.19% 13.57% 15.21% 15.64% 17.15% 17.63% 19.29% 19.82%
Pro forma financial ratios:
Return on assets
(annualized) (2).......... 0.81% 0.84% 0.85% 0.87% 0.88% 0.90% 0.91% 0.94%
Return on equity
(annualized) (3).......... 3.54% 3.54% 3.45% 3.46% 3.39% 3.39% 3.32% 3.32%
Equity to assets............... 23.39% 24.01% 24.91% 25.56% 26.38% 27.05% 27.99% 28.69%
- ------------------
</TABLE>
(1) If the contribution to the Foundation had been expensed during the six
months ended June 30, 1998, the offering price to pro forma earnings per
share would have been 27.57x, 29.08x, 30.28x and 31.44x at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively.
(2) If the contribution to the Foundation had been expensed during the six
months ended June 30, 1998, return on assets would have been .43%, .47%,
.51% and .56% at the minimum, midpoint, maximum and 15% above the maximum
of the Estimated Valuation Range, respectively.
(3) If the contribution to the Foundation had been expensed during the six
months ended June 30, 1998, return on equity would have been 1.89%, 1.94%,
1.98% and 2.02% at the minimum, midpoint, maximum and 15% above the maximum
of the Estimated Valuation Range, respectively.
<PAGE>
REGULATORY CAPITAL COMPLIANCE
The following table compares Lincoln Federal's historical and pro forma
regulatory capital levels as of June 30, 1998 to Lincoln Federal's capital
requirements historically and after giving effect to the Conversion.
<TABLE>
<CAPTION>
At June 30, 1998
Pro Forma Capital Based on Sale of
4,305,000 Shares 5,100,000 Shares 5,895,000 Shares 6,809,250 Shares
Lincoln Federal Sold at Price of Sold at Price of Sold at Price of Sold at Price of
Historical $10.00 $10.00 $10.00 $10.00 (1)
Amount Ratio (2) Amount (4) Ratio (2) Amount (4)Ratio (2) Amount (4)Ratio (2) Amount (4) Ratio (2)
--------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Equity capital based upon
generally accepted
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
accounting principles. $42,795 14.1% $58,990 18.4% $61,974 19.1% $64,957 19.9% $68,388 20.7%
======= ==== ====== ==== ======= ==== ======= ==== ======= ====
Tangible capital :
Historical or
pro forma........... $42,248 13.9% $58,443 18.2% $61,427 19.0% $64,410 19.7% $67,841 20.5%
Required.............. 4,569 1.5% 4,812 1.5% 4,857 1.5% 4,901 1.5% 4,953 1.5%
------- ---- ------ ---- ------- ---- ------- ---- ------- ----
Excess.............. $37,679 12.4% $53,631 16.7% $56,570 17.5% $59,509 18.2% $62,888 19.0%
======= ==== ====== ==== ======= ==== ======= ==== ======= ====
Core capital :
Historical or
pro forma .......... $42,248 13.9% $58,443 18.2% $61,427 19.0% $64,410 19.7% $67,841 20.5%
Required.............. 9,138 3.0% 9,624 3.0% 9,713 3.0% 9,803 3.0% 9,906 3.0%
------- ---- ------ ---- ------- ---- ------- ---- ------- ----
Excess.............. $33,110 10.9% $48,819 15.2% $51,714 16.0% $54,607 16.7% $57,935 17.5%
======= ==== ====== ==== ======= ==== ======= ==== ======= ====
Risk-based capital (3):
Historical or
pro forma .......... $43,680 24.6% $59,875 33.0% $62,859 34.5% $65,842 36.0% $69,273 37.8%
Required.............. 14,217 8.0% 14,520 8.0% 14,568 8.0% 14,616 8.0% 14,670 8.0%
------- ---- ------ ---- ------- ---- ------- ---- ------- ----
Excess.............. $29,463 16.6% 45,355 25.0% $48,291 26.5% $51,226 28.0% $54,603 29.8%
======= ==== ====== ==== ======= ==== ======= ==== ======= ====
</TABLE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15%, including 200,000 shares to be issued to the Foundation, to
reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering,
if any.
(2) Tangible and core capital levels are shown as a percentage of total
assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(3) Pro forma risk-based capital amounts and percentages assume net
proceeds have been invested in 20% risk-weighted assets. Computations
of ratios are based on historical adjusted total assets of $304,599,000
and risk-weighted assets of $177,718,000.
(4) Capital levels are increased for contribution of 50% of the net
proceeds of the Offering by the Holding Company and reduced for charges
to capital resulting from the ESOP and RRP. See notes (3) and (4) on
page 27.
<PAGE>
THE CONVERSION
THE BOARDS OF DIRECTORS OF LINCOLN FEDERAL AND THE HOLDING COMPANY AND
THE OTS HAVE 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 2, 1998, our Board of Directors adopted a Plan of Conversion
(the "Plan") pursuant to which we will convert from a federal mutual savings
bank to a federal stock savings bank, and become a wholly-owned subsidiary of
the Holding 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 Holding
Company and the Common Stock of the Holding Company is being offered to our
customers and, if necessary, to the general public, with a preference given to
residents of Hendricks, Montgomery and Clinton Counties, Indiana. The Plan has
also been approved by the OTS, subject to approval of the Plan by our members. A
Special Meeting of Members (the "Special Meeting") has been scheduled for that
purpose on _____________, 1998. The approval of the Plan by the OTS does not
constitute a recommendation or endorsement of the Plan by the OTS.
We have mailed to each person eligible to vote at the Special Meeting a
proxy statement (the "Proxy Statement"). The Proxy Statement contains
information concerning the business purposes of the Conversion and the effects
of the Plan and the Conversion on voting rights, liquidation rights, the
continuation of our business and existing savings accounts, FDIC insurance and
loans. The Proxy Statement also describes the manner in which the Plan may be
amended or terminated.
In furtherance of our commitment to the communities we serve, the Plan
provides for the establishment of the Foundation as part of the Conversion. The
Foundation is intended to complement our existing community reinvestment
activities and to establish a common bond between us and the communities that we
serve, thereby enabling those communities to share in the growth and
profitability of the Holding Company over the long term. Consistent with our
goal, the Holding Company intends to donate to the Foundation immediately
following the Conversion 200,000 shares of its authorized but unissued Common
Stock. See "Establishment of the Foundation."
Reasons for Conversion
As a stock institution, we will be structured in the form used by
commercial banks, most business entities, and a growing number of savings
associations. Converting to the stock form is intended to have a positive effect
on our future growth and performance by: (i) affording our depositors and
employees the opportunity to become shareholders of the Holding Company and
thereby participate more directly in our future and the Holding Company's
future; (ii) providing the Holding Company with the flexibility to grow through
mergers and acquisitions by permitting the offering of the Holding Company's
stock to the shareholders of acquired companies; (iii) providing substantially
increased net worth and equity capital for investment in our business, thus
enabling management to pursue new and additional lending and investment
opportunities and to expand operations; and (iv) providing future access to
capital markets through the sale of stock of the Holding Company in order to
generate additional capital to accommodate or promote future growth. We believe
that the increased capital and operating flexibility will enhance our
competitiveness with other types of financial services organizations. Although
our current members will, upon Conversion, lose the voting and liquidation
rights they presently have as members (except to the limited extent of their
rights in the liquidation account established in the Conversion), they are being
offered a priority right to purchase shares in the Conversion and thereby obtain
voting and liquidation rights in the Holding Company.
The net proceeds to us from the sale of Common Stock offered hereby,
after retention by the Holding Company of 50% of the net proceeds after payment
of expenses incurred in connection with the Conversion, will increase our
existing net worth and thus provide an even stronger capital base to support our
lending and investment activities. This increase in our net worth, when combined
with the extra expenses we will incur as a publicy-traded company, will also,
however, likely cause our return on equity to decrease in comparison with our
performance in previous years. The net proceeds will also enable us to take
advantage of new opportunities that may arise, including the possible
acquisition of another financial institution or the acquisition of assets from
another financial institution, although we have no such present plans,
discussions or agreements with respect to any such acquisitions. In addition,
the Conversion will provide us with new opportunities to attract and retain
talented and experienced personnel by offering stock incentive programs.
Our Board of Directors believes that the Conversion to a holding
company structure is the best way to enable us to diversify our business
activities should we choose to do so. Currently, there are no plans, written or
oral, for the Holding Company to engage in any material activities apart from
holding our shares of stock that it acquires in connection with the Conversion,
although the Board may determine to further expand the Holding Company's
activities after the Conversion.
The additional Common Stock of the Holding Company being authorized in
the Conversion will be available for future acquisitions (although the Holding
Company has no current plans, discussions or agreements with respect to any
acquisition) and for issuance and sale to raise additional equity capital,
subject to market conditions and generally without shareholder approval. The
Holding Company's ability to raise additional funds through the sale of equity
or debt securities to the public or institutional investors should also be
enhanced by the increase in its equity capital base provided by the Conversion.
Although the Holding Company currently has no plans with respect to future
issuances of equity or debt securities, the more flexible operating structure
provided by the Holding Company and the stock form of ownership is expected to
assist us in competing aggressively with other financial institutions in our
market area.
The Conversion will also permit our members who subscribe for shares of
Common Stock to become shareholders of the Holding Company, thereby allowing
members to indirectly own stock in the financial institution in which they
maintain deposit accounts. Such ownership may encourage shareholders to promote
us to others, thereby further contributing to our growth.
Establishment of the Foundation
General. In furtherance of our commitment to the communities
we serve, the Plan provides that Lincoln Federal and the Holding Company will
establish the Foundation, which will be incorporated under Indiana law as a
nonprofit corporation without members, and will fund the Foundation with Common
Stock of the Holding Company. By further enhancing our visibility and reputation
in the communities that we serve, we believe that the Foundation will enhance
the long-term value of our community banking franchise. The Foundation will be
dedicated to charitable purposes, including community development activities
within the communities that we serve.
Purpose of the Foundation. We intend for the Foundation to provide
funding to support charitable causes and community development activities. In
recent years, we have emphasized community lending and community development
activities within the communities that we serve. The Foundation is being formed
as a complement to our existing community activities, not as a replacement for
those activities. While we intend to continue to emphasize community lending and
community development activities following the Conversion, those activities are
not our sole corporate purpose. The Foundation, on the other hand, will be
completely dedicated to engaging in community activities and promoting
charitable causes, and may be able to support such activities in ways that are
not currently available to us.
We believe that the Foundation will enable us to assist our local
communities in areas beyond community development and lending. We believe the
establishment of the Foundation will enhance our current activities under the
Community Reinvestment Act of 1977 (the "CRA"). In this regard, our Board of
Directors believes the establishment of a charitable foundation is consistent
with our commitment to community service. The Board further believes that the
funding of the Foundation with Common Stock of the Holding Company will enable
the communities that we serve to share in any future growth and success of the
Holding Company upon completion of the Conversion. The Foundation will
accomplish that goal by providing for continued ties between the Foundation and
us, thereby forming a partnership with our community. The establishment of the
Foundation will also enable the Holding Company and Lincoln Federal to develop a
unified charitable donation strategy and will centralize the responsibility for
administration and allocation of corporate charitable funds. Charitable
foundations have been formed by other financial institutions for this purpose,
among others. We do not expect, however, that the contribution to the Foundation
will take the place of our traditional community lending activities.
Structure of the Foundation. The Foundation has been incorporated under
Indiana law as a nonprofit corporation without members. The Foundation's Board
of Directors will initially consist of three members of the Holding Company's
Board of Directors: Wayne E. Kessler, Edward E. Whalen and John L. Wyatt. Each
director, officer and employee of the Holding Company, as well as any person who
has the power to direct the management or policies of the Holding Company or any
other person who owes a fiduciary duty to the Holding Company, must comply with
the regulations of the OTS regarding conflicts of interest if such person is
also a director of the Foundation, a member of the distribution committee or an
employee of the Foundation. Following the Conversion, the Foundation's Board may
be increased to include all members of the Holding Company's Board and may
include outside members as well. For information concerning the intended
purchases of Common Stock by members of the Foundation's Board, see "Proposed
Purchases by Directors and Executive Officers." Upon completion of the
Conversion, the Foundation and its directors will hold, in the aggregate,
270,000 shares of Common Stock, or 6.0%, 5.1%, 4.4% or 3.9% at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation Range.
The members of the Foundation, consisting of its Board members, will
elect the directors at the annual meeting of the Foundation. Directors will be
divided into three classes with each class appointed for staggered three-year
terms. The articles of incorporation of the Foundation provide that the
Foundation is organized exclusively for charitable purposes, including community
development, as set forth in Section 501(c)(3) of the Code. The Foundation's
articles of incorporation further provide that no part of the net earnings of
the Foundation will inure to the benefit of, or be distributable to its
directors, officers or members, except that the Foundation may pay reasonable
compensation for services rendered by such persons.
The authority for the affairs of the Foundation will be vested in its
Board of Directors, which will be responsible for establishing the Foundation's
policies with respect to grants or donations, consistent with the purposes for
which the Foundation was established. Although no formal policy governing
Foundation grants exists at this time, the Foundation's Board of Directors will
adopt such a policy upon establishment of the Foundation. As directors of a
nonprofit corporation, directors of the Foundation will at all times be bound by
their fiduciary duty to advance the Foundation's charitable goals, to protect
the assets of the Foundation and to act in a manner consistent with the
charitable purpose for which the Foundation is established.
The Directors of the Foundation will also be responsible for directing
the activities of the Foundation, including the management of the Common Stock
of the Holding Company held by the Foundation. However, we expect that, as a
condition to receiving the approval of the OTS to the Conversion, the Foundation
will be required to commit to the OTS that all shares of Common Stock held by
the Foundation will be voted in the same ratio as all other shares of the
Holding Company's Common Stock on all proposals considered by shareholders of
the Holding Company; provided, however, that, consistent with this condition,
the OTS would waive this voting restriction under certain circumstances if
compliance with the voting restriction would: (i) cause a violation of the law
of the State of Indiana and the OTS determines that federal law would not
preempt the application of the laws of Indiana to the Foundation; (ii) would
cause the Foundation to lose its tax-exempt status, or cause the Internal
Revenue Service to deny the Foundation's request for a determination that it is
an exempt organization or otherwise have a material and adverse tax consequence
on the Foundation; or (iii) would cause the Foundation to be subject to an
excise tax under Section 4941 of the Code. In order for the OTS to waive such
voting restriction, the Holding Company's or the Foundation's legal counsel
would be required to render an opinion satisfactory to the OTS that compliance
with the voting requirement would have the effect described in clauses (i), (ii)
or (iii) above. Under those circumstances, the OTS would grant a waiver of the
voting restriction upon submission of such legal opinions(s) by the Holding
Company or the Foundation that are satisfactory to the OTS. In the event that
the OTS were to waive the voting requirement, the directors would direct the
voting of the Common Stock held by the Foundation.
The Foundation's place of business will be located at our
administrative offices. We expect that initially the Foundation will have no
employees but, rather, will utilize the members of our staff who, generally,
will not receive any additional compensation for work they perform on behalf of
the Foundation. The Board of Directors of the Foundation has appointed Edward E.
Whalen as president, and will appoint such other officers as may be necessary to
manage the operations of the Foundation. In this regard, it is expected that we
will be required to provide the OTS with a commitment that, to the extent
applicable, we will comply with the affiliate restrictions set forth in Sections
23A and 23B of the Federal Reserve Act with respect to any transactions between
us and the Foundation.
The Holding Company intends to capitalize the Foundation with 200,000
shares of Common Stock. We elected to fund the Foundation with Common Stock
rather than cash because we desired to form a bond with the communities we serve
in a manner that would allow them to share in any future growth and success of
the Holding Company and Lincoln Federal over the long term. The funding of the
Foundation with stock also provides the Foundation with a potentially larger
endowment than if the Holding Company contributed cash to the Foundation since,
as a shareholder, the Foundation will share in any future growth and success of
the Holding Company. As such, the contribution of Common Stock to the Foundation
has the potential to provide a self-sustaining funding mechanism which reduces
the amount of cash that the Holding Company, if it were not making the stock
donation, would have to contribute to the Foundation in future years in order to
maintain a level amount of charitable grants and donations.
The Foundation will receive working capital from any dividends that may
be paid on the Common Stock in the future and, subject to applicable federal and
state laws, loans collateralized by the Common Stock or from the proceeds of the
sale of any of the Common Stock in the open market from time to time as may be
permitted to provide the Foundation with additional liquidity. As a private
foundation under Section 501(c)(3) of the Code, the Foundation generally will be
required to distribute annually in grants or donations a minimum of 5% of the
average fair market value of its net investment assets. One of the conditions
imposed on the gift of Common Stock by the Holding Company is that the amount of
Common Stock that may be sold by the Foundation in any one year shall not exceed
5% of the average market value of the assets held by the Foundation, except
where the Board of Directors of the Foundation determines that the failure to
sell an amount of Common Stock greater than such amount would result in a
longer-term reduction of the value of the Foundation's assets and as such would
jeopardize the Foundation's capacity to carry out its charitable purposes. Upon
completion of the Conversion and the contribution of shares to the Foundation
immediately following the Conversion, the Holding Company would have 4,505,000,
5,300,000, 6,095,000 and 7,009,250 shares issued and outstanding at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation Range.
Because the Holding Company will have an increased number of shares outstanding,
the voting and ownership interests of shareholders in the Holding Company's
Common Stock would be diluted by 3.8% at the midpoint of the Estimated Valuation
Range, as compared to their interests in the Holding Company if the Foundation
were not established. For additional discussion of the dilutive effect,
including the dilution in ownership and book value per share resulting from the
contribution of the Holding Company's Common Stock to the Foundation, see "Pro
Forma Data" and "Comparison of Valuation and Pro Forma Information with No
Foundation."
Tax Considerations. We have been advised by Barnes & Thornburg that an
organization created and operated for the above charitable purposes would
generally qualify as a Section 501(c)(3) exempt organization under the Code, and
further that such an organization would likely be classified as a private
foundation. The IRS has approved the Foundation's request to be recognized as an
exempt organization under Section 501(c)(3) of the Code, effective June 12,
1998, the date of the Foundation's organization.
Barnes & Thornburg, however, has not rendered any advice on the
condition that we expect will be imposed by the OTS requiring that all shares of
Common Stock of the Holding Company held by the Foundation be voted in the same
ratio as all other outstanding shares of Common Stock of the Holding Company on
all proposals considered by shareholders of the Holding Company. Consistent with
the expected condition, in the event that the Holding Company or the Foundation
receives an opinion of its legal counsel that compliance with this voting
restriction would cause the Foundation to lose its tax-exempt status or
otherwise have a material and adverse tax consequence on the Foundation, or
subject the Foundation to an excise tax under Section 4941 of the Code, it is
expected that the OTS would waive such voting restriction upon submission of a
legal opinion(s) by the Holding Company or the Foundation satisfactory to the
OTS. See "-Regulatory Conditions Imposed on the Foundation."
Under Indiana law, the Holding Company is authorized by statute to make
charitable contributions. Under the Code, the Holding Company is generally
allowed a deduction for federal income tax purposes for charitable contributions
made to qualifying donees within the taxable year of up to 10% of its taxable
income (with certain modifications) for such year. Charitable contributions made
by the Holding Company in excess of the annual deductible amount will be
deductible over each of the five succeeding taxable years, subject to certain
limitations.
We believe that the Conversion presents a unique opportunity to
establish and fund a charitable foundation given the substantial amount of
additional capital being raised in the Conversion. In making such a
determination, we considered the dilutive impact of the contribution of Common
Stock to the Foundation on the amount of Common Stock available to be offered
for sale in the Conversion. Based on such consideration, we believe that the
contribution to the Foundation in excess of the 10% annual deduction limitation
is justified given our capital position and earnings, the substantial additional
capital being raised in the Conversion and the potential benefits of the
Foundation to the communities that we serve. In this regard, assuming the sale
of the Common Stock at the midpoint of the Estimated Valuation Range, the
Holding Company would have pro forma shareholders' equity of $86.8 million, or
24.9% of pro forma consolidated assets, and Lincoln Federal's pro forma
tangible, core and total risk-based capital ratios would be 19.0%, 19.0% and
34.5%, respectively. See "Regulatory Capital Compliance," "Capitalization," and
"Comparison of Valuation and Pro Forma Information with No Foundation." Thus,
the amount of the contribution will not adversely affect the financial condition
of the Holding Company and Lincoln Federal and we therefore believe that the
amount of the charitable contribution is reasonable given our pro forma capital
positions. As such, we believe that the contribution does not raise safety and
soundness concerns.
We have received the opinion of Barnes & Thornburg that the Holding
Company's contribution of its own stock to the Foundation would not constitute
an act of self-dealing, and that the Holding Company will be entitled to a
deduction in the amount of the fair market value of the stock at the time of the
contribution, subject to the annual deduction limitation described above. The
Holding Company, however, would be able to carry forward any unused portion of
the deduction for five years following the contribution, subject to certain
limitations. Barnes & Thornburg has not, however, rendered advice as to fair
market value for purposes of determining the amount of the tax deduction. If the
Foundation had been established in 1997, the Holding Company would have received
a tax benefit of approximately $680,000 in 1997 and/or over the subsequent
five-year period (based on our pre-tax income for 1997, an assumed marginal tax
rate of 34% and a deduction for the contribution of Common Stock equal to $2.0
million). The Holding Company is permitted under the Code to carry over the
excess contribution over the five-year period following the contribution to the
Foundation. Assuming the close of the Offering at the midpoint of the Estimated
Valuation Range, the Holding Company estimates that all of the deduction should
be deductible over the six-year period. Neither the Holding Company nor Lincoln
Federal expect to make any further contributions to the Foundation within the
first five years following the initial contribution. After that time, we may
consider future contributions to the Foundation. Any such decisions would be
based on an assessment of, among other factors, our financial condition at that
time, the interests of our shareholders and depositors, and the financial
condition and operations of the Foundation.
Although we have received the opinion of Barnes & Thornburg that the
Holding Company is entitled to a deduction for the charitable contribution,
there can be no assurances that the IRS will allow the Holding Company to deduct
its contribution of Common Stock to the Foundation. In such event, the Holding
Company's tax benefit related to the contribution to the Foundation would be
expensed without tax benefit, resulting in a reduction in earnings in the year
in which the IRS makes such a determination. See "Risk Factors-Establishment of
the Foundation."
As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are generally exempt from federal and state
corporate income taxation. However, investment income, such as interest,
dividends and capital gains, of a private foundation will generally be subject
to a federal excise tax of 2.0%. The Foundation will be required to make an
annual filing with the IRS within four and one-half months after the close of
the Foundation's fiscal year to maintain its tax-exempt status. The Foundation
will be required to publish a notice that the annual information return will be
available for public inspection for a period of 180 days after the date of such
public notice. The information return for a private foundation must include,
among other things, an itemized list of all grants made or approved, showing the
amount of each grant, the recipient, any relationship between a grant recipient
and the Foundation's managers and a concise statement of the purpose of each
grant. The Foundation will also be required to file a bi-annual report with the
Secretary of State of Indiana.
Regulatory Conditions Imposed on the Foundation. We expect that, before
the OTS will approve the Conversion, it will require the Foundation to agree to
the following conditions: (i) the Foundation will be subject to examination by
the OTS; (ii) the Foundation must comply with supervisory directives imposed by
the OTS; (iii) the Foundation will operate in accordance with written policies
adopted by the Board of Directors, including a conflict of interest policy; and
(iv) any shares of Common Stock held by the Foundation must be voted in the same
ratio as all other outstanding shares of Common Stock on all proposals
considered by shareholders of the Holding Company; provided, however, that the
OTS would waive this voting restriction under certain circumstances if
compliance with the voting restriction would: (a) cause a violation of the laws
of the State of Indiana and the OTS determines that federal law would not
preempt the application of the laws of Indiana to the Foundation; (b) would
cause the Foundation to lose its tax-exempt status or otherwise have a material
and adverse tax consequence on the Foundation; or (c) would cause the Foundation
to be subject to an excise tax under Section 4941 of the Code. In order for the
OTS to waive such voting restriction, the Holding Company's or the Foundation's
legal counsel would be required to render an opinion satisfactory to the OTS.
There can be no assurances that a legal opinion addressing these issues could be
rendered, or if rendered, that the OTS would grant an unconditional waiver of
the voting restriction. In no event would the voting restriction survive the
sale of shares of the Common Stock held by the Foundation.
Various OTS regulations may be deemed to apply to the Foundation
including regulations regarding (i) transactions with affiliates, (ii) conflicts
of interest, (iii) capital distributions and (iv) repurchases of capital stock
within the three-year period subsequent to a mutual-to-stock conversion. Because
only three of the nine directors of the Holding Company and Lincoln Federal are
expected to serve as directors of the Foundation and, following the Conversion
the Foundation and its directors will hold less than 10% of the outstanding
shares of the Holding Company's Common Stock, the Holding Company and Lincoln
Federal do not believe that the Foundation should be deemed an affiliate of
Lincoln Federal. The Holding Company and Lincoln Federal anticipate that the
Foundation's affairs will be conducted in a manner consistent with the OTS'
conflict of interest regulations and, in keeping therewith, Lincoln Federal's
Board of Directors readopted the Plan of Conversion and approved the
establishment of the Foundation with the three directors who also serve on the
Board of the Foundation not participating in such action. Lincoln Federal has
provided information to the OTS demonstrating that the initial contribution of
Common Stock to the Foundation would be within the amount which Lincoln Federal
would be permitted to make as a capital distribution assuming such contribution
is deemed to have been made by Lincoln Federal.
Principal Effects of Conversion
General. Each savings depositor in a mutual savings bank such as
Lincoln Federal has both a savings account and a pro rata ownership in the net
worth of that institution, based upon the balance in his or her savings account.
This ownership interest has no tangible market value separate from the savings
account. Upon conversion to stock form, the ownership of our net worth will be
represented by the outstanding shares of stock to be owned by the Holding
Company. Certificates are issued to evidence ownership of the capital stock.
These stock certificates are transferable and, therefore, the shares may be
transferred with no effect on any account the seller may hold with us.
Continuity. While the Conversion is being accomplished, we will
continue without interruption our normal business of accepting deposits and
making loans. After the Conversion, we will continue to provide services for
account holders and borrowers under current policies carried on by our present
management and staff.
Our directors at the time of Conversion will continue to serve as our
directors after the Conversion until the expiration of their current terms, and
thereafter, if reelected. All of our executive officers at the time of
Conversion will retain their positions after the Conversion.
Effect on Deposit Accounts. Under the Plan, each of our depositors at
the time of the Conversion will automatically continue as a depositor after the
Conversion, and each deposit account will remain the same with respect to
deposit balance, interest rate and other terms. Each account will also continue
to be insured by the FDIC in exactly the same way as before. Depositors will
continue to hold their existing certificates, passbooks and other evidence of
their accounts.
Effect on Loans of Borrowers. None of our loans will be affected by the
Conversion. The amount, interest rate, maturity and security for each loan will
be unchanged.
Effect on Voting Rights of Members. Currently in our mutual form, our
depositor and certain borrower members have voting rights and may vote for the
election of directors. Following the Conversion, depositors and borrowers will
cease to have voting rights. All voting rights in Lincoln Federal will be vested
in the Holding Company as our sole shareholder. Voting rights in the Holding
Company will be vested exclusively in its shareholders, with one vote for each
share of Common Stock. Neither the Common Stock to be sold in the Conversion nor
the capital stock of Lincoln Federal will be insured by the FDIC or by any other
government entity.
Effect on Liquidation Rights. Current federal regulations and the Plan
of Conversion provide for the establishment of a "liquidation account" by us for
the benefit of our deposit account holders with balances of no less than $50.00
on June 30, 1997 ("Eligible Account Holders"), and our deposit account holders
with balances of no less than $50.00 on September 30, 1998 ("Supplemental
Eligible Account Holders"), who continue to maintain their accounts with us
after the Conversion. The liquidation account will be credited with our net
worth as reflected in the latest statement of financial condition in the final
prospectus used in the Conversion. Each Eligible Account Holder and Supplemental
Eligible Account Holder will, with respect to each deposit account held, have a
related inchoate interest in a portion of the balance of the liquidation
account. This inchoate interest is referred to in the Plan as a "subaccount
balance." In the event of a complete liquidation of us after the Conversion (and
only in such event), Eligible Account Holders and Supplemental Eligible Account
Holders would be entitled to a distribution from the liquidation account in an
amount equal to the then current adjusted subaccount balance then held, before
any liquidation distribution would be made to the Holding Company as our sole
shareholder. We believe that a liquidation of Lincoln Federal is unlikely.
Each Eligible Account Holder will have a subaccount balance in the
liquidation account for each deposit account held as of June 30, 1997 (the
"Eligibility Record Date"). Each Supplemental Eligible Account Holder will have
a subaccount balance in the liquidation account for each deposit account held as
of September 30, 1998 (the "Supplemental Eligibility Record Date"). Each initial
subaccount balance will be the amount determined by multiplying the total
opening balance in the liquidation account by a fraction, the numerator of which
is the amount of the qualifying deposit (a deposit of at least $50 as of June
30, 1997, or September 30, 1998, respectively) of such deposit account, and the
denominator of which is the total of all qualifying deposits on that date. If
the amount in the deposit account on any subsequent annual closing date of
Lincoln Federal is less than the balance in such deposit account on any other
annual closing date, or the balance in such account on the Eligibility Record
Date or the Supplemental Eligibility Record Date, as the case may be, this
interest in the liquidation account will be reduced by an amount proportionate
to any such reduction, and will not thereafter be increased despite any
subsequent increase in the related deposit account. An Eligible Account
Holder's, as well as a Supplemental Eligible Account Holder's, interest in the
liquidation account will cease to exist if the deposit account is closed. The
liquidation account will never increase and will be correspondingly reduced as
the interests in the liquidation account are reduced or cease to exist. In the
event of liquidation, any assets remaining after the above liquidation rights of
Eligible Account Holders and Supplemental Eligible Account Holders are satisfied
will be distributed to the Holding Company as our sole shareholder.
A merger, consolidation, sale of bulk assets, or similar combination or
transaction in which we are not the surviving entity would not be considered to
be a "liquidation" under which distribution of the liquidation account could be
made, provided the surviving institution is an FDIC-insured institution. In such
a transaction, the liquidation account would be assumed by the surviving
institution. The OTS has stated that the consummation of a transaction of the
type described in the preceding sentence in which the surviving entity is not an
FDIC-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then-remaining balance in the liquidation account.
The creation and maintenance of the liquidation account will not
restrict the use of or application of any of the net worth accounts, except that
we may not declare or pay a cash dividend on or repurchase our capital stock if
the effect of such dividend or repurchase would be to cause our net worth to be
reduced below the aggregate amount then required for the liquidation account.
Tax Effects. We intend to proceed with the Conversion on the basis of
an opinion from Barnes & Thornburg as to all tax matters that are material to
the Conversion. The opinion is based, among other things, on certain
representations made by us, including the representation that the exercise price
of the subscription rights to purchase the Common Stock will be approximately
equal to the fair market value of the stock at the time of the completion of the
Conversion. We have received an opinion of Keller which, based on certain
assumptions, concludes that the subscription rights to purchase the Common Stock
issued in the Conversion do not have any economic value at the time of
distribution or at the time the subscription rights are exercised, whether or
not a Community Offering takes place, and Barnes & Thornburg's opinion is given
in reliance thereon. Barnes & Thornburg's opinion provides substantially as
follows:
1. Our change in form from a mutual savings bank to a stock savings and
bank will qualify as a reorganization under Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the "Code"), and no gain or
loss will be recognized to us in either our mutual form or our stock
form by reason of the Conversion.
2. No gain or loss will be recognized by the converted savings bank upon
receipt of money from the Holding Company for the converted savings
bank's capital stock, and no gain or loss will be recognized by the
Holding Company upon the receipt of money for Common Stock of the
Holding Company.
3. The basis of the assets of the converted savings bank will be the same
as the basis in our hands prior to the Conversion.
4. The holding period of the assets of the converted savings bank will
include the period during which the assets were held by us in our
mutual form prior to Conversion.
5. No gain or loss will be realized by our deposit account holders or
borrowers, upon the constructive issuance to them of withdrawable
deposit accounts of the converted savings bank immediately after the
Conversion, interests in the liquidation account, and/or on the
distribution to them of nontransferable subscription rights to purchase
Common Stock.
6. The basis of an account holder's deposit accounts in the converted
savings bank after the Conversion will be the same as the basis of his
or her deposit accounts with us prior to the Conversion.
7. The basis of each account holder's interest in the liquidation account
will be zero. The basis of the non-transferable subscription rights
will be zero.
8. The basis of the Holding Company Common Stock to its shareholders will
be the actual purchase price ($10.00) thereof, and a shareholder's
holding period for Common Stock acquired through the exercise of
subscription rights will begin on the date on which the subscription
rights are exercised.
9. No taxable income will be realized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members as a result of
the exercise of the nontransferable subscription rights.
10. The converted savings bank in its stock form will succeed to and take
into account our earnings and profits or deficit in earnings and
profits, in our mutual form, as of the date of Conversion.
The opinion also concludes in effect that:
1. No taxable income will be realized by us on the issuance of
subscription rights to eligible subscribers to purchase shares of
Common Stock at fair market value.
2. The converted savings bank will succeed to and take into account the
dollar amounts of those accounts of Lincoln Federal in its mutual form
which represent bad debt reserves in respect of which Lincoln Federal
in its mutual form has taken a bad debt deduction for taxable years on
or before the date of the transfer.
3. The creation of the liquidation account will have no effect on our
taxable income, deductions, or additions to bad debt reserves or
distributions to shareholders under Section 593 of the Code.
Barnes & Thornburg has also issued an opinion stating in essence that
the Conversion will not be a taxable transaction to the Holding Company or to us
under any Indiana tax statute imposing a tax on income, and that our depositors
and borrowers will be treated under such laws in a manner similar to the manner
in which they will be treated under federal income tax law.
The opinions of Barnes & Thornburg and Keller, unlike a letter ruling
issued by the Internal Revenue Service, are not binding on the Service and the
conclusions expressed herein may be challenged at a future date. The Service has
issued favorable rulings for transactions substantially similar to the proposed
Conversion, but any such ruling may not be cited as precedent by any taxpayer
other than the taxpayer to whom the ruling is addressed. We do not plan to apply
for a letter ruling concerning the transactions described herein.
Offering of Common Stock
Under the Plan of Conversion, up to 5,895,500 shares of Common Stock
are being offered for sale, initially through the Subscription Offering (subject
to a possible increase to 6,809,250 shares). See "- Subscription Offering." The
Plan of Conversion requires, with certain exceptions, that a number of shares
equal to at least 4,305,000 be sold in order for the Conversion to be completed.
Shares may also be offered to the public in a Community Offering which is
expected to commence after the Subscription Offering terminates, but may begin
at any time during the Subscription Offering. The Community Offering may expire
at any time when orders for at least 4,305,000 shares have been received in the
Subscription Offering and Community Offering, but no later than ____________,
1999, unless extended by us and the Holding Company. The offering may be
extended, subject to OTS approval, until 24 months following the members'
approval of the Plan of Conversion, or until _____________, 2000. The actual
number of shares to be sold in the Conversion will depend upon market and
financial conditions at the time of the Conversion, provided that no fewer than
4,305,000 shares or more than 6,809,250 shares will be sold in the Conversion.
The per share price to be paid by purchasers in the Community Offering, if any,
for any remaining shares will be $10.00, the same price paid by subscribers in
the Subscription Offering. See "- Stock Pricing."
The Subscription Offering expires at 12:00 noon, Plainfield time, on
____________, 1998. OTS regulations and the Plan of Conversion require that we
complete the sale of Common Stock within 45 days after the close of the
Subscription Offering. This 45-day period expires on ____________, 1999. In the
event we are unable to complete the sale of Common Stock within this 45-day
period, we may request an extension of this time period from the OTS. No single
extension granted by the OTS, however, may exceed 90 days. No assurance can be
given that an extension would be granted if requested. The OTS has, however,
granted extensions due to the inability of mutual financial institutions to
complete a stock offering as a result of the development of adverse conditions
in the stock market. If an extension is granted, we will promptly notify
subscribers of the granting of the extension of time and will promptly return
subscriptions unless subscribers affirmatively elect to continue their
subscriptions during the period of extension.
Such extensions may not be made beyond _____________, 2000.
As permitted by OTS regulations, the Plan of Conversion provides that
if, for any reason, purchasers cannot be found for an insignificant residue of
unsubscribed shares of the Common Stock, our Board of Directors will seek to
make other arrangements for the sale of the remaining shares. Such other
arrangements will be subject to the approval of the OTS. If such other purchase
arrangements cannot be made, the Plan of Conversion will terminate. In the event
that the Conversion is not completed, we will remain a mutual savings bank, all
subscription funds will be promptly returned to subscribers with interest earned
thereon at our passbook rate, which is currently 2.72% per annum (except for
payments to have been made through withdrawal authorizations which will have
continued to earn interest at the contractual account rates), and all withdrawal
authorizations will be canceled.
Subscription Offering
In accordance with OTS regulations, nontransferable rights to subscribe
for the purchase of the Holding Company's Common Stock have been granted under
the Plan of Conversion to the following persons in the following order of
priority: (1) our Eligible Account Holders; (2) the ESOP; (3) our Supplemental
Eligible Account Holders; and (4) our members other than Eligible Account
Holders and Supplemental Eligible Account Holders, at the close of business on
___________, 1998, the voting record date for the Special Meeting, including
holders of deposit accounts on ___________, 1998 and borrowers of Lincoln
Federal on June 19, 1984, who remain borrowers on ___________, 1998 ("Other
Members"). All subscriptions received will be subject to the availability of
Common Stock after satisfaction of all subscriptions of all persons having prior
rights in the Subscription Offering, and to the maximum and minimum purchase
limitations set forth in the Plan of Conversion (and described below). The June
30, 1997, date for determination of Eligible Account Holders and the September
30, 1998 date for determination of Supplemental Eligible Account Holders were
selected in accordance with federal regulations applicable to the Conversion.
Category I: Eligible Account Holders. Each Eligible Account Holder, in
his capacity as such (counting all persons on a single joint account as one
Eligible Account Holder), is permitted to subscribe for up to 25,000 shares of
the Holding Company's Common Stock, provided that each Eligible Account Holder
may not subscribe for more than 68,093 shares in the Conversion including shares
subscribed for by such person's Associates or persons acting in concert as a
group.
If sufficient shares are not available in this Category I, shares will
be allocated in a manner that will allow each Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
allocation consist of the lesser of 100 shares or the amount subscribed for.
Thereafter, unallocated shares will be allocated to subscribing Eligible Account
Holders in the proportion that the amounts of their respective qualifying
deposits bear to the total amount of qualifying deposits of all subscribing
Eligible Account Holders.
The "qualifying deposits" of an Eligible Account Holder is the amount
of the deposit balances (provided such aggregate balance is not less than
$50.00) in his or her deposit accounts, including demand deposit accounts, as of
the close of business on June 30, 1997. Subscription rights received by
directors and officers in this category based upon their increased deposits in
Lincoln Federal during the year preceding June 30, 1997, are subordinated to the
subscription rights of other Eligible Account Holders. Notwithstanding the
foregoing, shares of Common Stock with a value in excess of $58,950,000, the
maximum of the Estimated Valuation Range, may be sold to the ESOP before
satisfying the subscriptions of Eligible Account Holders.
Category II: The ESOP. The Holding Company's tax-qualified ESOP is
permitted to subscribe for up to 10% of the aggregate number of shares of the
Holding Company's Common Stock sold in the Conversion and issued to the
Foundation, provided that shares remain available after satisfying the
subscription rights of Eligible Account Holders for up to $58,950,000. The ESOP
intends to subscribe for a number of shares equal to 8% of the Holding Company's
Common Stock sold in the Conversion and issued to the Foundation. The ESOP's
right to purchase shares of Common Stock under this category shall be
subordinated to all rights received by the Eligible Account Holders to purchase
shares pursuant to Category I; provided, however, that notwithstanding any
provision of the Plan of Conversion to the contrary, the ESOP shall have a
priority right to purchase any such shares of Common Stock sold in the
Conversion exceeding the maximum of the Estimated Valuation Range. If the ESOP
is unable to purchase all or part of the shares of Common Stock for which it
subscribes, the ESOP may purchase such shares on the open market or may purchase
authorized but unissued shares of the Holding Company. Any purchase by the ESOP
of authorized but unissued shares could dilute the interests of the Holding
Company's shareholders.
Category III: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder, in his capacity as such (counting all persons on a
single joint account as one Supplemental Eligible Account Holder), is permitted
to subscribe for up to 25,000 shares of the Holding Company's Common Stock,
provided that each Supplemental Account Holder may not subscribe for more than
68,093 shares in the Conversion including shares subscribed for by such person's
Associates or person acting in concert as a group, to the extent that shares of
the Holding Company's Common Stock remain available for purchase after
satisfaction of the subscription rights of all Eligible Account Holders and the
ESOP. Any subscription rights received by a person as a result of his or her
status as an Eligible Account Holder will reduce to the extent thereof the
subscription rights granted to such person as a result of his or her status as a
Supplemental Eligible Account Holder.
If sufficient shares are not available in this Category III, shares
will be allocated in a manner that will allow each Supplemental Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make his or her allocation consist of the lesser of 100 shares or the amount
subscribed for. Thereafter, unallocated shares will be allocated to subscribing
Supplemental Eligible Account Holders in the proportion that the amounts of
their respective qualifying deposits bear to the total amount of qualifying
deposits of all subscribing Supplemental Eligible Account Holders.
The "qualifying deposits" of a Supplemental Eligible Account Holder is
the amount of the deposit balances (provided such aggregate balance is not less
than $50) in his or her deposit accounts, including demand deposit accounts, as
of the close of business on September 30, 1998.
Category IV: Other Members. Each savings account holder, other than an
Eligible Account Holder or a Supplemental Eligible Account Holder, who is
entitled to vote at the Special Meeting due to the existence of a savings
account on ________, 1998, and our borrowers as of June 19, 1984 who remain
borrowers on _______, 1998 (an "Other Member"), in his capacity as such
(counting all persons on a single joint account as one Other Member), is
permitted to subscribe for up to 25,000 shares of the Holding Company's Common
Stock, provided that each Other Member may not subscribe for more than 68,093
shares in the Conversion, including shares subscribed for by such person's
Associates or persons acting in concert as a group, to the extent that shares
remain available for purchase after satisfaction of the subscription rights of
all Eligible Account Holders, the ESOP and all Supplemental Eligible Account
Holders.
If sufficient shares are not available in this Category IV, shares will
be allocated pro rata among subscribing Other Members in the same proportion
that the number of shares subscribed for by each Other Member bears to the total
number of shares subscribed for by all Other Members.
Timing of Offering and Method of Payment. The Subscription Offering
will expire at 12:00 noon, Plainfield time, on ______________, 1998 (the
"Expiration Date"). The Expiration Date may be extended by Lincoln Federal and
the Holding Company for successive 90-day periods, subject to OTS approval, to
____________, 2000.
Subscribers must, before the Expiration Date, or such date to which the
Expiration Date may be extended, return an original Order Form to us, properly
completed, together with checks or money orders in an amount equal to the
Purchase Price ($10.00 per share) multiplied by the number of shares for which
subscription is made. Payment for stock purchases can also be accomplished
through authorization on the original Order Form of withdrawals from accounts
with us (including a certificate of deposit, but excluding IRA accounts). Funds
must actually be in the account when an order for the purchase of Common Stock
is submitted. We have the right to reject any orders transmitted by facsimile or
on copies of Order Forms and any payments made by wire transfer. The
beneficiaries of IRA accounts are deemed to have the same subscription rights as
other depositors. However, the IRA accounts maintained with us do not permit
investment in the Common Stock. A depositor interested in using his or her IRA
funds to purchase Common Stock must do so through a self-directed IRA account.
Since we do not offer such accounts, we will allow such a depositor to make a
trustee-to-trustee transfer of the IRA funds on deposit with us that he wishes
to invest. There will be no early withdrawal or IRS interest penalties for such
transfers. The new trustee would hold the Common Stock in a self-directed
account in the same manner that we now hold the depositor's IRA funds. An annual
administrative fee would be payable to the new trustee.
Depositors interested in using funds in a Lincoln Federal IRA to
purchase Common Stock should contact us at (317) 837-5036 as soon as possible so
that the necessary forms may be forwarded for execution and returned prior to
the Expiration Date of the Subscription Offering.
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 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 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 Securities
Exchange Act of 1934, as amended (the "1934 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.
Until completion or termination of the Conversion, subscribers who
elect to make payment through authorization of withdrawal from accounts with us
will not be permitted to reduce the deposit balance in any such accounts below
the amount required to purchase the shares for which they subscribed. In such
cases interest will continue to be credited on deposits authorized for
withdrawal until the completion of the Conversion. Interest at the passbook
rate, which is currently 2.72% per annum will be paid on amounts submitted by
check. Authorized withdrawals from certificate accounts for the purchase of
Common Stock will be permitted without the imposition of early withdrawal
penalties or loss of interest. However, withdrawals from certificate accounts
that reduce the balance of such accounts below the required minimum for specific
interest rate qualification will cause the cancellation of the certificate
accounts at the effective date of the Conversion, and the remaining balance will
earn interest at the passbook savings rate. Stock subscriptions received and
accepted by us are final and may not be revoked by the purchaser. Subscriptions
may be withdrawn only in the event that we extend the Expiration Date of the
Subscription Offering as described above.
Members in Non-Qualified States or Foreign Countries. 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 stock pursuant to the
Plan reside. However, no person will be offered or sold or receive any stock
pursuant to the Subscription Offering if such person resides in a foreign
country or resides in a state in the United States with respect to which all of
the following apply: (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state; (ii) the granting of
subscription rights or the offer or sale of Common Stock to such persons would
require us or the Holding Company or our respective officers and directors,
under the securities laws of such state, to register as a broker, dealer,
salesman or selling agent, or to register or otherwise qualify the Common Stock
for sale in such state; and (iii) such registration, qualification or filing in
our judgment or in the judgment of the Holding Company would be impracticable or
unduly burdensome for reasons of cost or otherwise.
To assist in the Subscription Offering and the Community Offering, if
any, the Holding Company has established a Stock Information Center that you may
contact at (317) 837-5036. Callers to the Stock Information Center will be able
to request a Prospectus and other information relating to the offering.
Community Offering
To the extent shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of the Common
Stock in a Community Offering to the general public, with preference given to
residents of Hendricks, Montgomery and Clinton Counties, Indiana, the counties
in which our banking offices are located. The right of any person to purchase
shares in the Community Offering is subject to our right to accept or reject
such purchase in whole or in part. We may terminate the Community Offering as
soon as we have received orders for at least the minimum number of shares
available for purchase in the Conversion.
The Community Offering may expire at any time when orders for at least
4,305,000 shares have been received in the Subscription Offering and Community
Offering (but no later than ______________, 1999, unless extended by us and the
Holding Company). Persons wishing to purchase stock in the Community Offering,
if conducted, should return the Order Form to us, properly completed, together
with a check or money order in the amount equal to the Purchase Price ($10.00
per share) multiplied by the number of shares which that person desires to
purchase. However, as noted above, we may terminate the Community Offering as
soon as we receive orders for at least the minimum number of shares available
for purchase in the Conversion.
The maximum number of shares of Common Stock which may be purchased in the
Community Offering by any person (including such person's Associates) or persons
acting in concert is 25,000 in the aggregate. A member who, together with his
Associates and persons acting in concert, has subscribed for shares in the
Subscription Offering may subscribe for a number of additional shares in the
Community Offering that does not exceed the lesser of (i) 25,000 shares or (ii)
the number of shares which, when added to the number of shares subscribed for by
the member (and his Associates and persons acting in concert) in the
Subscription Offering, would not exceed 68,093. We reserve the right to reject
any orders received in the Community Offering in whole or in part.
If all the Holding Company Common Stock offered in the Subscription
Offering is subscribed for, no Holding Company Common Stock will be available
for purchase in the Community Offering. Purchase orders received during the
Community Offering will be filled up to a maximum of 2% of the total number of
shares of Common Stock issued in the Conversion, with any remaining unfilled
purchase orders to be allocated on an equal number of shares basis. If the
Community Offering extends beyond 45 days following the expiration of the
Subscription Offering, subscribers will have the right to increase, decrease or
rescind subscriptions for stock previously submitted. All sales of Holding
Company Common Stock in the Community Offering will be at the same price per
share as the sales of Holding Company Common Stock in the Subscription Offering.
Cash and checks received in the Community Offering will be placed in a
special savings account with us, and will earn interest at the passbook rate,
which is currently 2.72% per annum from the date of deposit until completion or
termination of the Conversion. In the event that the Conversion is not
consummated for any reason, all funds submitted pursuant to the Community
Offering will be promptly refunded with interest as described above.
Delivery of Certificates
Certificates representing shares issued in the Subscription Offering
and in the Community Offering, if any, pursuant to Order Forms will be mailed to
the persons entitled to them at the addresses of such persons specified in
properly completed Order Forms as soon as practicable following consummation of
the Conversion. Any certificates returned as undeliverable will be held by the
Holding Company until claimed by the person legally entitled to them or
otherwise disposed of in accordance with applicable law.
Marketing Arrangements
To assist us and the Holding Company in marketing the Common Stock, we
have retained the services of Webb, which is a division of Keefe, Bruyette, as
our financial advisor. Keefe, Bruyette is a broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"). Webb will assist us in the
Conversion as follows: (1) in training and educating our employees regarding the
mechanics and regulatory requirements of the conversion process; (2) in managing
the Stock Information Center by assisting stock subscribers and keeping records
of all stock subscriptions; (3) in preparing marketing materials; (4) in
obtaining proxies from our members with respect to the Special Meeting; and (5)
in assisting with the Community Offering. For providing these services, we have
agreed to pay Webb a management fee of $25,000 and a success fee based on the
aggregate dollar amount of shares of Common Stock sold in the Conversion other
than shares sold to executive officers, directors and employees (or members of
their immediate families) or to the ESOP or Foundation. The success fee will be
calculated based upon 1.15% of the Common Stock sold to residents of Indiana,
plus .75% of the Common Stock sold to non-residents of Indiana. The management
fee will be applied against the success fee. Webb will not seek reimbursement
for out-of-pocket expenses, but will be reimbursed for legal fees, not to exceed
$40,000, and expenses of counsel. Offers and sales in the Subscription Offering
and the Community Offering will be on a best efforts basis and, as a result,
Webb is not obligated to purchase any shares of the Common Stock. Keefe,
Bruyette intends to make a market in the Common Stock, although it is under no
obligation to do so.
We have also agreed to indemnify Webb, under certain circumstances,
against liabilities and expenses (including legal fees) arising out of Webb's
engagement by us, including liabilities under the Securitities Act of 1933 (the
"1933 Act").
Selected Dealers
With the prior approval of Lincoln Federal, Webb may enter into an
agreement with certain dealers chosen by Lincoln Federal and Webb (together, the
"Selected Dealers") to assist in the sale of shares in the Community Offering.
Selected Dealers will receive commissions at an agreed upon rate, not to exceed
5.5%, for all shares sold by such Selected Dealers. During the Community
Offering, Selected Dealers may only solicit indications of interest from their
customers to place orders with us as of a certain date (the "Order Date") for
the purchase of shares of Common Stock. When and if the Holding Company, Lincoln
Federal and Webb believe that enough indications of interest and orders have
been received in the Subscription Offering and the Community Offering, if any,
to consummate the Conversion, Webb will request, as of the Order Date, Selected
Dealers to submit orders to purchase shares for which they have previously
received indications of interest from the customers. Selected Dealers will send
confirmations of the orders to such customers on the next business day after the
Order Date. Selected Dealers will debit the accounts of their customers on the
date which will be three business days from the Order Date (the "Settlement
Date"). On the Settlement Date, funds received by Selected Dealers will be
remitted to us. It is anticipated that the Conversion will be consummated on the
Settlement Date. However, if consummation is delayed after payment has been
received by us from Selected Dealers, funds will earn interest at the passbook
rate, which is currently 2.72% per annum, until the completion of the offering.
Funds will be returned promptly in the event the Conversion is not consummated.
Limitations on Common Stock Purchases
The Plan includes a number of limitations on the number of shares of
Common Stock which may be purchased during the Conversion. These are summarized
below:
(1) No fewer than 25 shares may be purchased by any person purchasing shares
of Common Stock in the Conversion (provided that sufficient shares are
available).
(2) No Eligible Account Holder, Supplemental Eligible Account Holder or Other
Member, in his capacity as such (including all persons on a single joint
account as one member), may subscribe for more than 25,000 shares.
Notwithstanding the foregoing, the maximum number of shares of Common Stock
which may be purchased in the Conversion by any Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member (including such person's
Associates or group acting in concert and counting all persons on a joint
account as one member) shall be 68,093 shares in the aggregate, except that
the ESOP may purchase in the aggregate not more than 10% of the total number
of shares offered in the Conversion. The maximum number of shares of Common
Stock which may be purchased in the Community Offering, if any, by any person
(including such person's Associates or persons acting in concert) is 68,093
in the aggregate. A member who, together with his Associates and persons
acting in concert, has subscribed for shares in the Subscription Offering may
subscribe for a number of additional shares in the Community Offering that
does not exceed the lesser of (i) 25,000 shares or (ii) the number of shares
which, when added to the number of shares subscribed for by the member (and
his Associates and persons acting in concert) in the Subscription Offering
(including all persons on a joint account), would not exceed 68,093. The ESOP
expects to purchase a number of shares equal to 8% of the total number of
shares sold in the Conversion. Lincoln Federal's and the Holding Company's
Boards of Directors may, however, in their sole discretion, increase the
maximum purchase limitation set forth above up to 9.99% of the shares of
Common Stock sold in the Conversion, provided that orders for shares
exceeding 5% of the shares of Common Stock sold in the Conversion may not
exceed, in the aggregate, 10% of the shares sold in the Conversion. The
maximum purchase limitation likely would be increased only if an insufficient
number of subscriptions is received to sell the number of shares of Common
Stock at the minimum of the Estimated Valuation Range. If the Boards of
Directors decide to increase the purchase limitation, all persons who
subscribe for shares of Common Stock offered in the Conversion will be given
the opportunity to increase their subscriptions accordingly, subject to the
rights and preferences of any person who has priority subscription rights.
Subscribers will be notified in writing delivered to the address indicated on
their respective Stock Order Forms. The overall purchase limitation may be
reduced in the sole discretion of the Boards of Directors of the Holding
Company and Lincoln Federal.
(3) No more than 34.0% of the shares of Common Stock may be purchased in the
Conversion by directors and officers of Lincoln Federal and the Holding
Company and their Associates. This restriction does not apply to shares
purchased by the ESOP.
OTS regulations define "acting in concert" as (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. The Holding Company and Lincoln
Federal may presume that certain persons are acting in concert based upon, among
other things, joint account relationships or the fact that such persons have
filed joint Schedules 13D with the SEC with respect to other companies.
The term "Associate" of a person is defined to mean (i) any corporation
or organization (other than Lincoln Federal or its subsidiary or the Holding
Company) of which such person is a director, officer, partner or 10%
shareholder; (ii) any trust or other estate in which such person has a
substantial beneficial interest or serves as trustee or in a similar fiduciary
capacity; provided, however that such term shall not include any employee stock
benefit plan of the Holding Company or Lincoln Federal in which such a 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 relative
of such spouse, who either has the same home as such person or who is a director
or officer of Lincoln Federal or its subsidiary or the Holding Company.
Directors are not treated as Associates of one another solely because of their
board membership. Compliance with the foregoing limitations does not necessarily
constitute compliance with other regulatory restrictions on acquisitions of the
Common Stock. For a further discussion of limitations on purchases of the Common
Stock during and subsequent to the Conversion, see "- Restrictions on Sale of
Stock by Directors and Officers," "- Restrictions on Purchase of Stock by
Directors and Officers Following Conversion," and "Restrictions on Acquisition
of the Holding Company."
Restrictions on Repurchase of Stock by the Holding Company
Repurchases of its shares by the Holding Company will be restricted for
a period of three years from the date of the Conversion. OTS regulations
currently prohibit the Holding Company from repurchasing any of its shares
within one (1) year following the Conversion except in exceptional
circumstances. So long as we continue to meet certain capitalization
requirements, the Holding Company may repurchase shares in an open-market
repurchase program (which cannot exceed 5% of its outstanding shares in a
twelve-month period except in exceptional circumstances) during the second and
third year following the Conversion by giving appropriate prior notice to the
OTS. The OTS has authority to waive these restrictions under certain
circumstances. Unless repurchases are permitted under the foregoing regulations,
the Holding Company may not, for a period of three years from the date of the
Conversion, repurchase any of its capital stock from any person, except in the
event of an offer to purchase by the Holding Company on a pro rata basis from
all of its shareholders which is approved in advance by the OTS, except in
exceptional circumstances established to the satisfaction of the OTS, or except
for purchases of shares required to fund the RRP. The Holding Company may use
some of the net proceeds received from the sale of the Common Stock offered by
this Prospectus to repurchase such Common Stock, subject to OTS requirements.
Under Indiana law, the Holding Company will be precluded from
repurchasing its equity securities if, after giving effect to such repurchase,
the Holding Company would be unable to pay its debts as they become due or the
Holding Company's assets would be less than its liabilities and obligations to
preferential shareholders.
Restrictions on Sale of Stock by Directors and Officers
All shares of the Common Stock purchased by directors and officers of
Lincoln Federal or the Holding Company in the Conversion will be subject to the
restriction that such shares may not be sold or otherwise disposed of for value
for a period of one year following the date of purchase, except for any
disposition of such shares (i) following the death of the original purchaser or
(ii) by reason of an exchange of securities in connection with a merger or
acquisition approved by the applicable regulatory authorities. Sales of shares
of the Common Stock by the Holding Company's directors and officers will also be
subject to certain insider trading and other transfer restrictions under the
federal securities laws. See "Regulation - Federal Securities Laws" and
"Description of Capital Stock."
Each certificate for such restricted shares will bear a legend
prominently stamped on its face giving notice of the restrictions on transfer,
and instructions will be issued to the Holding Company's transfer agent to the
effect that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is a violation of the
restriction. Any shares of Common Stock issued pursuant to a stock dividend,
stock split or otherwise with respect to restricted shares will be subject to
the same restrictions on sale.
Restrictions on Purchase of Stock by Directors and Officers Following Conversion
OTS regulations provide that for a period of three years following the
Conversion, without prior written approval of the OTS, neither directors nor
officers of Lincoln Federal or the Holding Company nor their Associates may
purchase shares of the Common Stock of the Holding Company, except from a dealer
registered with the SEC. This restriction does not, however, apply to negotiated
transactions involving more than one percent of the Holding Company's
outstanding Common Stock, to shares purchased pursuant to stock option or other
incentive stock plans approved by the Holding Company's shareholders, or to
shares purchased by employee benefit plans maintained by the Holding Company
which may be attributable to individual officers or directors.
Restrictions on Transfer of Subscription Rights and Common Stock
Prior to the completion of the Conversion, OTS regulations and the Plan
of Conversion prohibit any person with subscription rights, including our
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members, from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or the shares of Common Stock to be issued upon their exercise.
Such rights may be exercised only by the person to whom they are granted and
only for his or her account. Each person exercising such subscription rights
will be required to certify that he or she is purchasing shares solely for his
or her own account and that he or she has no agreement or understanding
regarding the sale or transfer of such shares. The regulations also prohibit any
person from offering or making an announcement of an offer or intent to make an
offer to purchase such subscription rights or shares of Common Stock prior to
the completion of the Conversion. We intend to 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 known by us to involve the transfer of such
rights. In addition, persons who violate the purchase limitations may be subject
to sanctions and penalties imposed by the OTS.
Stock Pricing
The aggregate purchase price of the Holding Company Common Stock being
sold in the Conversion will be based on the appraised aggregate pro forma market
value of the Common Stock, as determined by an independent valuation. We
retained Keller, which is experienced in the valuation and appraisal of
financial institutions, including savings associations involved in the
conversion process, to prepare an appraisal. Keller will receive a fee of
$25,000 for its appraisal, plus out-of-pocket expenses up to $1,000. Keller has
also prepared a business plan for us for a fee of $6,000, plus out-of-pocket
expenses. We have agreed to indemnify Keller, under certain circumstances,
against liabilities and expenses (including legal fees) arising out of Keller's
engagement by us.
Keller has prepared an appraisal that establishes the Estimated
Valuation Range of the estimated pro forma market value of the Common Stock, as
of August 14, 1998, and as updated as of October 22, 1998, from a minimum of
$43,050,000 to a maximum of $58,950,000, with a midpoint of $51,000,000. This
appraisal assumes that the Holding Company issues 200,000 shares of Common Stock
to the Foundation. A copy of the appraisal is on file and available for
inspection at the offices of the OTS, 1700 G Street, N.W., Washington, D.C.
20552 and the Central Regional Office of the OTS, 200 West Madison, Suite 1300,
Chicago, Illinois 60606. The appraisal has also been filed as an exhibit to the
Holding Company's Registration Statement with the SEC, and may be reviewed at
the SEC's public reference facilities. See "Additional Information." The
appraisal involved a comparative evaluation of our operating and financial
statistics with those of other financial institutions. The appraisal also took
into account such other factors as the market for savings associations
generally, prevailing economic conditions, both nationally and in Indiana, which
affect the operations of savings associations, the competitive environment
within which we operate, and the effect of our becoming a subsidiary of the
Holding Company. No detailed individual analysis of the separate components of
Lincoln Federal's and the Holding Company's assets and liabilities was performed
in connection with the evaluation. The Board of Directors reviewed with
management Keller's methods and assumptions and accepted Keller's appraisal as
reasonable and adequate. The Holding Company, in consultation with Webb, has
determined to offer the Common Stock in the Conversion at a price of $10.00 per
share. The Holding Company's decision regarding the Purchase Price was based
solely on its determination that $10.00 per share is a customary purchase price
in conversion transactions. The Estimated Valuation Range may be increased or
decreased to reflect market and financial conditions prior to the completion of
the Conversion.
Promptly after the completion of the Subscription Offering and the
Community Offering, if any, Keller will confirm to us that, to the best of
Keller's knowledge and judgment, nothing of a material nature has occurred which
would cause Keller to conclude that the amount of the aggregate proceeds
received from the sale of the Common Stock in the Conversion was incompatible
with its estimate of our total pro forma market value at the time of the sale.
If, however, the facts do not justify such a statement, a new Estimated
Valuation Range and price per share may be set. Under such circumstances, the
Holding Company will be required to resolicit subscriptions. In that event,
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced;
provided that if our pro forma market value upon Conversion, excluding the
contribution of 200,000 shares to the Foundation, has increased to an amount
which does not exceed $68,092,500 (15% above the maximum of the Estimated
Valuation Range, excluding the contribution of 200,000 shares to the Foundation)
the Holding Company and Lincoln Federal do not intend to resolicit subscriptions
unless it is determined after consultation with the OTS that a resolicitation is
required.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares shown above. A
change in the number of shares to be issued in the Conversion will not affect
subscription rights. In the event of an increase in the maximum number of shares
being offered, persons who exercise their maximum subscription rights will be
notified of such increase and of their right to purchase additional shares.
Conversely, in the event of a decrease in the maximum number of shares being
offered, persons who exercise their maximum subscription rights will be notified
of such decrease and of the accompanying reduction in the number of shares for
which subscriptions may be made. In the event of a resolicitation, subscribers
will be afforded the opportunity to increase, decrease or maintain their
previously submitted order. The Holding Company will be required to resolicit if
the price per share is changed such that the total aggregate purchase price is
not within the minimum and 15% above the maximum of the Estimated Valuation
Range.
THE INDEPENDENT VALUATION IS NOT INTENDED AND MUST NOT BE CONSTRUED AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE
CONVERSION OR OF PURCHASING THE SHARES OF THE COMMON STOCK. MOREOVER, BECAUSE
SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER
OF MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO THE AMOUNT OF NET PROCEEDS AND
THE EARNINGS THEREON), ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO
ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SHARES IN THE CONVERSION WILL
THEREAFTER BE ABLE TO SELL THE SHARES AT PRICES RELATED TO THE FOREGOING
VALUATION OF THE PRO FORMA MARKET VALUE.
Number of Shares to be Issued
It is anticipated that the total offering of Common Stock (the number
of shares of Common Stock issued in the Conversion multiplied by the Purchase
Price of $10.00 per share) will be within the current minimum and 15% above the
maximum of the Estimated Valuation Range. Unless otherwise required by the OTS,
no resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions so long as the change in the
number of shares to be issued in the Conversion, in combination with the
Purchase Price, results in an offering within the minimum and 15% above the
maximum of the Estimated Valuation Range.
An increase in the total number of shares of Common Stock to be issued
in the Conversion would decrease both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
increasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. A decrease in the number of shares to be issued
in the Conversion would increase both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
decreasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. For a presentation of the effects of such
changes, see "Pro Forma Data."
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by
Lincoln Federal and the Holding Company will be final. The Plan provides that,
if deemed necessary or desirable by the Boards of Directors of the Holding
Company and Lincoln Federal, the Plan may be substantively amended by the Boards
of Directors, as a result of comments from regulatory authorities or otherwise,
with the concurrence of the OTS. Moreover, if the Plan of Conversion is so
amended, subscriptions which have been received prior to such amendment will not
be refunded unless otherwise required by the OTS.
Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes of
members eligible to be cast at the Special Meeting and the sale of all shares of
the Common Stock within 24 months following approval of the Plan by the members.
If these conditions are not satisfied, the Plan will be terminated and we will
continue business in the mutual form of organization. The Plan may be terminated
by the Boards of Directors of Lincoln Federal and the Holding Company at any
time prior to the Special Meeting and, with the approval of the OTS, by such
Boards of Directors at any time thereafter. Furthermore, OTS regulations and the
Plan of Conversion require that the Holding Company complete the sale of Common
Stock within 45 days after the close of the Subscription Offering. The OTS may
grant an extension of this time period if necessary, but no assurance can be
given that an extension would be granted. See "- Offering of Common Stock."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
General
Lincoln Bancorp was formed as an Indiana corporation on September 10,
1998 for the purpose of issuing the Common Stock and owning all of the capital
stock of Lincoln Federal issued in the Conversion. As a newly formed
corporation, the Holding Company has no operating history. All information in
this section should be read in conjunction with the consolidated financial
statements and notes thereto included within this document.
Lincoln Federal's principal business has historically consisted of
attracting deposits from the general public and making loans secured by
residential real estate. Our earnings primarily depend upon net interest income,
which is the difference between our interest income and interest expense.
Interest income is a function of the balances of loans and investments
outstanding during a given period and the yield earned on such loans and
investments. Interest expense is a function of the amount of deposits and
borrowings outstanding during the same period and interest rates paid on such
deposits and borrowings. Our earnings are also affected by provisions for loan
losses, service charges, operating expenses and income taxes.
We are also affected by prevailing economic conditions, as well as
government policies and regulations concerning, among other things, monetary and
fiscal affairs, housing and financial institutions. See "Regulation." Deposit
flows are influenced by a number of factors, including interest rates paid on
competing investments, account maturities and levels of personal income and
savings within our market. In addition, deposit growth is affected by how
customers perceive the stability of the financial services industry amid various
current events such as regulatory changes, failures of other financial
institutions and financing of the deposit insurance fund. Lending activities are
influenced by the demand for and supply of housing lenders, the availability and
cost of funds and various other items. Sources of funds for our lending
activities include deposits, payments on loans, borrowings and income provided
from operations.
Current Business Strategy
Our business strategy is to continue to operate a well-capitalized,
profitable and independent community savings bank dedicated primarily to
residential lending with an emphasis on personal service, and to provide a full
range of financial services to our customers. We have sought to implement this
strategy by (i) emphasizing the origination of one- to four-family residential
mortgage loans in our market area, (ii) seeking to increase the percentage of
higher-yielding commercial and consumer loans, (iii) purchasing investment
securities and loan participations, (iv) maintaining levels of capital well in
excess of regulatory requirements, and (v) improving asset quality.
The highlights of our business strategy are as follows:
o Profitability. Although no assurance can be made regarding
future profitability, we have been profitable in each of the
past five fiscal years. We had net income of $3.5 million in
fiscal 1997, $3.0 million in fiscal 1996, and $3.4 million in
fiscal 1995. Our net income for the six months ended June 30,
1998, was $817,000. Our average return on average assets for
the five years ended December 31, 1997, was 1.28%. Our returns
on average assets for the year ended December 31, 1997, and
the six months ended June 30, 1998 (on an annualized basis)
were 1.02% and .53%, respectively. This reduction in income
during the six-month period ended June 30, 1998 is largely
attributable to measures we took to restructure our balance
sheet, including the securitization of certain adjustable-rate
and low-yielding fixed-rate residential loans, and the sale of
certain residential loans in our portfolio.
o Origination of One- to Four-Family Residential Loans. Our
primary lending activity is the origination of one- to
four-family residential loans secured by property in our
primary market area. As of June 30, 1998, approximately 85% of
the loans in this category in our portfolio were secured by
property located in Hendricks, Montgomery and Clinton
Counties.
o Commercial Real Estate and Consumer Loans. We intend to
continue our recent emphasis on making higher-yielding
commercial real estate and consumer loans. We intend that the
higher yields that we earn on these types of loans will at
least partially offset the decline in interest income we have
experienced following the securitization and sale of certain
one- to four-family residential loans in our portfolio. From
December 31, 1995 to June 30, 1998, the percentage of consumer
loans in our portfolio has increased from 3.8% to 10.8% of our
gross loans receivable. The percentage of commercial real
estate loans has increased from 5.3% to 7.0% of gross loans
receivable over the same period as the result of the decrease
of the size of our overall loan portfolio. This increase in
consumer loans is largely attributable to a marketing campaign
designed to encourage our existing customers to apply for home
equity loans or lines of credit with us.
o Capital Position. At June 30, 1998, we exceeded all of our
regulatory capital requirements, and our equity capital was
$42.8 million, or 14.1% of total assets. Assuming net proceeds
at the midpoint of the Estimated Valuation Range, our pro
forma equity to assets ratio (excluding $31.8 million of net
proceeds to be retained by the Holding Company) at such date
would have been 20.5%. Assuming net proceeds at the minimum,
maximum and 15% above the maximum of the Estimated Valuation
Range, our pro forma equity to assets ratio (excluding the
proceeds to be retained by the Holding Company) at such date
would have been 19.5%, 21.4% and 22.4%, respectively. This
increase in our equity capital, along with the likely increase
in our expenses following the Conversion, will likely cause
our return on equity to decline, which could adversely affect
the trading price of the shares of Common Stock.
o Asset Quality. Following the Conversion, we intend to take
further measures to improve the quality of our assets.
Historically, our underwriting criteria for one- to
four-family residential loans focused heavily on the value of
the collateral securing the loan. We are currently revising
our lending policies to emphasize factors such as the income,
debt-to-income ratio, stability of earnings and past credit
history of a potential borrower in making credit decisions. We
have also recently established uniform underwriting criteria
to be used by each of our branch offices and we intend to
centralize the underwriting function in our Plainfield office
in the near future. We also intend to establish more
aggressive collection efforts for the non-performing loans in
our portfolio. We intend for these measures to reduce the
amount of non-performing loans in our portfolio and to
increase the ratio of our allowance for loan losses to
non-performing assets, which is currently below levels
maintained by our peer group of savings associations.
Asset/Liability Management--Qualitative and Quantitative Information About
Market Risk
Qualitative Information About Market Risk
An important component of our asset/liability management policy
includes examining the interest rate sensitivity of our assets and liabilities
and 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 business of savings
associations, the origination of 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.
ALCO Committee. Our board of directors has delegated responsibility for
the day-to-day management of interest rate risk to the Asset/Liability ("ALCO")
Committee, which consists of our President, T. Tim Unger, Chief Financial
Officer John M. Baer, Vice President-Lending Maxwell O. Magee, Branch
Coordinator Jim Standish, and Marketing Director Angela Coleman. The ALCO
Committee meets weekly to manage and review Lincoln Federal's assets and
liabilities. The ALCO Committee establishes daily interest rates for deposits
and approves the interest rates on one- to four-family residential loans, which
are based upon current rates established by the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). The ALCO Committee also approves interest rates for
other types of loans based upon the national prime rate and local market rates.
Loan Portfolio Restructuring. Our principal strategy to reduce exposure
to fluctuating market interest rates is to manage the interest-rate sensitivity
of our interest-earning assets and interest-bearing liabilities. In early 1997,
our new management concluded that our asset portfolio exposed us to significant
risks in the event of a material and prolonged increase or decrease in interest
rates. To address this problem, in 1997 we securitized and sold certain one- to
four-family residential loans in our portfolio in order to reduce our exposure
to interest rate risk. We presented to Freddie Mac pools of one- to four-family
residential mortgage loans with either fixed interest rates or variable interest
rates pegged to the 11th District Cost of Funds Index ("COFI"). COFI loans
increase our exposure to interest rate risk because the COFI index does not
follow, and usually lags behind, the U.S. Treasury yield curve, which is the
index we use to establish the interest rates for our deposits. In addition, many
of the COFI loans did not adjust quickly enough to changes in market interest
rates as the result of annual rate adjustment limitations in the loan
agreements.
Many of the loans we securitized did not include all of the
documentation required by Freddie Mac. We were able to securitize these loans by
representing to Freddie Mac that, other than the loans with the missing
documentation specifically identified in the Freddie Mac Master Commitment, the
loans that we securitized did not otherwise vary from Freddie Mac's standard
underwriting and mortgage eligibility requirements.
After grouping these loans into pools with similar loans that we
originated, we assigned the notes and mortgages to Freddie Mac in consideration
for several mortgage-backed securities representing the different loan pools. In
August, 1997, we securitized approximately $76.2 million of one- to four-family
residential mortgage loans in this manner, consisting of $26.9 million in COFI
loans and $49.3 million in fixed-rate loans. We immediately sold on the
secondary market all of the mortgage-backed securities representing the COFI
loans and $27.4 million of the securities backed by lower-yielding fixed-rate
loans for a gain of $118,000. We retained in our investment portfolios
mortgage-backed securities representing $21.9 million of higher-yielding
fixed-rate loans.
In April, 1998, we securitized an additional $39.9 million of our one-
to four-family residential mortgage loans, consisting of $14.2 million of COFI
loans and $25.7 million of fixed-rate loans for a gain of $105,000. We sold on
the secondary market the mortgage-backed security representing the COFI loans
and $6.9 million of lower-yielding fixed-rate loans. We retained in our
investment portfolio mortgage-backed securities representing $18.8 million of
higher-yielding fixed-rate loans.
We continue to service all of the loans that we originated that have
been securitized by Freddie Mac in consideration of a fee of .25% and .375% of
the outstanding loan balance for fixed-rated and variable-rate loans,
respectively. Investors who purchased the mortgage-backed securities are repaid
from the regular principal and interest payments made by the borrowers on the
underlying loans, which "pass through" to the investors. Freddie Mac acts as a
guarantor with respect to these regular payments to the investors in
consideration of a fee that varies up to .375% of the outstanding balance on
loans in the different loan pools.
Although the loans that we securitized were sold without recourse, we
agreed to indemnify Freddie Mac pursuant to the Master Commitment in the event
that Freddie Mac makes a payment to an investor pursuant to its guarantee on
certain loans noted in the Master Commitment as lacking the documentation
required by Freddie Mac's underwriting standards. Our indemnification to Freddie
Mac pursuant to this provision is limited, however, solely to losses that arise
as a result of the documentation exception or discrepancy noted in the Master
Commitment. Freddie Mac may also require us to repurchase a loan upon a
borrower's default if the due diligence information contained in the loan data
report that we provided to Freddie Mac was not accurate, true or complete, if we
fail to provide additional information or documentation to Freddie Mac upon
request, or if we breach any representation or warranty in the Master
Commitment. We have not experienced any significant losses on these loans in the
past and do not anticipate any significant losses as a result of this
indemnification.
In June, 1998, we sold an additional $19.3 million of our
adjustable-rate COFI loans in a whole-loan sale to a private investor that
closed in July, 1998. We recognized a loss of $218,000 from this transaction.
The securitization of certain of our loans and the whole loan sale reduced the
heavy concentration of fixed-rate and adjustable-rate COFI mortgages in our
portfolio while converting those assets to more liquid and marketable
mortgage-backed securities. In the aggregate, we have sold $75.4 million of the
securities generated from the securitization and have retained securities with a
face value of $40.7 million in our available-for-sale securities portfolio. We
used the proceeds from these sales of mortgage-backed securities to repay
outstanding FHLB advances from a balance of $106.9 million at June 30, 1997 to
$45.7 million at June 30, 1998. We also used some of the proceeds from these
sales to purchase interest rate-sensitive securities. We also restructured our
remaining FHLB debt by prepaying advances with higher interest rates and
extending the repayment terms of other debt, thereby reducing our exposure to
interest rate risk and reducing our cost of funds.
Because of the lack of customer demand for adjustable rate loans in our
market area, we primarily originate fixed-rate real estate loans which accounted
for approximately 63.2% of our loan portfolio at June 30, 1998. We continue to
offer and attempt to increase our volume of adjustable rate loans when market
interest rates make these type loans more attractive to customers. 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 increase our commercial real estate,
consumer and commercial loan portfolios. There is no assurance, however, that we
will be able to do so. See "Business of Lincoln Federal Savings Bank--Lending
Activities."
Net Portfolio Value. We believe it is critical to measure and manage
the effect of changing interest rates on our net portfolio value ("NPV"). This
approach calculates the difference between the present value of expected cash
flows from assets and the present value of expected cash flows from liabilities,
as well as cash flows from off-balance sheet contracts. We manage assets and
liabilities within the context of the marketplace, regulatory limitations and
within limits established by our Board of Directors on the amount of change in
NPV which is acceptable given certain interest rate changes.
The OTS issued a regulation, which uses a net market value methodology
to measure the interest rate risk exposure of savings associations. Under this
OTS regulation, an institution's "normal" level of interest rate risk in the
event of an assumed change in interest rates is a decrease in the institution's
NPV in an amount not exceeding 2% of the present value of its assets. Savings
associations with over $300 million in assets or less than a 12% risk-based
capital ratio are required to file OTS Schedule CMR. Data from Schedule CMR is
used by the OTS to calculate changes in NPV (and the related "normal" level of
interest rate risk) based upon certain interest rate changes (discussed below).
Because we have assets greater than $300 million, we are required to file
Schedule CMR. Under the regulation, associations which must file are required to
take a deduction (the interest rate risk capital component) from their total
capital available to calculate their risk based capital requirement if their
interest rate risk exposure is greater than "normal." The amount of that
deduction is one-half of the difference between (a) the institution's actual
calculated exposure to a 200 basis point interest rate increase or decrease
(whichever results in the greater pro forma decrease in NPV) and (b) its
"normal" level of exposure which is 2% of the present value of its assets.
Quantitative Information About Market Risk
Presented below, as of June 30, 1998, is an analysis performed by the
OTS of our interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 200 basis point increments,
up and down 400 basis points and in accordance with the proposed regulations. At
June 30, 1998, 2% of the present value of our assets was approximately $6.2
million. Because the interest rate risk of a 200 basis point increase in market
rates (which was greater than the interest rate risk of a 200 basis point
decrease) was $9.6 million at June 30, 1998, we would have been required to
deduct $1.7 million from our capital if the OTS' NPV methodology had been in
effect. Our exposure to interest rate risk results primarily from the
concentration of fixed rate mortgage loans in our portfolio.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV of Assets
In Rates $ Amount $ Change % Change NPV Ratio Change
- --------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 bp* $27,926 ($21,585) (44)% 9.89% (599) bp
+200 bp 39,959 (9,552) (19)% 13.40% (248) bp
0 bp 49,511 --- --- 15.88% ---
-200 bp 52,047 2,536 5% 16.33% 44 bp
-400 bp 54,929 5,419 11% 16.81% 93 bp
</TABLE>
* Basis points.
In contrast, the following chart presents the calculation of our
exposure to interest rate risk as of June 30, 1997, as determined by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV of Assets
In Rates $ Amount $ Change % Change NPV Ratio Change
- --------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 bp* $13,323 ($30,728) (70)% 4.19% (814) bp
+200 bp 29,054 (14,996) (34)% 8.60% (373) bp
0 bp 44,050 --- --- 12.33% ---
-200 bp 51,284 7,233 16% 13.89% 156 bp
-400 bp 53,944 9,894 22% 14.32% 199 bp
</TABLE>
* Basis points.
These charts indicate the extent to which our exposure to interest rate
risk declined during the one-year period beginning June 30, 1997. For example,
in the event of a 200 basis point (or 2%) increase in interest rates, the net
portfolio value of our assets would have declined by $15 million, or 34%, at
June 30, 1997, and by $9.6 million, or 19%, at June 30, 1998. This reduction in
our exposure to interest rate risk is largely attributable to the securitization
and sale of the adjustable-rate COFI loans and certain fixed-rate loans in our
portfolio in the transactions described above.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the methods of analysis presented above. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable-rate loans, have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. Further, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the table.
Average Balances and Interest Rates and Yields
The following tables present at June 30, 1998 and for the six-month
periods ended June 30, 1998 and 1997, and the years ended December 31, 1997,
1996 and 1995, the average daily balances, of each category of our
interest-earning assets and interest-bearing liabilities, and the interest
earned or paid on such amounts.
<TABLE>
<CAPTION>
At June 30, Six Months Ended June 30,
1998 1998 1997
Average Average Average Average
Balance Yield/Cost Balance Interest(6) Yield/Cost Balance Interest(6) Yield/Cost
------- ---------- ------- ----------- ---------- ------- ----------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning deposits.......... $ 20,737 5.69% $19,094 $ 485 5.08% $ 2,570 $ 96 7.47%
Mortgage-backed securities
available for sale (1)........... 43,206 7.34 33,880 1,268 7.49
Other investment securities
available for sale (1)........... 14,828 6.41 382 13 6.81 117 4 6.84
Other investment securities
held to maturity ................ 3,500 5.94 6,177 187 6.05 14,508 433 5.97
Loans receivable (2) (5)........... 204,115 7.79 233,078 9,244 7.93 313,688 12,142 7.74
Stock in FHLB of Indianapolis...... 5,447 7.93 5,447 216 7.93 4,946 192 7.76
Total interest-earning assets.... 291,833 7.48 298,058 11,413 7.66 335,829 12,867 7.66
Non-interest earning assets, net of
allowance for loan losses and
unrealized gain/loss on securities
available for sale................. 12,667 12,713 12,779
Total assets..................... $304,500 $310,771 $348,608
Liabilities and equity capital:
Interest-bearing liabilities:
Interest-bearing demand deposits... $ 7,487 2.06 $ 7,782 79 2.03 $ 7,506 77 2.05
Savings deposits................... 20,609 3.12 20,883 322 3.08 27,036 417 3.08
Money market savings deposits...... 28,631 4.89 28,074 687 4.89 18,968 459 4.84
Certificates of deposit............ 153,039 5.71 150,799 4,248 5.63 152,935 4,136 5.41
FHLB advances...................... 45,686 5.60 52,577 1,519 5.78 95,530 2,656 5.56
Total interest-bearing liabilities 255,452 5.28 260,115 6,855 5.27 301,975 7,745 5.13
Other liabilities..................... 6,253 7,722 7,489
Total liabilities.............. 261,705 267,837 309,464
Equity capital........................ 42,795 42,934 39,144
Total liabilities and
equity capital............. $304,500 $310,771 $348,608
Net interest-earning assets........... $ 36,381 $ 37,943 $ 33,854
Net interest income................... $4,558 $5,122
Interest rate spread (3).............. 2.20% 2.39% 2.53%
Net yield on weighted average
interest-earning assets (4)........ 3.06% 3.05%
Average interest-earning
assets to average
interest-bearing liabilities....... 114.59% 111.21%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
Average Average Average Average Average Average
Balance Interest(6) Yield/Cost Balance Interest(6)Yield/Cost Balance Interest(6) Yield/Cost
(Dollars in thousands)
Assets:
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits............$11,853 $ 653 5.51% $ 3,969 $ 256 6.45% $ 4,710 $ 332 7.05%
Mortgage-backed securities
available for sale (1)............. 13,089 1,086 8.30 --- --- --- --- --- ---
Other investment securities
available for sale (1)............. 66 5 7.58 117 9 7.69 115 9 7.83
Other investment securities
held to maturity .................. 12,758 768 6.02 15,355 933 6.08 14,225 856 6.02
Loans receivable (2) (5).............286,912 22,369 7.80 296,288 22,902 7.73 274,307 20,529 7.48
Stock in FHLB of Indianapolis........ 5,199 416 8.00 4,522 353 7.81 4,288 339 7.91
Total interest-earning assets......329,877 25,297 7.67 320,251 24,453 7.64 297,645 22,065 7.41
Non-interest earning assets,
net of allowance
for loan losses and unrealized
gain/loss on securities
available for sale.................. 15,694 11,243 11,785
Total assets......................$345,571 $331,494 $309,430
Liabilities and equity capital:
Interest-bearing liabilities:
Interest-bearing demand deposits..... 7,438 154 2.07 7,198 151 2.10 6,525 143 2.19
Savings deposits.....................$25,159 781 3.10 $32,253 1,092 3.39 35,444 1,295 3.65
Money market savings deposits........ 21,278 1,044 4.91 7,003 320 4.57 3,233 108 3.34
Certificates of deposit..............151,507 8,425 5.56 152,381 8,675 5.69 148,786 8,456 5.68
FHLB advances........................ 92,121 5,248 5.70 87,621 4,881 5.57 73,403 4,484 6.11
Total interest-bearing liabilities.297,503 15,652 5.26 286,456 15,119 5.28 267,391 14,486 5.42
Other liabilities....................... 7,729 8,070 7,946
Total liabilities................305,232 294,526 275,337
Equity capital.......................... 40,339 36,968 34,093
Total liabilities and
equity capital..............$345,571 $331,494 $309,430
Net interest-earning assets............ $32,374 $33,795 $ 30,254
Net interest income..................... $9,645 $9,334 $7,579
Interest rate spread (3)................ 2.41% 2.36% 1.99%
Net yield on weighted average
interest-earning assets (4).......... 2.92% 2.91% 2.55%
Average interest-earning
assets to average
interest-bearing liabilities........ 110.88% 111.80% 111.31%
</TABLE>
(1) Mortgage-backed securities available for sale and other investment
securities available for sale are at amortized cost prior to SFAS No. 115
adjustments.
(2) Total loans, including loan held for sale, less loans in process.
(3) Interest rate spread is calculated by subtracting weighted average interest
rate cost from weighted average interest rate yield for the period
indicated.
(4) The net yield on weighted average interest-earning assets is calculated by
dividing net interest income by weighted average interest-earning assets
for the period indicated. No net yield amount is presented at June 30,
1998, because the computation of net yield is applicable only over a period
rather than at a specific date.
(5) The balances include nonaccrual loans.
(6) Interest income on loans receivable includes loan fee income of $264,000
and $287,000 for the six months ended June 30, 1998 and1997 and $554,000,
$490,000, and $340,000 for the years ended December 31, 1997, 1996, and
1995.
Interest Rate Spread
Our results of operations have been determined primarily by net
interest income and, to a lesser extent, fee income, miscellaneous income and
general and administrative expenses. Net interest income is determined by the
interest rate spread between the yields earned on interest-earning assets and
the rates paid on interest-bearing liabilities and by the relative amounts of
interest-earning assets and interest-bearing liabilities.
The following table sets forth the weighted average effective interest
rate that we earned on our loan and investment portfolios, the weighted average
effective cost of our deposits and advances, our interest rate spread and the
net yield on weighted average interest-earning assets for the periods and as of
the dates shown. Average balances are based on average daily balances.
<TABLE>
<CAPTION>
Six Months Ended
At June 30, June 30, Year Ended December 31,
1998 1998 1997 1997 1996 1995
-------------------------------------------------------------------------
Weighted average interest rate earned on:
<S> <C> <C> <C> <C> <C> <C>
Interest-earning deposits.................... 5.69% 5.08% 7.47% 5.51% 6.45% 7.05%
Mortgage-backed securities available for sale 7.34 7.49 --- 8.30 --- ---
Other investment securities available for sale 6.41 6.81 6.84 7.58 7.69 7.83
Other investment securities held to maturity. 5.94 6.05 5.97 6.02 6.08 6.02
Loans........................................ 7.79 7.93 7.74 7.80 7.73 7.48
FHLB stock................................... 7.93 7.93 7.76 8.00 7.81 7.91
Total interest-earning assets.............. 7.48 7.66 7.66 7.67 7.64 7.41
Weighted average interest rate cost of:
Interest-bearing demand deposits............. 2.06 2.03 2.05 2.07 2.10 2.19
Savings deposits............................. 3.12 3.08 3.08 3.10 3.39 3.65
Money market savings deposits................ 4.89 4.89 4.84 4.91 4.57 3.34
Certificates of deposit...................... 5.71 5.63 5.41 5.56 5.69 5.68
FHLB advances................................ 5.60 5.78 5.56 5.70 5.57 6.11
Total interest-bearing liabilities......... 5.28 5.27 5.13 5.26 5.28 5.42
Interest rate spread (1)........................ 2.20 2.39 2.53 2.41 2.36 1.99
Net yield on weighted average
interest-earning assets (2).................. N/A 3.06 3.05 2.92 2.91 2.55
</TABLE>
(1) Interest rate spread is calculated by subtracting combined weighted
average interest rate cost from combined weighted average interest rate
earned for the period indicated. Interest rate spread figures must be
considered in light of the relationship between the amounts of
interest-earning assets and interest-bearing liabilities.
(2) The net yield on weighted average interest-earning assets is calculated
by dividing net interest income by weighted average interest-earning
assets for the period indicated. No net yield figure is presented at June
30, 1998 because the computation of net yield is applicable only over a
period rather than at a specific date.
<PAGE>
The following table describes the extent to which changes in interest rates
and changes in volume of interest-related assets and liabilities have affected
our interest income and expense during the periods indicated. For each category
of interest-earning asset and interest-bearing liability, information is
provided on changes attributable to (1) changes in rate (changes in rate
multiplied by old volume) and (2) changes in volume (changes in volume
multiplied by old rate). Changes attributable to both rate and volume which
cannot be segregated have been allocated proportionally to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
Increase (Decrease) in Net Interest Income
Total
Due to Due to Net
Rate Volume Change
(In thousands)
Six months ended June 30, 1998 compared
to six months ended June 30, 1997
Interest-earning assets:
<S> <C> <C> <C>
Interest-earning deposits.................................. $ (99) $ 488 $ 389
Mortgage-backed securities available for sale.............. --- 1,268 1,268
Other investment securities available for sale............. --- 9 9
Other investment securities held to maturity............... 18 (264) (246)
Loans receivable........................................... 838 (3,736) (2,898)
FHLB stock................................................. 4 20 24
Total.................................................... 761 (2,215) (1,454)
Interest-bearing liabilities:
Interest-bearing demand deposits........................... (2) 4 2
Savings deposits........................................... --- (95) (95)
Money market savings deposits.............................. 5 223 228
Certificates of deposit.................................... 257 (145) 112
FHLB advances.............................................. 291 (1,428) (1,137)
Total.................................................... 551 (1,441) (890)
Net change in net interest income............................ $ 210 $ (774) $ (564)
Year ended December 31, 1997 compared
to year ended December 31, 1996
Interest-earning assets:
Interest-earning deposits.................................. $(42) $439 $397
Mortgage-backed securities available for sale.............. --- 1,086 1,086
Other investment securities available for sale............. --- (4) (4)
Other investment securities held to maturity............... (9) (156) (165)
Loans receivable........................................... 197 (730) (533)
FHLB stock................................................. 9 54 63
Total.................................................... 155 689 844
Interest-bearing liabilities:
Interest-bearing demand deposits........................... (2) 5 3
Savings deposits........................................... (85) (226) (311)
Money market savings deposits.............................. 25 699 724
Certificates of deposit.................................... (200) (50) (250)
FHLB advances.............................................. 112 255 367
Total.................................................... (150) 683 533
Net change in net interest income............................ $305 $ 6 $311
Year ended December 31, 1996 compared
to year ended December 31, 1995
Interest-earning assets:
Interest-earning deposits.................................. $ (27) $ (49) $ (76)
Mortgage-backed securities available for sale.............. --- --- ---
Other investment securities available for sale............. --- --- ---
Other investment securities held to maturity............... 8 69 77
Loans receivable........................................... 690 1,683 2,373
FHLB stock................................................. (4) 18 14
Total.................................................... 667 1,721 2,388
Interest-bearing liabilities:
Interest-bearing demand deposits........................... (6) 14 8
Savings deposits........................................... (91) (112) (203)
Money market savings deposits.............................. 51 161 212
Certificates of deposit.................................... 14 205 219
FHLB advances.............................................. (419) 816 397
Total.................................................... (451) 1,084 633
Net change in net interest income............................ $1,118 $ 637 $1,755
</TABLE>
<PAGE>
Financial Condition at June 30, 1998 Compared to Financial Condition at December
31, 1997
Total assets decreased $16.9 million, or 5.3%, at June 30, 1998
compared to December 31, 1997. The decrease was primarily due to the
securitization of approximately $39.9 million of one- to four-family residential
loans and the subsequent sale of approximately $21.1 million of these
mortgage-backed securities. Cash and interest-bearing deposits in other banks
increased by $4.8 million, and mortgage-backed securities available for sale and
other investment securities available for sale and held to maturity increased by
$23.4 million at June 30, 1998, compared to December 31, 1997. These increases
were primarily due to the loan securitization. A portion of the proceeds
received from the sales of mortgage-backed securities available for sale was
used to repay FHLB advances, thus reducing both the asset and liability sides of
the balance sheet.
Loans, Loans Held for Sale and Allowance for Loan Losses. The decrease
in our net loans including loans held for sale of $50.0 million, or 18.5%, from
December 31, 1997 to June 30, 1998 was due to the securitization of $39.9
million of loans in the second quarter of 1998. The loans securitized were one-
to four-family residential loans. The strategy behind the securitization and
sale of mortgage-backed securities was to change the mix of assets on our
balance sheet to reduce interest rate risk and to improve the liquidity of our
assets. In addition, at June 30, 1998, we had committed to sell loans of $19.3
million in a transaction that closed in July, 1998. We have no plans to
securitize or sell additional portfolio loans. We continue to service all loans
sold and securitized.
The allowance for loan losses increased to $1.43 million at June 30,
1998 from $1.36 million at December 31, 1997. The allowance as a percentage of
total loans including loans held for sale increased to .70% from .54% due
primarily to a decline in total loans as a result of a loan securitization and a
loan sale in the second quarter. The higher percentage level of the allowance
was considered necessary after considering several factors including: (i) a more
aggressive collection effort to reduce nonperforming and delinquent loans; (ii)
a higher concentration of delinquent loans in the remaining portfolio after our
securitizations and loan sale; (iii) a higher mix of consumer and development
loans in our portfolio; and (iv) the high level of nonperforming loans as
compared to our peer groups. The allowance for loan losses as a percentage of
non-performing loans was 87.2% and 37.6% at June 30, 1998 and December 31, 1997,
respectively. Although our allowance as a percentage of total loans was near
peer group levels and the allowance as a percentage of non-performing loans was
below our peer group at June 30, 1998, we believe the level of our allowance was
adequate based on our quarterly evaluation of the allowance.
Non-performing loans were $1.6 million and $3.6 million at each date,
respectively. The decline in non-performing loans was a result of a combination
of factors including improved collection efforts on one- to four-family
residential and consumer loans. During the six months ended June 30, 1998, we
also charged-off $301,000 in non-performing loans, a non-performing loan
totaling $367,000 was paid off and we received additional collateral on loans
totaling $218,000, allowing us to remove these loans from non-accrual status.
During the six months ended June 30, 1998, we had net charge-offs of $339,000 of
which $301,000 was related to a residential acquisition and development loan.
The borrowers had not responded to normal collection efforts and we filed a
foreclosure suit. We obtained an appraisal of the property and charged-off a
portion of the loan balance down to an estimated value. Included in
non-performing loans at June 30, 1998 were impaired loans of approximately
$808,000. Impaired loans at June 30, 1998 consisted of loans to two borrowers
collateralized by residential acquisition and development real estate. A
provision for losses of $121,000 had been recorded on impaired loans.
Other Assets. At June 30, 1998, other assets were approximately $2.1
million. The components of other assets at June 30, 1998 were capitalized
mortgage servicing rights of $735,000, an investment in Family Financial Life
Insurance Company of $650,000, cash surrender life insurance of $320,000 and
various other assets totaling $439,000. At December 31, 1997, other assets were
approximately $1.3 million. The increase at June 30, 1998 of $865,000 as
compared to the balance at December 31, 1997 was primarily due to our investment
in Family Financial Life Insurance Company during 1998. See "Business of Lincoln
Federal Savings Bank-Service Corporation Subsidiary."
Deposits. Deposits increased $7.3 million, or 3.6%, at June 30, 1998,
compared to December 31, 1997. Certificates of deposit increased $7.0 million,
or 4.8%, while other deposits increased $266,000, or .5%. The increase in
deposits was primarily due to a certificate of deposit special in February, 1998
that produced $4.3 million of new deposits.
Borrowed Funds. FHLB advances decreased $24.4 million, or 34.9%, at
June 30, 1998 compared to December 31, 1997. Proceeds from the sales of
mortgage-backed securities available for sale were used to repay a portion of
FHLB advances.
Other Liabilities. At June 30, 1998, other liabilities were
approximately $1.5 million. The components of other liabilities at June 30, 1998
were advances by borrowers for taxes and insurance of $613,000, deferred
directors fees of $573,000 and various other liabilities totaling $332,000. Our
directors and directors emeritus may, pursuant to a deferred compensation
agreement, defer payment of some or all of their directors fees, bonuses or
other compensation into a retirement account. Under this agreement, deferred
directors fees are to be distributed either in a lump-sum payment or in equal
annual or monthly installments over any period of from two to ten years. At
December 31, 1997, other liabilities were approximately $1.6 million. The
components of other liabilities at December 31, 1997 were advances by borrowers
for taxes and insurance of $723,000, deferred directors fees of $550,000 and
various other liabilities totaling $308,000.
Equity Capital. Equity capital increased $817,000, or 1.9%, from $42.0
million at December 31, 1997 to $42.8 million at June 30, 1998. The increase was
due primarily to net income of $817,000.
Financial Condition at December 31, 1997 Compared to Financial Condition at
December 31, 1996
Total assets decreased $24.2 million, or 7.0%, at December 31, 1997
compared to December 31, 1996. The decrease was primarily due to the
securitization of approximately $76.2 million of one- to four- family
residential loans and loans held for sale and the subsequent sale of
approximately $54.3 million of these mortgage-backed securities. Cash and
interest-bearing deposits in other banks increased by $8.6 million, and
mortgage-backed securities available for sale and other investment securities
available for sale and held to maturity increased by $23.7 million at December
31, 1997 compared to December 31, 1996. These increases were primarily due to
the loan securitization. In addition, a portion of the proceeds received from
the sales of mortgage-backed securities available for sale was used to repay
FHLB advances.
Loans, Loans Held for Sale and Allowance for Loan Losses. Our net
loans, including loans held for sale, decreased $57.0 million, or 18.6%, from
December 31, 1996 to December 31, 1997 due to the securitization of loans in the
third quarter of 1997. The loans securitized were one- to four-family
residential loans. The strategy behind the securitization was to change the mix
of assets on our balance sheet to reduce interest rate risk and to improve the
liquidity of our assets. The loan to deposit ratio had grown as high as 156% in
recent years, and it was necessary to obtain Federal Home Loan Bank advances to
fund our loan growth. The allowance for loan losses as a percentage of total
loans, including loans held for sale, increased to .54% from .40% as a result of
the decrease in loans outstanding during the period. The allowance for loan
losses as a percentage of non-performing loans was 37.6% and 24.5% at December
31, 1997 and 1996, respectively. Non-performing loans were $3.6 million and $2.4
million at each date, respectively. Included in non-performing loans at December
31, 1997 were impaired loans of $1.6 million. 77.8% of our impaired loans at
December 31, 1997, consisting of loans to three borrowers, were collateralized
by residential acquisition and development real estate. A provision for losses
of $237,000 had been recorded on impaired loans.
Other Assets. At December 31, 1997, other assets were approximately
$1.3 million. The components of other assets at December 31, 1997 were
capitalized mortgage servicing rights of $530,000, cash surrender value of life
insurance of $320,000 and various other assets totaling $429,000. At December
31, 1996, other assets were approximately $334,000. The increase at December 31,
1997 of $945,000 as compared to the balance at December 31, 1996 was primarily
due a $445,000 increase in capitalized mortgage servicing rights and our
investment in the cash surrender value of life insurance in 1997. Mortgage
servicing rights increased as a direct result of the adoption of new accounting
standards and an increase in our mortgage servicing portfolio. At December 31,
1997 and 1996, we serviced loans of $85.0 million and $36.8 million,
respectively.
Deposits. Deposits decreased $7.0 million, or 3.3%, during the period
ended December 31, 1997. Certificates of deposit decreased $11.4 million, or
7.3%, while other deposits increased $4.4 million, or 8.3%. The decrease in
deposits was primarily due to a reduction in public funds of approximately $7.3
million at December 31, 1997 as compared to 1996. This decline was a result of
less aggressive bidding on public funds when other lower cost funding options
were available.
Borrowed Funds. FHLB advances decreased $21.1 million, or 23.1%, at
December 31, 1997 compared to December 31, 1996. Proceeds from the sales of
mortgage-backed securities available for sale were used to repay a portion of
these FHLB advances.
Other Liabilities. At December 31, 1997, other liabilities were
approximately $1.6 million. The components of other liabilities at December 31,
1997 were advances by borrowers for taxes and insurance of $723,000, deferred
directors fees of $550,000 and various other liabilities totaling $308,000. At
December 31, 1996, other liabilities were approximately $1.9 million. The
components of other liabilities at December 31, 1996 were advances by borrowers
for taxes and insurance of $937,000, deferred directors fees of $421,000 and
various other liabilities totaling $555,000.
Equity Capital. Equity capital increased $4.1 million, or 10.7%, from
$37.9 million at December 31, 1996 to $42.0 million at December 31, 1997. The
increase was due to net income of $3.5 million and a net change in holding gains
on investments available for sale of $545,000.
Comparison of Operating Results For Six Months Ended June 30, 1998 and 1997
General. Net income for the six months ended June 30, 1998 decreased
$1.0 million to $817,000 compared to $1.9 million for the six months ended June
30, 1997. The decline in net income was primarily a result of a reduction in net
interest income, an increase in the provision for loan losses, an increase in
other expenses and an extraordinary item related to the prepayment of FHLB
advances offset by a reduction in tax expense. Annualized return on average
assets for the six months ended June 30, 1998 and 1997 was .53% and 1.07%,
respectively. Annualized return on average equity was 3.81% for the 1998 period
and 9.52% for the 1997 period.
Our net interest income declined primarily because we securitized
certain loans in our portfolio and sold the resulting mortgage-backed securities
on the secondary market. Because we no longer hold these loans in our portfolio,
we expect our net interest income to remain at reduced levels in the future as
well. We also incurred one-time expenses during the period in connection with
the prepayment of FHLB advances that we paid from the proceeds from the sale of
these mortgage-backed securities. As a result of these prepayments and the
restructuring of our other indebtedness to the FHLB, however, we significantly
decreased our exposure to interest rate risk. See "- Asset/Liability
Management." Thus, even though the securitization and sale of certain loans in
our portfolio and the prepayment penalties we incurred reduced our net interest
income during the period, these measures also significantly reduced our future
exposure to interest rate risk by decreasing the impact that possible future
interest rate increases may have on our earnings.
Because of our growth over the past several years, we recently hired
several full-time employees, which increased our operating expenses and reduced
our net income. See "- Salaries and Employee Benefits." In addition to these
increased salary expenses, we expect to incur additional increased expenses in
the future in connection with the ESOP and, assuming shareholder approval, the
RRP, which we intend to adopt in the Conversion. See "Executive Compensation and
Related Transactions of Lincoln Federal - Employee Stock Ownership Plan and
Trust" and "- RRP." We believe that the additional expenses incurred in
connection with the additional personnel we hired is necessary for us to
effectively service our existing customers and to position ourselves for future
growth. We also believe that the expenses we expect to incur in connection with
the ESOP and RRP will assist us in our future operations by providing our
directors, officers and employees with an ownership interest in the Holding
Company in a manner designed to encourage them to continue their service with
us. Accordingly, we believe that, although these increased operating expenses
will decrease our net income, we will benefit from these expenses in future
periods because of our increased capacity to serve our customers and the
increased likelihood that we will be able to attract and retain capable
management.
Interest Income. Total interest income was $11.4 million for the 1998
period compared to $12.9 million for the 1997 period. The decrease in interest
income was due primarily to a decrease in our average earning assets. Average
earning assets decreased $37.8 million, or 11.2%, primarily due to a decrease in
average loans of $80.6 million offset by an increase in average mortgage-backed
securities available for sale of $33.9 million. Our average yield on
interest-earning assets was 7.66% for the six-month periods ended June 30, 1998
and 1997.
Interest Expense. Interest expense decreased $890,000, or 11.5%, during
the six-month period ended June 30, 1998 as compared to the same period in 1997.
The decrease in interest expense was primarily the result of a decrease in
average interest-bearing liabilities of $41.9 million, or 13.9%. The decline in
average interest-bearing liabilities was primarily attributable to the repayment
of FHLB advances. Our average balance of FHLB advances decreased $43.0 million.
Our average cost of interest-bearing liabilities increased from 5.13% for the
1997 period to 5.27% for the 1998 period resulting primarily from an increase of
22 basis points in the cost of both our certificates of deposit and FHLB
advances.
Net Interest Income. Net interest income decreased $564,000, or 11.0%,
during the six-month period ended June 30, 1998 as compared to the same period
in 1997. Net interest income declined $774,000 due to a decrease in our volume
of net interest earning assets and liabilities and increased $210,000 as a
result of an improvement in our net yield on interest earning assets. Our
interest rate spread was 2.39% and 2.53% for the 1998 and 1997 periods,
respectively. Our net yield on interest-earning assets was 3.06% and 3.05% for
the 1998 and 1997 periods, respectively. Although our interest rate spread
decreased during the 1998 period, our yield on interest-earning assets improved
slightly because our average interest-earning asset as a percentage of
interest-bearing liabilities increased from 110.9% for the 1997 period to 114.6%
for the 1998 period.
Provision for Loan Losses. We maintain an allowance for loan losses
based upon a quarterly evaluation of the size and known inherent risk in the
components of our loan portfolio, our past loan loss experience, adverse
situations which may affect borrowers' ability to repay loans, estimated value
of underlying loan collateral, current and, to a lesser extent, expected future
economic conditions and peer comparisons. Our provision for loan losses for the
six months ended June 30, 1998 was $410,000 as compared to $50,000 for the same
period in 1997. We increased our provision for loan losses in 1998 compared to
1997 primarily because of our more aggressive collection efforts to reduce
nonperforming and delinquent loans, our higher concentration of delinquent loans
in the remaining portfolio after our securitization and loan sale, our higher
mix of consumer and development loans in our portfolio and our high level of
nonperforming loans as compared to our peer groups. While management estimates
loan losses using the best available information, no assurance can be given that
future additions to the allowance will not be necessary based on changes in
economic and real estate market conditions, further information obtained
regarding problem loans, identification of additional problem loans and other
factors, both within and outside of management's control.
Net realized and unrealized gain (loss) on loans held for sale. Net
realized and unrealized losses on loans held for sale of $114,000 were recorded
during the six months ended June 30, 1998, an increase of $96,000 over the net
losses of $18,000 recorded during the same period in 1997. The increased losses
in 1998 relate primarily to unrealized losses on the $19.3 million of loans held
for sale at June 30, 1998 which were lower-yielding loans as compared to the
loans remaining in the loan portfolio.
Net realized and unrealized gains on securities available for sale.
Proceeds from sales of securities available for sale during the six months ended
June 30, 1998 amounted to $21.1 million. Net gains of $105,000 were realized on
those sales. No realized or unrealized gains or losses on securities available
for sale were recorded during the six months ended June 30, 1997.
Equity in losses of limited partnerships. Equity in losses of limited
partnerships decreased $59,000, or 18.0%, from $327,000 for the six months ended
June 30, 1997 to $268,000 for the same period in 1998 due to the operating
results of our limited partnership investments. See "Business of Lincoln Federal
Savings Bank - Investments - Investments in Multi-Family Low- and
Moderate-Income Housing Projects."
Other Income. Other income increased $93,000, or 32.6%, from $285,000
for the six months ended June 30, 1997 to $378,000 for the same period in 1998.
This increase was due to increases in a variety of other income categories and
was not attributable to any one item.
Salaries and Employee Benefits. Salaries and employee benefits were
$1.3 million for the six months ended June 30, 1998 compared to $1.0 million for
the same period in 1997, an increase of 30.0%. These increases were primarily a
result of additional personnel. We had 74 full-time equivalent employees at June
30, 1998 compared to 70 full-time equivalent employees at June 30, 1997. We have
increased our number of employees and added personnel with the specialized
skills to more effectively service our existing customers and to position us for
future customer and product growth.
Net Occupancy and Equipment Expenses. Occupancy expenses increased
$2,000, or 1.5%, and equipment expenses increased $51,000, or 20.5%, from the
six months ended June 30, 1997 compared to the same period in 1998. The
increases in occupancy and equipment expenses were primarily attributable to
increased deprecation and amortization on computers, software and other
equipment and fees associated with computer equipment maintenance.
Data Processing Expense. Data processing expense increased $101,000, or
37.7%, from the six-month period ended June 30, 1997 to the same period in 1998.
This increase was primarily due to additional costs associated with Year 2000
compliance and testing.
Professional Fees. Professional fees increased $37,000, or 26.4%, from
the six-month period ended June 30, 1997 to the same period in 1998. This
increase was due to a variety of increased expenses and was not attributable to
any one item.
Mortgage Servicing Rights Amortization. Mortgage servicing rights
amortization increased $121,000 from $5,000 for the six-month period ended June
30, 1997 to $126,000 for the same period in 1998 due to increased servicing
activity and the adoption of Statement of Financial Accounting Standards
("SFAS") No. 122, "Accounting for Mortgage Serving Rights," and SFAS No. 125,
"Accounting for Transfers of Financial Assets, Servicing Rights and
Extinguishment of Liabilities." Average mortgage loans serviced for others were
approximately $89.6 million for the 1998 period as compared to $41.7 million for
the 1997 period.
Income Tax Expense. Income tax expense decreased $613,000, or 87.4%,
from the six months ended June 30, 1997 to the same period in 1998. These
variations in income tax expense are directly related to our taxable income and
the low- income housing tax credits earned during those periods. The effective
tax rate was 9.71% and 27.3% for 1998 and 1997, respectively. Our effective rate
declined in 1998 as compared to 1997 because our low-income housing tax credits
remained relatively constant while our level of income declined. We expect our
effective tax rate to increase in future periods. See "Business of Lincoln
Federal Savings Bank Investments - Investments in Multi-Family Low- and
Moderate-Income Housing Projects."
Extraordinary Item - Early Extinguishment of Debt, Net of Income Taxes.
Prepayment penalties of $249,000 on FHLB advances were recorded during the six
months ended June 30, 1998. Due to the securitization of loans and loans held
for sale and the subsequent sales of a portion of these mortgage-backed
securities, funds were available to prepay a portion of our FHLB advances.
Comparison of Operating Results For Years Ended December 31, 1997, 1996, and
1995
General. Net income for the years ended December 31, 1997, 1996 and
1995 was $3.5 million, $3.0 million and $3.4 million, respectively. Return on
average assets for the years ended December 31, 1997, 1996 and 1995 was 1.02%,
.90% and 1.09%, respectively. Return on average equity was 8.71% for 1997, 8.08%
for 1996 and 9.92% for 1995.
Interest Income. Total interest income increased from $24.5 million in
1996 to $25.3 million in 1997. Average earning assets increased $9.6 million, or
3.0%, from $320.2 million to $329.8 million from 1996 to 1997. Volume increases,
primarily from mortgage-backed securities available for sale and interest
earning deposits, accounted for $689,000 of the increase while higher interest
rates accounted for $155,000 of the increase. For the year ended December 31,
1996, total interest income totaled $24.5 million, an increase of $2.4 million,
or 10.9%, from the $22.1 million recorded in 1995. The increase was due to an
increase in the average earning assets accompanied by an increase in the average
yield. Average earning assets increased $22.6 million, or 7.6%, during this
period while the average yield on earning assets increased 23 basis points to
7.64% from 7.41%. The increase in average loans and the increased loan yield
were the primary factors contributing to these increases.
Interest Expense. Interest expense increased $533,000, or 3.5%, from
1996 to 1997. The increase in interest expense was primarily the result of an
increase in average interest-bearing liabilities of $11.0 million, or 3.9%, from
$286.5 million to $297.5 million. The growth in average interest-bearing
liabilities was primarily attributable to the growth in money market savings
deposits and FHLB advances offset by the decline in saving deposits. The average
balance of money market saving deposits and FHLB advances increased $14.3
million, or 203.8%, and $4.5 million, or 5.1%, respectively, while savings
deposits decreased by $7.1 million, or 22.0%. We utilized the deposit growth and
increased borrowings from the FHLB to fund loan activity and the subsequent
increase in mortgage-backed securities available for sale. Interest expense
increased $633,000, or 4.4%, from 1995 to 1996. Volume increases in
interest-bearing liabilities resulted in a $1.1 million increase in interest
expense while lower interest rates reduced expense by $451,000. The average cost
of interest-bearing liabilities decreased from 5.42% in 1995 to 5.28% in 1996.
Net Interest Income. Net interest income increased $311,000, or 3.3%,
from $9.3 million in 1996 to $9.6 million in 1997. $305,000 of our $311,000
increase in net interest income in 1997 was due to an increase in our interest
rate spread. Net interest income increased $1.8 million, or 23.2%, from 1995 to
1996. Our net interest income increased $1.1 million due to an increase in our
volume of net interest earning assets and $637,000 due to an increase in our
interest rate spread. Our interest rate spread was 2.41%, 2.36% and 1.99% for
1997, 1996 and 1995, respectively.
Provision for Loan Losses. Our provision for loan losses for the year
ended December 31, 1997 was $298,000. The 1997 provision and the related
increase in the allowance for loan losses were considered adequate, based on
size, condition and components of the loan portfolio. Provisions for loan losses
of $120,000 and $100,000 were made in 1996 and 1995, respectively. The
allowances for loan losses at December 31, 1996 and 1995 were also considered
adequate, based on size, condition, and components of the loan portfolios. The
increase in the provision in 1997 was due to the adoption of a more conservative
methodology for determining the adequacy of the allowance for loan losses rather
than a deterioration of the loan portfolio. Our current methodology assigns risk
factors based on loan type in addition to providing for non-performing and other
classified loans. The methodology used prior to 1997 focused primarily on
non-performing and other classified loans and did not assign risk factors to the
remaining loan portfolio based on loan type. While management estimates loan
losses using the best available information, no assurance can be given that
future additions to the allowance will not be necessary based on changes in
economic and real estate market conditions, further information obtained
regarding problem loans, identification of additional problem loans and other
factors, both within and outside of management's control.
Net realized and unrealized gain (loss) on loans held for sale. Net
realized and unrealized gains on loans held for sale of $299,000 were recorded
in 1997, an increase of $459,000 over the net losses of $160,000 recorded in
1996. In 1995, net realized and unrealized gains on loans held for sale were
$1.5 million which consisted primarily of unrealized gains recorded as we
recovered from unrealized losses recorded in the previous year as a result of
changes in interest rates.
Net realized and unrealized gains on securities available for sale.
Proceeds from sales of securities available for sale during 1997 amounted to
$54.5 million. Net gains of $118,000 were realized on those sales. No realized
or unrealized gains or losses on securities available for sale were recorded in
1996 and 1995.
Equity in losses of limited partnerships. Equity in losses of limited
partnerships increased $85,000, or 14.3%, from $596,000 for 1996 to $681,000 for
1997 due to the operating results of our limited partnership investments. In
comparison, losses of $1.6 million were recorded in 1995. In 1995, an additional
loss estimate of approximately $800,000 was recorded on our investment in Pedcor
Investments - 1987-I, L.P. This additional loss estimate was recorded to reserve
for fees earned by the general partner but payable at a future date based on
cash flow of the partnership. Although it was not possible to determine the
exact amount of the fees that will eventually be paid and should therefore be
accrued, we believe that the additional expense recorded was adequate based on
all available information. See "Business of Lincoln Federal Savings Bank -
Investments - Investments in Multi-Family Low- and Moderate-Income Housing
Projects."
Other Income. Other income increased $171,000, or 34.0%, from $503,000
for 1996 to $674,000 for 1997. This increase was due to an increase in loan
servicing fee income of $104,000 and smaller increases in a variety of other
income categories. Other income increased $30,000 or 6.3%, from $473,000 for
1995 to $503,000 for 1996.
Salaries and Employee Benefits. Salaries and employee benefits were
$2.2 million for 1997 compared to $1.7 million for 1996 and $1.5 million for
1995, increases of 29.4% and 13.3%, respectively. These increases were primarily
a result of additional personnel. We had 72, 69 and 58 full-time equivalent
employees at December 31, 1997, 1996 and 1995, respectively. We have increased
our number of employees and added personnel with the specialized skills to more
effectively service our existing customers and to position us for future
customer and product growth.
Net Occupancy and Equipment Expenses. Occupancy expenses increased
$36,000, or 15.3%, and equipment expenses increased $165,000, or 45.7%, from
1996 to 1997. The increases in occupancy and equipment expenses were primarily
attributable to increased deprecation and amortization on computers, software
and other equipment. Occupancy expenses for 1995 were at approximately the same
level as in 1997 and equipment expenses for 1995 were $185,000 less than the
1996 expenses. A significant portion of the equipment placed in service in 1995
was purchased in the fourth quarter of that year; therefore, a full year of
depreciation expense was not recorded until 1996.
Deposit Insurance Expense. Deposit insurance expense decreased $1.5
million, or 88.8%, from $1.7 million in 1996 to $194,000 in 1997. This decrease
was due to the recapitalization of the Savings Association Insurance Fund
(`SAIF") in 1996 which resulted in a decline in our deposit insurance
assessments in future periods. A one-time SAIF special assessment of
approximately $1.3 million was recorded in 1996. Prior to the recapitalization
of SAIF, we paid an assessment of $.23 per $100 of deposits. Subsequent to the
recapitalization, the assessment was reduced to $.0644 per $100 of deposits.
Deposit insurance expense for 1995 was $438,000.
Data Processing Expense. Data processing expense increased $268,000, or
85.6%, from 1996 to 1997 primarily due to expenses relating to the software
conversion of the general ledger and the loan and deposit subsidiary records.
Data processing expense increased $85,000, or 37.3%, from 1995 to 1996 primarily
due to the overall growth of our institution.
Professional Fees. Professional fees increased $169,000 from $69,000 in
1996 to $238,000 in 1997 primarily due to consulting fees paid in connection
with our loan securitization initiative. During 1997, we engaged an outside
consultant to review our loan portfolio and assist us with the securitization of
loans. We incurred $139,000 of expense in relation to this project. Professional
fees increased $21,000 from 1995 to 1996 primarily due to the overall growth of
our institution.
Mortgage Servicing Rights Amortization. Mortgage servicing rights
("MSR") amortization increased $55,000 from 1996 to 1997 due in part to
increased servicing activity. Average mortgage loans serviced for others were
approximately $68.1 million for 1997 compared to $35.2 million for 1996. In
1997, we adopted SFAS No. 122, "Accounting for Mortgage Serving Rights", and
SFAS No. 125, "Accounting for Transfers of Financial Assets, Servicing Rights
and Extinguishment of Liabilities". The adoption of these Statements also
contributed to the increase in amortization recorded in 1997. MSR amortization
increased $3,000 from 1995 to 1996.
Other Expense. Other expenses, consisting primarily of expenses related
to advertising, directors' fees, contributions, loan expenses, supplies, and
postage increased $292,000, or 43.7%, from 1996 to 1997. The increase was in
part due to approximately $175,000 of additional expense in 1997 as compared to
1996 for directors' compensation and related plans. The remaining increase
resulted from increases in a variety of expense categories and was not
attributable to any one item. Other expenses increased $124,000, or 22.8%, from
1995 to 1996. The increase resulted from increases in a variety of expense
categories and was not attributable to any one item.
Income Tax Expense. Income tax expense increased $289,000, or 33.2%,
from 1996 to 1997. Income tax expense decreased 323,000, or 27.1%, from 1995 to
1996. These variations in income tax expense are directly related to the taxable
income for those years. The effective tax rate was 24.8%, 22.6% and 26.1% for
1997, 1996 and 1995, respectively.
Liquidity and Capital Resources
Our primary sources of funds are deposits, borrowings and the proceeds
from principal and interest payments on loans and mortgage-backed securities and
the sales of loans and mortgage-backed securities available for sale. While
maturities and scheduled amortization of loans and mortgage-backed securities
are a predictable source of funds, deposit flows and mortgage and
mortgage-backed securities prepayments are greatly influenced by general
interest rates, economic conditions and competition.
Our primary investing activity is the origination of loans. During the
years ended December 31, 1997, 1996 and 1995, cash used to originate loans
exceeded repayments and other changes by $20.0 million, $11.4 million and $25.4
million, respectively. The growth in loans in 1997 was funded by proceeds from
the sale of mortgage-backed securities available for sale while growth in
deposits and FHLB advances funded our 1996 and 1995 loan growth.
During the six-month period ended June 30, 1998, cash repayments and
other changes exceeded cash used to originate loans by $5.3 million. During the
six-month period ended June 30, 1997, cash used to originate loans exceeded
repayments and other changes by $14.7 million.
During the years ended December 31, 1997, 1996 and 1995, we purchased
mortgage-backed securities and other securities available for sale and held to
maturity in the amounts of $7.8 million, $11.4 million and $9.3 million,
respectively. During the years ended December 31, 1997, 1996 and 1995, we
received proceeds from maturities of mortgage-backed securities and other
securities available for sale and held to maturity of $6.8 million, $7.9 million
and $10.4 million, respectively. During the year ended December 31, 1997, we
received proceeds for the sale of mortgage-backed and other securities available
for sale of $54.4 million which funds were used to fund our loan growth and
reduce the level of our FHLB advances. We did not receive any proceeds for the
sale of securities during 1996 and 1995.
During the six-months ended June 30, 1998, we purchased mortgage-backed
securities and other securities available for sale and held to maturity of $14.9
million. We did not purchase any securities during the six-months ended June 30,
1997. During the six-months ended June 30, 1998 and 1997, we received proceeds
from maturities of mortgage-backed securities and other securities available for
sale and held to maturity of $10.3 million and $1.8 million, respectively.
During the six-months ended June 30, 1998, we received proceeds for the sale of
mortgage-backed securities available for sale of $21.1 million which funds were
used to reduce our level of outstanding FHLB advances. We did not receive any
proceeds for the sale of securities during the six-months ended June 30, 1997.
We had outstanding loan commitments and unused lines of credit of $14.2
million at June 30, 1998. In addition, at June 30, 1998, we had committed to
sell loans of $19.3 million. We anticipate that we will have sufficient funds
from loan repayments, loan sales, and from our ability to borrow additional
funds from the FHLB of Indianapolis to meet our current commitments.
Certificates of deposit scheduled to mature in one year or less at June 30, 1998
totaled $111.6 million. We believe that a significant portion of such deposits
will remain with us based upon historical deposit flow data and our competitive
pricing in our market area.
Liquidity management is both a daily and long-term function of our
management strategy. In the event that we should require funds beyond our
ability to generate them internally, additional funds are available through the
use of FHLB advances. We had outstanding FHLB advances in amount of $45.7
million at June 30, 1998.
Federal law requires that savings associations maintain an average
daily balance of liquid assets in a minimum amount not less than 4% or more than
10% of their withdrawable accounts plus short-term borrowings. Liquid assets
include cash, certain time deposits, certain bankers' acceptances, specified
U.S. government, state or federal agency obligations, certain corporate debt
securities, commercial paper, certain mutual funds, certain mortgage-related
securities, and certain first-lien residential mortgage loans. The OTS recently
amended its regulation that implements this statutory liquidity requirement to
reduce the amount of liquid assets a savings association must hold from 5% of
net withdrawable accounts and short-term borrowings to 4%. The OTS also
eliminated the requirement that savings associations maintain short-term liquid
assets constituting at least 1% of their average daily balance of net
withdrawable deposit accounts and current borrowings. The revised OTS rule also
permits savings associations to calculate compliance with the liquidity
requirement based upon their average daily balance of liquid assets during each
quarter rather than during each month, as was required under the prior rule. The
OTS may impose monetary penalties on savings associations that fail to meet
these liquidity requirements. As of June 30, 1998, we had liquid assets of $70.9
million, and a regulatory liquidity ratio of 36.0%. We also have available $2
million under a line of credit with the FHLB-Indianapolis. Our unfunded loan
commitments at June 30, 1998 were $14.2 million, and we had $237,000 in standby
letters of credit outstanding at that date. It is our belief that upon
completion of the Conversion our liquidity ratios will increase.
Pursuant to OTS capital regulations, savings associations must
currently meet a 1.5% tangible capital requirement, a 3% leverage ratio (or core
capital) requirement, and a total risk-based capital to risk-weighted assets
ratio of 8%. At June 30, 1998, our tangible capital ratio was 13.9%, our core
capital ratio was 13.9%, and our risk-based capital to risk-weighted assets
ratio was 24.6%. Therefore, at June 30, 1998, our capital levels exceeded all
applicable regulatory capital requirements currently in effect. The following
table provides the minimum regulatory capital requirements and our capital
ratios as of June 30, 1998:
<TABLE>
<CAPTION>
At June 30, 1998
OTS Requirement Lincoln Federal's Capital Level
% of % of Amount
Capital Standard Assets Amount Assets(1) Amount of Excess
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tangible capital............................ 1.5% $4,569 13.9% $42,248 $37,679
Core capital (2)............................ 3.0 9,138 13.9 42,248 33,110
Risk-based capital.......................... 8.0 14,217 24.6 43,680 29,463
</TABLE>
(1) Tangible and core capital levels are shown as a percentage of adjusted
total assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(2) The OTS has proposed and is expected to adopt a core capital requirement
for savings associations comparable to that recently adopted by the OCC for
national banks. The new regulation, as proposed, would require at least 3%
of total adjusted assets for savings associations that received the highest
supervisory rating for safety and soundness, and 4% to 5% for all other
savings associations. The final form of such new OTS core capital
requirements may differ from this proposal. We expect to be in compliance
with such new requirements. See "Regulation - Regulatory Capital."
For definitions of tangible capital, core capital and risk-based
capital, see "Regulation - Savings Association Regulatory Capital."
As of June 30, 1998, management is not aware of any current
recommendations by regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have, a material adverse effect on our
liquidity, capital resources or results of operations.
Current Accounting Issues
In November 1993, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 93-6, "Employer's Accounting
for Employee Stock Ownership Plans." The SOP, among other things, changed the
measure of compensation expense recorded by employers from the cost of employee
stock ownership plan shares allocated to employees during the period to the fair
value of employee stock ownership plan shares allocated. Assuming the
acquisition of shares of stock by the ESOP, the application of SOP 93-6 is
likely to result in fluctuations in compensation expense due to changes in the
fair value of the stock.
In October, 1995, the FASB issued SFAS No. 123 entitled "Accounting for
Stock-Based Compensation." SFAS No. 123 establishes a fair value based method of
accounting and disclosing the amount of stock-based compensation paid to
employees. Historically, Accounting Principles Board ("APB") Opinion No. 25
"Accounting for Stock Issued to Employees" has measured compensation cost using
the method based on the award's intrinsic value. Those electing to remain with
the accounting in APB Opinion No. 25 must make pro forma disclosures of net
income and, when presented, earnings per share, as if the fair value based
method of accounting defined in SFAS 123 had been applied. The disclosure
provisions of SFAS No. 123 will be adopted by management upon completion of the
Conversion. We do not believe that adoption of SFAS No. 123 disclosure
provisions will have a material adverse effect on our consolidated financial
position or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
of Financial Assets, Servicing Rights and Extinguishment of Liabilities," that
provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method provides that
the carrying amount of the financial assets transferred be allocated to
components of the transaction based on their relative fair values. Transactions
subject to the provisions of SFAS No. 125 include, among others, transfers
involving repurchase agreements, securitizations of financial assets, loan
participations and transfers of receivables with recourse. An entity that
undertakes an obligation to service financial assets recognizes either a
servicing asset or liability for the servicing contract. A servicing asset or
liability that is purchased or assumed is initially recognized at its fair
value. Servicing assets and liabilities are amortized in proportion to and over
the period of estimated net servicing income or net servicing loss and are
subject to subsequent assessments for impairment based on fair value. SFAS No.
125 provides that a liability is removed from the balance sheet only if the
debtor either pays the creditor and is relieved of its obligation for the
liability or is legally released from being the primary obligor. SFAS No. 125 is
effective for applicable transactions occurring after December 31, 1996, and is
to be applied prospectively. Retroactive application is not permitted. The
adoption of SFAS No. 125 has not had a material adverse effect on our financial
position or results of operations.
In February 1997, the FASB issued SFAS No. 128, Earnings per Share,
establishing standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential common stock,
such as the shares issuable under our proposed stock option plan, as well as any
other entity that chooses to present EPS in its financial statements.
This Statement simplifies the current standards of APB Opinion No. 15,
Earnings per Share, and makes them comparable to international EPS standards. It
eliminates the presentation of primary EPS and requires presentation of basic
EPS (the principal difference being that common stock equivalents are not
considered in the computation of basic EPS). It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS includes no dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if the potential common shares were exercised or converted into
common stock or resulted in the issuance of common stock that then shared in the
earnings of the entity. Diluted EPS is computed similarly to that of fully
diluted EPS pursuant to Opinion No. 15. We do not expect the adoption of SFAS
No. 128 to have a material impact on our financial position or results of
operations.
The Statement is effective for our financial statements issued for
periods ending after December 15, 1997, including interim periods. Earlier
application is not permitted. The Statement requires restatement of all
prior-period EPS data presented.
In February 1997, the FASB issued SFAS No. 129, Disclosure of
Information about Capital Structure, continuing the current requirements to
disclose certain information about an entity's capital structure found in APB
Opinion No. 10, Omnibus Opinion--1966, Opinion No. 15, and SFAS No. 47,
Disclosure of Long-Term Obligations. It consolidates specific disclosure
requirements from those standards. SFAS No. 129 is effective for our financial
statements issued for periods ending after December 15, 1997, including interim
periods. We do not expect the adoption of SFAS No. 129 to have a material impact
on our financial position or results of operations.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income, establishing standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This Statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
SFAS No. 130 requires us to (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position.
The Statement is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, establishing standards for the way
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. This Statement
supersedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, but retains the requirement to report information about major
customers. It amends SFAS No. 94, Consolidation of All Majority-Owned
Subsidiaries, to remove the special disclosure requirements for previously
unconsolidated subsidiaries. This Statement does not apply to nonpublic business
enterprises or to not-for-profit organizations.
SFAS No. 131 requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
This Statement requires that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. It requires reconciliations of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts in the enterprise's general-purpose financial
statements. This Statement also requires that a public business enterprise
report descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general-purpose financial statements, and changes
in the measurement of segment amounts from period to period.
SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. This Statement need
not be applied to interim financial statements in the initial year of its
application, but comparative information for interim periods in the initial year
of application is to be reported in financial statements for interim periods in
the second year of application. We do not expect the adoption of SFAS No. 131 to
have a material impact on our financial condition or results of operations.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, requiring companies to record derivatives on
the balance sheet at their fair value. SFAS No. 133 also acknowledges that the
method of recording a gain or loss depends on the use of the derivative. If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
form commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.
For a derivative designated as hedging the exposure to changes in the
fair value of a recognized asset or liability or a firm commitment (referred to
as a fair value hedge), the gain or loss is recognized in earnings in the period
of change together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. The effect of that accounting is to
reflect in earnings the extent to which the hedge is not effective in achieving
offsetting changes in fair value.
For a derivative designated as hedging the exposure to variable cash
flows of a forecasted transaction (referred to as a cash flow hedge), the
effective portion of the derivative's gain or loss is initially reported as a
component of other comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects earnings. The
ineffective portion of the gain or loss is reported in earnings immediately.
For a derivative designated as hedging the foreign currency exposure of
a net investment in a foreign operation, the gain or loss is reported in other
comprehensive income (outside earnings) as part of the cumulative transaction
adjustment. The accounting for a fair value hedge described above applies to a
derivative designated as a hedge of the foreign currency exposure of an
unrecognized firm commitment or an available-for-sale security. Similarly, the
accounting for a cash flow hedge described above applies to a derivative
designated as a hedge of the foreign currency exposure of a
foreign-currency-denominated forecasted transaction.
For a derivative not designated as a hedging instrument, the gain or
loss is recognized in earnings in the period of change.
The new Statement applies to all entities. If hedge accounting is
elected by the entity, the method of assessing the effectiveness of the hedging
derivative and the measurement approach of determining the hedge's effectiveness
must be established at the inception of the hedge.
SFAS No. 133 amends SFAS No. 52 and supercedes SFAS Nos. 80, 105, and
119. SFAS No. 107 is amended to include the disclosure provisions about the
concentrations of credit risk from SFAS No. 105. Several Emerging Issues Task
Force consensuses are also changed or nullified by the provisions of SFAS No.
133.
SFAS No. 133 will be effective for all fiscal years beginning after
June 15, 1999. Early application is encouraged; however, this Statement may not
be applied retroactively to financial statements of prior periods.
Due to the recent issuance of this statement, we have not determined
the timing or impact on our operation of adopting this Statement.
Impact of Inflation
The consolidated financial statements presented herein have been
prepared in accordance with generally accepted accounting principles. These
principles require the measurement of financial position and operating results
in terms of historical dollars, without considering changes in the relative
purchasing power of money over time due to inflation.
Our primary assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services, since such prices are affected by inflation. In a period
of rapidly rising interest rates, the liquidity and maturities structures of our
assets and liabilities are critical to the maintenance of acceptable performance
levels.
The principal effect of inflation, as distinct from levels of interest
rates, on earnings is in the area of noninterest expense. Such expense items as
employee compensation, employee benefits and occupancy and equipment costs may
be subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans that we have made. We are unable to determine the extent, if any,
to which properties securing our loans have appreciated in dollar value due to
inflation.
Year 2000 Issue
Our lending and deposit activities, like those of most financial
institutions, depend significantly upon computer systems. See "Business of
Lincoln Federal Savings Bank -- Year 2000 Considerations." We are addressing the
potential problems associated with the possibility that the computers which
control our operating systems, facilities and infrastructure may not be
programmed to read four-digit date codes. This could cause some computer
applications to be unable to recognize the change from the year 1999 to the year
2000, which could cause computer systems to generate erroneous data or to fail.
We are working with the companies that supply or service our systems that rely
on computers to identify and remedy any Year 2000 related problems. We have
established a December 31, 1998 deadline for our third-party data service
providers to certify that they are or will be Year 2000 compliant, and we
currently expect to complete testing for Year 2000 compliance by the second
quarter of 1999.
Our Board of Directors reviews on a quarterly basis our progress in
addressing Year 2000 issues. We believe that our expenses related to upgrading
our systems and software for Year 2000 compliance will not exceed $300,000. As
of June 30, 1998, we had spent approximately $100,000 in connection with Year
2000 compliance. Although we believe we are taking the necessary steps to
address the Year 2000 compliance issue, no assurances can be given that some
problems will not occur or that we will not incur significant additional
expenses in future periods. In the event that we are ultimately required to
purchase replacement computer systems, programs and equipment, or to incur
substantial expenses to make our current systems, programs and equipment Year
2000 compliant, our net income and financial condition could be adversely
affected.
In addition to possible expenses related to our own systems and those
of our service providers, we could incur losses if Year 2000 problems affect any
of our depositors or borrowers. Such problems could include delayed loan
payments due to Year 2000 problems affecting any of our significant borrowers or
impairing the payroll systems of large employers in our market area. Because our
loan portfolio to individual borrowers is diversified and our market area does
not depend significantly upon one employer or industry, we do not expect any
such Year 2000 related difficulties that may affect our depositors and borrowers
to significantly affect our net earnings or cash flow.
BUSINESS OF LINCOLN FEDERAL SAVINGS BANK
General
We were originally organized in 1884 as Ladoga Federal Savings and Loan
Association, located in Ladoga, Indiana. In 1979 we merged with Plainfield First
Federal Savings and Loan Association, a federal savings and loan association
located in Plainfield, Indiana which was originally organized in 1896. Following
the merger, we changed our name to Lincoln Federal Savings and Loan Association
and, in 1984, we adopted our current name, Lincoln Federal Savings Bank. We
currently conduct our business from four full-service offices located in
Hendricks, Montgomery and Clinton Counties, Indiana, with our main office
located in Plainfield. We expect to open a new office in Avon, Indiana in
December, 1998. Our principal business consists of attracting deposits from the
general public and originating fixed-rate and adjustable-rate loans secured
primarily by first mortgage liens on one- to four-family residential real
estate. Our deposit accounts are insured up to applicable limits by the SAIF of
the FDIC.
We offer a number of financial services, including: (i) one- to
four-family residential real estate loans; (ii) commercial real estate loans;
(iii) real estate construction loans; (iv) land loans; (v) multi-family
residential loans; (vi) consumer loans, including home equity loans and
automobile loans; (vii) commercial loans; (viii) money market demand accounts
("MMDAs"); (ix) savings accounts; (x) checking accounts; (xi) NOW accounts; and
(xii) certificates of deposit.
Lending Activities
We have historically concentrated our lending activities on the
origination of loans secured by first mortgage liens for the purchase,
construction or refinancing of one- to four-family residential real property.
One- to four-family residential mortgage loans continue to be the major focus of
our loan origination activities, representing 77.1% of our total loan portfolio
at June 30, 1998. We also offer commercial real estate loans, real estate
construction loans and consumer loans. To a limited extent, we also offer
multi-family loans, land loans and commercial loans. Mortgage loans secured by
commercial real estate totaled approximately 7.0% of our total loan portfolio at
June 30, 1998. Real estate construction loans totaled approximately 3.7% of our
total loans as of June 30, 1998. Consumer loans, which consist primarily of home
equity and second mortgage loans, have increased significantly in the past two
years from $7.9 million, or 2.7% of our loan portfolio at December 31, 1995, to
$18.5 million, or 8.9% of our loan portfolio at June 30, 1998.
<PAGE>
Loan Portfolio Data. The following table sets forth the composition of our
loan portfolio (including loans held for sale) by loan type and security type as
of the dates indicated, including a reconciliation of gross loans receivable
after consideration of the allowance for loan losses and loans in process.
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1996 1995
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
TYPE OF LOAN
Real estate mortgage loans:
One-to-four-family
<S> <C> <C> <C> <C> <C> <C> <C> <C>
residential (1)................$159,887 77.12% $205,976 81.03% $269,618 84.84% $248,947 84.48%
Multi-family..................... 1,048 .51 1,133 .45 1,111 .35 1,012 .34
Commercial real estate........... 14,457 6.97 14,914 5.87 14,830 4.66 15,727 5.34
Construction..................... 7,722 3.72 9,912 3.90 13,159 4.14 7,838 2.66
Land............................. 1,699 .82 1,455 .57 2,725 .86 9,877 3.35
Commercial.......................... 141 .07 242 .10 --- --- --- .---
Consumer loans:
Home equity and
second mortgages............... 18,525 8.93 17,218 6.77 13,239 4.17 7,858 2.67
Other............................ 3,849 1.86 3,340 1.31 3,124 .98 3,409 1.16
Gross loans receivable.........$207,328 100.00% $254,190 100.00% $317,806 100.00% $294,668 100.00%
TYPE OF SECURITY
One-to-four-family
residential real estate (1)....$185,766 89.60% $232,966 91.65% $290,956 91.55% $264,142 89.64%
Multi-family real estate......... 1,048 .51 1,133 .45 1,111 .35 1,012 .34
Commercial real estate........... 14,825 7.15 15,054 5.92 19,890 6.26 16,229 5.51
Land............................. 1,699 .82 1,455 .57 2,725 .86 9,877 3.35
Deposits......................... 1,114 .54 1,106 .44 1,155 .37 995 .34
Auto............................. 2,150 1.04 2,041 .80 1,502 .47 1,690 .57
Other security................... 341 .16 426 .17 356 .11 611 .21
Unsecured ....................... 385 .18 9 .-- 111 .03 113 .04
Gross loans receivable......... 207,328 100.00 254,190 100.00% 317,806 100.00 294,668 100.00
Deduct:
Allowance for loan losses........... 1,432 .69 1,361 .54 1,241 .39 1,121 .38
Deferred loan fees (1).............. 1,143 .55 1,690 .66 2,707 .85 2,854 .97
Loans in process.................... 2,071 1.00 2,504 .99 8,086 2.55 5,347 1.81
Net loans receivable.............$202,682 97.76% $248,635 97.81% $305,772 96.21% $285,346 96.84%
Mortgage Loans:
Adjustable-rate.................. $74,809 36.79% $95,106 37.95% $117,062 37.20% $112,193 38.52%
Fixed-rate....................... 128,529 63.21 155,502 62.05 197,620 62.80 179,066 61.48
Total..........................$203,338 100.00% $250,608 100.00% $314,682 100.00% $291,259 100.00%
</TABLE>
1994 1993
Percent Percent
Amount of Total Amount of Total
------ -------- ------ --------
TYPE OF LOAN
Real estate mortgage loans:
One-to-four-family
residential (1)............... $228,489 83.78% $176,115 83.77%
Multi-family.................... 559 .20 857 .41%
Commercial real estate.......... 12,780 4.69 12,249 5.83%
Construction.................... 19,343 7.09 8,610 4.09%
Land............................ 1,435 .53 5,343 2.54%
Commercial......................... --- --- --- ---%
Consumer loans:
Home equity and
second mortgages.............. 7,018 2.57 5,355 2.55%
Other........................... 3,108 1.14 1,713 .81%
Gross loans receivable........ $272,732 100.00% $210,242 100.00%
TYPE OF SECURITY
One-to-four-family
residential real estate (1)... $253,150 92.82% $190,080 90.41%
Multi-family real estate........ 559 .21 857 .41%
Commercial real estate.......... 14,480 5.31 12,249 5.83%
Land............................ 1,435 .53 5,343 2.54%
Deposits........................ 959 .35 591 .28%
Auto............................ 1,635 .60 926 .44%
Other security.................. 392 .14 72 .03%
Unsecured ...................... 122 .04 124 .06%
Gross loans receivable........ 272,732 100.00 210,242 100.00%
Deduct:
Allowance for loan losses.......... 1,047 .39 1,056 .50%
Deferred loan fees (1)............. 2,703 .99 2,116 1.01%
Loans in process................... 8,728 3.20 9,216 4.38%
Net loans receivable............ $260,254 95.42% $197,854 94.11%
Mortgage Loans:
Adjustable-rate.................$ 84,365 31.29% $ 51,757 24.82%
Fixed-rate...................... 185,259 68.71 156,772 75.18%
Total......................... $269,624 100.00% $208,529 100.00%
(1) Net loans held for sale included in the above categories amounted to
$19,264,000, $24,201,000, $15,534,000, $16,141,000 and $8,779,000 at
June 30, 1998 and December 31, 1996, 1995, 1994, and 1993,
respectively. There were no loans held for sale at December 31, 1997.
<PAGE>
The following table sets forth certain information at December 31,
1997, regarding the dollar amount of loans maturing in our loan portfolio based
on the contractual terms to maturity. Demand loans having no stated schedule of
repayments and no stated maturity and overdrafts are reported as due in one year
or less. This schedule does not reflect the effects of possible prepayments or
enforcement of due-on-sale clauses. Management expects prepayments will cause
actual maturities to be shorter.
<TABLE>
<CAPTION>
Balance Due During Years Ended December 31,
Outstanding at 2001 2003 2008 2013
December 31, to to to and
1997 1998 1999 2000 2002 2007 2012 following
(In thousands)
Real estate mortgage loans:
One- to four-family
<S> <C> <C> <C> <C> <C> <C> <C> <C>
residential loans................ $205,976 $ 180 $ 71 $ 304 $2,847 $16,336 $43,541 $142,697
Multi-family loans.................... 1,133 67 --- --- 76 131 687 172
Commercial real estate loans....... 14,914 4,796 253 415 195 2,952 3,917 2,386
Construction loans................. 9,912 7,137 2,666 109 --- --- --- ---
Land loans......................... 1,455 1,190 265 --- --- --- --- ---
Commercial......................... 242 87 16 56 83 --- --- ---
Consumer loans:
Installment loans................. 2,234 100 303 506 1,279 37 9 ---
Loans secured by deposits.......... 1,106 517 504 14 71 --- --- ---
Home equity loans and
and second mortgages............. 17,218 1,218 393 250 1,103 14,254 --- ---
Total consumer loans............. 20,558 1,835 1,200 770 2,453 14,291 9 ---
Total.......................... $254,190 $15,292 $4,471 $1,654 $5,654 $33,710 $48,154 $145,255
</TABLE>
The following table sets forth, as of December 31, 1997, the dollar
amount of all loans due after one year that have fixed interest rates and
floating or adjustable interest rates.
<TABLE>
<CAPTION>
Due After December 31, 1998
Fixed Rates Variable Rates Total
(In thousands)
Real estate mortgage loans:
<S> <C> <C> <C>
One- to four-family residential loans............. $132,186 $73,610 $205,796
Multi-family loans................................ 321 745 1,066
Commercial real estate loans...................... 6,626 3,492 10,118
Construction loans................................... 2,775 --- 2,775
Land loans........................................ 265 --- 265
Commercial........................................... 155 --- 155
Installment loans.................................... 2,134 --- 2,134
Loans secured by deposits............................ 589 --- 589
Home equity loans and second mortgages............... 5,080 10,920 16,000
Total............................................. $150,131 $88,767 $238,898
</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 do not
originate one- to four-family residential mortgage loans if the ratio of the
loan amount to the lesser of the current cost or appraised value of the property
(the "Loan-to-Value Ratio") exceeds 95%. We require private mortgage insurance
on loans with a Loan-to-Value Ratio in excess of 80%. The cost of such insurance
is factored into the annual percentage rate on such loans.
In the past, our underwriting criteria for one- to four-family
residential loans focused heavily on the value of the collateral securing the
loan and placed less emphasis on the borrower's debt servicing capacity and
other credit factors. We are currently revising our lending policies to
emphasize factors other than the value of the underlying collateral, such as the
income, debt-to-income ratio, stability of earnings and past credit history of a
potential borrower, in making credit decisions. We have also recently
established uniform underwriting criteria to be used by each of our branch
offices which are based on the Freddie Mac lending criteria. We originate
fixed-rate loans which provide for the payment of principal and interest over a
period of up to 30 years.
We also offer adjustable-rate mortgage ("ARM") loans pegged to the
one-year U.S. Treasury securities yield adjusted to a constant maturity. We no
longer offer adjustable rate COFI loans because that index adjusts less rapidly
to changes in interest rates compared to other indices. We may offer discounted
initial interest rates on ARM loans, but we require that the borrower qualify
for the loan at the fully-indexed rate (the index rate plus the margin). A
substantial portion of the ARM loans in our portfolio at June 30, 1998 provide
for maximum rate adjustments per year and over the life of the loan of 2% and
6%, respectively. Our residential ARMs are amortized for terms up to 30 years.
Although we would generally prefer to originate mortgage loans that have
adjustable rather than fixed interest rates, the current low-interest rate
environment has reduced borrower demand for ARM loans.
In two separate transactions in August, 1997 and April, 1998, we
securitized approximately $41.1 million of the COFI loans in our portfolio and
sold the resulting mortgage-backed securities on the secondary market. In June,
1998 we sold in a direct, whole-loan sale to a private investor an additional
$19.3 million of COFI loans. Because this loan sale did not close until the
third quarter of 1998, these loans are reflected as "Loans held for sale" in the
June 30, 1998 financial statements. Following the closing of this whole-loan
sale, the amount of COFI loans in our portfolio was reduced to $4.8 million. We
also pooled $75.0 million of fixed-rate one- to four-family residential loans
into Freddie Mac mortgage-backed securities. We sold on the secondary market
$34.3 million of these securities which were backed by lower-yielding,
fixed-rate loans. We continue to hold in our investment portfolio $40.7 million
of these securities that are backed by higher-yielding, fixed-rate mortgage
loans that we originated. See "Management's Discussion and Analysis of Lincoln
Federal Savings Bank and Subsidiary - Asset/Liability Management."
With the exception of the loans that were securitized during 1997 and
1998 and in the whole-loan sale in 1998, we determine when we originate a one-
to four-family residential loan whether we intend to hold the loan until
maturity or sell it in the secondary market. We generally sell on the secondary
market all of the fixed-rate loans that we originate with terms of more than 15
years that are written to Freddie Mac standards and retain in our loan portfolio
any loans that we originate that are not written to Freddie Mac standards. We
retain the servicing rights on the loans that we sell.
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 also 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 33.4%
of our one- to four-family residential loans had adjustable rates of interest.
All of the one- to four-family residential mortgage loans that we
originate include "due-on-sale" clauses, which give us the right to declare a
loan immediately due and payable in the event that, among other things, the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not repaid. However, we occasionally permit assumptions
of existing residential mortgage loans on a case-by-case basis.
At June 30, 1998, approximately $159.9 million, or 77.1% of our
portfolio of loans, consisted of one- to four-family residential loans.
Approximately $808,000, or .5% of total residential loans, were included in
non-performing assets as of that date. See "--Non-Performing and Problem
Assets."
Commercial Real Estate and Multi-Family Loans. Our commercial real
estate loans are secured by churches, warehouses, office buildings, hotels and
other commercial properties. We generally originate commercial real estate loans
as five-year balloon loans amortized over a 10- or 15-year period, with an
adjustable interest rate indexed primarily to the prime rate. At June 30, 1998
we had $2.9 million in outstanding balloon loans secured by commercial and
multi-family real estate. We generally require a Loan-to-Value Ratio of at least
75% on commercial real estate loans, although we may make loans with a
Loan-to-Value Ratio of up to 80% on loans secured by owner-occupied commercial
real estate or by multi-family residential properties.
Commercial real estate loans generally are larger than one- to
four-family residential loans and involve a greater degree of risk. Commercial
real estate loans often involve large loan balances to single borrowers or
groups of related borrowers. Payments on these loans depend to a large degree on
results of operations and management of the properties and may be affected to a
greater extent by adverse conditions in the real estate market or the economy in
general. Accordingly, the nature of the loans makes them more difficult for
management to monitor and evaluate. In addition, balloon loans may involve a
greater degree of risk to the extent the borrower is unable to obtain financing
or cannot repay the loan when the loan matures and the balloon payment is due.
At June 30, 1998 our largest commercial real estate borrower had loans
outstanding in the aggregate amount of $2.2 million which were secured by motels
located throughout Central Indiana. Also as of that date, our largest commercial
real estate loan had an outstanding balance of $1,357,000 and was secured by a
church located in Plainfield, Indiana. At June 30, 1998, approximately $14.5
million, or 7.0% of our total loan portfolio, consisted of commercial real
estate loans. On the same date, there were no commercial real estate loans
included in non-performing assets. Following the Conversion, we generally intend
to increase the amount of commercial real estate loans in our portfolio.
At June 30, 1998, approximately $1 million, or .5% of our total loan
portfolio, consisted of mortgage loans secured by multi-family dwellings (those
consisting of more than four units). We write multi-family loans on terms and
conditions similar to our commercial real estate loans. The largest multi-family
loan as of June 30, 1998 was $351,000 and was secured by an apartment building
in Clayton, Indiana. On the same date, there were no multi-family loans included
in non-performing assets.
Multi-family loans, like commercial real estate loans, involve greater
risk than do residential loans. Also, the loans-to-one-borrower limitation
limits our ability to make loans to developers of apartment complexes and other
multi-family units.
Construction Loans. We offer construction loans to developers for the
acquisition and development of residential and nonresidential real estate and to
builders of one- to four-family residential properties. A significant portion of
these loans are made on a speculative basis (i.e., before the builder/developer
obtains a commitment from a buyer). At June 30, 1998, approximately $7.7
million, or 3.7% of our total loan portfolio, consisted of construction loans.
Of these loans, approximately $3.4 million were for the acquisition and
development of residential housing developments and $4.0 million financed the
construction of one-to four-family residential properties. As of June 30, 1998,
our largest construction loan relationship and largest construction loan had a
balance of $1.2 million and was secured by a residential housing development
located in Avon, Indiana. As of June 30, 1998, this loan was peforming according
to its terms. Also on that date, construction loans in the amount of $808,000
were included in non-performing assets.
Construction loans on residential properties where the borrower has
entered into a verifiable sales contract to a non-related party to purchase the
completed home may be made with a maximum Loan-to-Value Ratio of the lesser of
90% of the price stipulated in the sales contract or 80% of the appraised value
of the property. With respect to residential properties constructed on a
speculative basis, we generally require a Loan-to-Value Ratio of 75% of the "as
completed" appraised value of the property. Although speculative loans make up a
significant percentage of our construction loan portfolio, we generally will
finance only one speculative construction project per builder. Residential
construction loans are generally written with a fixed rate of interest and for
an initial term of six months. We generally offer construction loans on
commercial land development projects with a maximum Loan-to-Value Ratio of 75%
of the appraised value of the property or 80% of the property's cost plus 80% of
the cost of verifiable improvements to the property. Construction loans on
commercial real estate properties are generally written for a term not to exceed
30 months.
While providing a comparable, and in some cases higher, yield than a
conventional mortgage loan, construction loans involve a higher level of risk.
For example, if a project is not completed and the borrower defaults, we may
have to hire another contractor to complete the project at a higher cost. Also,
a project may be completed, but may not be salable, resulting in the borrower
defaulting and requiring that we take title to the project.
Land Loans. At June 30, 1998, approximately $1.7 million, or .8% of our
total loan portfolio, consisted of mortgage loans secured by undeveloped real
estate. We impose a maximum Loan-to-Value Ratio of 65% of the appraised value of
the land or 90% of the cost of the undeveloped land for pre-development land
acquisition loans. We write these loans for a maximum term of 12 months. At June
30, 1998, our largest land loan totaled $416,000 and was secured by bare land
located in Plainfield, Indiana.
Land loans present greater risk than conventional loans since land
development borrowers who are over budget may divert the loan funds to cover
cost-overruns rather than direct them toward the purpose for which such loans
were made. In addition, land loans are more difficult to monitor than
conventional mortgage loans. As such, a defaulting borrower could cause us to
take title to partially improved land that is unmarketable without further
capital investment.
Consumer Loans. Our consumer loans consist of variable- and fixed-rate
home equity loans and lines of credit, automobile, recreational vehicle, boat
and motorcycle loans and loans secured by deposits. We do not make indirect
consumer loans. Consumer loans tend to have shorter terms and higher yields than
permanent residential mortgage loans. At June 30, 1998, our consumer loans
aggregated approximately $22.4 million, or 10.8% of our total loan portfolio.
Included in consumer loans at June 30, 1998 were $12.6 million of variable-rate
home equity lines of credit. These variable-rate loans improve our exposure to
interest rate risk.
Our home equity lines of credit and fixed-term loans are generally
written for up to 95% of the available equity (the appraised value of the
property less any first mortgage amount) if we hold the first mortgage, and up
to 90% of the available equity if we do not hold the first mortgage. Our home
equity loans increased significantly from $7.9 million at December 31, 1995 to
$18.5 million at June 30, 1998, primarily as the result of a marketing campaign
directed at our existing customers. We generally will write automobile loans for
up to 100% of the acquisition price for a new automobile and up to the NADA
retail value for a used automobile. New car loans are written for terms of up to
60 months and used car loans are written for terms up to 48 months, depending on
the age of the car. Loans for recreational vehicles and boats are written for no
more than 80% of the purchase price or "verified value," whichever is less, for
a maximum term of 120 months and 84 months, respectively. Motorcycles loans are
written for no more than 75% of the purchase price or "verified value" with a
term not to exceed 48 months. All of our consumer loans have a fixed rate of
interest except for home equity lines of credit, which are offered at a variable
rate. At June 30, 1998, consumer loans in the amount of $27,000 were included in
non-performing assets.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or are secured by
rapidly depreciable assets, such as automobiles. Further, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance. In addition, consumer loan
collections depend on the borrower's continuing financial stability, and thus
are more likely to be affected by adverse personal circumstances. Furthermore,
the application of various federal and state laws, including bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans. See
"- Non-Performing and Problem Assets." There can be no assurances that
additional delinquencies will not occur in the future.
Commercial Loans. We offer commercial loans, which consist primarily of
loans to businesses that are secured by assets other than real estate. As of
June 30, 1998, commercial loans amounted to $141,000. Commercial loans tend to
bear somewhat greater risk than residential mortgage loans, depending on the
ability of the underlying enterprise to repay the loan. Although commercial
loans have not historically comprised a large portion of our loan portfolio, we
intend to increase the amount of loans we make to small businesses in the future
in order to increase our rate of return and diversify our portfolio. As of June
30, 1998, none of our commercial loans were included in nonperforming assets.
Origination, Purchase and Sale of Loans. Historically, we have confined
our loan origination activities primarily to Hendricks, Montgomery and Clinton
Counties. At June 30, 1998, we did not have any mortgage loans secured by
property located outside of Indiana. Our loan originations are generated from
referrals from existing customers, real estate brokers, and newspaper and
periodical advertising. Loan applications are currently underwritten and
processed at our offices in Hendricks, Montgomery and Clinton counties, although
we intend to centralize the underwriting function in our main office in
Plainfield in the near future.
Our loan approval process is intended to assess the borrower's ability
to repay the loan, the viability of the loan and the adequacy of the value of
the property that will secure the loan. To assess the borrower's ability to
repay, we study the employment and credit history and information on the
historical and projected income and expenses of our mortgagors.
We generally require appraisals on all real property securing our
first-mortgage loans and require an attorney's opinion and a valid lien on the
mortgaged real estate. Appraisals for all real property securing first-mortgage
loans are performed by independent appraisers who are state-licensed. We require
fire and extended coverage insurance in amounts at least equal to the principal
amount of the loan and also require flood insurance to protect the property
securing our interest if the property is in a flood plain. We also generally
require private mortgage insurance for all residential mortgage loans with
Loan-to-Value Ratios of greater than 80%. We generally require escrow accounts
for insurance premiums and taxes for residential mortgage loans that we
originate.
Our underwriting standards for consumer loans are intended to protect
against some of the risks inherent in making consumer loans. Borrower character,
paying habits and financial strengths are important considerations.
We occasionally purchase participation interests in loans originated by
other financial institutions in order to diversify our portfolio, supplement
local loan demand and to obtain more favorable yields. The participations that
we purchase normally represent a portion of residential or commercial real
estate loans originated by other Indiana financial institutions, most of which
are secured by property located in Indiana. As of June 30, 1998, however, we had
only $145,000 in loan participations in our asset portfolio.
The following table shows loan origination and repayment activity for
Lincoln Federal during the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
1998 1997 1997 1996 1995
(In thousands)
<S> <C> <C> <C> <C> <C>
Gross loans receivable at
beginning of period.............................$254,190 $317,806 $317,806 $294,668 $272,732
Loans Originated:
Real estate mortgage loans:
One-to-four family loans (1)................ 24,491 24,354 44,472 54,396 46,754
Multi-family loans.......................... 68 140 259
Commercial real estate loans................ 2,472 1,734 6,608 3,033 5,650
Construction loans.......................... 3,347 3,738 10,411 15,640 19,515
Land loans.................................. 580 680 3,053 6,227 2,888
Commercial loans.............................. --- --- 242 --- ---
Consumer loans................................ 7,805 4,839 12,432 14,303 2,880
Total originations........................ 38,695 35,345 77,286 93,739 77,946
Purchases (sales) of participation loans, net...... (47,666) (78,887) (4,681) (7,786)
Reductions:
Repayments and other deductions............... 37,694 22,783 61,904 65,818 48,157
Transfers from loans to real estate owned..... 197 --- 111 102 67
Total reductions............................ 37,891 22,783 62,015 65,920 48,224
Total gross loans receivable at
end of period...........................$207,328 $330,368 $254,190 $317,806 $294,668
======== ======== ======== ======== ========
</TABLE>
(1) Includes certain home equity loans.
Our total loan originations during the period ended June 30, 1998
totaled $38.7 million, compared to $35.3 million during the period ended June
30, 1997. For the year ended December 31, 1997, our loan originations totaled
$77.3 million, compared to $93.7 million and $77.9 million in the years ended
December 31, 1996 and 1995, respectively.
Origination and Other Fees. We realize income from late charges,
checking account service charges, loan servicing fees and fees for other
miscellaneous services. Late charges are generally assessed if a loan payment is
not received within a specified number of days after it is due. The grace period
depends on the individual loan documents. We also receive a loan servicing fee
of 1/4% on fixed-rate loans and 3/8% on ARM loans that we service for others.
Non-Performing and Problem Assets
After a mortgage loan becomes 10 days past due, we deliver a
delinquency notice to the borrower. When loans are 30 to 60 days in default, we
send additional delinquency notices and make personal contact by telephone with
the borrower to establish acceptable repayment schedules. When loans become 60
days in default, we again contact the borrower, this time in person, to
establish acceptable repayment schedules. When a mortgage loan is 90 days
delinquent, we will have either entered into a workout plan with the borrower or
referred the matter to our attorney for collection. Management is authorized to
commence foreclosure proceedings for any loan upon making a determination that
it is prudent to do so.
We review mortgage loans on a regular basis and place one- to
four-family residential loans on a non-accrual status when they become 120 days
delinquent. Other loans are placed on a non-accrual status when they become 90
days delinquent. Generally, when loans are placed on a non-accrual status,
unpaid accrued interest is written off.
Non-performing Assets. At June 30, 1998, $1,741,000, or .6% of our
total assets, were non-performing (non-performing loans and non-accruing loans)
compared to $3,669,000, or 1.1%, of our total assets at December 31, 1997. At
June 30, 1998, residential loans accounted for $808,000 of our non-performing
assets. We had real estate owned ("REO") properties in the amount of $98,000 as
of June 30, 1998.
The table below sets forth the amounts and categories of our
non-performing assets (non-performing loans, foreclosed real estate and troubled
debt restructurings) for the last three years. It is our policy that all earned
but uncollected interest on all loans be reviewed monthly to determine if any
portion thereof should be classified as uncollectible for any loan past due in
excess of 90 days. We deem any delinquent loan that is 90 days or more past due
to be a non-performing asset.
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1996 1995
(Unaudited) (Dollars in thousands)
Non-performing assets:
<S> <C> <C> <C> <C>
Non-performing loans................................ $1,601 $ 3,257 $ 2,397 $1,797
Troubled debt restructurings........................ 42 367 46 598
Total non-performing loans........................ 1,643 3,624 2,443 2,395
Foreclosed real estate.............................. 98 45 75 ---
Total non-performing assets....................... $1,741 $ 3,669 $2,518 $2,395
Non-performing loans to total loans.................... .80% 1.45% .80% .83%
Non-performing assets to total assets.................. .57% 1.14% .73% .75%
</TABLE>
Interest income of $30,000 and $93,000 for the six months ended June
30, 1998 and the year ended December 31, 1997, respectively, was recognized on
the non-performing loans summarized above. Interest income of $80,000 and
$225,000 for the six months ended June 30, 1998 and the years ended December 31,
1997, respectively, would have been recognized under their original loan terms.
At June 30, 1998, we held loans delinquent from 30 to 89 days totalling
$5.1 million. As of that date, we were not aware of any other loans in which
borrowers were experiencing financial difficulties and were not aware of any
assets that would need to be disclosed as non-performing assets.
Our two largest non-performing loans at June 30, 1998 were made to
separate borrowers in connection with the development of residential
subdivisions in Hendricks County, Indiana. We have placed both loans on
non-accrual status. We originated the larger of the two loans in January, 1994
in the original amount of $1.2 million. The loan became delinquent in September,
1995, and as of June 30, 1998, the borrower owed $673,000. We have written this
amount down to $372,000 on our books, reflecting the market value of the
collateral less the estimated costs of foreclosing on the property. In addition,
we have established a reserve for this loan due to its classified status. We
have turned the collection of this loan over to our attorney and a foreclosure
action has been filed.
The other significant delinquent loan in our portfolio was originated
in September, 1993 in the original principal amount of $600,000. We extended an
additional loan for $295,000 to the same borrower in August, 1995. Both loans
became delinquent in September, 1996. As of June 30, 1998, the borrower owed an
aggregate amount of $435,000 on the two loans. We have continuously worked with
the borrower since the loans became delinquent to restructure the repayment
terms of the loans. We have not charged the loan off but, due to its classified
status, we have established a reserve based on management's estimate of the
value of the collateral. We have not initiated foreclosure proceedings on this
loan.
<PAGE>
Delinquent Loans. The following table sets forth certain information at
June 30, 1998, and at December 31, 1997, 1996, and 1995, relating to
delinquencies in our portfolio. Delinquent loans that are 90 days or more past
due are considered non-performing assets.
<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
30-89 Days 90 Days or More 30-89 Days 90 Days or More
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loansof Loans of Loans of Loansof Loans
(Dollars in thousands)
Residential
<S> <C> <C> <C> <C> <C> <C> <C> <C>
mortgage loans.......... 99 4,707 19 766 140 6,040 26 1,228
Commercial
real estate loans....... 1 93 --- --- --1 100 1 367
Multi-family
mortgage loans.......... ----- --- --- --- ------ --- --- ---
Construction loans......... --- --- 3 808 --- --- 3 1,214
Land loans................. 1 6 --- --- --- --- --- ---
Consumer loans............. 20 258 2 27 29 379 20 448
--- ------ -- ------ --- ------ -- ------
Total................... 121 $5,064 24 $1,601 170 $6,519 50 $3,257
=== ====== == ====== === ====== == ======
Delinquent loans to
total loans............. 3.27% 3.91%
==== ====
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995
30-89 Days 90 Days or More 30-89 Days 90 Days or More
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loansof Loans of Loans of Loans of Loans of Loans
Residential
<S> <C> <C> <C> <C> <C> <C> <C> <C>
mortgage loans......... 143 6,613 11 797 156 6,598 12 452
Commercial
real estate loans...... 2 609 --- --- --- --- --- ---
Multi-family
mortgage loans......... --- --- 4 1,594 --- --- --- ---
Construction loans........ --- --- --- --- --- --- 3 1,199
Land loans................ 4 47 --- --- 1 152 --- ---
Consumer loans............ 7 39 1 6 10 188 8 146
--- ------ -- ----- --- ------ -- ------
Total.................. 156 $7,308 16 2,397 167 $6,938 23 $1,797
=== ====== == ===== === ====== == ======
Delinquent loans to
total loans............ 3.16% 3.05%
==== ====
</TABLE>
<PAGE>
Classified assets. Federal regulations and our Asset Classification
Policy provide for the classification of loans and other assets such as debt and
equity securities considered by the OTS to be of lesser quality as
"substandard," "doubtful" or "loss" assets. An asset is considered "substandard"
if it is inadequately protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any. "Substandard" assets include
those characterized by the "distinct possibility" that the institution 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.
An insured institution is required to establish general allowances for
loan losses in an amount deemed prudent by management for loans classified
substandard or doubtful, as well as for other problem loans. 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 an insured
institution classifies problem assets as "loss," it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to the classification of its assets and the amount of its valuation
allowances is subject to review by the OTS which can order the establishment of
additional general or specific loss allowances.
We regularly review our loan portfolio to determine whether any loans
require classification in accordance with applicable regulations. Our classifed
assets are made up entirely of non-performing assets.
Allowance for Loan Losses
The allowance for loan losses is maintained through the provision for
loan losses, which is charged to earnings. The allowance for loan losses is
determined in conjunction with our review and evaluation of current economic
conditions (including those of our lending area), changes in the character and
size of the loan portfolio, loan delinquencies (current status as well as past
and anticipated trends) and adequacy of collateral securing loan delinquencies,
historical and estimated net charge-offs, and other pertinent information
derived from a review of the loan portfolio. In our opinion, our allowance for
loan losses is adequate to absorb probable losses inherent in the loan portfolio
at June 30, 1998. However, there can be no assurance that regulators, when
reviewing our loan portfolio in the future, will not require increases in our
allowances for loan losses or that changes in economic conditions will not
adversely affect our loan portfolio.
Summary of Loan Loss Experience. The following table analyzes changes
in the allowance during the past three fiscal years ended December 31, 1997, and
the six-month periods ended June 30, 1998, and June 30, 1997.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
1998 1997 1997 1996 1995
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period.............. $ 1,361 $ 1,241 $ 1,241 $ 1,121 $ 1,047
Charge-offs:
One- to four-family
residential mortgage loans........... (29) --- --- --- (15)
Commercial real estate mortgage loans.. --- --- (178) --- ---
Construction loans..................... (301) --- --- --- (12)
Consumer loans......................... (25) --- --- --- (2)
Total charge-offs.................... (355) --- (178) --- (29)
Recoveries.................................. --- --- --- --- ---
One- to four-family
residential mortgage loans........... 13 --- --- --- 3
Consumer loans......................... 3 --- --- --- ---
Total recoveries..................... 16 --- --- --- 3
Net charge-offs.......................... (339) --- (178) --- (26)
Provision for losses on loans............... 410 50 298 120 100
Balance end of period.................... $1,432 $ 1,291 $ 1,361 $ 1,241 $1,121
Allowance for loan losses as a percent of
total loans outstanding.................. 0.70% 0.40% 0.54% 0.40% 0.39%
Ratio of net charge-offs to average
loans outstanding........................ .15 --- .06 --- .01
</TABLE>
Allocation of Allowance for Loan Losses. The following table presents
an analysis of the allocation of our allowance for loan losses at the dates
indicated.
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1997 1996 1995
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in each in each in each in each in each
category category category category category
to total total to total to total total
Amount loans Amount loans Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of
period applicable to:
Real estate mortgage loans:
One- to four-family
residential............. $605 77.12% $253 85.67% $401 81.78% $206 84.84% $ 77 84.48%
Multi-family.............. 10 .51 11 .33 11 .45 --- .35 --- .34
Commercial................ 217 6.97 517 3.63 221 5.88 468 4.66 214 5.34
Construction loans........ 195 3.72 219 3.17 249 3.14 367 4.14 402 2.66
Land loans................ 25 .82 39 1.17 15 .57 --- .86 --- 3.35
Commercial loans............ 2 .07 --- --- 11 .10 --- --- --- ---
Consumer loans.............. 339 10.79 252 6.03 268 8.08 98 5.15 72 3.83
Unallocated................. 39 --- --- --- 185 --- 102 --- 356
Total.......................$1,432 100.00% $1,291 100.00% $1,361 100.00% $1,241 100.00% $1,121 100.00%
</TABLE>
Investments
Investments. During the third quarter of 1997, we adopted a revised
investment policy that authorizes us to invest in U.S. Treasury securities,
securities guaranteed by GNMA, securities issued by agencies of the U.S.
Government, mortgage-backed securities issued by Freddie Mac or FNMA and in
highly-rated mortgage-backed securities, collateralized mortgage obligations and
investment-grade corporate debt securities. This revised policy permits our
management to react quickly to market conditions. Most of the securities in our
portfolio are considered available-for-sale. At June 30, 1998, our investment
portfolio consisted of investments in Freddie Mac and FNMA mortgage-backed
securities, corporate securities, federal agency securities, FHLB stock, an
investment in Pedcor Investments - 1987 - I, L.P., an investment in Bloomington
Housing Associates, L.P., and an investment in an insurance company. See
"-Investments in Multi-Family, Low- and Moderate-Income Housing Projects" and
"Service Corporation Subsidiary." At June 30, 1998, approximately $70.3 million,
or 23.1%, of our total assets consisted of such investments. We also had $20.7
million in interest-earning deposits with the FHLB-Indianapolis as of that date.
As of that date, we also had pledged to the FHLB-Indianapolis as collateral
investment securities with a carrying value of $47.6 million, including $44.1
million in mortgage-backed securities and $3.5 million in other securities.
Investment Securities. The following table sets forth the amortized
cost and the market value of our investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1996 1995
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- -----
(Unaudited) (In thousands)
Investment securities available for sale:
<S> <C> <C> <C> <C>
Mortgage-backed securities......... $43,206 $44,112(1) $28,495 $29,399 --- --- --- ---
Corporate debt obligations......... 14,828 14,828 --- --- --- --- --- ---
Federated liquid cash fund......... --- --- --- --- $ 17 $ 17 $ 16 $ 16
Freddie Mac stock................... --- --- -- --- 100 101 100 100
Total investment securities
available for sale.............. 58,034 58,940 28,495 29,399 117 118 116 116
Investment securities
held to maturity--
Federal agency securities......... 3,500 3,509 9,635 9,615 15,185 14,997 11,600 11,591
Total investment securities......... 61,534 62,499 38,130 39,014 15,302 15,115 11,716 11,707
Investment in limited partnerships.. 2,633 (1) 2,706 (1) 3,187 (1) 3,583 (1)
Investment in insurance company..... 650 (1) --- --- --- --- --- ---
FHLB stock (2)...................... 5,447 5,447 5,447 5,447 4,797 4,797 4,300 4,300
Total investments................... $70,264 $46,283 $23,286 $19,599
</TABLE>
(1) Market values are not available
(2) Market value is based on the price at which the stock may be resold to
the FHLB of Indianapolis.
The following table sets forth the amount of investment securities
excluding mortgage-backed securities which mature during each of the periods
indicated and the weighted average yields for each range of maturities at June
30, 1998.
<TABLE>
<CAPTION>
Amount at June 30, 1998 which matures in
One Year One Year After
or Less to Five Years Ten Years
Amortized Average Amoritzed Average Amortized Average
Cost Yield Cost Yield Cost Yield
(Dollars in thousands)
<S> <C> <C> <C> <C>
Corporates securities -- available for sale.....$ --- ---% $ --- ---% $14,828 6.41%
Federal agency securities -- held to maturity... 1,250 5.77 2,250 6.04 --- ---
$1,250 5.77% $2,250 6.04% $14,828 6.41%
</TABLE>
At June 30, 1998, our corporate investments included securities of two
issuers with an aggregate book value in excess of 10% of our equity capital as
follows:
Issuer Book Value Market Value
Huntington Bancshares, Inc. $4,969 $4,969
KeyCorp 4,972 4,972
Mortgage-backed Securities. The following table sets forth the
composition of our mortgage-backed securities portfolio at June 30, 1998 and
December 31, 1997. There were no mortgage-backed securities outstanding at
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
Amortized Percent Market Amortized Percent Market
Cost of Total Value Cost of Total Value
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan
Mortgage Corporation $36,416 84.3% $37,264 $20,997 73.7% $21,859
Federal National
Mortgage Corporation 6,790 15.7 6,848 7,498 26.3 7,540
Total mortgage-backed
securities $43,206 100.0% $44,112 $28,495 100.0% $29,399
</TABLE>
All mortgage-backed securities outstanding at June 30, 1998 and
December 31, 1997 mature after ten years and have a weighted average yield of
7.34% and 7.72%, respectively.
The following table sets forth the changes in our mortgage-backed
securities portfolio for the six-month period ended June 30, 1998 and for the
year ended December 31, 1997. There were no mortgage-backed securities
outstanding during the six months ended June 30, 1997 or during the years ended
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
For the Six Months Ended For the Year Ended
June 30, 1998 December 31, 1997
(Dollars in thousands)
<S> <C> <C>
Beginning balance $29,399 $ ---
Securitization of loans 39,729 76,455
Purchases 96 7,574
Monthly repayments (4,138) (1,237)
Proceeds from sales (21,081) (54,415)
Gains on sales 105 118
Change in unrealized gain on
securities available for sale 2 904
Ending balance $44,112 $29,399
</TABLE>
Investments in Multi-Family, Low- and Moderate-Income Housing Projects.
We have an investment in Pedcor Investments - 1987 - I, L.P. ("Pedcor"), an
Indiana limited partnership that was organized to construct, own and operate a
208-unit apartment complex in Indianapolis, Indiana (the "Pedcor Project"). The
Pedcor Project, which is operated as a multi-family, low- and moderate-income
housing project, has been completed and is performing as planned. At the
inception of the Pedcor Project in August, 1988, we committed to invest $2.7
million in Pedcor. In January, 1998, we made our final payment pursuant to this
commitment and are no longer liable to contribute additional funds for the
Pedcor Project.
We hold a separate investment in a multi-family, low- and moderate-income
housing project through our wholly-owned subsidiary, LF Service Corp. ("LF"). LF
has invested in Bloomington Housing Associates, L.P. ("BHA"), which is an
Indiana limited partnership that was organized to construct, own and operate a
130-unit apartment complex in Bloomington, Indiana (the "BHA Project").
Development of the BHA Project has been completed and the project is performing
as planned. LF committed to invest approximately $4.9 million in BHA at the
inception of the Bloomington Project in August, 1992. Through June 30, 1998, LF
had invested cash of approximately $2.7 million in BHA with five additional
annual capital contributions remaining to be paid in January of each year
through January, 2003, totaling $2.2 million.
A low- and moderate-income housing project qualifies for certain federal
income tax credits if (i) it is a residential rental property, (ii) the units
are used on a nontransient basis, and (iii) 20% or more of the units in the
project are occupied by tenants whose incomes are 50% or less of the area median
gross income, adjusted for family size, or alternatively, at least 40% of the
units in the project are occupied by tenants whose incomes are 60% or less of
the area median gross income. Qualified low income housing projects generally
must comply with these and other rules for fifteen years, beginning with the
first year the project qualified for the tax credit, or some or all of the tax
credit together with interest may be recaptured. The tax credit is subject to
the limitations on the use of general business credit, but no basis reduction is
required for any portion of the tax credit claimed. As of June 30, 1998, 77% of
the units in the Pedcor Project and 95% of the units in the Bloomington Project
were occupied, and all of the tenants met the income test required for the tax
credits.
We have received tax credits of $121,000 and $300,000 from the operation of
the Pedcor Project and $178,000 and $355,000 from the operation of the
Bloomington Project for the six months ended June 30, 1998 and for the year
ended December 31, 1997, respectively. The tax credits from the Pedcor Project
will be available to us through 1999 and the tax credits from the BHA project
will be available through 2012. Although we have reduced income tax expense by
the full amount of the tax credit available each year, we have not been able to
fully utilize available tax credits to reduce income taxes payable because we
may not use tax credits that would reduce our regular corporate tax liability
below our alternative minimum tax liability. We may carry forward unused tax
credits for a period of fifteen years and we believe that we will be able to
utilize available tax credits during the carry-forward period. Additionally,
Pedcor and BHA have incurred operating losses in the early years of their
operations primarily due to accelerated depreciation of assets. Lincoln Federal
has accounted for its investment in Pedcor, and LF has accounted for its
investment in BHA, on the equity method. Accordingly, Lincoln Federal and LF
have each recorded their share of these losses as reductions to their
investments in Pedcor and BHA, respectively. At June 30, 1998, our investment in
Pedcor was $77,000 and LF's investment in BHA was $2.6 million.
The following summarizes our equity in Pedcor's losses and tax credits and
LF's equity in BHA's losses and tax credits recognized in our consolidated
financial statements.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1998 1997 1996 1995
(In Thousands)
<S> <C> <C> <C> <C>
Investment in Pedcor........................ $ 77 $ 76 $ 153 $ 151
Equity in losses, net
of income tax effect..................... $ (117) $(167) $ (120) $(598)
Tax credit.................................. 121 300 300 300
Increase in after-tax net income from
Pedcor investment........................ $ 4 $ 133 $ 180 $(298)
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1998 1997 1996 1995
(In Thousands)
<S> <C> <C> <C> <C>
Investment in BHA........................... $2,555 $2,630 $3,034 $3,433
Equity in losses, net
of income tax effect..................... $ (45) $ (244) $ (240) $ (366)
Tax credit.................................. 178 355 355 355
Increase in after-tax net income from
BHA investment........................... $ 133 $ 111 $ 115 $ (11)
</TABLE>
Sources of Funds
General. Deposits have traditionally been our primary source of funds
for use in lending and investment activities. In addition to deposits, we derive
funds from scheduled loan payments, investment maturities, loan prepayments,
retained earnings, income on earning assets and borrowings. While scheduled loan
payments and income on earning assets are relatively stable sources of funds,
deposit inflows and outflows can vary widely and are influenced by prevailing
interest rates, market conditions and levels of competition. Borrowings from the
FHLB of Indianapolis have been used in the short-term to compensate for
reductions in deposits or deposit inflows at less than projected levels.
Deposits. We attract deposits principally from within Hendricks,
Montgomery and Clinton Counties through the offering of a broad selection of
deposit instruments, including fixed-rate passbook accounts, NOW accounts,
variable rate money market accounts, fixed-term certificates of deposit,
individual retirement accounts and savings accounts. We do not actively solicit
or advertise for deposits outside of Hendricks, Montgomery and Clinton Counties,
and substantially all of our depositors are residents of those counties. Deposit
account terms vary, with the principal differences being the minimum balance
required, the amount of time the funds remain on deposit and the interest rate.
We do not accept brokered deposits. Although we sometimes may bid for public
deposits, we held only $1.1 million of such funds, or .5% of our total deposits,
at June 30, 1998. We periodically run specials on certificates of deposit with
specific maturities.
We establish the interest rates paid, maturity terms, service fees and
withdrawal penalties on a periodic basis. Determination of rates and terms are
predicated on funds acquisition and liquidity requirements, rates paid by
competitors, growth goals, and applicable regulations. We rely, in part, on
customer service and long-standing relationships with customers to attract and
retain our deposits. We also closely price our deposits to the rates offered by
our competitors.
Approximately 72% of our deposits consist of certificates of deposit,
which generally have higher interest rates than other deposit products that we
offer. Certificates of deposit have increased 4.8% during the six-month period
ended June 30, 1998. Money market savings accounts represent nearly 14% of our
deposits and have grown 10.1% during the six-month period ended June 30, 1998.
We offer special rates on certificates of deposit with maturities that fit our
asset and liability strategies.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and other prevailing interest rates and
competition. The variety of deposit accounts that we offer has allowed us to
compete effectively in obtaining funds and to respond with flexibility to
changes in consumer demand. We have become more susceptible to short-term
fluctuations in deposit flows as customers have become more interest rate
conscious. We manage the pricing of our deposits in keeping with our
asset/liability management and profitability objectives. Based on our
experience, we believe that our savings accounts, NOW and MMDAs are relatively
stable sources of deposits. However, the ability to attract and maintain
certificates of deposit, and the rates we pay on these deposits, have been and
will continue to be significantly affected by market conditions.
An analysis of our deposit accounts by type, maturity, and rate at June
30, 1998, is as follows:
<TABLE>
<CAPTION>
Minimum Balance at Weighted
Opening June 30, % of Average
Type of Account Balance 1998 Deposits Rate
- -----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
(Dollars in thousands)
Withdrawable:
<S> <C> <C> <C> <C>
Savings accounts........................................... $ 25 $20,609 9.76% 3.12%
Money market............................................... 1,000 28,631 13.56 4.89
NOW accounts............................................... 200 7,487 3.54 2.06
Non-interest bearing demand accounts....................... 200 1,394 .66 ---
Total withdrawable....................................... 58,121 27.52 3.78
Certificates (original terms):
3 months or less........................................... 1,000 407 .19 4.14
6 months................................................... 1,000 8,835 4.19 5.25
12 months.................................................. 1,000 27,605 13.07 5.34
18 months.................................................. 1,000 16,413 7.77 5.38
24 months.................................................. 1,000 9,375 4.44 5.84
30 months.................................................. 1,000 65,066 30.82 5.97
36 months ................................................. 1,000 11,124 5.27 5.76
60 months.................................................. 1,000 13,081 6.19 5.83
Public fund certificates...................................... 1,133 .54 5.46
Total certificates............................................ 153,039 72.48 5.71
Total deposits................................................ $211,160 100.0% 5.18
</TABLE>
The following table sets forth by various interest rate categories the
composition of our time deposits at the dates indicated:
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1996 1995
---------------------------------------------------------------------
(Unaudited) (In thousands)
<S> <C> <C> <C> <C>
4.00 to 4.99%.......... $15,002 $15,926 $14,672 $ 18,429
5.00 to 5.99%.......... 90,987 81,199 106,675 62,435
6.00 to 6.99%.......... 47,050 48,872 36,071 69,204
7.00 to 7.99%.......... --- --- --- 1,153
Total............... $153,039 $145,997 $157,418 $151,221
</TABLE>
The following table represents, by various interest rate categories, the
amounts of time deposits maturing during each of the three years following June
30, 1998. Matured certificates, which have not been renewed as of June 30, 1998,
have been allocated based upon certain rollover assumptions.
<TABLE>
<CAPTION>
Amounts at June 30, 1998 Maturing In
One Year Two Three Greater Than
or Less Years Years Three Years
(In thousands)
<S> <C> <C>
4.00 to 4.99%.......... $14,996 $ 6
5.00 to 5.99%.......... 66,207 19,800 $3,674 $1,306
6.00 to 6.99%.......... 30,365 10,854 3,916 1,915
Total............... $111,568 $30,660 $7,590 $3,221
</TABLE>
The following table indicates the amount of our other certificates of
deposit of $100,000 or more by time remaining until maturity as of June 30,
1998.
At June 30, 1998
Maturity Period (In thousands)
Three months or less............................. $3,803
Greater than three months through six months..... 1,971
Greater than six months through twelve months.... 7,494
Over twelve months............................... 3,430
Total....................................... $16,698
<PAGE>
The following table sets forth the dollar amount of savings deposits in the
various types of deposits that we offer at the dates indicated, and the amount
of increase or decrease in such deposits as compared to the previous period.
<TABLE>
<CAPTION>
DEPOSIT ACTIVITY
Balance Increase Balance Increase Balance
at (Decrease) at (Decrease) at
June 30, % of from December 31, % of from December 31, % of
1998 Deposits 1997 1997 Deposits 1996 1996 Deposits
(Dollars in thousands)
Withdrawable:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts.................... $20,609 9.76% $(1,358) $21,967 10.78% $(7,747) $29,714 14.09%
Money market accounts............... 28,631 13.56 2,629 26,002 12.75 11,573 14,429 6.84
NOW accounts........................ 7,487 3.54 (78) 7,565 3.71 (986) 8,551 4.06
Noninterest-bearing demand accounts. 1,394 .66 (927) 2,321 1.14 1,610 711 0.34
-------- ------ ------ -------- ------ ------- -------- ------
Total withdrawable................ 58,121 27.52 266 57,855 28.38 4,450 53,405 25.33
Certificates (original terms):
91 days............................. 407 .19 85 322 0.16 (212) 534 0.25
6 months............................ 8,835 4.19 4,273 4,562 2.24 (1,657) 6,219 2.95
12 months........................... 27,605 13.07 (2,108) 29,713 14.58 (26,010) 55,723 26.43
18 months........................... 16,413 7.77 (1,473) 17,886 8.77 1,969 15,917 7.55
24 months........................... 9,375 4.44 8,102 1,273 0.62 1,273 --- .---
30 months........................... 65,066 30.82 (624) 65,690 32.22 29,101 36,589 17.36
36 months .......................... 11,124 5.27 (126) 11,250 5.52 (11,192) 22,442 10.65
60 months........................... 13,081 6.19 (1,090) 14,171 6.95 2,595 11,576 5.49
Public fund certificates............... 1,133 .54 3 1,130 0.56 (7,288) 8,418 3.99
Other certificates..................... --- --- --- --- --- --- --- ---
-------- ------ ------ -------- ------ ------- -------- ------
Total certificates..................... 153,039 72.48 7,042 145,997 71.62 (11,421) 157,418 74.67
-------- ------ ------ -------- ------ ------- -------- ------
Total deposits......................... $211,160 100.00% $7,308 $203,852 100.00% $(6,971) $210,823 100.00%
======== ====== ====== ======== ====== ======= ======== ======
</TABLE>
Increase Balance
(Decrease) at
from December 31, % of
1995 1995 Deposits
Withdrawable:
Savings accounts.................... $(3,593) $33,307 16.98%
Money market accounts............... 11,244 3,185 1.62
NOW accounts........................ 1,470 7,081 3.61
Noninterest-bearing demand accounts. (612) 1,323 0.68
------- -------- ------
Total withdrawable................ 8,509 44,896 22.89
Certificates (original terms):
91 days............................. (2) 536 0.27
6 months............................ (58) 6,277 3.20
12 months........................... (6,791) 62,514 31.88
18 months........................... (1,517) 17,434 8.89
24 months........................... --- --- ---
30 months........................... 10,557 26,032 13.27
36 months .......................... (1,202) 23,644 12.06
60 months........................... (795) 12,371 6.31
Public fund certificates............... 6,046 2,372 1.21
Other certificates..................... (41) 41 0.02
------- -------- ------
Total certificates..................... 6,197 151,221 77.11
------- -------- ------
Total deposits......................... $14,706 $196,117 100.00%
======= ======== ======
<PAGE>
Total deposits at June 30, 1998 were approximately $211.2 million, compared to
approximately $196.1 million at December 31, 1995. Our deposit base depends
somewhat upon the manufacturing sector of Hendricks, Montgomery and Clinton
Counties. Although the manufacturing sector in these counties is relatively
diversified and does not significantly depend upon any industry, a loss of a
material portion of the manufacturing workforce could adversely affect our
ability to attract deposits due to the loss of personal income attributable to
the lost manufacturing jobs and the attendant loss in service industry jobs.
In the unlikely event of our liquidation after the Conversion, all
claims of creditors (including those of deposit account holders, to the extent
of their deposit balances) would be paid first followed by distribution of the
liquidation account to certain deposit account holders, with any assets
remaining thereafter distributed to the Holding Company as the sole shareholder
of Lincoln Federal. See "The Conversion - Principal Effects of Conversion -
Effect on Liquidation Rights."
Borrowings. We focus on generating high quality loans and then seeking
the best source of funding from deposits, investments or borrowings. At June 30,
1998, we had borrowings in the amount of $45.7 million from the FHLB of
Indianapolis which bear fixed and variable interest rates and which are due at
various dates through 2008. We are required to maintain eligible loans and
investment securities, including mortgage-backed securites, in our portfolio of
at least 160% of outstanding advances as collateral for advances from the FHLB
of Indianapolis. We also have available a $2 million line of credit with the
FHLB of Indianapolis. We do not anticipate any difficulty in obtaining advances
appropriate to meet our requirements in the future.
The following table presents certain information relating to our
borrowings at or for the six months ended June 30, 1998 and 1997 and at or for
the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
At or for the
Six Months At or for the Year
Ended June 30, Ended December 31,
1998 1997 1997 1996 1995
-----------------------------------------------------------------
(Dollars in thousands)
FHLB Advances:
<S> <C> <C> <C> <C> <C>
Outstanding at end of period......................... $45,686 $106,932 $70,136 $91,232 $81,936
Average balance outstanding for period............... 52,577 95,530 92,121 87,621 73,403
Maximum amount outstanding at any
month-end during the period..................... 70,136 106,932 106,932 93,932 81,936
Weighted average interest rate
during the period............................... 5.78% 5.56% 5.70 % 5.57% 6.11%
Weighted average interest rate
at end of period................................ 5.60 5.65 5.71 5.49 5.85
Note payable to Bloomington.......................... 2,203 2,691 2,691 3,180 3,668
</TABLE>
Properties
The following table provides certain information with respect to
Lincoln Federal's offices as of June 30, 1998:
<TABLE>
<CAPTION>
Net Book
Value of
Property, Approximate
Description Owned or Year Total Furniture & Square
and Address leased Opened Deposits Fixtures (1) Footage
-----------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
1121 East Main Street Owned 1970 $90,200 $1,354 9,925
Plainfield, IN 46168
134 South Washington Street Owned 1962 56,100 474 9,340
Crawfordsville, IN 47933
1900 East Wabash Street Owned 1974 30,800 302 2,670
Frankfort, IN 46041
975 East Main Street Owned 1981 34,000 291 2,890
Brownsburg, IN 46112
</TABLE>
(1) Land and other capitalized costs associated with the future Avon,
Indiana branch totalled $417,000.
We own computer and data processing equipment which we use for
transaction processing, loan origination, and accounting. The net book value of
our electronic data processing equipment was approximately $123,000 at June 30,
1998.
We currently operate four automatic teller machines ("ATMs"), with one
ATM located at each of our branch offices. Our new branch in Avon will also
operate an ATM when it opens in January, 1999. Our ATMs participate in the
Cirrus(R) and MAC(R) networks.
We have also contracted for the data processing and reporting services
of On-Line Financial Services, Inc. in Oak Brook, Illinois. The cost of these
data processing services is approximately $38,000 per month.
We have also executed a Correspondent Services Agreement with the FHLB
of Indianapolis under which we receive item processing and other services for a
fee of approximately $3,400 per month.
Service Corporation Subsidiary
OTS regulations permit federal savings associations to invest in the
capital stock, obligations or other specified types of securities of
subsidiaries (referred to as "service corporations") and to make loans to such
subsidiaries and joint ventures in which such subsidiaries are participants in
an aggregate amount not exceeding 2% of the association's assets, plus an
additional 1% of assets if the amount over 2% is used for specified community or
inner-city development purposes. In addition, federal regulations permit
associations to make specified types of loans to such subsidiaries (other than
special purpose finance subsidiaries) in which the association owns more than
10% of the stock, in an aggregate amount not exceeding 50% of the association's
regulatory capital if the association's regulatory capital is in compliance with
applicable regulations. A savings association that acquires a non-savings
association subsidiary, or that elects to conduct a new activity within a
subsidiary, must give the FDIC and the OTS at least 30 days advance written
notice. The FDIC may, after consultation with the OTS, prohibit specified
activities if it determines such activities pose a serious threat to the SAIF.
Moreover, a savings association must deduct from capital, for purposes of
meeting the core capital, tangible capital and risk-based capital requirements,
its entire investment in and loans to a subsidiary engaged in activities not
permissible for a national bank (other than exclusively agency activities for
its customers or mortgage banking subsidiaries).
We currently own one subsidiary, LF, whose assets consist of an
investment in Family Financial Life Insurance Company ("Family Financial") and
in BHA. See "- Investments in Low- and Moderate-Income Housing Projects." LF
recently received regulatory approval to invest in Family Financial, an Indiana
stock insurance company. In May, 1998, LF acquired a 16.7% interest in Family
Financial for $650,000. The remaining interests are held in equal amounts by
service corporations of five other financial institutions, four of which are
located in Indiana and one in South Carolina. Fifty percent of the common stock
of Family Financial is held by Corporation Partners, a Louisiana general
partnership in which the six participating service corporations own equal
interests. The service corporations directly own, in equal amounts, the
remaining 50% of the common stock of Family Financial.
Family Financial primarily engages in retail sales of mortgage and
credit insurance products in connection with loans originated by its constituent
shareholder financial institutions. Products offered by Family Financial include
group and individual term mortgage life insurance, group mortgage disability
insurance, group accidental death insurance, group credit life insurance, and
group credit accident and disability insurance policies. Family Financial also
markets a variety of tax-deferred annuity contracts which are wholly reinsured
by other insurance companies. LF expects to receive (1) dividends paid on Family
Financial shares owned directly by it, (2) a pro rata allocation of dividends
received on shares held by Consortium Partners, which are divided among the
partners based on the actuarially determined value of Family Financial's various
lines of insurance generated by customers of these partners, and (3) commissions
on sales of insurance products made to customers. For the period ended June 30,
1998, Lincoln Federal did not receive any income from commissions and dividends
paid on Family Financial activities.
Employees
As of June 30, 1998, we employed 75 persons on a full-time basis and 3
on a part-time basis. None of our employees is represented by a collective
bargaining group and we consider our employee relations to be good.
Employee benefits for our full-time employees include, among other
things, a Pentegra Group (formerly known as Financial Institutions Retirement
Fund) defined benefit pension plan, which is a noncontributory,
multiple-employer comprehensive pension plan (the"Pension Plan"), and
hospitalization/major medical insurance, long-term disability insurance, life
insurance, and participation in the Lincoln Federal 401(k) Plan, which is
administered by Pentegra Group.
We consider our employee benefits to be competitive with those offered
by other financial institutions and major employers in our area. See "Executive
Compensation and Related Transactions of Lincoln Federal."
Legal Proceedings
Although we are involved, from time to time, in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which we presently are a party or to which any of our property is
subject.
Year 2000 Considerations
Our lending and deposit activities depend significantly upon computer
systems to process and record transactions. We are aware of the potential Year
2000 related problems that may affect the operating systems that control our
computers as well as those of our third-party data service providers that
maintain many of our records. In 1997, we began the process of identifying any
Year 2000 related problems that may affect our computer systems, and our
management is closely monitoring the data service providers' progress in making
their systems Year 2000 compliant. We currently expect to complete testing for
Year 2000 compliance by the second quarter of 1999.
We have contacted the companies that supply or service our material
operations to certify that their respective computer systems are Year 2000
compliant. We have established a December 31, 1998 deadline for these companies
to provide this certification, which should provide our service providers with
adequate time to make their systems Year 2000 compliant. This deadline should
also provide us sufficient time to identify and contract with alternative
service providers to replace those providers who cannot certify that they are,
or soon will be Year 2000 compliant. We do not expect the expense of such
changes in suppliers or servicers to be material to our operations, financial
condition or results.
In addition to possible expenses related to our own systems and those
of our service providers, we could incur losses if Year 2000 problems affect any
of our significant borrowers or impair the payroll systems of large employers in
our market area, either of which could delay loan payments by our borrowers.
Because our loan portfolio to individual borrowers is diversified and our market
area does not depend significantly upon one employer or industry, we do not
expect any significant or prolonged Year 2000 related difficulties that will
affect net earnings or cash flow. We believe that our expenses related to
upgrading our systems and software for Year 2000 compliance will not exceed
$300,000. At June 30, 1998, we had spent approximately $100,000 in connection
with Year 2000 compliance. Our management does not consider the additional cost
of these efforts to be significant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Year 2000 Issue."
MANAGEMENT OF LINCOLN BANCORP
Directors and Executive Officers of the Holding Company
The Board of Directors of the Holding Company consists of the same
individuals who serve as directors of Lincoln Federal. The Holding Company's
Articles 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. The Holding Company's officers will be elected annually by
its Board of Directors and will serve at the Board's discretion. The terms of
the present directors expire at the Holding Company's first shareholders'
meeting, which is anticipated to be held in June, 1999. At that meeting, it is
anticipated that the directors will be nominated to serve for the following
terms: the terms of David E. Mansfield, John L. Wyatt and T. Tim Unger will
expire in 1999, the terms of Edward E. Whalen, Wayne E. Kessler and Lester N.
Bergum, Jr. will expire in 2000 and the terms of W. Thomas Harmon, John C.
Milholland and Jerry R. Holifield will expire in 2001. See "Management of
Lincoln Federal Savings Bank."
The Holding Company's Bylaws provide that directors must (1) be
residents of Hendricks, Montgomery or Clinton County, Indiana, (2) have had a
loan or deposit relationship with us which they have maintained for nine months
prior to their nomination to the Board, and (3) with respect to nonemployee
directors, must have served as a member of a civic or community organization
based in Hendricks, Clinton or Montgomery County for at least 12 months during
the five years prior to their nomination to the Board or, in the case of
existing directors, at least 12 months prior to September 10, 1998. The Holding
Company's Board may waive one or more of these requirements for new members
appointed to the Board in connection with the acquisition of another financial
institution by the Holding Company or the acquisition or opening of a new branch
by Lincoln Federal. See "Restrictions on Acquisition of the Holding Company -
Provisions of the Holding Company's Articles and Bylaws."
The executive officers of the Holding Company are identified below.
Name Position with Holding Company
---- -----------------------------
T. Tim Unger Chairman of the Board, President
and Chief Executive Officer
John M. Baer Secretary and Treasurer
MANAGEMENT OF LINCOLN FEDERAL SAVINGS BANK
Directors of Lincoln Federal
Our Board of Directors currently consists of nine persons with two
additional persons who serve as directors emeritus. Our directors emeritus
attend the Board's regular meetings but do not vote on matters presented to the
Board. Each director holds office for a term of three years, and one-third of
the Board is elected at each annual meeting of our members.
Our Board of Directors met 18 times during the fiscal year ended
December 31, 1997. No director attended fewer than 75% of the aggregate number
of meetings of the Board of Directors and the Board's committees in the past 12
months.
Listed below are the current directors of Lincoln Federal:
Director of Position
Lincoln Federal Expiration with
Director Since of Term Lincoln Federal
- -------- ----- ------- ---------------
Lester N. Bergum, Jr. 1996 2000 Director
W. Thomas Harmon 1982 2001 Director
Jerry R. Holifield 1992 2001 Director
Wayne E. Kessler 1976 2000 Director
David E. Mansfield 1997 1999 Director
John C. Milholland 1988 2001 Director
T. Tim Unger 1996 1999 Director, President and
Chief Executive Officer
Edward E. Whalen 1961 2000 Chairman of the Board
John L. Wyatt 1992 1999 Director
Presented below is certain information concerning the directors of Lincoln
Federal:
Lester N. Bergum, Jr. (age 50) is an attorney and partner with the firm
of Robison, Robison, Bergum & Johnson in Frankfort, Indiana, where he has
practiced since 1974. He has also served since 1989 as president of Title
Insurance Services, Inc., a title agency located in Frankfort, Indiana.
W. Thomas Harmon (age 59) has served as the co-owner, Vice President,
Treasurer and Secretary of Crawfordsville Town & Country Homecenter, Inc. in
Crawfordsville, Indiana, since 1978. Mr Harmon is also a co-owner and officer of
RGW, Inc., in Crawfordsville, a company that develops real estate subdivisions
and manages apartment rental properties, a position he has held since 1965.
Jerry Holifield (age 57) has been the Superintendent of the Plainfield
Community School Corporation since 1991.
Wayne E. Kessler (age 68) has been a self-employed farmer in
Crawfordsville, Indiana since 1949. Mr. Kessler is currently semi-retired.
David E. Mansfield (age 56) is an Administrative Supervisor for
Marathon Oil Company where he has worked since 1973.
John C. Milholland (age 62) has been Principal of Frankfort Senior High
School in Frankfort, Indiana since 1989.
T. Tim Unger (age 58) has been President and Chief Executive Officer of
Lincoln Federal since January, 1996. Before then, Mr. Unger served as President
and Chief Executive Officer of Summit Bank of Clinton County from 1989 through
1995.
Edward E. Whalen (age 70) retired as President and Chief Executive
Officer of Lincoln Federal in 1996. Mr. Whalen was employed by Lincoln Federal
for 36 years and has served on the board of directors since 1961.
John L. Wyatt (age 62) is a District Agent for Northwestern Mutual Life
Insurance Company where he has been employed since 1960.
We also have a director emeritus program pursuant to which our former
directors may continue to serve as advisors to the Board of Directors upon their
retirement or resignation from the Board. Currently, Frank A. Beardsley and
Charles Jones serve as directors emeritus. See "Executive Compensation and
Related Transactions of Lincoln Federal - Compensation of Directors."
Executive Officers of Lincoln Federal Who Are Not Directors
Presented below is certain information regarding our executive officer
who is not a director:
Name Position
---- --------
John M. Baer Chief Financial Officer, Secretary and Treasurer
John M. Baer (age 50) has served as Lincoln Federal's Chief Financial
Officer since June, 1997 and as its Secretary and Treasurer since January, 1998.
Before working for Lincoln Federal, Mr. Baer served as Vice President and Chief
Financial Officer of the Community Bank Group of Bank One in Indianapolis,
Indiana from June, 1996 through June, 1997. From October, 1989 through June,
1996 he served as Senior Vice President and Chief Financial Officer of Bank One,
Merrillville, NA, in Merrillville, Indiana.
Committees of the Boards of Directors of Lincoln Federal and the Holding Company
Our Board of Directors has four committees. The Audit Committee, which
consists of W. Thomas Harmon, Wayne E. Kessler and Jerry R. Holifield, oversees
our internal and external auditors and monitors our compliance with OTS
compliance regulations. The Asset Quality Committee, which consists of Lester N.
Bergum, John L. Wyatt and David E. Mansfield, is responsible for establishing
standards for credit analysis, underwriting and credit management and for
general oversight of our lending policies. The ALCO/Investment Committee, which
consists of John C. Milholland, David E. Mansfield and Edward E. Whalen, reviews
the financial information provided by our Chief Financial Officer and oversees
our interest rate risk and liquidity management policies. Our Executive
Committee, which consists of Jerry R. Holifield, T. Tim Unger, Edward E. Whalen
and John L. Wyatt, establishes the job descriptions and compensation for our
employees and officers.
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF LINCOLN FEDERAL
Remuneration of Named Executive Officer
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to our President and Chief
Executive Officer for the fiscal year ended December 31, 1997. Other than Mr.
Unger, we had no executive officers who earned over $100,000 in salary and
bonuses during that fiscal year.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Name Other Securities All
and Annual Restricted Underlying LTIP Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary ($) Bonus ($) sation($)(1) Award(s)($) SARs (#) ($) sation($) (2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. Tim Unger 1997 $135,000 (3)(4) $10,000 --- --- --- --- $3,330
</TABLE>
(1) Mr. Unger received certain perquisites, but the incremental cost of
providing such perquisites did not exceed the lesser of $50,000 or 10%
of his salary and bonus.
(2) Other Compensation includes Lincoln Federal's matching contributions
under its 401(k) Plan. (3) Mr. Unger does not receive any directors
fees.
(4) Includes amounts deferred pursuant to Section 401(k) of the Code under
Lincoln Federal's 401(k) Plan.
Employment Contract
We have entered into a three-year employment contract with Mr. Unger.
The contract with Mr. Unger, effective as of the effective date of the
Conversion, extends annually for an additional one-year term to maintain its
three-year term if our Board of Directors determines to so extend it, unless
notice not to extend is properly given by either party to the contract. Mr.
Unger receives an initial salary under the contract equal to his current salary
subject to increases approved by the Board of Directors. The contract also
provides, among other things, for participation in other fringe benefits and
benefit plans available to our employees. Mr. Unger may terminate his employment
upon 60 days' written notice to us. We may discharge Mr. Unger for cause (as
defined in the contract) at any time or in certain specified events. If we
terminate Mr. Unger's employment for other than cause or if Mr. Unger terminates
his own employment for cause (as defined in the contract), Mr. Unger will
receive his base compensation under the contract for an additional three years
if the termination follows a change of control in the Holding Company, and for
the balance of the contract if the termination does not follow a change of
control. In addition, during such period, Mr. Unger will continue to participate
in our group insurance plans and retirement plans, or receive comparable
benefits. Moreover, within a period of three months after such termination
following a change of control, Mr. Unger will have the right to cause us to
purchase any stock options he holds for a price equal to the fair market value
(as defined in the contract) of the shares subject to such options minus their
option price. If the payments provided for in the contract, together with any
other payments made to Mr. Unger by us, are deemed to be payments in violation
of the "golden parachute" rules of the Code, such payments will be reduced to
the largest amount which would not cause us to lose a tax deduction for such
payments under those rules. As of the date hereof, the cash compensation which
would be paid under the contract to Mr. Unger if the contract were terminated
either after a change of control of the Holding Company, without cause by us, or
for cause by Mr. Unger, would be $405,000. For purposes of this employment
contract, a change of control of the Holding Company is generally an acquisition
of control, as defined in regulations issued under the Change in Bank Control
Act and the Savings and Loan Holding Company Act.
The employment contract protects our confidential business information
and protects us from competition by Mr. Unger should he voluntarily terminate
his employment without cause or be terminated by us for cause.
Compensation of Directors
We pay our non-employee directors a monthly retainer of $850 plus $400
for each regular meeting attended and $200 for each committee meeting attended,
with a maximum of $1,200 in annual committee fees. Our directors emeritus
receive a $500 monthly retainer plus $100 for each meeting they attend. Total
fees paid to our directors and directors emeritus for the year ended December
31, 1997 were approximately $134,000.
Our directors and directors emeritus may, pursuant to a deferred
compensation agreement, defer payment of some or all of their directors fees,
bonuses or other compensation into a retirement account. Under this agreement,
deferred directors fees are to be distributed either in a lump-sum payment or in
equal annual or monthly installments over any period of from two to ten years.
The lump sum or first installment is payable to the director, at the director's
discretion, on the first day of the calendar year immediately following the year
in which he ceases to be a director, or in the year in which the director
attains that age specified by the retirement income test of the Social Security
Act. Any additional installments will be paid on the first day of each
succeeding year thereafter. At present, the following directors participate in
the deferred compensation plan: Lester N. Bergum, Jr., W. Thomas Harmon, Wayne
E. Kessler and Edward E. Whalen.
Directors of the Holding Company and LF are not currently paid
directors' fees. The Holding Company may, if it believes it is necessary to
attract qualified directors or is otherwise beneficial to the Holding Company,
adopt a policy of paying directors' fees.
We have also adopted a Deferred Director Supplemental Retirement Plan
(the "Supplemental Plan") which provides for the continuation of directors fees
to a director upon the later of a director's attainment of age 70 or the date on
which he ceases to be a director. A director's interest in the Supplemental Plan
will vest gradually over a five-year period commencing upon the director's
completion of five years of service on our board. Upon completing nine years of
service, the director's interest in the Supplemental Plan will be fully vested.
The interests of directors who, as of December 1, 1997, had served at least one
year on the Board vested immediately upon the adoption of the Supplemental Plan.
The benefits payable to a director under the Supplemental Plan are calculated by
multiplying the director's vested percentage times the rate of directors fees
paid to the director immediately prior to his attainment of age 70 or, if
earlier, the date his status as a director terminated. In the event that a
director's death occurs prior to the commencement of payments under the
Supplemental Plan, the director's designated beneficiary shall receive a monthly
payment calculated by multiplying the director's vested percentage times the
rate of directors fees in effect immediately prior to the director's death or,
if earlier, the date on which his status as a director terminated. Payments
under the Supplemental Plan will continue for 120 months.
Benefits
Insurance Plans. Our officers and employees are covered by
non-contributory medical, life and accidental death and dismemberment and
long-term disability insurance plans. This coverage is provided pursuant to
group plans sponsored by the Indiana League of Savings Institutions Group
Insurance Trust.
401(k) Plan. Our full-time salaried employees who are over 21 years of
age with at least one year of service may participate in the Lincoln Federal
Savings Bank 401(k) Plan, which is administered by Pentegra Group (the "Thrift
Plan"), a contributory multiple employer tax-exempt trust and savings plan.
Participants may elect to make monthly contributions up to 15% of their salary.
We make a matching contribution of 50% of the employee's contribution that does
not exceed 5% of the employee's salary. Contributions may be invested in equity
funds which invest in widely traded stocks, or asset allocation funds, which
invest in a combination of equity and fixed-income assets. Contributions may
also be invested in a Government Bond Fund which invests in long-term U.S.
Treasury Bonds, or in a money market fund that invests in a range of
high-quality, short-term instruments or in a stable value fund that invests in
Guaranteed Investment Contracts and Synthetic Guaranteed Investment Contracts
offered by insurance companies. The normal distribution is a lump sum upon
termination of employment, although other payment options may be selected.
During fiscal 1997, Mr. Unger received employer contributions of $3,330 under
the Thrift Plan.
Pension Plan. Our full-time employees are included in the Pension Plan.
Separate actuarial valuations are not made for individual employer members of
the Pension Plan. Our employees are eligible to participate in the plan once
they have attained the age of 21 and completed one year of service for us and
provided that the employee is expected to complete a mimimum of 1,000 hours of
service in the 12 consecutive months following his enrollment date. An
employee's pension benefits are 100% vested after five years of service.
The Pension Plan provides for monthly or lump sum retirement benefits
determined as a percentage of the employee's average salary (for the employee's
highest five consecutive years of salary) times his years of service. Salary
includes base annual salary as of each January 1, exclusive of overtime,
bonuses, fees and other special payments. Early retirement, disability, and
death benefits are also payable under the Pension Plan, depending upon the
participant's age and years of service. We recorded a benefit of approximately
$26,000 for the Pension Plan during the fiscal year ended December 31, 1997.
The estimated base annual retirement benefits presented on a
straight-line basis payable at normal retirement age (65) under the Pension Plan
to persons in specified salary and years of service classifications are as
follows (benefits noted in the table are not subject to any offset).
<TABLE>
<CAPTION>
Years of Service
Highest 5-Year
Average
Compensation 15 20 25 30 35 40 45
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 40,000 12,000 16,000 20,000 24,000 28,000 32,000 36,000
60,000 18,000 24,000 30,000 36,000 42,000 48,000 54,000
80,000 24,000 32,000 40,000 48,000 56,000 64,000 72,000
100,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
120,000 36,000 48,000 60,000 72,000 84,000 96,000 108,000
</TABLE>
Benefits are currently subject to maximum Code limitations of $125,000
per year. The years of service credited to Mr. Unger under the Pension Plan as
of December 31, 1997 were two.
Transactions With Certain Related Persons
We have followed a policy of offering to our directors, officers, and
employees real estate mortgage loans secured by their principal residence as
well as other loans. Current law authorizes us to make loans or extensions of
credit to our executive officers, directors, and principal shareholders on the
same terms that are available with respect to loans made to all of our
employees. At present, we offer loans to our executive officers, directors,
principal shareholders and employees with an interest rate that is .5% lower
than the rate generally available to the public, but otherwise are offered with
substantially the same terms as those prevailing for comparable transactions.
All loans to directors and executive officers must be approved in advance by a
majority of the disinterested members of the Board of Directors. Our policy
regarding loans to directors and employees meets the requirements of current
law. Loans to directors, executive officers and their associates totaled
approximately $816,000, or 1.9% of equity capital at June 30, 1998.
Employee Stock Ownership Plan and Trust
The Holding Company has established for our eligible employees an ESOP
effective July 1, 1998, subject to our conversion to stock form. Employees with
at least one year of employment with us and who have attained age 21 are
eligible to participate. As part of the Conversion, the ESOP intends to borrow
funds from the Holding Company and use those funds to purchase a number of
shares equal to 8% of the Common Stock to be sold in the Conversion and issued
to the Foundation. Collateral for the loan will be the Common Stock purchased by
the ESOP. The loan will be repaid principally from our discretionary
contributions to the ESOP over a period of 20 years. The initial interest rate
for the loan will be the prime rate on the date the loan is executed. Shares
purchased by the ESOP will be held in a suspense account for allocation among
participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense
accounts in an amount proportional to the repayment of the ESOP loan will be
allocated among ESOP participants on the basis of compensation in the year of
allocation. Participants in the ESOP will receive credit for service prior to
the effective date of the ESOP. Benefits generally become 100% vested after five
years of credited service. Prior to the completion of five years of credited
service, a participant who terminates employment for reasons other than death,
retirement, or disability will not receive any benefits under the ESOP.
Forfeitures will be reallocated among remaining participating employees upon the
earlier of the forfeiting participant's death or after the expiration of at
least three years from the date on which such participant's employment was
terminated. Benefits will be payable in the form of Common Stock or cash for
fractional shares upon death, retirement, early retirement, disability or
separation from service. Our contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated. In November 1993, the
American Institute of Certified Public Accountants (the "AICPA") issued
Statement of Position ("SOP") 93-6, which requires us to record compensation
expense in an amount equal to the fair market value of the shares released from
the suspense account.
In connection with the establishment of the ESOP, the Holding Company
will establish a committee of our employees to administer the ESOP. Home Federal
Savings Bank will serve as corporate trustee of the ESOP. The ESOP committee may
instruct the trustee regarding investment of funds contributed to the ESOP. The
ESOP trustee, subject to its fiduciary duty, must vote all allocated shares held
in the ESOP in accordance with the instructions of participating employees.
Under the ESOP, nondirected shares, and shares held in the suspense account,
will be voted in a manner calculated to most accurately reflect the instructions
it has received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Stock Option Plan
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors
intends to submit for shareholder approval the Stock Option Plan for directors
and officers of Lincoln Federal and of the Holding Company. If approved by the
shareholders, Common Stock in an aggregate amount equal to 10.0% of the shares
issued in the Conversion and contributed to the Foundation would be reserved for
issuance by the Holding Company upon the exercise of the stock options granted
under the Stock Option Plan. Assuming the sale of 5.1 million shares in the
Conversion and the issuance of 200,000 shares to the Foundation, an aggregate of
530,000 shares would be reserved for issuance under the Stock Option Plan. No
options would be granted under the Stock Option Plan until the date on which
shareholder approval is received. At that time, it is anticipated that options
for the following number of shares will be granted to the following directors,
executive officers and employees of Lincoln Federal and the Holding Company:
Percentage of Shares
Optionee Issued in Conversion
-------- --------------------
T. Tim Unger............................................ 2.5%
Other Directors ........................................ 3.0
All other employees..................................... 3.0
Total............................................... 8.5%
It is anticipated that these options would be granted for terms of 10
years (in the case of incentive options) or 10 years and one day (in the case of
non-qualified options), and at an option price per share equal to the fair
market value of the shares on the date of the grant of the stock options. If the
Stock Option Plan is adopted within one year following the Conversion, options
will become exercisable at a rate of 20% at the end of each twelve (12) months
of service with us after the date of grant, subject to early vesting in the
event of death or disability. Options granted under the Stock Option Plan are
adjusted for capital changes such as stock splits and stock dividends. Unless
the Holding Company decides to call an earlier special meeting of shareholders,
the date of grant of these options is expected to be the date of the Holding
Company's annual meeting of shareholders to be held at least six months after
the Conversion.
The Stock Option Plan would be administered by a Committee of
non-employee members of the Holding Company's Board of Directors. Options
granted under the Stock Option Plan to employees could be "incentive" stock
options designed to result in a beneficial tax treatment to the employee but no
tax deduction to the Holding Company. Non-qualified stock options could also be
granted under the Stock Option Plan, and will be granted to the non-employee
directors to receive grants of stock options. In the event an option recipient
terminated his or her employment or service as an employee or director, the
options would terminate during certain specified periods.
RRP
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors also
intends to submit the RRP for shareholder approval. The RRP will provide our
directors and officers with an ownership interest in the Holding Company in a
manner designed to encourage them to continue their service with us. Lincoln
Federal will contribute funds to the RRP from time to time to enable it to
acquire an aggregate amount of Common Stock equal to up to 4% of the shares of
Common Stock sold in the Conversion and issued to the Foundation, either
directly from the Holding Company or on the open market. Four percent of the
shares sold in the Conversion and issued to the Foundation would amount to
180,200 shares, 212,000 shares, 243,800 shares or 280,370 shares at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation Range,
respectively. In the event that additional authorized but unissued shares would
be acquired by the RRP after the Conversion, the interests of existing
shareholders would be diluted. Our executive officers and directors will be
awarded Common Stock under the RRP without having to pay cash for the shares.
No awards under the RRP would be made until the date the RRP is
approved by the Holding Company's shareholders. At that time, it is anticipated
that awards of the following number of shares would be made to the following
directors and executive officers of the Holding Company and Lincoln Federal:
Percentage of Shares
Recipient of Issued in Conversion to be
Awards Awarded Under RRP
T. Tim Unger............................................ .8%
Other Directors......................................... 1.2
All other employees..................................... 1.4
Total............................................... 3.4%
Awards would be nontransferable and nonassignable, and during the
lifetime of the recipient could only be earned by and made to him or her. If the
RRP is adopted within one year of the Conversion the shares which are subject to
an award would vest and be earned by the recipient at a rate of 20% of the
shares awarded at the end of each full twelve (12) months of service with us
after the date of grant of the award. Awards are adjusted for capital changes
such as stock dividends and stock splits. Notwithstanding the foregoing, awards
would be 100% vested upon termination of employment or service due to death or
disability. Assuming the RRP is adopted within one year of the Conversion, if an
executive officer's or director's employment or service were to terminate for
other reasons, the grantee would forfeit any nonvested award. If employment or
service is terminated for cause (as would be defined in the RRP), or if conduct
would have justified termination or removal for cause, shares not already
delivered under the RRP, whether or not vested, could be forfeited by resolution
of the Board of Directors of the Holding Company.
When shares become vested and could actually be distributed in
accordance with the RRP, the participants would also receive amounts equal to
accrued dividends and other earnings or distributions payable with respect
thereto. When shares become vested under the RRP, the participant will recognize
income equal to the fair market value of the Common Stock earned, determined as
of the date of vesting, unless the recipient makes an election under ss. 83(b)
of the Code to be taxed earlier. The amount of income recognized by the
participant would be a deductible expense for tax purposes for the Holding
Company. Shares not yet vested under the RRP will be voted by the Trustee of the
RRP, taking into account the best interests of the recipients of the RRP awards.
REGULATION
General
As a federally chartered, SAIF-insured savings association, we are
subject to extensive regulation by the OTS and the FDIC. For example, we must
obtain OTS approval before we may engage in certain activities and must file
reports with the OTS regarding our activities and financial condition. The OTS
periodically examines our books and records and, in conjunction with the FDIC in
certain situations, has examination and enforcement powers. This supervision and
regulation are intended primarily for the protection of depositors and federal
deposit insurance funds. Our semi- annual assessment owed to the OTS, which is
based upon a specified percentage of assets, is approximately $40,000.
We are also subject to federal and state regulation as to such matters
as loans to officers, directors, or principal shareholders, required reserves,
limitations as to the nature and amount of our loans and investments, regulatory
approval of any merger or consolidation, issuance or retirements of our
securities, and limitations upon other aspects of banking operations. In
addition, our activities and operations are subject to a number of additional
detailed, complex and sometimes overlapping federal and state laws and
regulations. These include state usury and consumer credit laws, state laws
relating to fiduciaries, the Federal Truth-In-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community Reinvestment Act, anti-redlining legislation and antitrust
laws.
The United States Congress is considering legislation that would
require all federal savings associations, such as Lincoln Federal, to either
convert to a national bank or a state-chartered bank by a specified date to be
determined. In addition, under the legislation, the Holding Company likely would
not be regulated as a savings and loan holding company but rather as a bank
holding company. This proposed legislation would abolish the OTS and transfer
its functions among the other federal banking regulators. Certain aspects of the
legislation remain to be resolved and, therefore, no assurance can be given as
to whether or in what form the legislation will be enacted or its effect on the
Holding Company and Lincoln Federal.
Savings and Loan Holding Company Regulation
Under current law, the Holding Company will be regulated as a
"non-diversified savings and loan holding company" within the meaning of the
Home Owners' Loan Act, as amended (the "HOLA"), and subject to regulatory
oversight of the Director of the OTS. As such, the Holding Company is registered
with the OTS and thereby subject to OTS regulations, examinations, supervision
and reporting requirements. As a subsidiary of a savings and loan holding
company, Lincoln Federal is subject to certain restrictions in its dealings with
the Holding Company and with other companies affiliated with the Holding
Company.
In general, the HOLA prohibits a savings and loan holding company,
without prior approval of the Director of the OTS, from acquiring control of
another savings association or savings and loan holding company or retaining
more than 5% of the voting shares of a savings association or of another holding
company which is not a subsidiary. The HOLA also restricts the ability of a
director or officer of the Holding Company, or any person who owns more than 25%
of the Holding Company's stock, from acquiring control of another savings
association or savings and loan holding company without obtaining the prior
approval of the Director of the OTS.
The Holding Company's Board of Directors presently intends to operate
the Holding Company as a unitary savings and loan holding company. Under current
law, there are generally no restrictions on the permissible business activities
of a unitary savings and loan holding company. However, Congress is considering
a bill which includes a provision that would generally prohibit a company that
filed a holding company application with the OTS after March 31, 1998 from
engaging in diversified business activities. If this bill is enacted, our
ability to engage in diversified business activities would be restricted.
Notwithstanding the above rules as to permissible business activities
of unitary savings and loan holding companies, if the savings association
subsidiary of such a holding company fails to meet the Qualified Thrift Lender
("QTL") test, then such unitary holding company would become subject to the
activities restrictions applicable to multiple holding companies. (Additional
restrictions on securing advances from the FHLB also apply.) See "-Qualified
Thrift Lender." At June 30, 1998, our asset composition was in excess of that
required to qualify us as a Qualified Thrift Lender.
If the Holding Company were to acquire control of another savings
association other than through a merger or other business combination with
Lincoln Federal, the Holding Company would thereupon become a multiple savings
and loan holding company. Except where such acquisition is pursuant to the
authority to approve emergency thrift acquisitions and where each subsidiary
savings association meets the QTL test, the activities of the Holding Company
and any of its subsidiaries (other than Lincoln Federal or other subsidiary
savings associations) would thereafter be subject to further restrictions. The
HOLA provides that, among other things, no multiple savings and loan holding
company or subsidiary thereof which is not a savings association shall commence
or continue for a limited period of time after becoming a multiple savings and
loan holding company or subsidiary thereof, any business activity other than (i)
furnishing or performing management services for a subsidiary savings
association, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
savings association, (iv) holding or managing properties used or occupied by a
subsidiary savings association, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by the FSLIC by regulation as of
March 5, 1987, to be engaged in by multiple holding companies, or (vii) those
activities authorized by the Federal Reserve Board (the "FRB") as permissible
for bank holding companies, unless the Director of the OTS by regulation
prohibits or limits such activities for savings and loan holding companies.
Those activities described in (vii) above must also be approved by the Director
of the OTS before a multiple holding company may engage in such activities.
The Director of the OTS may also approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state, if the multiple savings and loan holding
company involved controls a savings association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the laws of the state in which the association to be acquired is located
specifically permit associations to be acquired by state-chartered associations
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 associations). Also, the Director of the OTS may approve an acquisition
resulting in a multiple savings and loan holding company controlling savings
associations in more than one state in the case of certain emergency thrift
acquisitions.
Indiana law permits federal and state savings association holding
companies with their home offices located outside of Indiana to acquire savings
associations whose home offices are located in Indiana and savings association
holding companies with their principal place of business in Indiana ("Indiana
Savings Association Holding Companies") upon receipt of approval by the Indiana
Department of Financial Institutions. Moreover, Indiana Savings Association
Holding Companies may acquire savings associations with their home offices
located outside of Indiana and savings association holding companies with their
principal place of business located outside of Indiana upon receipt of approval
by the Indiana Department of Financial Institutions.
No subsidiary savings association of a savings and loan holding company
may declare or pay a dividend on its permanent or nonwithdrawable stock unless
it first gives the Director of the OTS 30 days advance notice of such
declaration and payment. Any dividend declared during such period or without
giving notice shall be invalid.
Federal Home Loan Bank System
We are a member of the FHLB of Indianapolis, which is one of twelve
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 associations 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. All FHLB advances must be fully secured by sufficient collateral as
determined by the FHLB. The Federal Housing Finance Board ("FHFB"), an
independent agency, controls the FHLB System, including the FHLB of
Indianapolis.
As a member, we are required to purchase and maintain stock in the FHLB
of Indianapolis in an amount equal to at least 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts, or similar obligations at
the beginning of each year. At June 30, 1998, our investment in stock of the
FHLB of Indianapolis was $5.4 million. The FHLB imposes various limitations on
advances such as limiting the amount of certain types of real estate-related
collateral to 30% of a member's capital and limiting total advances to a member.
Interest rates charged for advances vary depending upon maturity, the cost of
funds to the FHLB of Indianapolis and the purpose of the borrowing.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. For the fiscal year ended
December 31, 1997, dividends paid by the FHLB of Indianapolis to us totaled
approximately $416,000, for an annual rate of 8.0%. For the six-month period
ended June 30, 1998, we received dividends of $216,000, for an annual rate of
7.9%
Insurance of Deposits
Deposit Insurance. The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of banks and thrifts
and safeguards the safety and soundness of the banking and thrift industries.
The FDIC administers two separate insurance funds, the BIF for commercial banks
and state savings banks and the SAIF for savings associations such as Lincoln
Federal and banks that have acquired deposits from savings associations. The
FDIC is required to maintain designated levels of reserves in each fund. As of
September 30, 1996, the reserves of the SAIF were below the level required by
law, primarily because a significant portion of the assessments paid into the
SAIF had been used to pay the cost of prior thrift failures, while the reserves
of the BIF met the level required by law in May, 1995. However, on September 30,
1996, provisions designed to recapitalize the SAIF and eliminate the premium
disparity between the BIF and SAIF were signed into law. See "- Assessments"
below.
Assessments. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and members of 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 the target level
within a reasonable time and may decrease these rates if the target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's risk level is
determined based on its capital level and the FDIC's level of supervisory
concern about the institution.
On September 30, 1996, President Clinton signed into law legislation
which included provisions designed to recapitalize the SAIF and eliminate the
significant premium disparity between the BIF and the SAIF. Under the new law,
we were charged a one-time special assessment equal to $.657 per $100 in
assessable deposits at March 31, 1995. We recognized this one-time assessment as
a non-recurring operating expense of approximately $1.3 million ($785,000 after
tax) during the three-month period ending September 30, 1996, and we paid this
assessment on November 27, 1996. The assessment was fully deductible for both
federal and state income tax purposes. Beginning January 1, 1997, our annual
deposit insurance premium was reduced from .23% to .0644% of total assessable
deposits. BIF institutions pay lower assessments than comparable SAIF
institutions because BIF institutions pay only 20% of the rate paid by SAIF
institutions on their deposits with respect to obligations issued by the
federally-chartered corporation which provided some of the financing to resolve
the thrift crisis in the 1980's ("FICO"). The 1996 law also provides for the
merger of the SAIF and the BIF by 1999, but not until such time as bank and
thrift charters are combined. Until the charters are combined, savings
associations with SAIF deposits may not transfer deposits into the BIF system
without paying various exit and entrance fees, and SAIF institutions will
continue to pay higher FICO assessments. Such exit and entrance fees need not be
paid if a SAIF institution converts to a bank charter or merges with a bank, as
long as the resulting bank continues to pay applicable insurance assessments to
the SAIF, and as long as certain other conditions are met.
Savings Association Regulatory Capital
Currently, savings associations are subject to three separate minimum
capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. The leverage limit
requires that savings associations maintain "core capital" of at least 3% of
total assets. Core capital is generally defined as common shareholders' equity
(including retained income), noncumulative perpetual preferred stock and related
surplus, certain minority equity interests in subsidiaries, qualifying
supervisory goodwill, purchased mortgage servicing rights and purchased credit
card relationships (subject to certain limits) less nonqualifying intangibles.
Under the tangible capital requirement, a savings association must maintain
tangible capital (core capital less all intangible assets except purchased
mortgage servicing rights which may be included after making the above-noted
adjustment in an amount up to 100% of tangible capital) of at least 1.5% of
total assets. Under the risk-based capital requirements, a minimum amount of
capital must be maintained by a savings association to account for the relative
risks inherent in the type and amount of assets held by the savings association.
The risk-based capital requirement requires a savings association to maintain
capital (defined generally for these purposes as core capital plus general
valuation allowances and permanent or maturing capital instruments such as
preferred stock and subordinated debt less assets required to be deducted) equal
to 8.0% of risk-weighted assets. Assets are ranked as to risk in one of four
categories (0-100%). A credit risk-free asset, such as cash, requires no
risk-based capital, while an asset with a significant credit risk, such as a
non-accrual loan, requires a risk factor of 100%. Moreover, a savings
association must deduct from capital, for purposes of meeting the core capital,
tangible capital and risk-based capital requirements, its entire investment in
and loans to a subsidiary engaged in activities not permissible for a national
bank (other than exclusively agency activities for its customers or mortgage
banking subsidiaries). At June 30, 1998, we were in compliance with all capital
requirements imposed by law.
The OTS has promulgated a rule which sets forth the methodology for
calculating an interest rate risk component to be used by savings associations
in calculating regulatory capital. The OTS has delayed the implementation of
this rule, however. The rule requires savings associations with "above normal"
interest rate risk (institutions whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain additional capital for interest rate risk under the
risk-based capital framework. Even though the OTS has delayed implementing this
rule, we nevertheless measure our interest rate risk in conformity with the OTS
regulation and, as of June 30, 1998, we would have been required to deduct $1.7
million from our total capital available to calculate our risk-based capital
requirement. The OTS recently updated its standards regarding the management of
interest rate risk to include summary guidelines to assist savings associations
in determining their exposures to interest rate risk. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Lincoln Federal Savings Bank - Asset/Liability Management."
If an association is not in compliance with the capital requirements,
the OTS is required to prohibit asset growth and to impose a capital directive
that may restrict, among other things, the payment of dividends and officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operating activities of
the association, imposing a capital directive, cease and desist order, or civil
money penalties, or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.
Prompt Corrective Regulatory Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FedICIA") requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital requirements. For these purposes, FedICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. At June 30,
1998, we were categorized as "well capitalized," meaning that our total
risk-based capital ratio exceeded 10%, our Tier I risk-based capital ratio
exceeded 6%, our leverage ratio exceeded 5%, and we were not subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure.
The FDIC may order savings associations which have insufficient capital
to take corrective actions. For example, a savings association which is
categorized as "undercapitalized" would be subject to growth limitations and
would be required to submit a capital restoration plan, and a holding company
that controls such a savings association would be required to guarantee that the
savings association complies with the restoration plan. "Significantly
undercapitalized" savings associations would be subject to additional
restrictions. Savings associations deemed by the FDIC to be "critically
undercapitalized" would be subject to the appointment of a receiver or
conservator.
Dividend Limitations
An OTS regulation imposes limitations upon all "capital distributions"
by savings associations, including cash dividends, payments by an association to
repurchase or otherwise acquire its shares, payments to shareholders of another
institution in a cash-out merger and other distributions charged against
capital. The regulation establishes a three-tiered system of regulation, with
the greatest flexibility being afforded to well-capitalized associations. A
savings association which has total capital (immediately prior to and after
giving effect to the capital distribution) that is at least equal to its fully
phased-in capital requirements would be a Tier 1 institution ("Tier 1
Institution"). An association that has total capital at least equal to its
minimum capital requirements, but less than its fully phased-in capital
requirements, would be a Tier 2 institution ("Tier 2 Institution"). An
institution having total capital that is less than its minimum capital
requirements would be a Tier 3 institution ("Tier 3 Institution"). However, an
institution which otherwise qualifies as a Tier 1 Institution may be designated
by the OTS as a Tier 2 or Tier 3 Institution if the OTS determines that the
institution is "in need of more than normal supervision." We are currently a
Tier 1 Institution.
A Tier 1 Institution may, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year up to the greater
of (a) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" at the beginning of
the calendar year (the smallest excess over its capital requirements), or (b)
75% of its net income over the most recent four-quarter period. Any additional
amount of capital distributions would require prior regulatory approval.
Accordingly, at June 30, 1998, we had available approximately $15.5 million for
distribution, without consideration of any capital infusion from the Conversion
and without consideration of the restrictions on our capital distributions as a
result of the establishment of a liquidation account in connection with the
Conversion. See "The Conversion - Effect on Liquidation Rights."
The OTS has proposed revisions to these regulations which would permit
a savings association, without filing a prior notice or application with the
OTS, to make a capital distribution to its shareholders in a maximum amount that
does not exceed the association's undistributed net income for the prior two
years plus the amount of its undistributed income from the current year. This
proposed rule would require a savings association, such as Lincoln Federal, that
is a subsidiary of a savings and loan holding company to file a notice with the
OTS before making a capital distribution up to the "maximum amount" described
above. The proposed rule would also require all savings associations, whether
under a holding company or not, to file an application with the OTS prior to
making any capital distribution where the association is not eligible for
"expedited processing" under the OTS "Expedited Processing Regulation," or where
the proposed distribution, together with any other distributions made in the
same year, would exceed the "maximum amount" described above.
Pursuant to the Plan of Conversion, we will establish a liquidation
account for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders. See "The Conversion - Principal Effects of Conversion." We will
not be permitted to pay dividends to the Holding Company if our net worth would
be reduced below the amount required for the liquidation account. We must also
must file a notice with the OTS 30 days before declaring a dividend to the
Holding Company.
Limitations on Rates Paid for Deposits
Regulations promulgated by the FDIC pursuant to FedICIA place
limitations on the ability of insured depository institutions to accept, renew
or roll over deposits by offering rates of interest which are significantly
higher than the prevailing rates of interest on deposits offered by other
insured depository institutions having the same type of charter in the
institution's normal market area. Under these regulations, "well-capitalized"
depository institutions may accept, renew or roll such deposits over without
restriction, "adequately capitalized" depository institutions may accept, renew
or roll such deposits over with a waiver from the FDIC (subject to certain
restrictions on payments of rates) and "undercapitalized" depository
institutions may not accept, renew or roll such deposits over. The regulations
contemplate that the definitions of "well capitalized," "adequately capitalized"
and "undercapitalized" will be the same as the definition adopted by the
agencies to implement the corrective action provisions of FedICIA. We do not
believe that these regulations will have a materially adverse effect on our
current operations.
Safety and Soundness Standards
On February 2, 1995, the federal banking agencies adopted final safety
and soundness standards for all insured depository institutions. The standards,
which were issued in the form of guidelines rather than regulations, relate to
internal controls, information systems, internal audit systems, loan
underwriting and documentation, compensation and interest rate exposure. In
general, the standards are designed to assist the federal banking agencies in
identifying and addressing problems at insured depository institutions before
capital becomes impaired. If an institution fails to meet these standards, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan may result in enforcement
proceedings. On August 27, 1996, the federal banking agencies added asset
quality and earning standards to the safety and soundness guidelines.
Real Estate Lending Standards
OTS regulations require savings associations to establish and maintain
written internal real estate lending policies. Each association's lending
policies must be consistent with safe and sound banking practices and
appropriate to the size of the association and the nature and scope of its
operations. The policies must establish loan portfolio diversification
standards; establish prudent underwriting standards, including loan-to-value
limits, that are clear and measurable; establish loan administration procedures
for the association's real estate portfolio; and establish documentation,
approval, and reporting requirements to monitor compliance with the
association's real estate lending policies. The association's written real
estate lending policies must be reviewed and approved by the association's Board
of Directors at least annually. Further, each association is expected to monitor
conditions in its real estate market to ensure that its lending policies
continue to be appropriate for current market conditions.
Loans to One Borrower
Under OTS regulations, we may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of our unimpaired capital
and surplus. Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus, if such loans or extensions of credit are fully secured by
readily marketable collateral, including certain debt and equity securities but
not including real estate. In some cases, a savings association may lend up to
30% of unimpaired capital and surplus to one borrower for purposes of developing
domestic residential housing, provided that the association meets its regulatory
capital requirements and the OTS authorizes the association to use this expanded
lending authority. We have established an "in-house" lending limit of $2 million
to a single or related group of borrowers, which is significantly lower than the
regulatory lending limit described above. Any loan that exceeds this "in-house"
lending limit up to our regulatory lending limit must first be approved by our
board of directors. At June 30, 1998, we had two loan relationships that
exceeded our "in-house" lending limit, each of which was authorized by our board
of directors. Also on that date, we did not have any loans or extensions of
credit to a single or related group of borrowers in excess of our regulatory
lending limits. We do not believe that the loans-to-one-borrower limits will
have a significant impact on our business operations or earnings following the
Conversion.
Qualified Thrift Lender
Savings associations must meet a QTL test. If we maintain an
appropriate level of qualified thrift investments ("QTIs") (primarily
residential mortgages and related investments, including certain
mortgage-related securities) and otherwise qualify as a QTL, we will continue to
enjoy full borrowing privileges from the FHLB of Indianapolis. The required
percentage of QTIs is 65% of portfolio assets (defined as all assets minus
intangible assets, property used by the association in conducting its business
and liquid assets equal to 10% of total assets). Certain assets are subject to a
percentage limitation of 20% of portfolio assets. In addition, savings
associations may include shares of stock of the FHLBs, FNMA, and Freddie Mac as
QTIs. Compliance with the QTL test is determined on a monthly basis in nine out
of every twelve months. As of June 30, 1998, we were in compliance with our QTL
requirement, with approximately 79.0% of our assets invested in QTIs.
A savings association which fails to meet the QTL test must either
convert to a bank (but its deposit insurance assessments and payments will be
those of and paid to the SAIF) or be subject to the following penalties: (i) it
may not enter into any new activity except for those permissible for a national
bank and for a savings association; (ii) its branching activities shall be
limited to those of a national bank; (iii) it shall not be eligible for any new
FHLB advances; and (iv) it shall be bound by regulations applicable to national
banks respecting payment of dividends. Three years after failing the QTL test
the association must (i) dispose of any investment or activity not permissible
for a national bank and a savings association and (ii) repay all outstanding
FHLB advances. If such a savings association is controlled by a savings and loan
holding company, then such holding company must, within a prescribed time
period, become registered as a bank holding company and become subject to all
rules and regulations applicable to bank holding companies (including
restrictions as to the scope of permissible business activities).
Acquisitions or Dispositions and Branching
The Bank Holding Company Act specifically authorizes a bank holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located. Similarly,
a savings and loan holding company may acquire control of a bank. Moreover,
federal savings associations may acquire or be acquired by any insured
depository institution. Regulations promulgated by the FRB restrict the
branching authority of savings associations acquired by bank holding companies.
Savings associations acquired by bank holding companies may be converted to
banks if they continue to pay SAIF premiums, but as such they become subject to
branching and activity restrictions applicable to banks.
Subject to certain exceptions, commonly-controlled banks and savings
associations must reimburse the FDIC for any losses suffered in connection with
a failed bank or savings association affiliate. Institutions are commonly
controlled if one is owned by another or if both are owned by the same holding
company. Such claims by the FDIC under this provision are subordinate to claims
of depositors, secured creditors, and holders of subordinated debt, other than
affiliates.
The OTS has adopted regulations which permit nationwide branching to
the extent permitted by federal statute. Federal statutes permit federal savings
associations to branch outside of their home state if the association meets the
domestic building and loan test in ss.7701(a)(19) of the Code or the asset
composition test of ss.7701(c) of the Code. Branching that would result in the
formation of a multiple savings and loan holding company controlling savings
associations in more than one state is permitted if the law of the state in
which the savings association to be acquired is located specifically authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their holding companies in the state where the acquiring association or
holding company is located. Moreover, Indiana banks and savings associations are
permitted to acquire other Indiana banks and savings associations and to
establish branches throughout Indiana.
Finally, The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to acquire
banks in other states and, with state consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through merger
or de novo expansion. The State of Indiana enacted legislation establishing
interstate branching provisions for Indiana state-chartered banks consistent
with those established by the Riegle-Neal Act (the "Indiana Branching Law"). The
Indiana Branching Law authorizes Indiana banks to branch interstate by merger or
de novo expansion, provided that such transactions are not permitted to
out-of-state banks unless the laws of their home states permit Indiana banks to
merge or establish de novo banks on a reciprocial basis. The Indiana Branching
Law became effective March 15, 1996.
Transactions with Affiliates
We are subject to Sections 22(h), 23A and 23B of the Federal Reserve
Act, which restrict financial transactions between banks and their directors,
executive officers and affiliated companies. The statute limits credit
transactions between a bank or savings association and its executive officers
and its affiliates, prescribes terms and conditions for bank affiliate
transactions deemed to be consistent with safe and sound banking practices, and
restricts the types of collateral security permitted in connection with a bank's
extension of credit to an affiliate.
Federal Securities Law
The shares of Common Stock of the Holding Company will be registered
with the SEC under the 1934 Act. The Holding Company will be subject to the
information, proxy solicitation, insider trading restrictions and other
requirements of the 1934 Act and the rules of the SEC thereunder. After three
years following our conversion to stock form, if the Holding Company has fewer
than 300 shareholders, it may deregister its shares under the 1934 Act and cease
to be subject to the foregoing requirements.
Shares of Common Stock held by persons who are affiliates of the
Holding Company may not be resold without registration unless sold in accordance
with the resale restrictions of Rule 144 under the 1933 Act. If the Holding
Company meets the current public information requirements under Rule 144, each
affiliate of the Holding Company who complies with the other conditions of Rule
144 (including those that require the affiliate's sale to be aggregated with
those of certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of the Holding Company
or (ii) the average weekly volume of trading in such shares during the preceding
four calendar weeks.
Community Reinvestment Act Matters
Federal law requires that ratings of depository institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a four-unit descriptive rating -- outstanding, satisfactory, needs to
improve, and substantial noncompliance -- and a written evaluation of an
institution's performance. Each FHLB is required to establish standards of
community investment or service that its members must maintain for continued
access to long-term advances from the FHLBs. The standards take into account a
member's performance under the CRA and its record of lending to first-time home
buyers. The OTS has designated our record of meeting community credit needs as
satisfactory.
TAXATION
Federal Taxation
Historically, savings associations, such as Lincoln Federal, have been
permitted to compute bad debt deductions using either the bank experience method
or the percentage of taxable income method. However, for years beginning after
December 31, 1995, no savings association may use the percentage of taxable
income method of computing its allowable bad debt deduction for tax purposes.
Instead, all savings associations are required to compute their allowable
deduction using the experience method. As a result of the repeal of the
percentage of taxable income method, reserves taken after 1987 using the
percentage of taxable income method generally must be included in future taxable
income over a six-year period, although a two-year delay may be permitted for
associations meeting a residential mortgage loan origination test. We do not
have any reserves taken after 1987 that must be recaptured. In addition, the
pre-1988 reserve, for which no deferred taxes have been recorded, need not be
recaptured into income unless (i) the savings association no longer qualifies as
a bank under the Code, or (ii) the savings association pays out excess dividends
or distributions. Although we do have some reserves from before 1988, we are not
required to recapture these reserves.
Depending on the composition of its items of income and expense, a
savings association may be subject to the alternative minimum tax. A savings
association must pay an alternative minimum tax on the amount (if any) by which
20% of alternative minimum taxable income ("AMTI"), as reduced by an exemption
varying with AMTI, exceeds the regular tax due. AMTI equals regular taxable
income increased or decreased by certain tax preferences and adjustments,
including depreciation deductions in excess of that allowable for alternative
minimum tax purposes, tax-exempt interest on most private activity bonds issued
after August 7, 1986 (reduced by any related interest expense disallowed for
regular tax purposes), the amount of the bad debt reserve deduction claimed in
excess of the deduction based on the experience method and 75% of the excess of
adjusted current earnings over AMTI (before this adjustment and before any
alternative tax net operating loss). AMTI may be reduced only up to 90% by net
operating loss carryovers, but alternative minimum tax paid can be credited
against regular tax due in later years.
For federal income tax purposes, we have been reporting our income and
expenses on the accrual method of accounting. Our federal income tax returns
have not been audited in recent years.
State Taxation
We are subject to Indiana's Financial Institutions Tax ("FIT"), which
is imposed at a flat rate of 8.5% on "adjusted gross income." "Adjusted gross
income," for purposes of FIT, begins with taxable income as defined by Section
63 of the Code and, thus, incorporates federal tax law to the extent that it
affects the computation of taxable income. Federal taxable income is then
adjusted by several Indiana modifications. Other applicable state taxes include
generally applicable sales and use taxes plus real and personal property taxes.
Our state income tax returns have not been audited in recent years.
For further information relating to the tax consequences of the
Conversion, see "The Conversion - Principal Effects of Conversion - Tax
Effects."
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
General
Although the Boards of Directors of Lincoln Federal and the Holding
Company are not aware of any effort that might be made to obtain control of the
Holding Company after the Conversion, the Boards of Directors believe that it is
appropriate to include certain provisions in the Holding Company's Articles of
Incorporation (the "Articles") to protect the interests of the Holding Company
and its shareholders from unsolicited changes in the control of the Holding
Company in circumstances that the Board of Directors of the Holding Company
concludes will not be in the best interests of Lincoln Federal, the Holding
Company or the Holding Company's shareholders.
Although the Holding Company's Board of Directors believes that the
restrictions on acquisition described below are beneficial to shareholders, the
provisions may have the effect of rendering the Holding Company less attractive
to potential acquirors, thereby discouraging future takeover attempts which
would not be approved by the Board of Directors but which certain shareholders
might deem to be in their best interest or pursuant to which shareholders might
receive a substantial premium for their shares over then current market prices.
These provisions will also render the removal of the incumbent Board of
Directors and of management more difficult. The Board of Directors has, however,
concluded that the potential benefits of these restrictive provisions outweigh
the possible disadvantages.
The following general discussion contains a summary of the material
provisions of the Articles, the Holding Company's Code of By-Laws (the
"By-Laws"), and certain other regulatory provisions, that may be deemed to have
an effect of delaying, deferring or preventing a change in the control of the
Holding Company. The following description of certain of these provisions is
general and not necessarily complete, and with respect to provisions contained
in the Articles and By-Laws, reference should be made in each case to the
document in question, each of which is part of our application for approval of
the Conversion or the Holding Company's Registration Statement filed with the
SEC. See "Additional Information."
Provisions of the Holding Company's Articles and By-Laws
Directors. Certain provisions in the Articles and By-Laws will impede
changes in majority control of the Board of Directors of the Holding Company.
The Articles provide that the Board of Directors of the Holding Company will be
divided into three classes, with directors in each class elected for three-year
staggered terms. Therefore, it would take two annual elections to replace a
majority of the Holding Company's Board. Moreover, the Holding Company's By-laws
provide that directors of the Holding Company must be residents of Hendricks,
Clinton or Montgomery County, Indiana, must have had a loan or deposit
relationship with us which they have maintained for nine (9) months prior to
their nomination to the Board, and, if nonemployee directors, must have served
as a member of a civic or community organization based in Hendricks, Clinton or
Montgomery County, Indiana for at least nine (9) months during the five years
prior to their nomination to the Board (or in the case of existing directors,
prior to September, 1998). The Holding Company's Board may waive one or more of
these requirements for new members appointed to the Board in connection with the
acquisition of another financial institution by the Holding Company or the
acquisition or opening of a new branch by Lincoln Federal. Therefore, the
ability of a shareholder to attract qualified nominees to oppose persons
nominated by the Board of Directors may be limited.
The Articles also provide that the size of the Board of Directors shall
range between five and fifteen directors, with the exact number of directors to
be fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors of the Holding
Company.
The Articles provide that any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term only by a
majority vote of the directors then in office. Finally, the By-Laws impose
certain notice and information requirements in connection with the nomination by
shareholders of candidates for election to the Board of Directors or the
proposal by shareholders of business to be acted upon at an annual meeting of
shareholders.
The Articles provide that a director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of at least 80%
of the shares eligible to vote generally in the election of directors. Removal
for "cause" is limited to the grounds for termination in the OTS regulation
relating to employment contracts of federally-insured savings associations.
Restrictions on Call of Special Meetings. The Articles provide that a
special meeting of shareholders may be called only by the Chairman of the Board
of the Holding Company or pursuant to a resolution adopted by a majority of the
total number of directors of the Holding Company. Shareholders are not
authorized to call a special meeting.
No Cumulative Voting. The Articles provide that there shall be no
cumulative voting rights in the election of directors.
Authorization of Preferred Stock. The Articles authorize 2,000,000
shares of preferred stock, without par value. The Holding Company is authorized
to issue preferred stock from time to time in one or more series subject to
applicable provisions of law, and the Board of Directors is authorized to fix
the designations, powers, preferences and relative participating, optional and
other special rights of such shares, including voting rights (if any and which
could be as a separate class) and conversion rights. In the event of a proposed
merger, tender offer or other attempt to gain control of the Holding Company not
approved by the Board of Directors, it might be possible for the Board of
Directors to authorize the issuance of a series of preferred stock with rights
and preferences that would impede the completion of such a transaction. An
effect of the possible issuance of preferred stock, therefore, may be to deter a
future takeover attempt. The Board of Directors has no present plans or
understandings for the issuance of any preferred stock and does not intend to
issue any preferred stock except on terms which the Board of Directors deems to
be in the best interests of the Holding Company and its shareholders.
Limitations on 10% Shareholders. The Articles provide that: (i) no
person shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company (provided that such limitation shall not apply to the acquisition of
equity securities by any one or more tax-qualified employee stock benefit plans
maintained by the Holding Company, if the plan or plans beneficially own no more
than 25% of any class of such equity security of the Holding Company); and that
(ii) shares beneficially owned in violation of the stock ownership restriction
described above shall not be entitled to vote and shall not be voted by any
person or counted as voting stock in connection with any matter submitted to a
vote of shareholders. For these purposes, a person (including management) who
has obtained the right to vote shares of the Common Stock pursuant to revocable
proxies shall not be deemed to be the "beneficial owner" of those shares if that
person is not otherwise deemed to be a beneficial owner of those shares.
Evaluation of Offers. The Articles of the Holding Company provide that
the Board of Directors of the Holding Company, when determining to take or
refrain from taking corporate action on any matter, including making or
declining to make any recommendation to the Holding Company's shareholders, may,
in connection with the exercise of its judgment in determining what is in the
best interest of the Holding Company, Lincoln Federal and the shareholders of
the Holding Company, give due consideration to all relevant factors, including,
without limitation, the social and economic effects of acceptance of such offer
on the Holding Company's customers and Lincoln Federal's present and future
account holders, borrowers, employees and suppliers; the effect on the
communities in which the Holding Company and Lincoln Federal operate or are
located; and the effect on the ability of the Holding Company to fulfill the
objectives of a holding company and of us or future financial institution
subsidiaries to fulfill the objectives of a financial institution under
applicable statutes and regulations. The Articles of the Holding Company also
authorize the Board of Directors to take certain actions to encourage a person
to negotiate for a change of control of the Holding Company or to oppose such a
transaction deemed undesirable by the Board of Directors including the adoption
of so-called shareholder rights plans. By having these standards and provisions
in the Articles of the Holding Company, the Board of Directors may be in a
stronger position to oppose such a transaction if the Board concludes that the
transaction would not be in the best interest of the Holding Company, even if
the price offered is significantly greater than the then market price of any
equity security of the Holding Company.
Procedures for Certain Business Combinations. The Articles require that
certain business combinations between the Holding Company (or any majority-owned
subsidiary thereof) and a 10% or greater shareholder either be approved (i) by
at least 80% of the total number of outstanding voting shares of the Holding
Company or (ii) by a majority of certain directors unaffiliated with such 10% or
greater shareholder or involve consideration per share generally equal to the
higher of (A) the highest amount paid by such 10% shareholder or its affiliates
in acquiring any shares of the Common Stock or (B) the "Fair Market Value"
(generally, the highest closing bid paid for the Common Stock during the thirty
days preceding the date of the announcement of the proposed business combination
or on the date the 10% or greater shareholder became such, whichever is higher).
Amendments to Articles and Bylaws. Amendments to the Articles must be
approved by a majority vote of the Holding Company's Board of Directors and also
by a majority of the outstanding shares of the Holding Company's voting shares;
provided, however, that approval by at least 80% of the outstanding voting
shares is required for certain provisions (i.e., provisions relating to number,
classification, and removal of directors; provisions relating to the manner of
amending the By-Laws; call of special shareholder meetings; criteria for
evaluating certain offers; certain business combinations; and amendments to
provisions relating to the foregoing). The provisions concerning limitations on
the acquisition of shares may be amended only by an 80% vote of the Holding
Company's outstanding shares unless at least two-thirds of the Holding Company's
Continuing Directors (directors of the Holding Company on September 10, 1998, or
directors recommended for appointment or election by a majority of such
directors) approve such amendments in advance of their submission to a vote of
shareholders (in which case only a majority vote of shareholders is required).
The By-Laws may be amended only by a majority vote of the total number
of directors of the Holding Company.
Purpose and Effects of the Anti-Takeover Provisions of the Holding
Company Articles and By-Laws. The Holding Company's Board of Directors believes
that the provisions described above are prudent and will reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by its Board of Directors.
These provisions will also assist in the orderly deployment of the Conversion
proceeds into productive assets during the initial period after the Conversion.
The Board of Directors believes these provisions are in the best interest of
Lincoln Federal and the Holding Company and its shareholders. In the judgment of
the Board of Directors, the Holding Company's Board of Directors will be in the
best position to determine the true value of the Holding Company and to
negotiate more effectively for what may be in the best interests of the Holding
Company and its shareholders. The Board of Directors believes that these
provisions will encourage potential acquirors to negotiate directly with the
Board of Directors of the Holding Company and discourage hostile takeover
attempts. It is also the view of the Board of Directors that these provisions
should not discourage persons from proposing a merger or other transaction at
prices reflecting the true value of the Holding Company and which is in the best
interests of all shareholders.
Attempts to take over financial institutions and their holding
companies have recently increased. Takeover attempts that have not been
negotiated with and approved by the Board of Directors present to shareholders
the risk of a takeover on terms that may be less favorable than might otherwise
be available. A transaction that is negotiated and approved by the Board of
Directors, on the other hand, can be carefully planned and undertaken at an
opportune time to obtain maximum value for the Holding Company and its
shareholders, with due consideration given to matters such as the management and
business of the acquiring corporation and maximum strategic development of the
Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it to undertake defensive measures at a
great expense. Although a tender offer or other takeover attempt may be made at
a price substantially above then current market prices, such offers are
sometimes made for less than all of the outstanding shares of a target company.
As a result, shareholders may be presented with the alternative of partially
liquidating their investment at a time that may be disadvantageous, or retaining
their investment in an enterprise which is under different management and whose
objective may not be similar to that of the remaining shareholders. The
concentration of control, which could result from a tender offer or other
takeover attempt, could also deprive the Holding Company's remaining
shareholders of the benefits of certain protective provisions of the 1934 Act if
the number of beneficial owners becomes less than 300 and the Holding Company
terminates its registration under the 1934 Act.
Despite the belief of the Holding Company's Board of Directors in the
benefits to shareholders of the foregoing provisions, the provisions may also
have the effect of discouraging future takeover attempts which would not be
approved by the Board of Directors, but which certain shareholders might deem to
be in their best interest or pursuant to which shareholders might receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so. These provisions will also render the removal
of the incumbent Board of Directors and of management more difficult. The Board
of Directors has, however, concluded that the potential benefits of these
restrictive provisions outweigh the possible disadvantages.
Other Restrictions on Acquisition of the Holding Company and Lincoln Federal
State Law. Several provisions of the Indiana Business Corporation Law,
as amended (the "IBCL"), could affect the acquisition of shares of the Common
Stock or otherwise affect the control of the Holding Company. Chapter 43 of the
IBCL prohibits certain business combinations, including mergers, sales of
assets, recapitalizations, and reverse stock splits, between corporations such
as the Holding Company (assuming that it has over 100 shareholders) and an
interested shareholder, defined as the beneficial owner of 10% or more of the
voting power of the outstanding voting shares, for five years following the date
on which the shareholder obtained 10% ownership unless the acquisition was
approved in advance of that date by the board of directors. If prior approval is
not obtained, several price and procedural requirements must be met before the
business combination can be completed. These requirements are similar to those
contained in the Holding Company Articles and described in " - Provisions of the
Holding Company's Articles and By-Laws - Procedures for Certain Business
Combinations." In general, the price requirements contained in the IBCL may be
more stringent than those imposed in the Holding Company Articles. However, the
procedural restraints imposed by the Holding Company Articles are somewhat
broader than those imposed by the IBCL. Also, the provisions of the IBCL may
change at some future date, but the relevant provisions of the Holding Company
Articles may only be amended by an 80% vote of the shareholders of the Holding
Company.
In addition, the IBCL contains provisions designed to assure that
minority shareholders have some say in their future relationship with Indiana
corporations in the event that a person made a tender offer for, or otherwise
acquired, shares giving that person more than 20%, 33 1/3%, and 50% of the
outstanding voting securities of corporations having 100 or more shareholders
(the "Control Share Acquisitions Statute"). Under the Control Share Acquisitions
Statute, if an acquiror purchases those shares at a time that the corporation is
subject to the Control Share Acquisitions Statute, then until each class or
series of shares entitled to vote separately on the proposal, by a majority of
all votes entitled to be cast by that group (excluding shares held by officers
of the corporation, by employees of the corporation who are directors thereof
and by the acquiror), approves in a special or annual meeting the rights of the
acquiror to vote the shares which take the acquiror over each level of ownership
as stated in the statute, the acquiror cannot vote these shares. An Indiana
corporation otherwise subject to the Control Share Acquisitions Statute may
elect not to be covered by the statute by so providing in its Articles of
Incorporation or By-Laws. The Holding Company, however, will be subject to this
statute following the Conversion because of its desire to discourage
non-negotiated hostile takeovers by third parties.
The IBCL specifically authorizes Indiana corporations to issue options,
warrants or rights for the purchase of shares or other securities of the
corporation or any successor in interest of the corporation. These options,
warrants or rights may, but need not be, issued to shareholders on a pro rata
basis.
The IBCL specifically authorizes directors, in considering the best
interest of a corporation, to consider the effects of any action on
shareholders, employees, suppliers, and customers of the corporation, and
communities in which offices or other facilities of the corporation are located,
and any other factors the directors consider pertinent. As described above, the
Holding Company Articles contain a provision having a similar effect. Under the
IBCL, directors are not required to approve a proposed business combination or
other corporate action if the directors determine in good faith that such
approval is not in the best interest of the corporation. In addition, the IBCL
states that directors are not required to redeem any rights under or render
inapplicable a shareholder rights plan or to take or decline to take any other
action solely because of the effect such action might have on a proposed change
of control of the corporation or the amounts to be paid to shareholders upon
such a change of control. The IBCL explicitly provides that the different or
higher degree of scrutiny imposed in Delaware and certain other jurisdictions
upon director actions taken in response to potential changes in control will not
apply. The Delaware Supreme Court has held that defensive measures in response
to a potential takeover must be "reasonable in relation to the threat posed."
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any matter,
directors are authorized under the IBCL to consider both the short-term and
long-term interests of the corporation as well as interests of other
constituencies and other relevant factors. Any determination made with respect
to the foregoing by a majority of the disinterested directors shall conclusively
be presumed to be valid unless it can be demonstrated that such determination
was not made in good faith.
Because of the foregoing provisions of the IBCL, the Board will have
flexibility in responding to unsolicited proposals to acquire the Holding
Company, and accordingly it may be more difficult for an acquiror to gain
control of the Holding Company in a transaction not approved by the Board.
Federal Limitations. For three years following the Conversion, OTS
regulations prohibit any person (including entities), without the prior approval
of the OTS, from offering to acquire or acquiring more than 10% of any class of
equity security, directly or indirectly, of a converted savings association or
its holding company. This restriction does not apply to the acquisition by any
one or more tax-qualified employee stock benefit plans maintained by Lincoln
Federal or the Holding Company, provided that the plan or plans do not have
beneficial ownership in the aggregate of more than 25% of any class of equity
security of the Holding Company. For these purposes, a person (including
management) who has obtained the right to vote shares of the Common Stock
pursuant to revocable proxies shall not be deemed to be the "beneficial owner"
of those shares if that person is not otherwise deemed to be a beneficial owner
of those shares.
The Change in Bank Control Act provides that no "person," acting
directly or indirectly, or through or in concert with one or more persons, other
than a company, may acquire control of a savings association or a savings and
loan holding company unless at least 60 days prior written notice is given to
the OTS and the OTS has not objected to the proposed acquisition.
The Savings and Loan Holding Company Act also prohibits any "company,"
directly or indirectly or acting in concert with one or more other persons, or
through one or more subsidiaries or transactions, from acquiring control of an
insured savings institution 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 by the OTS.
The term "control" for purposes of the Change in Bank Control Act and
the Savings and Loan Holding Company Act includes the power, directly or
indirectly, to vote more than 25% of any class of voting stock of the savings
association or to control, in any manner, the election of a majority of the
directors of the savings association. It also includes a determination by the
OTS that such company or person has the power, directly or indirectly, to
exercise a controlling influence over or to direct the management or policies of
the savings association.
OTS regulations also set forth certain "rebuttable control
determinations" which arise (i) upon an acquisition of more than 10% of any
class of voting stock of a savings association; or (ii) upon an acquisition of
more than 25% of any class of voting or nonvoting stock of a savings
association; provided that, in either case, the acquiror is subject to any of
eight enumerated "control factors," which are: (1) the acquiror would be one of
the two largest holders of any class of voting stock of the association; (2) the
acquiror would hold more than 25% of the total shareholders' equity of the
association; (3) the acquiror would hold more than 35% of the combined debt
securities and shareholders' equity of the savings association; (4) the acquiror
is a party to any agreement pursuant to which the acquiror possesses a material
economic stake in the savings association or which enables the acquiror to
influence a material aspect of the management or policies of the association;
(5) the acquiror would have the ability, other than through the holding of
revocable proxies, to direct the votes of more than 25% of a class of the voting
stock or to vote in the future more than 25% of such voting stock upon the
occurrence of a future event; (6) the acquiror would have the power to direct
the disposition of more than 25% of the association's voting stock in a manner
other than a widely dispersed or public offering; (7) the acquiror and/or his
representative would constitute more than one member of the association's board
of directors; or (8) the acquiror would serve as an executive officer or in a
similar policy-making position with the association. For purposes of determining
percentage share ownership, a person is presumed to be acting in concert with
certain specified persons and entities, including members of the person's
immediate family, whether or not those family members share the same household
with the person.
The regulations also specify the criteria which the OTS uses to
evaluate control applications. The OTS is empowered to disapprove an acquisition
of control if it finds, among other things, that (i) the acquisition would
substantially lessen competition, (ii) the financial condition of the acquiring
person might jeopardize the institution or its depositors, or (iii) the
competency, experience, or integrity of the acquiring person indicates that it
would not be in the interest of the depositors, the institution, or the public
to permit the acquisition of control by such person.
DESCRIPTION OF CAPITAL STOCK
The Holding Company is authorized to issue 20,000,000 shares of Common
Stock, without par value, all of which have identical rights and preferences,
and 2,000,000 shares of preferred stock, without par value. The Holding Company
expects to issue up to 7,009,250 shares of Common Stock, including 200,000
shares expected to be issued to the Foundation, and no shares of preferred stock
in the Conversion. The Holding Company has received an opinion of its counsel
that the shares of Common Stock issued in the Conversion will be validly issued,
fully paid, and not liable for further call or assessment. This opinion was
filed with the SEC as an exhibit to the Holding Company's Registration Statement
under the 1933 Act.
Shareholders of the Holding Company will have no preemptive rights to
acquire additional shares of Common Stock which may be subsequently issued. The
Common Stock will represent nonwithdrawable capital, will not be of an insurable
type and will not be federally insured by the FDIC or any government entity.
Under Indiana law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company, unless preferred stock is issued
and voting rights are granted to the holders thereof. Each shareholder will be
entitled to one vote for each share held on all matters voted upon by
shareholders, subject to the limitations discussed under the caption
"Restrictions on Acquisition of the Holding Company." Shareholders may not
cumulate their votes in the election of the Board of Directors. Holders of
Common Stock will be entitled to payment of dividends as may be declared from
time to time by the Holding Company's Board of Directors.
In the unlikely event of the liquidation or dissolution of the Holding
Company, the holders of the Common Stock will be entitled to receive after
payment or provision for payment of all debts and liabilities of the Holding
Company, all assets of the Holding Company available for distribution, in cash
or in kind. See "The Conversion - Principal Effects of Conversion - Effect on
Liquidation Rights." If preferred stock is issued subsequent to the Conversion,
the holders thereof may have a priority over the holders of Common Stock in the
event of liquidation or dissolution.
The Board of Directors of the Holding Company will be authorized to
issue preferred stock in series and to fix and state the voting powers,
designations, preferences and relative, participating, optional or other special
rights of the shares of each such series and the qualifications, limitations and
restrictions thereof. Preferred stock may rank prior to the Common Stock as to
dividend rights, liquidation preferences, or both, and may have full or limited
voting rights. The holders of preferred stock will be entitled to vote as a
separate class or series under certain circumstances, regardless of any other
voting rights which such holders may have.
Except as discussed elsewhere herein, the Holding Company has no
specific plans for the issuance of the additional authorized shares of Common
Stock or for the issuance of any shares of preferred stock. In the future, the
authorized but unissued and unreserved shares of Common Stock will be available
for general corporate purposes including, but not limited to, possible issuance
as stock dividends or stock splits, in future mergers or acquisitions, under a
cash dividend reinvestment and stock purchase plan, or in future underwritten or
other public or private offerings. The authorized but unissued shares of
preferred stock will similarly be available for issuance in future mergers or
acquisitions, in future underwritten public offerings or private placements or
for other general corporate purposes. Except as described above or as otherwise
required to approve the transaction in which the additional authorized shares of
Common Stock or authorized shares of preferred stock would be issued, no
shareholder approval will be required for the issuance of these shares.
Accordingly, the Holding Company's Board of Directors without shareholder
approval can issue preferred stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock.
The offering and sale of Common Stock in the Conversion will be
registered under the 1933 Act. The subsequent sale or transfer of Common Stock
is governed by the 1934 Act, which requires that sales or exchanges of subject
securities be made pursuant to an effective registration statement or qualified
for an exemption from registration requirements of the 1933 Act. Similarly, the
securities laws of the various states also require generally the registration of
shares offered for sale unless there is an applicable exemption from
registration.
The Holding Company, as a newly organized corporation, has never issued
capital stock, and, accordingly, there is no market for the Common Stock. See
"Market for the Common Stock." See "Restrictions on Acquisition of the Holding
Company - Provisions of the Holding Company's Articles and By-Laws" for a
description of certain provisions of the Holding Company's Articles and By-Laws
which may affect the ability of the Holding Company's shareholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company. Also, see "Dividends" for a description of certain matters
relating to the possible future payment of dividends on the Common Stock.
TRANSFER AGENT
The Fifth Third Bank will act as transfer agent and registrar for the
Common Stock. The Fifth Third Bank's phone number is (513) 579-5320 or (800)
837-2755.
REGISTRATION REQUIREMENTS
Upon the Conversion, the Holding Company's Common Stock will be
registered pursuant to Section 12(g) of the 1934 Act and may not be deregistered
for a period of at least three years following the Conversion. As a result of
the registration under the 1934 Act, certain holders of Common Stock will be
subject to certain reporting and other requirements imposed by the 1934 Act. For
example, beneficial owners of more than 5% of the outstanding Common Stock will
be required to file reports pursuant to Section 13(d) or Section 13(g) of the
1934 Act, and officers, directors and 10% shareholders of the Holding Company
will generally be subject to reporting requirements of Section 16(a) and to the
liability provisions for profits derived from purchases and sales of Holding
Company Common Stock occurring within a six-month period pursuant to Section
16(b) of the 1934 Act. In addition, certain transactions in Common Stock, such
as proxy solicitations and tender offers, will be subject to the disclosure and
filing requirements imposed by Section 14 of the 1934 Act and the regulations
promulgated thereunder.
LEGAL AND TAX MATTERS
Barnes & Thornburg, 11 South Meridian Street, Indianapolis, Indiana
46204, special counsel to Lincoln Federal, will pass upon the legality and
validity of the shares of Common Stock being issued in the Conversion. Barnes &
Thornburg has issued an opinion concerning certain federal and state income tax
aspects of the Conversion and which provides that the Conversion, as proposed,
constitutes a tax-free reorganization under federal and Indiana law. Barnes &
Thornburg has also issued an opinion concerning the federal tax consequences of
certain matters relating to the establishment of the Foundation. Barnes &
Thornburg has consented to the references herein to its opinions. Certain legal
matters related to this offering will be passed upon for Webb by Silver,
Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., 7th Floor-East Tower,
Washington, D.C. 20005.
EXPERTS
Our consolidated financial statements at December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 appearing in
this Prospectus and Registration Statement have been audited by Olive LLP
(formerly Geo. S. Olive & Co. LLC), independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
Keller has consented to the publication of the summary herein of its
appraisal report as to the estimated pro forma market value of the Common Stock
of the Holding Company to be issued in the Conversion, to the reference to its
opinion relating to the value of the subscription rights, and to the filing of
the appraisal report as an exhibit to the registration statement filed by the
Holding Company under the 1933 Act.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement
under the 1933 Act with respect to the Common Stock offered hereby. As permitted
by the rules and regulations of the SEC, this Prospectus does not contain all
the information set forth in the registration statement. Such information can be
inspected and copied at the SEC's public reference facilities located at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Offices in
New York (Seven World Trade Center, 13th Floor, New York, New York 00048) and
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511) and copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. This information can also be found on the SEC's
website, located at www.sec.gov.
Lincoln Federal has filed with the OTS an Application for Conversion
from a federal mutual savings bank to a federal stock savings bank, and the
Holding Company has filed with the OTS an Application to become a savings and
loan holding company. This Prospectus omits certain information contained in
such Applications. The Applications may be inspected at the offices of the OTS,
1700 G Street, N.W., Washington, D.C. 20552 and at the Central Regional Office
of the OTS, 200 West Madison, Suite 1300, Chicago, Illinois 60606.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
TABLE OF CONTENTS
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
TABLE OF CONTENTS
Page
Report of Olive LLP................................................ F-2
Consolidated balance sheet--June 30, 1998 (unaudited)
and December 31, 1997 and 1996..................................... F-3
Consolidated statement of income--for the six months ended
June 30, 1998 and 1997 (unaudited) and the years ended
December 31, 1997, 1996 and 1995................................... F-4
Consolidated statement of comprehensive income
for the six months ended June 30, 1998 and 1997 (unaudited)
and the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated statement of changes in equity capital
for the six months ended June 30, 1998 (unaudited)
and for the years ended December 31, 1997, 1996 and 1995........... F-6
Consolidated statement of cash flows--for the six months ended
June 30, 1998 and 1997 (unaudited) and the years ended
December 31, 1997, 1996 and 1995................................... F-7
Notes to consolidated financial statements......................... F-9
All schedules are omitted because the required information is not
applicable or is included in the consolidated financial statements and related
notes.
Lincoln Bancorp ("Lincoln"), the Holding Company for Lincoln Federal
Savings Bank, has not commenced operations as of June 30, 1998 and will not
commence operations prior to the conversion of Lincoln Federal Savings Bank from
a federal savings bank to a federal stock savings bank. Accordingly, the
financial statements of Lincoln have been omitted and are not required.
<PAGE>
Independent Auditor's Report
Board of Directors
Lincoln Federal Savings Bank
Plainfield, Indiana
We have audited the accompanying consolidated balance sheet of Lincoln Federal
Savings Bank and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, comprehensive income, changes in equity
capital and cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements described above present
fairly, in all material respects, the consolidated financial position of Lincoln
Federal Savings Bank and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Olive LLP
Indianapolis, Indiana
March 19, 1998, except for note 16
as to which the date is July 2, 1998
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, December 31
1998 1997 1996
------------ ------------------------------
(Unaudited)
Assets
<S> <C> <C> <C>
Cash and due from banks $ 3,027,595 $ 4,190,199 $ 4,589,797
Short-term interest-bearing deposits in other banks 20,736,947 14,767,482 5,209,087
-------------------------------------------------
Total cash and cash equivalents 23,764,542 18,957,681 9,798,884
Interest-bearing deposits in other banks 595,000
Investment securities
Available for sale 58,939,886 29,399,376 118,355
Held to maturity (market value $3,509,000, $9,615,000
and $14,997,000) 3,500,000 9,634,952 15,184,779
-------------------------------------------------
Total investment securities 62,439,886 39,034,328 15,303,134
Mortgage loans held for sale 19,264,354 24,200,178
Loans 184,850,414 249,995,935 282,812,340
Allowance for loan losses (1,432,204) (1,360,731) (1,240,731)
-------------------------------------------------
Net loans 183,418,210 248,635,204 281,571,609
Premises and equipment 2,837,993 2,825,090 2,589,073
Investment in limited partnerships 2,632,863 2,705,997 3,187,423
Federal Home Loan Bank of Indianapolis stock 5,446,700 5,446,700 4,796,700
Interest receivable
Loans 952,675 1,138,824 1,611,013
Mortgage-backed securities 278,037 197,664
Other investment securities and
interest-bearing deposits 197,156 196,477 280,791
Deferred income tax 1,124,282 974,446 1,284,173
Other assets 2,143,508 1,278,828 333,598
-------------------------------------------------
Total assets $ 304,500,206 $ 321,391,239 $ 345,551,576
=================================================
Liabilities
Deposits
Noninterest-bearing $ 1,394,393 $ 2,321,167 $ 711,146
Interest-bearing 209,765,833 201,530,657 210,112,203
-------------------------------------------------
Total deposits 211,160,226 203,851,824 210,823,349
Federal Home Loan Bank advances 45,686,148 70,136,148 91,232,485
Note payable 2,202,501 2,691,001 3,179,501
Interest payable 1,138,165 1,153,517 483,732
Other liabilities 1,517,855 1,581,077 1,913,043
-------------------------------------------------
Total liabilities 261,704,895 279,413,567 307,632,110
-------------------------------------------------
Commitments and Contingencies
Equity Capital
Retained earnings--substantially restricted 42,248,263 41,431,674 37,918,466
Accumulated other comprehensive income 547,048 545,998 1,000
-------------------------------------------------
Total equity capital 42,795,311 41,977,672 37,919,466
-------------------------------------------------
Total liabilities and equity capital $ 304,500,206 $ 321,391,239 $ 345,551,576
=================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Consolidated Statement of Income
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
----------- ------------ ------------ ----------- -----------
(Unaudited)
Interest Income
<S> <C> <C> <C> <C> <C>
Loans receivable, including fees $9,244,231 $12,141,595 $22,369,033 $22,901,854 $20,529,408
Investment securities
Mortgage-backed securities 1,268,012 1,086,165
Other investment securities 199,601 436,964 773,033 941,860 864,715
Deposits with financial institutions 485,044 96,192 652,814 255,988 332,038
Dividend income 216,077 192,413 415,502 353,758 338,669
----------- ------------ ------------ ----------- -----------
Total interest income 11,412,965 12,867,164 25,296,547 24,453,460 22,064,830
----------- ------------ ------------ ----------- -----------
Interest Expense
Deposits 5,335,890 5,089,303 10,403,452 10,237,933 10,001,573
Federal Home Loan Bank advances 1,519,472 2,655,896 5,248,400 4,881,244 4,484,354
----------- ------------ ------------ ----------- -----------
Total interest expense 6,855,362 7,745,199 15,651,852 15,119,177 14,485,927
----------- ------------ ------------ ----------- -----------
Net Interest Income 4,557,603 5,121,965 9,644,695 9,334,283 7,578,903
Provision for losses on loans 409,937 50,000 297,555 120,000 100,000
Net Interest Income After
Provision for Losses on Loans 4,147,666 5,071,965 9,347,140 9,214,283 7,478,903
----------- ------------ ------------ ----------- -----------
Other Income
Net realized and unrealized gain (loss)
on loans held for sale (114,322) (17,741) 299,020 (159,727) 1,463,230
Net realized gains on sale of securities
available for sale 104,980 118,283
Equity in losses of limited partnerships (268,134) (327,333) (681,426) (596,009) (1,595,580)
Other income 378,663 285,767 674,139 502,506 473,129
----------- ------------ ------------ ----------- -----------
Total other income (loss) 101,187 (59,307) 410,016 (253,230) 340,779
----------- ------------ ------------ ----------- -----------
Other Expenses
Salaries and employee benefits 1,318,489 1,022,419 2,247,436 1,718,974 1,528,969
Net occupancy expenses 135,177 133,226 272,101 236,252 272,277
Equipment expenses 299,884 248,579 525,734 360,775 175,547
Deposit insurance expense 99,514 84,641 193,672 1,724,734 438,393
Data processing expense 369,173 268,128 581,087 312,794 227,690
Professional fees 177,481 140,186 237,819 68,745 48,300
Mortgage servicing rights amortization 126,374 5,061 66,784 12,478 9,382
Other expenses 569,481 545,915 960,755 668,543 543,516
----------- ------------ ------------ ----------- -----------
Total other expenses 3,095,573 2,448,155 5,085,388 5,103,295 3,244,074
----------- ------------ ------------ ----------- -----------
Income Before Income Tax and
Extraordinary Item 1,153,280 2,564,503 4,671,768 3,857,758 4,575,608
Income tax expense 186,388 701,364 1,158,560 869,539 1,193,042
----------- ------------ ------------ ----------- -----------
Income Before Extraordinary Item 966,892 1,863,139 3,513,208 2,988,219 3,382,566
Extraordinary item--early extinguishment
of debt, net of income taxes of $98,583 (150,303)
----------- ------------ ------------ ----------- -----------
Net Income $ 816,589 $ 1,863,139 $ 3,513,208 $ 2,988,219 $ 3,382,566
=========== ============ ============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
-------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income $816,589 $1,863,139 $3,513,208 $2,988,219 $3,382,566
-------- ---------- ---------- ---------- ----------
Other comprehensive income, net of tax
Unrealized gains (losses) on securities
available for sale
Unrealized holding gains (losses)
arising during the period
net of tax expense (benefit)
of $42,271, $(656), $404,318,
$656 and $1,312 64,447 (1,000) 616,429 1,000 2,000
Less: Reclassification
adjustment for gains included
in net income net of tax
expense (benefit) of
$41,582 and $46, 852 63,397 71,431
1,050 (1,000) 544,998 1,000 2,000
-------- ---------- ---------- ---------- ----------
Comprehensive income $817,639 $1,862,139 $4,058,219 $2,989,219 $3,384,566
======== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Lincoln Federal Savings Bank and Subsidiary
Plainfield, Indiana
Consolidated Statement of Changes in Equity Capital
<TABLE>
<CAPTION>
Accumulated
Other
Retained Comprehensive
Earnings Income Total
<S> <C> <C> <C>
Balances, January 1, 1995 $31,547,681 $ (2,000) $31,545,681
Net income for 1995 3,382,566 3,382,566
Net change in unrealized gain on securities
available for sale 2,000 2,000
-----------------------------------------------------------
Balances, December 31, 1995 34,930,247 34,930,247
Net income for 1996 2,988,219 2,988,219
Net change in unrealized gain on securities
available for sale 1,000 1,000
-----------------------------------------------------------
Balances, December 31, 1996 37,918,466 1,000 37,919,466
Net income for 1997 3,513,208 3,513,208
Net change in unrealized gain on securities
available for sale 544,998 544,998
-----------------------------------------------------------
Balances, December 31, 1997 41,431,674 545,998 41,977,672
Net income for the six months ended
June 30, 1998 (unaudited) 816,589 816,589
Net change in unrealized gain
on securities available for sale 1,050 1,050
-----------------------------------------------------------
Balances, June 30, 1998 (unaudited) $42,248,263 $547,048 $42,795,311
===========================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Lincoln Federal Savings Bank and Subsidiary
Plainfield, Indiana
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
(Unaudited)
Operating Activities
<S> <C> <C> <C> <C> <C>
Net income $ 816,589 $1,863,139 $ 3,513,208 $2,988,219 $3,382,566
Adjustments to reconcile net income to
net cash provided (used) by
operating activities
Provision for loan losses 409,937 50,000 297,555 120,000 100,000
Gain on sale of foreclosed real estate (434) (7,394) (17,297) (2,724) (12,427)
(Gain) loss on disposal of premises
and equipment 7,456 (3,147) 1,736
Investment securities accretion, net (72) (100) (173) (5,764) (1,309)
Investment securities gains (104,981) (118,283)
Equity in losses of limited partnerships 268,134 327,333 681,426 596,009 1,595,580
Amortization of net loan
origination fees (216,970) (261,402) (318,087) (555,738) (435,717)
Depreciation and amortization 237,569 215,809 441,824 379,449 256,740
Deferred income tax benefit (150,524) 34,360 (48,394) (165,948) (434,124)
Change in
Loans held for sale 238,002 1,505,814 1,353,983 (8,666,247) 607,535
Interest receivable 105,097 68,044 358,839 (20,227) (208,290)
Interest payable (15,352) 696,141 669,785 192,646 30,652
Other liabilities (79,552) 186,827 242,329 (578,033) 816,023
Other assets 122,504 62,804 143,797 (80,935) (28,226)
Income taxes receivable payable 126,829 (347,994) (604,950) 14,400 445,056
--------------------------------------------------------------------------------
Net cash provided (used)
by operating activities 1,764,232 4,393,381 6,595,562 (5,788,040) 6,115,795
--------------------------------------------------------------------------------
Investing Activities
Net change in interest-bearing deposits 595,000 100,000 495,000
Purchases of securities
available for sale (14,924,502) (462) (7,798,838) (889) (926)
Proceeds from sales of securities
available for sale 21,080,952 54,532,285
Proceeds from maturities of securities
available for sale 4,137,734 1,236,765
Purchases of securities held to maturity (11,429,375) (9,250,000)
Proceeds from maturities of securities
held to maturity 6,135,000 1,800,000 5,550,000 7,850,000 10,400,000
Purchase of loans (999,737) (999,737)
Other net changes in loans 5,312,468 (14,689,689) (20,033,888) (11,425,829) (25,431,291)
Purchase of premises and equipment (257,928) (216,578) (677,841) (189,524) (549,218)
Proceeds from disposal of
property and equipment 6,500
Purchase of FHLB of Indianapolis stock (650,000) (650,000) (496,700)
Proceeds from sale of
foreclosed real estate 144,501 73,453 157,901 40,000 87,000
Improvements to foreclosed real estate (151) (10,294) (7,085)
Distribution from limited partnership 40,000
Contribution to limited partnership (195,000) (200,000) (200,000) (200,000) (200,000)
Other investing activities (650,000) (378,759)
---------------------------------------------------------------------------------
Net cash provided (used) by
investing activities 20,783,225 (14,883,013) 31,332,737 (15,756,111) (24,416,520)
---------------------------------------------------------------------------------
</TABLE>
<PAGE>
Lincoln Federal Savings Bank and Subsidiary
Plainfield, Indiana
Consolidated Statement of Cash Flows (continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
--------------------------------------------------------------------------------
1998 1997 1997 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
Financing Activities
Net change in
Noninterest-bearing, interest-bearing
demand, money market and
savings deposits 266,372 1,575,673 4,449,683 8,509,585 (9,409,620)
Certificates of deposit 7,042,030 (11,124,514) (11,421,208) 6,197,171 20,307,236
Short-term borrowings (2,137,058)
Proceeds from FHLB advances 10,000,000 38,700,000 73,400,000 94,700,000 178,000,000
Repayment of FHLB advances (34,450,000) (23,000,000) (94,496,337) (85,403,916) (180,063,599)
Payment on note payable to limited
partnership (488,500) (488,500) (488,500) (488,500) (488,500)
Net change in advances by
borrowers for taxes
and insurance (110,498) (94,051) (213,140) (358,426) (18,985)
----------------------------------------------------------------------------------
Net cash provided (used) by
financing activities (17,740,596) 5,568,608 (28,769,502) 23,155,914 6,189,474
----------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 4,806,861 (4,921,024) 9,158,797 1,611,763 (12,111,251)
Cash and Cash Equivalents,
Beginning of Year 18,957,681 9,798,884 9,798,884 8,187,121 20,298,372
---------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $23,764,542 $4,877,860 $18,957,681 $9,798,884 $8,187,121
=================================================================================
Additional Cash Flows and
Supplementary Information
Interest paid $6,897,070 $7,049,058 $14,982,067 $14,944,236 $14,468,846
Income tax paid 111,500 1,014,998 1,814,998 994,087 1,182,110
Loan balances transferred to
foreclosed real estate 196,872 110,767 102,087 67,488
Securitization of loans and loans held
for sale 39,903,448 76,229,830
Transfer of loans to loans
held for sale 19,611,239 3,137,084
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 1 -- Nature of Operations and Summary of Significant Accounting Policies
The accounting and reporting policies of Lincoln Federal Savings Bank ("Bank")
and its wholly owned subsidiary, L-F Service Corporation ("L-F Service"),
conform to generally accepted accounting principles and reporting practices
followed by the thrift industry. The more significant of the policies are
described below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Bank operates under a federal thrift charter and provides full banking
services. As a federally chartered thrift, the Bank is subject to regulation by
the Office of Thrift Supervision.
The Bank generates mortgage and consumer loans and receives deposits from
customers located primarily in Central Indiana. The Bank's loans are generally
secured by specific items of collateral including real property and consumer
assets. L-F Service invests in low income housing partnerships.
Consolidation--The consolidated financial statements include the accounts of the
Bank and subsidiary after elimination of all material intercompany transactions
and accounts.
Investment Securities--Debt securities are classified as held to maturity when
the Bank has the positive intent and ability to hold the securities to maturity.
Securities held to maturity are carried at amortized cost.
Debt securities not classified as held to maturity are classified as available
for sale. Securities available for sale are carried at fair value with
unrealized gains and losses reported separately, net of tax, in equity capital.
Amortization of premiums and accretion of discounts are recorded using the
interest method as interest income from securities. Realized gains and losses
are recorded as net security gains (losses). Gains and losses on sales of
securities are determined on the specific-identification method.
Loan securitizations--The Bank securitized certain mortgage loans and created
mortgage-backed securities for sale in the secondary market. Because the
resulting securities were collateralized by the identical loans previously held,
no gain or loss was recognized at the time of the securitization transactions.
When securitized loans are sold to an outside party, the specific-identification
method is used to determine the cost of the security sold, and a gain or loss is
recognized in income.
Mortgage loans held for sale are carried at the lower of aggregate cost or
market. Net unrealized losses are recognized through a valuation allowance by
charges to income. Gains or losses on sales of loans as recorded in the
consolidated statement of income include the amounts as determined above as well
as principal gains or losses associated with the sales and the recognition of
unamortized loan origination fees and commitment fees paid to the purchasers.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Loans are carried at the principal amount outstanding. A loan is impaired when,
based on current information or events, it is probable that the Bank will be
unable to collect all amounts due (principal and interest) according to the
contractual terms of the loan agreement. Payments with insignificant delays not
exceeding 90 days outstanding are not considered impaired. Certain nonaccrual
and substantially delinquent loans may be considered to be impaired. The Bank
considers its investment in one-to-four family residential loans and consumer
loans to be homogeneous and therefore excluded from separate identification for
evaluation of impairment. Interest income is accrued on the principal balances
of loans. The accrual of interest on impaired and nonaccrual loans is
discontinued when, in management's opinion, the borrower may be unable to meet
payments as they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed when considered uncollectible. Interest income is
subsequently recognized only to the extent cash payments are received. Certain
loan fees and direct costs are being deferred and amortized as an adjustment of
yield on the loans over the contractual lives of the loans. When a loan is paid
off or sold, any unamortized loan origination fee balance is credited to income.
Allowance for loan losses is maintained to absorb loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loss experience, changes
in the composition of the portfolio, the current condition and amount of loans
outstanding, and the probability of collecting all amounts due. Impaired loans
are measured by the present value of expected future cash flows, or the fair
value of the collateral of the loan, if collateral dependent.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of June
30, 1998 (unaudited) and December 31, 1997 and 1996, the allowance for loan
losses is adequate based on information currently available. A worsening or
protracted economic decline in the area within which the Bank operates would
increase the likelihood of additional losses due to credit and market risks and
could create the need for additional loss reserves.
Foreclosed real estate is carried at the lower of cost or fair value less
estimated selling costs. When foreclosed real estate is acquired, any required
adjustment is charged to the allowance for loan losses. All subsequent activity
is included in current operations.
Mortgage servicing rights on originated loans are capitalized by allocating the
total cost of the mortgage loans between the mortgage servicing rights and the
loans based on their relative fair values. Capitalized servicing rights, which
include purchased servicing rights, are amortized in proportion to and over the
period of estimated servicing revenues.
Premises and equipment are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based principally on the
estimated useful lives of the assets which range from 3 to 39 years. Maintenance
and repairs are expensed as incurred while major additions and improvements are
capitalized. Gains and losses on dispositions are included in current
operations.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Federal Home Loan Bank stock is a required investment for institutions that are
members of the Federal Home Loan Bank (FHLB) system. The required investment in
the common stock is based on a predetermined formula.
Investment in limited partnerships is recorded using the equity method of
accounting. Losses due to impairment are recorded when it is determined that the
investment no longer has the ability to recover its carrying amount. The
benefits of low income housing tax credits associated with the investment are
accrued when earned.
Pension plan costs are based on actuarial computations and charged to current
operations. The funding policy is to pay at least the minimum amounts required
by ERISA.
Income tax in the consolidated statement of income includes deferred income tax
provisions or benefits for all significant temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. The Bank
files consolidated income tax returns with its subsidiary.
Reclassifications of certain amounts in the 1996 and 1995 consolidated financial
statements have been made to conform to the 1997 presentation.
Note 2 -- Restriction on Cash
The Bank is required to maintain reserve funds in cash and/or on deposit with
the Federal Reserve Bank. The reserve required at June 30, 1998 (unaudited) and
December 31, 1997, was $106,000.
Note 3 -- Investment Securities
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
June 30 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Available for sale
Mortgage-backed securities
Federal Home Loan Mortgage Corporation $36,416 $851 $37,267
Federal National Mortgage Corporation 6,790 58 $3 6,845
Corporate debt obligations 14,828 14,828
-----------------------------------------------------------
Total available for sale 58,034 909 3 58,940
-----------------------------------------------------------
Held to maturity
Federal agencies 3,500 9 3,509
-----------------------------------------------------------
Total held to maturity 3,500 9 3,509
-----------------------------------------------------------
Total investment securities $61,534 $918 $3 $62,449
===========================================================
</TABLE>
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
December 31 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale
Mortgage-backed securities
Federal Home Loan Mortgage Corporation $20,997 $862 $21,859
Federal National Mortgage Corporation 7,498 42 7,540
-----------------------------------------------------------
Total available for sale 28,495 904 29,399
-----------------------------------------------------------
Held to maturity
Federal agencies 9,635 5 $25 9,615
-----------------------------------------------------------
Total held to maturity 9,635 5 25 9,615
-----------------------------------------------------------
Total investment securities $38,130 $909 $25 $39,014
===========================================================
</TABLE>
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
December 31 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale
Federated liquid cash fund $ 17 $ 17
FHLMC stock 100 $1 101
-----------------------------------------------------------
Total available for sale 117 1 118
-----------------------------------------------------------
Held to maturity
Federal agencies 15,185 3 $191 14,997
Total held to maturity 15,185 3 191 14,997
-----------------------------------------------------------
Total investment securities $15,302 $4 $191 $15,115
===========================================================
</TABLE>
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The amortized cost and fair value of securities at June 30, 1998 (unaudited) and
December 31, 1997, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
June 30, 1998
Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Within one year $1,250 $1,251
One to five years 2,250 2,258
Over ten years $14,828 $14,828
-----------------------------------------------------------
14,828 14,828 3,500 3,509
Mortgage-backed securities 43,206 44,112
-----------------------------------------------------------
Totals $58,034 $58,940 $3,500 $3,509
===========================================================
December 31, 1997
-----------------------------------------------------------
Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
-----------------------------------------------------------
Within one year $2,750 $2,742
One to five years 6,885 6,873
-----------------------------------------------------------
9,635 9,615
Mortgage-backed securities $28,495 $29,399
-----------------------------------------------------------
Totals $28,495 $29,399 $9,635 $9,615
===========================================================
</TABLE>
Securities with a carrying value of $47,612,000 and $38,957,000 were pledged at
June 30, 1998 (unaudited) and December 31, 1997 to secure FHLB advances.
Proceeds from sales of securities available for sale during the six months ended
June 30, 1998 (unaudited) and the year ended December 31, 1997 were $21,081,000
and $54,532,000. Gross gains of $105,000 for the six months ended June 30, 1998
(unaudited), and gross gains of $208,000 and gross losses of $90,000 for the
year ended December 31,1997 were realized on those sales.
The retained interest in loans securitized and included in securities available
for sale does not include a material amount of loans formerly classified as held
for sale.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 4 -- Loans and Allowance
<TABLE>
<CAPTION>
December 31
June 30, ---------------------
1998 1997 1996
--------------------------------
(Unaudited)
Real estate mortgage loans
<S> <C> <C> <C>
One-to-four family $140,434 $205,976 $245,198
Multi-family 1,048 1,133 1,111
Real estate construction loans 7,722 9,912 13,159
Commercial, industrial and agricultural loans 16,297 16,611 17,555
Consumer loans 22,374 20,558 16,363
--------------------------------
Total loans 187,875 254,190 293,386
Less
Undisbursed portion of loans 2,071 2,504 8,086
Deferred loan fees 954 1,690 2,488
--------------------------------
$184,850 $249,996 $282,812
================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
--------------------------------------------------------------------------------
1998 1997 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Allowance for loan losses
<S> <C> <C> <C> <C> <C>
Balances, Beginning of Period $1,361 $1,241 $1,241 $1,121 $1,047
Provision for loan losses 410 50 298 120 100
Recoveries on loans 16 3
Loans charged off (355) (178) (29)
--------------------------------------------------------------------------------
Balances, End of Period $1,432 $1,291 $1,361 $1,241 $1,121
================================================================================
</TABLE>
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Information on impaired loans is summarized below.
June 30, December 31
1998 1997 1996
(Unaudited)
Impaired loans with an allowance $808 $1,582 $2,106
=======================================
Allowance for impaired loans
(included in the Bank's
allowance for loan losses) $121 $237 $523
=======================================
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Average balance of impaired loans $1,273 $2,063 $1,933 $2,177 $569
Interest income recognized on impaired loans 9 60 64 194 45
Cash-basis interest included above 9 60 64 194 49
</TABLE>
The Bank has no commitments to loan additional funds to the borrowers of
impaired loans.
Note 5 -- Premises and Equipment
June 30, December 31
1998 1997 1996
(Unaudited)
Land $ 881 $ 881 $ 493
Buildings and land improvements 2,716 2,734 2,695
Furniture and equipment 1,507 1,490 1,240
---------------------------------------
Total cost 5,104 5,105 4,428
Accumulated depreciation (2,266) (2,280) (1,839)
---------------------------------------
Net $2,838 $2,825 $2,589
=======================================
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 6 -- Investment In Limited Partnership
The Bank has an investment of $2,632,863, $2,705,997 and $3,187,423 at June 30,
1998 (unaudited) and December 31, 1997 and 1996 representing equity in certain
limited partnerships organized to build, own and operate apartment complexes.
The Bank records its equity in the net income or loss of the partnerships based
on the Bank's interest in the partnerships, which interests are 49.5 percent in
Pedcor Investments-1987-I (Pedcor) and 99 percent in Bloomington Housing
Associates L.P. (Bloomington Housing). In addition to recording its equity in
the losses of the partnership, the Bank has recorded the benefit of low income
housing tax credits of $299,000 and $327,000 for the six months ended June 30,
1998 and 1997 (unaudited) and $655,000 for the years ended December 31, 1997 and
1996. Condensed combined financial statements of the partnerships are as
follows:
June 30, December 31
1998 1997 1996
(Unaudited)
Assets
Cash $ 395 $ 363 $ 361
Note receivable--limited partner 2,203 2,691 3,180
Land and property 9,527 9,716 10,063
Other assets 1,452 1,499 1,419
-----------------------------
Total assets $13,577 $14,269 $15,023
=============================
Liabilities
Notes payable $ 9,075 $ 9,536 $ 9,738
Other liabilities 624 710 706
-----------------------------
Total liabilities 9,699 10,246 10,444
Partners' equity 3,878 4,023 4,579
-----------------------------
Total liabilities and partners' equity $13,577 $14,269 $15,023
=============================
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
-----------------------------------------------------------------------
(Unaudited)
Condensed statement of operations
<S> <C> <C> <C> <C> <C>
Total revenue $ 760 $ 817 $ 1,677 $ 1,655 $ 1,579
Total expenses 1,296 1,245 2,633 2,438 2,398
-----------------------------------------------------------------------
Net loss $ (536) $ (428) $ (956) $ (783) $ (819)
=======================================================================
</TABLE>
At December 31, 1997, the Bank had committed to make a capital contribution of
$195,000 to Pedcor in January 1998.
Note 7 -- Deposits
<TABLE>
<CAPTION>
June 30, December 31
1998 1997 1996
(Unaudited)
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 1,394 $ 2,321 $ 711
Interest-bearing demand 7,487 7,565 8,551
Money market savings deposits 28,631 26,002 14,429
Savings deposits 20,609 21,967 29,714
Certificates and other time deposits of $100,000 or more 16,698 15,334 24,279
Other certificates and time deposits 136,341 130,663 133,139
-------------------------------------------
Total deposits $211,160 $203,852 $210,823
===========================================
</TABLE>
Certificates maturing in years ending :
June 30 December 31
(Unaudited)
1998 $111,568 $ 69,205
1999 30,660 65,038
2000 7,590 5,822
2001 2,464 5,120
2002 757 812
--------------------------------
$153,039 $145,997
==============================
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Deposits in excess of $100,000 are not federally insured.
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
---------------------------------------------------------------
(Unaudited)
Interest expense on deposits
<S> <C> <C> <C> <C> <C>
Interest-bearing demand $ 79 $ 77 $ 154 $ 151 $ 143
Money market savings deposits 687 459 1,044 320 108
Savings deposits 322 417 781 1,092 1,295
Certificates 4,248 4,136 8,424 8,675 8,456
---------------------------------------------------------------
$ 5,336 $ 5,089 $10,403 $10,238 $10,002
===============================================================
</TABLE>
Note 8 -- Federal Home Loan Bank Advances
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
Weighted Weighted
Average Average
Amount Rate Amount Rate
(Unaudited)
Advances from FHLB
Maturities in years ending
<S> <C> <C> <C> <C>
1998 $35,000 5.47%
1999 $24,000 5.53% 7,000 5.21
2000 3,750 6.15
2002
12,700 5.81
2003 10,000 5.67
1,686 5.36
2004 1,686 5.36
2007 10,000 6.67
2008
10,000 5.73
------- ----------
$45,686 5.60% $ 70,136 5.71%
======= ==========
</TABLE>
The FHLB advances are secured by first mortgage loans and investment securities
totaling $203,631,000 and $238,781,000 at June 30, 1998 (unaudited) and December
31, 1997. Advances are subject to restrictions or penalties in the event of
prepayment.
During the six months ended June 30, 1998 (unaudited), the Bank prepaid FHLB
advances of $16,450,000. The early repayments resulted in prepayment penalties
of $150,000, net of income taxes of $98,600, which has been accounted for as an
extraordinary item as required by generally accepted accounting principles.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The Bank has an available line of credit with the FHLB totaling $2,000,000. The
line of credit expires September 9, 1998 and bears interest at a rate equal to
the current variable advance rate. There were no drawings on this line of credit
at June 30, 1998 (unaudited) and December 31, 1997.
Note 9 -- Note Payable
The note payable to Bloomington Housing dated August 18, 1992 in the original
amount of $4,945,001 bears no interest so long as there exists no event of
default. As of June 30, 1998 (unaudited) and December 31, 1997, the Bank was in
compliance with all terms of the note. In the instance where an event of default
has occurred, interest shall be calculated at a rate of five percent above the
Indiana base rate as described in the note. The following table summarizes the
payment terms of the note.
June 30 December 31
(Unaudited)
Payments due in years ending:
1998 $ 489
1999 $ 489 489
2000 489 489
2001 489 489
2002 489 489
2003 247 246
----------------------------
$2,203 $2,691
============================
Note 10 -- Loan Servicing
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheet. The unpaid principal balances of these loans consist
of the following:
<TABLE>
<CAPTION>
June 30, December 31
1998 1997 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
Mortgage loan portfolio serviced for
<S> <C> <C> <C> <C> <C>
FHLMC $101,922 $46,540 $84,879 $36,660 $37,710
Other investors 75 92 84 100 212
---------------------------------------------------------------------
$101,997 $46,632 $84,963 $36,760 $37,922
=====================================================================
</TABLE>
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
In 1996, the Bank adopted SFAS No. 122, Accounting for Mortgage Servicing
Rights. This Statement requires the capitalization of retained mortgage
servicing rights on originated or purchased loans by allocating the total cost
of the mortgage loans between the mortgage servicing rights and the loans
(without the servicing rights) based on their relative fair values. SFAS No. 122
was superseded during 1996 by SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities. SFAS No. 125
(as did SFAS No. 122) requires the assessment of impairment of capitalized
mortgage servicing rights and requires that impairment be recognized through a
valuation allowance based on the fair value of those rights. Prior to 1996, the
Bank had recognized loan servicing costs when participating interests in loans
sold had an average contractual interest rate, adjusted for normal servicing,
that differed from the agreed yield to the purchases. The aggregate fair value
of capitalized mortgage servicing rights at June 30, 1998 (unaudited) and
December 31, 1997 totaled $758,000 and $530,000. Comparable market values and a
valuation model that calculates the present value of future cash flows were used
to estimate fair value. For purposes of measuring impairment, risk
characteristics including product type, investor type, and interest rates, were
used to stratify the originated mortgage servicing rights.
<TABLE>
<CAPTION>
June 30 December 31
------------------------------------------------------------------------------
1998 1997 1997 1996 1995
(Unaudited)
Mortgage Servicing Rights
<S> <C> <C> <C> <C> <C>
Balances, January 1 $530 $85 $ 85 $49 $58
Servicing rights capitalized 354 512 48
Amortization of servicing rights (126) (5) (67) (12) (9)
----------------------------------------------------------------------------
Balances, end of period $758 $80 $530 $85 $49
============================================================================
</TABLE>
Note 11 -- Income Tax
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1998 1997 1997 1996 1995
(Unaudited)
Income tax expense
Currently payable
<S> <C> <C> <C> <C> <C>
Federal $ 206 $ 449 $ 841 $ 695 $ 1,134
State 131 218 366 341 493
Deferred
Federal (164) 17 (58) (163) (351)
State 13 17 10 (3) (83)
------------------------------------------------------
Total income tax expense $ 186 $ 701 $ 1,159 $ 870 $ 1,193
======================================================
Reconciliation of federal
statutory to actual tax expense
Federal statutory income taxat34% $ 392 $ 872 $ 1,588 $ 1,312 $ 1,556
Effect of state income taxes 95 155 248 223 271
Tax credits (299) (327) (655) (655) (655)
Other (2) 1 (22) (10) 21
------------------------------------------------------
Actual tax expense $ 186 $ 701 $ 1,159 $ 870 $ 1,193
======================================================
Effective tax rate 16.16% 27.3% 24.8% 22.6% 26.1%
</TABLE>
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The components of the deferred tax asset are as follows at:
<TABLE>
<CAPTION>
June 30, December 31
1998 1997 1996
(Unaudited)
Assets
<S> <C> <C>
Depreciation $ 18 $ 18
Allowance for loan losses 609 578 $ 470
Loan fees 106 112 154
Deferred director fees 284 273 177
Loss on limited partnerships 416 411 402
Business tax credits 509 294 198
Loan interest 57
Other 2 13 21
------------------------------------------
Total assets 1,944 1,699 1,479
------------------------------------------
Liabilities
Depreciation 12
State income tax 71 76 79
FHLB stock dividends 78 78 78
Loans held for sale 6
Mortgage servicing rights 312 213 20
Securities available for sale 359 358
------------------------------------------
Total liabilities 820 725 195
------------------------------------------
$1,124 $974 $1,284
==========================================
</TABLE>
No valuation allowance was considered necessary at June 30, 1998 (unaudited) and
December 31, 1997 and 1996.
At June 30, 1998 (unaudited) and December 31, 1997, the Bank had an unused
business income tax credit carryforward of $509,000 and $294,000 expiring in
2012.
Income tax expense attributable to securities gains was $42,000 for the six
months ended June 30, 1998 (unaudited) and $47,000 for year ended December 31,
1997.
Retained earnings at June 30, 1998 (unaudited) and December 31, 1997 include
approximately $5,928,000 for which no deferred income tax liability has been
recognized. This amount represents an allocation of income to bad debt
deductions as of December 31, 1987 for tax purposes only. Reduction of amounts
so allocated for purposes other than tax bad debt losses including redemption of
bank stock or excess dividends, or loss of "bank" status, would create income
for tax purposes only, which income would be subject to the then-current
corporate income tax rate. The unrecorded deferred income tax liability on the
above amounts at June 30, 1998 (unaudited) and December 31, 1997 was
approximately $2,348,000.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 12 -- Commitments and Contingent Liabilities
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included in the accompanying financial statements. The
Bank's exposure to credit loss in the event of nonperformance by the other party
to the financial instruments for commitments to extend credit and standby
letters of credit is represented by the contractual or notional amount of those
instruments. The Bank uses the same credit policies in making such commitments
as it does for instruments that are included in the consolidated statement of
financial condition.
Financial instruments whose contract amount represents credit risk were as
follows:
June 30, December 31
1998 1997 1996
- --------------------------------------------------------------------------------
(Unaudited)
Loan commitments
At variable rates $9,145 $7,255 $6,642
At fixed rates ranging from
6.125 to 10.50% 5,078
7.25 to 9.50% 9,263
6.0 to 9.75% 11,865
Commitment to sell loans 19,264
Standby letters of credit 237 715 878
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness 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 credit
evaluation. Collateral held varies, but may include residential real estate,
income-producing commercial properties, or other assets of the borrower.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party.
The Bank and subsidiary are also subject to claims and lawsuits which arise
primarily in the ordinary course of business. It is the opinion of management
that the disposition or ultimate determination of such possible claims or
lawsuits will not have a material adverse effect on the consolidated financial
position of the Bank.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 13 -- Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies and is assigned to a capital category. The assigned
capital category is largely determined by three ratios that are calculated
according to the regulations: total risk adjusted capital, Tier 1 capital, and
Tier 1 leverage ratios. The ratios are intended to measure capital relative to
assets and credit risk associated with those assets and off-balance sheet
exposures of the entity. The capital category assigned to an entity can also be
affected by qualitative judgments made by regulatory agencies about the risk
inherent in the entity's activities that are not part of the calculated ratios.
There are five capital categories defined in the regulations, ranging from well
capitalized to critically undercapitalized. Classification of a bank in any of
the undercapitalized categories can result in actions by regulators that could
have a material effect on a bank's operations. At June 30, 1998 (unaudited) and
December 31, 1997 and 1996, the Bank is categorized as well capitalized and met
all subject capital adequacy requirements. There are no conditions or events
since June 30, 1998 (unaudited) and December 31, 1997 that management believes
have changed the Bank's classification.
The Bank's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
June 30, 1998
Required for To Be Well
Actual Adequate Capital 1 Capitalized 1
Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital 1
(to risk-weighted assets) $43,680 24.6% $14,217 8.0% $17,772 10.0%
Core capital 1 (to adjusted tangible assets) 42,248 13.9% 9,138 3.0% 18,276 6.0%
Core capital 1 (to adjusted total assets) 42,248 13.9% 9,138 3.0% 15,230 5.0%
1 As defined by regulatory agencies
December 31, 1997
Required for To Be Well
Actual Adequate Capital 1 Capitalized 1
Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------
Total risk-based capital 1
(to risk-weighted assets) $42,793 25.3% $13,547 8.0% $16,934 10.0%
Core capital 1 (to adjusted tangible assets) 41,432 12.9% 9,625 3.0% 19,250 6.0%
Core capital 1 (to adjusted total assets) 41,432 12.9% 9,625 3.0% 16,042 5.0%
</TABLE>
1 As defined by regulatory agencies
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
December 31, 1996
Required for To Be Well
Actual Adequate Capital 1 Capitalized 1
Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------
Total risk-based capital 1
<S> <C> <C> <C> <C> <C> <C>
(to risk-weighted assets) $38,989 21.8% $14,342 8.0% $17,928 10.0%
Core capital 1 (to adjusted tangible assets) 37,918 11.0% 10,367 3.0% 20,733 6.0%
Core capital 1 (to adjusted total assets) 37,918 11.0% 10,367 3.0% 17,278 5.0%
</TABLE>
1 As defined by regulatory agencies
The Bank's tangible capital at June 30, 1998 (unaudited) and December 31, 1997
was $42,428,000 and $41,432,000, which amounts were 13.9 and 12.9 percent of
tangible assets and exceeded the required ratio of 1.5 percent.
Reconciliation of capital for financial statement purposes to regulatory capital
was as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
Core Tangible Risk-Based Core Tangible Risk-Based
Capital Capital Capital Capital Capital Capital
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Capital for financial
statement purposes $42,795 $42,795 $42,795 $41,978 $41,978 $41,978
Less
Net unrealized gain on securities
available for sale 547 547 547 546 546 546
Add
General loan valuation allowance 1,432 1,361
----------------------------------------------------------------------------------
Regulatory capital $42,248 $42,248 $43,680 $41,432 $41,432 $42,793
==================================================================================
</TABLE>
Note 14 -- Benefit Plans
The Bank is a participant in a pension fund known as the Financial Institutions
Retirement Fund ("FIRF"). This plan is a multi-employer plan: Pension expense
(benefit) was $0 for the six months ended June 30, 1998 and 1997 (unaudited) and
$(26,000), $70,000 and $88,000 for the years ended December 31, 1997, 1996 and
1995. This plan provides pension benefits for substantially all of the Bank's
employees.
The Bank has a retirement savings 401(k) plan in which substantially all
employees may participate. The Bank matches employees' contributions at the rate
of 50 percent for the first 5 percent of W-2 earnings contributed by
participants. The Bank's expense for the plan was $15,000 and $6,000 for the six
months ended June 30, 1998 and 1997 (unaudited) and $19,000, $20,000 and $12,000
for the years ended December 31, 1997, 1996 and 1995.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Note 15 -- Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument.
Cash and Cash Equivalents--The fair value of cash and cash equivalents
approximates carrying value.
Interest-Bearing Deposits--The fair value of interest-bearing deposits
approximates carrying value.
Securities--Fair values are based on quoted market prices.
Loans and Loans Held for Sale--The fair value for loans is estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality.
FHLB Stock--Fair value of FHLB stock is based on the price at which it may be
resold to the FHLB.
Interest Receivable/Payable--The fair value of accrued interest
receivable/payable approximates carrying values.
Deposits--Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
on such time deposits.
FHLB Advances--The fair value of these borrowings is estimated using a
discounted cash flow calculation, based on current rates for similar debt.
Note Payable--Limited Partnership--The fair value of the borrowing is estimated
using a discounted cash flow calculation based on the prime interest rate.
Advance Payments by Borrowers for Taxes and Insurance--The fair value
approximates carrying value.
Off-Balance Sheet Commitments--Commitments include commitments to originate
mortgage and consumer loans and standby letters of credit and are generally of a
short-term nature. The fair value of such commitments 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
carrying amounts of these commitments, which are immaterial, are reasonable
estimates of the fair value of these financial instruments.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The estimated fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
December 31
June 30, 1998 1997 1996
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $23,765 $23,765 $18,958 $18,958 $9,799 $9,799
Interest-bearing deposits 595 595
Securities available for sale 58,940 58,940 29,399 29,399 118 118
Securities held to maturity 3,500 3,509 9,635 9,615 15,185 14,997
Loans including loans held for sale, net 202,683 205,485 248,635 250,420 305,772 306,153
Stock in FHLB 5,447 5,447 5,447 5,447 4,797 4,797
Interest receivable 1,428 1,428 1,533 1,533 1,892 1,892
Liabilities
Deposits 211,160 211,459 203,852 204,270 210,823 211,287
Borrowings
FHLB advances 45,686 45,254 70,136 69,753 91,232 90,735
Note payable--limited partnership 2,203 1,835 2,691 2,198 3,180 2,514
Interest payable 1,138 1,138 1,154 1,154 484 484
Advances by borrowers for
taxes and insurance 613 613 723 723 937 937
</TABLE>
Note 16 -- Subsequent Event--Plan of Conversion
On July 2, 1998, the Board of Directors adopted a Plan of conversion ("Plan")
whereby the Bank will convert from a Federally chartered mutual institution to a
Federally chartered stock savings bank. The Plan is subject to approval of
regulatory authorities and members at a special meeting. The stock of the Bank
will be issued to Lincoln, a holding company formed in connection with the
conversion, and the Bank will become a wholly-owned subsidiary of Lincoln.
Pursuant to the Plan, shares of capital stock of Lincoln are expected to be
offered initially for subscription to eligible members of the Bank and certain
other persons as of specified dates subject to various subscription priorities
as provided in the Plan. The capital stock will be offered at a price to be
determined by the Board of Directors based upon an appraisal to be made by an
independent appraisal firm. The exact number of shares to be offered will be
determined by the Board of Directors in conjunction with the determination of
the subscription price. At least the minimum number of shares offered in the
conversion must be sold. Any stock not purchased in the subscription offering
will be sold in a community offering expected to be commenced following the
subscription offering.
<PAGE>
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
Plainfield, Indiana
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The Plan provides that when the conversion is completed, a "liquidation account"
will be established in an amount equal to the retained income of the Bank as of
the date of the most recent financial statements contained in the final
conversion prospectus. The liquidation account is established to provide a
limited priority claim to the assets of the Bank to qualifying depositors
("eligible account holders") at June 30, 1997 and other depositors
("supplemental eligible account holders") as of September 30, 1998 who continue
to maintain deposits in the Bank after conversion. In the unlikely event of a
complete liquidation of the Bank, and only in such event, eligible account
holders would receive from the liquidation account a liquidation distribution
based on their proportionate share of the then total remaining qualifying
deposits.
Pursuant to the Plan, Lincoln intends to establish a Charitable Foundation (the
"Foundation") in connection with the conversion. The Plan provides that the Bank
and Lincoln will create the Foundation and donate an amount of Lincoln's common
stock equal to 5.0% of the common stock to be issued in the conversion. The
Foundation is being formed as a complement to the Bank's existing community
activities and will be dedicated to community activities and the promotion of
charitable causes.
The Foundation will submit a request to the Internal Revenue Service to be
recognized as a tax-exempt organization and would likely be classified as a
private foundation. A contribution of common stock to the Foundation by Lincoln
would be tax deductible, subject to an annual limitation based on 10% of
Lincoln's annual taxable income. Lincoln, however, would be able to carry
forward any unused portion of the deduction for five years following the
contribution. Upon funding the Foundation, Lincoln will recognize an expense in
the full amount of the contribution, offset in part by the corresponding tax
benefit, during the quarter in which the contribution is made.
Current regulations allow the Bank to pay dividends on its stock after the
conversion if its regulatory capital would not thereby be reduced below the
amount then required for the aforementioned liquidation account. Also, capital
distribution regulations limit the Bank's ability to make capital distributions
which include dividends, stock redemptions or repurchases, cash-out mergers,
interest payments on certain convertible debt and other transactions charged to
the capital account based on its capital level and supervisory condition. Under
regulations in effect at June 30, 1998, repurchase of bank or holding company
stock may only be made during the first year following conversion in exceptional
circumstances approved by the Office of Thrift Supervision. For the second and
third years following conversion, subject to the demonstration of a valid
business purpose and approval by the Office of Thrift Supervision, annual
repurchases of up to 5 percent of outstanding stock can be made.
Costs of conversion will be netted from proceeds of sale of common stock and
recorded as a reduction of additional paid-in capital or common stock. If the
conversion is not competed, such costs, totalling $26,000 at June 30, 1998
(unaudited), would be charged to expense.
Note 17 -- Unaudited Financial Statements
The accompanying consolidated balance sheet as of June 30, 1998, and the
consolidated statements of income, comprehensive income, changes in equity
capital and cash flows for the six months ended June 30, 1998 and 1997 are
unaudited, but management is of the opinion that all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation of the
results of the periods reported, have been included in the accompanying
financial statements. The results of operations for the six months ended June
30, 1998 are not necessarily indicative of those expected for the remainder of
the year.
<PAGE>
GLOSSARY
1933 Act Securities Act of 1933, as amended
1934 Act Securities Exchange Act of 1934, as amended
APY Annual Percentage Yield
Associate The term "Associate" of a person is defined to mean (i)
any corporation or organization (other than Lincoln
Federal or its subsidiaries or the Holding Company) of
which such person is a director, officer, partner or
10% shareholder; (ii) any trust or other estate in
which such person has a substantial beneficial interest
or serves as trustee or in a similar fiduciary
capacity; provided, however that such term shall not
include any employee stock benefit plan of the Holding
Company or Lincoln Federal in which such a 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 relative of such
spouse, who either has the same home as such person or
who is a director or officer of Lincoln Federal or its
subsidiaries or the Holding Company. ATM Automated
Teller Machine
Barnes & Thornburg Barnes & Thornburg, Indianapolis, Indiana
BIF Bank Insurance Fund of the FDIC
Code The Internal Revenue Code of 1986, as amended
Community Offering Offering for sale to members of the general public of
any shares of Common Stock not subscribed for in the
Subscription Offering, with preference given to
residents of Hendricks, Montgomery and Clinton Counties
Common Stock Up to 6,809,250 shares of Common Stock, with no par
value, offered by Lincoln Bancorp in connection with
the Conversion
Conversion Simultaneous conversion of Lincoln Federal Savings Bank
to stock form, the issuance of Lincoln Federal's
outstanding capital stock to Lincoln Bancorp and
Lincoln Bancorp's offer and sale of Common Stock
Eligible Account Holders Savings account holders of Lincoln Federal with account
balances of at least $50 as of the close of business on
June 30, 1997
ERISA Employee Retirement Income Security Act of 1974, as
amended
ESOP The Lincoln Bancorp Employee Stock Ownership Plan and
Trust
Estimated
Valuation Range Estimated pro forma market value of the Common Stock
ranging from $43,050,000 to $68,092,500
Expiration Date 12:00 noon, Plainfield Time, on _____________, 1998
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
FedICIA Federal Deposit Insurance Corporation Improvement Act
of 1991, as amended
FHLB Federal Home Loan Bank
FNMA Federal National Mortgage Association
Foundation The Lincoln Federal Charitable Foundation, Inc.
Freddie Mac Federal Home Loan Mortgage Corporation
Holding Company Lincoln Bancorp
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
Keefe, Bruyette Keefe, Bruyette & Woods, Inc.
Keller Keller & Company, Inc.
LF LF Service Corp., a wholly-owned subsidiary of Lincoln
Federal Savings Bank
Lincoln Federal Lincoln Federal Savings Bank of Plainfield, Indiana
MMDA Money Market Demand Account
NASD National Association of Securities Dealers, Inc.
Nasdaq National National Association of Securities Dealers Automated
Market System Quotation System--National Market
NOW account Negotiable Order of Withdrawal Account
NPV Net portfolio value
OCC Office of the Comptroller of the Currency
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) who
are entitled to vote at the Special Meeting due to the
existence of a savings account on the Voting Record
Date for the Special Meeting, and borrowers of Lincoln
Federal as of June 19, 1984 who remain borrowers on the
Voting Record Date
OTS Office of Thrift Supervision
Pension Plan Multiple-employer, noncontributory defined benefit
retirement plan adopted by Lincoln Federal for its
full-time employees through Pentegra Group (formerly
known as Financial Institutions Retirement Fund)
Plan or
Plan of Conversion Plan of Lincoln Federal Savings Bank to convert from a
federally chartered mutual savings bank to a federally
chartered stock savings bank and the issuance of all of
Lincoln Federal's outstanding capital stock to Lincoln
Bancorp and the issuance of Lincoln Bancorp's Common
Stock to the public
Purchase Price $10.00 per share price of the Common Stock
QTI Qualified thrift investment
QTL Qualified thrift lender
REO Real Estate Owned
RRP Management Recognition and Retention Plan to be
submitted for approval at a meeting of the Holding
Company's shareholders to be held at least six months
after the completion of the Conversion
SAIF Savings Association Insurance Fund of the FDIC
SFAS Statement of Financial Accounting Standard
SEC Securities and Exchange Commission
Special Meeting Special Meeting of members of Lincoln Federal called
for the purpose of approving the Plan
Stock Option Plan The Lincoln Bancorp Stock Option Plan for directors and
officers to be submitted for approval at a meeting of
the Holding Company's shareholders to be held at least
six months after the completion of the Conversion
Subscription Offering Offering of non-transferable rights to subscribe for
the Common Stock, in order of priority, to Eligible
Account Holders, the ESOP, Supplemental Eligible
Account Holders and Other Members
Supplemental Eligible Depositors of Lincoln Federal Savings Bank who are not
Account Holders Eligible Account Holders, with account balances of at
least $50 on September 30, 1998
Voting Record Date The close of business on ________, 1998, the date for
determining members entitled to vote at the Special
Meeting
Webb Charles Webb & Company, a Division of Keefe, Bruyette &
Woods, Inc.
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representation other than as contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Holding Company or Lincoln Federal. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the shares of Common Stock offered hereby to any person in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale hereunder shall, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to the date hereof.
Lincoln Bancorp
(Proposed Holding Company for
Lincoln Federal Savings Bank)
Up to 6,809,250 Shares
Common Stock
(without par value)
SUBSCRIPTION AND
COMMUNITY OFFERING
PROSPECTUS
CHARLES WEBB & COMPANY
A Division of Keefe, Bruyette and Woods, Inc.
______________, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until _____________, 1998, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution(1).
Blue Sky Legal Services and Registration Fees $ 5,000
OTS Filing Fees $ 14,400
NASD Filing Fee $ 8,964
Securities and Exchange Commission Registration Fee $ 26,334
NASDAQ National Market System Listing Fee $ 72,875
Legal Services and Disbursements - Issuer's counsel $ 150,000
Auditing and Accounting Services $ 115,000
Appraisal fees and expenses $ 26,000
Business plan fees and expenses $ 6,000
Conversion agent fees and expenses $ 20,000
Printing costs (including Desktop Publishing and EDGAR fees)$ 100,000
Postage and mailing $ 50,000
Commissions and other offering fees (2) $ 444,332
Computer and telephone equipment for conversion center $ 70,000
Expenses of Sales Agents
(Including Counsel Fees and Disbursements) $ 40,000
Advertising $ 2,000
Transfer agent fees $ 2,000
Other expenses $ 130,467
TOTAL (3) $1,283,372
(1) Costs represented by salaries and wages of regular employees and officers
of the Registrant are excluded.
(2) Assumes that the Common Stock is sold for $51,000,000, the midpoint of the
Estimated Valuation Range, that no shares of stock will be sold through
brokers, that 70% of shares sold are sold to Indiana residents, that all
shares are sold in the Subscription Offering, and that executive officers
and directors of the Registrant and of Lincoln Federal Savings Bank and
their Associates and the Lincoln Bancorp Employee Stock Ownership Plan
acquire 786,000 shares.
(3) All the above items, except the Registration, OTS and NASD Filing Fees, are
estimated.
<PAGE>
Item 14. Indemnification of Directors and Officers.
Section 21 of the Indiana Business Corporation Law, as amended (the "BCL"),
grants to each corporation broad powers to indemnify directors, officers,
employees or agents against expenses incurred in certain proceedings if the
conduct in question was found to be in good faith and was reasonably believed to
be in the corporation's best interests. This statute provides, however, that
this indemnification should not be deemed exclusive of any other indemnification
rights provided by the articles of incorporation, by-laws, resolution or other
authorization adopted by a majority vote of the voting shares then issued and
outstanding. Section 10.05 and Article 13 of the Articles of Incorporation of
the Registrant state as follows:
Section 10.05. Limitation of Liability and Reliance on Corporate
Records and Other Information.
Clause 10.051. General Limitation. No Director, member of any committee
of the Board of Directors, or of another committee appointed by the Board,
Officer, employee or agent of the Corporation ("Corporate Person") shall be
liable for any loss or damage if, in taking or omitting to take any action
causing such loss or damage, either (1) such Corporate Person acted (A) in
good faith, (B) with the care an ordinarily prudent person in a like
position would have exercised under similar circumstances, and (C) in a
manner such Corporate Person reasonably believed was in the best interests
of the Corporation, or (2) such Corporate Person's breach of or failure to
act in accordance with the standards of conduct set forth in Clause
10.051(1) above (the "Standards of Conduct") did not constitute willful
misconduct or recklessness.
Clause 10.052. Reliance on Corporate Records and Other Information. Any
"Corporate Person" shall be fully protected, and shall be deemed to have
complied with the Standards of Conduct, in relying in good faith, with
respect to any information contained therein, upon (1) the Corporate
Records, or (2) information, opinions, reports or statements (including
financial statements and other financial data) prepared or presented by (A)
one or more other Corporate Persons whom such Corporate Person reasonably
believes to be competent in the matters presented, (B) legal counsel,
public accountants or other persons as to matters that such Corporate
Person reasonably believes are within such person's professional or expert
competence, (C) a committee of the Board of Directors or other committee
appointed by the Board of Directors, of which such Corporate Person is not
a member, if such Corporate Person reasonably believes such committee of
the Board of Directors or such appointed committee merits confidence, or
(D) the Board of Directors, if such Corporate Person is not a Director and
reasonably believes that the Board merits confidence.
ARTICLE 13
Indemnification
Section 13.01. General. The Corporation shall, to the fullest extent to
which it is empowered to do so by the Act, or any other applicable laws, as
from time to time in effect, indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, by reason of the fact that he
is or was a Director, Officer, employee or agent of the Corporation, or
who, while serving as such Director, Officer, employee or agent of the
Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether for profit or not, against expenses (including
counsel fees), judgments, settlements, penalties and fines (including
excise taxes assessed with respect to employee benefit plans) actually or
reasonably incurred by him in accordance with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably
believed, in the case of conduct in his official capacity, was in the best
interest of the Corporation, and in all other cases, was not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, he either had reasonable cause to believe his conduct was
lawful or no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not meet the prescribed standard of conduct.
Section 13.02. Authorization of Indemnification. To the extent that a
Director, Officer, employee or agent of the Corporation has been
successful, on the merits or otherwise, in the defense of any action, suit
or proceeding referred to in Section 13.01 of this Article, or in the
defense of any claim, issue or matter therein, the Corporation shall
indemnify such person against expenses (including counsel fees) actually
and reasonably incurred by such person in connection therewith. Any other
indemnification under Section 13.01 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case, upon a determination that indemnification of the Director, Officer,
employee or agent is permissible in the circumstances because he has met
the applicable standard of conduct. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of
Directors who were not at the time parties to such action, suit or
proceeding; or (2) if a quorum cannot be obtained under subdivision (1), by
a majority vote of a committee duly designated by the Board of Directors
(in which designation Directors who are parties may participate),
consisting solely of two or more Directors not at the time parties to such
action, suit or proceeding; or (3) by special legal counsel: (A) selected
by the Board of Directors or its committee in the manner prescribed in
subdivision (1) or (2), or (B) if a quorum of the Board of Directors cannot
be obtained under subdivision (1) and a committee cannot be designated
under subdivision (2), selected by a majority vote of the full Board of
Directors (in which selection Directors who are parties may participate);
or (4) by the Shareholders, but shares owned by or voted under the control
of Directors who are at the time parties to such action, suit or proceeding
may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as
to reasonableness of expenses shall be made by those entitled under
subsection (3) to select counsel.
Section 13.03. Good Faith Defined. For purposes of any determination
under Section 13.01 of this Article 13, a person shall be deemed to have
acted in good faith and to have otherwise met the applicable standard of
conduct set forth in Section 13.01 if his action is based on information,
opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by (1) one or more Officers or
employees of the Corporation or another enterprise whom he reasonably
believes to be reliable and competent in the matters presented; (2) legal
counsel, public accountants, appraisers or other persons as to matters he
reasonably believes are within the person's professional or expert
competence; or (3) a committee of the Board of Directors of the Corporation
or another enterprise of which the person is not a member if he reasonably
believes the committee merits confidence. The term "another enterprise" as
used in this Section 13.03 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent.
The provisions of this Section 13.03 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to
have met the applicable standards of conduct set forth in Section 13.01 of
this Article 13.
Section 13.04. Payment of Expenses in Advance. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be
paid for or reimbursed by the Corporation in advance of the final
disposition of such action, suit or proceeding, as authorized in the
specific case in the same manner described in Section 13.02 of this
Article, upon receipt of a written affirmation of the Director, Officer,
employee or agent's good faith belief that he has met the standard of
conduct described in Section 13.01 of this Article and upon receipt of a
written undertaking by or on behalf of the Director, Officer, employee or
agent to repay such amount if it shall ultimately be determined that he did
not meet the standard of conduct set forth in this Article 13, and a
determination is made that the facts then known to those making the
determination would not preclude indemnification under this Article13.
Section 13.05. Provisions Not Exclusive. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which
a person seeking indemnification may be entitled under these Articles of
Incorporation, the Corporation's Code of By-Laws, any resolution of the
Board of Directors or Shareholders, any other authorization, whenever
adopted, after notice, by a majority vote of all Voting Stock then
outstanding, or any contract, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a Director, Officer, employee
or agent, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 13.06. Vested Right to Indemnification. The right of any
individual to indemnification under this Article shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 13.01 of
this Article 13 and, once vested, shall not later be impaired as a result
of any amendment, repeal, alteration or other modification of any or all of
these provisions. Notwithstanding the foregoing, the indemnification
afforded under this Article shall be applicable to all alleged prior acts
or omissions of any individual seeking indemnification hereunder,
regardless of the fact that such alleged acts or omissions may have
occurred prior to the adoption of this Article. To the extent such prior
acts or omissions cannot be deemed to be covered by this Article 13, the
right of any individual to indemnification shall be governed by the
indemnification provisions in effect at the time of such prior acts or
omissions.
Section 13.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer,
employee or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by the individual in that capacity or arising
from the individual's status as a Director, Officer, employee or agent,
whether or not the Corporation would have power to indemnify the individual
against the same liability under this Article.
Section 13.08. Additional Definitions. For purposes of this Article,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
For purposes of this Article, serving an employee benefit plan at the
request of the Corporation shall include any service as a Director,
Officer, employee or agent of the Corporation which imposes duties on, or
involves services by such Director, Officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries. A
person who acted in good faith and in a manner he reasonably believed to be
in the best interests of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interest of the Corporation" referred to in this Article.
For purposes of this Article, "party" includes any individual who is or
was a plaintiff, defendant or respondent in any action, suit or proceeding,
or who is threatened to be made a named defendant or respondent in any
action, suit or proceeding.
For purposes of this Article, "official capacity," when used with
respect to a Director, shall mean the office of director of the
Corporation; and when used with respect to an individual other than a
Director, shall mean the office in the Corporation held by the Officer or
the employment or agency relationship undertaken by the employee or agent
on behalf of the Corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or any partnership, joint
venture, trust, employee benefit plan, or other enterprise, whether for
profit or not.
Section 13.09. Payments a Business Expense. Any payments made to any
indemnified party under this Article under any other right to
indemnification shall be deemed to be an ordinary and necessary business
expense of the Corporation, and payment thereof shall not subject any
person responsible for the payment, or the Board of Directors, to any
action for corporate waste or to any similar action.
Under the Act, an Indiana corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise, against any
liability asserted against him or incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of the Act.
The Registrant has purchased insurance designed to protect and indemnify the
Registrant and its officers and directors in case they are required to pay any
amounts arising from certain claims, including claims under the Securities Act
of 1933, which might be made against the officers and directors by reason of any
actual or alleged act, error, omission, misstatement, misleading statement,
neglect, or breach of duty while acting in their respective capacities as
officers or directors of the Registrant.
Item 15. Recent Sales of Unregistered Securities.
Because the Registrant was only recently incorporated to act as a holding
company upon the completion of the offering registered by means of this
Registration Statement, the Registrant has not yet issued any shares of its
capital stock or other securities.
Item 16. Exhibits and Financial Statement Schedules.
(a) The exhibits furnished with this Registration Statement are
listed beginning on page E-l.
(b) No financial statement schedules are required.
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii)To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table on the effective registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of an action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Plainfield,
State of Indiana, on October 30, 1998.
LINCOLN BANCORP
By /s/ T. Tim Unger
------------------------
T. Tim Unger
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer and Director:
/s/ T. Tim Unger Director, )
------------------------- )
T. Tim Unger President and )
Chief Executive Officer )
)
)
(2) Principal Financial )
and Accounting Officer: )
)
)
/s/ John M. Baer Chief Financial Officer )
John M. Baer and Secretary )
)
)
(3) The Board of Directors: )
)
LESTER N. BERGUM Director )
)
W. THOMAS HARMON Director )October 30, 1998
)
JERRY R. HOLIFIELD Director )
)
WAYNE E. KESSLER Director )
)
DAVID E. MANSFIELD Director )
)
JOHN C. MILHOLLAND Director )
)
T. TIM UNGER Director )
)
EDWARD E. WHALEN Director )
)
JOHN L. WYATT Director )
By: /s/ T. Tim Unger
----------------------
T. Tim Unger
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
1 Form of Agency Agreement to be entered into among
Registrant, Lincoln Federal Savings Bank, and Charles
Webb & Company, a division of Keefe, Bruyette & Woods,
Inc.
2 Plan of Conversion
3(1) Registrant's Articles of Incorporation*
(2) Registrant's Code of By-Laws
4 Form of Stock Certificate*
5 Opinion of Barnes & Thornburg re legality of securities
being registered*
8(1) Opinion of Barnes & Thornburg re tax matters
(2) Opinion of Keller and Company, Inc. re economic value
of Subscription Rights*
10(1) Letter Agreements entered into between Registrant and
Keller & Company, Inc. relating to appraisal and
business plan*
(2) Lincoln Bancorp Stock Option Plan*
(3) Lincoln Federal Savings Bank Recognition and Retention
Plan and Trust*
(4) Employment Agreement between Lincoln Federal Savings
Bank and T. Tim Unger*
(5) Lincoln Bancorp Employee Stock Ownership Plan and Trust
Agreement*
(6) ESOP Loan Commitment and Exempt Loan and Share Purchase
Agreement between Trust under Lincoln Bancorp Employee
Stock Ownership Plan and Trust Agreement and Lincoln
Bancorp
(7) Unfunded Deferred Compensation Plan for the Directors
of Lincoln Federal Savings Bank, as amended*
(8) Lincoln Federal Saving Bank Deferred Director
Supplemental Retirement Plan (Effective December 1,
1997)*
21 Subsidiaries of the Registrant*
23(1) Consent of Keller & Company, Inc.*
(2) Consent of Geo. S. Olive & Co. LLC
(3) Consent of Barnes & Thornburg (included in Exhibit 5)*
24 Power of Attorney included on page S-6 of the
Registration Statement*
27 Financial Data Schedule*
99(1) Appraisal Report of Keller & Company, Inc.
(2) Stock Order Form
(3) Appraisal update
(4) Charitable Gift
*Previously filed
Exhibit 1
LINCOLN BANCORP
6,809,250 Shares
COMMON SHARES
(No Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
[________ __], 1998
Charles Webb & Company, a Division of
Keefe, Bruyette & Woods, Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Lincoln Bancorp, an Indiana corporation (the "Company"), and Lincoln
Federal Savings Bank, Plainfield, Indiana, a federally chartered mutual savings
bank (the "Bank") (references to the "Bank" include the Bank in the mutual or
stock form, as indicated by the context), with its deposit accounts insured by
the Savings Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC"), hereby confirm their agreement with
Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc. ("Webb",
"KBW" or "the Agent"), as follows:
Section 1. The Offering. The Bank, in accordance with its plan of
conversion adopted by its Board of Directors (the "Plan"), intends to convert
from a federally chartered mutual savings bank to a federally chartered stock
savings bank, and will issue all of its issued and outstanding capital stock to
the Company. In addition, pursuant to the Plan, the Company will offer and sell
up to 6,809,250 of its common shares, no par value per share (the "Shares" or
"Common Shares"), in a subscription offering (the "Subscription Offering") to
(1) depositors of the Bank with Qualifying Deposits (as defined in the Plan) as
of June 30, 1997 ("Eligible Account Holders"), (2) the Lincoln Bancorp Employee
Stock Ownership Plan (the "ESOP"), (3) depositors of the Bank with Qualifying
Deposits as of September 30, 1998 ("Supplemental Eligible Account Holders") and
(4) the Bank's
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<PAGE>
Other Members as defined in the Plan. Subject to the prior subscription rights
of the above-listed
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<PAGE>
parties, the Company is offering for sale in a community offering (the
"Community Offering" and when referred to together with the Subscription
Offering, the "Subscription and Community Offering") conducted concurrently with
the Subscription Offering, the Shares not subscribed for or ordered in the
Subscription Offering to members of the general public to whom a copy of the
Prospectus (as hereinafter defined) is delivered with a preference given to
residents of Hendricks, Montgomery and Clinton Counties, Indiana. It is
anticipated that shares not subscribed for in the Subscription and Community
Offering will be offered to certain members of the general public on a best
efforts basis through a selected dealers agreement (the "Syndicated Community
Offering") (the Subscription Offering, Community Offering and Syndicated
Community Offering are collectively referred to as the "Offering"). It is
acknowledged that the purchase of Shares in the Offering is subject to the
maximum and minimum purchase limitations as described in the Plan and that the
Company and the Bank may reject, in whole or in part, any orders received in the
Community Offering or Syndicated Community Offering. Collectively, these
transactions are referred to herein as the "Conversion."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. 333-63373) (the
"Registration Statement") containing a prospectus relating to the Offering for
the registration of the Shares under the Securities Act of 1933 (the "1933
Act"), and has filed such amendments thereof and such amended prospectuses as
may have been required to the date hereof. The term "Registration Statement"
shall include any documents incorporated by reference therein and all financial
schedules and exhibits thereto, as amended, including post-effective amendments.
The prospectus, as amended, on file with the Commission at the time the
Registration Statement initially became effective is hereinafter called the
"Prospectus," except that if any Prospectus is filed by the Company pursuant to
Rule 424(b) or (c) of the rules and regulations of the Commission under the 1933
Act (the "1933 Act Regulations") differing from the prospectus on file at the
time the Registration Statement initially becomes effective, the term
"Prospectus" shall refer to the prospectus filed pursuant to Rule 424(b) or (c)
from and after the time said prospectus is filed with the Commission.
In accordance with Title 12, Part 563b of the Code of Federal
Regulations (the "Conversion Regulations") and the laws and regulations of the
State of Indiana, the Bank has filed with the Office of Thrift Supervision (the
"OTS") an Application for Conversion (the "Conversion Application"), including
the Prospectus and the Conversion Valuation Appraisal Report prepared by Keller
& Company, Inc. (the "Appraisal") and has filed such amendments thereto as may
have been required by the OTS. The Conversion Application has been approved by
the OTS and the related Prospectus has been authorized for use by the OTS. In
addition, the Company has filed with the OTS its application on Form H-(e)1 (the
"Holding Company Application") to become a registered savings and loan holding
company under the Home Owners' Loan Act, as amended ("HOLA"); and it has been
approved.
Section 2. Retention of Agent; Compensation; Sale and Delivery of the
Shares. Subject to the terms and conditions herein set forth, the Company and
the Bank hereby appoint the Agent as their exclusive financial advisor and
marketing agent (i) to utilize its best efforts to solicit
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<PAGE>
subscriptions for Common Shares and to advise and assist the Company and the
Bank with respect to the Company's sale of the Shares in the Offering and (ii)
to participate in the Offering in the areas of market making, research coverage
and in syndicate formation (if necessary).
On the basis of the representations, warranties, and agreements herein
contained, but subject to the terms and conditions herein set forth, the Agent
accepts such appointment and agrees to consult with and advise the Company and
the Bank as to the matters set forth in the letter agreement, dated December 4,
1997, between the Bank and Webb (a copy of which is attached hereto as Exhibit
A). It is acknowledged by the Company and the Bank that the Agent shall not be
required to purchase any Shares or be obligated to take any action which is
inconsistent with all applicable laws, regulations, decisions or orders.
The obligations of the Agent pursuant to this Agreement (other than
those set forth in Section 2(a) and (d) hereof) shall terminate upon the
completion or termination or abandonment of the Plan by the Company or upon
termination of the Offering, but in no event later than 45 days after the
completion of the Subscription Offering (the "End Date"). All fees or expenses
due to the Agent but unpaid will be payable to the Agent in next day funds at
the earlier of the Closing Date (as hereinafter defined) or the End Date. In the
event the Offering is extended beyond the End Date, the Company, the Bank and
the Agent may agree to renew this Agreement under mutually acceptable terms.
In the event the Company is unable to sell a minimum of 4,305,000
Shares within the period herein provided, this Agreement shall terminate and the
Company shall refund to any persons who have subscribed for any of the Shares
the full amount which it may have received from them plus accrued interest, as
set forth in the Prospectus; and none of the parties to this Agreement shall
have any obligation to the other parties hereunder, except as set forth in this
Section 2 and in Sections 6, 8 and 9 hereof.
In the event the Offering is terminated for any reason not attributable
to the action or inaction of the Agent, the Agent shall be paid the fees due to
the date of such termination pursuant to subparagraphs (a) and (d) below.
If all conditions precedent to the consummation of the Conversion,
including, without limitation, the sale of all Shares required by the Plan to be
sold, are satisfied, the Company agrees to issue, or have issued, the Shares
sold in the Offering and to release for delivery certificates for such Shares on
the Closing Date (as hereinafter defined) against payment to the Company by any
means authorized by the Plan; provided, however, that no funds shall be released
to the Company until the conditions specified in Section 7 hereof shall have
been complied with to the reasonable satisfaction of the Agent and their
counsel. The release of Shares against payment therefor shall be made on a date
and at a place acceptable to the Company, the Bank and the Agent. Certificates
for shares shall be delivered directly to the purchasers in accordance with
their directions. The date upon which the Company shall release or deliver the
Shares sold in the Offering, in accordance with the terms herein, is called the
"Closing Date."
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<PAGE>
The Agent shall receive the following compensation for its services
hereunder:
(a) A management fee of $25,000; payable in four consecutive
monthly installments of $6,250. Such fees shall be deemed to
have been earned when due. Should the Conversion be terminated
for any reason not attributable to the action or inaction of
the Agent, the Agent shall have earned and be entitled to be
paid fees accruing through the stage at which the termination
occurred, including any accrued legal fees expended by the
Agent.
(b) A Success Fee shall be charged based on the aggregate Purchase
Price of Common Shares sold in the Subscription Offering and
Community Offering, excluding shares purchased by the Bank's
officers, directors, or employees (or members of their
immediate families) and their associates (as such term is
determined in the Plan of Conversion) plus any ESOP,
tax-qualified or stock-based compensation plan (except IRA's)
or similar plans created by the Bank or the Company for some
or all of its directors or employees. The Success Fee is
calculated as follows: (i) 1.15% of stock sold to residents of
the State of Indiana, (ii) .75% of stock sold to non-residents
of Indiana. The management fee described in subparagraph 2(a)
shall be applied against the Success Fee described in this
subparagraph 2(b).
(c) If any of the Common Shares remain available after the
Subscription Offering, at the request of the Bank, Webb will
seek to form a syndicate of registered broker-dealers
("Selected Dealers") to assist in the sale of such Common
Shares on a best efforts basis, subject to the terms and
conditions set forth in the selected dealers agreement. Webb
will endeavor to distribute the Common Shares among the
Selected Dealers in a fashion which best meets the
distribution objectives of the Bank and the Plan. Webb will be
paid a fee not to exceed 5.5% of the aggregate Purchase Price
of the Shares sold by the Selected Dealers. Webb will pass
onto the Selected Dealers who assist in the Syndicated
Community Offering an amount competitive with gross
underwriting discounts charged at such time for comparable
amounts of stock sold at a comparable price per share in a
similar market environment. Fees with respect to purchases
affected with the assistance of Selected Dealers other than
Webb shall be transmitted by Webb to such Selected Dealers.
The decision to utilize Selected Dealers will be made by the
Bank upon consultation with Webb. In any event, with respect
to any purchases of Shares, fees paid pursuant to this
subparagraph 2(c) such fees shall be in lieu of, and not in
addition to, payment pursuant to subparagraph 2(a) and 2(b).
(d) The Agent will not request reimbursement for any out-of-pocket
expenses relating to travel, lodging, photocopying and meal
expenses. The Bank and Company shall reimburse the Agent for
fees and expenses of counsel and the legal fees will not
exceed $40,000. The Bank will bear the expenses of the
Offering customarily borne by issuers including, without
limitation, regulatory filing fees, SEC, "Blue Sky," and
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<PAGE>
NASD filing and registration fees; the fees of the Bank's
accountants, attorneys, appraiser, transfer agent and
registrar, printing, mailing and marketing expenses associated
with the conversion; and the fees set forth under this Section
2; and fees for "Blue sky" legal work. The Company or the Bank
will reimburse Webb for expenses incurred by Webb on their
behalf.
Full payment of Agent's actual and accountable expenses, advisory fees
and compensation shall be made in next day funds on the earlier of the Closing
Date or a determination by the Bank to terminate or abandon the Plan.
Section 3. Prospectus; Offering. The Shares are to be initially offered
in the Offering at the Purchase Price as defined and set forth on the cover page
of the Prospectus.
Section 4. Representations and Warranties. The Company and the Bank
jointly and severally represent and warrant to and agree with the Agent as
follows:
(a) The Registration Statement which was prepared by the Company
and the Bank and filed with the Commission was declared
effective by the Commission on [___________], 1998. At the
time the Registration Statement, including the Prospectus
contained therein (including any amendment or supplement),
became effective, the Registration Statement contained all
statements that were required to be stated therein in
accordance with the 1933 Act and the 1933 Act Regulations,
complied in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations and the Registration
Statement, including the Prospectus contained therein
(including any amendment or supplement thereto), and any
information regarding the Company or the Bank contained in
Sales Information (as such term is defined in Section 8
hereof) authorized by the Company or the Bank for use in
connection with the Offering, did not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and at the time any Rule
424(b) or (c) Prospectus was filed with the Commission and at
the Closing Date referred to in Section 2, the Registration
Statement, including the Prospectus contained therein
(including any amendment or supplement thereto), and any
information regarding the Company or the Bank contained in
Sales Information (as such term is defined in Section 8
hereof) authorized by the Company or the Bank for use in
connection with the Offering will contain all statements that
are required to
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<PAGE>
be stated therein in accordance with the 1933 Act and the 1933
Act Regulations and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in
this Section 4(a) shall not apply to statements or omissions
made in reliance upon and in conformity with written
information furnished to the Company or the Bank by the Agent
or its counsel expressly regarding the Agent for use in the
Prospectus under the caption "The Conversion-Marketing
Arrangements" or statements in or omissions from any Sales
Information or information filed pursuant to state securities
or blue sky laws or regulations regarding the Agent.
(b) The Conversion Application which was prepared by the Company
and the Bank and filed with the OTS was approved on
[___________], 1998 and the related Prospectus has been
authorized for use by the OTS. At the time of the approval of
the Conversion Application, including the Prospectus
(including any amendment or supplement thereto), by the OTS
and at all times subsequent thereto until the Closing Date,
the Conversion Application, including the Prospectus
(including any amendment or supplement thereto), will comply
in all material respects with the Conversion Regulations,
except to the extent waived in writing by the OTS. The
Conversion Application, including the Prospectus (including
any amendment or supplement thereto), does not include any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 4(b)
shall not apply to statements or omissions made in reliance
upon and in conformity with written information furnished to
the Company or the Bank by the Agent or its counsel expressly
regarding the Agent for use in the Prospectus contained in the
Conversion Application under the caption "The
Conversion-Marketing Arrangements" or statements in or
omissions from any sales information or information filed
pursuant to state securities or blue sky laws or regulations
regarding the Agent. The Holding Company Application for
approval pursuant to the HOLA and the regulations promulgated
thereunder (the "Control Act Regulations") has been prepared
by the Bank and the Company
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<PAGE>
in material conformity with the requirements of the Control
Act Regulations and has been filed with and approved by the
OTS. A conformed copy of the Holding Company Application has
been delivered to the Agent.
(c) The Company has filed with the OTS the Holding Company
Application, and such Application was deemed complete by the
OTS. As of the Closing Date, approval of the Company's
acquisition of the Bank will have been obtained from the OTS.
(d) No order has been issued by the OTS or the FDIC (hereinafter
any reference to the FDIC shall include the SAIF) preventing
or suspending the use of the Prospectus, and no action by or
before any such government entity to revoke any approval,
authorization or order of effectiveness related to the
Conversion is, to the best knowledge of the Company or the
Bank, pending or threatened.
(e) At the Closing Date, the Plan will have been adopted by the
Boards of Directors of both the Company and the Bank and
approved by the members of the Bank, and the offer and sale of
the Shares will have been conducted in all material respects
in accordance with the Plan, the Conversion Regulations, and
all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions
precedent to the Conversion imposed upon the Company or the
Bank by the OTS, the Commission, or any other regulatory
authority and in the manner described in the Prospectus. No
person has sought to obtain review of the final action of the
OTS in approving the Plan or in approving the Conversion or
the Holding Company Application pursuant to the HOLA or any
other statute or regulation.
(f) The Bank has been organized and is a validly existing
federally chartered savings bank in mutual form of
organization and upon the Conversion will become a duly
organized and validly existing federally chartered savings
bank in permanent capital stock form of organization, in both
instances duly authorized to conduct its business and own its
property as described in the Registration Statement and the
Prospectus; the Bank has obtained all material licenses,
permits and other governmental authorizations currently
required for the conduct of its business, except those that
individually or in the aggregate would not materially
adversely affect the financial condition, earnings, capital,
assets, properties
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<PAGE>
or business of the Company and the Bank, taken as a whole; all
such licenses, permits and governmental authorizations are in
full force and effect, and the Bank is in compliance with all
material laws, rules, regulations and orders applicable to the
operation of its business; the Bank is existing under federal
law and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which
its ownership of property or leasing of property or the
conduct of its business requires such qualification, unless
the failure to be so qualified in one or more of such
jurisdictions would not have a material adverse effect on the
condition, financial or otherwise, or the business, operations
or income of the Bank. The Bank does not own equity securities
or any equity interest in any other business enterprise except
as described in the Prospectus or as would not be material to
the operations of the Bank. Upon completion of the sale by the
Company of the Shares contemplated by the Prospectus, (i) all
of the authorized and outstanding capital stock of the Bank
will be owned by the Company and (ii) the Company will have no
direct subsidiaries other than the Bank. The Conversion will
have been effected in all material respects in accordance with
all applicable statutes, regulations, decisions and orders;
and, except with respect to the filing of certain post-sale,
post-Conversion reports, and documents in compliance with the
1933 Act Regulations, the OTS's resolutions or letters of
approval, all terms, conditions, requirements and provisions
with respect to the Conversion imposed by the Commission, the
OTS and the FDIC, if any, will have been complied with by the
Company and the Bank in all material respects or appropriate
waivers will have been obtained and all material notice and
waiting periods will have been satisfied, waived or elapsed.
(g) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Indiana with
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus, and at the Closing
Date the Company will be qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of its
business requires such qualification, except where the failure
to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business, operations
or income of the Company. The Company has obtained all
material licenses, permits and other governmental
authorizations currently
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<PAGE>
required for the conduct of its business except those that
individually or in the aggregate would not materially
adversely affect the financial condition, earnings, capital,
assets, properties or business of the Company and the Bank,
taken as a whole; all such licenses, permits and governmental
authorizations are in full force and effect, and the Company
is in all material respects complying with all laws, rules,
regulations and orders applicable to the operation of its
business.
(h) The Bank is a member of the Federal Home Loan Bank of
Indianapolis ("FHLB-Indianapolis"). The deposit accounts of
the Bank are insured by the FDIC up to the applicable limits,
and no proceedings for the termination or revocation of such
insurance are pending or, to the best knowledge of the Company
or the Bank, threatened. Upon consummation of the Conversion,
the liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders will be duly
established in accordance with the requirements of the
Conversion Regulations.
(i) The Company and the Bank have good and marketable title to all
real property and good title to all other assets material to
the business of the Company and the Bank, taken as a whole,
and to those properties and assets described in the
Registration Statement and Prospectus as owned by them, free
and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Registration Statement and
Prospectus, or are not material to the business of the Company
and the Bank, taken as a whole; and all of the leases and
subleases material to the business of the Company and the
Bank, taken as a whole, under which the Company or the Bank
hold properties, including those described in the Registration
Statement and Prospectus, are in full force and effect.
(j) The Company and the Bank have received an opinion of their
special counsel, Barnes & Thornburg, with respect to the
federal and Indiana income tax consequences of the Conversion;
all material aspects of the opinion of Barnes & Thornburg are
accurately summarized in the Registration Statement and will
be accurately summarized in the Prospectus; and further
represent and warrant that the facts upon which such opinion
is based are truthful, accurate and complete.
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<PAGE>
(k) The Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to
enter into this Agreement, to carry out the provisions and
conditions hereof and to issue and sell the Shares to be sold
by the Company as provided herein and as described in the
Prospectus, except approval or confirmation by the OTS of the
final appraisal of the Bank. The consummation of the
Conversion, the execution, delivery and performance of this
Agreement and the consummation of the transactions herein
contemplated have been duly and validly authorized by all
necessary corporate action on the part of the Company and the
Bank and this Agreement has been validly executed and
delivered by the Company and the Bank and is the valid, legal
and binding agreement of the Company and the Bank enforceable
in accordance with its terms (except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of
creditors of savings and loan holding companies, the accounts
of whose subsidiaries are insured by the FDIC, or by general
equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, and except
to the extent, if any, that the provisions of Sections 8 and 9
hereof may be unenforceable as against public policy).
(l) Neither the Company nor the Bank are in violation of any
directive received from the OTS, the FDIC, or any other agency
to make any material change in the method of conducting their
businesses so as to comply in all material respects with all
applicable statutes and regulations (including, without
limitation, regulations, decisions, directives and orders of
the OTS and the FDIC) and, except as may be set forth in the
Registration Statement and the Prospectus, there is no suit or
proceeding or charge or action before or by any court,
regulatory authority or governmental agency or body, pending
or, to the knowledge of the Company or the Bank, threatened,
which might materially and adversely affect the Conversion,
the performance of this Agreement or the consummation of the
transactions contemplated in the Plan and as described in the
Registration Statement and the Prospectus or which might
result in any material adverse change in the condition
(financial or otherwise), earnings, capital or properties of
the Company or the Bank, or which would materially affect
their properties and assets.
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<PAGE>
(m) The financial statements, schedules and notes related thereto
which are included in the Prospectus fairly present the
balance sheet, income statement, statement of changes in
equity capital and statement of cash flows of the Bank at the
respective dates indicated and for the respective periods
covered thereby and comply as to form in all material respects
with the applicable accounting requirements of Title 12 of the
Code of Federal Regulations and generally accepted accounting
principles (including those requiring the recording of certain
assets at their current market value). Such financial
statements, schedules and notes related thereto have been
prepared in accordance with generally accepted accounting
principles consistently applied through the periods involved,
present fairly in all material respects the information
required to be stated therein and are consistent with the most
recent financial statements and other reports filed by the
Bank with the OTS, except that accounting principles employed
in such regulatory filings conform to the requirements of the
OTS and not necessarily to GAAP. The other financial,
statistical and pro forma information and related notes
included in the Prospectus present fairly the information
shown therein on a basis consistent with the audited and
unaudited financial statements of the Bank included in the
Prospectus, and as to the pro forma adjustments, the
adjustments made therein have been properly applied on the
basis described therein.
(n) Since the respective dates as of which information is given in
the Registration Statement including the Prospectus: (i) there
has not been any material adverse change, financial or
otherwise, in the condition of the Company or the Bank and its
subsidiaries, considered as one enterprise, or in the
earnings, capital or properties of the Company or the Bank,
whether or not arising in the ordinary course of business;
(ii) there has not been any material increase in the long-term
debt of the Bank or in the principal amount of the Bank's
assets which are classified by the Bank as substandard,
doubtful or loss or in loans past due 90 days or more or real
estate acquired by foreclosure, by deed-in-lieu of foreclosure
or deemed in-substance foreclosure or any material decrease in
equity capital or total assets of the Bank, nor has the
Company or the Bank issued any securities (other than in
connection with the incorporation of the Company) or incurred
any liability or obligation for borrowing other than in the
ordinary course of business; (iii) there have not been any
material transactions entered into by the Company or the Bank
other than
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<PAGE>
in the normal course of business; (iv) there has not been any
material adverse change in the aggregate dollar amount of the
Bank's deposits or its consolidated net worth or spread; (v)
there has been no material adverse change in the Company's or
the Bank's relationship with its insurance carriers,
including, without limitation, cancellation or other
termination of the Company's or the Bank's fidelity bond or
any other type of insurance coverage; (vi) except as disclosed
in the Prospectus, there has been no material change in
management of the Company or the Bank, neither of which has
any material undisclosed liability of any kind, contingent or
otherwise; (vii) neither the Company nor the Bank has
sustained any material loss or interference with its
respective business or properties from fire, flood, windstorm,
earthquake, accident or other calamity, whether or not covered
by insurance; (viii) neither the Company nor the Bank is in
default in the payment of principal or interest on any
outstanding debt obligations; (ix) the capitalization,
liabilities, assets, properties and business of the Company
and the Bank conform in all material respects to the
descriptions thereof contained in the Prospectus; and (x)
neither the Company nor the Bank has any material contingent
liabilities, except as set forth in the Prospectus. All
documents made available to or delivered or to be made
available to or delivered by the Bank or the Company or their
representatives in connection with the issuance and sale of
the Shares, including records of account holders, depositors,
borrowers and other members of the Bank, or in connection with
the Agent's exercise of due diligence, except for those
documents which were prepared by parties other than the Bank,
the Company or their representatives, to the best knowledge of
the Bank and the Company, were on the dates on which they were
delivered, or will be on the dates on which they are to be
delivered, true, complete and correct in all material
respects.
(o) As of the date hereof and as of the Closing Date, neither the
Company nor the Bank is (i) in violation of its articles of
incorporation or code of regulations or charter or bylaws,
respectively (and the Bank will not be in violation of its
charter or bylaws in capital stock form upon consummation of
the Conversion), or (ii) in default in the performance or
observance of any material obligation, agreement, covenant, or
condition contained in any material contract, lease, loan
agreement, indenture or other instrument to which it is a
party or by which it or any of its property may be bound. The
consummation of the
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<PAGE>
transactions herein contemplated will not: (i) conflict with
or constitute a breach of, or default under, or result in the
creation of any material lien, charge or encumbrance (with the
exception of the liquidation account established in the
Conversion) upon any of the assets of the Company or the Bank
pursuant to the Articles of Incorporation and Bylaws of the
Company or the Charter and Bylaws of the Bank (in either
mutual or capital stock form) or any material contract, lease
or other instrument in which the Company or the Bank has a
beneficial interest, or any applicable law, rule, regulation
or order; (ii) violate any authorization, approval, judgement,
decree, order, statute, rule or regulation applicable to the
Company or the Bank, except for such violations which would
not have a material adverse effect on the financial condition
and results of operations of the Company and the Bank on a
consolidated basis; or (iii) with the exception of the
liquidation account established in the Conversion, result in
the creation of any material lien, charge or encumbrance upon
any property of the Company or the Bank.
(p) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default on the
part of the Company or the Bank in the due performance and
observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, note, bank loan or credit
agreement or any other instrument or agreement to which the
Company or the Bank is a party or by which any of them or any
of their property is bound or affected, except such defaults
which would not have a material adverse affect on the
financial condition or results of operations of the Company
and the Bank on a consolidated basis; such agreements are in
full force and effect; and no other party to any such
agreements has instituted or, to the best knowledge of the
Company and the Bank, threatened any action or proceeding
wherein the Company or the Bank would or might be alleged to
be in default thereunder, where such action or proceeding, if
determined adversely to the Company or the Bank, would have a
material adverse effect on the Company or the Bank considered
as one enterprise.
(q) Upon consummation of the Conversion, the authorized, issued
and outstanding equity capital of the Company will be within
the range set forth in the Prospectus under the caption
"Capitalization," and no Shares have been or will be issued
and outstanding prior to the Closing Date; the Shares will
have been
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<PAGE>
duly and validly authorized for issuance and, when issued and
delivered by the Company pursuant to the Plan against payment
of the consideration calculated as set forth in the Plan and
in the Prospectus, will be duly and validly issued, fully paid
and non-assessable, except for shares purchased by the ESOP
with funds borrowed from the Company to the extent payment
therefor in cash has not been received by the Company; except
to the extent that subscription rights and priorities pursuant
thereto exist pursuant to the Plan, no preemptive rights exist
with respect to the Shares; and the terms and provisions of
the Shares will conform in all material respects to the
description thereof contained in the Registration Statement
and the Prospectus. To the best knowledge of the Company and
the Bank, upon the issuance of the Shares, good title to the
Shares will be transferred from the Company to the purchasers
thereof against payment therefor, subject to such claims as
may be asserted against the purchasers thereof by third-party
claimants.
(r) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and
delivery of this Agreement or the issuance of the Shares,
except for the approval of the Commission and the OTS, and any
necessary qualification, notification, registration or
exemption under the securities or blue sky laws of the various
states in which the Shares are to be offered, and except as
may be required under the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD")
and/or The Nasdaq Stock Market.
(s) Olive LLP, which has certified the audited financial
statements and schedules of the Bank included in the
Prospectus, has advised the Company and the Bank in writing
that they are, with respect to the Company and the Bank,
independent public accountants within the meaning of the Code
of Professional Ethics of the American Institute of Certified
Public Accountants and applicable regulations of the OTS.
(t) Keller & Company, Inc., which has prepared the Bank's
Conversion Valuation Appraisal Report as of August 14, 1998
(as amended or supplemented, if so amended or supplemented)
(the "Appraisal"), has advised the Company in writing that it
is independent of the Company and the Bank within the meaning
of the Conversion Regulations.
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<PAGE>
(u) The Company and the Bank have timely filed all required
federal, state and local tax returns; the Company and the Bank
have paid all taxes that have become due and payable in
respect of such returns, except where permitted to be
extended, have made adequate reserves for similar future tax
liabilities and no deficiency has been asserted with respect
thereto by any taxing authority.
(v) The Bank is in compliance in all material respects with the
applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of
1970, as amended, and the regulations and rules thereunder.
(w) To the knowledge of the Company and the Bank, neither the
Company, the Bank nor employees of the Company or the Bank has
made any payment of funds of the Company or the Bank as a loan
for the purchase of the Shares or made any other payment of
funds prohibited by law, and no funds have been set aside to
be used for any payment prohibited by law.
(x) Prior to the Conversion, neither the Company nor the Bank has:
(i) issued any securities within the last 18 months (except
for notes to evidence bank loans and reverse repurchase
agreements or other liabilities in the ordinary course of
business or as described in the Prospectus); (ii) had any
material dealings within the 12 months prior to the date
hereof with any member of the NASD, or any person related to
or associated with such member, other than discussions and
meetings relating to the proposed Offering and routine
purchases and sales of United States government and agency and
other securities in the ordinary course of business; (iii)
entered into a financial or management consulting agreement
except as contemplated hereunder; and (iv) engaged any
intermediary between the Agent and the Company and the Bank in
connection with the offering of the Shares, and no person is
being compensated in any manner for such service. Appropriate
arrangements have been made for placing the funds received
from subscriptions for Shares in a special interest- bearing
account with the Bank until all Shares are sold and paid for,
with provision for refund to the purchasers in the event that
the Conversion is not completed for whatever reason or for
delivery to the Company if all Shares are sold.
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<PAGE>
(y) The Company and the Bank have not relied upon the Agent or its
legal counsel or other advisors for any legal, tax or
accounting advice in connection with the Conversion.
(z) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(aa) Any certificates signed by an officer of the Company or the
Bank pursuant to the conditions of this Agreement and
delivered to the Agent or their counsel that refers to this
Agreement shall be deemed to be a representation and warranty
by the Company or the Bank to the Agent as to the matters
covered thereby with the same effect as if such representation
and warranty were set forth herein.
Section 5. Representations and Warranties.
KBW represents and warrants to the Company and the Bank that:
(i) it is a corporation and is validly existing in good
standing under the laws of the State of New York and licensed to
conduct business in the State of Indiana and that Webb is an
unincorporated division thereof with full power and authority to
provide the services to be furnished to the Bank and the Company
hereunder.
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of the Agent,
and this Agreement has been duly and validly executed and delivered by
the Agent and is a legal, valid and binding agreement of the Agent,
enforceable in accordance with its terms.
(iii) Each of the Agent and its employees, agents and
representatives who shall perform any of the services hereunder shall
be duly authorized and empowered, and shall have all licenses,
approvals and permits necessary to perform such services; and the Agent
is a registered selling agent in each of the jurisdictions in which the
Shares are to be offered by the Company in reliance upon the Agent as a
registered selling agent as set forth in the blue sky memorandum
prepared with respect to the Offering.
(iv) The execution and delivery of this Agreement by the
Agent, the consummation of the transactions contemplated hereby and
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<PAGE>
compliance with the terms and provisions hereof will not conflict with,
or result in a breach of, any of the terms, provisions or conditions
of, or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, the Articles of
Incorporation or Bylaws of the Agent or any agreement, indenture or
other instrument to which the Agent is a party or by which it or its
property is bound.
(v) No approval of any regulatory or supervisory or other
public authority is required in connection with the Agent's execution
and delivery of this Agreement, except as may have been received.
(vi) There is no suit or proceeding or charge or action before
or by any court, regulatory authority or government agency or body or,
to the knowledge of the Agent, pending or threatened, which might
materially adversely affect the Agent's performance of this Agreement.
Section 5.l Covenants of the Company and the Bank. The Company and the
Bank hereby jointly and severally covenant with KBW as follows:
(a) The Company will not, at any time after the date the
Registration Statement is declared effective, file any
amendment or supplement to the Registration Statement without
providing the Agent and its counsel an opportunity to review
such amendment or supplement or file any amendment or
supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(b) The Bank will not, at any time after the Conversion
Application is approved by the OTS, file any amendment or
supplement to such Conversion Application without providing
the Agent and its counsel an opportunity to review such
amendment or supplement or file any amendment or supplement to
which amendment or supplement the Agent or its counsel shall
reasonably object.
(c) The Company will not, at any time before the Holding Company
Application is approved by the OTS, file any amendment or
supplement to such Holding Company Application without
providing the Agent and its counsel an opportunity to review
the nonconfidential portions of such amendment or supplement
or file any amendment or supplement to which amendment or
supplement the Agent or its counsel shall reasonably object.
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<PAGE>
(d) The Company and the Bank will use their best efforts to cause
any post-effective amendment to the Registration Statement to
be declared effective by the Commission and any post-effective
amendment to the Conversion Application to be approved by the
OTS and will immediately upon receipt of any information
concerning the events listed below notify the Agent: (i) when
the Registration Statement, as amended, has become effective;
(ii) when the Conversion Application, as amended, has been
approved by the OTS; (iii) any comments from the Commission,
the OTS, or any other governmental entity with respect to the
Conversion or the transactions contemplated by this Agreement;
(iv) of the request by the Commission, the OTS, or any other
governmental entity for any amendment or supplement to the
Registration Statement, the Conversion Application or for
additional information; (v) of the issuance by the Commission,
the OTS, or any other governmental entity of any order or
other action suspending the Offering or the use of the
Registration Statement or the Prospectus or any other filing
of the Company or the Bank under the Conversion Regulations,
or other applicable law, or the threat of any such action;
(vi) the issuance by the Commission, the OTS, or any authority
of any stop order suspending the effectiveness of the
Registration Statement or of the initiation or threat of
initiation or threat of any proceedings for that purpose; or
(vii) of the occurrence of any event mentioned in paragraph
(h) below. The Company and the Bank will make every reasonable
effort (i) to prevent the issuance by the Commission, the OTS,
or any other state authority of any such order and, if any
such order shall at any time be issued, (ii) to obtain the
lifting thereof at the earliest possible time.
(e) The Company and the Bank will deliver to the Agent and to its
counsel two conformed copies of the Registration Statement,
the Conversion Application and the Holding Company
Application, as originally filed and of each amendment or
supplement thereto, including all exhibits. Further, the
Company and the Bank will deliver such additional copies of
the foregoing documents to counsel to the Agent as may be
required for any NASD filings.
(f) The Company and the Bank will furnish to the Agent, from time
to time during the period when the Prospectus (or any later
prospectus related to this offering) is required to be
delivered under the 1933 Act or the Securities Exchange Act of
1934 (the "1934 Act"), such number of copies of such
Prospectus (as
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<PAGE>
amended or supplemented) as the Agent may reasonably request
for the purposes contemplated by the 1933 Act, the 1933 Act
Regulations, the 1934 Act or the rules and regulations
promulgated under the 1934 Act (the "1934 Act Regulations").
The Company authorizes the Agent to use the Prospectus (as
amended or supplemented, if amended or supplemented) in any
lawful manner contemplated by the Plan in connection with the
sale of the Shares by the Agent.
(g) The Company and the Bank will comply with any and all material
terms, conditions, requirements and provisions with respect to
the Conversion and the transactions contemplated thereby
imposed by the Commission, the OTS or the Conversion
Regulations, and by the 1933 Act, the 1933 Act Regulations,
the 1934 Act and the 1934 Act Regulations to be complied with
prior to or subsequent to the Closing Date and when the
Prospectus is required to be delivered, and during such time
period the Company and the Bank will comply, at their own
expense, with all material requirements imposed upon them by
the Commission, the OTS or the Conversion Regulations, and by
the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations, including, without limitation, Rule
10b-5 under the 1934 Act, in each case as from time to time in
force, so far as necessary to permit the continuance of sales
or dealing in the Common Shares during such period in
accordance with the provisions hereof and the Prospectus.
(h) If, at any time during the period when the Prospectus relating
to the Shares is required to be delivered, any event relating
to or affecting the Company or the Bank shall occur, as a
result of which it is necessary or appropriate, in the opinion
of counsel for the Company and the Bank or in the reasonable
opinion of the Agent's counsel, to amend or supplement the
Registration Statement or Prospectus in order to make the
Registration Statement or Prospectus not misleading in light
of the circumstances existing at the time the Prospectus is
delivered to a purchaser, the Company and the Bank will
immediately so inform the Agent and prepare and file, at their
own expense, with the Commission, and the OTS and furnish to
the Agent a reasonable number of copies of an amendment or
amendments of, or a supplement or supplements to, the
Registration Statement or Prospectus (in form and substance
reasonably satisfactory to the Agent and its counsel after a
reasonable time for review) which
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<PAGE>
will amend or supplement the Registration Statement or
Prospectus so that as amended or supplemented it will not
contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at
the time the Prospectus is delivered to a purchaser, not
misleading. For the purpose of this Agreement, the Company and
the Bank each will timely furnish to the Agent such
information with respect to itself as the Agent may from time
to time reasonably request.
(i) The Company and the Bank will take all necessary actions in
cooperating with the Agent and furnish to whomever the Agent
may direct such information as may be required to qualify or
register the Shares for offering and sale by the Company or to
exempt such Shares from registration, or to exempt the Company
as a broker-dealer and its officers, directors and employees
as broker-dealers or agents under the applicable securities or
blue sky laws of such jurisdictions in which the Shares are
required under the Conversion Regulations to be sold or as the
Agent and the Company and the Bank may reasonably agree upon;
provided, however, that the Company shall not be obligated to
file any general consent to service of process, to qualify to
do business in any jurisdiction in which it is not so
qualified, or to register its directors or officers as
brokers, dealers, salesmen or agents in any jurisdiction. In
each jurisdiction where any of the Shares shall have been
qualified or registered as above provided, the Company will
make and file such statements and reports in each fiscal
period as are or may be required by the laws of such
jurisdiction.
(j) The liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders will be duly
established and maintained in accordance with the requirements
of the OTS, and such Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their
savings accounts in the Bank will have an inchoate interest in
their pro rata portion of the liquidation account, which shall
have a priority superior to that of the holders of the Common
Shares in the event of a complete liquidation of the Bank.
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<PAGE>
(k) The Company and the Bank will not sell or issue, contract to
sell or otherwise dispose of, for a period of 90 days after
the Closing Date, without the Agent's prior written consent,
any of their common shares, other than the Shares or other
than in connection with any plan or arrangement described in
the Prospectus, including existing stock benefit plans.
(l) The Company shall register its Common Shares under Section
12(g) of the 1934 Act concurrently with the Offering and shall
request that such registration be effective prior to or upon
completion of the Conversion. The Company shall maintain the
effectiveness of such registration for not less than three
years or such shorter period as may be required by the OTS.
(m) During the period during which the Common Shares are
registered under the 1934 Act or for three (3) years from the
date hereof, whichever period is greater, the Company will
furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report of the Company
(including a consolidated balance sheet and statements of
consolidated income, shareholders' equity and cash flows of
the Company and its subsidiaries as at the end of and for such
year, certified by independent public accountants in
accordance with Regulation S-X under the 1933 Act and the 1934
Act).
(n) During the period of three years from the date hereof, the
Company will furnish to the Agent: (i) as soon as practicable
after such information is publicly available, a copy of each
report of the Company furnished to or filed with the
Commission under the 1934 Act or any national securities
exchange or system on which any class of securities of the
Company is listed or quoted (including, but not limited to,
reports on Forms 10-K, 10-Q and 8-K and all proxy statements
and annual reports to stockholders), (ii) a copy of each other
non-confidential report of the Company mailed to its
shareholders or filed with the Commission, the OTS or any
other supervisory or regulatory authority or any national
securities exchange or system on which any class of securities
of the Company is listed or quoted, each press release and
material news items and additional documents and information
with respect to the Company or the Bank as the Agent may
reasonably request; and (iii) from time to time, such other
nonconfidential information concerning the Company or the Bank
as the Agent may reasonably request.
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<PAGE>
(o) The Company and the Bank will use the net proceeds from the
sale of the Shares in the manner set forth in the Prospectus
under the caption "Use of Proceeds."
(p) Other than as permitted by the Conversion Regulations, the
HOLA, the 1933 Act, the 1933 Act Regulations and its rules and
regulations and the laws of any state in which the Shares are
registered or qualified for sale or exempt from registration,
neither the Company nor the Bank will distribute any
prospectus, offering circular or other offering material in
connection with the offer and sale of the Shares.
(q) The Company will use its best efforts to (i) encourage and
assist a market maker to establish and maintain a market for
the Shares and (ii) list and maintain quotation of the Shares
on a national or regional securities exchange or on The Nasdaq
Stock Market effective on or prior to the Closing Date.
(r) The Bank will maintain appropriate arrangements for depositing
all funds received from persons mailing subscriptions for or
orders to purchase Shares in the Offering on an
interest-bearing basis at the rate described in the Prospectus
until the Closing Date and satisfaction of all conditions
precedent to the release of the Bank's obligation to refund
payments received from persons subscribing for or ordering
Shares in the Offering in accordance with the Plan and as
described in the Prospectus or until refunds of such funds
have been made to the persons entitled thereto or withdrawal
authorizations canceled in accordance with the Plan and as
described in the Prospectus. The Bank will maintain such
records of all funds received to permit the funds of each
subscriber to be separately insured by the FDIC (to the
maximum extent allowable) and to enable the Bank to make the
appropriate refunds of such funds in the event that such
refunds are required to be made in accordance with the Plan
and as described in the Prospectus.
(s) The Company will promptly take all necessary action to
register as a savings and loan holding company under the HOLA.
(t) The Company and the Bank will take such actions and furnish
such information as are reasonably requested by the Agent in
order for the Agent to ensure compliance with the NASD's
"Interpretation Relating to Free Riding and Withholding."
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(u) Neither the Company nor the Bank will amend the Plan of
Conversion without notifying the Agent prior thereto.
(v) The Company shall assist the Agent, if necessary, in
connection with the allocation of the Shares in the event of
an oversubscription and shall provide the Agent with any
information necessary to assist the Company in allocating the
Shares in such event and such information shall be accurate
and reliable in all material respects.
(w) Prior to the Closing Date, the Company and the Bank will
inform the Agent of any event or circumstances of which it is
aware as a result of which the Registration Statement and/or
Prospectus, as then amended or supplemented, would contain an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein not misleading.
(x) Subsequent to the date the Registration Statement is declared
effective by the Commission and prior to the Closing Date,
except as otherwise may be indicated or contemplated therein
or set forth in an amendment or supplement thereto, neither
the Company nor the Bank will have: (i) issued any securities
or incurred any liability or obligation, direct or contingent,
for borrowed money, except borrowings from the same or similar
sources indicated in the Prospectus in the ordinary course of
its business, or (ii) entered into any transaction which is
material in light of the business and properties of the
Company and the Bank, taken as a whole.
(y) The facts and representations provided to Barnes & Thornburg
by the Bank and the Company and upon which Barnes & Thornburg
will base its opinion under Section 7(c)(1) are and will be
truthful, accurate and complete.
Section 6. Payment of Expenses. Whether or not the Conversion is
completed or the sale of the Shares by the Company is consummated, the Company
and the Bank jointly and severally agree to pay or reimburse the Agent for: (a)
all filing fees in connection with all filings related to the Offering with the
NASD; (b) any stock issue or transfer taxes which may be payable with respect to
the sale of the Shares; (c) all reasonable expenses of the Conversion, including
but not limited to the Company's and the Bank's, and the Agent's attorneys' fees
(not to exceed $40,000 without the Bank's consent) and expenses, blue sky fees,
transfer agent, registrar and other agent charges, fees relating to auditing and
accounting or other advisors and costs of printing all documents necessary in
connection with the Conversion; provided, however, there will be no
out-of-pocket expenses charged
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by the Agent for expenses such as travel, photocopying lodging and meals. In the
event the Company is unable to sell a minimum of 4,305,000 Shares or the
Conversion is terminated or otherwise abandoned, the Company and the Bank shall
promptly reimburse the Agent in accordance with Section 2(d) hereof.
Section 7. Conditions to the Agent's Obligations. The obligations of
the Agent hereunder, as to the Shares to be delivered at the Closing Date, are
subject, to the extent not waived in writing by the Agent, to the condition that
all representations and warranties of the Company and the Bank herein are, at
and as of the commencement of the Offering and at and as of the Closing Date,
true and correct in all material respects, the condition that the Company and
the Bank shall have performed all of their obligations hereunder to be performed
on or before such dates, and to the following further conditions:
(a) At the Closing Date, the Company and the Bank shall have
conducted the Conversion in all material respects in
accordance with the Plan, the Conversion Regulations, all
requirements of Indiana law, and all other applicable laws,
regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the
Conversion imposed upon them by the OTS.
(b) The Registration Statement shall have been declared effective
by the Commission and the Conversion Application approved by
the OTS not later than 5:30 p.m. on the date of this
Agreement, or with the Agent's consent at a later time and
date; and at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefore initiated
or threatened by the Commission or any state authority, and no
order or other action suspending the authorization of the
Prospectus or the consummation of the Conversion shall have
been issued or proceedings therefore initiated or, to the
Company's or the Bank's knowledge, threatened by the
Commission, the OTS, the FDIC, or any other state authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and
addressed to the Agent and for its benefit, of Barnes &
Thornburg, special counsel for the Company and the Bank, in
form and substance to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation under the laws of the State
of Indiana.
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(ii) The Company has corporate power and
authority to own, lease and operate its properties
and to conduct its business as described in the
Registration Statement and the Prospectus.
(iii) The Bank is a validly existing
federally chartered savings bank in mutual form and
immediately following the completion of the
Conversion will be a validly existing federally
chartered savings bank in permanent capital stock
form of organization, in both instances duly
authorized to conduct its business and own its
property as described in the Registration Statement
and the Prospectus. All of the outstanding capital
stock of the Bank upon completion of the Conversion
will be duly authorized and, upon payment therefor,
will be validly issued, fully paid and non-assessable
and will be owned by the Company, to such counsel's
Actual Knowledge, free and clear of any liens,
encumbrances, claims or other restrictions.
(iv) The Bank is a member of the
FHLB-Indianapolis. The deposit accounts of the Bank
are insured by the FDIC up to the maximum amount
allowed under law and no proceedings for the
termination or revocation of such insurance are
pending or, to such counsel's Actual Knowledge,
threatened; the description of the liquidation
account as set forth in the Prospectus under the
captions "The Conversion-Principal Effects of
Conversion-Effect on Liquidation Rights," to the
extent that such information constitutes matters of
law and legal conclusions, has been reviewed by such
counsel and is accurately described in all material
respects.
(v) Immediately following the consummation
of the Conversion, the authorized, issued and
outstanding Common Shares of the Company will be
within the range set forth in the Prospectus under
the caption "Capitalization," and no Common Shares
have been issued prior to the Closing Date; at the
time of the Conversion, the Shares subscribed for
pursuant to the Offering will have been duly and
validly authorized for issuance, and when issued and
delivered by the Company pursuant to the Plan against
payment of the consideration calculated as set forth
in the Plan and Prospectus, will be duly and validly
issued and fully paid and non-assessable, except for
shares purchased by the ESOP with funds borrowed from
the Company to the extent payment therefor in cash
has not been received by the Company; except to the
extent that subscription rights and priorities
pursuant thereto exist pursuant to the Plan, the
issuance of the Shares is not subject to preemptive
rights and the terms and provisions of the Shares
conform in all material respects to the description
thereof contained in the Prospectus. To such
counsel's Actual Knowledge, upon the issuance of the
Shares, good title to the Shares will be transferred
from the Company to the purchasers thereof
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against payment therefor, subject to such claims as
may be asserted against the purchasers thereof by
third-party claimants.
(vi) The Bank and the Company have full
corporate power and authority to enter into the
Agreement and to consummate the transactions
contemplated thereby and by the Plan. The execution
and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been
duly and validly authorized by all necessary action
on the part of the Company and the Bank; and this
Agreement is a valid and binding obligation of the
Company and the Bank, enforceable against the Company
and the Bank in accordance with its terms, except as
the enforceability thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium,
conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting
the enforcement of creditors' rights generally or the
rights of creditors of federally chartered savings
institutions, (ii) general equitable principles,
(iii) laws relating to the safety and soundness of
insured depository institutions, and (iv) applicable
law or public policy with respect to the
indemnification and/or contribution provisions
contained herein, including without limitation the
provisions of Sections 23A and 23B of the Federal
Reserve Act and except that no opinion need be
expressed as to the effect or availability of
equitable remedies or injunctive relief (regardless
of whether such enforceability is considered in a
proceeding in equity or at law).
(vii) The Conversion Application has been
approved by the OTS and the Prospectus has been
authorized for use by the OTS. The OTS has approved
the Holding Company Application and the purchase by
the Company of all of the issued and outstanding
capital stock of the Bank and no action has been
taken, and to such counsel's Actual Knowledge, none
is pending or threatened, to revoke any such
authorization or approval.
(viii) The Plan has been duly adopted by the
required vote of the directors of the Company and the
Bank, and based upon the certificate of the
inspectors of election, by the members of the Bank.
(ix) Subject to the satisfaction of the
conditions to the OTS's approval of the Conversion,
no further approval, registration, authorization,
consent or other order of any federal regulatory
agency is required in connection with the execution
and delivery of this Agreement, the issuance of the
Shares and the consummation of the Conversion, except
as may be required under the securities or blue sky
laws of various jurisdictions (as to which no opinion
need be rendered) and except as may be required under
the rules and regulations of the NASD and/or The
Nasdaq Stock Market (as to which no opinion need by
rendered).
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<PAGE>
(x) The Registration Statement is effective
under the 1933 Act and no stop order suspending the
effectiveness has been issued under the 1933 Act or
proceedings therefor initiated or, to such counsel's
Actual Knowledge, threatened by the Commission.
(xi) At the time the Conversion Application,
including the Prospectus contained therein, was
approved by the OTS, the Conversion Application,
including the Prospectus contained therein, complied
as to form in all material respects with the
requirements of the Conversion Regulations, federal
and state law and all applicable rules and
regulations promulgated thereunder (other than the
financial statements, the notes thereto, and other
tabular, financial, statistical and appraisal data
included therein, as to which no opinion need be
rendered).
(xii) At the time that the Registration
Statement became effective, (i) the Registration
Statement (as amended or supplemented, if so amended
or supplemented) (other than the financial
statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included
therein, as to which no opinion need be rendered),
complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act
Regulations, and (ii) the Prospectus (other than the
financial statements, the notes thereto, and other
tabular, financial, statistical and appraisal data
included therein, as to which no opinion need be
rendered) complied as to form in all material
respects with the requirements of the 1933 Act, the
1933 Act Regulations, the Conversion Regulations and
federal law.
(xiii) The terms and provisions of the
Shares of the Company conform, in all material
respects, to the description thereof contained in the
Registration Statement and Prospectus, and the form
of certificate used to evidence the Shares is in due
and proper form.
(xiv) To such counsel's Actual Knowledge,
there are no legal or governmental proceedings
pending or threatened which are required to be
disclosed in the Registration Statement and
Prospectus, other than those disclosed therein.
(xv) To such counsel's Actual Knowledge,
there are no material contracts, indentures,
mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to
in the Conversion Application, the Registration
Statement or the Prospectus or required to be filed
as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto in
the Conversion Application, the Registration
Statement or the Prospectus. The description in the
Conversion Application,
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<PAGE>
the Registration Statement and the Prospectus of such
documents and exhibits is accurate in all material
respects and fairly presents the information required
to be shown.
(xvi) The Plan complies in all material
respects with all applicable federal and Indiana
laws, rules, regulations, decisions and orders
including, but not limited to, the Conversion
Regulations; to such counsel's Actual Knowledge, no
order has been issued by the OTS, the Commission, the
FDIC, or any state authority to suspend the Offering
or the use of the Prospectus, and no action for such
purposes has been instituted or threatened by the
OTS, the Commission, the FDIC, or any other state
authority and, to such counsel's Actual Knowledge, no
person has sought to obtain regulatory or judicial
review of the final action of the OTS approving the
Plan, the Conversion Application, the Holding Company
Application or the Prospectus.
(xvii) To such counsel's Actual Knowledge, the
Company and the Bank have obtained all material
licenses, permits and other governmental
authorizations currently required for the conduct of
their businesses and all such licenses, permits and
other governmental authorizations are in full force
and effect, and the Company and the Bank are in all
material respects complying therewith.
(xviii) To such counsel's Actual Knowledge,
neither the Company nor the Bank is in violation of
its Articles of Incorporation and Bylaws or its
Charter and Bylaws, as appropriate or, to such
counsel's Actual Knowledge, in default or violation
of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which
it is a party or by which it or its property may be
bound, except for such defaults or violations which
would not have a material adverse impact on the
financial condition or results of operations of the
Company and the Bank on a consolidated basis; to such
counsel's Actual Knowledge, the execution and
delivery of this Agreement, the incurrence of the
obligations herein set forth and the consummation of
the transactions contemplated herein will not
conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or
assets of the Company or the Bank pursuant to any
material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which
the Company or the Bank is a party or by which any of
them may be bound, or to which any of the property or
assets of the Company or the Bank are subject (other
than the establishment of the liquidation account);
and such action will not result in any violation of
the provisions of the Articles of Incorporation or
Bylaws of the Company or the Charter or the Bylaws of
the Bank or, to such counsel's Actual Knowledge,
result in any violation of any
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<PAGE>
applicable federal or state law, act, regulation
(except that no opinion with respect to the
securities and blue sky laws of various jurisdictions
or the rules or regulations of the NASD and/or The
Nasdaq Stock Market need be rendered) or order or
court order, writ, injunction or decree.
(xix) The Company's Articles of
Incorporation and Bylaws comply in all material
respects with the laws of the State of Indiana. The
Bank's Charter and Bylaws comply in all material
respects with federal law.
(xx) To such counsel's Actual Knowledge,
neither the Company nor the Bank is in violation of
any directive from the OTS or the FDIC to make any
material change in the method of conducting its
respective business.
(xxi) The information in the Prospectus
under the captions "Regulation," "The Conversion,"
"Restrictions on Acquisition of the Holding Company"
and "Description of Capital Stock," to the extent
that such information constitutes matters of law,
summaries of legal matters, documents or proceedings,
or legal conclusions, has been reviewed by such
counsel and is correct in all material respects. The
description of the Conversion process in the
Prospectus under the caption "The Conversion" to the
extent that such information constitutes matters of
law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed
by such counsel and fairly describes such process in
all material respects. The descriptions in the
Prospectus of statutes or regulations are accurate
summaries and fairly present the information required
to be shown. The information under the caption "The
Conversion-Principal Effects of the Conversion--Tax
Effects" has been reviewed by such counsel and fairly
describes the opinions rendered by them to the
Company and the Bank with respect to such matters.
In addition, such counsel shall state that
during the preparation of the Conversion Application,
the Registration Statement and the Prospectus, they
participated in conferences with certain officers of,
the independent public and internal accountants for,
and other representatives of, the Company and the
Bank, at which conferences the contents of the
Conversion Application, the Registration Statement
and the Prospectus and related matters were discussed
and, while such counsel have not confirmed the
accuracy or completeness of or otherwise verified the
information contained in the Conversion Application,
the Registration Statement or the Prospectus and do
not assume any responsibility for such information,
based upon such conferences and a review of documents
deemed relevant for the purpose of rendering their
opinion (relying as to materiality as to factual
matters on certificates of officers and other factual
representations by the Company and the Bank), nothing
has come to their attention that would lead them to
believe that the Conversion
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<PAGE>
Application, the Registration Statement, the
Prospectus, or any amendment or supplement thereto
(other than the financial statements, the notes
thereto, and other tabular, financial, statistical
and appraisal data included therein as to which no
view need be rendered) contained an untrue statement
of a material fact or omitted to state a material
fact required to be stated therein or necessary to
make the statements therein, in light of the
circumstances under which they were made, not
misleading.
In giving such opinion, such counsel may
rely as to all matters of fact on certificates of
officers or directors of the Company and the Bank and
certificates of public officials. Such counsel's
opinion shall be limited to matters governed by
federal laws and by the laws of the State of Indiana.
The term "Actual Knowledge" as used herein shall have
the meaning set forth in the Legal Opinion Accord of
the American Bar Association Section of Business Law.
For purposes of such opinion, no proceedings shall be
deemed to be pending, no order or stop order shall be
deemed to be issued, and no action shall be deemed to
be instituted unless, in each case, a director or
executive officer of the Company or the Bank shall
have received a copy of such proceedings, order, stop
order or action. In addition, such opinion may be
limited to present statutes, regulations and judicial
interpretations and to facts as they presently exist;
in rendering such opinion, such counsel need assume
no obligation to revise or supplement it should the
present laws be changed by legislative or regulatory
action, judicial decision or otherwise; and such
counsel need express no view, opinion or belief with
respect to whether any proposed or pending
legislation, if enacted, or any proposed or pending
regulations or policy statements issued by any
regulatory agency, whether or not promulgated
pursuant to any such legislation, would affect the
validity of the Conversion or any aspect thereof.
Such counsel may assume that any agreement is the
valid and binding obligation of any parties to such
agreement other than the Company or the Bank.
(d) At the Closing Date, the Agent shall receive a certificate of
the Chief Executive Officer and the Principal Accounting
Officer of the Company and the Bank in form and substance
reasonably satisfactory to the Agent's Counsel, dated as of
such Closing Date, to the effect that: (i) they have carefully
examined the Prospectus and, in their opinion, at the time the
Prospectus became authorized for final use, the Prospectus did
not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; (ii) since the date the
Prospectus became authorized for final use, no event has
occurred which should have been set forth in an amendment or
supplement to the Prospectus which has not been so set forth,
including specifically, but without limitation,
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<PAGE>
any material adverse change in the condition,
financial or otherwise, or in the earnings, capital,
properties or business of the Company or the Bank and
the conditions set forth in this Section 7 have been
satisfied; (iii) since the respective dates as of
which information is given in the Registration
Statement and the Prospectus, there has been no
material adverse change in the condition, financial
or otherwise, or in the earnings, capital or
properties of the Company or the Bank independently,
or of the Company and the Bank considered as one
enterprise, whether or not arising in the ordinary
course of business; (iv) the representations and
warranties in Section 4 are true and correct with the
same force and effect as though expressly made at and
as of the Closing Date; (v) the Company and the Bank
have complied in all material respects with all
agreements and satisfied all conditions on their part
to be performed or satisfied at or prior to the
Closing Date and will comply in all material respects
with all obligations to be satisfied by them after
the Conversion; (vi) no stop order suspending the
effectiveness of the Registration Statement has been
initiated or, to the best knowledge of the Company or
the Bank, threatened by the Commission or any state
authority; (vii) no order suspending the Offering,
the Conversion, the acquisition of all of the shares
of the Bank by the Company or the effectiveness of
the Prospectus has been issued and no proceedings for
that purpose are pending or, to the best knowledge of
the Company or the Bank, threatened by the OTS, the
Commission, the FDIC, or any state authority; and
(viii) to the best knowledge of the Company or the
Bank, no person has sought to obtain review of the
final action of the OTS approving the Plan.
(e) Prior to and at the Closing Date: (i) in the
reasonable opinion of the Agent, there shall have
been no material adverse change in the condition,
financial or otherwise, or in the earnings or
business of the Company or the Bank independently, or
of the Company and the Bank considered as one
enterprise, from that as of the latest dates as of
which such condition is set forth in the Prospectus,
other than transactions referred to or contemplated
therein; (ii) the Company or the Bank shall not have
received from the OTS or the FDIC any direction (oral
or written) to make any material change in the method
of conducting their business with which it has not
complied (which direction, if any, shall have been
disclosed to the Agent) or which materially and
adversely would affect the business, operations or
financial condition or income of the Company and the
Bank taken as a whole; (iii) neither the Company nor
the Bank shall have been in default (nor shall an
event have occurred which, with notice or lapse of
time or both, would constitute a default) under any
provision of any agreement or instrument relating to
any outstanding indebtedness; (iv) no action, suit or
proceeding, at law or in equity or before or by any
federal or state commission, board or other
administrative agency, shall be pending or, to the
knowledge of the Company or the Bank, threatened
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against the Company or the Bank or affecting any of
their properties wherein an unfavorable decision,
ruling or finding would materially and adversely
affect the business, operations, financial condition
or income of the Company or the Bank taken as a
whole; and (v) the Shares shall have been qualified
or registered for offering and sale or exempted
therefrom under the securities or blue sky laws of
the jurisdictions as the Agent shall have reasonably
requested and as agreed to by the Company and the
Bank.
(f) Concurrently with the execution of this Agreement,
the Agent shall receive a letter from Olive LLP dated
as of the date of the Prospectus and addressed to the
Agent: (i) confirming that Olive LLP is a firm of
independent public accountants within the meaning of
Rule 101 of the Code of Professional Ethics of the
American Institute of Certified Public Accountants
and applicable regulations of the OTS and stating in
effect that in its opinion the financial statements,
schedules and related notes of the Bank as of
December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997, included
in the Prospectus and covered by their opinion
included therein, comply as to form in all material
respects with the applicable accounting requirements
and related published rules and regulations of the
OTS and the 1933 Act; (ii) stating in effect that, on
the basis of certain agreed upon procedures (but not
an audit in accordance with generally accepted
auditing standards) consisting of a reading of the
latest available unaudited interim financial
statements of the Bank prepared by the Bank, a
reading of the minutes of the meetings of the Board
of Directors and members of the Bank and
consultations with officers of the Bank responsible
for financial and accounting matters, nothing came to
their attention which caused them to believe that:
(A) the unaudited financial statements included in
the Prospectus are not in conformity with the 1933
Act, applicable accounting requirements of the OTS
and generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included in the
Prospectus; or (B) during the period from the date of
the latest unaudited financial statements included in
the Prospectus to a specified date not more than
three business days prior to the date of the
Prospectus, except as has been described in the
Prospectus, there was any increase in borrowings,
other than normal deposit fluctuations, by the Bank;
or (C) there was any decrease in the net assets of
the Bank at the date of such letter as compared with
amounts shown in the latest unaudited balance sheets
included in the Prospectus; and (iii) stating that,
in addition to the audit referred to in their opinion
included in the Prospectus and the performance of the
procedures referred to in clause (ii) of this
subsection (g), they have compared with the general
accounting records of the Bank, which are subject to
the internal controls of the Bank, the accounting
system and other data prepared by the Bank, directly
from such accounting records, to the extent specified
in such
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<PAGE>
letter, such amounts and/or percentages set forth in
the Prospectus as the Agent may reasonably request;
and they have reported on the results of such
comparisons.
(g) At the Closing Date, the Agent shall receive a letter
dated the Closing Date, addressed to the Agent,
confirming the statements made by Olive LLP in the
letter delivered by it pursuant to subsection (g) of
this Section 7, the "specified date" referred to in
clause (ii) of subsection (g) to be a date specified
in the letter required by this subsection (h) which
for purposes of such letter shall not be more than
three business days prior to the Closing Date.
(h) At the Closing Date, the Agent shall receive a letter
from Keller & Company, Inc., dated the Closing Date
thereof and addressed to counsel for the Agent (i)
confirming that said firm is independent of the
Company and the Bank and is experienced and expert in
the area of corporate appraisals within the meaning
of Title 12 of the Code of Federal Regulations,
Section 563b.7(f)(1)(i), (ii) stating in effect that
the Appraisal prepared by such firm complies in all
material respects with the applicable requirements of
Title 12 of the Code of Federal Regulations, and
(iii) further stating that its opinion of the
aggregate pro forma market value of the Company and
the Bank expressed in its Appraisal dated as of
August 14, 1998, as most recently updated, remains in
effect.
(i) The Company and the Bank shall not have sustained
since the date of the latest financial statements
included in the Prospectus any material loss or
interference with its business from fire, explosion,
flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than
as set forth or contemplated in the Registration
Statement and Prospectus and since the respective
dates as of which information is given in the
Registration Statement and Prospectus, there shall
not have been any change in the long-term debt of the
Company or the Bank other than debt incurred in
relation to the purchase of Shares by the Bank's
eligible plans, or any change, or any development
involving a prospective change, in or affecting the
general affairs, management, financial position,
shareholders' equity or results of operations of the
Company or the Bank, otherwise than as set forth or
contemplated in the Registration Statement and
Prospectus, the effect of which, in any such case
described above, is in Webb's reasonable judgment
sufficiently material and adverse as to make it
impracticable or inadvisable to proceed with the
Subscription Offering or the delivery of the Shares
on the terms and in the manner contemplated in the
Prospectus.
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(j) At or prior to the Closing Date, the Agent shall
receive: (i) a copy of the letters from the OTS
approving the Conversion Application and authorizing
the use of the Prospectus; (ii) a copy of the order
from the Commission declaring the Registration
Statement effective; (iii) a certificate from the OTS
evidencing the good standing of the Bank; (iv) a
certificate of good standing from the State of
Indiana evidencing the good standing of the Company;
(v) a certificate from the FDIC evidencing the Bank's
insurance of accounts; (vi) a certificate from the
FHLB-Indianapolis evidencing the Bank's membership
thereof; (vii) a copy of the letter from the OTS
approving the Company's Holding Company Application;
and (viii) a certified copy of the Bank's Charter and
Bylaws.
(k) Subsequent to the date hereof, there shall not have
occurred any of the following: (i) a suspension or
limitation in trading in securities generally on the
New York Stock Exchange or in the over-the-counter
market, or quotations halted generally on The Nasdaq
Stock Market, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices
for securities have been required by either of such
exchanges or the NASD or by order of the Commission
or any other governmental authority; (ii) a general
moratorium on the operations of commercial banks, or
federal savings and loan associations or a general
moratorium on the withdrawal of deposits from
commercial banks or federal savings and loan
associations declared by federal or state
authorities; (iii) the engagement by the United
States in hostilities which have resulted in the
declaration, on or after the date hereof, of a
national emergency or war; or (iv) a material decline
in the price of equity or debt securities if the
effect of such a declaration or decline, in the
Agent's reasonable judgement, makes it impracticable
or inadvisable to proceed with the Offering or the
delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement and the
Prospectus.
(l) At or prior to the Closing Date, counsel to the Agent
shall have been furnished with such documents and
opinions as they may reasonably require for the
purpose of enabling them to pass upon the sale of the
Shares as herein contemplated and related proceedings
or in order to evidence the occurrence or
completeness of any of the representations or
warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings
taken by the Company or the Bank in connection with
the Conversion and the sale of the Shares as herein
contemplated shall be satisfactory in form and
substance to Webb and its counsel.
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<PAGE>
Section 8. Indemnification.
(a) The Company and the Bank jointly and severally agree
to indemnify and hold harmless the Agent, its
respective officers and directors, employees and
agents, and each person, if any, who controls the
Agent within the meaning of Section 15 of the 1933
Act or Section 20(a) of the 1934 Act, against any and
all loss, liability, claim, damage or expense
whatsoever (including, but not limited to, settlement
expenses), joint or several, that the Agent or any of
them may suffer or to which the Agent and any such
persons may become subject under all applicable
federal or state laws or otherwise, and to promptly
reimburse the Agent and any such persons upon written
demand for any expense (including reasonable fees and
disbursements of counsel) incurred by the Agent or
any of them in connection with investigating,
preparing or defending any actions, proceedings or
claims (whether commenced or threatened) to the
extent such losses, claims, damages, liabilities or
actions: (i) arise out of or are based upon any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
(or any amendment or supplement thereto), preliminary
or final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), the Holding Company
Application or any instrument or document executed by
the Company or the Bank or based upon written
information supplied by the Company or the Bank filed
in any state or jurisdiction to register or qualify
any or all of the Shares or to claim an exemption
therefrom or provided to any state or jurisdiction to
exempt the Company as a broker-dealer or its
officers, directors and employees as broker-dealers
or agent, under the securities laws thereof
(collectively, the "Blue Sky Application"), or any
document, advertisement, oral statement or
communication ("Sales Information") prepared, made or
executed by or on behalf of the Company or the Bank
with their consent or based upon written or oral
information furnished by or on behalf of the Company
or the Bank, whether or not filed in any
jurisdiction, in order to qualify or register the
Shares or to claim an exemption therefrom under the
securities laws thereof; (ii) arise out of or are
based upon the omission or alleged omission to state
in any of the foregoing documents or information a
material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading; or (iii) arise from any theory of
liability whatsoever relating to or arising from or
based upon the Registration Statement (or any
amendment or supplement thereto), preliminary or
final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), any Blue Sky
Application or Sales Information or other
documentation distributed in connection with the
Conversion; provided, however, that no
indemnification is required under this paragraph (a)
to the extent such losses, claims, damages,
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<PAGE>
liabilities or actions arise out of or are based upon
any untrue material statement or alleged untrue
material statement in, or material omission or
alleged material omission from, the Registration
Statement (or any amendment or supplement thereto),
preliminary or final Prospectus (or any amendment or
supplement thereto), the Conversion Application, any
Blue Sky Application or Sales Information made in
reliance upon and in conformity with information
furnished in writing to the Company or the Bank by
the Agent or its counsel regarding the Agent,
provided, that it is agreed and understood that the
only information furnished in writing to the Company
or the Bank by the Agent regarding the Agent is set
forth in the Prospectus under the caption "The
Conversion-Offering of Common Stock"; and, provided
further, that such indemnification shall be to the
extent not prohibited by the Commission, the OTS, the
FDIC and the Board of Governors of the Federal
Reserve.
(b) The Agent agrees to indemnify and hold harmless the
Company and the Bank, their directors and officers
and each person, if any, who controls the Company or
the Bank within the meaning of Section 15 of the 1933
Act or Section 20(a) of the 1934 Act against any and
all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement
expenses), joint or several, which they, or any of
them, may suffer or to which they, or any of them may
become subject under all applicable federal and state
laws or otherwise, and to promptly reimburse the
Company, the Bank, and any such persons upon written
demand for any expenses (including reasonable fees
and disbursements of counsel) incurred by them, or
any of them, in connection with investigating,
preparing or defending any actions, proceedings or
claims (whether commenced or threatened) to the
extent such losses, claims, damages, liabilities or
actions: (i) arise out of or are based upon any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
(or any amendment or supplement thereto), the
Conversion Application (or any amendment or
supplement thereto), the preliminary or final
Prospectus (or any amendment or supplement thereto),
any Blue Sky Application or Sales Information, (ii)
are based upon the omission or alleged omission to
state in any of the foregoing documents a material
fact required to be stated therein or necessary to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading, or (iii) arise from any theory of
liability whatsoever relating to or arising from or
based upon the Registration Statement (or any
amendment or supplement thereto), preliminary or
final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), or any Blue Sky
Application or Sales Information or other
documentation distributed in connection with the
Conversion; provided, however, that the Agent's
obligations under this Section 8(b) shall exist only
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<PAGE>
if and only to the extent that such untrue statement
or alleged untrue statement was made in, or such
material fact or alleged material fact was omitted
from, the Registration Statement (or any amendment or
supplement thereto), the preliminary or final
Prospectus (or any amendment or supplement thereto),
the Conversion Application (or any amendment or
supplement thereto), any Blue Sky Application or
Sales Information in reliance upon and in conformity
with information furnished in writing to the Company
or the Bank by the Agent or its counsel regarding the
Agent, provided, that it is agreed and understood
that the only information furnished in writing to the
Company or the Bank by the Agent regarding the Agent
is set forth in the Prospectus under the caption "The
Conversion-Offering of Common Stock."
(c) Each indemnified party shall give prompt written
notice to each indemnifying party of any action,
proceeding, claim (whether commenced or threatened),
or suit instituted against it in respect of which
indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve it
from any liability which it may have on account of
this Section 8 or otherwise. An indemnifying party
may participate at its own expense in the defense of
such action. In addition, if it so elects within a
reasonable time after receipt of such notice, an
indemnifying party, jointly with any other
indemnifying parties receiving such notice, may
assume defense of such action with counsel chosen by
it and approved by the indemnified parties that are
defendants in such action, unless such indemnified
parties reasonably object to such assumption on the
ground that there may be legal defenses available to
them that are different from or in addition to those
available to such indemnifying party. If an
indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection
with such action, proceeding or claim, other than
reasonable costs of investigation. In no event shall
the indemnifying parties be liable for the fees and
expenses of more than one separate firm of attorneys
(and any special counsel that said firm may retain)
for each indemnified party in connection with any one
action, proceeding or claim or separate but similar
or related actions, proceedings or claims in the same
jurisdiction arising out of the same general
allegations or circumstances.
(d) The agreements contained in this Section 8 and in
Section 9 hereof and the representations and
warranties of the Company and the Bank set forth in
this Agreement shall remain operative and in full
force and effect regardless of: (i) any investigation
made by or on behalf of the Agent or its officers,
directors or controlling persons, agent or employees
or by or on behalf of the Company or the Bank or any
officers, directors or controlling persons, agent or
-38-
<PAGE>
employees of the Company or the Bank; (ii) delivery
of and payment hereunder for the Shares; or (iii) any
termination of this Agreement.
Section 9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding, but after deducting any contribution received by the Company, the
Bank or the Agent from persons other than the other parties thereto, who may
also be liable for contribution) in such proportion so that the Agent is
responsible for that portion represented by the percentage that the fees paid to
the Agent pursuant to Section 2 of this Agreement (not including expenses) bears
to the gross proceeds received by the Company from the sale of the Shares in the
Offering, and the Company and the Bank shall be responsible for the balance. If,
however, the allocation provided above is not permitted by applicable law, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative fault of the Company and the Bank on the one hand and the Agent on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, proceedings or claims in
respect thereto), but also the relative benefits received by the Company and the
Bank on the one hand and the Agent on the other from the Offering (before
deducting expenses). The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and/or the Bank on the one hand or the Agent
on the other and the parties' relative intent, good faith, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Bank and the Agent agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro-rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above in this Section 9. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions, proceedings or claims in respect thereof)
referred to above in this Section 9 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action, proceeding or claim. It is expressly
agreed that the Agent shall not be liable for any loss, liability, claim, damage
or expense or be required to contribute any amount pursuant to Section 8(b) or
this Section 9 which in the aggregate exceeds the amount paid (excluding
reimbursable expenses) to the Agent under this Agreement. It is understood that
the above stated limitation on the Agent's liability is essential to the Agent
and that the Agent would not have entered into this Agreement if such limitation
had not been agreed to by the parties to this Agreement. No person found guilty
of any fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not found
guilty of such fraudulent misrepresentation. The obligations of the Company, the
Bank and the Agent under this Section 9 and under Section 8 shall be in addition
to any liability which the Company, the Bank and the Agent may otherwise have.
For purposes of this Section 9, each of the Agent's, the Company's or the Bank's
officers and directors
-39-
<PAGE>
and each person, if any, who controls the Agent or the Company or the Bank
within the meaning of the 1933 Act and the 1934 Act shall have the same rights
to contribution as the Agent, the Company or the Bank. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action,
suit, claim or proceeding against such party in respect of which a claim for
contribution may be made against another party under this Section 9, will notify
such party from whom contribution may be sought, but the omission to so notify
such party shall not relieve the party from whom contribution may be sought from
any other obligation it may have hereunder or otherwise than under this Section
9.
Section 10. Survival of Agreements, Representations and Indemnities.
The respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company, the Bank and
the Agent set forth in or made pursuant to this Agreement shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of the Agent, the Company,
the Bank or any controlling person referred to in Section 8 hereof, and shall
survive the issuance of the Shares, and any successor or assign of the Agent,
the Company, the Bank, and any such controlling person shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
Section 11. Termination. The Agent may terminate this Agreement by
giving the notice indicated below in this Section 11 at any time after this
Agreement becomes effective as follows:
(a) In the event the Company fails to sell the required
minimum number of the Shares by [________ __, ____],
and in accordance with the provisions of the Plan or
as required by the Conversion Regulations, and
applicable law, this Agreement shall terminate upon
refund by the Company to each person who has
subscribed for or ordered any of the Shares the full
amount which it may have received from such person,
together with interest as provided in the Prospectus,
and no party to this Agreement shall have any
obligation to the other hereunder, except as set
forth in Sections 2(a), 6, 8 and 9 hereof.
(b) If any of the conditions specified in Section 7 shall
not have been fulfilled when and as required by this
Agreement, unless waived in writing, or by the
Closing Date, this Agreement and all of the Agent's
obligations hereunder may be cancelled by the Agent
by notifying the Company and the Bank of such
cancellation in writing or by telegram at any time at
or prior to the Closing Date, and any such
cancellation shall be without liability of any
-40-
<PAGE>
party to any other party except as otherwise provided
in Sections 2(a), 6, 8 and 9 hereof.
(c) If the Agent elects to terminate this Agreement as
provided in this Section, the Company and the Bank
shall be notified promptly by telephone or telegram,
confirmed by letter.
The Company and the Bank may terminate this Agreement in the event the
Agent is in material breach of the representations and warranties or covenants
contained in Section 5 and such breach has not been cured after the Company and
the Bank have provided the Agent with notice of such breach.
This Agreement may also be terminated by mutual written consent of the
parties hereto.
Section 12. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be mailed in writing and if sent to the
Agent shall be mailed, delivered or telegraphed and confirmed to Charles Webb &
Company, 211 Bradenton Drive, Dublin, Ohio 43017-5034, Attention: Harold T.
Hanley III (with a copy to Silver, Freedman & Taff, L.L.P., Attention: Martin L.
Meyrowitz, P.C. and, if sent to the Company and the Bank, shall be mailed,
delivered or telegraphed and confirmed to the Company and the Bank at 1121 E.
Main Street, Plainfield, Indiana 46168-1760, Attention: T. Tim Unger, President
(with a copy to Barnes & Thornburg, Attention: Claudia V. Swhier).
Section 13. Parties. The Company and the Bank shall be entitled to act
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of the Agent when the same shall have been given by the undersigned.
The Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Company or the Bank, when
the same shall have been given by the undersigned or any other officer of the
Company or the Bank. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Agent, the Company, the Bank, and their respective
successors and assigns, and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained. It is understood and
agreed that this Agreement is the exclusive agreement among the parties hereto,
and supersedes any prior agreement among the parties and may not be varied
except in writing signed by all the parties.
Section 14. Closing. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 6 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
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<PAGE>
Section 15. Partial Invalidity. In the event that any term, provision
or covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
Section 16. Construction. This Agreement shall be construed in
accordance with the laws of the State of Indiana.
Section 17. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
If the foregoing correctly sets forth the arrangement among the
Company, the Bank and the Agent, please indicate acceptance thereof in the space
provided below for that purpose, whereupon this letter and the Agent's
acceptance shall constitute a binding agreement.
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<PAGE>
Section 18. Entire Agreement. This Agreement, including schedules and
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
Very truly yours,
LINCOLN BANCORP LINCOLN FEDERAL SAVINGS BANK
By Its Authorized By Its Authorized
Representative: Representative:
- --------------------------- ----------------------------
T. Tim Unger T. Tim Unger
President President
Accepted as of the date first above written
Charles Webb & Company, A Division of
Keefe, Bruyette & Woods, Inc.
By Its Authorized
Representative:
Harold T. Hanley III
Senior Vice President
-43-
Exhibit 2
LINCOLN FEDERAL SAVINGS BANK
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On July 2, 1998, and on October 20, 1998, the Board of Directors of Lincoln
Federal Savings Bank (the "Bank") adopted a Plan of Conversion whereby the Bank
will convert from a federal mutual savings bank to a federal stock savings bank
and, upon conversion, will become a wholly-owned subsidiary of a Holding Company
to be formed by the Bank, all pursuant to the Rules and Regulations of the
Office of Thrift Supervision. The Plan provides that non-transferable
subscription rights to purchase Conversion Stock will be offered first to the
Bank's Eligible Account Holders of record as of June 30, 1997, and then, to the
extent that stock is available, to a Tax-Qualified Employee Stock Benefit Plan,
if any, and then, to the extent that stock is available, to Supplemental
Eligible Account Holders, and then, to the extent that stock is available, to
Other Members of the Bank. Concurrently with, during or promptly after the
Subscription Offering, any shares of Conversion Stock not sold in the
Subscription Offering may also be offered to the general public in a Direct
Community Offering. The price of the Conversion Stock will be based upon an
independent appraisal of the Bank and the Holding Company and will reflect the
Bank's estimated pro forma market value, as converted. The Holding Company will
use the net proceeds it derives from the offering of Conversion Stock to
purchase shares of the Capital Stock of the Bank authorized upon its conversion;
provided, however, that the Holding Company may retain, for general business
purposes, from the net proceeds of the Conversion up to the maximum amount
permitted to be retained by the Holding Company pursuant to applicable
regulations and policy guidelines. It is the desire of the Board of Directors of
the Bank to attract new capital to the Bank in order to increase its net worth,
repay certain outstanding indebtedness, support future deposit growth, increase
the amount of funds available for residential mortgage and other lending, and to
provide greater resources for possible branching and acquisitions and for the
expansion of customer services. The Converted Bank is also expected to benefit
from its management and other personnel having a stock ownership in its business
since stock ownership is viewed as an effective performance incentive and a
means of attracting, retaining and compensating management and other personnel.
In addition, the stock form of organization will permit Members of the Bank and
others the opportunity to become shareholders of the Holding Company and thereby
participate more directly in earnings and growth. The Holding Company structure
has been adopted as a part of the Conversion to provide the Bank with greater
organizational flexibility to respond to the increasingly competitive
environment in which it operates. In furtherance of the Bank's long term
commitment to its community, the Plan provides for the establishment of a
charitable foundation as part of the Conversion. The charitable foundation is
intended to complement the Bank's existing community reinvestment activities in
a manner that will allow the communities in which the Bank operates to share in
the potential growth and profitability of the Holding Company and the Bank over
the long term. Consistent with the Bank's goal, the Holding Company intends to
donate to the charitable foundation from its authorized but unissued common
stock of up to 8% of the number of shares sold in the Conversion. The
establishment of the charitable foundation is subject to the approval of the
Members of the Bank. In the event the charitable foundation is not approved, the
Bank may determine to complete the Conversion without the charitable foundation.
No change will be made in the Board of Directors or management of the Bank as a
result of the Conversion. The Board of Directors and management of the Holding
Company will be selected from members of the Board and management of the Bank.
<PAGE>
II. DEFINITIONS
Affiliate: An "affiliate" of, or a person "affiliated" with, a specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate relationship with
any Person, means (i) any corporation or organization (other than the Bank or a
majority-owned subsidiary of the Bank or the Holding Company) of which such
Person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, except that for purposes of Sections VI.B., VI.D.1, .4 and .5, and
VI.E. 1, it does not include any Tax-Qualified Employee Stock Benefit Plan or
Non-Tax-Qualified Employee Stock Benefit Plan in which a Person has a
substantial beneficial interest or serves as a trustee or in a similar fiduciary
capacity, and that for purposes of Section VI.D.2 it does not include any
Tax-Qualified Employee Stock Benefit Plan, and (iii) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Bank or any of its parents or
subsidiaries.
Bank: Lincoln Federal Savings Bank, whose principal office is located in
Plainfield, Indiana, a federal mutual savings bank and including the Converted
Bank, as the context requires.
Capital Stock: Shares of common stock, par value $.01 per share, to be
issued by the Converted Bank to the Holding Company in the Conversion.
Conversion: Change of the Bank's articles and bylaws from a federal mutual
savings bank charter and bylaws to a federal savings bank charter and bylaws
authorizing issuance of shares of common stock by the Bank pursuant to and
otherwise conforming to the requirements of a federal stock savings bank. Such
term includes the issuance of Conversion Stock as provided for in the Plan, and
the purchase by the Holding Company of all of the shares of Capital Stock to be
issued by the Bank in connection with its Conversion from mutual to stock form.
Conversion Stock: Shares of common stock, without par value, to be issued
by the Holding Company in the Conversion.
Converted Bank: The federally chartered stock savings bank resulting from
the Conversion of the Bank in accordance with the Plan.
Dealer: Any Person who engages directly or indirectly as agent, broker or
principal in the business of offering, buying, selling, or otherwise dealing or
trading in securities issued by another Person.
Deposit Account: Any withdrawable or repurchasable shares, investment
certificates or deposits or other savings accounts, including money market
deposit accounts and negotiable order of withdrawal accounts held by Members of
the Bank.
<PAGE>
Direct Community Offering: The offering for sale to the general public,
with preference given to residents of Clinton, Hendricks and Montgomery Counties
in Indiana, of any shares of Conversion Stock not subscribed for in the
Subscription Offering.
Eligibility Record Date: The close of business on June 30, 1997.
Eligible Account Holder: Holder of a Qualifying Deposit in the Bank on the
Eligibility Record Date for purposes of determining Subscription Rights and
establishing subaccount balances in the liquidation account to be established
pursuant to Section XI hereof.
Estimated Price Range: The range of the estimated aggregate pro forma
market value of the total number of shares of Conversion Stock to be issued in
the Conversion, as determined by the independent appraiser in accordance with
Section VI.A hereof.
FDIC: Federal Deposit Insurance Corporation.
Holding Company: The corporation organized under Indiana law to own and
hold 100% of the outstanding Capital Stock of the Converted Bank.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended.
Market Maker: A Dealer who, with respect to a particular security, (i)
regularly publishes bona fide, competitive bid and offer quotations in a
recognized inter-dealer quotation system; or (ii) furnishes bona fide
competitive bid and offer quotations on request; and (iii) is ready, willing,
and able to effect transactions in reasonable quantities at his quoted prices
with other brokers or dealers.
Members: All Persons or entities who qualify as members of the Bank
pursuant to its mutual charter and bylaws.
Non-Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan or
defined contribution plan maintained by the Bank which is not a Tax-Qualified
Employee Stock Benefit Plan.
Officer: The Chairman of the Board, Vice-Chairman of the Board, President,
Vice-President, Secretary, Treasurer or principal financial officer, comptroller
or principal accounting officer, and any other person performing similar
functions with respect to any organization, whether incorporated or
unincorporated.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account Holders or
Supplemental Eligible Account Holders, as of the Voting Record Date.
OTS: Office of Thrift Supervision.
<PAGE>
Person: An individual, a corporation, a partnership, a bank, a joint-stock
company, a trust, any unincorporated organization, or a government or political
subdivision thereof.
Plan: The Plan of Conversion of the Bank, including any amendment approved
as provided in the Plan.
Purchase Price: The price per share, determined as provided in Section VI.A
of the Plan, at which Conversion Stock will be sold by the Holding Company in
the Conversion.
Qualifying Deposit: The aggregate balance as of the Eligibility Record Date
or Supplemental Eligibility Record Date of all Deposit Accounts of an Eligible
Account Holder or Supplemental Eligible Account Holder, as applicable, provided
such aggregate balance is not less than $50.00. Multiple deposit accounts which
are separate accounts for purposes of FDIC insurance shall be deemed to be
separate Qualifying Deposits for purposes of determining whether a holder is an
Eligible Account Holder, Supplemental Eligible Account Holder, or Other Member.
Sales Agents: The Dealer or Dealers or investment banking firm or firms
agreeing to offer and sell Conversion Stock for the Bank and the Holding Company
in the Direct Community Offering.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose of
considering and voting upon the Plan.
Subscription Offering: The offering of shares of Conversion Stock for
subscription and purchase pursuant to Section VI.B of the Plan.
Subscription Rights: Non-transferable, non-negotiable personal rights of
Eligible Account Holders, any Tax-Qualified Employee Stock Benefit Plan,
Supplemental Eligible Account Holders, and Other Members to subscribe for shares
of Conversion Stock in the Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar quarter
preceding OTS approval of the Application for Approval of Conversion of the
Bank.
Supplemental Eligible Account Holder: Any Person holding a Qualifying
Deposit, except officers, directors, and their Associates, as of the
Supplemental Eligibility Record Date for purposes of determining Subscription
Rights and establishing subaccount balances in the liquidation account to be
established pursuant to Section XI hereof.
Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan or
defined contribution plan maintained by the Bank or the Holding Company such as
an employee stock ownership plan, stock bonus plan, profit-sharing plan or other
plan, which, with its related trust, meets the requirements to be "qualified"
under Section 401 of the Internal Revenue Code.
Voting Record Date: The close of business on the date set by the Board of
Directors in accordance with applicable law for determining Members eligible to
vote at the Special Meeting.
<PAGE>
III. PROCEDURE FOR CONVERSION
A. The Board of Directors of the Bank shall adopt the Plan by not less than
a two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in the
communities in which the Bank maintains its offices and/or by mailing a letter
to each of its members.
C. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection at the office of the Bank.
D. The Bank shall submit an Application for Approval of Conversion to
convert to a stock form of organization to the OTS. Upon filing that Application
in the prescribed form, the Bank shall publish a "Notice of Filing of an
Application for Conversion to Convert to a Stock Savings Bank" in a newspaper of
general circulation, as referred to in Paragraph III.C. above. The Bank also
shall prominently display a copy of such notice in its offices.
E. The Bank shall cause the Holding Company to be incorporated under the
laws of Indiana. Upon its organization, the Holding Company shall adopt and
approve the Plan.
F. An Application shall be filed with the OTS on behalf of the Holding
Company for permission to acquire control of the Bank and become a duly
registered savings and loan holding company ("Savings and Loan Holding Company
Application").
G. As soon as practicable after the adoption of the Plan by the Board of
Directors of the Bank, a registration statement relating to the Conversion Stock
will be filed with the SEC under the Securities Act of 1933, as amended, and
appropriate filings will be made under applicable state securities laws.
H. The Bank and the Holding Company shall obtain an opinion of counsel or a
favorable ruling from the Internal Revenue Service which shall state that the
Conversion of the Bank to a stock savings and loan association and the adoption
of the holding company structure will not result in any gain or loss for federal
income tax purposes to the Holding Company or the Bank or to the Bank's Eligible
Account Holders, Supplemental Eligible Account Holders, or Other Members.
Receipt of a favorable opinion or ruling is a condition precedent to completion
of the Conversion.
I. After approval by the OTS of the Application for Approval of Conversion
and registration of the Conversion Stock with the SEC and applicable blue sky
authorities, the Plan will be submitted to the Members at a Special Meeting for
their approval and the Conversion Stock may be offered as hereinafter provided.
J. The Board of Directors of the Bank also intends to take all necessary
steps to establish a charitable foundation and to fund such charitable
foundation in the manner set forth in Section IX hereof, subject to the approval
of the Bank's Members.
<PAGE>
IV. CONVERSION PROCEDURE
Upon registration with the SEC and receipt of other required regulatory
approvals, the Holding Company will offer the Conversion Stock for sale in the
Subscription Offering at the Purchase Price to Eligible Account Holders, any
Tax-Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holders
and Other Members of the Bank prior to or within 45 days after the date of the
Special Meeting. However, the Holding Company may delay commencing the
Subscription Offering beyond such 45 day period in the event that the Board of
Directors of the Bank determines that there exist unforeseen material adverse
market or financial conditions. The Bank and the Holding Company may,
concurrently with or promptly after the Subscription Offering, also offer the
Conversion Stock to and accept subscriptions from other persons in a Direct
Community Offering; provided that Eligible Account Holders, any Tax-Qualified
Employee Stock Benefit Plan, Supplemental Eligible Account Holders, and Other
Members shall have the priority rights to subscribe for Conversion Stock set
forth in Section VI.B of this Plan. If the Subscription Offering commences prior
to the Special Meeting, subscriptions will be accepted subject to the approval
of the Plan at the Special Meeting.
The period for the Subscription Offering will be not less than 20 days nor
more than 45 days unless extended by the Bank. If shares of Conversion Stock
falling within the Estimated Price Range are not sold in the Subscription
Offering, completion of the sale of shares of Conversion Stock at least
sufficient to fall within the Estimated Price Range is required within 45 days
after termination of the Subscription Offering, subject to the extension of such
45 day period by the Bank and the Holding Company. The Bank and the Holding
Company may seek one or more extensions of such 45 day period if necessary to
complete the sale of shares at least sufficient to fall within the Estimated
Price Range. In connection with such extensions, subscribers and other
purchasers will be permitted to increase, decrease or rescind their
subscriptions or purchase orders. If for any reason the minimum amount of common
stock cannot be sold in the Subscription Offering and Direct Community Offering,
the Bank and the Holding Company will use their best efforts to obtain other
purchasers. Completion of the sale of the minimum amount of Conversion Stock is
required within 24 months after the date of the Special Meeting. The Holding
Company will purchase all of the Capital Stock of the Bank with the net proceeds
received by the Holding Company from the sale of Conversion Stock, provided that
the Holding Company may retain up to the maximum amount permitted to be retained
by the Holding Company pursuant to applicable regulations and policy guidelines,
subject to the approval of the Boards of Directors of the Holding Company and
the Bank.
V. SUBMISSION TO MEMBERS FOR APPROVAL
After the approval of the Plan and the Savings and Loan Holding Company
Application by the OTS, a Special Meeting of Members to vote on the Plan and on
the charitable foundation to be established pursuant to Section IX hereof shall
be held in accordance with the Bank's mutual bylaws. The Bank will distribute
proxy solicitation materials to all Members as of the Voting Record Date, which
Voting Record Date shall be not less than ten (10) nor more than sixty (60) days
prior to the Special Meeting. Notice of the Special Meeting shall be given to
each Member by means of the approved proxy statement not less than twenty (20)
nor more than forty-five (45) days prior to the date of the Special Meeting. The
Bank shall use reasonable efforts to see that such notice is sent to each
beneficial holder of an account held in a fiduciary capacity.
<PAGE>
The proxy materials will include such documents authorized for use by the
regulatory authorities and may also include a prospectus as provided below. The
Bank may also use a summary form of proxy statement, in which case the Bank will
provide Members with an attached postage-paid postcard on which to indicate
whether the Member wishes to receive the prospectus and the Subscription
Offering will not be closed prior to the expiration of 30 days after the mailing
of the postage-paid postcard. The Bank will also advise each Eligible Account
Holder and Supplemental Eligible Account Holder not entitled to vote at the
Special Meeting of the proposed Conversion and the scheduled Special Meeting,
and provide a postage-paid postcard on which to indicate whether such Person
wishes to receive the prospectus, if the Subscription Offering is not held
concurrently with the proxy solicitation, provided that the Subscription
Offering will not be closed prior to the expiration of 30 days after the mailing
of the postage-paid postcard.
Pursuant to OTS regulations, the affirmative vote of not less than a
majority of the total outstanding votes of the Bank's Members will be required
for approval. Voting may be in person or by proxy. The OTS shall be notified
promptly of the action of the Bank's Members.
VI. STOCK OFFERING
A. Number of Shares and Purchase Price of Conversion Stock
The aggregate price for which all shares of Conversion Stock will be sold
will be based on an independent appraisal of the estimated total pro forma
market value of the Converted Bank and the Holding Company. The appraisal shall
be stated in terms of an Estimated Price Range, the maximum of which shall be no
more than 15% above the average of the minimum and maximum of such price range
and the minimum of which shall be no more than 15% below such average. Such
appraisal shall be performed in accordance with OTS guidelines and will be
updated as appropriate under or required by applicable law.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of financial institution
appraisals. The appraisal will include, among other things, an analysis of the
historical and pro forma operating results and net worth of the Converted Bank
and the Holding Company and a comparison of the Converted Bank and the Holding
Company and the Conversion Stock with comparable stock financial institutions
and holding companies and their respective outstanding capital stocks.
All shares of Conversion Stock sold in the Conversion will be sold at the
same price per share referred to in the Plan as the Purchase Price. The Purchase
Price will be determined by the Boards of Directors of the Holding Company and
of the Bank prior to the filing of the Application for Approval of Conversion
with the OTS.
The number of shares of Conversion Stock to be issued and sold by the
Holding Company in the Conversion will be determined by the Boards of Directors
of the Bank and the Holding Company prior to the commencement of the
Subscription Offering and will fall within a range of shares based on the
Estimated Price Range divided by the Purchase Price, subject to adjustment if
necessitated by market or financial conditions prior to consummation of the
Conversion. The total number of shares of Conversion Stock may also be subject
to increase in connection with any right granted to the Bank and the Holding
Company to issue additional shares to cover over-allotments or
over-subscriptions in the Subscription Offering and Direct Community Offering;
provided that this option may not cover more than 15% of the maximum number of
shares offered in the Subscription Offering and Direct Community Offering. No
resolicitation of subscribers need be made and subscribers need not be permitted
to modify or cancel their subscriptions unless the changes in the number of
shares to be issued in the Conversion, in combination with the Purchase Price,
result in an offering which is below the low end of the Estimated Price Range or
more than 15% above the maximum of such range.
<PAGE>
B. Subscription Rights
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, any Tax-Qualified Employee
Stock Benefit Plan, Supplemental Eligible Account Holders, and Other Members as
set forth below. The Bank and the Holding Company may retain and pay for the
services of financial and other advisors and investment bankers to assist in
connection with any or all aspects of the Subscription Offering. All such fees,
expenses, commissions and retainers shall be reasonable.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable Subscription
Rights to subscribe for a number of shares of Conversion Stock which shall be
determined by the Boards of Directors of the Holding Company and of the Bank
before the Subscription Offering commences and shall be no greater than 1.0% of
the number of shares of the Conversion Stock determined by dividing the
super-maximum of the Estimated Price Range as of the date the Conversion Stock
is offered by the Purchase Price, except that any one or more Tax-Qualified
Employee Stock Benefit Plans may purchase in the aggregate not more than ten
percent (10%) of the shares of Conversion Stock offered in the Conversion, and
that shares held by one or more Tax-Qualified or Non-Tax-Qualified Employee
Stock Benefit Plans and attributed to a Person shall not be aggregated with
other shares purchased directly by or otherwise attributable to that Person. If
sufficient shares are not available in this Preference Category No. 1, shares
may be allocated first to permit each subscribing Eligible Account Holder to
purchase the lesser of 100 shares or the number of shares subscribed for, and
thereafter pro rata in the same proportion that his Qualifying Deposit bears to
the sum of all Qualifying Deposits of all subscribing Eligible Account Holders.
The foregoing subscription rights are subject to the rights of Tax-Qualified
Employee Stock Benefit Plans in the event that shares of Conversion Stock in
excess of the maximum of the Estimated Price Range are sold, as provided in
section VI.B.2.
Subscription Rights to purchase Conversion Stock received by directors and
Officers of the Bank and their Associates, based on their increased deposits in
the Bank in the one year period preceding the Eligibility Record Date, shall be
subordinated to all other subscriptions involving the exercise of Subscription
Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Stock Benefit
Plans
Each Tax-Qualified Employee Stock Benefit Plan shall receive Subscription
Rights to subscribe for the number of shares of Conversion Stock in the
Subscription Offering remaining after satisfying the subscriptions of Eligible
Account Holders provided for under Preference Category No. 1 above, requested by
any such Plan, subject to the purchase limitations set forth in Section VI. D.
of this Plan, provided, however, that if the shares of Conversion Stock sold in
the Conversion exceed the maximum of the Estimated Price Range, up to 10% of the
total offering of Conversion Stock may be sold to Tax-Qualified Employee Stock
Benefit Plans.
<PAGE>
3. Preference Category No. 3: Supplemental Eligible Account Holders.
In the event that the Eligibility Record Date is more than 15 months prior
to the date of the latest amendment to the Application for Approval of
Conversion filed prior to OTS approval, and if there are any shares of
Conversion Stock remaining after satisfying the subscriptions of Eligible
Account Holders provided for under Preference Category No. 1 above and the
subscriptions of any Tax-Qualified Employee Stock Benefit Plans provided for
under Preference Category No. 2 above, then and only in that event each
Supplemental Eligible Account Holder of the Bank shall receive, without payment,
Subscription Rights to purchase a number of shares of Conversion Stock which
shall be determined by the Boards of Directors of the Holding Company and of the
Bank before the Subscription Offering commences and shall be no greater than
1.0% of the number of shares of the Conversion Stock determined by dividing the
super-maximum of the Estimated Price Range as of the date the Conversion Stock
is offered by the Purchase Price, except that any one or more Tax-Qualified
Employee Stock Benefit Plans may purchase in the aggregate not more than ten
percent (10%) of the shares of Conversion Stock offered in the Conversion, and
that shares held by one or more Tax-Qualified or Non-Tax-Qualified Employee
Stock Benefit Plans and attributed to a person shall not be aggregated with
other shares purchased directly by or otherwise attributable to that Person. Any
Subscription Rights received by Eligible Account Holders in accordance with
Preference Category No. 1 shall reduce to the extent thereof the Subscription
Rights granted pursuant to this Preference Category No. 3. If sufficient shares
are not available in this Preference Category No. 3, shares may be allocated
first to permit each subscribing Supplemental Eligible Account Holder to
purchase the lesser of 100 shares or the number of shares subscribed for, and
thereafter pro rata in the same proportion that the Qualifying Deposit of the
Supplemental Eligible Account Holder bears to the total Qualifying Deposits of
all subscribing Supplemental Eligible Account Holders.
4. Preference Category No. 4: Other Members
Each Other Member shall receive non-transferable Subscription Rights to
subscribe for shares of Conversion Stock remaining after satisfying the
subscriptions of Eligible Account Holders provided for under Category No. 1
above, the subscriptions of any Tax-Qualified Employee Stock Benefit Plans
provided for under Category No. 2 above, and the subscriptions of Supplemental
Eligible Account Holders provided for under Category No. 3 above, subject to the
following conditions:
a. Each Other Member shall be entitled to subscribe for a number
of shares which shall be determined by the Boards of Directors of the
Holding Company and the Bank before the Subscription Offering commences
and shall not exceed 1.0% of the number of shares of Conversion Stock
determined by dividing the super-maximum of the Estimated Price Range
as of the date the Conversion Stock is offered by the Purchase Price,
to the extent that stock is available, except that any one or more
Tax-Qualified Employee Stock Benefit Plans may purchase in the
aggregate not more than ten percent (10%) of the shares offered in the
Conversion, and that shares held by one or more Tax-Qualified or
Non-Tax-Qualified Employee Stock Benefit Plans and attributed to a
Person shall not be aggregated with other shares purchased directly by
or otherwise attributable to that Person.
<PAGE>
b. If sufficient shares are not available in this Preference
Category No. 4, shares may be allocated among subscribing Other Members
pro rata in the same proportion that the number of shares subscribed
for by each Other Member bears to the total number of shares subscribed
for by all Other Members.
If the total number of shares subscribed for in the Subscription Offering
falls within the Estimated Price Range, the Conversion may be consummated.
C. Direct Community Offering
1. If the total number of shares of Conversion Stock subscribed for in
the Subscription Offering does not fall within the Estimated Price Range,
additional shares representing up to the difference between the shares
subscribed for in the Subscription Offering and the number of shares equal
to the maximum of the Estimated Price Range may be offered for sale in a
Direct Community Offering. This will involve an offering of all
unsubscribed shares directly to the general public, giving preference to
residents of Clinton, Hendricks and Montgomery Counties in Indiana. The
Direct Community Offering, if any, shall be for a period of not less than
20 days nor more than 90 days unless extended by the Bank and the Holding
Company, and shall commence concurrently with, during or promptly after the
Subscription Offering. The purchase price per share to the general public
in a Direct Community Offering shall be equal to the Purchase Price.
Purchase orders received during the Direct Community Offering shall be
filled up to a maximum of two percent of the total number of shares of
Conversion Stock, with any remaining unfilled purchase orders to be
allocated on an equal number of shares basis. The Bank and the Holding
Company may use an investment banking firm or firms on a best efforts basis
to sell the unsubscribed shares in the Direct Community Offering. The Bank
and the Holding Company may pay a commission or other fee to the Sales
Agents as to the unsubscribed shares sold by such firm or firms in the
Direct Community Offering and may also reimburse such firm or firms for
expenses incurred in connection with the sale. Such Sales Agents may also
be paid a management fee based on shares of Conversion Stock sold in the
Conversion to compensate them for any advisory assistance they provide
during the Conversion. The Conversion Stock will be offered and sold in the
Direct Community Offering so as to achieve the widest distribution of the
Conversion Stock. The Bank reserves the right to reject any orders received
in the Direct Community Offering in whole or in part.
2. If for any reason any shares remain unsold after the Subscription
Offering and Direct Community Offering, if any, the Board of Directors will
seek to make other arrangements for the sale of the remaining shares,
pursuant to procedures approved by the OTS. If such other arrangements
cannot be made, the Plan will terminate.
D. Additional Limitations Upon Purchases of Shares of Conversion Stock
<PAGE>
The following additional limitations shall be imposed on all purchases of
Conversion Stock in the Conversion:
1. No person, by himself or herself, or with an Associate or group of
Persons acting in concert, may subscribe for or purchase more than a number
of shares of the Conversion Stock which shall be determined by the Boards
of Directors of the Holding Company and the Bank before the Subscription
Offering commences and shall not exceed 1.0% of the number of shares
determined by dividing the super-maximum of the Estimated Price Range as of
the date the Conversion Stock is offered by the Purchase Price, except that
any one or more Tax-Qualified Employee Stock Benefit Plans may purchase in
the aggregate not more than ten percent (10%) of the shares offered in the
Conversion, and shall be entitled to purchase this quantity regardless of
the number of shares to be purchased by other parties, and that shares held
by one or more Tax-Qualified or Non-Tax-Qualified Employee Stock Benefit
Plans and attributed to a Person shall not be aggregated with shares
purchased directly by or otherwise attributable to that Person.
2. Directors and Officers and their Associates may not purchase in all
categories in the Conversion an aggregate of more than 28% of the
Conversion Stock offered in the Conversion. In calculating the number of
shares which may be purchased, any shares attributable to the Officers and
directors and their Associates but held by one or more Tax-Qualified
Employee Stock Benefit Plans shall not be included.
3. The minimum number of shares of Conversion Stock that may be
purchased by any Person in the Conversion is 25 shares, provided sufficient
shares are available; provided, however, that if the Purchase Price is
greater than $20.00 per share, such minimum number of shares shall be
adjusted so that the aggregate Purchase Price will not exceed $500.00.
4. The Boards of Directors of the Bank and the Holding Company may, in
their sole discretion, and without further approval of Members, increase
the maximum purchase limitation set forth in subparagraph (1) above up to
9.99% of the Conversion Stock offered in the Conversion, provided that
orders for shares exceeding 5% of the shares of Conversion Stock shall not
exceed, in the aggregate, 10% of the shares of Conversion Stock, except
that Tax-Qualified Employee Stock Benefit Plans may purchase in the
aggregate up to ten percent (10%) of the Conversion Stock offered in the
Conversion and not be included in the order limit.
5. In determining the maximum percentage limitation under subparagraph
(1) above and in Sections VI.B.1, 3, and 4 the Boards of Directors of the
Bank and the Holding Company may set separate limitations for each Person
together with Associates and Persons acting in concert. Such separate
limitations shall not, however, apply to any Tax-Qualified Employee Stock
Benefit Plan. The Boards of Directors of the Bank and the Holding Company
may, in their sole discretion decrease the maximum purchase limitation set
forth in subparagraph (1) above, without further approval of Members.
<PAGE>
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the Holding Company and the Bank may increase
or decrease any of the purchase limitations set forth herein at any time. In the
event that either the individual purchase limitation or the number of shares of
Conversion Stock to be sold in the Conversion, is increased after commencement
of the Subscription Offering, the Holding Company and the Bank shall permit any
Person who subscribed for shares of Conversion Stock to purchase an additional
number of shares such that such Person shall be permitted to subscribe for the
then maximum number of shares permitted to be subscribed for by such Person,
subject to the rights and preferences of any person who has priority
Subscription Rights. In the event that either the individual purchase limitation
or the number of shares of Conversion Stock to be sold in the Conversion is
decreased after commencement of the Subscription Offering, the orders of any
Person who subscribed for the maximum number of shares of Conversion Stock shall
be decreased by the minimum amount necessary so that such Person shall be in
compliance with the then maximum number of shares permitted to be subscribed for
by such Person.
For purposes of this Section VI, the directors of the Bank and the Holding
Company shall not be deemed to be Associates or a
group acting in concert solely as a result of their being directors of the Bank
or of the Holding Company.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Conversion Stock Being Sold
1. Transferability. Conversion Stock purchased by Persons other than
directors and Officers of the Bank or the Holding Company will be
transferable without restriction. Shares purchased by directors or Officers
of the Bank or of the Holding Company shall not be sold or otherwise
disposed of for value for a period of one year from the date of Conversion,
except for any disposition of such shares (i) following the death of the
original purchaser or (ii) resulting from an exchange of securities in a
merger or acquisition approved by the applicable regulatory authorities.
Transfers that could result in a change of control of the Bank or the
Holding Company or result in the ownership by any person of more than 10%
of any class of the Bank's or of the Holding Company's equity securities
may be subject to the prior approval of the OTS. Moreover, transfers of
Holding Company common stock are also subject to restrictions in the
Holding Company's Articles of Incorporation.
The certificates representing shares of Conversion Stock issued by
Holding Company to directors and Officers shall bear a legend giving
appropriate notice of the one year holding period restriction. The Holding
Company shall give appropriate instructions to the transfer agent for such
stock with respect to the applicable restrictions relating to the transfer
of restricted stock. Any shares subsequently issued as a stock dividend,
stock split, or otherwise with respect to any such restricted stock shall
be subject to the same holding period restrictions for directors and
Officers of the Bank and of the Holding Company as may be then applicable
to such restricted stock.
<PAGE>
No director or Officer of the Bank or the Holding Company, or Associate
of such a director or Officer, shall purchase any outstanding shares of
common stock of the Holding Company for a period of three years following
the Conversion without the prior written approval of the OTS, except from a
broker or dealer registered with the SEC, in a negotiated transaction
involving more than one percent of the then outstanding shares of common
stock, pursuant to any one or more Tax-Qualified or Non-Tax-Qualified
Employee Stock Benefit Plans which may be attributable to individual
Officers or directors, or pursuant to stock option and other incentive
stock plans approved by Holding Company's shareholders. As used herein, the
term negotiated transaction means a transaction in which the securities are
offered and the terms and arrangements relating to any sale are arrived at
through direct communications between the seller or any Person acting on
its behalf and the purchaser or his investment representative. The term
investment representative shall mean a professional investment advisor
acting as agent for the purchaser and independent of the seller and not
acting on behalf of the seller in connection with the transaction.
2. Repurchase and Dividend Rights. Except as set forth below, for a
period of three years following Conversion, the Holding Company shall not
repurchase any shares of its capital stock, except in the case of an offer
approved by the OTS to repurchase on a pro rata basis made to all holders
of common stock of the Holding Company, the repurchase of qualifying shares
of a director, or a purchase on the open market by a Tax-Qualified or
Non-Tax-Qualified Employee Stock Benefit Plan in an amount reasonable and
appropriate to fund the plan. Notwithstanding anything to the contrary in
the foregoing, the Holding Company may repurchase its common stock to the
extent and subject to the requirements set forth in 12 C.F.R. 563b.3(g)(3),
as it may be amended from time to time.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its Capital Stock if
the result thereof would be to reduce the net worth of the Converted Bank
below the amount required for the liquidation account to be established
pursuant to Section XII hereof. Any dividend declared or paid on, or
repurchase of, the Converted Bank's Capital Stock must also comply with
regulations adopted by the OTS setting standards for payment of dividends
and other "capital distributions" by federal stock savings savings and loan
associations insured by the FDIC set forth in 12 C.F.R. ss. 563.134, as it
may be amended from time to time.
The above limitations shall not preclude payments of dividends or
repurchases of stock by the Converted Bank or by the Holding Company in the
event applicable federal regulatory limitations are liberalized subsequent
to OTS approval of the Plan.
3. Voting Rights. Upon Conversion, holders of deposit accounts and
borrowers will not have voting rights in the Converted Bank or the Holding
Company. Exclusive voting rights with respect to the Converted Bank will be
held and exercised by the Holding Company as holder of the Bank's Capital
Stock. Voting rights with respect to the Holding Company shall be held and
exercised by the holders of the Holding Company's common stock. Each
shareholder of the Holding Company will upon Conversion be entitled to vote
on any matters coming before the shareholders of the Holding Company for
consideration and will be entitled to one vote for each share of Holding
Company common stock owned by said shareholder, except as otherwise
prescribed by law and except insofar as the Holding Company's Articles of
Incorporation may provide with respect to the cumulation of votes for the
election of directors or may limit voting rights as set forth in Section
XIII hereof.
<PAGE>
F. Exercise of Subscription Rights; Order Forms
1. The Bank may commence the Subscription Offering concurrently with
the proxy solicitation for the Special Meeting. If the Subscription
Offering occurs concurrently with the solicitation of proxies for the
Special Meeting, the prospectus and Order Form may be sent to each Eligible
Account Holder, Supplemental Eligible Account Holder and Other Member at
their last known address as shown on the records of the Bank. However, the
Bank may furnish a prospectus and Order Form only to Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members who have
returned to the Bank by a specified date a postcard or other written
communication requesting a prospectus and Order Form, provided that the
Subscription Offering shall not be closed prior to the expiration of 30
days after the mailing of the proxy solicitation material and/or letter
sent in lieu of the proxy statement to those Eligible Account Holders and
Supplemental Eligible Account Holders who are not Members on the Voting
Record Date. In such event, the Bank shall provide a postage-paid postcard
for this purpose and make appropriate disclosure in its proxy statement for
the solicitation of proxies to be voted at the Special Meeting and/or
letter sent in lieu of the proxy statement to those Eligible Account
Holders and Supplemental Eligible Account Holders who are not Members on
the Voting Record Date. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Bank may transmit, no more
than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental Eligible Account Holder and
Other Member who had been furnished with proxy solicitation materials a
notice which shall state that the Bank is not required to furnish a
prospectus or Order Form to them unless they return by a reasonable date a
certain postage-paid postcard or other written communication requesting a
prospectus and Order Form.
2. Each Order Form will be preceded or accompanied by a prospectus
describing the Bank and the shares of Conversion Stock being offered for
subscription and containing all other information required under the
Securities Act of 1933 and by the OTS or necessary to enable Persons to
make informed investment decisions regarding the purchase of Conversion
Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Bank or the Holding Company
or their representative for purposes of exercising Subscription
Rights, which date will be not less than 20 days after the Order Forms
are mailed;
(iii) The Purchase Price to be paid for each share subscribed for
when the Order Form is returned;
<PAGE>
(iv) Except as otherwise provided in Section VI.D.3 hereof, a
statement that 25 shares is the minimum number of shares of Conversion
Stock that may be subscribed for under the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the
Order Form;
(vii) Specifically designated blank spaces for dating and signing
the Order Form;
(viii)An acknowledgment that the subscriber has received the
prospectus;
(ix) A statement of the consequences of failure to properly
complete and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified on
the Order Form unless such expiration date is extended by the Bank and
the Holding Company, and that the Subscription Rights may be exercised
only by delivering the Order Form, properly completed and executed, to
the Bank or the Holding Company or their representative by the
expiration date, together with required payment of the Purchase Price
for all shares of Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are non-transferable
and that all shares of Conversion Stock subscribed for upon exercise
of Subscription Rights must be purchased on behalf of the Person
exercising the Subscription Rights for his own account; and
(xi) A statement that, after receipt by the Bank or the Holding
Company or their representative, a subscription may not be modified,
withdrawn or canceled without the consent of the Bank and the Holding
Company.
G. Method of Payment
Payment for all shares of Conversion Stock subscribed for, computed on the
basis of the Purchase Price, must accompany all completed Order Forms. Payment
may be made in cash (if presented in person), by check, or, if the subscriber
has a deposit in the Bank (including a certificate of deposit), the subscriber
may authorize the Bank to charge the subscriber's account.
Payment for shares of Conversion Stock subscribed for by Tax-Qualified
Employee Stock Benefit Plans may be made with funds contributed by the Bank or
the Holding Company and/or funds obtained pursuant to a loan from an unrelated
financial institution or the Holding Company pursuant to a loan commitment which
is in force from the time that any such plan submits an order form until the
closing of the Conversion.
If a subscriber authorizes the Bank to charge his or her account, the funds
will continue to earn interest, but may not be used by the subscriber until all
Conversion Stock has been sold or the Plan of Conversion is terminated,
whichever is earlier. The Bank will allow subscribers to purchase shares by
withdrawing funds from certificate accounts, without the assessment of early
withdrawal penalties. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn interest at the
then-current passbook rate. This waiver of early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of
Conversion Stock under the Plan of Conversion. Interest will also be paid, at
not less than the then current passbook rate, on all orders paid in cash or by
check or money order, from the date payment is received until consummation of
the Conversion. Payments made in cash or by check or money order will be placed
by the Bank or the Holding Company in an escrow or other account established
specifically for this purpose.
<PAGE>
In the event of an unfilled amount of any subscription order, the Converted
Bank will make an appropriate refund, or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the Conversion. If for
any reason the Conversion is not consummated, purchasers will have refunded to
them all payments made and all withdrawal authorizations will be canceled in the
case of subscription payments authorized from accounts at the Bank.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Bank and the Holding Company shall have the
absolute right, in their sole discretion, to reject any Order Form, including
but not limited to, any Order Forms which (i) are not delivered or are returned
by the United States Postal Service (or the addressee cannot be located); (ii)
are not received back by the Bank or the Holding Company or their
representative, or are received after termination of the date specified thereon;
(iii) are defectively completed or executed; (iv) are not accompanied by the
total required payment for the shares of Conversion Stock subscribed for
(including cases in which the subscribers' accounts in the Bank are insufficient
to cover the authorized withdrawal for the required payment); (v) are submitted
by or on behalf of a person whose representations the Boards of Directors
believe to be false or who they otherwise believe, either alone or acting in
concert with others, is violating, evading or circumventing, or intends to
violate, evade or circumvent, the terms and conditions of this Plan; or (vi) are
transmitted by facsimile or accompanied by payments made by wire transfer. In
such event, the Subscription Rights of the person to whom such rights have been
granted will not be honored and will be treated as though such Person failed to
return the completed Order Form within the time period specified therein. The
Bank and the Holding Company may, but will not be required to, waive any
irregularity relating to any Order Form or require submission of corrected Order
Forms or the remittance of full payment for subscribed shares by such date as
the Bank or the Holding Company may specify. The Bank and the Holding Company's
interpretation of the terms and conditions of this Plan and of the proper
completion of the Order Form will be final, subject to the authority of the OTS.
I. Members in Non-Qualified States or in Foreign Countries
The Bank and the Holding Company will make reasonable efforts to comply
with the securities laws of all states in the United States in which Persons
entitled to subscribe for Conversion Stock pursuant to the Plan reside. However,
the Bank or the Holding Company will not be required to offer Subscription
Rights to any Person who resides in a foreign country or who resides in a state
of the United States with respect to which all of the following apply: (i) a
small number of Persons otherwise eligible to subscribe for shares under this
Plan reside in such state and (ii) the granting of Subscription Rights or offer
or sale of shares of Conversion Stock to such Persons would require the Bank or
the Holding Company or their respective Officers or directors to register, under
the securities laws of such state, as a broker, dealer, salesman or agent or to
register or otherwise qualify the Conversion Stock for sale in such state; and
(iii) such registration, qualification or filing in the judgment of the Holding
Company and the Bank would be impracticable or unduly burdensome for reasons of
cost or otherwise.
<PAGE>
VII. FEDERAL STOCK CHARTER AND BYLAWS
A. As part of the Conversion, the Bank take all appropriate steps to amend
its charter to read in the form of a federal stock charter as prescribed by the
OTS for a federal stock savings bank. By their approval of the Plan, the Members
of the Bank will thereby approve and adopt such federal stock charter.
B. The Bank will also take appropriate steps to amend its bylaws to read in
the form prescribed by the OTS for a federal stock savings bank.
C. The effective date of the adoption of the Converted Bank's federal stock
charter and bylaws shall be the date of the issuance and sale of the Conversion
Stock as specified by the OTS.
D. Copies of the amended charter and bylaws will be mailed to all Members
as part of the proxy materials for the Special Meeting.
VIII. STOCK INCENTIVE PLANS AND EMPLOYMENT CONTRACTS
In order to provide an incentive for directors, Officers and employees of
the Holding Company and the Bank, the Board of Directors of the Holding Company
or of the Bank is authorized to adopt a stock option plan or plans, a management
recognition plan and trust, a restricted stock bonus plan, an employee stock
ownership plan and trust, and similar stock incentive plans. Such plans (other
than an employee stock ownership plan) shall be subject to approval at an annual
or special meeting of shareholders of the Holding Company, and in the case of
any such plans other than an employee stock ownership plan, will be implemented
no earlier than the date of such shareholder meeting to be held no earlier than
six (6) months following completion of the Conversion. Moreover, the Boards of
Directors of the Bank and Holding Company are authorized to enter into
employment contracts with key employees.
IX. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION
As part of the Conversion, the Holding Company and the Bank intend to
establish a charitable foundation that will qualify as an exempt organization
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Foundation"), and to donate to the Foundation up to 8% of the number of shares
of common stock sold in the Conversion. The Foundation is being formed in
connection with the Conversion in order to complement the Bank's existing
community reinvestment activities and to share with the communities in which the
Bank operates a part of the Bank's financial success as a locally headquartered,
community-minded, financial services institution. The funding of the Foundation
with common stock of the Holding Company accomplishes this goal as it enables
such communities to share in the potential growth and profitability of the
Holding Company and the Bank over the long-term.
The Foundation will be dedicated to the promotion of charitable purposes
within the communities in which the Bank operates, including, but not limited
to, grants or donations to support housing assistance, scholarships, local
education, not-for-profit medical facilities, not-for-profit community groups
and other types of organizations or civic-minded projects. The Foundation will
annually distribute total grants to assist charitable organizations or to fund
projects within its local community of not less than 5% of the average fair
value of Foundation assets each year. In order to serve the purposes for which
it was formed and maintain its 501(c)(3) qualification, the Foundation may sell,
on an annual basis, a limited portion of the common stock contributed to it by
the Holding Company.
<PAGE>
An initial board of directors of the Foundation will be comprised of
individuals who are officers and/or directors of the Bank. After the
establishment of the Foundation, the directors may be selected only by the
Foundation's Board of Directors. The board of directors of the Foundation will
be responsible for establishing the policies of the Foundation with respect to
grants or donations, consistent with the stated purposes of the Foundation.
The establishment and funding of the Foundation as part of the Conversion
is subject to the approval of the Members by an affirmative vote of a majority
of the votes eligible to be cast by Members in person or by proxy at the Special
Meeting. In the event that the Bank's Members approve the Plan, but not the
charitable foundation, the Bank may determine to complete the Conversion without
the establishment of the Foundation and may do so without amending this Plan or
obtaining any further vote of the Bank's Members. Failure of the Members to
approve the Foundation may materially affect the pro forma market value of the
Bank. In such an event, the Bank may establish a new Estimated Price Range and
commence a resolicitation of subscribers, if required by the OTS or applicable
law or if deemed appropriate by the Bank. For comparison purposes, Members will
be provided with a projection of the pro forma market value of the Conversion
Stock, an Estimated Price Range and certain selected pro forma financial data
that would result if the Conversion were consummated without establishment of
the charitable foundation.
X. SECURITIES REGISTRATION AND MARKET MAKING
In connection with the Conversion, the Holding Company will register its
common stock with the SEC, pursuant to the Securities Exchange Act of 1934, as
amended. In connection with the registration, the Holding Company will under
take not to deregister such stock, without the approval of the OTS, for a period
of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist two
or more Market Makers to establish and maintain a market for its common stock
promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the National Association of
Securities Dealers Automated Quotations System or to be listed on a national or
regional securities exchange.
XI. STATUS OF DEPOSIT ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
All Deposit Accounts of the Converted Bank will retain the same status
after the Conversion as such Accounts had prior to the Conversion. Each Deposit
Account holder shall retain, without payment, a withdrawable Deposit Account or
Accounts in the Converted Bank, equal in amount to the withdrawable value of
such account holder's Deposit Account or Accounts immediately prior to
Conversion. All Deposit Accounts will continue to be insured by the FDIC up to
the applicable limits of insurance coverage, and shall be subject to the same
terms and conditions (except as to voting and liquidation rights) to which such
Deposit Accounts were subject at the time of the Conversion. All loans shall
retain the same status after Conversion as those loans had prior to Conversion.
Notwithstanding the foregoing, as provided in Section VI.E.3, voting rights of
Deposit Account holders and borrowers will not survive the Conversion.
<PAGE>
XII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final prospectus
used in connection with the Conversion. The operation and maintenance of the
liquidation account will not operate to restrict the use or application of any
of the net worth accounts of the Converted Bank; provided, however, that such
net worth accounts will not be voluntarily reduced below the required dollar
amount of the liquidation account. Each Eligible Account Holder and Supplemental
Eligible Account Holder shall, with respect to each Deposit Account held, have a
related inchoate interest in a portion of the liquidation account balance
("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date and/or the Supplemental Eligibility
Record Date of such Eligible Account Holder or Supplemental Eligible Account
Holder and the denominator is the total amount of the Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders on such
date(s). For savings accounts in existence at both dates, separate subaccounts
shall be determined on the basis of the Qualifying Deposits in such savings
accounts on such record dates. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the respective record dates is less than the lesser
of (i) the deposit balance in such Deposit Account at the close of business on
any other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, the subaccount balance shall be reduced in
an amount proportionate to the reduction in such deposit balance. In the event
of a downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Deposit Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of Converted Bank (and only in such
event), each Eligible Account Holder and/or Supplemental Eligible Account Holder
shall be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then-current adjusted subaccount balances for
Deposit Accounts then held before any liquidation distribution may be made to
shareholders. No merger, consolidation, bulk purchase of assets with assumptions
of Deposit Accounts and other liabilities, or similar transactions in which the
Converted Bank is not the surviving institution, shall be considered to be a
complete liquidation if the surviving institution is a qualifying institution
insured by the FDIC. In such transactions, the liquidation account shall be
assumed by the surviving institution.
<PAGE>
The Converted Bank shall not be required to recompute the liquidation
account and subaccount balances provided the Converted Bank maintains records
sufficient to make necessary computations in the event of a complete liquidation
or such other events as may require a computation of the balance of the
liquidation account. The liquidation subaccount of an account holder shall be
maintained for as long as the account holder maintains an account with the same
Social Security number.
XIII. RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
A. Present regulations provide that for a period of three years following
completion of the Conversion, no person (i.e., individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, or any unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution) shall directly or indirectly offer to
purchase or actually acquire the beneficial ownership of more than ten percent
of any class of equity security of the Holding Company without the prior
approval of the OTS. However, approval is not required for purchases directly
from the Holding Company or from underwriters or a selling group acting on its
behalf with a view toward public resale, or for purchases not exceeding one
percent per annum of the shares outstanding. Civil penalties may be imposed by
the OTS for willful violation or assistance of any violation. Where any person
directly or indirectly acquires beneficial ownership of more than ten percent of
Holding Company common stock outstanding within such three year period without
the prior approval of the OTS, the Holding Company stock beneficially owned by
such person in excess of ten percent shall not be counted as shares entitled to
vote and shall not be voted by any person or counted as voting shares in
connection with any matter submitted to the shareholders of the Holding Company
for a vote.
B. The Holding Company may provide in its Articles of Incorporation that,
for a specified period of up to five years or for an unspecified period of time
following the date of the completion of the Conversion, no person shall directly
or indirectly offer to acquire or acquire the beneficial ownership of more than
ten percent of the outstanding Holding Company common stock. Furthermore, the
Articles of Incorporation may provide that, for a specified period of up to five
years or for an unspecified period of time following the date of the completion
of the Conversion, shares of Holding Company common stock beneficially owned in
violation of such percentage limitation shall not be entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matter submitted to the shareholders of the Holding Company for a vote. The
Holding Company may provide in its Articles of Incorporation such other
provisions affecting acquisition of Holding Company common stock or possible
changes of control of the Holding Company as shall be determined by the Holding
Company's Board of Directors.
XIV. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the Boards of Directors of the Bank and the Holding Company. After submission
of the Plan and proxy materials to the Members, the Plan may be amended by a
two-thirds vote of the Boards of Directors of the Bank and the Holding Company
only with the concurrence of the OTS or resubmission to the Members.
<PAGE>
The Plan may be terminated by a two-thirds vote of the Boards of Directors
of the Bank and the Holding Company at any time prior to the Special Meeting of
Members, and at any time following such Special Meeting with the concurrence of
the OTS. In its discretion, the respective Boards of Directors may modify or
terminate the Plan upon the order or with the approval of the OTS, and without a
resolicitation of proxies or another meeting of Members. The Plan shall
terminate if the sale of shares of Conversion Stock falling within the Estimated
Price Range is not completed within 24 months of the date of the Special
Meeting. A specific resolution approved by a majority of the Boards of Directors
of the Bank and the Holding Company is required in order for the Bank and the
Holding Company to terminate the Plan prior to the end of such 24 month period.
XV. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by the Bank and the Holding Company in connection with
the Conversion shall be reasonable.
XVI. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
Neither the Bank nor the Holding Company shall knowingly loan funds or
otherwise extend credit to any Person to purchase shares of Conversion Stock,
provided, however that, with the approval of the OTS, the Holding Company may be
permitted to loan funds to a Tax-Qualified Employee Stock Benefit Plan for
purposes of acquiring shares of Conversion Stock in the Conversion.
XVII. EFFECTIVE DATE
The effective date of the Conversion shall be the date of the closing of
the sale of all shares of Conversion Stock. The closing (which shall be within
45 days after the completion of the Subscription Offering, unless the Holding
Company and the Bank extend such period as provided herein) for all shares of
Conversion Stock sold in the Subscription Offering and any Direct Community
Offering shall occur simultaneously, and the closing is conditioned upon the
prior receipt of all requisite regulatory and other approvals.
CODE OF BY-LAWS
OF
LINCOLN BANCORP
ARTICLE I
Offices
Section 1. Principal Office. The principal office (the "Principal Office")
of Lincoln Bancorp (the "Corporation") shall be at 1121 East Main Street,
Plainfield, Indiana 46168-0510, or such other place as shall be determined by
resolution of the Board of Directors of the Corporation (the "Board").
Section 2. Other Offices. The Corporation may have such other offices at
such other places within or without the State of Indiana as the Board may from
time to time designate, or as the business of the Corporation may require.
ARTICLE II
Seal
Section 1. Corporate Seal. The corporate seal of the Corporation (the
"Seal") shall be circular in form and shall have inscribed thereon the words
"Lincoln Bancorp" and "INDIANA." In the center of the seal shall appear the word
"Seal." Use of the Seal or an impression thereof shall not be required, and
shall not affect the validity of any instrument whatsoever.
ARTICLE III
Shareholder Meetings
Section 1. Place of Meeting. Every meeting of the shareholders of the
Corporation (the "Shareholders") shall be held at the Principal Office, unless a
different place is specified in the notice or waiver of notice of such meeting
or by resolution of the Board or the Shareholders, in which event such meeting
may be held at the place so specified, either within or without the State of
Indiana.
Section 2. Annual Meeting. The annual meeting of the Shareholders (the
"Annual Meeting") shall be held each year at 1:30 P.M. on the third Tuesday in
April (or, if such day is a legal holiday, on the next succeeding day not a
legal holiday), for the purpose of electing directors of the Corporation
("Directors") and for the transaction of such other business as may legally come
before the Annual Meeting. If for any reason the Annual Meeting shall not be
held at the date and time herein provided, the same may be held at any time
thereafter, or the business to be transacted at such Annual Meeting may be
transacted at any special meeting of the Shareholders (a "Special Meeting")
called for that purpose.
Section 3. Notice of Annual Meeting. Written or printed notice of the
Annual Meeting, stating the date, time and place thereof, shall be delivered or
mailed by the Secretary or an Assistant Secretary to each Shareholder of record
entitled to notice of such Meeting, at such address as appears on the records of
the Corporation, at least ten and not more than sixty days before the date of
such Meeting.
<PAGE>
Section 4. Special Meetings. Special Meetings, for any purpose or purposes
(unless otherwise prescribed by law), may be called by only the Chairman of the
Board of Directors (the "Chairman"), if any, or by the Board, pursuant to a
resolution adopted by a majority of the total number of Directors of the
Corporation, to vote on the business proposed to be transacted thereat. All
requests for Special Meetings shall state the purpose or purposes thereof, and
the business transacted at such Meeting shall be confined to the purposes stated
in the call and matters germane thereto.
Section 5. Notice of Special Meetings. Written or printed notice of all
Special Meetings, stating the date, time, place and purpose or purposes thereof,
shall be delivered or mailed by the Secretary or the President or any Vice
President calling the Meeting to each Shareholder of record entitled to notice
of such Meeting, at such address as appears on the records of the Corporation,
at least ten and not more than sixty days before the date of such Meeting.
Section 6. Waiver of Notice of Meetings. Notice of any Annual or Special
Meeting (a "Meeting") may be waived in writing by any Shareholder, before or
after the date and time of the Meeting specified in the notice thereof, by a
written waiver delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. A Shareholder's attendance at any Meeting in
person or by proxy shall constitute a waiver of (a) notice of such Meeting,
unless the Shareholder at the beginning of the Meeting objects to the holding of
or the transaction of business at the Meeting, and (b) consideration at such
Meeting of any business that is not within the purpose or purposes described in
the Meeting notice, unless the Shareholder objects to considering the matter
when it is presented.
Section 7. Quorum. At any Meeting, the holders of a majority of the voting
power of all shares of the Corporation (the "Shares") issued and outstanding and
entitled to vote at such Meeting (after giving effect to the provisions in
Article 11 of the Articles of Incorporation of the Corporation, as the same may,
from time to time, be amended (the "Articles")), represented in person or by
proxy, shall constitute a quorum for the election of Directors or for the
transaction of other business, unless otherwise provided by law, the Articles or
this Code of By-Laws, as the same may, from time to time, be amended (these
"By-Laws"). If, however, a quorum shall not be present or represented at any
Meeting, the Shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the Meeting from time to time,
without notice other than announcement at the Meeting of the date, time and
place of the adjourned Meeting, unless the date of the adjourned Meeting
requires that the Board fix a new record date (the "Record Date") therefor, in
which case notice of the adjourned Meeting shall be given. At such adjourned
Meeting, if a quorum shall be present or represented, any business may be
transacted that might have been transacted at the Meeting as originally
scheduled.
Section 8. Voting. At each Meeting, every Shareholder entitled to vote
shall have one vote for each Share standing in his name on the books of the
Corporation as of the Record Date fixed by the Board for such Meeting, except as
otherwise provided by law or the Articles, and except that no Share shall be
voted at any Meeting upon which any installment is due and unpaid and no share
which is not entitled to vote pursuant to Article 11 of the Articles shall be
voted at any Meeting. Voting for Directors and, upon the demand of any
Shareholder, voting upon any question properly before a Meeting, shall be by
ballot. A plurality vote shall be necessary to elect any Director, and on all
other matters, the action or a question shall be approved if the number of votes
cast thereon in favor of the action or question exceeds the number of votes cast
opposing the action or question, except as otherwise provided by law or the
Articles.
<PAGE>
Section 9. Shareholder List. The Secretary shall prepare before each
Meeting a complete list of the Shareholders entitled to notice of such Meeting,
arranged in alphabetical order by class of Shares (and each series within a
class), and showing the address of, and the number of Shares entitled to vote
held by, each Shareholder (the "Shareholder List"). Beginning five business days
before the Meeting and continuing throughout the Meeting, the Shareholder List
shall be on file at the Principal Office or at a place identified in the Meeting
notice in the city where the Meeting will be held, and shall be available for
inspection by any Shareholder entitled to vote at the Meeting. On written
demand, made in good faith and for a proper purpose and describing with
reasonable particularity the Shareholder's purpose, and if the Shareholder List
is directly connected with the Shareholder's purpose, a Shareholder (or such
Shareholder's agent or attorney authorized in writing) shall be entitled to
inspect and to copy the Shareholder List, during regular business hours and at
the Shareholder's expense, during the period the Shareholder List is available
for inspection. The original stock register or transfer book (the "Stock Book"),
or a duplicate thereof kept in the State of Indiana, shall be the only evidence
as to who are the Shareholders entitled to examine the Shareholder List, or to
notice of or to vote at any Meeting.
Section 10. Proxies. A Shareholder may vote either in person or by proxy
executed in writing by the Shareholder or a duly authorized attorney-in-fact. No
proxy shall be valid after eleven months from the date of its execution, unless
a shorter or longer time is expressly provided therein.
Section 11. Notice of Shareholder Business. At an Annual Meeting of the
Shareholders, only such business shall be conducted as shall have been properly
brought before the Meeting. To be properly brought before an Annual Meeting,
business must be (a) specified in the notice of Meeting (or any supplement
thereto) given by or at the direction of the Board, (b) otherwise properly
brought before the Meeting by or at the direction of the Board, or (c) otherwise
properly brought before the Meeting by a Shareholder. For business to be
properly brought before an Annual Meeting by a Shareholder, the Shareholder must
have the legal right and authority to make the Proposal for consideration at the
Meeting and the Shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a Shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 120 days prior to the Meeting; provided, however,
that in the event that less than 130 days' notice or prior public disclosure of
the date of the Meeting is given or made to Shareholders (which notice or public
disclosure shall include the date of the Annual Meeting specified in these
By-Laws, if such By-Laws have been filed with the Securities and Exchange
Commission and if the Annual Meeting is held on such date), notice by the
Shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the Annual Meeting was mailed or such public disclosure was made. A
Shareholder's notice to the Secretary shall set forth as to each matter the
Shareholder proposes to bring before the Annual Meeting (a) a brief description
of the business desired to be brought before the Annual Meeting and the reasons
for conducting such business at the Annual Meeting, (b) the name and record
address of the Shareholders proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the Shareholder, and
(d) any material interest of the Shareholder in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at an
Annual Meeting except in accordance with the procedures set forth in this
Section 11. The Chairman of an Annual Meeting shall, if the facts warrant,
determine and declare to the Meeting that business was not properly brought
before the Meeting and in accordance with the provisions of this Section 11, and
if he should so determine, he shall so declare to the Meeting and any such
business not properly brought before the Meeting shall not be transacted. At any
Special Meeting of the Shareholders, only such business shall be conducted as
shall have been brought before the Meeting by or at the direction of the Board
of Directors.
<PAGE>
Section 12. Notice of Shareholder Nominees. Only persons who are nominated
in accordance with the procedures set forth in this Section 12 shall be eligible
for election as Directors. Nominations of persons for election to the Board may
be made at a Meeting of Shareholders by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors or by any Shareholder of the Corporation entitled to vote for the
election of Directors at the Meeting who complies with the notice procedures set
forth in this Section 12. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a Shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 120 days prior to the Meeting; provided, however, that
in the event that less than 130 days' notice or prior public disclosure of the
date of the Meeting is given or made to Shareholders (which notice or public
disclosure shall include the date of the Annual Meeting specified in these
By-Laws, if such By-Laws have been filed with the Securities and Exchange
Commission and if the Annual Meeting is held on such date), notice by the
Shareholders to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the Meeting was mailed or such public disclosure was made. Such Shareholder's
notice shall set forth (a) as to each person whom the Shareholder proposes to
nominate for election or re-election as a Director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the Shareholder giving the notice (i) the name and
record address of such Shareholder and (ii) the class and number of shares of
the Corporation which are beneficially owned by such Shareholder. No person
shall be eligible for election as a Director of the Corporation unless nominated
in accordance with the procedures set forth in this Section 12. The Chairman of
the Meeting shall, if the facts warrant, determine and declare to the Meeting
that a nomination was not made in accordance with the procedures prescribed by
these By-Laws, and if he should so determine, he shall so declare to the Meeting
and the defective nomination shall be disregarded.
ARTICLE IV
Board of Directors
Section 1. Number. The business and affairs of the Corporation shall be
managed by a Board of not less than five (5) nor more than fifteen (15)
Directors, as may be specified from time to time by resolution adopted by a
majority of the total number of the Corporation's Directors, divided into three
classes as provided in the Articles. If and whenever the Board of Directors has
not specified the number of Directors, the number shall be nine. Directors (a)
must have their primary domicile in Clinton, Hendricks or Montgomery Counties,
Indiana, and (b) must have a loan or deposit relationship with Lincoln Federal
Savings Bank which they have maintained for at least a continuous period of nine
(9) months immediately prior to their nomination to the Board (or in case of
directors of the Corporation on September 10, 1998, prior to the filing of the
<PAGE>
Corporation's Articles). In addition, each Director who is not an employee of
the Corporation or any of its subsidiaries must have served as a member of a
civic or community organization based in Clinton, Hendricks or Montgomery
Counties, Indiana for at least a continuous period of twelve (12) months during
the five (5) years prior to his or her nomination to the Board. The Board may
waive one or more of the requirements set forth in the two previous sentences
for one or more representatives it determines to appoint or nominate to the
Board in connection with an acquisition of another financial institution by the
Corporation or in connection with the acquisition or opening of a new branch by
its subsidiary, Lincoln Federal Savings Bank. The Board may elect or appoint,
from among its members, a Chairman of the Board (the "Chairman"), who need not
be an officer (an "Officer") or employee of the Corporation. The Chairman, if
elected or appointed, shall preside at all Shareholder Meetings and Board
Meetings and shall have such other powers and perform such other duties as are
incident to such position and as may be assigned by the Board.
Section 2. Vacancies and Removal. Any vacancy occurring in the Board shall
be filled as provided in the Articles. Shareholders shall be notified of any
increase in the number of Directors and the name, principal occupation and other
pertinent information about any Director elected by the Board to fill any
vacancy. Any Director, or the entire Board, may be removed from office only as
provided in the Articles.
Section 3. Powers and Duties. In addition to the powers and duties
expressly conferred upon it by law, the Articles or these By-Laws, the Board may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not inconsistent with the law, the Articles or these By-Laws.
Section 4. Annual Board Meeting. Unless otherwise determined by the Board,
the Board shall meet each year immediately after the Annual Meeting, at the
place where such Meeting has been held, for the purpose of organization,
election of Officers of the Corporation (the "Officers") and consideration of
any other business that may properly be brought before such annual meeting of
the Board (the "Annual Board Meeting"). No notice shall be necessary for the
holding of the Annual Board Meeting. If the Annual Board Meeting is not held as
above provided, the election of Officers may be held at any subsequent duly
constituted meeting of the Board (a "Board Meeting").
Section 5. Regular Board Meetings. Regular meetings of the Board ("Regular
Board Meetings") may be held at stated times or from time to time, and at such
place, either within or without the State of Indiana, as the Board may
determine, without call and without notice.
Section 6. Special Board Meetings. Special meetings of the Board ("Special
Board Meetings") may be called at any time or from time to time, and shall be
called on the written request of at least two Directors, by the Chairman or the
President, by causing the Secretary or any Assistant Secretary to give to each
Director, either personally or by mail, telephone, telegraph, teletype or other
form of wire or wireless communication at least two days' notice of the date,
time and place of such Meeting. Special Board Meetings shall be held at the
Principal Office or at such other place, within or without the State of Indiana,
as shall be specified in the respective notices or waivers of notice thereof.
<PAGE>
Section 7. Waiver of Notice and Assent. A Director may waive notice of any
Board Meeting before or after the date and time of the Board Meeting stated in
the notice by a written waiver signed by the Director and filed with the minutes
or corporate records. A Director's attendance at or participation in a Board
Meeting shall constitute a waiver of notice of such Meeting and assent to any
corporate action taken at such Meeting, unless (a) the Director at the beginning
of such Meeting (or promptly upon his arrival) objects to holding of or
transacting business at the Meeting and does not thereafter vote for or assent
to action taken at the Meeting; (b) the Director's dissent or abstention from
the action taken is entered in the minutes of such Meeting; or (c) the Director
delivers written notice of his dissent or abstention to the presiding Director
at such Meeting before its adjournment, or to the Secretary immediately after
its adjournment. The right of dissent or abstention is not available to a
Director who votes in favor of the action taken.
Section 8. Quorum. At all Board Meetings, a majority of the number of
Directors designated for the full Board (the "Full Board") shall be necessary to
constitute a quorum for the transaction of any business, except (a) that for the
purpose of filling of vacancies a majority of Directors then in office shall
constitute a quorum, and (b) that a lesser number may adjourn the Meeting from
time to time until a quorum is present. The act of a majority of the Board
present at a Meeting at which a quorum is present shall be the act of the Board,
unless the act of a greater number is required by law, the Articles or these
By-Laws.
Section 9. Audit and Other Committees of the Board. The Board may, by
resolution adopted by a majority of the Full Board, designate an Audit Committee
comprised of two or more Directors, which shall have such authority and exercise
such duties as shall be provided by resolution of the Board. The Board may, by
resolution adopted by such majority, also designate other regular or special
committees of the Board ("Committees"), in each case comprised of two or more
Directors and to have such powers and exercise such duties as shall be provided
by resolution of the Board.
Section 10. Resignations. Any Director may resign at any time by giving
written notice to the Board, The Chairman, the President or the Secretary. Any
such resignation shall take effect when delivered unless the notice specifies a
later effective date. Unless otherwise specified in the notice, the acceptance
of such resignation shall not be necessary to make it effective.
Section 11. Age Limitations. No person 70 or above years of age shall be
eligible for election, reelection, appointment, or reappointment to the board of
the Corporation. No director shall serve as such beyond the annual meeting of
the shareholders of the Corporation immediately following the date the director
turns age 70.
Section 12. Directors Emeritus. Directors Emeritus may be appointed and
their compensation for services (in an amount not to exceed those fees paid to
voting directors) determined by resolution of the board of directors of the
Corporation. Only former directors of the Corporation (including former
directors of other corporations which have merged with, or otherwise been
acquired by the Corporation) shall be eligible to serve as Directors Emeritus.
Directors Emeritus shall be available for consultation with and advice to
management of the Corporation. Directors Emeritus may attend meetings of the
board of directors, but shall have no vote on any matter acted upon by such
Board.
<PAGE>
ARTICLE V
Officers
Section 1. Officers. The Officers shall be the President, the Secretary and
the Treasurer, and may include one or more Assistant Secretaries, one or more
Vice Presidents, one or more Assistant Treasurers, a Comptroller and one or more
Assistant Comptrollers. Any two or more offices may be held by the same person.
The Board may from time to time elect or appoint such other Officers as it shall
deem necessary, who shall exercise such powers and perform such duties as may be
prescribed from time to time by these By-Laws or, in the absence of a provision
in these By-Laws in respect thereto, as may be prescribed from time to time by
the Board.
Section 2. Election of Officers. The Officers shall be elected by the Board
at the Annual Board Meeting and shall hold office for one year or until their
respective successors shall have been duly elected and shall have qualified;
provided, however, that the Board may at any time elect one or more persons to
new or different offices and/or change the title, designation and duties and
responsibilities of any of the Officers consistent with the law, the Articles
and these By-Laws.
Section 3. Vacancies; Removal. Any vacancy among the Officers may be filled
for the unexpired term by the Board. Any Officer may be removed at any time by
the affirmative vote of a majority of the Full Board.
Section 4. Delegation of Duties. In the case of the absence, disability,
death, resignation or removal from office of any Officer, or for any other
reason that the Board shall deem sufficient, the Board may delegate, for the
time being, any or all of the powers or duties of such Officer to any other
Officer or to any Director.
Section 5. President. The President shall be a Director and, subject to the
control of the Board, shall have general charge of and supervision and authority
over the business and affairs of the Corporation, and shall have such other
powers and perform such other duties as are incident to this office and as may
be assigned to him by the Board. In the case of the absence or disability of the
Chairman or if no Chairman shall be elected or appointed by the Board, the
President shall preside at all Shareholder Meetings and Board Meetings.
Section 6. Vice Presidents. Each of the Vice Presidents, if any, shall have
such powers and perform such duties as may be prescribed for him by the Board or
delegated to him by the President. In the case of the absence, disability,
death, resignation or removal from office of the President, the powers and
duties of the President shall, for the time being, devolve upon and be exercised
by the Executive Vice President, if there be one, and if not, then by such one
of the Vice Presidents as the Board or the President may designate, or, if there
be but one Vice President, then upon such Vice President; and he shall
thereupon, during such period, exercise and perform all of the powers and duties
of the President, except as may be otherwise provided by the Board.
Section 7. Secretary. The Secretary shall have the custody and care of the
Seal, records, minutes and the Stock Book of the Corporation; shall attend all
Shareholder Meetings and Board Meetings, and duly record and keep the minutes of
their proceedings in a book or books to be kept for that purpose; shall give or
cause to be given notice of all Shareholder Meetings and Board Meetings when
such notice shall be required; shall file and take charge of all papers and
documents belonging to the Corporation; and shall have such other powers and
perform such other duties as are incident to the office of secretary of a
business corporation, subject at all times to the direction and control of the
Board and the President.
<PAGE>
Section 8. Assistant Secretaries. Each of the Assistant Secretaries, if
any, shall assist the Secretary in his duties and shall have such other powers
and perform such other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the absence, disability, death,
resignation or removal from office of the Secretary, his powers and duties
shall, for the time being, devolve upon such one of the Assistant Secretaries as
the Board, the President or the Secretary may designate, or, if there be but one
Assistant Secretary, then upon such Assistant Secretary; and he shall thereupon,
during such period, exercise and perform all of the powers and duties of the
Secretary, except as may be otherwise provided by the Board.
Section 9. Treasurer. The Treasurer shall have control over all records of
the Corporation pertaining to moneys and securities belonging to the
Corporation; shall have charge of, and be responsible for, the collection,
receipt, custody and disbursements of funds of the Corporation; shall have the
custody of all securities belonging to the Corporation; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; and shall disburse the funds of the Corporation as may be ordered
by the Board, taking proper receipts or making proper vouchers for such
disbursements and preserving the same at all times during his term of office.
When necessary or proper, he shall endorse on behalf of the Corporation all
checks, notes or other obligations payable to the Corporation or coming into his
possession for or on behalf of the Corporation, and shall deposit the funds
arising therefrom, together with all other funds and valuable effects of the
Corporation coming into his possession, in the name and the credit of the
Corporation in such depositories as the Board from time to time shall direct, or
in the absence of such action by the Board, as may be determined by the
President or any Vice President. If the Board has not elected a Comptroller or
an Assistant Comptroller, or in the absence or disability of the Comptroller and
each Assistant Comptroller or if, for any reason, a vacancy shall occur in such
offices, then during such period the Treasurer shall have, exercise and perform
all of the powers and duties of the Comptroller. The Treasurer shall also have
such other powers and perform such other duties as are incident to the office of
treasurer of a business corporation, subject at all times to the direction and
control of the Board and the President.
If required by the Board, the Treasurer shall give the Corporation a bond,
in such an amount and with such surety or sureties as may be ordered by the
Board, for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 10. Assistant Treasurers. Each of the Assistant Treasurers, if any,
shall assist the Treasurer in his duties, and shall have such other powers and
perform such other duties as may be prescribed for him by the Board or delegated
to him by the President. In case of the absence, disability, death, resignation
or removal from office of the Treasurer, his powers and duties shall, for the
time being, devolve upon such one of the Assistant Treasurers as the Board, the
President or the Treasurer may designate, or, if there be but one Assistant
Treasurer, then upon such Assistant Treasurer; and he shall thereupon, during
such period, exercise and perform all the powers and duties of the Treasurer
except as may be otherwise provided by the Board. If required by the Board, each
Assistant Treasurer shall likewise give the Corporation a bond, in such amount
and with such surety or sureties as may be ordered by the Board, for the same
purposes as the bond that may be required to be given by the Treasurer.
<PAGE>
Section 11. Comptroller. The Comptroller, if any, shall have direct control
over all accounting records of the Corporation pertaining to moneys, properties,
materials and supplies, including the bookkeeping and accounting departments;
shall have direct supervision over the accounting records in all other
departments pertaining to moneys, properties, materials and supplies; shall
render to the President and the Board, at Regular Board Meetings or whenever the
same shall be required, an account of all his transactions as Comptroller and of
the financial condition of the Corporation; and shall have such other powers and
perform such other duties as are incident to the office of comptroller of a
business corporation, subject at all times to the direction and control of the
Board and the President.
Section 12. Assistant Comptrollers. Each of the Assistant Comptrollers, if
any, shall assist the Comptroller in his duties, and shall have such other
powers and perform such other duties as may be prescribed for him by the Board
or delegated to him by the President. In case of the absence, disability, death,
resignation or removal from office of the Comptroller, his powers and duties
shall, for the time being, devolve upon such one of the Assistant Comptrollers
as the Board, the President or the Comptroller may designate, or, if there be
but one Assistant Comptroller, then upon such Assistant Comptroller; and he
shall thereupon, during such period, exercise and perform all the powers and
duties of the Comptroller, except as may be otherwise provided by the Board.
ARTICLE VI
Certificates for Shares
Section 1. Certificates. Certificates for Shares ("Certificates") shall be
in such form, consistent with law and the Articles, as shall be approved by the
Board. Certificates for each class, or series within a class, of Shares, shall
be numbered consecutively as issued. Each Certificate shall state the name of
the Corporation and that it is organized under the laws of the State of Indiana;
the name of the registered holder; the number and class and the designation of
the series, if any, of the Shares represented thereby; and a summary of the
designations, relative rights, preferences and limitations applicable to such
class and, if applicable, the variations in rights, preferences and limitations
determined for each series and the authority of the Board to determine such
variations for future series; provided, however, that such summary may be
omitted if the Certificate states conspicuously on its front or back that the
Corporation will furnish the Shareholder such information upon written request
and without charge. Each Certificate shall be signed (either manually or in
facsimile) by (i) the President or a Vice President and (ii) the Secretary or an
Assistant Secretary, or by any two or more Officers that may be designated by
the Board, and may have affixed thereto the Seal, which may be a facsimile,
engraved or printed.
Section 2. Record of Certificates. Shares shall be entered in the Stock
Book as they are issued, and shall be transferable on the Stock Book by the
holder thereof in person, or by his attorney duly authorized thereto in writing,
upon the surrender of the outstanding Certificate therefor properly endorsed.
Section 3. Lost or Destroyed Certificates. Any person claiming a
Certificate to be lost or destroyed shall make affidavit or affirmation of that
fact and, if the Board or the President shall so require, shall give the
Corporation and/or the transfer agents and registrars, if they shall so require,
a bond of indemnity, in form and with one or more sureties satisfactory to the
Board or the President and/or the transfer agents and registrars, in such amount
as the Board or the President may direct and/or the transfer agents and
registrars may require, whereupon a new Certificate may be issued of the same
tenor and for the same number of Shares as the one alleged to be lost or
destroyed.
<PAGE>
Section 4. Shareholder Addresses. Every Shareholder shall furnish the
Secretary with an address to which notices of Meetings and all other notices may
be served upon him or mailed to him, and in default thereof notices may be
addressed to him at his last known address or at the Principal Office.
ARTICLE VII
Corporate Books and Records
Section 1. Places of Keeping. Except as otherwise provided by law, the
Articles or these By-Laws, the books and records of the Corporation (including
the "Corporate Records," as defined in the Articles) may be kept at such place
or places, within or without the State of Indiana, as the Board may from time to
time by resolution determine or, in the absence of such determination by the
Board, as shall be determined by the President.
Section 2. Stock Book. The Corporation shall keep at the Principal Office
the original Stock Book or a duplicate thereof, or, in case the Corporation
employs a stock registrar or transfer agent within or without the State of
Indiana, another record of the Shareholders in a form that permits preparation
of a list of the names and addresses of all the Shareholders, in alphabetical
order by class of Shares, stating the number and class of Shares held by each
Shareholder (the "Record of Shareholders").
Section 3. Inspection of Corporate Records. Any Shareholder (or the
Shareholder's agent or attorney authorized in writing) shall be entitled to
inspect and copy at his expense, after giving the Corporation at least five
business days' written notice of his demand to do so, the following Corporate
Records: (1) the Articles; (2) these By-Laws; (3) minutes of all Shareholder
Meetings and records of all actions taken by the Shareholders without a meeting
(collectively, "Shareholders Minutes") for the prior three years; (4) all
written communications by the Corporation to the Shareholders including the
financial statements furnished by the Corporation to the Shareholders for the
prior three years; (5) a list of the names and business addresses of the current
Directors and the current Officers; and (6) the most recent Annual Report of the
Corporation as filed with the Secretary of State of Indiana. Any Shareholder (or
the Shareholder's agent or attorney authorized in writing) shall also be
entitled to inspect and copy at his expense, after giving the Corporation at
least five business days' written notice of his demand to do so, the following
Corporate Records, if his demand is made in good faith and for a proper purpose
and describes with reasonable particularity his purpose and the records he
desires to inspect, and the records are directly connected with his purpose: (1)
to the extent not subject to inspection under the previous sentence,
Shareholders Minutes, excerpts from minutes of Board Meetings and of Committee
meetings, and records of any actions taken by the Board or any Committee without
a meeting; (2) appropriate accounting records of the Corporation; and (3) the
Record of Shareholders.
Section 4. Record Date. The Board may, in its discretion, fix in advance a
Record Date not more than seventy days before the date (a) of any Shareholder
Meeting, (b) for the payment of any dividend or the making of any other
distribution, (c) for the allotment of rights, or (d) when any change or
conversion or exchange of Shares shall go into effect. If the Board fixes a
Record Date, then only Shareholders who are Shareholders of record on such
Record Date shall be entitled (a) to notice of and/or to vote at any such
Meeting, (b) to receive any such dividend or other distribution, (c) to receive
any such allotment of rights, or (d) to exercise the rights in respect of any
such change, conversion or exchange of Shares, as the case may be,
notwithstanding any transfer of Shares on the Stock Book after such Record Date.
<PAGE>
Section 5. Transfer Agents; Registrars. The Board may appoint one or more
transfer agents and registrars for its Shares and may require all Certificates
to bear the signature either of a transfer agent or of a registrar, or both.
ARTICLE VIII
Checks, Drafts, Deeds and Shares of Stock
Section 1. Checks, Drafts, Notes, Etc. All checks, drafts, notes or orders
for the payment of money of the Corporation shall, unless otherwise directed by
the Board or otherwise required by law, be signed by one or more Officers as
authorized in writing by the President. In addition, the President may authorize
any one or more employees of the Corporation ("Employees") to sign checks,
drafts and orders for the payment of money not to exceed specific maximum
amounts as designated in writing by the President for any one check, draft or
order. When so authorized by the President, the signature of any such Officer or
Employee may be a facsimile signature.
Section 2. Deeds, Notes, Bonds, Mortgages, Contracts, Etc. All deeds,
notes, bonds and mortgages made by the Corporation, and all other written
contracts and agreements, other than those executed in the ordinary course of
corporate business, to which the Corporation shall be a party, shall be executed
in its name by the President, a Vice President or any other Officer so
authorized by the Board and, when necessary or required, the Secretary or an
Assistant Secretary shall attest the execution thereof. All written contracts
and agreements into which the Corporation enters in the ordinary course of
corporate business shall be executed by any Officer or by any other Employee
designated by the President or a Vice President to execute such contracts and
agreements.
Section 3. Sale or Transfer of Stock. Subject always to the further orders
and directions of the Board, any share of stock issued by any corporation and
owned by the Corporation (including reacquired Shares of the Corporation) may,
for sale or transfer, be endorsed in the name of the Corporation by the
President or a Vice President, and said endorsement shall be duly attested by
the Secretary or an Assistant Secretary either with or without affixing thereto
the Seal.
Section 4. Voting of Stock of Other Corporations. Subject always to the
further orders and directions of the Board, any share of stock issued by any
other corporation and owned or controlled by the Corporation (an "Investment
Share") may be voted at any shareholders' meeting of such other corporation by
the President or by a Vice President. Whenever, in the judgment of the
President, it is desirable for the Corporation to execute a proxy or give a
shareholder's consent in respect of any Investment Share, such proxy or consent
shall be executed in the name of the Corporation by the President or a Vice
President, and, when necessary or required, shall be attested by the Secretary
or an Assistant Secretary either with or without affixing thereto the Seal. Any
person or persons designated in the manner above stated as the proxy or proxies
of the Corporation shall have full right, power and authority to vote an
Investment Share the same as such Investment Share might be voted by the
Corporation.
ARTICLE IX
Fiscal Year
Section 1. Fiscal Year. The Corporation's fiscal year shall begin on
January 1 of each year and end on December 31 of the same year.
ARTICLE X
Amendments
Section 1. Amendments. These By-Laws may be altered, amended or repealed,
in whole or in part, and new By-Laws may be adopted, at any Board Meeting by the
affirmative vote of a majority of the Full Board.
EXHIBIT 8(1)
October 30, 1998
Board of Directors
Lincoln Federal Savings Bank
1121 East Main Street
Plainfield, Indiana 46168-0510
Re: Federal Income Tax Opinion Relating to Conversion of Lincoln
Federal Savings Bank ("Lincoln") from a Federally-Chartered
Mutual to a Federally-Chartered Stock Organization
Gentlemen:
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to the Federal income tax consequences of the proposed
conversion (the "Conversion") of Lincoln from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank.
Lincoln is a federally-chartered mutual savings bank. As a mutual
savings bank, Lincoln has no authorized capital stock. Instead, Lincoln, in
mutual form, has a unique equity structure. A depositor of Lincoln is entitled
to interest on his account balance as declared and paid by Lincoln. A depositor
has no right to a distribution of any earnings of Lincoln, but rather these
amounts become retained earnings of Lincoln. A depositor, however, has a right
to share pro rata, with respect to the withdrawal value of his respective
account, in any liquidation proceeds distributed in the event Lincoln is ever
liquidated. Voting rights in Lincoln are held by its members, i.e., depositors
and certain borrowers. Each depositor is entitled to cast one vote for each $100
or a fraction thereof deposited in a deposit account. Each eligible borrower
member may cast one vote for each loan held. No member may cast more than 1,000
votes. All of the interests held by a depositor in Lincoln cease when such
depositor closes his accounts with Lincoln.
-1-
<PAGE>
The Board of Directors of Lincoln has decided that in order to
stimulate the growth and expansion of Lincoln through the raising of additional
capital, it would be advantageous for Lincoln to convert from a
federally-chartered mutual savings bank to a federally-chartered stock savings
bank and to form an Indiana corporation ("Holding Company") to own all of
Lincoln's issued and outstanding capital stock. It is proposed pursuant to a
plan of Conversion (the "Plan") that Lincoln's charter to operate as a mutual
savings bank be amended and a new charter be acquired to allow it to continue
its operations in the form of a stock savings bank ("Converted Bank"). Under the
Plan, Lincoln will issue shares of its capital stock to Holding Company in
exchange for all but 50% of the net proceeds derived from the sale of Holding
Company's common stock, without par value ("Common Stock"), to members of
Lincoln and certain members of the public through a subscription and community
offering, if necessary. The Plan must be approved by the Office of Thrift
Supervision ("OTS") and by an affirmative vote of at least a majority of the
total votes eligible to be cast at a meeting of Lincoln's members called to vote
on the Plan.
Following authorization, the Plan provides for the issuance of shares
of Common Stock. The aggregate purchase price at which all shares of Common
Stock will be offered and sold pursuant to the Plan will be equal to the
estimated pro forma market value of Lincoln at the time of conversion. The
estimated pro forma market value will be determined by an independent appraiser.
Pursuant to the Plan, all such shares will be issued and sold at a uniform price
per share.
As required by OTS regulations, shares of Common Stock will be offered
pursuant to non-transferable subscription rights on the basis of preference
categories. No subscriber will be allowed to purchase fewer than 25 shares of
Common Stock. Lincoln has established four preference categories under which
shares of Common Stock may be purchased and a direct community offering category
for the sale of shares not purchased under the preference categories.
The first category of preference is reserved for Lincoln's eligible
account holders. The Plan defines "eligible account holders" as any person
holding a qualifying deposit. The Plan defines "qualifying deposit" as the
aggregate balance of all savings and deposit accounts of an eligible account
holder in Lincoln at the close of business on June 30, 1997, provided such
aggregate balance is not less than $50.00. Once a Lincoln savings account holder
qualifies as an eligible account holder, he will receive, without payment,
non-transferable subscription rights to purchase Common Stock. Subject to
certain limited exceptions, the maximum number of shares that each eligible
account holder may subscribe for in his capacity as such is 25,000, subject to a
68,093 maximum for each such account holder and his Associates (as defined in
the Plan) or group of persons acting in concert. If there is an
oversubscription, shares will be allocated among subscribing eligible account
holders so as to permit each such account holder, to the extent possible, to
purchase a number of shares sufficient to make his total allocation equal to 100
shares. Any shares not then allocated shall be allocated among the subscribing
eligible account holders in the proportion that their qualifying deposits bear
to the total qualifying deposits of eligible account holders on the eligibility
record date. Non-transferable subscription rights to purchase Common Stock
received by officers and directors of Lincoln and their Associates based on
their increased deposits in Lincoln in the one-year period preceding the
eligibility record date shall be subordinated to all other subscriptions
involving the
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exercise of nontransferable subscription rights to purchase shares of Common
Stock under the first preference category. Notwithstanding the foregoing, shares
of Common Stock in excess of the maximum of the valuation range of shares
offered in the Conversion may be sold to the second category of preference
before fully satisfying the subscriptions of eligible account holders.
The second category of preference is reserved for the Holding Company's
employee stock ownership plan (the "ESOP") to be established at the time of the
Conversion. This category may subscribe for up to 10% of the shares sold in the
Conversion; provided that shares remain available after satisfying the
subscription rights of eligible account holders up to the maximum of the
valuation range of shares offered in the Conversion. It is anticipated that the
ESOP will subscribe for 8% of the shares issued in the Conversion (including
200,000 shares issued to a charitable foundation described below) pursuant to
this category of preference.
The third category of preference is reserved for Lincoln's supplemental
eligible account holders. These are persons holding savings and deposit accounts
at Lincoln at the close of business on September 30, 1998, with an aggregate
balance of not less than $50.00. If there is not subscription for all of the
Common Stock in the first and second preference categories, supplemental
eligible account holders will receive, without payment, non-transferable
subscription rights to purchase Common Stock. Subject to certain limited
exceptions, the maximum number of shares that each supplemental eligible account
holder may subscribe for in his capacity as such is 25,000, subject to a 68,093
maximum for each such account holder and his Associates or group of persons
acting in concert. Any subscription rights received by eligible account holders
in accordance with the first category of preference will reduce to the extent
thereof the subscription rights granted in this third category of preference. If
there is an oversubscription, shares will be allocated among subscribing
supplemental eligible account holders so as to permit each such account holder,
to the extent possible, to purchase a number of shares sufficient to make his
total allocation equal to 100 shares. Any shares not then allocated shall be
allocated to supplemental eligible account holders in the proportion that their
qualifying deposits bear to the qualifying deposits of all subscribing
supplemental eligible account holders.
If there is not subscription for all of the Common Stock in the first,
second and third preference categories, the fourth preference category,
consisting of members of Lincoln as of the record date for the special meeting
of members at which the Plan will be submitted for approval who are not eligible
account holders or supplemental eligible account holders ("Other Members"), will
receive, without payment, non-transferable subscription rights entitling them to
purchase Common Stock. Subject to certain limited exceptions, each Other Member
shall receive subscription rights to purchase up to 25,000 shares of Common
Stock in his capacity as such, subject to a 68,093 maximum for each such member
and his Associates or group of persons acting in concert, to the extent that
such stock is available after satisfaction of the first, second and third
preference categories. In the event of an oversubscription by Other Members,
shares will be allocated pro rata in the same proportion that the number of
shares subscribed for by each Other Member bears to the total number of shares
subscribed for by all Other Members.
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<PAGE>
If there are shares of Common Stock available after the first, second,
third and fourth preference categories have been exhausted, it is anticipated
that they will be sold to members of the general public in a best efforts
community offering, giving preference to residents of Clinton, Hendricks, and
Montgomery Counties. The maximum number of shares which may be purchased in this
Community Offering by any person (including his Associates) or persons acting in
concert is 25,000 shares of Common Stock. A person with subscription rights who,
together with his Associates and persons acting in concert, has subscribed for
shares in the Subscription Offering, may subscribe for additional shares in the
Community Offering that do not exceed the lesser of (i) 25,000 shares or (iii)
the number of shares which, when added to the number of shares subscribed for by
such person and his Associates and persons acting in concert would not exceed
68,093 shares.
Lincoln's Board of Directors may increase the maximum purchase
limitations in the Plan up to 9.99% of the shares of Common Stock offered in the
Conversion, provided that orders for Common Stock exceeding 5% of the total
offering may not exceed, in the aggregate, 10% of the total offering. Officers
and directors of Lincoln and their Associates may not purchase in the aggregate
more than 34% of the shares offered pursuant to the Plan. Directors of Lincoln
will not be deemed Associates or a group acting in concert solely as a result of
their membership on the Board of Directors of Lincoln. All of the shares of
Common Stock purchased by officers and directors will be subject to certain
restrictions on sale for a period of one year. In order to achieve the widest
distribution of the stock in the Community Offering, orders for stock shall be
filled up to a maximum of 2% of the Common Stock and thereafter remaining shares
shall be allocated on an equal number of shares basis per order until all orders
have been filled. The overall purchase limitation may be reduced to any number
to a minimum of 1% of the shares sold in the Conversion, in the sole discretion
of the Board of Directors of Lincoln.
The Plan provides that no person will be issued any subscription rights
or be permitted to purchase any Common Stock if such person resides in a foreign
country or in a state of the United States with respect to which all of the
following apply: (a) a small number of persons otherwise eligible to subscribe
for shares under this Plan reside in such state; (b) the issuance of
subscription rights or the offer or sale of the Common Stock to such persons
would require Lincoln or the Holding Company or their respective officers or
directors under the securities law of such state to register as a broker or
dealer or to register or otherwise qualify its securities for sale in such
state; and (c) such registration or qualification would be impracticable for
reasons of cost or otherwise.
The Plan also provides for the establishment of a liquidation account
by Lincoln. The liquidation account will be equal in amount to the net worth of
Lincoln near the time of conversion. The establishment of the liquidation
account will not operate to restrict the use or application of any of the net
worth accounts of Converted Bank, except that Converted Bank will not
voluntarily reduce the net worth accounts if the result thereof would be to
reduce its net worth below the amount required to maintain the liquidation
account. The liquidation account will be for the benefit of Lincoln's eligible
account holders and supplemental eligible account holders who maintain accounts
in Lincoln at the time of conversion. All such account holders, including those
account holders not entitled to subscription rights for reasons of foreign or
out-of-state residency (as described above),
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will have an interest in the liquidation account. The interest such account
holder will have is a right to receive, in the event of a complete liquidation
of Converted Bank, a liquidating distribution from the liquidation account in
the amount of the then current adjusted subaccount balances for deposit accounts
then held, prior to any liquidation distribution being made with respect to
capital stock.
The initial subaccount balance for a deposit account held by an
eligible account holder and supplemental eligible account holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of the qualifying deposit in the
deposit account and the denominator is the total amount of qualifying deposits
of all eligible account holders and supplemental eligible account holders in
Lincoln. The initial subaccount balance will never be increased, but may be
decreased if the deposit balance in any qualifying savings account of any
eligible account holder or supplemental eligible account holder on any annual
closing date subsequent to the eligibility record date or supplemental
eligibility record date is less than the lesser of (1) the deposit balance in
the savings account at the close of business on any other annual closing date
subsequent to the eligibility record date or supplemental eligibility record
date, or (2) the amount of the qualifying deposit in such deposit account. In
such event, the subaccount balance for the deposit account will be adjusted by
reducing each subaccount balance in an amount proportionate to the reduction in
the deposit balance. Once decreased, the Plan provides that the subaccount
balance may never be subsequently increased, and if the deposit account of an
eligible account holder or supplemental eligible account holder is closed, the
related subaccount balance in the liquidation account will be reduced to zero.
Following the Conversion, voting rights with respect to Converted Bank
will rest with Holding Company, and with respect to Holding Company will rest
exclusively with the holders of Common Stock. The Conversion will not interrupt
the business of Lincoln, and its business will continue as usual by Converted
Bank. Each depositor will retain a withdrawable savings or deposit account or
accounts equal in amount to the withdrawable account at the time of conversion.
Mortgage loans of Lincoln will remain unchanged and retain their same
characteristics in Converted Association after the conversion. The Converted
Bank will continue the membership of Lincoln in the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") and the
Federal Home Loan Bank System, and will remain subject to the regulatory
authority of the OTS and the FDIC.
As part of the Conversion, the Bank has provided for the establishment
of a charitable foundation that will qualify as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Foundation"). The Foundation is intended to further the Converted Bank's long
term commitment to its community. The Plan provides that the Foundation is
intended to complement the Bank's existing community reinvestment activities so
as to allow the local community to share in the growth and profitability of the
Holding Company and the Converted Bank over the long term. The Plan of
Conversion provides that the Holding Company intends to donate to the Foundation
200,000 shares of its authorized but unissued common stock. In the event that
the Foundation does not receive the requisite approval from regulatory agencies
and Bank members, the Bank may determine to complete the Conversion without the
Foundation.
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<PAGE>
The Foundation will be dedicated to the promotion of charitable and
educational purposes within Hendricks County, Montgomery County and Clinton
County, Indiana and its neighboring communities, including, but not limited to,
grants or donations to support housing assistance, scholarships, local
education, not-for-profit medical facilities, not-for-profit community groups
and other types of organizations or civic minded projects. The Foundation will
annually distribute total grants and donations to assist charitable
organizations or to fund projects within its local community of not less than 5%
of the average fair value of the Foundation assets each year. In order to serve
the purposes for which it is found and to maintain its Section 501(c)(3)
qualification, the Foundation may sell, on an annual basis, a limited portion of
the Common Stock contributed to it by the Holding Company.
It is anticipated that on a date which is at least six months following
the Conversion, Holding Company and/or the Bank will adopt a stock option plan
and a "recognition and retention" plan and trust ("RRP"). A number of shares of
Common Stock equal to four percent (4.0%) of the shares of Common Stock issued
in the Conversion (including the shares issued to the Foundation) will be
reserved to fund the RRP and a number of shares of Common Stock equal to 10% of
the shares of Common Stock issued in the Conversion (including the shares issued
to the Foundation) will be reserved for stock option grants under the stock
option plan. In addition, the Converted Bank will establish an employee stock
ownership plan and trust for the benefit of its employees at the time of the
Conversion. The stock option plan, RRP and employee stock ownership plan are
referred to collectively herein as the "Employee Plans." Additionally, Holding
Company will adopt certain "anti-takeover provisions" in its proposed Articles
of Incorporation and Code of By-Laws.
We have received, and are relying upon, certificates of certain
officers of Lincoln to the effect that:
a. Converted Bank has no plan or intention to redeem or otherwise
acquire any of its capital stock issued to Holding Company in
connection with the Conversion.
b. Immediately following consummation of the Conversion,
Converted Bank will possess the same assets and liabilities as
Lincoln held immediately prior to the proposed transaction,
plus all but 50% of the net proceeds from the sale of Common
Stock.
c. Converted Bank has no plan or intention to sell or otherwise
dispose of any of the assets of Lincoln acquired in the
Conversion, except for dispositions in the ordinary course of
business.
d. Following the Conversion, Converted Bank will continue to
engage in the same business in substantially the same manner
as engaged in by Lincoln before the Conversion.
e. The aggregate fair market value of the qualifying deposits (as
defined in the Plan) held by eligible account holders as of
the close of business on June 30, 1997, and by
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supplemental eligible account holders on September 30, 1998,
equaled or exceeded or will equal or exceed 99% of the
aggregate fair market value of all savings accounts in Lincoln
(including accounts of less than $50) at the close of business
on such respective dates.
f. No shares of Common Stock will be issued to or be purchased by
depositor-employees at a discount or as compensation in the
Conversion, although shares may be purchased at fair market
value by the RRP and the ESOP established in connection with
the Conversion.
g. No cash or property will be given to eligible account holders,
supplemental eligible account holders or Other Members in lieu
of (a) non-transferable subscription rights or (b) an interest
in the liquidation account of Converted Bank.
h. Lincoln is not under the jurisdiction of a court in any Title
11 or similar case within the meaning of Section 368(a)(3)(A)
of the Internal Revenue Code of 1986, as amended (the "Code").
i. At the time of the Conversion the fair market value of the
assets of Lincoln on a going concern basis will exceed the
amount of its liabilities plus the amount of liabilities to
which the assets are subject. All such liabilities were
incurred in the ordinary course of business and are associated
with the assets transferred. Immediately before the
Conversion, Lincoln will have a positive net worth.
j. Lincoln has received or will receive an opinion from Keller &
Company, Inc., which concludes that the subscription rights to
be received by eligible subscribers have no economic value at
the date of distribution or the time of exercise whether or
not a public offering takes place (the "Keller Financial
Opinion"). The exercise price of the subscription rights will
be approximately equal to the fair market value of the Common
Stock at the time of the Conversion.
k. Holding Company has no plan or intention to sell or otherwise
dispose of the capital stock of Converted Bank received by it
in the proposed transaction, and there is no plan or intention
for Converted Bank to be liquidated or merged with another
corporation following the transaction.
l. The fair market value of the withdrawable deposit accounts in
Converted Bank (plus the related interest in the Converted
Bank liquidation account) to be constructively received under
the Plan by the eligible account holders and supplemental
eligible account holders of Lincoln will, in each instance, be
approximately equal to the fair market value of Lincoln's
deposit accounts (plus the related interest in the Lincoln
liquidation account) surrendered in constructive exchange by
them. All proprietary
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rights in Lincoln form an integral part of the withdrawable
savings accounts being surrendered in the exchange.
m. Lincoln utilizes a reserve for bad debts in accordance with
Section 593 of the Code, and following the Conversion,
Converted Bank shall likewise continue to utilize a reserve
for bad debts in accordance with Section 593 of the Code.
n. Holding Company, Lincoln and Converted Bank are corporations
within the meaning of Section 7701(a)(3) of the Code. Lincoln
and Converted Bank are domestic building and loan associations
within the meaning of Section 7701(a)(19)(C) of the Code.
o. Lincoln deposit account holders and Other Members will pay
expenses of the Conversion solely attributable to them, if
any. Lincoln and Holding Company will each pay its own
expenses of the Conversion and will not pay any expenses
solely attributable to the deposit account holders, Other
Members or the holders of Common Stock.
p. Immediately following the Conversion, the former depositors of
Lincoln will own all of the outstanding interests in the
Converted Bank liquidation account and will own such interests
solely by reason of their ownership of deposits at Lincoln
(including the attendant rights to liquidation proceeds)
immediately before the Conversion.
q. Assets of Lincoln used to pay expenses of the Conversion
(without reference to expenses of the offering or sale of the
Common Stock) and to make distributions (other than regular,
normal interest payments) will, in the aggregate, constitute
less than 1% of the net assets of Lincoln. Any such expenses
or distributions will be paid or reimbursed from proceeds of
the sale of the Common Stock.
r. At the time of the Conversion, Lincoln will not have
outstanding any warrants, options, convertible securities, or
any other type of right pursuant to which any person could
acquire stock in Converted Bank.
s. No account holder of Lincoln who is eligible to receive an
interest in the Converted Bank liquidation account will be
excluded from participation in the Converted Bank liquidation
account.
t. Holding Company has no plan or intention to redeem or
otherwise reacquire any of the Common Stock issued in the
proposed transaction.
u. Neither the Common Stock nor the stock of Converted Bank
issued pursuant to the proposed transactions will be callable
or subject to a put option (except as required under any
Employee Plan).
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v. None of the compensation received by a Lincoln employee who is
also an eligible account holder, supplemental eligible account
holder, or Other Member will be separate consideration for, or
allocable to, his or her status as eligible account holder,
supplemental eligible account holder, or Other Member; none of
the Common Stock or interests in the liquidation account of
Converted Bank received by any such employee will be separate
consideration for, or allocable to, any employment agreement
or arrangement (other than an Employee Plan); and the
compensation paid to the employee will be for services
actually rendered and will be commensurate with the
compensation that would be paid to third parties bargaining at
arm's length for similar services.
w. There is no intercorporate indebtedness existing between
Holding Company and Lincoln that was issued or acquired, or
will be settled, at a discount.
x. Holding Company is not an investment company as described in
Section 351(e) of the Code.
y. The principal amount, interest rate and maturity date of each
deposit account in Converted Bank received by a Lincoln
eligible account holder or supplemental eligible account
holder are identical to those of the corresponding Lincoln
deposit account that was held by the account holder
immediately prior to the Conversion.
OPINION OF COUNSEL
Based solely upon the foregoing information, including the Keller
Financial Opinion, the provisions of the Code, the regulations thereunder and
such other authorities as we have deemed appropriate to consider, all as in
effect on the date hereof, our opinion is as follows:
(1) The change in the form of Lincoln from a federally-chartered
mutual savings bank to a federally-chartered stock savings
bank, as described above, will constitute a reorganization
within the meaning of Section 368(a)(1)(F) of the Code and no
gain or loss will be recognized to either Lincoln or to
Converted Bank as a result of such Conversion (see Rev. Rul.
80-105, 1980-1 C.B. 78). Lincoln and Converted Bank will each
be a party to a reorganization within the meaning of Section
368(b) of the Code (Rev. Rul. 72-206, 1972-1 C.B. 105).
(2) No gain or loss will be recognized by Converted Bank on the
receipt of money and other property, if any, from Holding
Company in exchange for shares of Converted Bank's capital
stock (Section 1032(a) of the Code).
(3) No gain or loss will be recognized by Holding Company upon the
receipt of money for Common Stock (Section 1032(a) of the
Code).
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(4) The assets of Lincoln will have the same basis in the hands of
Converted Bank as in the hands of Lincoln immediately prior to
the Conversion (Section 362(b) of the Code).
(5) The holding period of the assets of Lincoln to be received by
Converted Bank will include the period during which the assets
were held by Lincoln prior to the Conversion (Section 1223(2)
of the Code).
(6) Depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of Converted
Bank, non-transferable subscription rights to purchase Common
Stock, and/or interests in the liquidation account of
Converted Bank. Any gain resulting therefrom will be
recognized, but only in an amount not in excess of the fair
market value of the subscription rights and interests in the
liquidation accounts received. The liquidation accounts will
have nominal, if any, fair market value. See Paulsen v.
Commissioner, 469 U.S. 131, 139 (1985), quoting Society for
Savings v. Bowers, 349 U.S. 143 (1955); but see Rev. Rul.
69-3, 1969-1 C.B. 103 and Rev. Rul. 69-646, 1969-2 C.B. 54
(the interest received rises to the level of "stock" and thus,
in some circumstances, Section 354 of the Code applies). Based
solely on the accuracy of the conclusion reached in the Keller
Financial Opinion, and our reliance on such opinion, that the
subscription rights have no economic value at the time of
distribution or exercise, no gain or loss will be required to
be recognized by eligible account holders or supplemental
eligible account holders upon receipt or distribution of
subscription rights. (Section 1001 of the Code.) Similarly,
based solely on the accuracy of the aforesaid conclusion
reached in the Keller Financial Opinion and our reliance
thereon, we give the following opinions: (a) no taxable income
will be recognized by the Other Members of Lincoln upon the
distribution to them of subscription rights or upon the
exercise of the subscription rights to acquire Common Stock at
fair market value; (b) no taxable income will be realized by
the depositors or borrowers of Lincoln as a result of the
exercise of the non-transferable subscription rights to
purchase Common Stock at fair market value, Rev. Rul. 56-572,
1956-2 C.B. 182; and (c) no taxable income will be realized by
Converted Bank, Lincoln or Holding Company on the issuance or
distribution of subscription rights to depositors and
borrowers of Lincoln to purchase shares of Common Stock at
fair market value. Section 311 of the Code.
(7) A depositor's basis in the deposits of Converted Bank will be
the same as the basis of such depositor's deposits in Lincoln.
Section 1012 of the Code. The basis of the non-transferable
subscription rights will be zero increased by the amount of
gain, if any, recognized on their receipt. The basis of the
interest in the liquidation account of Converted Bank received
by eligible account holders and supplemental eligible account
holders will be equal to the cost of such property, i.e., the
fair market value of the proprietary interest in Converted
Bank received in exchange for the proprietary interest in
Lincoln, which in this transaction we assume to be zero.
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(8) The basis of the Holding Company Common Stock to its
shareholders will be the purchase price thereof, plus, in the
case of stock acquired by the exercise of subscription rights,
the basis, if any, in the subscription rights exercised.
Section 1012 of the Code.
(9) A shareholder's holding period for Common Stock acquired
through the exercise of the non-transferable subscription
rights shall begin on the date on which the subscription
rights are exercised. Section 1223(6) of the Code. The holding
period of the Common Stock purchased pursuant to the Community
Offering will commence on the date following the date on which
the stock is purchased. Rev. Rul. 70-598, 1970-2 C.B. 168;
Rev. Rul. 66-97, 1966-1 C.B. 190.
(10) The part of the taxable year of Lincoln before the Conversion
and the part of the taxable year of Converted Bank after the
Conversion will constitute a single taxable year of Converted
Bank. (See Rev. Rul. 57-276, 1957-1 C.B. 126). Consequently,
Lincoln will not be required to file a federal income tax
return for any short portion of such taxable year (Section
1.381(b)-1(a)(2) of the Income Tax Regulations).
(11) Converted Bank will succeed to and take into account the
earnings and profits or deficit in earnings and profits of
Lincoln as of the date or dates of Conversion. (Section
381(c)(2) of the Code and Section 1.381(c)(2)-1 of the Income
Tax Regulations.)
(12) Regardless of book entries made for the creation of the
liquidation account, the Conversion will not diminish the
accumulated earnings and profits of the Converted Bank
available for the subsequent distribution of dividends within
the meaning of Section 316 of the Code (Sections 1.312-11(b)
and (c) of the Income Tax Regulations). The creation of the
liquidation account on the records of Converted Bank will have
no effect on its taxable income, deductions for addition to
reserve for bad debts under Section 593 of the Code, or
distributions to shareholders under Section 593(e) of the Code
(Rev. Rul. 68-475, 1968-2 C.B. 259).
(13) Converted Bank will succeed to and take into account,
immediately after the Conversion, those accounts of Lincoln
which represent bad debt reserves in respect of which Lincoln
has taken a bad debt deduction for taxable years ending on or
before the date of the Conversion. The bad debt reserves will
not be required to be restored to the gross income of either
Lincoln or Converted Bank solely as a result of the
Conversion, and such bad debt reserves will have the same
character in the hands of the Converted Bank as they would
have had in the hands of Lincoln if no distribution or
Conversion had occurred. (Section 381(c)(4) of the Code and
Section 1.381(c)(4)-1(a)(1)(ii) of the Income Tax
Regulations.) No opinion is being expressed as to whether the
bad debt reserves will be required to be restored to the
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gross income of either Lincoln or Converted Bank for the
taxable year of the transfer as a result of the requirements
of Section 593(g) of the Code.
(14) Inasmuch as the Conversion constitutes a tax-free
reorganization for federal income tax purposes, Lincoln will
not incur any liability for Indiana adjusted gross income tax,
financial institutions tax, supplemental net income tax,
county adjusted gross income tax or county option income tax
as a result of the Conversion. Lincoln will not incur any
Indiana gross income tax liability as a result of the
Conversion. Amounts received by Holding Company in exchange
for the issuance of Common Stock and amounts received by
Converted Bank in exchange for the issuance of its capital
stock will constitute contributions to capital which are
exempt from the gross income tax.
(15) Assuming that the interests in the liquidation account and the
subscription rights that will be constructively issued to them
as a part of the Plan have nominal, if any, fair market value,
depositors will incur no liability for Indiana gross income
tax, adjusted gross income tax, financial institutions tax,
county adjusted gross income tax or county option income tax
as a result of the Conversion.
(16) Following the Conversion, the Converted Bank will continue to
be subject to the Indiana financial institutions tax.
Our opinion on the above issues is based on information and
representations provided by officers of Lincoln on behalf of Lincoln and its
members. Neither the Internal Revenue Service nor the Indiana Department of
Revenue has ruled on these issues and our opinion is not binding on either
agency. The Internal Revenue Service or the Indiana Department of Revenue could
take a position contrary to that expressed in this opinion on some or all of the
above issues, and such a position if ultimately sustained could result in
adverse tax consequences to Lincoln or its members.
No opinion is provided as to possible tax consequences of the
Conversion under any federal, state, local or foreign tax laws except as
specifically provided above.
Very truly yours,
BARNES & THORNBURG
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Exhibit 10(6)
December ___, 1998
Home Federal Savings Bank, as Trustee
of the Lincoln Bancorp Employee Ownership Plan and Trust
501 Washington Street
Columbus, Indiana 47201
Dear Sir:
This letter confirms Lincoln Bancorp's commitment to fund a leveraged
ESOP in an amount up to $5,607,400. The commitment is subject to the following
terms and conditions:
1) Lender: Lincoln Bancorp.
2) Borrower: Lincoln Bancorp Employee Stock Ownership Plan.
3) Trustee: Home Federal Savings Bank.
4) Security: Unallocated shares of stock of the Company held in
the Lincoln Bancorp Employee Stock Ownership Plan.
5) Maturity: Up to 20 years from takedown.
6) Amortization: Equal annual principal payments, plus accrued
interest.
7) Pricing:
a. The Prime Rate as published in the Wall Street
Journal on the date of the loan transaction.
8) Interest Payments:
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a. Annual on a 360 day basis.
9) Funding: In full by the date of closing of the conversion of
Lincoln Federal Savings Bank to stock form (the "Closing
Date").
10) Prepayment: Voluntary prepayments are permitted at any time.
11) Conditions Precedent to Closing: Receipt by the Company of all
supporting loan documents in a form and with terms and
conditions satisfactory to the Company and its counsel.
Consummation of the transaction will also be contingent upon
no material adverse change occurring in the condition of
Lincoln Federal Savings Bank or the Company.
12) Closing Date: Not later than the Closing Date, unless such
date is waived by the Company.
If the terms and conditions are agreeable to you, please indicate your
acceptance by signing the enclosed copy and returning it to my attention.
Sincerely,
LINCOLN BANCORP
By:
John M. Baer
Accepted on behalf of Lincoln Bancorp
Employee Stock Ownership Plan and Trust
By: Home Federal Savings Bank, as Trustee
Trust Officer
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Exhibit 10(6)
EXEMPT LOAN AND SHARE PURCHASE AGREEMENT
between
TRUST UNDER
LINCOLN BANCORP
EXEMPT STOCK OWNERSHIP PLAN AND TRUST AGREEMENT
(EFFECTIVE AS OF JULY 1, 1998)
and
LINCOLN BANCORP
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION...........................2
Section 1.1. General Interpretation..............................2
Section 1.2. Certain Definitions.................................2
ARTICLE II TRUST LOAN; TRUST NOTE; PAYMENTS.........................2
Section 2.1. Trust Loan..........................................2
Section 2.2. Use of Trust Loan Proceeds..........................3
Section 2.3. Trust Note..........................................3
Section 2.4. Interest............................................3
Section 2.5. Payments............................................3
Section 2.6. Optional Prepayment.................................4
Section 2.7. Place and Time of Payment...........................4
Section 2.8. Application of Certain Payments.....................4
Section 2.9. Due Date Extension..................................4
Section 2.10. Computations........................................5
Section 2.11. Interest on Overdue Amounts.........................5
ARTICLE III SECURITY.................................................5
Section 3.1. Security............................................5
Section 3.2. Release of Shares...................................5
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS................5
Section 4.1. Representations and Warranties of Trustee...........5
Section 4.2. Representations and Warranties of Company...........6
Section 4.3. Covenants of Company................................8
ARTICLE V CONDITIONS PRECEDENT.....................................8
Section 5.1. Documentation Satisfactory to Company...............8
Section 5.2. Other Conditions Precedent to
Company Obligations..............................9
Section 5.3. Documentation Satisfactory to Trustee...............9
Section 5.4. Other Conditions Precedent to
Trustee's Obligation.............................9
ARTICLE VI EVENTS OF DEFAULT AND THEIR EFFECT.......................9
Section 6.1. Events of Default; Effect...........................9
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ARTICLE VII SHARE PURCHASES.........................................10
Section 7.1. Purchase of Shares.................................10
Section 7.2. Manner of Purchase.................................10
Section 7.3. Readily Tradeable..................................10
Section 7.4. No Prohibited Transactions.........................10
Section 7.5. Maximum Number of Shares...........................10
ARTICLE VIII GENERAL.................................................11
Section 8.1. Waivers; Amendments................................11
Section 8.2. Confirmations; Information.........................11
Section 8.3. Captions...........................................11
Section 8.4. Governing Law......................................11
Section 8.5. Notices............................................11
Section 8.6. Expenses...........................................11
Section 8.7. Reimbursement......................................11
Section 8.8. Entire Agreement...................................12
Section 8.9. Severability.......................................12
Section 8.10. No Assignment......................................12
Section 8.11. Counterparts.......................................12
ARTICLE IX LIMITED RECOURSE........................................12
Section 9.1. Limited Recourse...................................12
Section 9.2. No Personal Recourse Against Trustee...............12
Exhibit A TRUST NOTE..............................................14
Exhibit B SHARE PLEDGE AGREEMENT...................................1
Exhibit C CERTIFICATE OF TRUSTEE..................................10
Exhibit D CERTIFICATE OF THE COMPANY..............................11
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EXEMPT LOAN AND SHARE PURCHASE AGREEMENT
THIS EXEMPT LOAN AND SHARE PURCHASE AGREEMENT (this "Agreement" or
"Loan Agreement"), dated December ___, 1998, between the Trust (the "Trust")
established pursuant to the provisions of the LINCOLN BANCORP EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST AGREEMENT (EFFECTIVE AS OF JULY 1, 1998) (the "ESOP")
by Home Federal Savings Bank, as Trustee (the "Trustee"), and LINCOLN BANCORP,
an Indiana corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has duly established the ESOP in connection with
which the Trust has been created;
WHEREAS, pursuant to the ESOP and direction of the Company pursuant to
Section 8.7 of the ESOP, the Trust desires to borrow from the Company, and the
Company desires to lend to the Trust, an aggregate principal amount equal to up
to Five Million Six Hundred Seven Thousand Four Hundred Dollars ($5,607,400)
(the "Trust Loan"), representing the cost of 8% of the shares of Common Stock,
without par value, of the Company (the "Common Stock"), offered in the
Subscription Offering and the Community Offering of the Company's Common Stock
being made in connection with the Company's acquisition of the common stock of
Lincoln Federal Savings Bank (the "Bank") upon conversion of the Bank from a
federal mutual savings bank to a federal stock savings bank (the "Conversion"),
plus 8% of 200,000 shares issued by the Company to a charitable foundation
valued at $10.00 per share;
WHEREAS, the parties hereto intend that the Trust Loan constitute an
"exempt loan" within the meaning of Section 4975(d)(3) of the Code, Treasury
Regulation ss. 54.4975-7(b), Section 408(b)(3) of ERISA, and Department of Labor
Regulation ss. 2550.408b-3 (collectively, the "Exempt Loan Rules") and an
"Exempt Loan" within the meaning of Sections 1.20 and 8.7 of the ESOP;
WHEREAS, the parties intend that the Trustee will utilize the Trust
Loan for the purpose of effecting purchases in the Subscription Offering and
Community Offering (collectively, the "Offering") or otherwise of shares of
Company Common Stock, without par value ("Shares"), to be held in the Trust for
participants in the ESOP.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and other good and valuable
consideration (the receipt, adequacy and sufficiency of which each party hereto
respectively acknowledges by its execution hereof), the parties hereto intending
legally to be bound do hereby agree as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. General Interpretation. This Agreement shall be construed
and interpreted so as to maintain the status of the ESOP as a qualified
leveraged employee stock ownership plan under Sections 401(a) and 4975(e)(7) of
the Code, the Trust as exempt from taxation under Section 501(a) of the Code,
and the Trust Loan as an "exempt loan" under the Exempt Loan Rules, and as an
"Exempt Loan" under Section 8.7 of the ESOP (collectively, the "Required
Status").
Section 1.2. Certain Definitions. In this Agreement, unless a clear
contrary intention appears, the terms set forth below have the following
meanings when used herein. Other terms are defined elsewhere herein.
(a) "Business Day" means a day, other than a Saturday, Sunday or public
holiday, on which commercial banks are open in Plainfield, Indiana for the
purpose of conducting commercial banking business.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
(c) "Default" means an event or circumstance which, with notice or
lapse of time or both, would constitute an Event of Default as defined in
Section 6.1.
(d) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and regulations promulgated thereunder.
(e) "Loan Documents" shall mean, collectively, this Agreement, the
Trust Note, the Share Pledge Agreement and any other instruments or documents
required to be delivered pursuant hereto or thereto, in each case as amended and
in effect from time to time.
ARTICLE II
TRUST LOAN; TRUST NOTE; PAYMENTS
Section 2.1. Trust Loan. Subject to the terms and conditions of this
Agreement, the Company agrees to make available to the Trust, and the Trust may
borrow from the Company, on the Closing Date (hereinafter defined), the Trust
Loan under this Agreement in an amount up to Five Million Six Hundred Seven
Thousand Four Hundred Dollars ($5,607,400), representing the cost of 8% of the
Shares offered in the Offering and 8% of 200,000 shares issued by the Company to
a charitable foundation, valued at $10.00 per share. The Company shall, upon
fulfillment of the applicable conditions set forth in Article V, on the Closing
Date make the Trust Loan up to such amount available to the Trustee in
immediately available funds, at its principal office.
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Notwithstanding the foregoing, the Company shall not be obligated to make any
portion of the Trust Loan available to the Trust if the Conversion is not
consummated, or if the ESOP is not permitted to purchase any shares because of
an oversubscription in the first category of eligible subscribers. The Closing
of the Trust Loan (the "Closing") will occur at the offices of Barnes &
Thornburg, 1313 Merchants Bank Building, 11 South Meridian Street, Indianapolis,
Indiana 46204, on the same date that the Conversion closes, or such later date
as the parties shall agree upon (the "Closing Date").
Section 2.2. Use of Trust Loan Proceeds. The Trust will use the
proceeds of the Trust Loan to purchase Shares in the Offering, in accordance
with Article VII hereof.
Section 2.3. Trust Note. The Trust Loan will be represented by a
promissory note of the Trust (the "Trust Note"), substantially in the form of
Exhibit A hereto, appropriately completed, dated the Closing Date, payable to
the order of the Company in the original principal amount of the Trust Loan, or
so much thereof as may at any time have been advanced hereunder and thereunder,
on the maturity date thereof.
Section 2.4. Interest. The portion of the Trust Loan principal
outstanding at any time shall accrue and bear daily interest at a fixed rate per
annum equal to the prime rate as published in "The Wall Street Journal" on the
Closing Date (the "Interest Rate"), payable annually in accordance with Section
2.5. On any stated or accelerated maturity of the Trust Loan all accrued and
unpaid interest thereon shall be forthwith due and payable.
Section 2.5. Payments. The Trust shall pay the principal amount of the
Trust Loan together with accrued interest as follows:
(a) an initial principal installment of one twentieth (1/20)
of the initial principal amount of the Trust Loan, shall be due and
payable on December 31, 1999, together with all interest accrued on the
Trust Loan from the Closing Date through and including December 31,
1999; and
(b) thereafter, payments of principal and interest shall be
made in annual installments due and payable on the last business day of
December of each year, commencing on December 31, 2000, through and
including December 31, 2018, which annual installments shall include a
principal payment in the amount of one twentieth of the initial
principal amount of the Trust Loan, plus all interest accrued on the
Trust Loan through and including the date of such payment.
The outstanding principal of the Trust Loan, together with all accrued and
unpaid interest and any other obligations then outstanding, will in any event be
due and payable in full on December 31, 2018.
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Section 2.6. Optional Prepayment.
(a) Upon compliance with this Section 2.6, the Trust, at its
option, may prepay the Trust Note at any time and from time to time,
either in whole or in part, by payment of the principal amount of the
Trust Note or portion thereof to be prepaid and accrued interest
thereon to the date of such prepayment.
(b) The Trustee will give notice of any prepayment of the
Trust Note pursuant to this Section 2.6 to the Company not less than 3
days nor more than 60 days before the date fixed for such optional
prepayment specifying (i) such date, (ii) that prepayment is to be made
under Section 2.6 of this Agreement, (iii) the principal amount of the
Trust Note to be prepaid on such date, and (iv) accrued interest
applicable to the prepayment. Such notice of prepayment shall be signed
by the Trustee. Notice of prepayment having been so given, the
aggregate principal amount of the Trust Note specified in such notice,
together with accrued interest thereon shall become due and payable on
the prepayment date.
(c) Partial prepayments of the Trust Note made pursuant to
this Section 2.6 shall be credited in each case against remaining
scheduled payments on the Trust Note in the inverse order of the due
dates of such payments.
(d) No such prepayment shall, however, be permitted if such
prepayment would adversely affect the Required Status.
Section 2.7. Place and Time of Payment. All payments of principal of,
or interest on, the Trust Note shall be made by the Trust to the Company in same
day funds at Plainfield, Indiana, not later than 11:00 a.m. on the date due.
Funds received after that hour shall be deemed to have been received on the next
following Business Day.
Section 2.8. Application of Certain Payments. If, and to the extent,
Shares acquired with proceeds of the Trust Loan, held in the Trust and not yet
allocated to participant accounts are sold, then, to the extent allowable by the
Exempt Loan Rules and applicable law, the Trustee, at the direction of the ESOP
Committee administering the ESOP (the "Committee"), may apply the proceeds
thereof toward the repayment of the Trust Loan. Dividends or other cash
distributions paid on the Shares purchased with the proceeds of the Trust Loan
(whether or not allocated to the accounts of Participants) shall be used by the
Trustee, at the discretion of the Committee, to the extent permissible to repay
the Trust Loan in accordance with the provisions of Section 4.5 of the ESOP.
Section 2.9. Due Date Extension. If any payment of principal of, or
interest on, the Trust Note falls due on a day that is not a Business Day, then
such due date shall be extended to the next following Business Day, and
additional interest shall accrue and be payable for the period of such
extension.
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Section 2.10. Computations. All computations of interest on the Trust
Loan and other amounts due hereunder shall be based on a year of 360 days,
comprising twelve 30-day months.
Section 2.11. Interest on Overdue Amounts. If any payment of principal
of, or interest on, the Trust Note is not made when due, interest shall accrue
on the amount thereof, commencing on such due date through the date on which
such amount is paid in full, at a rate per annum equal to the Interest Rate plus
two percent (2%).
ARTICLE III
SECURITY
Section 3.1. Security. Payment of the Trust Note and performance by the
Trust of its obligations under this Agreement and the Trust Note will be secured
by a pledge of, and the grant of a security interest in, the Shares by the
Trustee on behalf of the Trust to and in favor of the Company under a Share
Pledge Agreement, substantially in the form of Exhibit B hereto (the "Share
Pledge Agreement").
Section 3.2. Release of Shares. Notwithstanding any provision of this
Agreement or the Share Pledge Agreement to the contrary contained or implied,
the Company will release from the pledge and security interest under the Share
Pledge Agreement, such Shares as must be allocated to ESOP participants under
the ESOP pursuant to Section 8.7(h) of the ESOP and otherwise under the Code,
the Exempt Loan Rules or other applicable law, provided that Section 8.7(h) of
the ESOP shall not be amended without the Trustee's prior consent.
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS
Section 4.1. Representations and Warranties of Trustee. To induce the
Company to enter this Agreement and to make the Trust Loan, the Trustee
represents and warrants to the Company as follows:
(a) The Trustee has determined that the Trust Loan is
primarily for the benefit of ESOP participants and their beneficiaries
and bears interest at a rate not in excess of a reasonable rate and
that the terms of the loan are at least as favorable to the Trust and
the ESOP participants as the terms of a comparable loan resulting from
arm's-length negotiations between completely independent parties;
(b) The Trustee is a federal savings bank, legally existing
and in good standing under federal law, has corporate power and
authority and is duly authorized to enter into and perform the Trust;
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(c) The Trustee has full right, power and authority to
execute, deliver and perform on behalf of the Trust under the Trust
Agreement, the ESOP and otherwise the obligations set forth in the Loan
Documents, and the execution and performance of such obligations will
not conflict with or result in a breach of the terms of the ESOP or the
Trust or result in a breach or violation of the Trustee's Articles of
Association or By-Laws or of any law or regulation, order, writ,
injunction or decree of any court or governmental authority binding on
the Trust or Trustee;
(d) The ESOP (and related Trust) has been duly authorized by
all necessary corporate action on the part of the Trustee, if any, has
been duly executed by an authorized officer of the Trustee and
delivered and constitutes a legal, valid and binding obligation of the
Trustee and declaration of trust enforceable in accordance with its
terms;
(e) The Loan Documents have been duly authorized, executed and
delivered by the Trustee and constitute legal, valid and binding
obligations, contracts and agreements of the Trustee on behalf of the
Trust, enforceable in accordance with their respective terms;
(f) The execution, delivery and performance of the Loan
Documents do not conflict with, or result in the creation or imposition
of any lien or encumbrance upon any of the property of the Trustee
(other than the Collateral, as defined in the Share Pledge Agreement)
pursuant to the provisions of the ESOP (and related Trust) or any other
agreement or other instrument to which the Trustee is a party or may be
bound; and
(g) No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental body, Federal, state or local, is necessary in connection
with the execution, delivery and performance by the Trustee of the Loan
Documents.
Section 4.2. Representations and Warranties of Company. To induce the
Trust to enter this Agreement and undertake the obligations hereunder, the
Company represents and warrants to the Trust as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Indiana, has corporate power
and authority and is duly authorized to enter into and perform its
obligations under this Agreement;
(b) Neither the execution and delivery of this Agreement, nor
the performance of the terms hereof nor the establishment of the ESOP
or the Trust violates, conflicts with or constitutes a default under
Company's Articles of Incorporation or By-Laws or any material
agreement to which the Company is a party or by which the Company or
any of its assets is bound, or violates any law, regulation, order or
decree of any court, arbitration or governmental authority applicable
to the Company, in any manner that would have a material adverse effect
on the Trust, the ESOP, the Required Status or the Company;
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(c) The Company and the Bank have taken all actions required
to be taken by it to establish the ESOP and the related Trust. The ESOP
and related Trust are intended to, and the terms thereof have been
drafted with the purpose to, comply with the requirements of Sections
401(a) and 501(a) of the Code, as applicable, with the requirements for
treatment as a leveraged employee stock ownership plan, as that term is
defined in Section 4975(e)(7) of the Code, and with other applicable
laws;
(d) The Bank has duly appointed the Trustee as trustee of the
Trust and the Committee under the ESOP;
(e) The Company has delivered to Trustee copies of its
Articles of Incorporation and its By-Laws, the ESOP, and resolutions of
its Board of Directors with respect to approval of this Agreement and
entering into of the transactions and execution of all documents
contemplated by this Agreement, in each case certified by the Secretary
of the Company, which copies are true, correct and complete. None of
such documents or resolutions has been amended or modified in any
respect and such documents and resolutions remain in full force and in
effect, in the form previously delivered to the Trustee;
(f) Other than the Common Stock, the Company has no other
classes of shares outstanding or treasury shares.
(g) The Company's ability to honor put options (the "Put
Options"), which would obligate the Company to repurchase shares of
Common Stock distributed from time to time to ESOP participants and
beneficiaries under Section 6.13 of the ESOP, is not presently
restricted by the provisions of any law, rule or regulation in effect
on the date hereof (except for capital, liquidation account,
requirements to obtain regulatory approval of repurchase transactions,
and similar constraints imposed by regulatory authorities on savings
associations) or by the terms of any loan, financing or other agreement
or instrument to which the Company is a party or by which the Company
is or may be bound.
(h) There are no actions, proceedings, or investigations
pending or, to the Company's knowledge, threatened against or affecting
the Company or any of its property or rights at law or in equity or
before or by any court or tribunal that have not been disclosed to the
Trustee and may have a material adverse effect on the value of the
Common Stock.
(i) All employee plans of the Bank and the Company are in
compliance, in all material respects, with all applicable reporting,
disclosure and filing requirements pertaining to employee benefit plans
set forth in the Code and ERISA.
(j) No consent, approval or other authorization or notice to
any governmental authority or expiration of any government-imposed
waiting period is required in connection with the execution or delivery
of this Agreement, except such as has been obtained, given or expired.
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(k) The shares of Common Stock constitute "qualifying employer
securities" within the meaning of Section 409(l) of the Code.
Section 4.3. Covenants of Company. The Company covenants that:
(a) The Company shall submit or cause to be submitted to the
Internal Revenue Service within ninety (90) days following the Closing
Date an application for a determination letter confirming that the
ESOP, effective as of January 1, 1998, and the related Trust are
qualified and exempt from taxation under Sections 401(a) and 501(a),
respectively, of the Code and that the ESOP meets the requirements of
Section 4975(e)(7) of the Code.
(b) The Company and the Bank shall make all changes reasonably
requested by the Internal Revenue Service as a condition of obtaining a
determination letter from the Internal Revenue Service with respect to
the ESOP, effective January 1, 1997. The Company and the Bank shall
continue to do all things necessary to cause the ESOP and the Trust at
all times to be operated and administered such that the ESOP remains
qualified under Section 401(a) and remains an employee stock ownership
plan under Section 4975(e)(7) of the Code and the Trust remains
tax-exempt under Section 501(a) of the Code.
(c) If at any time the ESOP is required, by applicable law,
court order, or otherwise, to make distributions of Shares that
otherwise would be in violation of Federal or state securities laws,
the Company shall take all actions necessary to permit such required
distributions to be made in full compliance with such laws.
(d) The Company shall honor the Put Options if, and to the
extent, required by Section 409(h) of the Code and regulations
thereunder, and shall not permit its ability to honor such Options to
be materially restricted in any way.
(e) The Company or the Bank shall provide to the Trustee all
governmental filings relating to the ESOP and all ESOP amendments
within sixty days of the date on which such filing or amendment is
effected, and, on an annual basis, shall provide complete financial
statements of the ESOP and the Company.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1. Documentation Satisfactory to Company. The obligation of
the Company to make the Trust Loan is, in addition to the conditions precedent
contained in Section 5.2, subject to the condition precedent that the Company
shall have received each of the following, duly executed and dated as of the
Closing Date (or such earlier date as shall be satisfactory to the Company) and
in form and substance satisfactory to the Company:
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(a) the Trust Note;
(b) the Share Pledge Agreement; and
(c) a certificate of the Trustee, substantially in the form of
Exhibit C hereto, with such changes thereto as shall be acceptable to
the Company and its counsel, and with respect to such other matters as
the Company may reasonably request.
Section 5.2. Other Conditions Precedent to Company Obligations. In
addition to the condition precedent contained in Section 5.1, the obligation of
the Company to make the Trust Loan available is subject to the conditions
precedent that (i) the Conversion is consummated, (ii) the representations and
warranties made by the Trustee herein shall be true and correct in all material
respects on the Closing Date as if made on and as of the Closing Date; and (iii)
the ESOP shall be permitted to purchase Shares in the Conversion.
Section 5.3. Documentation Satisfactory to Trustee. The obligation of
the Trust to enter into the Trust Loan is subject to the condition precedent
that the Trustee shall have received each of the following, duly executed and
dated as of the Closing Date (or such earlier date as shall be satisfactory to
Trustee) and in form and substance satisfactory to Trustee:
(a) The Share Pledge Agreement; and
(b) A certificate of the Company, substantially in the form of
Exhibit D hereto, with such changes thereto as shall be acceptable to
the Trustee and its counsel, and with respect to such other matters as
the Trustee may reasonably request.
Section 5.4. Other Conditions Precedent to Trustee's Obligation. The
obligation of the Trustee to enter into the Trust Loan is subject to the
conditions precedent that (i) the Conversion is consummated, (ii) the
representations and warranties made by the Company herein shall be true and
correct in all material respects on the Closing Date as if made on and as of the
Closing Date, and (iii) no injunction or restraining order shall be in effect or
litigation pending or threatened to forbid or enjoin the consummation of the
transaction contemplated by this Agreement.
ARTICLE VI
EVENTS OF DEFAULT AND THEIR EFFECT
Section 6.1. Events of Default; Effect. If default in the payment when
due of any principal of, or default (and continuance thereof for 5 days) in the
payment when due of interest on, the Trust Note (an "Event of Default") occurs,
unless the effect thereof as an Event of Default has been waived in writing by
the Company, then the Company may declare the Trust Note to be due and payable,
whereupon the Trust Note shall become immediately due and payable, without
presentment, demand,
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protest or notice to the Trust or other action by the Company of any kind
whatsoever, all of which actions the Trust hereby waives to the maximum extent
permitted by law.
The Company shall promptly advise the Trust of any declaration of
default, but failure to do so or delay in doing so shall not impair the effect
of such declaration. Notwithstanding anything to the contrary herein or in the
Trust Note or the Share Pledge Agreement contained or implied, if a Default or
Event of Default occurs with respect to the Trust Loan by the Trust, the value
of Trust assets transferred in satisfaction thereof shall not exceed the amount
of such default. In addition, such a transfer of such Trust assets shall only
occur upon and to the extent of the failure of the Trust to meet the payment
schedule of the Trust Loan provided in Article II.
ARTICLE VII
SHARE PURCHASES
Section 7.1. Purchase of Shares. The Company is making the Trust Loan
available to the Trustee for the purpose of allowing the Trustee to purchase
Shares in the Conversion. To the extent the ESOP is permitted to purchase up to
560,740 Shares in the Conversion, the Trustee agrees to use all of the proceeds
of the Trust Loan to purchase Shares in accordance with this Article VII.
Section 7.2. Manner of Purchase. The Trustee shall timely subscribe to
purchase the Shares the ESOP is permitted to purchase in the Conversion pursuant
to the Association's Plan of Conversion. The Trustee shall draw upon the Trust
Loan and use the proceeds thereof to purchase the number of Shares the ESOP may
purchase in the Offering, simultaneously with consummation of the Conversion.
Section 7.3. Readily Tradeable. The Company agrees to use reasonable
efforts to cause the Shares to be, and to maintain the Shares' status as,
"readily tradeable on an established securities market" within the meaning of
Section 409(l)(1) of the Code.
Section 7.4. No Prohibited Transactions. The Trustee in the performance
of its obligations under this Agreement, shall observe its fiduciary obligations
under Section 404 of ERISA, shall not engage in any transaction prohibited by
ERISA or contrary to such fiduciary obligations, and, in acquiring Shares, shall
not (and shall not be deemed obligated to) pay more than "adequate
consideration", as defined in Section 3(18) of ERISA.
Section 7.5. Maximum Number of Shares. The Trust shall not purchase
Shares with proceeds of the Trust Loan in excess of 560,740 Shares.
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ARTICLE VIII
GENERAL
Section 8.1. Waivers; Amendments. No delay on the part of the Company,
or the holder of the Trust Note in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
any of them of any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement, the Trust Note or the Share Pledge Agreement shall in any event be
effective unless the same shall be in writing and signed and delivered by the
Company and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 8.2. Confirmations; Information. The Company and the Trust (or
holder of the Trust Note) agree from time to time, upon written request received
by it from the other, to confirm to the other in writing the aggregate unpaid
principal balance then outstanding under the Trust Note and such other matters
relating to the Trust Loan, the Trust, the ESOP or the purchase of Shares as may
reasonably be the subject of inquiry.
Section 8.3. Captions. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
Section 8.4. Governing Law. To the extent not preempted by ERISA, this
Agreement and the Trust Note shall be a contract made under and governed by the
laws of the State of Indiana, without regard to conflict of laws principles. All
obligations of the Trust and rights of the Company and other holder of the Trust
Note expressed herein or in such Trust Note shall be in addition to and not in
limitation of those provided by law.
Section 8.5. Notices. All communications and notices hereunder shall be
in writing and shall be deemed to be given when sent by registered or certified
mail, postage prepaid, return receipt requested, or by telecopier, duly
confirmed, and addressed to such party at the address indicated below or to such
other address as such party may designate in writing pursuant to this Section
8.5.
Lincoln Bancorp
1121 East Main Street
Plainfield, Indiana 46168-0510
Attention: T. Tim Unger, President
Home Federal Savings Bank
501 Washington Street
Columbus, Indiana 47201
Attention: David L. Fisher
Section 8.6. Expenses. All expenses of the transaction contemplated by
this Agreement shall be paid by the Company.
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Section 8.7. Reimbursement. If the Trustee uses proceeds from the Trust
Loan to purchase Common Stock directly from the Company and it is subsequently
determined by a court of competent jurisdiction that the Trustee paid in excess
of "adequate consideration" within the meaning of ERISA for such shares, the
Company shall, as soon as practicable following such judgment, reimburse the
Trustee for the amount of the excess payment.
Section 8.8. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties.
Section 8.9. Severability. Should any clause, paragraph or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, paragraphs or parts of this Agreement which can be affected without
such illegal clause, paragraph or part shall nevertheless remain in full force
and effect.
Section 8.10. No Assignment. This Agreement and the obligations of the
parties herein may not be assigned or assumed by any other parties.
Section 8.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
put together shall constitute one and the same instrument.
ARTICLE IX
LIMITED RECOURSE
Section 9.1. Limited Recourse. Notwithstanding anything to the contrary
herein or in the Trust Note, the Share Pledge Agreement or any other instrument,
agreement or document contained or implied, the obligations of the Trust under
this Agreement, the Trust Note and the Share Pledge Agreement (collectively, the
"Trust Loan Obligations") shall be enforceable to the extent permitted under
law, including (without limitation) the Exempt Loan Rules, only against the
Trust to the extent of the Collateral (as defined in the Share Pledge Agreement)
not theretofore released from the pledge and security interest under the Share
Pledge Agreement as provided in Section 3.2 and contributions and other payments
(other than contributions of employer securities) made to the Trust in
accordance with the ESOP to enable the Trust to pay and satisfy the Trust Loan
Obligations and from earnings attributable to the Shares purchased with Trust
Loan proceeds and the investment of such contributions and payments
(collectively, the "Trust Loan Collateral"). No recourse shall be had to or
against the Trust or the assets thereof (other than the Trust Loan Collateral)
for any deficiency judgment against the Trust for the purpose of obtaining
payment or other satisfaction of the Trust Loan Obligations.
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<PAGE>
Section 9.2. No Personal Recourse Against Trustee. Without limiting the
provisions of Section 9.1, the Trustee of the Trust shall have no personal
liability for any of the Trust Loan Obligations.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective representatives thereunto duly
authorized as of the date first above written.
TRUST UNDER LINCOLN BANCORP
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
By: Home Federal Savings Bank, Trustee
By:
Printed: David L. Fisher
Its: Senior Vice President & Trust Officer
LINCOLN BANCORP
By:
Printed: T. Tim Unger
Its: President and Chief Executive Officer
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<PAGE>
Exhibit A
TRUST NOTE
$___________ December ___, 1998
Due: December 31, 2018
FOR VALUE RECEIVED, the undersigned, the Trust (the "Trust")
established pursuant to the provisions of the LINCOLN BANCORP EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST AGREEMENT, DATED AND EFFECTIVE AS OF JULY 1, 1998 (the
"Plan") by HOME FEDERAL SAVINGS BANK, as Trustee (the "Trustee"), promises to
pay to the order of LINCOLN BANCORP, an Indiana corporation (together with its
successors, endorsees and assigns, the "Company"), at such place and in such
other manner as the Company may direct in writing, and when required pursuant to
the provisions of that certain Exempt Loan and Share Purchase Agreement, dated
December ___, 1998 (the "Loan Agreement"), by and among the Trustee and the
Company, the principal amount of ____________________________ Dollars
($__________) or so much thereof as may be advanced by the Company to the Trust
hereunder and under the Loan Agreement, said amount being due and payable
together with accrued interest in such installments and at such times as
provided in the Loan Agreement, with the entire unpaid principal balance due and
payable with accrued interest in full on December 31, 2018, as provided in the
Loan Agreement.
The principal balance hereof from time to time outstanding shall bear
interest from the date of each disbursement of the Trust Loan evidenced by this
Trust Note through and including the date on which such principal amount is paid
in full, at the times provided in the Loan Agreement, at the Interest Rate, as
defined in the Loan Agreement which is _____________ percent (_____%) per annum
(or, in the case of overdue principal and, to the extent legally enforceable,
overdue interest, at the Interest Rate plus two percent (2%) per annum).
This Trust Note has been issued by the Trust in accordance with the
terms of the Loan Agreement to evidence the Trust Loan made by the Company to
the Trust under the Loan Agreement, to which reference is hereby made for the
statement of the terms thereof. This Trust Note and the Company are entitled to
the benefits of the Loan Agreement and the Company may enforce the agreements of
the Trust contained therein and in the Loan Documents, and may exercise the
respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof. All capitalized
terms used in this Trust Note which are not otherwise defined herein have the
respective meanings assigned to them in the Loan Agreement.
The Trust has the right to prepay the principal amount of this Trust
Note without penalty on the terms and conditions specified in the Loan
Agreement.
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<PAGE>
If any Event of Default shall occur, the entire unpaid principal amount
of this Trust Note and all of the accrued but unpaid interest thereon may become
or be due and payable in the manner and with the effect provided in the Loan
Agreement. The collection and enforcement of this Trust Note are subject to the
provisions and limitations of Section 9.1 of the Loan Agreement.
To the extent not preempted by ERISA, this Trust Note and the
obligations of the Trust hereunder shall be governed by the laws of the State of
Indiana without regard to principles of conflict of laws.
All parties to this Trust Note, including endorsers, sureties and
guarantors, if any, hereby waive presentment, demand, protest, notice, relief
from valuation and appraisement laws and any and all other notices and demands
in connection with the delivery, acceptance, performance and enforcement of this
Trust Note and also hereby assent to extensions of the time of payment or
forbearance or other indulgences without notice, and agree to remain bound until
the principal, premium, if any, and interest are paid in full, notwithstanding
any extensions of time for payment which may be granted, even though the period
or periods of extension may be indefinite, and notwithstanding any inaction by,
or failure to assert any legal rights available to, the holder of this Trust
Note.
IN WITNESS WHEREOF, the Trust has caused this instrument to be executed
by the Trustee, the day and year first above written.
TRUST UNDER LINCOLN BANCORP
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
By: Home Federal Savings Bank, Trustee
By:
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<PAGE>
Exhibit B
SHARE PLEDGE AGREEMENT
between
TRUST UNDER
LINCOLN BANCORP
STOCK OWNERSHIP PLAN AND TRUST AGREEMENT
and
LINCOLN BANCORP
Dated: December ___, 1998
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<PAGE>
SHARE PLEDGE AGREEMENT
THIS SHARE PLEDGE AGREEMENT (this "Agreement" or "Share Pledge
Agreement"), dated as of December ___, 1998, between the Trust (the "Trust")
established pursuant to the provisions of LINCOLN BANCORP EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST AGREEMENT (EFFECTIVE AS OF JULY 1, 1998) (the "Plan")
by HOME FEDERAL SAVINGS BANK, as Trustee ("Trustee"), and LINCOLN BANCORP, an
Indiana corporation (the "Company").
WITNESSETH:
WHEREAS, contemporaneously herewith, the Trust and the Company have
entered into that certain Exempt Loan and Share Purchase Agreement (the "Loan
Agreement"; definitions of terms appearing in which have the same meanings
herein, unless a clear contrary intention appears), dated December ___, 1998,
pursuant to which the Company has agreed to lend to the Trust, and the Trust has
agreed to borrow from the Company, the Trust Loan, and the Trust, to evidence
its indebtedness to the Company with respect to the Trust Loan, has executed and
delivered the Trust Note to the Company; and
WHEREAS, it is a condition precedent to the obligation of the Company
to make the Trust Loan that, among other things, the Trust execute and deliver
this Agreement to the Company,
NOW, THEREFORE, in consideration of the Loan Agreement and the Trust
Loan and other good and valuable consideration (the receipt, adequacy and
sufficiency of which the Trust acknowledges by its execution hereof, the Trust
intending to be legally bound does hereby covenant and agree with the Company as
follows:
Section 1. Pledge. To secure the due and punctual payment and
performance of the obligations of the Trust hereunder and under the Loan
Agreement and the Trust Note (collectively, the "Liabilities"), the Trustee on
behalf of the Trust hereby pledges, hypothecates, assigns, transfers, sets over
and delivers unto the Company, its successors and assigns and hereby grants to
the Company, its successors and assigns a security interest in:
(a) all Shares of Company Common Stock purchased or to be
purchased with the proceeds of the Trust Loan (collectively, the
"Pledged Shares") and the certificates representing or evidencing the
Pledged Shares, and, to the extent permitted by Section 4975(e)(7) of
the Internal Revenue Code of 1986, as amended, and Reg. ss.
54.4975-7(b)(5) promulgated thereunder, all cash, securities, interest,
dividends, rights and other property at any time and from time to time
received in respect of or in exchange for any or all of the Pledged
Shares; and
(b) all proceeds of all of the foregoing
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<PAGE>
(all such Pledged Shares, certificates, cash, securities, interest, dividends,
rights and other property, and proceeds thereof, other than as released, sold or
otherwise applied by the Company pursuant to the' terms hereof, being herein
collectively called the "Collateral"), TO HAVE AND TO HOLD such Collateral,
together with all rights, titles, interests, privileges and preferences
appertaining or incidental thereto, forever, subject, however, to the terms,
covenants and conditions hereafter set forth.
Section 2. Warranties and Covenants.
(a) The Trust represents and warrants to the Company that the
Trust is, or at the time of any future delivery, pledge, assignment or
transfer will be, the lawful owner of the Collateral, free of all
claims and liens other than the security interest hereunder, with full
right to deliver, pledge, assign and transfer the Collateral to the
Company as Collateral hereunder.
(b) So long as any of the Liabilities remain outstanding, the
Trust will, unless the Company shall otherwise consent in writing:
(i) promptly deliver to the Company from time to time
certificates representing Pledged Shares as the Trustee
acquires them and, upon request of the Company, such stock
powers and other documents, satisfactory in form and substance
to the Company, with respect to the Collateral as the Company
may reasonably request to preserve and protect, and to enable
the Company to enforce, its rights and remedies hereunder;
(ii) not create or suffer to exist any lien, security
interest or other charge or encumbrance against, in or with
respect to any of the Collateral except for the pledge
hereunder and the security interest created hereby;
(iii) not make or consent to any amendment or other
modification or waiver with respect to any of the Collateral
or enter into any agreement or permit to exist any restriction
with respect to any of the Collateral other than pursuant
hereto; and
(iv) not take or fail to take any action which would
in any manner impair the value or enforceability of the
Company's security interest in any of the Collateral.
Section 3. Care of Collateral. The Company shall be deemed to have
exercised reasonable care with respect to the interest of the Trust in the
custody and preservation of the Collateral if it takes such action for that
purpose as the Trust shall request in writing or as it would with respect to
similar assets of its own, but failure of the Company to comply with any such
request shall not of itself be deemed a failure to exercise reasonable care.
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<PAGE>
Section 4. Certain Rights Regarding Collateral and Liabilities.
(a) The Company may from time to time, whether before or after any of
the Liabilities shall become due and payable, without notice to the Trust, to
the extent otherwise permitted (i) retain or obtain a security interest in the
Collateral, to secure payment and performance of any of the Liabilities, (ii)
retain or obtain the primary or secondary liability of any party or parties, in
addition to the Trust, with respect to any of the Liabilities, (iii) extend or
renew for any period (whether or not longer than the original period) or
exchange any of the Liabilities or release or compromise any obligation of any
nature of any party with respect thereto, and (iv) surrender, release or
exchange all or any part of any property, in addition to the Collateral,
securing payment and performance of any of the Liabilities, or compromise or
extend or renew for any period (whether or not longer than the original period)
any obligations of any nature of any party with respect to any such property.
(b) The Company shall have no right to vote the Pledged Shares prior to
the occurrence of an Event of Default (hereinafter in Section 6(a) hereof
defined). After the occurrence of an Event of Default, the Trust shall have the
right to vote any and all of the Pledged Shares in accordance with the Plan
unless and until it receives notice from the Company that such right has been
terminated with respect to shares subject to execution as a result of the
Default.
Section 5. Dividends, etc.
(a) So long as no Default or Event of Default, shall have occurred and
be continuing, the Trust shall be entitled to receive any and all cash dividends
on the Pledged Shares which it is otherwise entitled to receive, and to vote the
Pledged Shares in accordance with the terms of the Plan and to give consents,
waivers and ratifications in respect of the Pledged Shares, but any and all
stock and/or liquidating dividends, distributions in property, returns of
capital or other distributions made on or in respect of the Pledged Shares,
whether resulting from a subdivision, combination or reclassification of the
outstanding capital stock of any issuer thereof or received in exchange for the
Pledged Shares or any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any issuer may be a party or
otherwise, and any and all cash and other property received in exchange for any
Collateral shall be, and become part of the Collateral pledged hereunder and, if
received by the Trust, shall forthwith be delivered to the Company or its
designated nominee (accompanied, if appropriate, by proper instruments of
assignment and/or stock powers executed by the Trust in accordance with the
Company's instructions) to be held subject to the terms of this Agreement and
the Plan.
(b) Upon the occurrence and during the continuance of an Event of
Default, subject to the terms of Section 4(b) hereof, all rights of the Trust
pursuant to Section 5(a) hereof shall cease and the Company shall have the sole
and exclusive right and authority to receive and retain the dividends which the
Trust would otherwise be authorized to retain and, to the extent permitted by
law, to vote and give consents, waivers and ratifications pursuant to Section
5(a) hereof. Any and all money and other property paid over to or received by
the Company pursuant to the provisions of this paragraph
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<PAGE>
(b) shall be retained by the Company as additional Collateral hereunder and be
applied in accordance with the provisions hereof.
Section 6. Event of Default.
(a) The occurrence of any of the following shall constitute an Event
of Default hereunder nonpayment, when due, whether by acceleration or otherwise,
of any amount payable on any of the Liabilities; an Event of Default as defined
in the Loan Agreement; any representation or warranty of the Trust contained
herein or given pursuant hereto being untrue in any material respect; or the
Trust's failure to perform any covenant or agreement contained herein.
(b) Upon the occurrence of an Event of Default, (i) the Company may
exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code as in effect from time to time in Indiana or otherwise
available to it, including, but not limited to, sale, assignment, or other
disposal of the Pledged Shares in exchange for cash or credit, and (ii) the
Company may, without demand or notice of any kind, but subject to Section 7,
appropriate and apply toward the payment of such of the Liabilities, and in such
order of application, as the Company may from time to time elect, any balances,
credits, deposits, accounts or moneys of the Trust. If any notification of
intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if mailed
at least five (5) days before such disposition, postage prepaid, addressed to
the Trust, either at the address of the Trust shown below, or at any other
address of the Trust appearing on the records of the Company. Any proceeds of
any disposition of Collateral shall be applied as provided in Section 7 hereof.
All rights and remedies of the Company expressed hereunder are in addition to
all other rights and remedies possessed by it, including those under any other
agreement or instrument relating to any of the Liabilities or security therefor.
No delay on the part of the Company in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by the Company of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. No action of the Company permitted
hereunder shall impair or affect the rights of the Company in and to the
Collateral.
(c) The Trust agrees that in any sale of any of the Collateral
whenever an Event of Default hereunder shall have occurred and be continuing,
the Company is hereby authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is necessary in order
to avoid any violation of law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualification, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Trust
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Company be liable nor accountable to the Trust for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
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<PAGE>
(d) Notwithstanding anything to the contrary herein or in the Trust
Note or the Loan Agreement contained or implied, if an Event of Default occurs
with respect to the Trust Loan by the Trust, the value of Trust assets
transferred in satisfaction thereof shall not exceed the amount of such default.
In addition, such a transfer of such Trust assets shall only occur upon, and to
the extent of the failure of, the Trust to meet the payment schedule of the
Trust Loan provided in Article II of the Loan Agreement.
Section 7. Application of Proceeds of Sale or Cash Held as
Collateral. The proceeds of sale of Collateral sold pursuant to the terms of
Section 6 hereof and/or, after an Event of Default, the cash held as Collateral
hereunder, shall be applied by the Company, to the extent permitted by
applicable law, as follows:
First: to payment of the costs and expenses of such sale,
including the out-of-pocket costs and expenses of the Company and the
reasonable fees and out-of-pocket costs and expenses of counsel
employed in connection therewith, and to the payment of all advances
made by the Company for the account of the Trust hereunder and the
payment of all costs and expenses incurred by the Company in
connection with the administration and enforcement of this Agreement,
to the extent that such advances, costs and expenses shall not have
been reimbursed to the Company;
Second: to the payment in full of the Liabilities; and
Third: the balance, if any, of such proceeds shall be paid to
the Trust, its successors and assigns, or as a court of competent
jurisdiction may direct.
Section 8. Authority of Company. The Company shall have and be
entitled to exercise all such powers hereunder as are specifically delegated to
the Company by the terms hereof, together with such powers as are incidental
thereto. The Company may execute any of its duties hereunder by or through
agents or employees and shall be entitled to retain counsel and to act in
reliance upon the advice of such counsel concerning all matters pertaining to
its duties hereunder. Neither the Company, nor any director, officer or employee
of the Company, shall be liable for any action taken or omitted to be taken by
it or them hereunder or in connection herewith, except for its or their own
gross negligence or wilful misconduct. The Trust hereby agrees, to the extent
permitted by applicable law, to reimburse the Company, on demand, for all costs
and expenses incurred by the Company in connection with the enforcement of this
Agreement (including costs and expenses incurred by any agent employed by the
Company).
Section 9. Termination. This Agreement shall terminate when all the
Liabilities have been fully paid and performed, at which time the Company shall
reassign and redeliver (or cause to be reassigned and redelivered) to the Trust,
or to such person or persons as the Trust shall designate, against receipt, such
of the Collateral (if any) as shall not have been theretofore released, sold or
otherwise applied by the Company pursuant to the terms hereof and shall still be
held by it hereunder,
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<PAGE>
together with any appropriate instruments of reassignment and release. Any such
reassignment shall be without recourse upon, or representation or warranty by,
the Company.
Section 10. Required Release of Collateral. Notwithstanding any
provision of this Agreement or the Loan Agreement to the contrary, the Company
from time to time will release from the pledge and security interest under the
Loan Agreement, such Collateral as must be allocated to participants under the
Plan pursuant to Section 8.7(h) of the Plan and otherwise under the Code, the
Exempt Loan Rules or other applicable law.
Section 11. Limited Recourse. Notwithstanding anything to the
contrary herein or in the Trust Note, the Loan Agreement or any other
instrument, agreement or document contained or implied, the Liabilities shall be
enforceable to the extent permitted under applicable law, including, without
limitation, the Exempt Loan Rules, only against the Trust to the extent of the
Collateral not theretofore released from the pledge and security interest under
this Agreement as provided herein and contributions (other than contributions of
employer securities) made to the Trust in accordance with the Plan to enable the
Trust to pay and satisfy the Liabilities and from earnings attributable to the
Shares and the investment of such contributions (collectively, the "'Trust Loan
Collateral"). No recourse shall be had to or against the Trust or the assets
thereof (other than the Trust Loan Collateral) for any deficiency judgment
against the Trust for the purpose of obtaining payment or other satisfaction of
the Liabilities. Without limiting the foregoing, the Trustee of the Trust shall
have no personal liability for any of the Liabilities, other than as required by
or arising under applicable law.
Section 12. Notices. All communications and notices hereunder shall
be in writing and, if mailed, shall be deemed to be given when sent by
registered or certified mail, postage prepaid, return receipt requested, or by
telecopier, duly confirmed, and addressed to such party at the address indicated
below or to such other address as such party may designate in writing pursuant
to this Section 12.
LINCOLN BANCORP
1121 East Main Street
P.O. Box 510
Plainfield, Indiana 46168-0510
Attention: T. Tim Unger, President
HOME FEDERAL SAVINGS BANK
501 Washington Street
Columbus, Indiana 47201
Attention: David L. Fisher
Section 13. Binding Agreement Assignment. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns,
except the Trust shall not be permitted to assign this Agreement
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<PAGE>
or any interest herein or in the Collateral, or any part thereof, or otherwise
grant any option with respect to the Collateral, or any part thereof and the
Company shall not assign any interest herein or in the Collateral unless such
assignment is expressly made subject to the terms of the Loan Documents.
Section 14. Miscellaneous Provisions. Neither this Agreement nor any
provision hereof may be amended, modified, waived, discharged or terminated nor
may any of the Collateral be released or the pledge or the security interest
created hereby extended, except by an instrument in writing duly signed by or on
behalf of the Company hereunder. The section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Agreement. This Agreement may be executed in any number of counterparts and
by the different parties on separate counterparts and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Agreement.
Section 15. Governing Law; Interpretation. This Agreement has been
made and delivered at Spencer, Indiana, and, except to the extent preempted by
ERISA, shall be governed by the internal laws of the State of Indiana, without
regard to principles of conflict of laws. Wherever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 16. Filing as a Financing Statement. At the option of the
Company, this Agreement, or a carbon, photographic or other reproduction of this
Agreement or of any Uniform Commercial Code financing statement covering the
Collateral or any portion thereof shall be sufficient as a Uniform Commercial
Code financing statement and may be filed as such.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective representatives thereunto duly authorized
as of the date first above written.
TRUST UNDER LINCOLN BANCORP
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
By: Home Federal Savings Bank, Trustee
By:
Printed:
Its:
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<PAGE>
LINCOLN BANCORP
By:
Printed: T. Tim Unger
Its: President and Chief Executive Officer
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<PAGE>
Exhibit C
CERTIFICATE OF TRUSTEE
The undersigned, Home Federal Savings Bank, a federal savings bank,
in its capacity as Trustee ("Trustee") of the Trust under Lincoln Bancorp
Employee Stock Ownership Plan and Trust Agreement (Effective as of July 1, 1998)
(the "Trust") hereby certifies, pursuant to Section 5.1(c) of that certain
Exempt Loan and Share Purchase Agreement between the Trust and Lincoln Bancorp
of even date herewith (the "Loan Agreement") that:
(i) it has determined that the Trust Loan, as defined in the
Loan Agreement, is primarily for the benefit of ESOP participants and
their beneficiaries and bears interest at a rate not in excess of a
reasonable rate and that the terms of the loan are at least as
favorable to the Trust and the ESOP participants as the terms of a
comparable loan resulting from arm's-length negotiations between
completely independent parties;
(ii) the other representations and warranties of the Trust
contained in the Loan Agreement are true in all material respects as of
the date of this Certificate; and
(iii) the conditions set forth in Article V of the Loan
Agreement, to the extent their satisfaction depends upon action on
the part of the Trust or the Trustee, have been satisfied as of the
date of this Certificate.
EXECUTED this ____ day of December, 1998.
HOME FEDERAL SAVINGS BANK,
as Trustee of the Trust
under the Lincoln Bancorp
Employee Stock Ownership
Plan and Trust Agreement
(Effective as of July 1,
1998)
By:
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<PAGE>
Exhibit D
CERTIFICATE OF THE COMPANY
The undersigned, Lincoln Bancorp, an Indiana corporation (the
"Company"), pursuant to Section 5.3(b) of that certain Exempt Loan and Share
Purchase Agreement between Home Federal Savings Bank, a federal savings bank, in
its capacity as Trustee of the Trust under the Lincoln Bancorp Employee Stock
Ownership Plan and Trust Agreement (Effective as of July 1, 1998) and the
Company of even date herewith (the "Loan Agreement"), hereby certifies that the
representations and warranties of the Company contained in the Loan Agreement
are true and correct in all material respects, and the Company is in compliance
with its covenants set forth in the Loan Agreement in all material respects, as
of the date of this Certificate.
EXECUTED as of this ___ day of December, 1998.
LINCOLN BANCORP
By:
T. Tim Unger, President and
Chief Executive Officer
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report dated March 19, 1998, except for note 16 as
to which the date is July 2, 1998, on the financial statements of Lincoln
Federal Savings Bank (the "Bank") and to the reference made to us under the
caption "Experts" in the Application of Conversion filed by the Bank with the
Office of Thrift Supervision and in the Registration Statement on Form S-1 filed
by Lincoln Bancorp with the United States Securities and Exchange Commission.
/s/ Olive LLP
Indianapolis, Indiana
October 29, 1998
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
Lincoln Federal Savings Bank
and
Lincoln Bancorp
As Of:
August 14, 1998
Prepared By:
Keller & Company, Inc.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
Lincoln Federal Savings Bank
and
Lincoln Bancorp
As Of:
August 14, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION 1
I. Description of Lincoln Federal Savings Bank
General 4
Performance Overview 7
Income and Expense 9
Yields and Costs 15
Interest Rate Sensitivity 16
Lending Activities 18
Non-Performing Assets 23
Investments 25
Deposit Activities 26
Borrowings 27
Subsidiaries 27
Office Properties 27
Management 28
II. Description of Primary Market Area 29
III. Comparable Group Selection
Introduction 34
General Parameters
Merger/Acquisition 35
Mutual Holding Companies 36
Trading Exchange 37
IPO Date 37
Geographic Location 37
Asset Size 38
Balance Sheet Parameters
Introduction 39
Cash and Investments to Assets 40
Mortgage-Backed Securities to Assets 40
One- to Four-Family Loans to Assets 41
Total Net Loans to Assets 41
Total Net Loans and Mortgage-Backed Securities to Assets 41
Borrowed Funds to Assets 42
Equity to Assets 43
Performance Parameters
Introduction 43
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
III. Comparable Group Selection (cont.)
Performance Parameters (cont.)
Return on Average Assets 44
Return on Average Equity 44
Net Interest Margin 45
Operating Expenses to Assets 45
Noninterest Income to Assets 46
Asset Quality Parameters
Introduction 47
Nonperforming Assets to Asset Ratio 47
Repossessed Assets to Assets 47
Loan Loss Reserves to Assets 48
The Comparable Group 48
IV. Analysis of Financial Performance 50
V. Market Value Adjustments
Earnings Performance and Growth Potential 53
Market Area 59
Financial Condition 60
Asset, Loan and Deposit Growth 62
Dividend Payments 64
Subscription Interest 65
Liquidity of Stock 66
Management 66
Marketing of the Issue 67
VI. Valuation Methods 69
Price to Book Value Method 70
Price to Earnings Method 71
Price to Assets Method 72
Valuation Conclusion 74
<PAGE>
LIST OF EXHIBITS
NUMERICAL PAGE
EXHIBITS
1 Consolidated Balance Sheets - At June 30, 1998,
and December 31, 1997 76
2 Consolidated Statements of Financial Condition -
At December 31, 1993 through 1997 77
3 Consolidated Statements of Income - Six months ended
June 30, 1998, and for the Year Ended
December 31, 1997 78
4 Consolidated Statements of Income - Year Ended
December 31, 1993 through 1996 79
5 Selected Consolidated Financial Information 80
6 Income and Expense Trends 81
7 Normalized Earnings Trend 82
8 Performance Indicators 83
9 Volume/Rate Analysis 84
10 Yield and Cost Trends 85
11 Net Portfolio Value 86
12 Loan Portfolio Composition 87
13 Loan Maturity Schedule 88
14 Loan Originations and Purchases 89
15 Delinquent Loans 90
16 Nonperforming Assets 91
17 Classified Assets 92
18 Allowance for Loan Losses 93
19 Investment Portfolio Composition 94
20 Mix of Deposits 95
21 Deposit Activity 96
22 Borrowed Funds Activity 97
23 Offices of Lincoln Federal Savings Bank 98
24 List of Key Officers and Directors 99
25 Key Demographic Data and Trends 100
26 Key Housing Data 101
27 Major Sources of Employment 102
28 Unemployment Rates 103
29 Market Share of Deposits 104
30 National Interest Rates by Quarter 105
31 Thrift Stock Prices and Pricing Ratios 106
32 Key Financial Data and Ratios 118
33 Recently Converted Thrift Institutions 131
34 Acquisitions and Pending Acquisitions 133
<PAGE>
LIST OF EXHIBITS (cont.)
NUMERICAL PAGE
EXHIBITS
35 Thrift Stock Prices and Pricing Ratios -
Mutual Holding Companies 134
36 Key Financial Data and Ratios -
Mutual Holding Companies 135
37 Balance Sheets Parameters -
Comparable Group Selection 136
38 Operating Performance and Asset Quality Parameters -
Comparable Group Selection 141
39 Balance Sheet Ratios -
Final Comparable Group 147
40 Operating Performance and Asset Quality Ratios
Final Comparable Group 148
41 Balance Sheet Totals - Final Comparable Group 149
42 Balance Sheet - Asset Composition
Most Recent Quarter 150
43 Balance Sheet - Liability and Equity
Most Recent Quarter 151
44 Income and Expense Comparison
Trailing Four Quarters 152
45 Income and Expense Comparison as a Percent of
Average Assets - Trailing Four Quarters 153
46 Yields, Costs and Earnings Ratios
Trailing Four Quarters 154
47 Dividends, Reserves and Supplemental Data 155
48 Valuation Analysis and Calculations 156
49 Market Pricings and Financial Ratios - Stock Prices
Comparable Group 157
50 Pro Forma Minimum Valuation 158
51 Pro Forma Mid-Point Valuation 159
52 Pro Forma Maximum Valuation 160
53 Pro Forma Superrange Valuation 161
54 Summary of Valuation Premium or Discount 162
<PAGE>
ALPHABETICAL EXHIBITS PAGE
A Background and Qualifications 163
B RB 20 Certification 167
C Affidavit of Independence 168
<PAGE>
KELLER LETTERHEAD
September 15, 1998
Board of Directors
Lincoln Federal Savings Bank
1121 East Main Street
Plainfield, IN 46168
Gentlemen:
We hereby submit an independent appraisal of the pro forma market value of the
to-be-issued stock of Lincoln Bancorp (the "Corporation"), which is the newly
formed holding company of Lincoln Federal Savings Bank ("Lincoln Federal" or the
"Bank"). The Corporation will hold all of the shares of the common stock of the
Bank. Such stock is to be issued in connection with the Bank's conversion from a
federally chartered mutual savings and loan association to a federally chartered
capital stock savings and loan association in accordance with the Bank's plan of
conversion. This appraisal was prepared and provided to the Bank in accordance
with the conversation requirements and regulations of the Office of Thrift
Supervision of the United States Department of the Treasury.
Keller & Company, Inc. is an independent financial institution consulting firm
that serves both thrift institutions and banks. The firm is a full-service
consulting organization, as described in more detail in Exhibit A, specializing
in market studies, business and strategic plans, stock valuations, conversion
appraisals, and fairness opinions for thrift institutions and banks. The firm
has affirmed its independence in this transaction with the preparation of its
Affidavit of Independence, a copy of which is included as Exhibit C.
Our appraisal is based on the assumption that the data provided to us by Lincoln
Federal and the material provided by the independent auditor, Olive LLC,
Indianapolis, Indiana, are both accurate and complete. We did not verify the
financial statements provided to us, nor did we conduct independent valuations
of the Bank's assets and liabilities. WE have also used information from other
public sources, but we cannot assure the accuracy of such material.
In the preparation of this appraisal, we held discussions with the management of
Lincoln Federal, with the law firm of Barnes & Thornburg, Indianapolis, Indiana,
the Bank's conversion counsel, and with Olive LLC. Further, we viewed the Bank's
local economy and primary market area.
This valuation must not be considered as a recommendation as to the purchase of
stock in the Corporation, and we can provide no guarantee or assurance that any
person who purchases shares of the Corporation's stock in this conversion will
subsequently be able to sell such shares at a price equivalent to the price
designated in this appraisal.
-1-
<PAGE>
This valuation recognizes the implications and impact of the Corporation's
establishment of a charitable foundation in connection with the Bank's
conversion. The foundation will be funded with authorized but unissued shares of
the Corporation equal to 3.85 percent of the shares to be offered to the public
at the midpoint of the valuation range.
Our valuation will be updated as required and will give consideration to any new
developments in the Bank's operation that have an impact on operations or
financial condition. Further, we will give consideration to any changes in
general market conditions and to specific changes in the market for
publicly-traded thrift institutions. Based on the material impact of any such
changes on the pro forma market value of the Bank as determined by this firm, we
will make necessary adjustments to the Bank's appraised value in an appraisal
update.
It is our opinion that as of August 14, 1998, the pro forma market value or
appraised value of the Corporation, inclusive of the value of the shares to be
issues to the foundation, is $67,500,000 at the midpoint, representing 6,750,000
shares at $10.00 per share. The pro forma valuation range of the Corporation is
from a minimum of $57,375,000 to a maximum of $77,625,000, with a super- maximum
of $89,268,750, representing 5,737,500 shares, 6,750,000 shares, 7,762,500
shares and 8,926,875 shares at $10.00 per share at the minimum, midpoint,
maximum and super-maximum, respectively.
Net of the shares to be issued to the foundation, the gross proceeds of the
public offering will be $65,000,000 at the midpoint, ranging from $54,875,000 at
the minimum to $75,125,000 at the maximum, with a super-maximum of $86,768,750,
representing 5,487,500 shares, 6,500,000 shares, 7,512,500 shares and 8,676,875
shares at $10.00 per share at the minimum, midpoint, maximum and super-maximum,
respectively.
The pro forma appraised value of Lincoln Bancorp as of August 14, 1998, is
$67,500,000 at the midpoint.
Very truly yours,
/s/ KELLER & COMPANY, INC.
<PAGE>
INTRODUCTION
Keller & Company, Inc. is an independent appraisal firm for financial
institutions, and has prepared this Conversion Appraisal Report ("Report") to
provide the pro forma market value of the to-be-issued common stock of Lincoln
Bancorp (the "Corporation"), an Indiana corporation, formed as a holding company
to own all of the to-be-issued shares of common stock of Lincoln Federal Savings
Bank ("Lincoln Federal" or the "Bank"), Plainfield, Indiana. The stock is to be
issued in connection with the Bank's Application for Approval of Conversion from
a federal- chartered mutual savings and loan association to a federal-chartered
stock savings and loan association. The Application is being filed with the
Office of Thrift Supervision ("OTS") of the Department of the Treasury and the
Securities and Exchange Commission ("SEC"). In accordance with the Bank's
conversion, there will be a simultaneous issuance of all the Bank's stock to the
Corporation, which will be formed by the Bank. Such Application for Conversion
has been reviewed by us, including the Prospectus and related documents, and
discussed with the Bank's management and the Bank's conversion counsel, Barnes &
Thornburg, L.L.P., Indianapolis, Indiana.
This conversion appraisal was prepared based on the guidelines provided
by OTS entitled "Guidelines for Appraisal Reports for the Valuation of Savings
Institutions Converting from the Mutual to Stock Form of Organization," in
accordance with the OTS application requirements of Regulation '563b and the
OTS's Revised Guidelines for Appraisal Reports, and represents a full appraisal
report. The Report provides detailed exhibits based on the Revised Guidelines
and a discussion on each of the fourteen factors that need to be considered. Our
valuation will be updated in accordance with the Revised Guidelines and will
consider any changes in market conditions for thrift institutions.
The pro forma market value is defined as the price at which the stock
of the Corporation after conversion would change hands between a typical willing
buyer and a typical willing seller when the former is not under any compulsion
to buy and the latter is not under any compulsion to sell, and with both parties
having reasonable knowledge
<PAGE>
Introduction (cont.)
of relevant facts in an arms-length transaction. The appraisal assumes the Bank
is a going concern and that the shares issued by the Corporation in the
conversion are sold in non-control blocks.
In preparing this conversion appraisal, we have reviewed the financial
statements for the five fiscal years ended December 31, 1993 through 1997, as
well as the financial statements for the six months ended June 30, 1997 and
1998, and discussed them with Lincoln Federal's management and with Lincoln
Federal's independent auditors, Olive, LLP, Indianapolis, Indiana. We have also
discussed and reviewed with management other financial matters and have reviewed
internal projections. We have reviewed the Corporation's preliminary Form S-1
and the Bank's preliminary Form AC and discussed them with management and with
the Bank's conversion counsel.
We have visited Lincoln Federal's home office and have traveled the
surrounding area. We have studied the economic and demographic characteristics
of the primary market area of Hendricks, Montgomery and Clinton Counties, and
analyzed the Bank's primary market area relative to Indiana and the United
States. We have also examined the competitive market within which Lincoln
Federal operates, giving consideration to the area's numerous bank and thrift
institution offices, mortgage banking offices, and other competitors and other
demographic and economic characteristics, both positive and negative.
We have given consideration to the market conditions for securities in
general and for publicly-traded thrift stocks in particular. We have examined
the performance of selected publicly-traded thrift institutions and compared the
performance of Lincoln Federal to those selected institutions.
<PAGE>
Introduction (cont.)
Our valuation is not intended to represent and must not be interpreted
to be a recommendation of any kind as to the desirability of purchasing the
to-be-outstanding shares of common stock of the Corporation. Giving
consideration to the fact that this appraisal is based on numerous factors that
can change over time, we can provide no assurance that any person who purchases
the stock of the Corporation in this mutual-to-stock conversion will
subsequently be able to sell such shares at prices similar to the pro forma
market value of the Corporation as determined in this conversion appraisal.
<PAGE>
I. DESCRIPTION OF LINCOLN FEDERAL SAVINGS BANK
GENERAL
Lincoln Federal Savings Bank was organized in 1884 as a
federal-chartered mutual savings and loan association, Ladoga Federal Savings
and Loan Association, Ladoga, Indiana. In 1979, Ladoga Federal merged with
Plainfield First Federal Savings and Loan Association and changed its name to
Lincoln Federal Savings and Loan Association. In 1984, the Bank changed its name
to Lincoln Federal Savings Bank. Lincoln Federal conducts its business from its
main office in Plainfield, Indiana and its three branches in Crawfordsville,
Frankfort and Brownsburg. The Bank serves its customers from its four offices
with a fifth office to open on Avon in January 1999.
Lincoln Federal's deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC") in the Savings Association
Insurance Fund ("SAIF"). The Bank is also subject to certain reserve
requirements of the Board of Governors of the Federal Reserve Bank (the "FRB").
Lincoln Federal is a member of the Federal Home Loan Bank (the "FHLB") of
Indianapolis and is regulated by the OTS and by the FDIC. As of June 30, 1998,
Lincoln Federal had assets of $304,500,000, deposits of $211,160,000 and equity
of $42,795,000.
Lincoln Federal is a community-oriented institution which has been
principally engaged in the business of serving the financial needs of the public
in its local communities and throughout its market area. Lincoln Federal has
been involved in the origination of residential mortgage loans secured by one-
to four-family dwellings, which represented 63.3 percent of its loan
originations during the six months ended June 30, 1998, and a lesser 57.5
percent of its loan originations during the fiscal year ended December 31, 1997.
Consumer loan originations represented a modest 20.2 percent and 16.1 percent of
total originations for the same respective time periods. At June 30, 1998, 79.9
percent of its gross loans consisted of residential real estate loans on one- to
four-family dwellings,
<PAGE>
General (cont.)
not including residential construction loans, compared to a moderately higher
83.8 percent at December 31, 1993, with the primary sources of funds being
retail deposits from residents in its local communities and FHLB advances. The
Bank is also an originator of multi-family loans, commercial real estate loans,
construction and land loans, commercial loans and consumer loans. Consumer loans
include home improvement loans, automobile loans, loans on savings accounts,
home equity loans, and secured and unsecured personal loans.
The Bank had $48.5 million, or a moderate 15.9 percent of its assets in
cash and interest-bearing deposits and investments including FHLB stock. The
Bank had an additional $43.2 million in mortgage-backed securities. Deposits,
FHLB advances, and equity have been the primary sources of funds for the Bank's
lending and investment activities.
The Bank's gross amount of stock to be sold in the subscription and
community offering will be $65,000,000 or 6,500,000 shares at $10 per share
based on the midpoint of the appraised value of $67.5 million, less $2.5 million
to be used to form the Lincoln Federal Charitable Foundation, Inc.
("Foundation"). The net conversion proceeds of $63,390,000 reflect the $2.5
million Foundation and conversion expenses of approximately $1,610,000. The
actual cash proceeds to the Bank will be $31.7 million representing fifty
percent of the net conversation proceeds. The ESOP will represent 8.0 percent of
the gross shares issued or 540,000 shares at $10 per share, representing
$5,400,000. The Bank's net proceeds will be invested in adjustable-rate and
fixed-rate mortgage loans, consumer loans and mortgage related securities, and
initially invested in short term investments. The Bank may also use the proceeds
to expand services, expand operations or acquire other financial service
organizations, diversification into other businesses, or for any other purposes
authorized by law. The Corporation will use its proceeds to fund the ESOP, to
invest in short-and intermediate-term government or federal agency securities or
possibly to purchase mortgage-backed and related securities.
<PAGE>
General (cont.)
Lincoln Federal has seen a moderate deposit increase over the past five
fiscal years with deposits increasing 14.8 percent from December 31, 1993 to
December 31, 1997, or an average of 3.71 percent per year. From December 31,
1997, to June 30, 1998, deposits increased by 3.58 percent or 7.16 percent,
annualized, compared to a 3.31 percent decrease in fiscal 1997. The Bank has
focused on increasing its residential real estate loan portfolio during the past
five years, monitoring its earnings and maintaining its equity to assets ratio.
Equity to assets increased from 12.49 percent of assets at December 31, 1993, to
13.06 percent at December 31, 1997, and then increased to 14.05 percent at June
30, 1998.
Lincoln Federal's primary lending strategy has been to focus on the
origination of adjustable-rate and fixed-rate one- to four-family loans, the
origination of commercial real estate and land loans, the origination of
construction loans and the origination of consumer and commercial loans.
Lincoln Federal's share of one- to four-family mortgage loans has
decreased moderately, from 83.8 percent of gross loans at December 31, 1993, to
77.1 percent as of June 30, 1998. Construction loans decreased from 4.1 percent
of gross loans at December 31, 1993, to 3.7 percent at June 30, 1998. Commercial
real estate and land loans decreased from 8.4 percent to 7.8 percent and
multi-family loans increased from 0.4 percent to 0.5 percent from December 31,
1993, to June 30, 1998. All types of mortgage loans as a group decreased from
96.6 percent of gross loans in 1993 to 89.2 percent at June 30, 1998. Commercial
loans increased from zero in 1993 to 0.1 percent of loans at June 30, 1998. The
decrease in mortgage loans was offset by the Bank's increase in consumer loans.
The Bank's share of consumer loans witnessed an increase in its share of loans
from 3.4 percent at December 31, 1993, to 10.8 percent at June 30, 1998, and the
level of consumer loans increased from $7.1 million to $22.4 due primarily to
growth in home equity loans.
<PAGE>
General (cont.)
Management's internal strategy has also included continued emphasis on
maintaining an adequate and appropriate allowance for loan losses relative to
loans and nonperforming assets in recognition of the more stringent requirements
within the industry to establish and maintain a higher level of general
valuation allowances and also in recognition of the Bank's historically higher
level of nonperforming assets and higher charge-offs in 1997 and the six months
ended June 30, 1998. At December 31, 1995, Lincoln Federal had $1,121,000 in its
loan loss allowance or 0.39 percent of gross loans and 46.8 percent of
nonperforming assets, which increased to $1,432,000 and represented a higher
0.70 percent of gross loans and 82.3 percent of nonperforming assets at June 30,
1998.
Interest income from loans and investments has been the basis of
earnings with the net interest margin being the key determinant of net earnings.
With a dependence on net interest margin for earnings, current management will
focus on strengthening the Bank's net interest margin without undertaking
excessive credit risk and will not pursue any significant change in its interest
rate risk position.
PERFORMANCE OVERVIEW
Lincoln Federal's financial position over the past five fiscal years of
December 31, 1993 through December 31, 1997, and for the six months ended June
30, 1998, is highlighted through the use of selected financial data in Exhibit
5. Lincoln Federal has focused on maintaining its equity level and overall
earnings, increasing its loan levels, increasing its investments, and
maintaining its net interest margin. Lincoln Federal has experienced a moderate
increase in assets from 1993 to 1997 with a more modest increase in deposits, a
noticeable increase in borrowed funds, and a rise in equity over the past five
fiscal years. Such a change in assets was the result of a major increase in both
loans and investments from 1993 to 1997.
<PAGE>
Performance Overview (cont.)
Lincoln Federal witnessed a total increase in assets of $95.9 million
or 42.5 percent for the period of December 31, 1993, to December 31, 1997,
representing an average annual increase in assets of 10.6 percent. For the year
ended December 31, 1997, assets decreased $24.2 million or 7.0 percent due to
the securitization of approximately $76.2 million in loans and the subsequent
sale of approximately $54.5 million of these mortgage-backed securities. For the
six months ended June 30, 1998, the Bank's assets decreased another $16.9
million or 5.3 percent with this decrease due to the securitization of $39.9
million in loans and the subsequent sale of $21.1 million of these
mortgage-backed securities. Over the past four fiscal periods, the Bank
experienced its largest dollar rise in assets of $83.5 million in fiscal year
1994, which represented a significant 37.0 percent increase in assets primarily
funded by a rise in deposits and borrowings. This increase was succeeded by a
$10.8 million or 3.5 percent increase in assets in fiscal year 1995 and a $25.8
million increase or 8.1 percent rise in fiscal year 1996.
The Bank's net loan portfolio, including mortgage loans and
non-mortgage loans, increased from $190.1 million at December 31, 1993, to
$250.0 million at December 31, 1997, and represented a total increase of $59.9
million, or 31.5 percent. The average annual increase during that period was
7.87 percent. That increase was primarily the result of higher levels of loan
originations of one- to four-family loans and consumer loans. For the year ended
December 31, 1997, loans decreased $32.8 million or 11.6 percent due to loan
securitizations. For the six months ended June 30, 1998, net loans decreased
another $65.1 million or 26.2 percent also as a result of loan securitizations.
Lincoln Federal has pursued obtaining funds through deposits and FHLB
advances in accordance with the demand for loans. The Bank's competitive rates
for savings in its local market in conjunction with its focus on service have
been the sources for attracting retail deposits. Deposits increased 18.8 percent
from 1993 to 1996, and then decreased 3.3
<PAGE>
Performance Overview (cont.)
percent in 1997 with an average annual rate of increase of 3.7 percent from
December 31, 1993, to December 31, 1997. For the six months ended June 30, 1998,
deposits increased by $7.3 million or 3.6 percent, annualized to 7.2 percent.
The Bank's strongest fiscal year deposit growth was in 1996, when deposits
increased a moderate $14.7 million or 7.5 percent. The Bank had FHLB advances of
$47.9 million at June 30, 1998 compared to a lower $17.6 million at December 31,
1993.
Lincoln Federal has been able to increase its equity each fiscal year
from 1993 through 1997 and in the six months ended June 30, 1998. At December
31, 1993, the Bank had equity of $28.2 million representing a 12.49 percent
equity to assets ratio and then increased to $42.0 million at December 31, 1997,
and representing a 13.06 percent equity to assets ratio. At June 30, 1998,
equity was a higher $42.8 million and a higher 14.05 percent of assets. The rise
in the equity to assets ratio from 1993 to 1997 is the result of the Bank's
steady earnings performance impacted by the Bank's moderate rise in assets.
Equity increased 49.0 percent from December 31, 1993, to December 31, 1997,
representing an average annual increase of 12.3 percent and increased only 1.9
percent for the six months ended June 30, 1998, or 3.8 percent, annually.
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for Lincoln Federal,
reflecting the Bank's income and expense trends. This table provides key income
and expense figures in dollars for the fiscal years of 1993 through 1997 and
income and expense figures for the six months ended June 30, 1997 and 1998.
<PAGE>
Lincoln Federal has witnessed an overall increase in its dollar level
of interest income from December 31, 1993, through December 31, 1997, due to the
Bank's growth in assets, primarily loans. Interest income ranged from a low of
$15.7 million in 1993 to a high of $25.3 million in 1997. This overall trend was
the result of increases in each fiscal year from 1993 to 1997. For the six
months ended June 30, 1998, interest income was $11.4 million, compared to $12.9
million for the six months ended June 30, 1997, reflecting a decrease in
interest income due to the Bank's reduction in loans and assets. The overall
increase in interest income from 1993 to 1997 was due primarily to the Bank's
increase in its loan portfolio.
The Bank's interest expense experienced a similar trend with increases
from fiscal year 1993 to 1997. Interest expense increased $7.6 million or 101.3
percent, from 1993 to 1996, compared to a larger dollar increase in interest
income of $8.7 million but a smaller 55.6 percent, for the same time period.
Interest expense then increased $533,600 or 3.5 percent from 1996 to 1997,
compared to an increase in interest income of $844,000 or 3.5 percent. Such
increase in interest income, notwithstanding the increase in interest expense,
resulted in a moderate dollar increase in annual net interest income of $311,000
or 3.3 percent for the fiscal year ended December 31, 1997, and a minimal
increase in net interest margin. Net interest income increased from $8,201,000
in 1993, its lowest level, to $9,645,000 in 1997. For the six months ended June
30, 1998, Lincoln Federal's actual net interest income was $4,588,000 or $9.1
million, annualized, which was moderately lower than the $5,122,000 for the six
months ended June 30, 1997, or $10.2 million, annualized.
The Bank has made provisions for loan losses in four of the past five
fiscal years of 1993 through 1997 and also in the six months ended June 30,
1998. The amounts of those provisions were determined in recognition of the
Bank's levels of nonperforming assets, charge-offs, repossessed assets, the
Bank's rise in lending activity, and industry norms. The loan loss provisions
were $369,000 in 1993, $100,000 in 1995, $120,000 in 1996, $298,000 in 1997 and
$410,000 in the six months ended June 30, 1998. The Bank had a decrease in
provisions of $1,000 in 1994. The impact of these loan loss provisions has been
to provide Lincoln Federal with a general valuation allowance of $1,432,000 at
June 30, 1998, or 0.70 percent of gross loans and 82.3 percent of nonperforming
assets.
<PAGE>
Income and Expense (cont.)
Total other income or noninterest income indicated very volatile levels
in fiscal years 1993 to 1997 due to unrealized gains and losses and losses on
its equity investment in limited partnerships. The highest level of noninterest
income was in fiscal year 1993 at $877,000 or 0.39 percent of assets and the
lowest level was a loss of $1,514,000 in 1994, representing 0.49 percent of
assets and due primarily to losses on loans held for sale. The average
noninterest income level for the past five fiscal years was a negative $27,800
or a minimal (0.01) percent of average assets. Excluding the larger loss in
1994, the average noninterest income was a much higher $343,750 or 0.11 percent
of average assets. In the six months ended June 30, 1998, noninterest income was
$101,000 or 0.07 percent of assets on an annualized basis. Other noninterest
income consists primarily of service charges, fees and other income.
The Bank's general and administrative expenses or other expenses
increased from $2,602,000 for the fiscal year of 1993 to $5,085,000 for the
fiscal year ended December 31, 1997. The dollar increase in other expenses was
$2,483,000 from 1993 to 1997, representing an average annual increase of
$620,750 or 16.4 percent. The higher average annual increase in other expenses
was due partially to the Bank's higher rise in core overhead expenses in fiscal
1997 of 33.7 percent due to higher data processing expenses, professional fees
and higher other expenses. On a percent of average assets basis, other expenses
increased from 1.29 percent of average assets for the fiscal year ended December
31, 1993, to 1.47 percent for the fiscal year ended December 31, 1997. For the
six months ended June 30, 1998, Lincoln Federal's ratio of other expenses to
average assets was a higher 2.15 percent, due to a higher data processing
expenses, compensation, professional fees and mortgage servicing rights
amortization.
<PAGE>
The net earnings position of Lincoln Federal has indicated profitable
performance in each of the past five fiscal years ended December 31, 1993
through 1997, and for the six months ended June 30, 1998. The annual net income
figures for the past five fiscal years of 1993, 1994, 1995, 1996 and 1997 have
been $4,176,000, $3,383,000, $3,383,000, $2,988,000 and $3,513,000, representing
returns on average assets of 2.06 percent, 1.32 percent, 1.09 percent, 0.90
percent, and 1.02 percent, respectively. For the six months ended June 30, 1998,
net earnings were $817,000, representing an annualized return on average assets
of 0.53 percent.
Exhibit 7 provides the Bank's normalized earnings or core earnings for
fiscal years 1996 and 1997 and for the twelve months ended June 30, 1998. The
Bank's normalized earnings eliminate any nonrecurring income and expense items.
There was an expense adjustment of $1.3 million in 1996 to eliminate the
one-time SAIF assessment. In fiscal 1997, there was an expense adjustment to
reduce the higher than normal provision for loan losses by $78,000. In the
twelve months ended June 30, 1998, there was a similar expense adjustment to
reduce the higher provision for loan losses by $237,000 and a $249,000 expense
reduction due to a FHLB prepayment penalty. With regard to income, there was a
$233,000 reduction to reflect the higher gain on securities available-for-sale.
The key performance indicators comprised of selected performance
ratios, asset quality ratios and capital ratios are shown in Exhibit 8 to
reflect the results of performance. The Bank's return on assets decreased from
2.06 percent in fiscal year 1993 to 0.90 percent in fiscal year 1996, and then
up to 1.02 percent in 1997. It was a lower level for the six months ended June
30, 1998, of 0.53 percent, annualized.
The Bank's average net interest rate spread decreased from 3.86 percent
in fiscal year 1993 to 2.36 percent in fiscal year 1996, then increased to 2.41
percent in 1997. For the six months ended June 30, 1998, net interest spread was
a lower 2.39 percent, annualized. The Bank's net interest margin also indicated
a declining trend, decreasing from 4.34 percent in fiscal year 1993 to 2.91
percent in fiscal year 1996, then increasing to 2.92 percent in fiscal 1997, and
then rising to 3.06 percent for the six months ended June 30, 1998, annualized.
Lincoln Federal's average net interest rate spread decreased 150 basis points
from 1993 to 1996 from 3.86 percent in 1993 to 2.36 percent in 1996 and then
<PAGE>
Income and Expense (cont.)
increased 5 basis points in 1997 to 2.41 percent. The Bank's net interest margin
followed a similar volatile trend, decreasing 143 basis points from 4.34 percent
in 1993 to 2.91 percent in 1996 and then increasing 1 basis point to 2.92
percent in 1997. For the six months ended June 30, 1998, Lincoln Federal's
annualized net interest spread decreased 2 basis points to 2.39 percent, and its
net interest margin increased 14 basis points to 3.06 percent.
The Bank's return on average equity decreased from 1993 to 1997. The
return on average equity decreased from 15.84 percent in 1993 to 8.71 percent in
fiscal year 1997. For the six months ended June 30, 1998, return on average
equity was a lower 3.81 percent, annualized.
Lincoln Federal's ratio of interest-earning assets to interest-bearing
liabilities decreased modestly from 112.05 percent at December 31, 1993, to
110.88 percent at December 31, 1997, and to a higher 114.59 percent at June 30,
1998.
The Bank's ratio of other expenses to average assets increased from
1.29 percent in fiscal year 1993 to a higher 1.47 percent in fiscal year 1997.
For the six months ended June 30, 1998, other expenses to assets increased to
2.15 percent. Another key noninterest expense ratio reflecting efficiency of
operation is the ratio of noninterest expenses to noninterest income plus net
interest income referred to as the "efficiency ratio". The industry norm is 64.0
percent with the lower the ratio indicating higher efficiency. The Bank has been
characterized with a higher level of efficiency historically reflected in its
lower efficiency ratio, which increased from 28.66 percent in 1993 to 50.57
percent in 1997. The ratio then increased to 66.43 percent for the six months
ended June 30, 1998.
<PAGE>
Income and Expense (cont.)
Earnings performance can be affected by an institution's asset quality
position. The ratio of nonperforming assets to total assets is a key indicator
of asset quality. Lincoln Federal witnessed an increase in its nonperforming
asset ratio from 1993 to 1997, and the ratio was much higher than normal.
Nonperforming assets consist of loans delinquent 90 days or more, nonaccruing
loans and repossessed assets. Lincoln Federal's nonperforming assets consist of
90-day delinquent loans and nonaccruing loans as there were no repossessed
assets. The ratio of nonperforming assets to total assets was 0.13 percent at
December 31, 1993, and increased to 0.73 percent at December 31, 1996. The ratio
then increased to 1.14 percent in 1997. At June 30, 1998, Lincoln Federal's
ratio of nonperforming assets to total assets decreased to 0.57 percent. The
Bank's allowance for loan losses was 0.53 percent of loans at December 31, 1993,
and increased to 0.54 percent at December 31, 1997, and then increased to 0.70
percent at June 30, 1998. As a percentage of nonperforming loans, Lincoln
Federal's allowance for loan losses was 350.08 percent in 1993 and 37.56 percent
in 1997. At June 30, 1998, the ratio increased to 87.16 percent reflective of a
decrease in nonperforming loans combined with an increase in allowance for loan
losses.
Exhibit 9 provides the changes in net interest income due to rate and
volume changes for the fiscal years of 1996 and 1997 and for the six months
ended June 30, 1998. In fiscal year 1996, net interest income increased
$1,755,000, due to an increase in interest income of $2,388,000 reduced by a
$633,000 increase in interest expense. The increase in interest income was due
to an increase due to rate of $667,000 accented by an increase due to volume of
$1,721,000. The increase in interest expense was due to an increase due to
volume of $1,284,000 reduced by a decrease due to a change in rate of $451,000.
In fiscal year 1997, net interest income increased $311,000 due to an
increase in interest income of $844,000 reduced by an increase in interest
expense of $533,000. The increase in interest income was due to an increase due
to volume of $689,000 accented by
<PAGE>
Income and Expense (cont.)
an increase due to rate of $155,000. The increase in interest expense was due to
an increase due to volume of $683,000 reduced by a decrease due to a change in
rate of $150,000.
For the six months ended June 30, 1998, compared to the six months
ended June 30, 1997, net interest income decreased $564,000 due to a $1,454,000
decrease in interest income reduced by a $1,137,000 decrease in interest
expense. The decrease in interest income was due to a $2,215,000 decrease due to
volume reduced by a $761,000 increase due to rate. The decrease in interest
expense was the result of a decrease due to volume of $1,441,000 reduced by an
increase due to rate of $551,000.
YIELDS AND COSTS
The overview of yield and cost trends for the years ended December 31,
1995 through 1997, for the six months ended June 30, 1997 and 1998, and at June
30, 1998 can be seen in Exhibit 10, which offers a summary of key yields on
interest-earning assets and costs of interest-bearing liabilities.
<PAGE>
Lincoln Federal's weighted average yield on its loan portfolio
increased 32 basis points from fiscal year 1995 to 1997, from 7.48 percent to
7.80 percent, and then increased 13 basis points to 7.93 percent for the six
months ended June 30, 1998, compared to a lower 7.74 percent for the six months
ended June 30, 1997. The yield on investment securities available-for-sale
decreased 25 basis points from 7.83 percent in 1995 to 7.58 percent in fiscal
year 1997 and then decreased 77 basis points to 6.81 percent for the six months
ended June 30, 1998, compared to a higher 6.89 percent for the six months ended
June 30, 1997. The yield on investment securities held-to-maturity showed no
change from 1995 to 1997 remaining at 6.02 percent and then increased 3 basis
points to 6.05 percent for the six months ended June 30, 1998. The yield on
interest-bearing deposits decreased 154 basis points from fiscal year 1995 to
1997, from 7.05 percent to 5.51 percent and then decreased 43 basis points to
5.08 percent for the six months ended June 30, 1998. The combined weighted
average yield on all interest-earning assets increased 26 basis points to 7.67
percent from 1995 to 1997, reflecting the Bank's higher share of higher-yielding
loans. The yield on interest-earning assets for the six months ended June 30,
1998, was a lower 7.66 percent, compared to an identical similar 7.66 percent
for the six months ended June 30, 1997. The yield on interest-earning assets was
a lower 7.48 percent at June 30, 1998.
Lincoln Federal's weighted average cost of interest-bearing liabilities
decreased 16 basis points to 5.26 percent from fiscal year 1995 to 1997, which
was less than the Bank's 26 basis point increase in yield, resulting in an
increase in the Bank's interest rate spread of 42 basis points from 1.99 percent
to 2.41 percent from 1995 to 1997. For the six months ended June 30, 1998, the
Bank's cost of funds increased 1 basis point to 5.27 percent, compared to a 1
basis point decrease in yield on interest-earning assets, resulting in a lower
net interest rate spread by 2 basis points to 2.39 percent compared to 2.53
percent for the six months ended June 30, 1997. The Bank's net interest rate
spread decreased 17 basis points to 2.22 percent at June 30, 1998. The Bank's
net interest margin increased from 2.55 percent in fiscal year 1995 to 2.92
percent in fiscal year 1997 or 37 basis points. The Bank's net interest margin
for the six months ended June 30, 1998, increased 14 basis points to 3.06
percent compared to a similar 3.05 percent for the six months ended June 30,
1997.
INTEREST RATE SENSITIVITY
Lincoln Federal has always monitored its interest rate sensitivity
position and focused on maintaining a higher level of rate sensitive assets by
originating primarily adjustable-rate mortgage loans accented by adjustable-rate
commercial real estate loans and short term consumer loans. Lincoln Federal has
recognized the thrift industry's historically higher interest rate risk
exposure, which caused a negative impact on earnings and market value
<PAGE>
Interest Rate Sensitivity (cont.)
of portfolio equity as a result of significant fluctuations in interest rates,
specifically rising rates. Such exposure was due to the disparate rate of
maturity and/or repricing of assets relative liabilities commonly referred to as
an institution's "gap". The larger an institution's gap, the greater the risk
(interest rate risk) of earnings loss due to a decrease in net interest margin
and a decrease in market value of equity or portfolio loss. In response to the
potential impact of interest rate volatility and negative earnings impact, many
institutions have taken steps in the 1990's to minimize their gap position. This
frequently results in a decline in the institution's net interest margin and
overall earnings performance. Lincoln Federal has responded to the interest rate
sensitivity issue by being an active originator and purchaser of adjustable-rate
mortgage loans, nonresidential adjustable-rate mortgage loans and multi-family
loans.
The Bank measures its interest rate risk through the use of its net
portfolio value ("NPV") of the expected cash flows from interest-earning assets
and interest-bearing liabilities and any off-balance sheet contracts. The NPV
for the Bank is calculated on a quarterly basis, by the Bank, as well as the
change in the NPV for the Bank under rising and falling interest rates. Such
changes in NPV under changing rates is reflective of the Bank's interest rate
risk exposure.
There are numerous factors which have a measurable influence on
interest rate sensitivity in addition to changing interest rates. Such key
factors to consider when analyzing interest rate sensitivity include the loan
payoff schedule, accelerated principal payments, deposit maturities, interest
rate caps on adjustable-rate mortgage loans, deposit withdrawals, etc.
Exhibit 11 provides the Bank's NPV as of June 30, 1998, and the change
in the Bank's NPV under rising and declining interest rates. Such calculations
are provided by the Bank, and the focus of this exposure table is a 200 basis
points change in interest rates either up or down.
<PAGE>
Interest Rate Sensitivity (cont.)
The Bank's change in its NPV at June 30, 1998, based on a rise in
interest rates of 200 basis points was a 19.0 percent decrease, representing a
dollar decrease in equity value of $9,552,000. In contrast, based on a decline
in interest rates of 200 basis points, the Bank's NPV was estimated to increase
5.0 percent or $2,536,000 at June 30, 1998. The Bank's exposure increases to a
44.0 percent decrease under a 400 basis point rise in rates, and the NPV is
estimated to increase 11.0 percent based on a 400 basis point decrease in rates.
The Bank is aware of its moderate interest rate risk exposure under
rapidly rising rates or falling rates. Due to Lincoln Federal's recognition of
the need to control its interest rate exposure, the Bank has focused on being
active in the origination and purchase of adjustable-rate residential mortgage
loans, adjustable-rate commercial real estate loans and multi-family loans and
plans to continue this lending strategy combined with maintaining a higher level
of short and intermediate term investments.
LENDING ACTIVITIES
Lincoln Federal has focused its lending activity on the origination of
conventional mortgage loans secured by one- to four-family dwellings. Exhibit 12
provides a summary of Lincoln Federal's loan portfolio, by loan type, at
December 31, 1993 through 1997, and at June 30, 1998.
Residential loans secured by one- to four-family dwellings but
excluding residential construction loans were the primary loan type representing
77.1 percent of the Bank's gross loans as of June 30, 1998. This share has seen
a moderate derease from 83.8 percent at December 31, 1993. The second largest
real estate loan type as of June 30, 1998, was commercial real estate loans,
which comprised a moderate 7.0 percent of gross loans
<PAGE>
Lending Activities (cont.)
compared to a lower 5.8 percent as of December 31, 1993. The commercial real
estate loan category was also the second largest real estate loan type in 1993.
The third key real estate loan type was construction loans, which represented
3.7 percent of gross loans as of June 30, 1998, compared to a higher 4.1 percent
at December 31, 1993. Construction loans were the third largest real estate loan
type at December 31, 1993. Lincoln Federal's land loans were the fourth largest
real estate loan type representing 0.8 percent of gross loans at June 30, 1998,
and a much larger 2.5 percent at December 31, 1993, making it the fourth largest
real estate loan type in 1993. The four largest real estate loan categories
represented 88.6 percent of gross loans at June 30, 1998, compared to a larger
96.2 percent of gross loans at December 31, 1993.
Commercial loans represent a small loan category for Lincoln Federal.
Commercial loans totaled only $141,000 and represented 0.1 percent of gross
loans at June 30, 1998, compared to zero at December 31, 1993.
The consumer loan category was the remaining loan type at June 30,
1998, and represented a moderate 10.8 percent of gross loans compared to 3.4
percent at December 31, 1993. Consumer loans were the second largest overall
loan type, at June 30, 1998, but the fourth largest loan type in 1993. The Bank
originates savings account loans, automobile loans, home equity loans and
secured and unsecured personal loans. The overall mix of loans has witnessed
moderate changes from fiscal year-end 1993 to June 30, 1998, with the Bank
having decreased its share of one- to four-family loans, commercial,
construction and land loans to offset its increases in commercial real estate
and consumer loans.
The emphasis of Lincoln Federal's lending activity is the origination
of conventional mortgage loans secured by one- to four-family residences. Such
residences are located in Lincoln Federal's market area, which includes
Hendricks, Montgomery and Clinton
<PAGE>
Lending Activities (cont.)
Counties. The Bank also originates interim construction loans on one- to
four-family residences primarily to individual owners and to developers. At June
30, 1998, 77.1 percent of Lincoln Federal's gross loans consisted of loans
secured by one- to four-family residential properties, excluding construction
loans. Construction loans represented 3.7 percent of gross loans.
The Bank originates adjustable-rate mortgage loans ("ARMs") with an
adjustment period of one year. The interest rates on ARMs are generally indexed
to the weekly average rate on one-year U. S. Treasury securities adjusted to a
constant maturity. ARMs have a maximum rate adjustment of 2.0 percent at each
adjustment period and a maximum rate adjustment of 6.0 percent for the life of
the loan. Rate adjustments are computed by adding a stated margin to the index.
The Bank may offer discounted initial rates, but the borrower must quality for
the loan at the fully indexed rate. The Bank retains all ARMs which it
originates, and ARMs are generally not convertible to fixed-rate loans.
The majority of ARMs have terms of 30 years, and fixed-rate loans have
normal terms of 15 to 25 years with a 30 year maximum term. The Bank also
retains its fixed-rate loans. Historically, the majority of Lincoln Federal's
one-to four-family mortgage loan portfolio has been fixed-rate mortgage loans,
with adjustable-rate loans representing 35.8 percent of these loans at June 30,
1998. Most of Lincoln Federal's commercial real estate and multi-family loans
are adjustable-rate. Overall, 37.2 percent of Lincoln Federal's loans at June
30, 1998, are adjustable-rate.
The normal loan-to-value ratio for conventional mortgage loans to
purchase or refinance one-to four-family dwellings generally does not exceed 80
percent at Lincoln Federal, even though the Bank is permitted to make loans with
higher loan-to-value ratios. The Bank does make loans up to 95 percent of
loan-to-value and does require credit life
<PAGE>
Lending Activities (cont.)
insurance for the amount in excess of the 80.0 percent loan-to-value ratio.
Mortgage loans originated by the Bank include due-on-sale clauses enabling the
Bank to adjust rates on fixed-rate loans in the event the borrower transfers
ownership.
Lincoln Federal has been an originator of commercial real estate loans
and multi-family loans. The Bank will continue to make multi-family and
nonresidential real estate loans. The Bank had a total of $14.5 million in
commercial real estate loans at June 30, 1998, or 7.0 percent of gross loans,
compared to $12.2 million or 5.8 percent of gross loans at December 31, 1993.
Lincoln Federal's multi-family loans have increased from $857,000 or 0.4 percent
of gross loans at December 31, 1993, to $1.1 million and a greater 0.5 percent
of gross loans at June 30, 1998. The major portion of commercial real estate
loans is secured by churches, warehouses, hotels, small office buildings, and
other commercial properties and are located in the Bank's primary market area.
The Bank also originates construction loans to individuals for
residential construction and to developers. At June 30, 1998, the Bank had $7.7
million in construction loans representing 3.7 percent of gross loans. Of this
total, $3.4 million was to builders of residential housing developments and $4.0
million was for the construction of one- to four-family residential properties.
Lincoln Federal has been relatively active in consumer lending.
Consumer loans originated consist primarily of home equity and second mortgage
loans, representing 82.8 percent of consumer loans. Consumer loans represented a
combined total of $22.4 million or 10.8 percent of gross loans at June 30, 1998,
up from $7.1 million or 3.4 percent of loans in 1993. The Bank also makes
commercial loans which totaled only $141,000 or 0.1 percent of loans at June 30,
1998, with such loans offered as a convenience to customers.
<PAGE>
Lending Activities (cont.)
Exhibit 13 provides a loan maturity schedule and breakdown and summary
of Lincoln Federal's fixed- and adjustable-rate loans, indicating a majority of
fixed-rate loans. At June 30, 1998, 37.2 percent of the Bank's total loans were
adjustable-rate and 62.8 percent were fixed-rate. The Bank also has a moderate
10.6 percent of its loans at June 30, 1998, due in 5 years or less with 32.3
percent due in 7 to 15 years.
As indicated in Exhibit 14, Lincoln Federal experienced a modest
decrease in its one-to four-family loan originations and total loan originations
from fiscal year 1995 to 1997. Total loan originations in fiscal year 1997 were
$77.3 million compared to $77.9 million in fiscal year 1995, reflective of lower
levels of one-to four-family, real estate, multi-family and construction loans.
The decrease in one- to four-family residential loan originations from 1995 to
1997 totaled $2.3 million compared to the $660,000 aggregate decrease in total
loan originations from 1995 to 1997. Multi-family and commercial real estate
increased $767,000 due to a $958,000 increase in commercial real estate loans.
Construction loan originations decreased $9.1 million, representing the largest
decrease in loan originations by loan type. Consumer loan originations increased
$9.6 million and exceeding the decrease in construction loans. Loan originations
for the six months ended June 30, 1998, were $38.7 million, representing $77.4
million on an annualized basis and in line with originations in 1997. Loan
originations on one- to four-family residences, excluding construction and land
loans, represented 58.0 percent of total loan originations in fiscal year 1996,
and 57.5 percent in fiscal year 1997. One- to four-family loan originations
increased to 63.3 percent of total loan originations for the six months ended
June 30, 1998. Consumer loans represented 15.3 percent of total loan
originations in 1996 and a larger 16.1 percent in 1997. For the six months ended
June 30, 1998, these loans represented a still larger 20.2 percent of total
originations.
Overall, loan originations exceeded principal payments, loan sales and
repayments in fiscal 1995 by $21.9 million and exceeded reductions in fiscal
1996 by a similar $23.1 million. In fiscal 1997, loan originations fell short of
reductions by $63.6 million due to
<PAGE>
Lending Activities (cont.)
the sale of $78.9 million in loans. For the six months ended June 30, 1998, loan
originations and purchases fell short of reductions by $46.9 million again due
to loan sales of $47.7 million.
NONPERFORMING ASSETS
Lincoln Federal understands asset quality risk and the direct
relationship of such risk to delinquent loans and nonperforming assets including
real estate owned. The quality of assets has been a key concern to financial
institutions throughout many regions of the country. A number of financial
institutions have been confronted with rapid increases in their levels of
nonperforming assets and have been forced to recognize significant losses,
setting aside major valuation allowances. A sharp increase in nonperforming
assets has often been related to specific regions of the country and has
frequently been associated with higher risk loans, including purchased
nonresidential real estate loans and multi-family loans. Lincoln Federal has
been faced with higher levels of nonperforming assets in the past and has made a
concerted effort to reduce its nonperforming assets during the past five years
and has been successful.
Exhibit 15 provides a summary of Lincoln Federal's delinquent loans at
June 30, 1998, and at December 31, 1995 through 1997, indicating a higher level
of delinquent loans. The Bank had $1.6 million or 0.81 percent of loans
delinquent 90 days or more at June 30, 1998, compared to $3.3 million or 1.28
percent of loans at December 31, 1997. Loans delinquent 30 to 89 days totaled
$5.1 million at June 30, 1998, or 2.46 percent of loans with $4.7 million in
one- to four-family loans. At June 30, 1998, delinquent loans of 30 days or more
totaled $6.7 million or 3.27 percent of gross loans.
Lincoln Federal's management reviews all loans delinquent 30 days or
more on a monthly basis, to assess their collectibility and to initiate any
direct contact with
<PAGE>
Nonperforming Assets (cont.)
borrowers. The board reviews all loans delinquent 90 days or more on a monthly
basis and all real estate owned. When a loan is delinquent 10 days, the Bank
sends the borrower a late payment notice. The Bank then initiates, through its
collection officer, both written and oral communication with the borrower if the
loan remains delinquent for 60 days. When the loan becomes delinquent at least
90 days, the Bank will commence foreclosure proceedings or will have entered
into a workout plan. The Bank does not normally accrue interest on loans past
due 90 days or more. One- to four-family loans delinquent 120 days or more are
placed on a non-accrual status.
Exhibit 16 provides a summary of Lincoln Federal's nonperforming assets
at June 30, 1998, and at December 31, 1995 through 1997. Nonperforming assets
consist of non-accrual loans, loans delinquent 90 days or more, foreclosed real
estate and troubled debt restructurings. The Bank historically carried a
modestly higher level of nonperforming assets but has reduced this ratio at June
30, 1998. Lincoln Federal's level of nonperforming assets ranged from a high
dollar amount of $3,669,000 or 0.80 percent of total loans at December 31, 1996,
to a low dollar amount of $1,741,000 or 0.80 percent of loans at June 30, 1998.
Lincoln Federal's level of nonperforming assets was similar to its
level of classified assets. The Bank's level of classified assets was $1,634,000
or 0.54 percent of assets at June 30, 1998 (reference Exhibit 17). The Bank's
classified assets consisted of $1,634,000 in substandard assets, with none
classified as doubtful or loss.
Exhibit 18 shows Lincoln Federal's allowance for loan losses at June
30, 1998, and for fiscal years ended 1995 through 1997, indicating the activity
and the resultant balances. Lincoln Federal has witnessed a modest increase in
its balance of allowance for loan losses from $1,121,000 in 1995 to $1,361,000
in 1997. The balance in allowance for loan losses then increased to $1,432,000
at June 30, 1998, with provisions of $100,000 in 1995, $120,000 in 1996,
$298,000 in 1997 and $410,000 in the first six months ended June 30,
<PAGE>
Nonperforming Assets (cont.)
1998. The Bank had net charge-offs of $26,000 in 1995, $178,000 in 1997 and
$339,000 for the six months ended June 30, 1998. The Bank's ratio of allowance
for loan losses to gross loans was 0.39 percent at December 31, 1995, and a
higher 0.54 percent at December 31, 1997. The allowance for loan losses to gross
loans was a still higher 0.70 percent at June 30, 1998. Allowance for loan
losses to nonperforming loans was 37.6 percent at December 31, 1997, and a
higher 87.2 percent at June 30, 1998, reflecting the increase in allowance for
loan losses combined with the decrease in nonperforming loans.
INVESTMENTS
The investment and securities portfolio, excluding interest-bearing
deposits of Lincoln Federal has been comprised of Federal agency securities,
corporate securities, mortgage-backed and related securities, equity investments
and FHLB stock. Exhibit 19 provides a summary of Lincoln Federal's investment
portfolio at December 31, 1997, and at June 30, 1998, including FHLB stock.
Investments totaled $70.3 million at June 30, 1998, compared to $46.3 million at
December 31, 1997, including FHLB stock of $5.4 million at June 30, 1998. The
primary component of investment securities, excluding mortgage-backed and
related securities, at June 30, 1998, was corporate securities, representing
54.8 percent of investments with Federal agency securities the primary category
with 54.2 percent at December 31, 1997. The Bank had FHLB stock totaling $5.4
million at June 30, 1998, $3.5 million in Federal agency securities and $2.6
million in investments in limited partnerships. The Bank also had $44.1 million
in mortgage-backed and related securities at June 30, 1998, compared to $29.4
million in mortgage-backed and related securities at December 31, 1997.
<PAGE>
DEPOSIT ACTIVITIES
The change in the mix of deposits from December 31, 1995, to June 30,
1998, is provided in Exhibit 20. There has been a modest change in both total
deposits and in the deposit mix during this period. Certificates of deposit
witnessed a decrease in their share of deposits, decreasing from a higher 77.1
percent of total deposits at December 31, 1995, to a still higher 72.5 percent
of total deposits at June 30, 1998. This increase is above the industry norm in
the share of certificates. The major component of certificates had rates between
5.00 percent and 5.99 percent and represented 59.4 percent of certificates at
June 30, 1998. At December 31, 1995, the major component of certificates was the
6.00 percent to 6.99 percent category with 45.8 percent of certificates. Savings
accounts decreased in dollar amount from $33.3 million to $20.6 million, and
their share of total deposits decreased from 17.0 percent to 9.8 percent from
December 31, 1995, to June 30, 1998, respectively, both representing a
significant share of deposits, NOW accounts indicated a modest dollar increase
rising from $7.1 million at December 31, 1995, to $7.5 million at June 30, 1998,
and their share of total deposits decreased from 3.6 percent to 3.5 percent.
Money market accounts witnessed a significant increase in deposits from $3.2
million at December 31, 1995, to $28.6 million at June 30, 1998, with their
share increasing from 1.6 percent to 13.6 percent over that time period.
Noninterest-bearing demand accounts witnessed minimal change increasing from
$1.3 million at December 31, 1995, to $1.4 million at June 30, 1998.
Exhibit 21 shows the Bank's deposit activity for the two years ended
December 31, 1996 and 1997, and for the six months ended June 30, 1998.
Including interest credited, Lincoln Federal experienced net increases in
deposits in fiscal year 1996 and for the six months ended June 30, 1998.
Including interest credited, there was a net decrease in deposits of $7.0
million or 3.3 percent of deposits in 1997. In fiscal year 1996, a net increase
in deposits of $14.7 million resulted in a 7.5 percent increase in deposits
including interest credited. For the six months ended June 30, 1998, a net
increase in deposits of $7.3 million produced a net increase of 3.6 percent, or
7.2 percent, annualized.
<PAGE>
BORROWINGS
Lincoln Federal made use of FHLB advances from December 31, 1995 to
June 30, 1998. The Bank had $45.7 million in FHLB advances at June 30, 1998,
representing 15.0 percent of assets with an average interest rate of 5.78
percent. The Bank had a higher $81.9 million at December 31, 1995, representing
25.6 percent of assets and an average rate of 6.11 percent.
SUBSIDIARIES
Lincoln Federal has a wholly-owned subsidiary, LF Service Corp. ("LF"),
whose assets consist of an investment in Family Financial Life Insurance Company
("Family Financial") and Bloomington Housing Associates, L.P. ("BHA"). BHA is an
Indiana limited partnership organized to construct, own and operate a 130-unit
apartment complex in Bloomington, Indiana. LF committed to invest $4.9 million,
and at June 30, 1998, the Bank had invested $2.7 million in BHA with five
additional annual capital contributions totaling $2.2 million. In May 1998, LF
acquired a 16.7 percent interest in Family Financial for $650,000. Family
Financial primarily engages in the sale of mortgage and credit insurance
products and also markets tax-deferred annuity contracts.
OFFICE PROPERTIES
Lincoln Federal has four full service offices located in Plainfield,
Crawfordsville, Frankfort and Brownsburg, Indiana (reference Exhibit 23).
Lincoln Federal owns all of its offices. The Bank will be opening a fifth offie
in Avon in January 1999 at a cost of $417,000 for land and other capitalized
costs. The Bank's investment in its office premises, including furniture,
fixtures and equipment, totaled $2.4 million or 0.80 percent of assets at June
30, 1998.
<PAGE>
MANAGEMENT
The President, Chief Executive Officer, and Managing Officer of Lincoln
Federal is T. Tim Unger, who is also a Director. Mr. Unger has been President
and Chief Executive Officer since 1996 when he also became a Director. Prior to
that, Mr. Unger served as President and Chief Executive Officer of Summit Bank
of Clinton County from 1989 to 1995. Mr. John M. Baer is Chief Financial
Officer, Secretary and Treasurer of the Bank, having joined the Bank as Chief
Financial Officer in 1997. Mr. Baer worked previously with Bank One in
Indianapolis. Mr. Maxwell O. Magee is Vice President, having held this position
since 1994. Mr. Magee was previously employed with Railroadmen's Federal Savings
and Loan Association.
<PAGE>
II. DESCRIPTION OF PRIMARY MARKET AREA
Lincoln Federal's primary market area for retail deposits encompasses
all of Clinton, Hendricks and Montgomery Counties, Indiana (the market area)
with all counties located in central Indiana. The Bank has four regular offices,
one each in Plainfield, Brownsburg, Crawfordsville and Frankfort with a new
office in Avon to open in early 1999.
The primary market area is characterized by a moderately higher than
average level of median household income than both Indiana and the United States
and a higher housing value than Indiana but lower than the United States.
Unemployment rates in the market area counties have been lower than national
unemployment rates in both Indiana and the United States and have declined over
the past few years. The market area's strongest employment categories are the
services industry, manufacturing industry and the wholesale/retail trade
industry, with a slightly higher level of residents employed in the
transportation industry category than in Indiana or the United States.
Exhibit 25 provides a summary of key demographic data and trends for
the market area, Indiana and the United States. Overall, from 1990 to 1997,
population increased in the market area as well as in Indiana and the United
States. The population increased by 14.6 percent for the market area from 1990
to 1997. In the same time period, population increased a smaller 6.2 percent in
Indiana, and increased in the United States by 7.7 percent. Future population
projections indicate that population will continue to increase in the market
area through the year 2002. From 1997 to 2002, population is expected to
increase by 8.7 percent in the market area, by 4.0 percent in Indiana and by 5.0
percent in the United States.
In conformance with its significant rise in population, the market area
witnessed an increase in households (families) of 16.0 percent from 1990 to
1997. During that same time period, the number of households increased in
Indiana by 7.5 percent and increased by 7.7 percent in the United States. By the
year 2002, the market area's households are projected to continue to increase by
4.9 percent in Indiana and increase in the United States by 5.0 percent.
<PAGE>
Description of Primary Market Area (cont.)
In 1990, per capita income in the market area was higher than the per
capita income in Indiana and the United States. The market area had a 1990 per
capita income of $13,962 compared to Indiana at a slightly lower $13,149 and the
United States at $12,313. From 1990 to 1997, per capita income increased in the
market area, Indiana and the United States, with the United States having the
greatest percent increase. The market area's per capita income increased from
1990 to 1997, by 43.0 percent to $19,964, while Indiana's per capita income
increased by a smaller 34.7% to $17,711. Per capital income in the United States
increased by a larger 47.0 percent to $18,100.
The 1990 median household income in the Bank's primary market area was
higher than the median household income in Indiana and the United States. The
market area had a 1990 median household income of $33,985, which was higher than
Indiana's median household income of $28,797 and also higher than the United
States' median household income of $28,525. From 1990 to 1997, median household
income in the primary market area, Indiana and the United States all increased,
with the market area indicating the highest rate of increase, and the United
States the lowest. Median household income increased by 37.9 percent to $46,855
in the market area compared to a lower 30.6 percent increase to $37,600 in
Indiana and a slightly lower 29.6 percent increase to $36,961 in the United
States. From 1997 to 2002, median household income is projected to increase by
25.0 percent in the market area while increasing by 20.0 percent in Indiana and
13.7 percent in the United States. Based on those rates of change, by 2002,
median household income is expected to be a higher $58,556 in the market area,
$45,103 in Indiana, and $42,042 in the United States.
Exhibit 26 provides a summary of key housing data for the market area,
Indiana and the United States. The market area had a higher than average rate of
owner-occupancy at 77.4 percent, greater than the 70.2 percent owner-occupancy
rate for Indiana. The United States had an owner-occupancy rate of 64.2 percent.
As a result, the market area
<PAGE>
Description of Primary Market Area (cont.)
supports a lower than average rate of renter-occupied housing at 22.6 percent
compared to 29.8 percent for Indiana and 35.8 percent for the United States.
The market area's median housing value of $61,066 is higher than
Indiana's but lower than the United States' median housing value. The market
area's median housing value of $61,066 is 14.1 percent higher than Indiana's
median housing value of $53,500 but 22.8 percent lower than the United States'
$79,098 median housing value. The average median rent of the market area of $380
was slightly above the median rent of both Indiana at $374 and the United States
at an identical $374.
In 1990, the major business source of employment by industry group,
based on number of employees, for the market area was the services industry,
responsible for 30.0 percent of jobs, which was lower than the United States
with 34.0 percent (reference, Exhibit 27). The manufacturing industry was the
second major employer in the market area at 25.1 percent. In the United States,
the wholesale/retail trade group was the second major employer with 27.5
percent. The wholesale/retail trade group was the third major employer in the
market area at 19.0 percent. In the United States the manufacturing group was
the third major employer with 19.2 percent. The construction group, finance,
insurance and real estate group, transportation/utilities group, and the
agriculture/mining groups combined to provide 25.9 percent of employment in the
market are and 19.3 percent in the United States.
The strong presence of the services group in the market area is due to
the strong presence of Cinergy/PSI, the State Department of Corrections and also
the Plainfield Schools, which together employ approximately 1,800 people.
<PAGE>
Description of Primary Market Area (cont.)
The following list provides some of the leading employers in the market
area:
Employer Number of Employees
- -------- -------------------
Cinergy/PSI 1,000
Galyans Trading Company 450
State Department of Corrections 380
Plainfield Schools 380
Customized Transportation, Inc. 250
The unemployment rate is another key economic indicator. Exhibit 28
shows the unemployment rates in the market area, Indiana and the United States
in 1994, 1995, 1996, 1997 and May 1998. The market area counties combined have
been characterized by a lower unemployment rate than Indiana as well as the
United States. In 1994, the market area had an unemployment rate of 2.9 percent
compared to an unemployment rate of 4.9 percent in Indiana and a higher 6.1
percent in the United States. The market area's unemployment rate decreased to
2.7 percent in 1995, compared to 4.7 percent in Indiana and a decrease to 5.6
percent in the United States. In 1996, the market area decreased slightly to 2.6
percent, while Indiana and the United States showed a larger decrease at 4.1
percent and 5.4 percent, respectively. In 1997, the market are counties had an
unemployment rate of 2.4 percent, with Indiana at 3.5 percent and the United
States at 4.9 percent. By May 1998, the unemployment rate in the market area
counties was still lower at 2.1 percent and had also decreased to 2.8 percent in
Indiana and to 4.2 percent in the United States.
Exhibit 29 provides deposit data for banks and thrifts in the three
market area counties. Lincoln Federal's deposit base in the market area was
$201.3 million or 44.6 percent of the $451.2 million total thrift deposits and a
much smaller 12.6 percent share of total deposits, which were $1.6 billion as of
June 30, 1997. The market area is dominated by the banking industry. Total bank
deposits in the market area were $1.1
<PAGE>
Description of Primary Market Area (cont.)
billion representing 71.6 percent of total deposits, compared to a lower $451.2
million or 28.4 percent of deposits for thrifts. It is evident from the size of
thrift deposits and bank deposits that the market area counties have a strong
deposit base, with the Bank having a strong level of market penetration for
thrift deposits but a small share of market penetration of total deposits.
Exhibit 30 provides interest rate data for each quarter for the years
1994 through 1997 and for the first two quarters of 1998. The interest rates
tracked are the Prime Rate, as well as 90-Day, One-Year and Thirty-Year Treasury
Bills. Short term interest rates experienced a slightly rising trend in 1994.
This rising trend continued into the first quarter of 1995 with prime at 9.00
percent. However, throughout 1995, interest rates saw dramatic decreases, as the
prime rate fell to its 1994 year end level of 8.50 percent. Such decrease in the
prime rate continued through the first quarter of 1996 as it fell to 8.25
percent and then remained at 8.25 percent through the remainder of 1996. Prime
rate increased to 8.50 percent in 1997 and has remained there. Rates on one-year
T-bills, however, witnessed an increase in 1996 after a measurable decrease in
1995. Rates on one-year T-Bills continued to increase in 1997 and into early
1998 and then decreased in the second quarter of 1998.
SUMMARY
To summarize, the market area represents an area with growing
population and household trends during the mid-1990s. The market area displayed
a higher per capita income and a higher median household income than Indiana and
the United States in 1997 and had a lower median housing value than the United
States but higher than Indiana with similar median rent values to both. Finally,
the market area has a lower unemployment rate when compared to Indiana and the
United States and a highly competitive financial institution market strongly
dominated by banks, with a relatively small presence of thrifts and a total
market deposit base for banks and thrifts that exceeds $1.6 billion in deposits.
<PAGE>
III. COMPARABLE GROUP SELECTION
Introduction
Integral to the valuation of the Corporation is the selection of an
appropriate group of publicly-traded thrift institutions, hereinafter referred
to as the "comparable group". This section identifies the comparable group and
describes each parameter used in the selection of each institution in the group,
resulting in a comparable group based on such specific and detailed parameters,
current financials and recent trading prices. The various characteristics of the
selected comparable group provide the primary basis for making the necessary
adjustments to the Corporation's pro forma value relative to the comparable
group. There is also a recognition and consideration of financial comparisons
with all publicly-traded, FDIC-insured thrifts in the United States and all
publicly-traded, FDIC-insured thrifts in the Midwest region and in Indiana.
Exhibits 31 and 32 present Thrift Stock Prices and Pricing Ratios and
Key Financial Data and Ratios, respectively, both individually and in aggregate,
for the universe of 365 publicly-traded, FDIC-insured thrifts in the United
States ("all thrifts"), excluding mutual holding companies, used in the
selection of the comparable group and other financial comparisons. Exhibits 31
and 32 also subclassify all thrifts by region, including the 139 publicly-traded
Midwest thrifts ("Midwest thrifts") and the 25 publicly-traded thrifts in
Indiana ("Indiana thrifts"), and by trading exchange. Exhibit 33 presents
prices, pricing ratios and price trends for all FDIC-insured thrifts completing
their conversions between January 1, 1998, and August 14, 1998.
The selection of the comparable group was based on the establishment of
both general and specific parameters using financial, operating and asset
quality characteristics of Lincoln Federal as determinants for defining those
parameters. The determination of parameters was also based on the uniqueness of
each parameter as a normal indicator of
<PAGE>
Introduction (cont.)
a thrift institution's operating philosophy and perspective. The parameters
established and defined are considered to be both reasonable and reflective of
Lincoln Federal's basic operation.
Inasmuch as the comparable group must consist of at least ten
institutions, the parameters relating to asset size and geographic location have
been expanded as necessary in order to fulfill this requirement.
GENERAL PARAMETERS
Merger/Acquisition
The comparable group will not include any institution that is in the
process of a merger or acquisition due to the price impact of such a pending
transaction. The following thrift institutions were potential comparable group
candidates but had to be eliminated due to their involvement in a
merger/acquisition.
Institution State
Home Bancorp of Elgin, Inc. Illinois
Mid-Iowa Financial Corp. Iowa
1ST Bancorp Indiana
Security First Corp. Indiana
There is are no pending merger/acquisition transaction involving thrift
institutions in Lincoln Federal's city, county or market area, as indicated in
Exhibit 34.
<PAGE>
Mutual Holding Companies
The comparable group will not include any mutual holding companies. The
percentage of public ownership of individual mutual holding companies indicates
a wide range from minimal to 49.0 percent, the largest permissible percentage,
causing them to demonstrate certain varying individual characteristics different
among themselves and from conventional, publicly-traded companies. A further
reason for the elimination of mutual holding companies as potential comparable
group candidates relates to the presence of a mid-tier, publicly-traded holding
company in some, but not all, mutual holding company structures. The presence of
mid-tier holding companies can also result in inconsistent and unreliable
comparisons among the relatively small universe of 22 publicly-traded mutual
holding companies as well between those 22 entities and the larger universe of
conventional, publicly-traded thrift institutions. As a result of the foregoing
and other factors, mutual holding companies typically demonstrate higher pricing
ratios that relate to their minority ownership structure and are inconsistent in
their derivation with those calculated for conventionally structured,
publicly-traded institutions. In our opinion, it is appropriate to limit
individual comparisons to institutions that are 100 percent publicly owned.
Exhibit 35 presents pricing ratios and Exhibit 36 presents key financial data
and ratios for the 22 publicly-traded, FDIC-insured mutual holding companies in
the United States. The following thrift institutions were potential comparable
group candidates, but were not considered due to their mutual holding company
form:
Institution State
Lincoln Federal SB of Siouxland, MHC Iowa
Webster City Federal Savings Bank, MHC Iowa
Jacksonville Savings Bank, MHC Illinois
Pulaski Bank, FSB, MHC Missouri
Wayne Savings Bancshares, MHC Indiana
<PAGE>
Trading Exchange
It is necessary that each institution in the comparable group be listed
on one of the three major stock exchanges, the New York Stock Exchange, the
American Stock Exchange, or the National Association of Securities Dealers
Automated Quotation System (NASDAQ). Such a listing indicates that an
institution's stock has demonstrated trading activity and is responsive to
normal market conditions, which are requirements for listing. Of the 387
publicly-traded, FDIC-insured institutions, including 22 mutual holding
companies, 14 are traded on the Indiana Stock Exchange, 26 are traded on the
American Stock Exchange and 347 are listed on NASDAQ.
IPO Date
Another general parameter for the selection of the comparable group is
the initial public offering ("IPO") date, which must be at least four quarterly
periods prior to the trading date of August 14, 1998, used in this report, in
order to insure at least four consecutive quarters of reported data as a
publicly-traded institution. The resulting parameter is a required IPO date
prior to March 31, 1997.
Geographic Location
The geographic location of an institution is a key parameter due to the
impact of various economic and thrift industry conditions on the performance and
trading prices of thrift institution stocks. Although geographic location and
asset size are the two parameters that have been developed incrementally to
fulfill the comparable group requirements, the geographic location parameter has
nevertheless eliminated regions of the United States distant to Lincoln Federal,
including the Midatlantic, New England, western, southwestern and southeastern
states.
<PAGE>
Geographic Location (cont.)
The geographic location parameter consists of Indiana and its
surrounding states of Ohio, Michigan, Kentucky and Illinois, as well as the
states of Iowa, Missouri and Wisconsin, for a total of eight states. To extend
the geographic parameter beyond those states could result in the selection of
similar thrift institutions with regard to financial conditions and operating
characteristics, but with different pricing ratios due to their geographic
regions. The result could then be an unrepresentative comparable group with
regard to price relative to the parameters and, therefore, an inaccurate value.
Asset Size
Asset size was another key parameter used in the selection of the
comparable group. The range of total assets for any potential comparable group
institution was $700 million or less, due to the general similarity of asset mix
and operating strategies of institutions within this asset range, compared to
Lincoln Federal, with assets of approximately $304.5 million. Such an asset size
parameter was necessary to obtain an appropriate comparable group of at least
ten institutions.
In connection with asset size, we did not consider the number of
offices or branches in selecting or eliminating candidates, since that
characteristic is directly related to operating expenses, which are recognized
as an operating performance parameter.
SUMMARY
Exhibits 37 and 38 show the 86 institutions considered as comparable
group candidates after applying the general parameters, with the shaded lines
denoting the institutions ultimately selected for the comparable group using the
balance sheet, performance and asset quality parameters established in this
section. It should be noted
<PAGE>
Summary (cont.)
that the comparable group candidates may be members of either the Bank Insurance
Fund (BIF) or the Savings Bank Insurance Fund (SAIF), since many members of each
fund hold significant balances of deposits insured by the other fund.
BALANCE SHEET PARAMETERS
Introduction
The balance sheet parameters focused on seven balance sheet ratios as
determinants for selecting a comparable group, as presented in Exhibit 37. The
balance sheet ratios consist of the following:
1. Cash and Investments to Assets
2. Mortgage-Backed Securities to Assets
3. One- to Four-Family Loans to Assets
4. Total Net Loans to Assets
5. Total Net Loans and Mortgage-Backed Securities to Assets
6. Borrowed Funds to Assets
7. Equity to Assets
The parameters enable the identification and elimination of thrift
institutions that are distinctly and functionally different from Lincoln Federal
with regard to asset mix. The balance sheet parameters also distinguish
institutions with a significantly different capital position from Lincoln
Federal. The ratio of deposits to assets was not used as a parameter as it is
directly related to and affected by an institution's equity and borrowed funds
ratios, which are separate parameters.
<PAGE>
Cash and Investments to Assets
Lincoln Federal's ratio of cash and investments to assets was 13.8
percent at June 30, 1998, and reflects the Bank's average share of investments
compared to national and regional averages. The Bank's investments consist
primarily of federal agency securities, corporate securities and FHLB deposits.
For its most recent five calendar years, Lincoln Federal's average ratio of cash
and investments to assets was a lower 8.2 percent, from a high of 8.9 percent in
1997 to a low of 6.4 percent in 1995, indicating an increase in 1997 and at June
30, 1998. It should be noted that, for the purposes of comparable group
selection, Lincoln Federal's $5.4 million balance of Federal Home Loan Bank
stock at June 30, 1998, is included in the other assets category, rather than in
cash and investments, in order to be consistent with reporting requirements and
sources of statistical and comparative analysis related to the universe of
comparable group candidates and the final comparable group.
The parameter range for cash and investments is broad in spite of
Lincoln Federal's lower balance of cash and investments, related to the general
volatility of this parameter and institutions' varying liquidity options and
approaches, including the purchase of mortgage-backed and mortgage derivative
securities. The range has been defined as 30.0 or less of assets, with a
midpoint of 15.0 percent.
Mortgage-Backed Securities to Assets
At June 30, 1998, Lincoln Federal's ratio of mortgage-backed securities
to assets, consisting of loans originated, securitized and sold by the Bank, was
a higher than average 14.49 percent compared to the regional average of 6.9
percent and the national average of 10.5 percent for publicly-traded thrifts.
Inasmuch as many institutions purchase mortgage-backed securities as an
alternative to both lending, relative to cyclical loan demand and prevailing
interest rates, and other investment vehicles, this parameter is also fairly
broad at 20.0 percent or less of assets and a midpoint of 10.0 percent.
<PAGE>
One- to Four-Family Loans to Assets
Lincoln Federal's lending activity is focused on the origination of
residential mortgage loans secured by one- to four-family dwellings. One- to
four-family loans, including construction loans, represented 54.2 percent of the
Bank's assets at June 30, 1998, which is higher than the national average of
49.0 percent and similar to the 53.1 percent average for savings institutions in
the Midwest. The parameter for this characteristic requires any comparable group
institution to have from 25.0 percent to 75.0 percent of its assets in one- to
four-family loans with a midpoint of 50.0 percent.
Total Net Loans to Assets
At June 30, 1998, Lincoln Federal had a ratio of total net loans to
assets of 66.6 percent and a higher five calendar year average of 85.8 percent,
the former being very similar to the national average of 66.8 percent and
modestly lower than the regional average of 70.9 percent for publicly-traded
thrifts. The Bank's decrease in its ratio of net loans to assets relates to its
securitization of portfolio loans during the second half of 1997 and the first
half of 1998, as discussed above. The parameter for the selection of the
comparable group is from 45.0 percent to 90.0 percent with a midpoint of 67.5
percent. The wider range is simply due to the fact that, as the referenced
national and regional averages indicate, many institutions hold a greater volume
of investment securities and/or mortgage-backed securities as cyclical
alternatives to lending, but may otherwise be similar to Lincoln Federal.
Total Net Loans and Mortgage-Backed Securities to Assets
As discussed previously, Lincoln Federal's shares of mortgage-backed
securities to assets and total net loans to assets were 14.5 percent and 66.6
percent, respectively, for a combined share of 81.1 percent. Recognizing the
industry and regional ratios of 10.5
<PAGE>
Total Net Loans and Mortgage-Backed Securities to Assets (cont.)
percent and 6.9 percent, respectively, of mortgage-backed securities to assets,
the parameter range for the comparable group in this category is 65.0 percent to
95.0 percent, with a midpoint of 80.0 percent.
Borrowed Funds to Assets
Lincoln Federal had a $47.9 million balance of borrowed funds at June
30, 1998, comprised of $45.7 million of FHLB advances and $2.2 million of notes
payable, representing 15.7 percent of assets. At December 31, 1997, the Bank's
borrowed funds were $72.8 million or a higher 22.7 percent of assets, and its
five calendar year average was 22.8 percent from a low ratio of 7.8 percent in
1993 to a high of 29.2 percent in 1994, with the ratio declining since December
31, 1994. The use of borrowed funds by some thrift institutions indicates an
alternative to retail deposits and may provide a source of term funds for
lending. The federal insurance premium on deposits has also increased the
attractiveness of borrowed funds.
The institutional demand for borrowed funds increased in 1996 and 1997
due to the difficulty in competing for deposits and moderate interest rates,
resulting in an increase in borrowed funds by many institutions as an
alternative to higher cost and/or longer term certificates. The ratio of
borrowed funds to assets, therefore, does not typically indicate higher risk or
more aggressive lending, but primarily an alternative to retail deposits.
The range of borrowed funds to assets is 30.0 percent or less with a
midpoint of 15.0 percent, similar to the national average of 15.8 percent for
publicly-traded thrifts, but lower than the average of 21.2 percent for all
FDIC-insured savings institutions.
<PAGE>
Equity to Assets
Lincoln Federal's equity to assets ratio as of June 30, 1998, was 14.1
percent. After conversion, based on the midpoint value of $67.5 million and a
public offering of $65.0 million, with 50.0 percent of the net proceeds of the
public offering going to the Bank, Lincoln Federal's equity is projected to
stabilize in the area of 24.0 percent. The consolidated pro forma equity to
assets ratio for the Corporation is projected to be 27.5 percent following
conversion. Based on those equity ratios, we have defined the equity ratio
parameter to be 7.0 percent to 20.0 percent with a midpoint ratio of 13.5
percent.
PERFORMANCE PARAMETERS
Introduction
Exhibit 38 presents five parameters identified as key indicators of
Lincoln Federal's earnings performance and the basis for such performance both
historically and during the four quarters ended June 30, 1998. The primary
performance indicator is the Bank's return on average assets (ROAA). The second
performance indicator is the Bank's return on average equity (ROAE). To measure
the Bank's ability to generate net interest income, we have used net interest
margin. The supplemental source of income for the Bank is noninterest income,
and the parameter used to measure this factor is the ratio of noninterest income
to average assets. The final performance indicator is the Bank's ratio of
operating expenses or noninterest expenses to average assets, a key factor in
distinguishing different types of operations, particularly institutions that are
aggressive in secondary market activities, which often results in much higher
operating costs and overhead ratios.
<PAGE>
Return on Average Assets
The key performance parameter is the ROAA. For the twelve months ended
June 30, 1998, Lincoln Federal's ROAA was 0.75 percent based on net earnings
after taxes and 0.69 percent based on core or normalized earnings after taxes,
as detailed in Item I of this report and presented in Exhibit 7. The Bank's ROAA
over the prior five years, based on net earnings, has ranged from a low of 0.90
percent in 1996, reflecting the SAIF assessment expense realized by the Bank, to
a high of 2.06 percent in 1993 with an average ROAA of 1.28 percent. Eliminating
the 1996 ROAA, the four fiscal year average indicates a higher 1.37 percent. The
consolidated ROAA for the Bank and the Corporation on a pro forma basis at the
time of conversion is projected to be 1.05 percent based on core income at the
midpoint valuation.
In recognition of the differences between net and core income for many
institutions, for consistency we have elected to base our ROAA analysis and
comparison on core or normalized income for both Lincoln Federal and the
comparable group. Considering the historical, current and projected earnings
performance of Lincoln Federal, the range for the ROAA parameter based on core
income has been defined as 0.60 percent to a high of 1.20 percent with a
midpoint of 0.90 percent.
Return on Average Equity
The ROAE has been used as a secondary parameter to eliminate any
institutions with an unusually high or low ROAE that is inconsistent with the
Bank's position. This parameter does not provide as much meaning for a newly
converted thrift institution as it does for established stock institutions, due
to the unseasoned nature of the capital structure of the newly converted thrift
and the inability to accurately reflect a mature ROAE for the newly converted
thrift relative to other stock institutions.
<PAGE>
Return on Average Equity (cont.)
The consolidated ROAE for the Bank and the Corporation on a pro forma
basis at the time of conversion will be 3.80 percent based on core income at the
midpoint valuation. Prior to conversion, the Bank's ROAE for the twelve months
ended June 30, 1998, was 5.98 percent based on net income and 5.53 percent based
on core income, with a five year average net ROAE of 10.73 percent. The
parameter range for the comparable group, based on core income, is from 4.0
percent to 12.0 percent with a midpoint of 8.0 percent.
Net Interest Margin
Lincoln Federal had a net interest margin of 2.85 percent for the
twelve months ended June 30, 1998, representing net interest income as a
percentage of average interest-earning assets. The Bank's range of net interest
margin for the calendar years of 1993 to 1997 has been from a low of 2.55
percent in 1995 to a high of 4.34 percent in 1993 with a five year average of
3.28 percent and a declining trend since 1993.
The parameter range for the selection of the comparable group is from a
low of 2.25 percent to a high of 3.60 percent with a midpoint of 2.93 percent.
Operating Expenses to Assets
For the twelve months ended June 30, 1998, Lincoln Federal had a lower
than average 1.82 percent ratio of operating expense to average assets,
including a non-recurring $249,886 consisting of prepayment penalties on FHLB
advances. Net of that non-recurring item, the Bank's ratio of operating expense
to average assets would have been a lower 1.66 percent for the twelve months
ended June 30, 1998. The Bank's operating expenses, net of non-recurring items,
indicate a higher than average annual
<PAGE>
Operating Expenses to Assets (cont.)
increase of just under 19.1 percent since 1993, with their ratio to average
assets ranging from a low of 1.05 percent in 1995 to a high of 1.47 percent in
1997, for a five year average of 1.22 percent. It should be noted, however, that
the Bank's current operating expense ratio remains lower than the averages of
2.04 percent for all FDIC-insured savings institutions and 2.28 percent for all
publicly-traded savings institutions.
The operating expense to assets parameter for the selection of the
comparable group is from a low of 1.50 percent to a high of 2.50 percent with a
midpoint of 2.00 percent.
Noninterest Income to Assets
Compared to publicly-traded thrifts, Lincoln Federal has consistently
experienced a considerably lower than average dependence on noninterest income
as a source of additional income. The Bank's noninterest income was $570,510 or
0.17 percent of average assets for the twelve months ended June 30, 1998,
including its non-recurring gain on the sale of securities, which is below the
average of 0.46 percent for publicly-traded thrift institutions during that
period. Lincoln Federal's average annual ratio of noninterest income for the
past five calendar years has been a negative 0.01 percent of average assets
since 1993, reflecting sharp fluctuations related primarily to shares of limited
partnership losses, ranging from a negative 0.57 percent in 1994 to a positive
0.39 percent in 1993.
The range for this parameter for the selection of the comparable group
is 0.75 percent of average assets or less, with a midpoint of 0.38 percent.
<PAGE>
ASSET QUALITY PARAMETERS
Introduction
The final set of financial parameters used in the selection of the
comparable group are asset quality parameters, also shown in Exhibit 38. The
purpose of these parameters is to insure that any thrift institution in the
comparable group has an asset quality position similar to that of Lincoln
Federal. The three defined asset quality parameters are the ratios of
nonperforming assets to total assets, repossessed assets to total assets and
loan loss reserves to total assets at the end of the most recent period.
Nonperforming Assets to Assets
Lincoln Federal's ratio of nonperforming assets to assets was 0.57
percent at June 30, 1998, which is lower than the national average of 0.62
percent for publicly-traded thrifts and similar to the Midwest regional average
of 0.56 percent, but considerably lower than its ratio of 1.14 percent at
December 31, 1997. For the five years ended December 31, 1993 to 1997, the
Bank's ratio fluctuated from a low of 0.04 percent at December 31, 1994, to a
high of 0.73 percent at December 31, 1996, with a five year average of 0.56
percent and a decline since the end of 1995.
The parameter range for nonperforming assets to assets has been defined
as 1.00 percent of assets or less with a midpoint of 0.50 percent.
Repossessed Assets to Assets
Lincoln Federal had repossessed assets of $98,000 or 0.03 percent of
assets at June 30, 1998. The Bank's balance of repossessed assets was zero,
$75,000 and $45,000 at December 31, 1995, 1996 and 1997, respectively,
representing nominal balances at the end
<PAGE>
Repossessed Assets to Assets (cont.)
of those three years. National and regional averages were 0.58 percent and 0.49
percent, respectively, for publicly-traded thrift institutions at June 30, 1998.
The range for the repossessed assets to total assets parameter is 0.15
percent of assets or less with a midpoint of 0.08 percent.
Loans Loss Reserves to Assets
Lincoln Federal had an allowance for loan losses of $1,432,000,
representing a loan loss allowance to total assets ratio of 0.47 percent at June
30, 1998, which is higher than its 0.42 percent ratio at December 31, 1997, and
its ratio of 0.36 percent at December 31, 1996. For the five calendar years of
1993 to 1997, the Bank's loan loss reserve averaged 0.39 percent of assets from
a low of 0.34 percent in 1994 to a high of 0.47 percent in 1993, indicating a
generally constant trend.
The loan loss allowance to assets parameter range used for the
selection of the comparable group required a minimum ratio of 0.12 percent of
assets.
THE COMPARABLE GROUP
With the application of the parameters previously identified and applied, the
final comparable group represents ten institutions identified in Exhibits 39, 40
and 41. The comparable group institutions range in size from $114.9 million to
$690.4 million with an average asset size of $323.5 million and have an average
of 6.8 offices per institution. One of the comparable group institutions was
converted in 1983, one in 1987, one in 1988, one in 1992, one in 1993, two in
1994, two in 1995 and one in 1996. All ten of the comparable group institutions
are traded on NASDAQ and all are SAIF members. The
<PAGE>
The Comparable Group (cont.)
comparable group institutions as a unit have a ratio of equity to assets of 10.9
percent, which is 16.5 percent lower than all publicly-traded thrift
institutions in the United States and 0.4 percent higher than publicly-traded
thrift institutions in Indiana; and for the most recent four quarters indicated
a core return on average assets of 0.85 percent, lower than all publicly-traded
thrifts at 0.88 percent and higher than publicly-traded Indiana thrifts at 0.75
percent.
<PAGE>
IV. ANALYSIS OF FINANCIAL PERFORMANCE
This section reviews and compares the financial performance of Lincoln
Federal to all publicly-traded thrifts, to publicly-traded thrifts in the
Midwest region and to Indiana thrifts, as well as to the ten institutions
constituting Lincoln Federal's comparable group, as selected and described in
the previous section. The comparative analysis focuses on financial condition,
earning performance and pertinent ratios as presented in Exhibits 42 through 47.
As presented in Exhibits 42 and 43, at June 30, 1998, Lincoln Federal's
total equity of 14.04 percent of assets was higher than the 10.85 percent for
the comparable group, the 13.00 for all thrifts, the 14.13 percent for Midwest
thrifts and the 10.81 percent ratio for Indiana thrifts. The Bank had a 66.56
percent share of net loans in its asset mix, similar to all thrifts at 66.84
percent, but lower than the comparable group at 73.49 percent, Midwest thrifts
at 70.92 percent and Indiana thrifts at 71.85 percent. Lincoln Federal's share
of net loans, lower than industry averages, is primarily the offsetting result
of its modestly lower than average 13.82 percent share of cash and investments
and modestly higher than average 14.49 percent share of mortgage-backed
securities. The comparable group had a slightly higher 14.69 percent share of
cash and investments and a lower 9.31 percent share of mortgage-backed
securities. All thrifts had 10.46 percent of assets in mortgage-backed
securities and 18.63 percent in cash and investments. Lincoln Federal's 69.35
percent share of deposits was slightly lower than the comparable group, similar
to all thrifts and Midwest thrifts and modestly higher than Indiana thrifts,
reflecting the Bank's generally average 15.73 percent ratio of borrowed funds to
assets. The comparable group had deposits of 71.24 percent and borrowings of
16.82 percent. All thrifts averaged a 69.16 percent share of deposits and 15.81
percent of borrowed funds, while Midwest thrifts had a 68.45 percent share of
deposits and a 15.16 percent share of borrowed funds. Indiana thrifts averaged a
65.33 percent share of deposits and an 18.14 percent share of borrowed funds.
Lincoln Federal was absent intangible assets at June 30, 1998, compared to 0.24
percent for the comparable group, 0.28 percent for all thrifts, 0.21 percent for
Midwest thrifts and 0.16 percent for Indiana thrifts.
<PAGE>
Analysis of Financial Performance (cont.)
Operating performance indicators are summarized in Exhibits 44 and 45
and provide a synopsis of key sources of income and key expense items for
Lincoln Federal in comparison to the comparable group, all thrifts, and regional
thrifts for the trailing four quarters.
As shown in Exhibit 46, for the twelve months ended June 30, 1998,
Lincoln Federal had a yield on average interest-earning assets lower than the
comparable group and also lower than the three geographical categories. The
Bank's yield on interest-earning assets was 7.49 percent compared to the
comparable group at 7.69 percent, all thrifts at 7.74 percent, Midwest thrifts
at 7.75 percent and Indiana thrifts at 7.88 percent.
The Bank's cost of funds for the twelve months ended June 30, 1998, was
higher than the comparable group and the three geographical categories. Lincoln
Federal had an average cost of interest-bearing liabilities of 5.23 percent
compared to 5.13 percent for the comparable group, 4.90 percent for all thrifts,
5.00 percent for Midwest thrifts and 5.09 percent for Indiana thrifts. The
Bank's lower yield on interest-earning assets and higher interest cost resulted
in net interest income of 2.76 percent of average total assets, which was lower
than the comparable group at 2.99 percent, all thrifts at 3.31 percent, Midwest
thrifts at 3.29 percent and Indiana thrifts at 3.20 percent. Lincoln Federal
demonstrated a net interest margin of 2.85 percent for the twelve months ended
June 30, 1998, based its ratio of net interest income to average
interest-earning assets, which was lower than the comparable group ratio of 3.07
percent. All thrifts averaged an even higher 3.44 percent net interest margin
for the trailing four quarters, as did Midwest thrifts at 3.41 percent and
Indiana thrifts at 3.33 percent.
Lincoln Federal's major source of income is interest earnings, as is
evidenced by the operations ratios presented in Exhibit 45. The Bank made a
$656,000 provision for loan losses during the twelve months ended June 30, 1998,
representing 0.20 percent of average assets and reflecting the Bank's objective
to increase its reserves for loan losses
<PAGE>
Analysis of Financial Performance (cont.)
to total assets, non-performing assets and classified assets. The comparable
group indicated a provision representing a much lower 0.09 percent of assets,
with all thrifts at 0.13 percent, Midwest thrifts at 0.12 percent and Indiana
thrifts at 0.18 percent.
The Bank's non-interest income was $571,000 or 0.17 percent of average
assets for the twelve months ended June 30, 1998, including its $223,263 gain on
the sale of securities, its $202,439 realized and unrealized gain on loans held
for sale and its $622,227 share of limited partnership losses. Such net
non-interest income ratio was considerably lower than the comparable group at
0.32 percent, all thrifts at 0.46 percent, Midwest thrifts at 0.40 percent, and
Indiana thrifts at 0.41 percent. For the twelve months ended June 30, 1998,
Lincoln Federal's operating expense ratio was 1.82 percent of average assets,
which was modestly lower than the comparable group at 1.91 percent and more
significantly lower than all thrifts at 2.28 percent, Midwest thrifts at 2.19
percent and Indiana thrifts at 2.25 percent.
The overall impact of Lincoln Federal's income and expense ratios is
reflected in the Bank's net income and return on assets. For the twelve months
ended June 30, 1998, the Bank had an ROAA of 0.75 percent based on net income
and a lower ROAA of 0.69 percent based on core income, as indicated in Exhibit
7. For its most recent four quarters, the comparable group had a higher net ROAA
of 0.92 percent and a higher core ROAA of 0.85 percent. All publicly-traded
thrifts also averaged a higher 0.88 percent core ROAA, as did Midwest thrifts at
0.88 percent and Indiana thrifts at 0.75 percent.
<PAGE>
V. MARKET VALUE ADJUSTMENTS
This is a conclusive section where adjustments are made to determine
the pro forma market value or appraised value of the Corporation based on a
comparison of Lincoln Federal with the comparable group. These adjustments will
take into consideration such key items as earnings performance and growth
potential, market area, financial condition, asset and deposit growth, dividend
payments, subscription interest, liquidity of the stock to be issued,
management, and market conditions or marketing of the issue. It must be noted,
however, that all of the institutions in the comparable group have their
differences among themselves and from the Bank, and as a result, such
adjustments become necessary.
EARNINGS PERFORMANCE AND GROWTH POTENTIAL
In analyzing earnings performance, consideration was given to net
interest income, the amount and volatility of interest income and interest
expense relative to changes in market area conditions and to changes in overall
interest rates, the quality of assets as it relates to the presence of problem
assets which may result in adjustments to earnings, the level of current and
historical classified assets and real estate owned, the balance of valuation
allowances to support any problem assets or nonperforming assets, the amount and
volatility of non-interest income, and the level of non-interest expenses.
As discussed earlier, the Bank's historical business philosophy has
focused on increasing its net interest income and net income, reducing its ratio
of nonperforming assets, strengthening its level of interest sensitive assets
relative to interest sensitive liabilities and thereby improving its sensitivity
measure and its overall interest rate risk, maintaining an adequate level of
general valuation allowances to reduce the impact of any unforeseen losses, and
closely monitoring its reasonable overhead expenses. The Bank's current
philosophy will continue to focus on increasing its net interest spread and net
interest margin; increasing its non-interest income, net income, return on
assets and return on equity; decreasing its non-performing and classified
assets, increasing its ratio of
<PAGE>
Earnings Performance and Growth Potential (cont.)
interest sensitive assets relative to interest sensitive liabilities, and
maintaining its reasonable overhead expenses.
Earnings are often related to an institution's ability to generate
loans and/or to increase its loan portfolio through loan purchases and
participations at favorable rates. The Bank was an active originator of both
mortgage and non-mortgage loans in years 1995 to 1997 and during the six months
ended June 30, 1998. For the six months ended June 30, 1998, annualized, total
loan originations were very similar to those in 1997 but with some notable
component variances. During the six months ended June 30, 1998, annualized, the
origination of one- to four-family loans, including certain home equity loans,
exceeded that category of originations in 1997 by 10.1 percent, and the
origination of consumer loans exceeded that category of originations in 1997 by
25.6 percent. Conversely, originations of commercial real estate loans,
construction loans and land loans declined 25.1 percent, 35.7 percent and 62.0
percent, respectively, in the first six months of 1998, annualized, compared to
calendar 1997. Total loan originations during 1997 were, however, $16.5 million
or 17.6 percent lower than in 1996, with most of the decrease in the categories
of one- to four family loans and construction loans, with additional decreases
in the origination of land loans and consumer loans, partially offset by an
increase in commercial real estate loans. Higher loan originations in 1996,
relating to moderating interest rates stimulating both home refinancing and
consumer spending, exceeded 1995 originations by $15.8 million or 20.3 percent,
with the largest increases in the categories of one- to four-family loans,
consumer loans and land loans, partially offset by moderate reductions in the
origination of construction loans and commercial real estate loans. For the six
months ended June 30, 1998, one- to four-family loans, commercial real estate
loans, construction loans, land loans and consumer loans represented 63.3
percent, 6.4 percent, 8.6 percent, 1.5 percent and 20.2 percent, respectively,
of total loan originations. In comparison, during 1997, one- to four-family
loans, commercial real estate loans, construction loans, land loans and consumer
loans represented 57.5 percent, 8.6 percent, 13.5 percent, 4.0 percent and 16.1
percent, respectively, of total loan originations.
<PAGE>
Earnings Performance and Growth Potential (cont.)
Total mortgage and non-mortgage loan originations of $38.7 million in
the six months ended June 30, 1998, offset by loan sales and securitizations of
$47.6 million, repayments and other deductions of $37.7 million and transfers to
real estate owned of $197,000, resulted in a reduction of $46.9 million in gross
loans receivable at June 30, 1998, compared to December 31, 1997. In 1997, total
loan originations of $77.3 million, offset by loan sales and securitizations of
$78.9 million, repayments and other deductions of $61.9 million and transfers to
real estate owned of $111,000, resulted in a reduction of $63.6 million in gross
loans receivable to $254.2 million at December 31, 1997, compared to $317.8
million at December 31, 1996. At December 31, 1996, compared to December 31,
1995, loans receivable increased $23.1 million due to originations of $93.7
million, offset by loan sales and principal repayments of $70.6 million. From
December 31, 1994, to June 30, 1998, loan sales and repayments of $353,070
million exceeded originations of 287,000 million by $65.4 million or 22.7
percent. It should be noted that of $139.0 million of loan sales and
securitizations from December 31, 1994, to June 30, 1998, approximately $40.7
million of such mortgage-backed securities are held by the Bank and backed by
fixed-rate mortgage loans originated by Lincoln Federal. Beginning at $210.2
million on December 31, 1993, gross loans receivable increased to $272.7
million, 294.7 million and $317.8 million at December 31,1994, 1995 and 1996,
respectively, before decreasing to $254.2 million at December 31, 1997, and
$207.3 million at June 30, 1998. A majority of the both the annual loan
increases and decreases has been in the category of permanent one- to
four-family residential real estate loans, with a significant portion of the
decreases related to the securitization of loans. Consumer loan originations,
consisting primarily of home equity loans and second mortgage loans, increased
strongly in 1996 and moderately in 1997 and in the first six months of 1998,
growing from 3.4 percent of loans at December 31, 1993, to 10.8 percent at June
30, 1998. Overall, the Bank's gross loans receivable decreased by $2.9 million
or 1.4 percent from December 31, 1993, to June 30, 1998, with considerable
fluctuation during that four and one half year period, representing an average
annual decrease of a minimal 0.3 percent.
<PAGE>
Earnings Performance and Growth Potential (cont.)
The impact of Lincoln Federal's primary lending efforts has been to
generate a yield on average interest-earning assets of 7.49 percent for Lincoln
Federal for the twelve months ended June 30, 1998, compared to a higher 7.69
percent for the comparable group, 7.74 percent for all thrifts and 7.75 percent
for Midwest thrifts. The Bank's ratio of interest income to average assets was
7.24 percent for the twelve months ended June 30, 1998, which was also lower
than the comparable group at 7.48 percent, all thrifts at 7.44 percent and
Midwest thrifts also at 7.48 percent.
Lincoln Federal's 5.23 percent cost of interest-bearing liabilities for
the twelve months ended June 30, 1998, was modestly higher than the comparable
group at 5.13 percent and moderately higher than all thrifts at 4.90 percent and
Midwest thrifts at 5.00 percent. The Bank's resulting net interest spread of
2.26 percent for the twelve months ended June 30, 1998, was lower than the
comparable group at 2.56 percent, all thrifts at 2.85 percent and Midwest
thrifts at 2.75. The Bank's net interest margin of 2.85 percent, based on
average interest-earning assets for the twelve months ended June 30, 1998, was
also lower than the comparable group at 3.07 percent, all thrifts at 3.44
percent and Midwest thrifts at 3.41 percent.
Including its gains on the sale of securities and loans and its limited
partnership loss, as previously discussed, the Bank's ratio of noninterest
income to assets was 0.17 percent for the twelve months ended June 30, 1998,
lower than the comparable group at 0.32 percent, but more significantly lower
than all thrifts at 0.46 percent and Midwest thrifts at 0.40 percent. The Bank's
operating expenses were modestly lower than the comparable group and more
noticeably lower than all thrifts and Midwest thrifts. For the twelve months
ended June 30, 1998, Lincoln Federal had an operating expenses to assets ratio
of 1.82 percent compared to 1.91 percent for the comparable group, 2.28 percent
for all thrifts and 2.19 percent for Midwest thrifts.
<PAGE>
Earnings Performance and Growth Potential (cont.)
For the twelve months ended June 30, 1998, Lincoln Federal generated
lower noninterest income and noninterest expenses, and a lower net interest
margin relative to its comparable group. As a result, the Bank's net and core
income were both lower than the comparable group for the twelve months ended
June 30, 1998. Based on net earnings, the Bank had a return on average assets of
2.06 percent in 1993, 1.32 percent in 1994, 1.09 percent in 1995, 0.90 percent
in 1996, 1.02 percent in 1997, 0.53 percent for the six months ended June 30,
1998, annualized, and 0.75 percent for the twelve months ended June 30, 1998.
For the twelve months ended June 30, 1998, the comparable group had a higher net
ROAA of 0.92 percent, while all thrifts indicated a lower 0.93 percent. The
Bank's core or normalized earnings, as shown in Exhibit 7, were lower than its
net earnings and resulted in a 0.69 percent core return on assets for the twelve
months ended June 30, 1998. That core ROAA was also lower than the comparable
group at 0.85 percent, and lower than all thrifts and Midwest thrifts, both at
0.88 percent.
<PAGE>
Lincoln Federal's earnings stream will continue to be dependent on both
the overall trends in interest rates and also on the consistency, reliability
and variation of its noninterest income and overhead expenses. Noninterest
income fluctuated considerably from January 1, 1993, through June 30, 1998,
related primarily to the Bank's gains and losses on the sale of loans and
securities, as well as its limited partnership losses, and overhead expenses
have been generally stable in their ratio to average assets. The Bank's net
interest margin, lower than the comparable group, has been the result of its
higher cost of funds and its lower yield on assets. Lincoln Federal's cost of
interest-bearing liabilities is likely to experience only minimal change and
fluctuation during the next few years, as fairly flat short term rates combine
with an increase in lower costing money market and NOW accounts and a decrease
in certificates of deposit. Weak upward pressure on lending rates is also
anticipated, and Lincoln Federal's composite yield on interest-earning assets is
likely to benefit modestly both from whatever rate increases occur and also from
the Bank's increasing shares of higher rate consumer and home equity loans,
while mortgage loans yields should remain generally constant. Adjustable-rate
loans will likely reprice at slightly higher rates, while fixed-rate loans will
be refinanced at lower rates compared to their current portfolio yield and
investments should experience a modest decrease in yield. It is also likely,
moreover, that strong competition from both financial institutions and mortgage
companies will limit the Bank's ability to significantly increase rates on
individual mortgage and non-mortgage loan products. Lincoln Federal's success in
achieving its objective to increase its overall net interest spread and net
interest margin will relate to its ability to increase its shares of higher
yielding non-mortgage loans, rather than by increasing rates on its loan
products in the anticipated flat rate environment. During the next few years, a
possible modest to moderate increase in the Bank's net interest spread and net
interest margin will be dependent on Lincoln Federal's marketing and
cross-selling capability, as well as the demographic and economic
characteristics and trends in its market area.
It has also been recognized that Lincoln Federal's current ROAA, in
addition to being lower than that of its comparable group, has drifted
consistently downward during the past five years and its net interest margin and
net interest spread have also indicated a significant decrease since 1993.
Lincoln Federal's ROAA, net interest spread and net interest margin for the
twelve months ended June 30, 1998, were 63.6 percent, 41.5 percent and 34.3
percent lower, respectively, than in 1993 and also lower than their five year
1993 to 1997 averages. The Bank's ROAE has indicated a decline of 62.2 percent
from 15.8 percent in 1993 to 6.0 percent in at June 30, 1998. Following
conversion, it is anticipated that the Bank's higher equity to assets ratio will
result in further decreases in ROAE until conversion proceeds can be deployed
into higher yielding loans.
Finally, as stated above, the competitive environment for both loans
and deposits in the Bank's primary market area may also limit Lincoln Federal's
ability to significantly increase its market share other than by increasing
savings rates or reducing loans rates, which are not consistent with the Bank's
current strategies.
<PAGE>
Earnings Performance and Growth Potential (cont.)
In recognition of the foregoing earnings related factors, with
consideration to Lincoln Federal's current performance measures and well as to
its absence of significant improvement in those performance measures during the
past five years, a moderate downward adjustment has been made to Lincoln
Federal's pro forma market value for earnings performance and growth potential.
MARKET AREA
Lincoln Federal's primary market area for retail deposits and loans
consists of Clinton, Hendricks and Montgomery, including the city of Plainfield.
As discussed in Section II, since 1990, this market area has experienced greater
population increases and lower unemployment rates than the comparable group
markets, Indiana and the United States. The unemployment rates in the Bank's
market area was 2.4 percent in 1997, compared to 4.3 percent in Indiana and 4.4
percent in the United States. By May, 1998, the market area's unemployment rate
had decreased to 2.1 percent, as had that of Indiana and the United States to
2.8 percent and 4.2 percent, respectively. Per capita income and median
household income in Lincoln Federal's market area have historically been and
remain higher than the state and national averages and similar to the comparable
group, reflecting the market area's lower unemployment rate. The median housing
value in the Bank's market area is 12.4 percent higher than Indiana, similar to
the comparable group and 22.8 percent lower than in the United States.
<PAGE>
Lincoln Federal's market area is primarily suburban, exurban and rural,
comprising a fairly broad range of income and educational levels and employment
sectors. In the Bank's market area, the services sector represents the primary
source of employment, followed by the manufacturing and wholesale/retail
sectors. The level of financial competition Lincoln Federal's market area is
strong, with commercial banks holding a majority of deposits, and financial
institutions of varying sizes and characteristics operating in and around
Lincoln Federal's banking offices. The Bank experienced net increases in
deposits in three of its most recent four calendar years, as deposits and
interest credited exceeded withdrawals, although its average annual growth rate
of was lower than the comparable group.
In recognition of the foregoing factors, we believe that no adjustment
is warranted for the Bank's market area.
FINANCIAL CONDITION
The financial condition of Lincoln Federal is discussed in Section I
and shown in Exhibits 1, 2, 5, 15, 16 and 17, and is compared to the comparable
group in Exhibits 41, 42 and 43. The Bank's ratio of total equity to total
assets was 14.04 percent at June 30, 1998, which was higher than the comparable
group at 10.85 percent and all thrifts at 13.00, similar to Midwest thrifts at
14.13 percent. With a conversion at the midpoint, the Corporation's pro forma
equity to assets ratio will increase to approximately 27.5 percent, and the
Bank's pro forma equity to assets ratio will increase to approximately 24.0
percent.
<PAGE>
The Bank's mix of assets and liabilities indicates some areas of
notable variation from its comparable group. Lincoln Federal had a lower 66.56
percent ratio of net loans to total assets at June 30, 1998, compared to the
comparable group at 73.49 percent, although the Bank's share of net loans was
similar to all thrifts at 66.84 percent. The Bank's 13.82 percent share of cash
and investments was similar to the comparable group at 14.69 percent, but lower
than all thrifts at 18.63 percent and Midwest thrifts at 17.23 percent; but
Lincoln Federal's ratio of mortgage-backed securities to total assets of 14.49
percent was higher than the comparable group at 9.31 percent and all thrifts at
10.46 percent. The Bank's 69.35 percent ratio of deposits to total assets was,
however, similar to the comparable group at 71.24 percent, all thrifts at 69.16
percent and Midwest thrifts at 68.45 percent. Lincoln Federal's 15.73 percent
ratio of borrowed funds to assets was also similar to the comparable group at
16.82 percent, all thrifts at 15.81 percent and Midwest thrifts at 15.16
percent.
Lincoln Federal had no intangible assets and a low 0.03 percent ratio
of repossessed real estate to total assets, compared to ratios of 0.24 percent
and 0.03 percent of intangible assets and repossessed real estate, respectively,
for the comparable group. All thrifts had intangible assets of 0.28 percent and
repossessed real estate of 0.58 percent. The financial condition of Lincoln
Federal is influenced by its level of nonperforming assets of $1,741,000 or 0.57
percent of assets at June 30, 1998, compared to a lower 0.35 percent for the
comparable group and a similar 0.62 percent for all thrifts and 0.56 percent for
Midwest thrifts. It should be recognized that the Bank's dollar balance of
nonperforming assets and its ratio of nonperforming assets to total assets have
historically been much higher than industry averages, although they have
decreased significantly since December 31, 1995. The Bank's ratio of
nonperforming assets to total assets was 0.75 percent, 0.73 percent and 1.14
percent at December 31, 1995, 1996 and 1997, respectively.
The Bank had a lower share of high risk real estate loans at 5.70
percent compared to 8.32 percent for the comparable group, and the Bank's share
was also lower than all thrifts at 11.71 percent. The regulatory definition of
high risk real estate loans is all mortgage loans other than those secured by
one- to four-family residential properties.
<PAGE>
At June 30, 1998, Lincoln Federal had $1,432,000 of allowances for loan
losses, which represented 0.47 percent of assets and 0.70 percent of total
loans. Those ratios are higher than the comparable group, which indicated
allowances equal to 0.42 percent of assets and 0.61 percent of total loans. More
significant, however, is an institution's ratio of allowances for loan losses to
nonperforming assets, since a considerable portion of nonperforming assets might
eventually be charged off. Lincoln Federal's $1,432,000 of allowances for loan
losses, represented a significantly lower 82.25 percent of nonperforming assets
at June 30, 1998, compared to the comparable group's 192.82 percent, with all
thrifts at 121.48 percent and Midwest thrifts at 149.04 percent. Lincoln
Federal's ratio of net charge-offs to average total loans, moreover, was 0.15
percent for the twelve months ended June 30, 1998, significantly higher that the
0.02 percent for the comparable group, 0.07 percent for all thrifts and 0.09
percent for Midwest thrifts. The Bank's ratio of net charge-offs to average
total loans was also a higher 0.06 percent for calendar 1997. Those ratios are
reflective of the Bank's maintenance of a modestly higher ratio of reserves to
loans, but a considerably lower ratio of reserves to nonperforming assets in
spite of recently higher charge-offs.
Lincoln Federal has experienced higher than average levels of interest
rate risk, as reflected by the exposure of its net portfolio value to negative
changes under conditions of rising interest rates.
Overall, with particular consideration to the Bank's asset quality,
reserves, coverage, interest rate risk and shares of loans and deposits relative
to the comparable group, we believe that a moderate downward adjustment is
warranted for Lincoln Federal's current financial condition.
<PAGE>
ASSET, LOAN AND DEPOSIT GROWTH
During the past five fiscal years, Lincoln Federal has been
characterized by slightly higher than average growth in assets, combined with
growth in deposits and loans lower than the comparable group. The Bank's five
year asset growth has also been higher than all thrifts, while its deposit and
loan growth have been similar to all thrifts. The Bank's average annual asset
growth rate from 1993 to 1997, was 13.6 percent, compared to a slightly lower
12.0 percent for the comparable group, 10.6 percent for all thrifts and 9.6
percent for Midwest thrifts. Lincoln Federal's asset growth rate is reflective
primarily of its somewhat smaller average annual deposit growth rate and higher
borrowings for the same five year period. The Bank's loans indicate an average
annual increase of 11.7 percent from 1993 to 1997, from a low of -18.7 percent
in 1997 to a high of 34.41 percent in 1994, compared to average growth rates of
13.4 percent for the comparable group, 11.8 percent for all thrifts and 11.8
percent for Midwest thrifts. Lincoln Federal's deposits indicate an average
annual increase of only 6.2 percent from January 1, 1993 to December 31, 1997,
1997, followed by a deposit increase of 3.6 percent or 7.2 percent annualized
during the six months ended June 30, 1998. Annual deposit changes have been from
a low of -3.4 percent in 1997 to a high of 17.2 percent in 1993, compared to
average growth rates of 8.2 percent for the comparable group, 6.0 percent for
all thrifts and 4.6 percent for Midwest thrifts.
The Bank's ability to maintain its asset base and deposits in the
future is, to a great extent, dependent on its being able to competitively price
its loan and savings products and to maintain a high quality of service to its
customers. Lincoln Federal's four offices serve the market area of Clinton,
Hendricks and Montgomery Counties. The Bank's market area has experienced a
strong increase in population and households between 1990 and 1997, although
those growth rates are projected to moderate considerably over the following
five years. The Bank's market area also indicate per capita income and median
household income slightly higher than both Indiana and the United States and in
May, 1998, had an unemployment rate lower than Indiana and the United States.
The Bank's dependence on its current market area, with no immediate
plans to expand beyond that market area, will likely result in limited asset
growth as a result of its highly competitive operating environment. Lincoln
Federal's projections indicate an approximately $15 million or 1.0 percent
shrinkage in deposits during the next three years, accompanied by a 6.0 percent
increase in both interest-earning assets and total assets, representing a dollar
increase of approximately $19 million. Total loans are projected to
<PAGE>
Asset, Loan and Deposit Growth (cont.)
experience three year growth of approximately 20.0 percent, with offsetting
reductions in investments and mortgage-backed securities. Total equity is
projected to increase by approximately $35 million, with borrowed funds
decreasing $15 million from the application of conversion proceeds. Lincoln
Federal's highly competitive operating environment, together with its
anticipated deposit shrinkage and modest asset growth, is likely to result in
less growth in assets and deposits for the Bank relative to the comparable
group. Loan growth, if the Bank's objectives are realized, should be similar to
that of the comparable group.
Based on these conditions, we have concluded that a minimum downward
adjustment to the Bank's pro forma value is warranted.
DIVIDEND PAYMENTS
Lincoln Federal has not committed to pay an initial cash dividend. The
future payment of cash dividends will be dependent upon such factors as earnings
performance, capital position, growth, and regulatory limitations. Nine of the
ten institutions in the comparable group pay cash dividends for an average
dividend yield of 2.35 for those nine institutions and an average of 2.12
percent for the ten institutions in the comparable group.
Currently, many thrifts are not committing to initial cash dividends,
compared to such a dividend commitment in the past. In our opinion, no
adjustment to the pro forma market value is warranted at this time related to
dividend payments.
<PAGE>
SUBSCRIPTION INTEREST
In the first half of 1998, investors' interest in new issues was
generally positive and subscription levels were consistently high, although a
few issues nevertheless received a less than strong reaction from the
marketplace. The number of conversions in the first half of 1998 increased from
the both the first and second halves of 1997. Overall, the reaction of IPO
investors appears to be related to a number of factors, including the financial
performance and condition of the converting thrift institution, the strength of
the local economy, general market conditions, aftermarket price trends and the
anticipation of continuing merger/acquisition activity in the thrift industry.
Further, there are currently an increased number of announced and pending
conversions which will compete with Lincoln Federal's offering.
Lincoln Federal will direct its offering primarily to depositors and
residents in its market area. The board of directors and officers anticipate
purchasing approximately $3.6 million or 5.3 percent of the stock offered to the
public based on the appraised midpoint valuation. The Bank will form an ESOP,
which plans to purchase 8.0 percent of the total shares issued in the
conversion. Additionally, the Prospectus restricts to 25,000 shares, based on
the $10.00 per share purchase price, the total number of shares in the
conversion that may be purchased by a single person, or by persons and
associates acting in concert as part of either the subscription offering or the
direct community offering.
The Bank has secured the services of Charles Webb & Company ("Webb") to
assist in the marketing and sale of the conversion stock.
Based on the larger size of the offering, recent market movement and
current market conditions, local market interest and the terms of the offering,
we believe that a minimum downward adjustment is warranted for the Bank's
anticipated subscription interest.
<PAGE>
LIQUIDITY OF THE STOCK
Lincoln Federal will offer its shares through a subscription offering
and, if required, a subsequent community offerings with the assistance of Webb.
If necessary, Webb will conduct a syndicated community offering upon the
completion of both the subscription and community offerings. Lincoln Federal
will pursue at least two market makers for the stock. The Bank's proposed market
capitalization pursuant to its public offering and shares to be issued are
modestly higher than the average of the comparable group. We have concluded,
therefore, that no adjustment to the pro forma market value is warranted at this
time relative to the liquidity of the stock.
MANAGEMENT
T. Tim Unger currently serves as president and chief executive officer
of the Bank, positions he has held since January, 1996. Mr. Unger has also been
a director of the Bank since 1996. Prior to joining Lincoln Federal, Mr. Unger
was president and chief executive officer of Summit Bank of Clinton County,
Indiana, from 1989 through 1995. John M. Baer has served as Lincoln Federal's
chief financial officer since June, 1997, and as its secretary and treasurer
since January, 1998. Previously, Mr. Baer was vice president and chief financial
officer of the Community Bank Group of Bank One in Indianapolis and as senior
vice president and chief financial officer of Bank One, Merrillville, NA,
Merrillville, Indiana.
<PAGE>
The management of Lincoln Federal have been successful in maintaining
the Bank's deposits and market share, and in increasing and strengthening
lending activity, despite a highly competitive operating environment, including
the presence of much larger financial institutions. Lincoln Federal's operating
expenses have been and continue to be lower than the comparable group and
industry averages, but the Bank's efficiency ratio has been modestly less
favorable than the comparable group and industry averages due to lower interest
income and non-interest income. During the past few years, Lincoln Federal has
been able to increase its retained earnings and total equity, its ratio of
equity to assets and its ratio of interest-earning assets to interest-bearing
liabilities. Since 1996, management has also been successful in increasing the
Bank's net interest spread and net interest margin to levels only modestly below
the comparable average, although they remain lower than in 1993 and 1994.
Lincoln Federal's return on assets, based on both net and core income, have been
declining slowly since 1993, but historically have been higher than or in line
with industry averages. For the twelve months ended June 30, 1998, the Bank's
return on assets was lower than comparable group and industry averages. Lincoln
Federal's operating expense ratio has been and continues to be more favorable
than the comparable group and industry averages.
Overall, we believe the Bank to be professionally, knowledgeably and
efficiently managed, as are the comparable group institutions. It is our opinion
that no adjustment to the pro forma market value of the Corporation is warranted
for management.
MARKETING OF THE ISSUE
The necessity to build a new issue discount into the stock price of a
converting thrift institution continues to prevail in recognition of uncertainty
among investors as a result of the thrift industry's dependence on interest rate
trends, recent volatility in the stock market and pending federal legislation
related to thrift charters and the regulation of financial institutions.
Recently converted institutions seem to have borne much of the impact of that
uncertainty, and previously strong subscription activity has become
inconsistent, somewhat unpredictable and more selective. The inference is that
the market has discounted those stocks pending the seasoning and stabilization
of their post-conversion earnings. The thirteen publicly-traded thrifts for
which information is available completing standard conversions in the first half
of 1998, all of which closed at the super-maximum of their valuation ranges, are
currently trading at an average of 104.49 percent of book value, compared to all
thrifts at 146.62 percent and Indiana thrifts at a lower 131.63 percent.
<PAGE>
Marketing of the Issue (cont.)
We believe that a new issue discount applied to the price to book
valuation approach continues and is considered to be reasonable and necessary in
the pricing of the Corporation. We have made a moderate downward adjustment to
the Corporation's pro forma market value in recognition of the new issue
discount.
<PAGE>
VI. VALUATION METHODS
Historically, the most frequently used method for determining the pro
forma market value of common stock for thrift institutions by this firm has been
the price to book value ratio method, due to the volatility of earnings in the
thrift industry in the early to mid-1990s. As earnings in the thrift industry
improved in the last few years, however, more emphasis has been placed on the
price to earnings method, particularly considering increases in stock prices
during the past twelve months. Primary emphasis, therefore, has been placed on
the price to earnings method in determining the pro forma market value of
Lincoln Bancorp, with additional analytical and correlative attention to the
price to book value method.
In recognition of the volatility and variance in earnings due to
fluctuations in interest rates, the continued differences in asset and liability
repricing and the frequent disparity in value between the price to book approach
and the price to earnings approach, a third valuation method, the price to net
assets method, has also been used. The price to assets method is used less often
for valuing ongoing institutions, but becomes more useful in valuing converting
institutions when the equity position and earnings performance of the
institutions under consideration are different.
In addition to the pro forma market value, we have defined a valuation
range with the minimum of the range being 85.0 percent of the pro forma market
value, the maximum of the range being 115.0 percent of the pro forma market
value, and a super maximum being 115.0 percent of the maximum. The pro forma
market value or appraised value will also be referred to as the "midpoint
value".
<PAGE>
In applying each of the valuation methods, consideration was given to
the adjustments to the Bank's pro forma market value discussed in Section V.
Moderate downward adjustments were made for the Lincoln Federal's earnings
performance and growth potential and financial condition, and for the marketing
of the issue. Minimum downward adjustments were made for the Bank's asset, loan
and deposit growth and for Valuation Methods (cont.)
subscription interest. No adjustments were made for the Bank's market area,
dividend payments, liquidity of the issue or the Bank's management.
PRICE TO BOOK VALUE METHOD
In the valuation of thrift institutions, the price to book value method
focuses on an institution's financial condition, and does not give as much
consideration to the institution's long term performance and value as measured
by earnings. Due to the earnings volatility of many thrift stocks, the price to
book value method is frequently used by investors who rely on an institution's
financial condition rather than earnings performance. This method, therefore, is
sometimes considered less meaningful for institutions that provide a consistent
earnings trend, but remains significant and reliable as a confirmational and
correlative analysis to the price to earnings and price to assets approaches. It
should be noted that the prescribed formulary computation of value using the pro
forma price to book value method returns a price to book value ratio below
market value.
Exhibit 49 shows the average and median price to book value ratios for
the comparable group which were 128.30 percent and 127.42 percent, respectively.
The total comparable group indicated a moderately wide range, from a low of
114.13 percent (MFB Corp.) to a high of 151.65 percent (First Northern Capital
Corp.). The comparable group had slightly higher average and median price to
tangible book value ratios of 131.43 percent and 129.34 percent, respectively,
from a low of 114.13 percent (MFB Corp.) to a high of 152.24 percent (FFW
Corp.). Excluding the low and the high in the group, the price to book value
range narrowed modestly from a low of 117.04 percent to a high of 140.05
percent, and the range of price to tangible book value ratio narrowed from
117.04 percent to 151.65 percent.
<PAGE>
Price to Book Value Method (cont.)
Taking into consideration all of the previously mentioned items in
conjunction with the adjustments made in Section V, we have determined a pro
forma price to book value ratio of 68.10 percent and a price to tangible book
value ratio of 68.46 percent at the midpoint. The price to book value ratio
increases from 63.61 percent at the minimum to 75.42 percent at the super
maximum, while the price to tangible book value ratio increases from 63.99
percent at the minimum to 75.76 percent at the super maximum.
The Corporation's pro forma price to book value and price to tangible
book value ratios of 68.10 percent and 68.46 percent, respectively, are strongly
influenced by the Bank's financial condition and local market, as well as
subscription interest in thrift stocks and overall market and economic
conditions. Further, the Corporation's ratio of equity to assets after
conversion at the midpoint of the valuation range will be approximately 27.54
percent compared to 10.85 percent for the comparable group. Based on the price
to book value ratio and the Bank's total equity of $42,795,000 at June 30, 1998,
the indicated pro forma market value of the Bank using this approach is
$67,545,204 at the midpoint (reference Exhibit 48).
PRICE TO EARNINGS METHOD
The focal point of this method is the determination of the earnings
base to be used and secondly, the determination of an appropriate price to
earnings multiple. The recent earnings position of Lincoln Federal is displayed
in Exhibit 3, indicating after tax net earnings for the twelve months ended June
30, 1998, of $2,467,000, and in Exhibit 7 indicating the derivation of the
Bank's lower core or normalized earnings of $2,284,000 for that period. To
arrive at the pro forma market value of the Corporation by means of the price to
earnings method, we used the core earnings base of $2,284,000.
<PAGE>
Price to Earnings Method (cont.)
In determining the price to earnings multiple, we reviewed the range of
price to core earnings and price to net earnings multiples for the comparable
group and all publicly-traded thrifts. The average price to core earnings
multiple for the comparable group was 16.92, while the median was 17.10. The
average price to net earnings multiple was 15.63 and the median multiple was
15.72. The comparable group's price to core earnings multiple was lower than the
average for all publicly-traded, FDIC-insured thrifts of 22.78, and also lower
than their median of 18.68. The range in the price to core earnings multiple for
the comparable group was from a low of 12.86 (Midwest Bancshares, Inc.) to a
high of 19.22 (First Northern Capital Corp.). The primary range in the price to
core earnings multiple for the comparable group, excluding the high and low
ranges, was from a low price to earnings multiple of 15.49 to a high of 18.85
times earnings for eight of the ten institutions in the group.
Consideration was given to the adjustments to the Corporation's pro
forma market value discussed in Section V. In recognition of these adjustments,
we have determined a price to core earnings multiple of 18.38 at the midpoint,
based on Lincoln Federal's core earnings of $2,284,000 for twelve months ended
June 30, 1998.
Based on the Bank's core earnings base of $2,284,000 (reference
Exhibits 7 and 48), the pro forma market value of the Corporation using the
price to earnings method is $67,527,704 at the midpoint.
PRICE TO ASSETS METHOD
<PAGE>
The final valuation method is the price to assets method. This method
is not frequently used due to the fact that it does not incorporate an
institution's equity position or earnings performance. Additionally, the
prescribed formulary computation of value using the pro forma price to net
assets method does not recognize the runoff of deposits concurrently allocated
to the purchase of conversion stock, returning a pro forma price to net assets
ratio below its true level following conversion. Exhibit 49 indicates that the
average price to assets ratio for the comparable group was 14.00 percent and the
median was 14.61 percent. The range in the price to assets ratios for the
comparable group varied from a low of 8.90 percent (Midwest Bancshares, Inc.) to
a high of 17.85 percent (Northeast Indiana Bancorp). It narrows only slightly
with the elimination of the two extremes in the group to a low of 9.68 percent
and a high of 17.79 percent.
Based on the adjustments made previously for Lincoln Federal, it is our
opinion that an appropriate price to assets ratio for the Corporation is 18.75
percent at the midpoint, which ranges from a low of 16.34 percent at the minimum
to 23.56 percent at the super maximum.
Based on the Bank's June 30, 1998, asset base of $304,500,000, the
indicated pro forma market value of the Corporation using the price to assets
method is $67,506,476 at the midpoint (reference Exhibit 48).
<PAGE>
VALUATION CONCLUSION
Exhibit 54 provides a summary of the valuation premium or discount for
each of the valuation ranges when compared to the comparable group based on each
of the valuation approaches. At the midpoint value, the price to book value
ratio of 68.10 percent for the Corporation represents a discount of 46.92
percent relative to the comparable group and decreases to 42.35 percent at the
super maximum. The price to core earnings multiple of 18.38 for the Corporation
at the midpoint value indicates a premium of 8.68 percent, increasing to a
premium of 26.95 percent at the super maximum. The price to assets ratio at the
midpoint represents a premium of 33.95 percent, increasing to a premium of 68.28
percent at the super maximum.
It is our opinion that as of August 14, 1998, the pro forma market
value of the Corporation, inclusive of the shares to be issued to the
foundation, is $67,500,000 at the midpoint, representing 6,750,000 shares at
$10.00 per share. The foundation constitutes 3.8 percent of the midpoint of the
subscription and community offering of $65,000,000 or $2,500,000. The total of
the stock to be offered to the public, excluding the shares to be issued to the
foundation, will be 5,487,500 shares, 6,500,000 shares, 7,512,500 shares and
8,676,875 shares at the minimum, midpoint, maximum and supermaximum,
respectively. The resulting gross proceeds of the subscription and community
offering will be $54,875,000, $65,000,000, $75,125,000 and $86,768,750 at the
minimum, midpoint, maximum and supermaximum, respectively.
Based on the established regulatory valuation formula, a standard
conversion, exclusive of the contribution of stock to the foundation, would have
resulted in a midpoint value of $70,000,000, resulting from a price to book
value ratio of 68.05 percent, a tangible book value ratio of 68.36 percent, a
price to core earnings multiple of 18.35 times earnings and a price to net
assets ratio of 19.20 percent.
Inclusive of the contribution of stock to the foundation, the pro forma
valuation range of the Corporation is from a minimum of $57,375,000 or 5,737,500
shares at
<PAGE>
Valuation Conclusion (cont.)
$10.00 per share to a maximum of $77,625,000 or 7,762,500 shares at $10.00 per
share, with such range being defined as 15 percent below the appraised value to
15 percent above the appraised value. The super maximum is $89,268,750 or
8,926,875 shares at $10.00 per share (reference Exhibits 50 to 53).
Inclusive of the contribution of stock to the foundation, the appraised
value of Lincoln Bancorp as of August 14, 1998, is $67,500,000 at the midpoint.
<PAGE>
NUMERICAL
EXHIBITS
<PAGE>
EXHIBIT 1
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
Consolidated Balance Sheet
At June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 3,027,595 $ 4,190,199
Short-term interest-bearing deposits in other banks 20,736,947 14,767,482
------------- -------------
Total cash and cash equivalents 23,764,542 18,957,681
Investment securities
Available for sale 58,939,886 29,399,376
Held to maturity (market value of $3,509,000 at June 30,
1998, and $9,615,000 at December 31, 1997) 3,500,000 9,634,952
------------- -------------
Total investment securities 62,439,886 39,034,328
Mortgage loans held for sale 19,264,354 --
Loans 184,850,414 249,995,935
Allowance for loan losses (1,432,204) (1,360,731)
------------- -------------
Net loans 183,418,210 248,635,204
Premises and equipment 2,837,993 2,825,090
Investment in limited partnerships 2,632,863 2,705,997
Federal Home Loan Bank of Indianapolis stock 5,446,700 5,446,700
Interest receivable
Loans 952,675 1,138,824
Mortgage-backed securities 278,037 197,664
Other investment securities and interest-bearing deposits 197,156 196,477
Deferred income tax 1,124,282 974,446
Other assets 2,143,508 1,278,828
------------- -------------
Total Assets $ 304,500,206 $ 321,391,239
============= =============
LIABILITIES
Deposits
Noninterest-bearing $ 1,394,393 $ 2,321,167
Interest-bearing 209,765,833 201,530,657
------------- -------------
Total deposits 211,160,226 203,851,824
Federal Home Loan Bank advances 45,686,148 70,136,148
Note payable 2,202,501 2,691,001
Interest payable 1,138,165 1,153,517
Other liabilities 1,517,855 1,581,077
------------- -------------
Total liabilities 261,704,895 279,413,567
EQUITY CAPITAL
Retained earnings - substantially restricted 42,248,263 41,431,674
Accumulated other comprehensive income 547,048 545,998
------------- -------------
Total equity capital 42,795,311 41,977,672
------------- -------------
Total liabilities and equity capital $ 304,500,206 $ 321,391,239
============= =============
</TABLE>
Source: Lincoln Federal Savings Bank and subsidiary's audited and unaudited
financial statements
<PAGE>
EXHIBIT 2
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
Consolidated Statements of Financial Condition
At December 31, 1993 through 1997
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------- -------------
ASSETS
<S> <C> <C> <C> <C>
Cash and due from banks $ 4,589,797 $ 4,473,805 $ 2,765,702 $ 652,247
Short-term interest-bearing deposits in other banks 5,209,087 3,713,316 17,532,670 2,125,099
------------- ------------- ------------- -------------
Total cash and cash equivalents 9,798,884 8,187,121 20,298,372 2,777,346
Interest-bearing 595,000 695,000 1,190,000 3,160,000
deposits
Investment securities
Available-for-sale 118,355 116,466 113,540 114,911
Held-to-maturity 15,184,779 11,599,640 12,748,331 9,748,468
------------- ------------- ------------- -------------
Total investment securities 15,303,134 11,716,106 12,861,871 9,863,379
Mortgage loans held for sale 24,200,178 15,533,931 16,141,466 8,778,661
Loans 282,812,340 270,932,860 245,159,196 190,131,400
Allowance for loan losses (1,240,731) (1,120,731) (1,046,587) (1,056,237)
------------- ------------- ------------- -------------
Net loans 281,571,609 269,812,129 244,112,609 189,075,163
Premises and equipment 2,589,073 2,782,351 2,491,609 2,420,779
Investment in limited partnerships 3,187,423 3,583,432 -- --
Federal Home Loan Bank of Indianapolis stock 4,796,700 4,300,000 4,300,000 1,422,200
Interest receivable
Loans 1,611,013 1,668,616 1,457,277 1,042,307
Other investment securities and interest-bearing 280,791 202,961 206,010 169,227
deposits
Deferred income tax 1,284,173 1,118,225 684,101 1,200,839
Other assets 333,598 177,558 5,266,645 5,589,720
------------- ------------- ------------- -------------
Total Assets $ 345,551,576 $ 319,777,430 $ 309,009,960 $ 225,499,621
============= ============= ============= =============
LIABILITIES
Deposits $ 210,823,349 $ 196,116,593 $ 185,218,977 $ 177,497,996
Borrowings 94,411,986 85,604,402 90,293,559 17,645,001
Advances by borrowers for property taxes and insurance 1,313,968 1,089,807
------------- -------------
Interest payable 483,732 291,086 260,434 69,329
Other liabilities 1,913,043 2,835,102 377,341 1,032,894
------------- ------------- ------------- -------------
Total liabilities 307,632,110 284,847,183 277,464,279 197,335,027
EQUITY CAPITAL
Retained income - substantially restricted 37,918,466 34,930,247 31,547,681 28,164,594
Net unrealized gain on securities available-for-sale 1,000 -- (2,000) --
------------- ------------- ------------- -------------
Total equity capital 37,919,466 34,930,247 31,545,681 28,164,594
------------- ------------- ------------- -------------
Total liabilities and equity capital $ 345,551,576 $ 319,777,430 $ 309,009,960 $ 225,499,621
============= ============= ============= =============
</TABLE>
Source: Lincoln Federal Savings Bank and subsidiary's audited financial
statements
<PAGE>
EXHIBIT 3
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
Consolidated Statements of Income
For the six months ended June 30, 1998 and
For the year ended December 31, 1997
<TABLE>
<CAPTION>
For the six
months Year ended
ended June 30, December 31,
1998 1997
-------------- ------------
(Unaudited)
Interest income
<S> <C> <C>
Loans receivable, including fees $ 9,244,231 $ 22,369,033
Investment securities
Mortgage-backed securities 1,268,012 1,086,165
Other investment securities 199,601 773,033
Deposits with financial institutions 485,044 652,814
Dividend income 216,077 415,502
------------ ------------
Total interest income 11,412,965 25,296,547
Interest expense
Deposits 5,335,890 10,403,452
Federal Home Loan Bank advances 1,519,472 5,248,400
------------ ------------
Total interest expense 6,855,362 15,651,852
------------ ------------
Net interest income 4,557,603 9,644,695
Provision for losses on loans 409,937 297,555
------------ ------------
Net interest income after provision
for losses on loans 4,147,666 9,347,140
Other income
Net realized and unrealized gain (loss) on loans held for sale (114,322) 299,020
Net realized gains on sale of securities available for sale 104,980 118,283
Equity in losses of limited partnerships (268,134) (681,426)
Other income 378,663 674,139
------------ ------------
Total other income (loss) 101,187 410,016
Other expenses
Salaries and employee benefits 1,318,489 2,247,436
Net occupancy expenses 135,177 272,101
Equipment expenses 299,884 525,734
Deposit insurance expense 99,514 193,672
Data processing expense 369,173 581,087
Professional fees 177,481 237,819
Mortgage servicing rights amortization 126,374 66,784
Prepayment penalties on FHLB advances 248,886 --
Other expenses 569,481 960,755
------------ ------------
Total other expenses 3,344,459 5,085,388
------------ ------------
Income before income taxes 904,394 4,671,768
Income tax expense 87,805 1,158,560
------------ ------------
Net income $ 816,589 $ 3,513,208
============ ============
</TABLE>
Source: Lincoln Federal Savings Bank and subsidiary's audited and unaudited
financial statements
<PAGE>
EXHIBIT 4
LINCOLN FEDERAL SAVINGS BANK AND SUBSIDIARY
PLAINFIELD, INDIANA
Consolidated Statements of Income
Years ended December 31, 1993 through 1996
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993
------------ ------------ ------------ ------------
Interest income:
<S> <C> <C> <C> <C>
Loans receivable, including fees $ 22,901,854 $ 20,529,408 $ 17,623,601 $ 14,845,381
Investment securities 941,860 864,715 571,386 588,202
Deposits with financial institutions 255,988 332,038 214,364 283,525
Dividend income 353,758 338,669 139,861 121,691
------------ ------------ ------------ ------------
Total interest income 24,453,460 22,064,830 18,549,212 15,838,799
Interest expense:
Deposits 10,237,933 10,001,573 7,499,247 7,444,311
Federal Home Loan Bank advances 4,881,244 4,484,354 1,927,926 75,297
------------ ------------ ------------ ------------
Total interest expense 15,119,177 14,485,927 9,427,173 7,519,608
Net interest income 9,334,283 7,578,903 9,122,039 8,319,191
Provision for losses on loans 120,000 100,000 (1,350) 369,212
------------ ------------ ------------ ------------
Net interest income after provision
for losses on loans 9,214,283 7,478,903 9,123,389 7,949,979
Other income:
Net realized and unrealized gain (loss) on
loans
held for sale (159,727) 1,463,230 (1,380,102) 642,659
Equity in losses of limited partnerships (596,009) (1,595,580) (663,224) (449,720)
Other income 502,506 473,129 235,153 290,797
------------ ------------ ------------ ------------
Total other income (253,230) 340,779 (1,808,173) 483,736
(loss)
Other expenses:
Salaries and employee 1,718,974 1,528,969 1,359,818 1,155,523
benefits
Net occupancy expenses 236,252 272,277 287,299 272,762
Equipment expenses 360,775 175,547 173,537 156,101
Deposit insurance expense 1,724,734 438,393 407,543 284,454
Data processing expense 312,794 227,690 -- --
Other expenses 749,766 601,198 609,008 457,618
------------ ------------ ------------ ------------
Total other expenses 5,103,295 3,244,074 2,837,205 2,326,458
------------ ------------ ------------ ------------
Income before income tax and cumulative effect
of change in accounting method 3,857,758 4,575,608 4,478,011 6,107,257
Income tax expense 869,539 1,193,042 1,094,924 2,286,546
------------ ------------ ------------ ------------
Income before cumulative effect of change in
accounting method -- -- 3,383,087 3,820,711
Cumulative effect of change in method of
accounting for income taxes -- -- -- 355,506
------------ ------------ ------------ ------------
Net income $ 2,988,219 $ 3,382,566 $ 3,383,087 $ 4,176,217
============ ============ ============ ============
</TABLE>
Source: Lincoln Federal Savings Bank and subsidiary's audited financial
statements
<PAGE>
EXHIBIT 5
Selected Consolidated Financial Information
At June 30, 1998 and at December 31, 1993 through 1997
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- ---------------------------------------------------------------
(In thousands)
Summary of Financial Condition Data:
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 304,500 $ 321,391 $ 345,552 $ 319,777 $ 309,010 $ 225,500
Cash and interest bearing deposits in
other banks (1) 23,765 18,958 10,394 8,882 21,488 5,937
Investment securities available for sale 58,940 29,399 118 116 114 115
Investment securities held to maturity 3,500 9,635 15,185 11,600 12,748 9,748
Mortgage loans held for sale (2) 19,264 -- 24,200 15,534 16,141 8,779
Loans 184,850 249,996 282,813 270,933 245,159 190,131
Allowance for loan losses (1,432) (1,361) (1,241) (1,121) (1,046) (1,056)
Net loans (3) 183,418 248,635 281,572 269,812 244,113 189,075
Investment in limited partnerships 2,633 2,706 3,187 3,583 5,019 5,432
Deposits 211,160 203,852 210,823 196,117 185,219 177,498
Borrowings 47,889 72,827 94,412 85,604 90,294 17,645
Equity capital-substantially restricted 42,795 41,978 37,919 34,930 31,546 28,165
</TABLE>
(1) Includes certificates of deposits in other financial institutions.
(2) Loans held for sale at June 30, 1998, consist of loans sold to a private
investor in a transaction that closed in July 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Lincoln Federal Savings Bank and Subsidiary--Asset/Liability Management."
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Lincoln Federal Savings Bank and
Subsidiary--Asset/Liability Management" for a discussion of the decline in
our net loans.
<PAGE>
EXHIBIT 6
Income and Expense Trends
For the Six Months Ended June 30, 1997 and 1998 and
For the Years Ended December 31, 1993 through 1997
<TABLE>
<CAPTION>
Six months ended
June 30, Year ended December 31,
-------------------- --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(In thousands)
Summary of Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 11,413 $ 12,867 $ 25,297 $ 24,453 $ 22,065 $ 18,309 $ 15,713
Total interest expense 6,855 7,745 15,652 15,119 14,486 9,418 7,512
-------- -------- -------- -------- -------- -------- --------
Net interest income 4,558 5,122 9,645 9,334 7,579 8,891 8,201
Provision for loan losses 410 50 298 120 100 (1) 369
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 4,148 5,072 9,347 9,214 7,479 8,892 7,832
-------- -------- -------- -------- -------- -------- --------
Other income
(losses):
Net realized and unrealized gain (loss)
on loans held for sale (114) (18) 299 (160) 1,463 (1,380) 643
Net realized and unrealized gains on
securities available-for-sale 105 -- 118 -- -- -- --
Equity in losses of limited partnerships (268) (327) (681) (596) (1,595) (663) (450)
Other 378 285 674 503 473 529 684
-------- -------- -------- -------- -------- -------- --------
Total other income (loss) 101 (60) 410 (253) 341 (1,514) 877
-------- -------- -------- -------- -------- -------- --------
Other expenses:
Salaries and employee 1,318 1,022 2,247 1,719 1,529 1,360 1,156
benefits
Net occupancy expenses 135 133 272 236 272 287 273
Equipment expenses 300 249 526 361 176 174 156
Deposit insurance expense 100 85 194 1,725 438 408 284
Data processing expense 369 268 581 313 228 201 180
Professional fees 177 140 238 69 48 41 54
Mortgage servicing rights amortization 126 5 67 12 9 54 267
Other 570 546 960 668 544 375 232
-------- -------- -------- -------- -------- -------- --------
Total other 3,095 2,448 5,085 5,103 3,244 2,900 2,602
expenses
-------- -------- -------- -------- -------- -------- --------
Income before income taxes,
extraordinary
item and cumulative effect of change
in
accounting principle 1,154 2,564 4,672 3,858 4,576 4,478 6,107
Income taxes 187 701 1,159 870 1,193 1,095 2,287
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary item and
cumulative effect of change in
accounting
967 1,863 3,513 2,988 3,383 3,383 3,820
principle
Extraordinary item-early extinguishment of
debt, net of income taxes of$99 150 -- -- -- -- -- --
Cumulative effect of change in
accounting principle -- -- -- -- -- -- 356
-------- -------- -------- -------- -------- -------- --------
Net income $817 $1,863 $3,513 $2,988 $3,383 $3,383 $4,176
======== ======== ======== ======== ======== ======== ========
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 7
Normalized Earnings Trend
For the Twelve Months Ended June 30, 1998, and
For the Years Ended December 31, 1997 and 1996
Twelve Months
Ended Years Ended
December 31,
June 30, -----------------
1998 1997 1996
------- ------- -------
(Dollars In Thousands)
NET EARNINGS
Net income before taxes $ 3,012 $ 4,672 $ 3,858
Income tax expense 545 1,159 870
------- ------- -------
Net earnings after taxes $ 2,467 $ 3,513 $ 2,988
NORMALIZED EARNINGS
Net income before taxes $ 3,012 $ 4,672 $ 3,858
Expense adjustments
Provision for loan losses 237 78 --
SAIF assessment -- -- 1,300
FHLB prepayment penalty 249 -- --
Income adjustments
Non-recurring gain (223) -- --
Other adjustments
NONE -- -- --
------- ------- -------
Normalized earnings before taxes 3,275 4,750 2,558
Income tax expense @ 34.0% 1,114 1,615 870
------- ------- -------
Normalized earnings after taxes $ 2,162 $ 3,135 $ 1,688
======= ======= =======
Source: Lincoln Federal's audited and unaudited financial statements
<PAGE>
EXHIBIT 8
Performance Indicators
For The Six Months Ended June 30, 1997 and 1998 and
For the Years Ended December 31, 1993 through 1997
<TABLE>
<CAPTION>
At or for the
Six months ended
June 30, Year ended December 31,
------------------ ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
Supplemental Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on assets (1)(2) 0.53% 1.07% 1.02% 0.90% 1.09% 1.32% 2.06%
Return on equity (1)(3) 3.81% 9.52% 8.71% 8.08% 9.92% 11.08% 15.84%
Equity to assets (4) 14.05% 11.25% 13.06% 10.97% 10.92% 10.21% 12.49%
Interest rate spread during period (1)(5) 2.39% 2.53% 2.41% 2.36% 1.99% 3.24% 3.86%
Net yield on interest-earning assets (1)(6) 3.06% 3.05% 2.92% 2.91% 2.55% 3.67% 4.34%
Efficiency Ratio (7) 66.43% 48.36% 50.57% 56.19% 40.96% 39.31% 28.66%
Other expenses to average assets (1)(8) 2.15% 1.40% 1.47% 1.54% 1.05% 1.13% 1.29%
Average interest-earning assets to
average interest-bearing liabilities 114.59% 111.21% 110.88% 111.80% 111.31% 111.18% 112.05%
Non-performing assets to total assets (4) 0.57% 0.99% 1.14% 0.73% 0.75% 0.04% 0.13%
Allowance for loan losses to total loans
outstanding 0.70% 0.40% 0.54% 0.40% 0.39% 0.40% 0.53%
(4)(9)
Allowance for loan losses to
non-performing loans (4) 87.16% 36.91% 37.56% 50.80% 46.81% 780.60% 350.08%
Net charge-offs to average
total loans outstanding 0.15% -- 0.06% -- 0.01% -- 0.01%
</TABLE>
(1) Information for six months ended June 30, 1998 and 1997, has been
annualized. Interim results are not necessarily indicative of the results
of operations for an entire year.
(2) Net income divided by average total assets.
(3) Net income divided by average total equity.
(4) At end of period.
(5) Interest rate spread is calculated by subtracting combined average interest
cost from combined average interest rate earned for the period indicated.
(6) Net interest income divided by average interest-earning assets.
(7) Other expenses (excluding federal income tax expense) divided by the sum of
net interest income and noninterest income. Excluding the effect of the
one-time SAIF assessment, the efficiency ratio would have been 42.28% for
the year ended December 31, 1996.
(8) Other expenses divided by average total assets.
(9) Total loans include loans held for sale.
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 9
Volume/Rate Analysis
For the Six Months Ended June 30, 1998 and 1997
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Six months ended Year ended December 31,
June 30, ----------------------------------------------------------------
1998 vs. 1997 1997 vs. 1996 1996 vs. 1995
------------------------------ ------------------------------ -------------------------------
Increase Increase Increase
(Decrease) (Decrease) (Decrease)
Due to Total Due to Total Due to Total
--------------- Increase ---------------- Increase ----------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ---------- ------ ---- ----------
(In thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning deposits $ 488 $ (99) $ 389 $ 439 $ (42) $ 397 $ (49) $ (27) $ (76)
Mortgage-backed securities
available-for-sale 1,268 1,268 1,086 -- 1,086 -- -- --
-------
Other investment securities
available-for-sale 9 -- 9 (4) -- (4) -- -- --
Other investment securities
held-to-maturity (264) 18 (246) (156) (9) (165) 69 8 77
Loans receivable (3,736) 838 (2,898) (730) 197 (533) 1,683 690 2,373
FHLB stock 20 4 24 54 9 63 18 (4) 14
------- ------- ------- ------- ------- ------- ------- ------- -------
Total $(2,215) $ 761 $(1,454) $ 689 $ 155 $ 844 $ 1,721 $ 667 $ 2,388
======= ======= ======= ======= ======= ======= ======= ======= =======
Interest bearing liabilities:
Interest-bearing
demand deposits $ 4 $ (2) $ 2 $ 5 $ (2) $ 3 $ 14 $ (6) $ 8
Savings deposits (95) -- (95) (226) (85) (311) (112) (91) (203)
Money market
savings deposits 223 5 228 699 25 724 161 51 212
Certificates of deposit (145) 257 112 (50) (200) (250) 205 14 219
FHLB advances (1,428) 291 (1,137) 255 112 367 816 (419) 397
------- ------- ------- ------- ------- ------- ------- ------- -------
Total $(1,441) $ 551 $ (890) $ 683 $ (150) $ 533 $ 1,084 $ (451) $ 633
======= ======= ------- ======= ======= ------- ======= ======= -------
Net change in net
interest income $ (774) $ 210 $ (564) $ 6 $ 305 $ 311 $ 637 $ 1,118 $ 1,755
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 10
Yield and Cost Trends
At June 30, 1998 and
For the Six Months Ended June 30, 1997 and 1998, and
For the Years Ended December 31, 1995 through 1997
<TABLE>
<CAPTION>
Six months ended
June 30, Year ended December 31,
At June 30, --------------------- -----------------------------
1998 1998 1997 1997 1996 1995
---------- --------- --------- ------ ------- --------
Yield/ Yield/ Yield/ Yield/ Yield/ Yield/
Rate Rate Rate Rate Rate Rate
Weighted average interest rate earned on:
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits 5.69% 5.08% 7.47% 5.51% 6.45% 7.05%
Mortgage-backed securities
available for sale 7.34% 7.49% -- 8.30% -- --
Other investment securities
available for sale 6.41% 6.81% 6.84% 7.58% 7.69% 7.83%
Other investment securities
held to maturity 5.94% 6.05% 5.97% 6.02% 6.08% 6.02%
Loans 7.79% 7.93% 7.74% 7.80% 7.73% 7.48%
FHLB stock 7.93% 7.93% 7.76% 8.00% 7.81% 7.91%
Total interest-earning assets 7.48% 7.66% 7.66% 7.67% 7.64% 7.41%
Weighted average interest rate cost of:
Interest-bearing demand deposits 2.06% 2.03% 2.05% 2.07% 2.10% 2.19%
Savings deposits 3.12% 3.08% 3.08% 3.10% 3.39% 3.65%
Money market savings deposits 4.89% 4.89% 4.84% 4.91% 4.57% 3.34%
Certificates of deposit 5.71% 5.63% 5.41% 5.56% 5.69% 5.68%
FHLB advances 5.60% 5.78% 5.56% 5.70% 5.57% 6.11%
Total interest-bearing 5.28% 5.27% 5.13% 5.26% 5.28% 5.42%
liabilities
Interest rate spread (1) 2.20% 2.39% 2.53% 2.41% 2.36% 1.99%
Net yield on weighted average
interest-earning sassets (2) N/A 3.06% 3.05% 2.92% 2.91% 2.55%
</TABLE>
(1) Interest rate spread is calculated by subtracting combined weighted average
interest rate cost from combined weighted average interest rate earned for
the period indicated. Interest rate spread figures must be considered in
light of the relationship between the amounts of interest-earning assets
and interest-bearing liabilities.
(2) The net yield on weighted average interest-earning assets is calculated by
dividing net interest income by weighted average interest-earning assets
for the period indicated. No net yield figure is presented at June 30,
1998, because the computation of net yield is applicable only over a period
rather than at a specific date.
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 11
Net Portfolio Value (NPV)
At June 30, 1998
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as Percent of PV of Asset
--------------------------------------- ---------------------------------------
in Rates $ Amount $ Change % Change NPV Ratio BP Change
- ------------- ------------ ------------- ------------ ------------------ -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 $ 27,926 $ (21,585) (44.0)% 9.89% (599)
+200 39,959 (9,552) (19.0)% 13.40% (248)
0 49,511 0 0 15.88% 0
(200) 52,047 2,536 5.0% 16.33% 44
(400) 54,929 5,419 11.0% 16.81% 93
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 12
Loan Portfolio Composition
At June 30, 1998, and at December 31, 1993 through 1997
<TABLE>
<CAPTION>
At June 30, At December 31,
1998 1997 1996 1995
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
TYPE OF LOAN
Real estate mortgage loans:
One-to-four-family
<S> <C> <C> <C> <C> <C> <C> <C> <C>
residential (1)................$159,887 77.12% $205,976 81.03% $269,618 84.84% $248,947 84.48%
Multi-family..................... 1,048 .51 1,133 .45 1,111 .35 1,012 .34
Commercial real estate........... 14,457 6.97 14,914 5.87 14,830 4.66 15,727 5.34
Construction..................... 7,722 3.72 9,912 3.90 13,159 4.14 7,838 2.66
Land............................. 1,699 .82 1,455 .57 2,725 .86 9,877 3.35
Commercial.......................... 141 .07 242 .10 --- --- --- .---
Consumer loans:
Home equity and
second mortgages............... 18,525 8.93 17,218 6.77 13,239 4.17 7,858 2.67
Other............................ 3,849 1.86 3,340 1.31 3,124 .98 3,409 1.16
Gross loans receivable.........$207,328 100.00% $254,190 100.00% $317,806 100.00% $294,668 100.00%
TYPE OF SECURITY
One-to-four-family
residential real estate (1)....$185,766 89.60% $232,966 91.65% $290,956 91.55% $264,142 89.64%
Multi-family real estate......... 1,048 .51 1,133 .45 1,111 .35 1,012 .34
Commercial real estate........... 14,825 7.15 15,054 5.92 19,890 6.26 16,229 5.51
Land............................. 1,699 .82 1,455 .57 2,725 .86 9,877 3.35
Deposits......................... 1,114 .54 1,106 .44 1,155 .37 995 .34
Auto............................. 2,150 1.04 2,041 .80 1,502 .47 1,690 .57
Other security................... 341 .16 426 .17 356 .11 611 .21
Unsecured ....................... 385 .18 9 .-- 111 .03 113 .04
Gross loans receivable......... 207,328 100.00 254,190 100.00% 317,806 100.00 294,668 100.00
Deduct:
Allowance for loan losses........... 1,432 .69 1,361 .54 1,241 .39 1,121 .38
Deferred loan fees (1).............. 1,143 .55 1,690 .66 2,707 .85 2,854 .97
Loans in process.................... 2,071 1.00 2,504 .99 8,086 2.55 5,347 1.81
Net loans receivable.............$202,682 97.76% $248,635 97.81% $305,772 96.21% $285,346 96.84%
Mortgage Loans:
Adjustable-rate.................. $74,809 36.79% $95,106 37.95% $117,062 37.20% $112,193 38.52%
Fixed-rate....................... 128,529 63.21 155,502 62.05 197,620 62.80 179,066 61.48
Total..........................$203,338 100.00% $250,608 100.00% $314,682 100.00% $291,259 100.00%
</TABLE>
1994 1993
Percent Percent
Amount of Total Amount of Total
------ -------- ------ --------
TYPE OF LOAN
Real estate mortgage loans:
One-to-four-family
residential (1)............... $228,489 83.78% $176,115 83.77%
Multi-family.................... 559 .20 857 .41%
Commercial real estate.......... 12,780 4.69 12,249 5.83%
Construction.................... 19,343 7.09 8,610 4.09%
Land............................ 1,435 .53 5,343 2.54%
Commercial......................... --- --- --- ---%
Consumer loans:
Home equity and
second mortgages.............. 7,018 2.57 5,355 2.55%
Other........................... 3,108 1.14 1,713 .81%
Gross loans receivable........ $272,732 100.00% $210,242 100.00%
TYPE OF SECURITY
One-to-four-family
residential real estate (1)... $253,150 92.82% $190,080 90.41%
Multi-family real estate........ 559 .21 857 .41%
Commercial real estate.......... 14,480 5.31 12,249 5.83%
Land............................ 1,435 .53 5,343 2.54%
Deposits........................ 959 .35 591 .28%
Auto............................ 1,635 .60 926 .44%
Other security.................. 392 .14 72 .03%
Unsecured ...................... 122 .04 124 .06%
Gross loans receivable........ 272,732 100.00 210,242 100.00%
Deduct:
Allowance for loan losses.......... 1,047 .39 1,056 .50%
Deferred loan fees (1)............. 2,703 .99 2,116 1.01%
Loans in process................... 8,728 3.20 9,216 4.38%
Net loans receivable............ $260,254 95.42% $197,854 94.11%
Mortgage Loans:
Adjustable-rate.................$ 84,365 31.29% $ 51,757 24.82%
Fixed-rate...................... 185,259 68.71 156,772 75.18%
Total......................... $269,624 100.00% $208,529 100.00%
(1) Net loans held for sale included in the above categories amounted to
$19,264,000, $24,201,000, $15,534,000, $16,141,000 and $8,779,000 at
June 30, 1998 and December 31, 1996, 1995, 1994, and 1993,
respectively. There were no loans held for sale at December 31, 1997.
<PAGE>
EXHIBIT 13
Loan Maturity Schedule
At December 31, 1997
Outstanding at
2001- 2003- 2008- 2013 and December 31,
<TABLE>
<CAPTION>
Due During Years Ended December 31, Balance
2001 2003 2008 2013 Outstanding at
to to to and December 31,
1998 1999 2000 2002 2007 2012 following 1997
(In thousands)
Real estate mortgage loans:
One- to four-family
<S> <C> <C> <C> <C> <C> <C> <C> <C>
residential loans.............. $ 180 $ 71 $ 304 $2,847 $16,336 $43,541 $142,697 $205,976
Multi-family loans.................. 67 --- --- 76 131 687 172 1,133
Commercial real estate loans..... 4,796 253 415 195 2,952 3,917 2,386 14,914
Construction loans............... 7,137 2,666 109 --- --- --- --- 9,912
Land loans....................... 1,190 265 --- --- --- --- --- 1,455
Commercial....................... 87 16 56 83 --- --- --- 242
Consumer loans:
Installment loans............... 100 303 506 1,279 37 9 --- 2,234
Loans secured by deposits........ 517 504 14 71 --- --- --- 1,106
Home equity loans and
and second mortgages........... 1,218 393 250 1,103 14,254 --- --- 17,218
Total consumer loans........... 1,835 1,200 770 2,453 14,291 9 --- 20,558
------- ------ ------ ------ ------- ------- -------- --------
Total........................ $15,292 $4,471 $1,654 $5,654 $33,710 $48,154 $145,255 $254,190
======= ====== ====== ====== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Due After December 31, 1998
-----------------------------------------
Fixed Variable
Rates Rates Total
------------ ------------- ------------
(In thousands)
Real estate mortgage loans:
<S> <C> <C> <C>
One- to four-family residential loans $ 132,186 $ 73,610 $ 205,796
Multi-family loans 321 745 1,066
Commercial real estate loans 6,626 3,492 10,118
Construction loans 2,775 2,775
--
Land loans 265 265
--
Commercial 155 155
--
Consumer loans:
Installment loans 2,134 2,134
--
Loans secured by deposits 589 589
--
Home equity loans and second
mortgages 5,080 10,920 16,000
------------ ------------- ------------
Total $ 150,131 $ 88,767 $ 238,898
============ ============= ============
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 14
Loan Originations and Purchases
For The Six Months Ended June 30, 1997 and 1998 and
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
For the six months ended For the years ended
June 30, December 31,
---------------------- ----------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Gross loans receivable at
beginning of period $ 254,190 $ 317,806 $ 317,806 $ 294,668 $ 272,732
--------- --------- --------- --------- ---------
Loans Originated:
Real estate mortgage loans:
One- to four-family
residential loans (1) 24,491 24,354 44,472 54,396 46,754
Multi-family loans -- -- 68 140 259
Commercial real estate loans 2,472 6,608 3,033
1,734 5,650
Construction loans 3,347 3,738 10,411 15,640
19,515
Land loans 580 680 3,053 6,227 2,888
Commercial loans -- -- 242 -- --
Consumer loans 7,805 4,839 12,432 14,303 2,880
--------- --------- --------- --------- ---------
Total originations 38,695 77,286 93,739
35,345 77,946
Purchases (sales) of participation
loans, net (47,666) -- (78,887) (4,681) (7,786)
Reductions:
Repayments and other deductions 37,694 22,783 61,904 65,818 48,157
Transfers from loans to real
estate owned 197 -- 111 102 67
--------- --------- --------- --------- ---------
Total reductions 37,891 22,783 62,015 65,920 48,224
--------- --------- --------- --------- ---------
Total gross loans receivable
at end of period $ 207,328 $ 330,368 $ 254,190 $ 317,806 $ 294,668
========= ========= ========= ========= =========
</TABLE>
(1) Includes certain home equity loans.
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 15
Delinquent Loans
At June 30, 1998 and
At December 31, 1995 through 1997
<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
30-89 Days 90 Days or More 30-89 Days 90 Days or More
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loansof Loans of Loans of Loansof Loans
(Dollars in thousands)
Residential
<S> <C> <C> <C> <C> <C> <C> <C> <C>
mortgage loans.......... 99 4,707 19 766 140 6,040 26 1,228
Commercial
mortgage loans.......... 1 93 --- --- --1 100 1 367
Multi-family
mortgage loans.......... ----- --- --- --- ------ --- --- ---
Construction loans......... --- --- 3 808 --- --- 3 1,214
Land loans................. 1 6 --- --- --- --- --- ---
Consumer loans............. 20 258 2 27 29 379 20 448
--- ------ -- ------ --- ------ -- ------
Total................... 121 $5,064 24 $1,601 170 $6,519 50 $3,257
=== ====== == ====== === ====== == ======
Delinquent loans to
total loans............. 3.27% 3.91%
==== ====
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995
-------------------------------------- -----------------------------------------
30-89 Days 90 Days or More 30-89 Days 90 Days or More
------------------ ------------------ ------------------ --------------------
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
-------- --------- -------- -------- -------- --------- -------- ---------
Residential
<S> <C> <C> <C> <C> <C> <C> <C> <C>
mortgage loans .. -- -- 17 $1,321 -- -- 12 452
Non residential
mortgage loans... -- -- 2 1,833 -- -- -- --
Multi-family
mortgage loans .. -- -- -- -- -- -- -- --
Construction loans . -- -- 6 1,837 -- -- 3 1,199
Land loans ......... -- -- -- -- -- -- -- --
Consumer loans ..... -- -- 3 25 -- -- 7 134
--- ------ -- ----- --- ------ -- ------
Total ........... -- -- 28 $5,016 -- -- 22 $1,785
=== ====== == ===== === ====== == ======
Delinquent loans to
total loans ..... 5.02% 3.28%
==== ====
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 16
Nonperforming Assets
At June 30, 1998, and at December 31, 1995 through 1997
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------
1998 1997 1996 1995
------ ------ ------ ------
(Unaudited) (In thousands)
Non-performing assets:
<S> <C> <C> <C> <C>
Non-performing loans $1,601 $3,257 $2,397 $1,797
Troubled debt restructurings 42 367 46 598
------ ------ ------ ------
Total non-performing loans 1,643 3,624 2,443 2,395
Foreclosed real estate 98 45 75 --
------ ------ ------ ------
Total non-performing assets $1,741 $3,669 $2,518 $2,395
====== ====== ====== ======
Non-performing loans to total loans 0.80% 1.45% 0.80% 0.83%
====== ====== ====== ======
Non-performing assets to total assets 0.57% 1.14% 0.73% 0.75%
====== ====== ====== ======
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 17
Classified Assets
At June 30, 1998
(Unaudited)
June 30,
1998
----------------
(In thousands)
Substandard assets $ 1,634
Doubtful assets 0
Loss assets 0
----------------
Total classified assets $ 1,634
================
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 18
Allowance for Loan Losses
For the Six Months Ended June 30, 1997 and 1998, and
For the Years Ended December 31, 1995 through 1997
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 1,361 $ 1,241 $ 1,241 $ 1,121 $ 1,047
Charge-offs
One- to four-family residential mortgage loans (29) -- -- -- (15)
Commercial real estate mortgage loans -- -- (178) -- (12)
Construction loans (301) -- -- -- (2)
Consumer loans (25) -- -- -- --
------- ------- ------- ------- -------
Total charge-offs (355) -- (178) -- (29)
------- ------- ------- ------- -------
Recoveries:
One- to four-family residential mortgage 13 -- -- -- 3
loans
Consumer loans 3
------- ------- ------- ------- -------
Total recoveries 16 -- -- -- 3
------- ------- ------- ------- -------
Net charge-offs (339) -- (178) -- (26)
------- ------- ------- ------- -------
Provision for losses on loans 410 50 298 120 100
------- ------- ------- ------- -------
Balance end of period $ 1,432 $ 1,291 $ 1,361 $ 1,241 $ 1,121
======= ======= ======= ======= =======
Allowance for loan losses as a percent
of total loans outstanding 0.70% 0.40% 0.54% 0.40% 0.39%
Ratio of net charge-offs to average
loans outstanding 0.15% -- 0.06% -- 0.01%
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 19
Investment Portfolio Composition
At June 30, 1998, and
At December 31, 1997
<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
------------------- ----------------------
Amortized Market Amortized Market
Cost Value Cost Value
-------- -------- -------- --------
(Unaudited)
(In thousands)
Investment securities available for sale:
<S> <C> <C> <C> <C>
Mortgage-backed securities $ 43,206 $ 44,112 (1) $ 28,495 $ 29,399
Corporates 14,828 14,828
-------- -------- -------- --------
Federated liquid cash fund -- -- -- --
Freddie Mac stock -- -- -- --
-------- -------- -------- --------
Total investment securities
available for sale 58,034 58,940 28,495 29,399
Investment securities held to maturity:
Federal agency securities 3,500 3,509 9,635 9,615
-------- -------- -------- --------
Total investment securities 61,534 62,449 38,130 39,014
Investment in limited partnerships 2,633 (1) 2,706 (1)
Investment in insurance company 650 (1) -- --
FHLB stock (2) 5,447 5,447 5,447 5,447
-------- -------- -------- --------
Total investments $ 70,264 $ 46,283
======== ========
</TABLE>
(1) Market values are not available
(2) Market value is based on the price at which the stock may be resold to the
FHLB of Indianapolis.
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
---------------------------------- ----------------------------------
Amortized Percent Market Amortized Percent Market
Cost of Total Value Cost of Total Value
---------- ---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation $ 36,416 84.3% $ 37,264 $20,997 73.7% $21,859
Federal National Mortgage Corporation 6,790 15.7% 6,848 7,498 26.3% 7,540
---------- ---------- ---------- ---------- ---------- ----------
Total mortgage-backed securities $ 43,206 100.0% $ 44,112 $28,495 100.0% $29,399
========== ========== ========== ========== ========== ==========
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 20
Mix of Deposits
At June 30, 1998, and at December 31, 1995 through1997
<TABLE>
<CAPTION>
Six Months Ended
June 30, December 31,
-------------------------------------------------------------------
1998 1997 1996 1995
--------------------- ---------------------- --------------------- ----------------------
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
--------------------- ---------------------- --------------------- ----------------------
(Dollars in thousands)
Withdrawable:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts $ 20,609 9.76% $ 21,967 10.78% $ 29,714 14.09% $ 33,307 16.98%
Money market accounts 28,631 13.56% 26,002 12.75% 14,429 6.84% 3,185 1.62%
NOW accounts 7,487 3.54% 7,565 3.71% 8,551 4.06% 7,081 3.61%
Noninterest-bearing
demand accounts 1,394 0.66% 2,321 1.14% 711 0.34% 1,323 0.68%
----------- --------- ----------- ---------- --------------------- ----------------------
Total withdrawable $ 58,121 27.52% $ 57,855 28.38% $ 53,405 25.33% $ 44,896 22.89%
Certificates (original
terms):
91 days 407 0.19% 322 0.16% 534 0.25% 536 0.27%
6 months 8,835 4.19% 4,562 2.24% 6,219 2.95% 6,277 3.20%
12 months 27,605 13.07% 29,713 14.58% 55,723 26.43% 62,514 31.88%
18 months 16,413 7.77% 17,886 8.77% 15,917 7.55% 17,434 8.89%
24 months 9,375 4.44% 1,273 0.62% -- -- -- --
30 months 65,066 30.82% 65,690 32.22% 36,589 17.36% 26,032 13.27%
36 months 11,124 5.27% 11,250 5.52% 22,442 10.65% 23,644 12.06%
60 months 13,081 6.19% 14,171 6.95% 11,576 5.49% 12,371 6.31%
Public fund certificates 1,133 0.54% 1,130 0.56% 8,418 3.99% 2,372 1.21%
Other certificates -- -- -- -- -- -- 41 0.02%
----------- --------- ----------- ---------- ----------- --------- ----------- ----------
Total certificates $ 153,039 72.48% $ 145,997 71.62% $ 157,418 74.67% $ 151,221 77.11%
----------- --------- ----------- ---------- ----------- --------- ----------- ----------
Total deposits $ 211,160 100.00% $ 203,852 100.00% $ 210,823 100.00% $ 196,117 100.00%
=========== ========= =========== ========== =========== ========= =========== ==========
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 21
Deposit Activity
For the Six Months Ended June 30, 1998, and
For the Years Ended December 31, 1996 and 1997
Six months Year ended December 31,
ended June 30, -----------------------
1998 1997 1996
---------- --------- ----------
(Dollars in thousands)
Opening Balance $ 203,852 $ 210,823 $ 196,117
Ending balance $ 211,160 $ 203,852 $ 210,823
========= ========= =========
Net increase (decrease) $ 7,308 $ (6,971) $ 14,706
========= ========= =========
Percent increase (decrease) 3.58% (3.31)% 7.50%
========= ========= =========
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 22
Borrowed Funds Activity
For the Six Months Ended June 30, 1998 and 1997 and
For the Years Ended December 31, 1995 through 1997
<TABLE>
<CAPTION>
At or For the
Six Months At or For the
Ended Year Ended
June 30, December 31,
---------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
------------ ------------- ------------- ------------- -------------
(Dollars in thousands)
FHLB advances:
<S> <C> <C> <C> <C> <C>
Outstanding at end of period $ 45,686 $ 106,932 $ 70,136 $ 91,232 $ 81,936
Average balance outstanding for period 52,577 95,530 92,121 87,621 73,403
Maximum amount outstanding at any
month-end during the period 70,136 106,932 106,932 93,932 81,936
Weighted average interest rate
during the period 5.78% 5.56% 5.70% 5.57% 6.11%
Weighted average interest rate
at end of period 5.60% 5.65% 5.71% 5.49% 5.85%
Note payable to Bloomington 2,203 2,691 2,691 3,180 3,668
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 23
OFFICES OF LINCOLN FEDERAL SAVINGS BANK
PLAINFIELD, INDIANA
<TABLE>
<CAPTION>
Net Book
Value of
Property,
Owned or Year Total Furniture &
Description and Address Leased Opened Deposits Fixtures(1)
- ---------------------------------------- ------------ ------------ ------------- ------------
(000)
<C> <C> <C> <C> <C>
1121 East Main Street Owned 1970 $ 90,200 $ 1,354
Plainfield, IN 46168
134 South Washington Street Owned 1962 $ 56,100 $ 474
Crawfordsville, IN 47933
1900 East Wabash Street Owned 1974 $ 30,800 $ 302
Frankfort, IN 46041
975 East Main Street Owned 1981 $ 34,000 $ 291
Brownsburg, IN 46112
</TABLE>
(1) Land and other capitalized costs associated with the future Avon, Indiana
branch totalled $417,000.
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 24
LIST OF KEY OFFICERS AND DIRECTORS
At June 30, 1998
<TABLE>
<CAPTION>
Director Term
Name Position(s) Held with the Bank Age (1) Since Expires
- -------------------------- --------------------------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Lester N. Bergum, Jr. Director 49 1996 1999
W. Thomas Harmon Director 58 1982 2001
Jerry R. Holifield Director 57 1992 2001
Wayne E. Kessler Director 57 1976 2000
David E. Mansfield Director 56 1997 2000
John C. Milholland Director 52 1998 2001
T. Timothy Unger Director, President and Chief 58 1996 1999
Executive
Officer
Edward E. Whalen Chairman of the Board 70 1961 2000
John L. Wyatt Director 62 1992 2000
John M. Baer Chief Financial Officer, Secretary -- -- --
and Treasurer
</TABLE>
Source: Lincoln Bancorp's Prospectus
<PAGE>
EXHIBIT 25
Key Demographic Data and Trends
Market Area, Indiana and the United States
1990, 1997 and 2002
<TABLE>
<CAPTION>
1990 1997 % Chg. 2002 % Chg.
----------- ----------- --- ----------- ---
Population
- ---------------
<S> <C> <C> <C> <C> <C>
Market Area (1) 141,127 161,704 14.6% 175,755 8.7%
Indiana 5,544,159 5,885,587 6.2% 6,123,040 4.0%
United States 248,709,873 267,805,150 7.7% 281,208,787 5.0%
Households
- ----------
Market Area 50,794 58,919 16.0% 64,721 9.8%
Indiana 2,065,355 2,220,749 7.5% 2,330,419 4.9%
United States 91,947,410 99,019,931 7.7% 104,000,643 5.0%
Per Capita Income
- -----------------
Market Area $ 13,962 $ 19,964 43.0% --- ---
Indiana 13,149 17,711 34.7% --- ---
United States 12,313 18,100 47.0% --- ---
Median Household Income
- -----------------------
Market Area $ 33,985 $ 46,855 37.9% $ 58,556 25.0%
Indiana 28,797 37,600 30.6% 45,103 20.0%
United States 28,525 36,961 29.6% 42,042 13.7%
</TABLE>
(1) Market area includes Hendricks, Montgomery and Clinton Counties
Source: Data Users Center and CACI
<PAGE>
EXHIBIT 26
Key Housing Data
Market Area, Indiana and the United States
1990
Occupied Housing Units
Market Area (1) 50,794
Indiana 2,065,355
United States 91,947,410
Occupancy Rate
Market Area
Owner-Occupied 77.4%
Renter-Occupied 22.6%
Indiana
Owner-Occupied 70.2%
Renter-Occupied 29.8%
United States
Owner-Occupied 64.2%
Renter-Occupied 35.8%
Median Housing Values
Market Area $ 61,066
Indiana 53,500
United States 79,098
Median Rent
Market Area $ 380
Indiana 374
United States 374
(1) Market area includes Hendricks, Montgomery and Clinton Counties
Source: U.S. Department of Commerce and CACI Sourcebook
<PAGE>
EXHIBIT 27
Major Sources of Employment by Industry Group
Market Area, Indiana and the United States
1990
Market United
Industry Group Area (1) Indiana States
----------- ------------ ---------
Agriculture/Mining 4.3% 2.9% 1.3%
Construction 6.5% 5.6% 4.8%
Manufacturing 25.1% 25.1% 19.2%
Transportation/Utilities 9.5% 6.6% 5.9%
Wholesale/Retail 19.0% 21.4% 27.5%
Finance, Insurance, & Real Estate 5.6% 5.7% 7.3%
Services 30.0% 32.7% 34.0%
(1) Market area includes Hendricks, Montgomery and Clinton Counties
Source: Bureau of the Census County Business Patterns
<PAGE>
EXHIBIT 28
Unemployment Rates
Market Area, Indiana and the United States
1994, 1995, 1996, 1997 and 1998
Location 1994 1995 1996 1997 1998(1)
- -------------------- -------- --------- -------- --------- ---------
Market Area (2) 2.9% 2.7% 2.6% 2.4% 2.1%
Indiana 4.9% 4.7% 4.1% 3.5% 2.8%
United States 6.1% 5.6% 5.4% 4.9% 4.2%
(1) May 1998
(2) Market area includes Hendricks, Montgomery and Clinton Counties
Source: Indiana Department of Workforce Development
<PAGE>
EXHIBIT 29
Market Share of Deposits
Clinton, Hendricks and Montgomery Counties
June 30, 1997
Clinton
County Lincoln's Lincoln's
Deposits Share Share
($000) ($000) (%)
-------------- -------------- -------------
Banks $ 296,035 --- ---
Thrifts 69,927 $ 33,571 48.0%
-------------- -------------- -------------
$ 365,962 $ 33,751 9.2%
Hendricks
County Lincoln's Lincoln's
Deposits Share Share
($000) ($000) (%)
-------------- -------------- -------------
Banks $ 534,273 --- ---
Thrifts 201,411 $ 113,277 56.2%
-------------- -------------- -------------
$ 735,684 $ 113,277 15.4%
Montgomery
County Lincoln's Lincoln's
Deposits Share Share
($000) ($000) (%)
-------------- -------------- -------------
Banks $ 309,970 --- ---
Thrifts 180,523 $ 54,258 30.1%
-------------- -------------- -------------
$ 490,493 $ 54,258 11.1%
Source: FDIC/OTS
<PAGE>
EXHIBIT 30
National Interest Rates by Quarter
1994-1998
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994 1994 1994 1994
Prime Rate 6.25% 7.25% 7.75% 8.50%
90-Day Treasury Bills 3.54% 4.23% 5.14% 5.66%
1-Year Treasury Bills 4.40% 5.49% 6.13% 7.15%
30-Year Treasury Notes 7.11% 7.43% 7.82% 7.88%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995 1995 1995 1995
Prime Rate 9.00% 9.00% 8.75% 8.50%
90-Day Treasury Bills 5.66% 5.58% 5.40% 5.06%
1-Year Treasury Bills 6.51% 5.62% 5.45% 5.14%
30-Year Treasury Notes 7.43% 6.71% 5.69% 5.97%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1996 1996 1996 1996
Prime Rate 8.25% 8.25% 8.25% 8.25%
90-Day Treasury Bills 5.18% 5.25% 5.16% 5.07%
1-Year Treasury Bills 5.43% 5.91% 5.38% 5.57%
30-Year Treasury Notes 6.73% 7.14% 6.47% 6.67%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1997 1997 1997 1997
Prime Rate 8.50% 8.50% 8.50% 8.50%
90-Day Treasury Bills 4.95% 4.68% 4.98% 5.01%
1-Year Treasury Bills 5.95% 5.36% 5.50% 5.47%
30-Year Treasury Notes 7.06% 6.41% 6.39% 6.05%
1st Qtr. 2nd Qtr.
1998 1998
Prime Rate 8.50% 8.50%
90-Day Treasury Bills 5.22% 4.93%
1-Year Treasury Bills 5.39% 5.19%
30-Year Treasury Notes 5.82% 5.70%
Source: The Wall Street Journal
<PAGE>
EXHIBIT 31
KELLER & COMPANY
Dublin, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED THRIFT INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF AUGUST 14, 1998
<TABLE>
<CAPTION>
PER SHARE
*
Latest All Time All Monthly QuarterlyBook 12 Month
Time
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- --------------- --------------- ----------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. AL NASDAQ 14.500 15.938 4.250 20.83 16.00 7.31 73.90 0.32
SRN Southern Banc Co. AL AMSE 14.563 19.125 11.375 -7.54 -11.07 14.95 85.93 0.35
SCBS Southern Community Bancshares AL NASDAQ 16.000 20.750 13.000 -5.19 -4.48 10.36 59.72 2.73
SZB SouthFirst Bancshares Inc. AL AMSE 17.625 22.750 10.625 -5.37 -11.88 16.75 168.46 0.55
FFBH First Federal Bancshares of AR AR NASDAQ 22.625 30.250 10.000 -11.27 -19.20 17.46 118.69 0.26
HCBB HCB Bancshares Inc. AR NASDAQ 13.500 16.125 12.625 -5.26 -13.77 14.45 83.79 NA
PFSL Pocahontas Bancorp Inc. AR NASDAQ 8.688 11.430 2.361 -9.74 -11.46 8.74 60.52 NA
FTF Texarkana First Financial Corp AR AMSE 26.875 30.625 10.000 -0.46 -5.70 16.23 109.09 0.56
BPLS Bank Plus Corp. CA NASDAQ 10.375 16.125 5.000 -17.82 -21.70 9.55 221.09 0.00
BVCC Bay View Capital Corp. CA NASDAQ 22.125 38.000 5.625 -29.20 -32.70 19.43 282.11 0.28
BYFC Broadway Financial Corp. CA NASDAQ 9.722 12.731 8.333 -9.68 -14.29 14.02 147.60 0.19
DSL Downey Financial Corp. CA NYSE 30.625 35.000 1.258 -9.43 -10.42 16.33 207.51 0.31
FSSB First FS&LA of San Bernardino CA NASDAQ 9.625 14.500 6.875 1.32 16.67 13.68 315.79 0.00
FED FirstFed Financial Corp. CA NYSE 20.313 26.938 1.067 -24.59 -17.82 11.33 189.03 0.00
GSB Golden State Bancorp Inc. CA NYSE 22.313 589.500 5.250 -28.46 -40.50 20.24 326.52 5.88
GDW Golden West Financial CA NYSE 82.500 114.250 3.875 -23.21 -23.39 50.76 678.36 0.49
AHM H.F. Ahmanson & Co. CA NYSE 59.688 82.813 2.688 -20.42 -26.54 28.65 468.54 0.88
HTHR Hawthorne Financial Corp. CA NASDAQ 16.750 35.500 2.250 -8.84 -16.77 15.07 378.93 0.00
HEMT HF Bancorp Inc. CA NASDAQ 16.000 18.250 8.188 -10.49 -2.29 13.15 164.20 0.00
HBNK Highland Bancorp Inc. CA NASDAQ 41.500 43.500 11.000 3.11 -1.19 19.36 246.16 0.25
ITLA ITLA Capital Corp. CA NASDAQ 19.750 24.000 11.375 -11.24 -15.51 13.85 132.69 0.00
LFCO Life Financial Corp. CA NASDAQ 10.875 25.375 10.750 -43.69 -49.57 9.11 72.06 0.00
MBBC Monterey Bay Bancorp Inc. CA NASDAQ 16.563 21.400 7.000 18.31 -4.81 12.79 111.18 0.10
PBOC PBOC Holdings Inc. CA NASDAQ 11.563 14.500 11.500 -12.73 -20.26 8.43 146.35 NA
PFFB PFF Bancorp Inc. CA NASDAQ 17.250 21.500 10.375 -8.31 -10.97 14.92 185.51 0.00
PROV Provident Financial Holdings CA NASDAQ 20.313 24.250 10.125 0.31 -13.33 17.85 168.39 0.00
QCBC Quaker City Bancorp Inc. CA NASDAQ 16.750 21.250 4.800 -17.28 -14.32 13.26 152.31 0.00
SGVB SGV Bancorp Inc. CA NASDAQ 15.250 19.375 7.750 -10.63 -16.44 13.73 173.91 0.00
UPFC United PanAm Financial Corp. CA NASDAQ 10.000 13.938 9.125 -13.52 -15.79 4.75 23.84 NA
WES Westcorp CA NYSE 9.938 23.875 3.703 -31.46 -29.01 12.60 138.92 0.35
FFBA First Colorado Bancorp Inc. CO NASDAQ 25.938 30.125 3.189 -9.98 -10.56 12.91 91.55 0.51
HCBC High Country Bancorp Inc. CO NASDAQ 13.500 15.500 13.250 -5.26 -10.74 13.65 69.76 NA
ANE Alliance Bncp of New England CT AMSE 12.500 16.083 1.375 -9.09 -21.05 7.90 101.22 0.13
BKC American Bank of Connecticut CT AMSE 23.875 32.563 2.688 -11.16 -19.07 12.65 146.27 0.81
BKCT Bancorp Connecticut Inc. CT NASDAQ 19.750 25.000 1.013 6.04 -1.86 9.58 96.83 0.52
DIBK Dime Financial Corp. CT NASDAQ 30.750 37.000 2.125 -12.46 -11.35 16.07 192.44 0.45
FFES First Federal of East Hartford CT NASDAQ 31.375 42.250 4.000 -10.36 -21.56 25.73 357.46 0.64
MECH MECH Financial Inc. CT NASDAQ 28.500 31.813 11.000 -4.20 -4.20 17.51 180.29 0.15
NMSB NewMil Bancorp Inc. CT NASDAQ 12.250 15.500 1.250 -5.77 -12.11 8.71 95.87 0.30
NSSY NSS Bancorp Inc. CT NASDAQ 49.500 58.750 9.875 -15.38 9.39 22.86 279.19 0.40
NTMG Nutmeg Federal S&LA CT NASDAQ 12.125 12.500 3.484 10.23 12.79 6.58 112.77 0.18
WBST Webster Financial Corp. CT NASDAQ 27.375 36.250 1.932 -20.07 -17.67 14.31 239.76 0.41
IFSB Independence Federal Svgs Bank DC NASDAQ 16.000 21.625 0.250 3.23 -26.01 15.46 214.30 0.47
WSFS WSFS Financial Corp. DE NASDAQ 18.250 23.875 1.250 -12.05 -14.62 7.62 123.88 0.03
BANC BankAtlantic Bancorp Inc. FL NASDAQ 11.000 17.125 0.278 -4.35 -18.90 6.96 102.43 8.05
BKUNA BankUnited Financial Corp. FL NASDAQ 11.125 18.500 2.320 -26.75 -35.04 10.29 201.52 0.00
FDTR Federal Trust Corp. FL NASDAQ 3.625 4.750 2.656 -13.44 -18.32 2.57 29.91 NA
FFLC FFLC Bancorp Inc. FL NASDAQ 18.000 23.500 7.650 -7.69 -11.66 14.11 110.23 0.32
FFPB First Palm Beach Bancorp Inc. FL NASDAQ 39.500 44.938 14.000 -10.73 9.72 23.52 343.43 0.68
HARB Harbor Florida Bancshares Inc. FL NASDAQ 12.063 13.500 1.976 -3.01 0.00 8.41 42.90 NA
OCN Ocwen Financial Corp. FL NYSE 18.375 30.375 10.125 -30.33 -26.87 7.03 57.68 0.00
CCFH CCF Holding Co. GA NASDAQ 20.500 24.000 9.773 -6.29 -11.83 12.90 177.20 0.59
EBSI Eagle Bancshares GA NASDAQ 22.500 27.250 1.875 -8.16 -3.23 13.36 192.95 0.61
FSTC First Citizens Corp. GA NASDAQ 29.000 35.500 1.970 -2.52 -12.12 13.56 135.85 NA
</TABLE>
<PAGE>
PRICING RATIOS
-----------------------------------
Price/ Price/ Price/ Price/Cor
EarningsBk. Assets Earnings
Value
(X) (%) (%) (X)
---------------- -------- --------
FFDB FirstFed Bancorp Inc. 21.97 198.36 19.62 21.97
SRN Southern Banc Co. 33.87 97.41 16.95 33.87
SCBS Southern Community Bancshares 17.78 154.44 26.79 17.58
SZB SouthFirst Bancshares Inc. 24.14 105.22 10.46 26.70
FFBH First Federal Bancshares of AR 18.85 129.58 19.06 19.17
HCBB HCB Bancshares Inc. NA 93.43 16.11 NA
PFSL Pocahontas Bancorp Inc. NA 99.41 14.36 NA
FTF Texarkana First Financial Corp 14.61 165.59 24.64 15.36
BPLS Bank Plus Corp. 28.04 108.64 4.69 18.86
BVCC Bay View Capital Corp. 27.31 113.87 7.84 15.36
BYFC Broadway Financial Corp. 15.94 69.34 6.59 44.19
DSL Downey Financial Corp. 15.16 187.54 14.76 18.01
FSSB First FS&LA of San Bernardino NM 70.36 3.05 NM
FED FirstFed Financial Corp. 14.83 179.29 10.75 15.75
GSB Golden State Bancorp Inc. 12.54 110.24 6.83 11.27
GDW Golden West Financial 11.87 162.53 12.16 12.13
AHM H.F. Ahmanson & Co. 15.63 208.34 12.74 15.75
HTHR Hawthorne Financial Corp. 10.95 111.15 4.42 9.31
HEMT HF Bancorp Inc. NM 121.67 9.74 145.45
HBNK Highland Bancorp Inc. 13.70 214.36 16.86 15.54
ITLA ITLA Capital Corp. 11.48 142.60 14.88 11.48
LFCO Life Financial Corp. 5.41 119.37 15.09 5.20
MBBC Monterey Bay Bancorp Inc. 51.76 129.50 14.90 51.76
PBOC PBOC Holdings Inc. NA 137.16 7.90 NA
PFFB PFF Bancorp Inc. 17.08 115.62 9.30 18.55
PROV Provident Financial Holdings 18.30 113.80 12.06 44.16
QCBC Quaker City Bancorp Inc. 14.69 126.32 11.00 14.96
SGVB SGV Bancorp Inc. 25.42 111.07 8.77 25.85
UPFC United PanAm Financial Corp. NA 210.53 41.95 NA
WES Westcorp 35.49 78.87 7.15 NM
FFBA First Colorado Bancorp Inc. 21.09 200.91 28.33 20.59
HCBC High Country Bancorp Inc. NA 98.90 19.35 NA
ANE Alliance Bncp of New England 13.89 158.23 12.35 28.41
BKC American Bank of Connecticut 13.34 188.74 16.32 15.81
BKCT Bancorp Connecticut Inc. 17.17 206.16 20.40 19.95
DIBK Dime Financial Corp. 11.83 191.35 15.98 11.83
FFES First Federal of East Hartford 15.01 121.94 8.78 13.88
MECH MECH Financial Inc. 17.59 162.76 15.81 17.70
NMSB NewMil Bancorp Inc. 16.55 140.64 12.78 21.12
NSSY NSS Bancorp Inc. 21.15 216.54 17.73 26.05
NTMG Nutmeg Federal S&LA 26.36 184.27 10.75 60.63
WBST Webster Financial Corp. 16.39 191.30 11.42 14.88
IFSB Independence Federal Svgs Bank 9.94 103.49 7.47 61.54
WSFS WSFS Financial Corp. 13.52 239.50 14.73 13.93
BANC BankAtlantic Bancorp Inc. 16.42 158.05 10.74 36.67
BKUNA BankUnited Financial Corp. 23.67 108.11 5.52 39.73
FDTR Federal Trust Corp. NA 141.05 12.12 NA
FFLC FFLC Bancorp Inc. 17.31 127.57 16.33 18.18
FFPB First Palm Beach Bancorp Inc. 25.32 167.94 11.50 47.59
HARB Harbor Florida Bancshares Inc. NA 143.44 28.12 NA
OCN Ocwen Financial Corp. 39.95 261.38 31.86 141.35
CCFH CCF Holding Co. 97.62 158.91 11.57 NM
EBSI Eagle Bancshares 15.31 168.41 11.66 15.73
FSTC First Citizens Corp. NA 213.86 21.35 NA
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FGHC First Georgia Holding Inc. GA NASDAQ 10.625 15.750 0.543 -32.54 13.84 3.07 37.68 0.07
FLFC First Liberty Financial Corp. GA NASDAQ 21.000 25.500 1.778 -14.72 -14.29 8.57 116.59 0.28
FLAG FLAG Financial Corp. GA NASDAQ 16.375 19.375 2.133 -11.49 23.58 7.46 85.58 0.23
NTBK Net.B@nk Inc. GA NASDAQ 22.500 34.250 8.750 -18.18 -3.74 6.07 40.14 0.00
CASH First Midwest Financial Inc. IA NASDAQ 19.625 24.875 8.833 -16.27 -16.04 16.40 161.13 0.45
HZFS Horizon Financial Svcs Corp. IA NASDAQ 16.000 16.875 5.188 3.23 1.59 9.60 105.36 0.17
MIFC Mid-Iowa Financial Corp. IA NASDAQ 12.250 13.000 2.474 6.52 1.03 7.73 77.85 0.08
MWBI Midwest Bancshares Inc. IA NASDAQ 13.500 19.500 3.917 -11.48 -14.96 10.85 151.77 0.24
FFFD North Central Bancshares Inc. IA NASDAQ 18.250 24.875 8.071 -10.98 -21.51 15.73 105.91 0.29
SFFC StateFed Financial Corp. IA NASDAQ 12.750 15.000 5.250 -10.53 -11.30 10.27 57.35 0.20
FBNW FirstBank Corp. ID NASDAQ 18.875 23.750 15.500 -19.25 -12.72 16.53 98.01 NA
ABCL Alliance Bancorp IL NASDAQ 22.000 29.250 6.000 -8.81 -21.43 15.80 180.87 0.44
AVND Avondale Financial Corp. IL NASDAQ 14.375 18.875 11.500 -17.27 -16.67 14.21 170.00 0.00
BFFC Big Foot Financial Corp. IL NASDAQ 15.750 23.938 12.313 -14.86 -24.10 15.24 83.36 0.00
CBCI Calumet Bancorp Inc. IL NASDAQ 30.250 39.000 6.889 -13.03 -19.33 27.74 156.43 0.00
CBK Citizens First Financial Corp. IL AMSE 17.125 22.375 9.500 -7.43 -14.91 15.53 111.27 0.00
CSBF CSB Financial Group Inc. IL NASDAQ 10.500 14.000 8.810 -17.65 -24.32 13.34 57.52 0.00
EGLB Eagle BancGroup Inc. IL NASDAQ 18.500 21.125 10.500 0.00 -5.13 17.82 147.91 0.00
EFC EFC Bancorp Inc. IL AMSE 11.375 14.938 11.250 -14.95 -19.47 12.56 53.08 NA
FBCI Fidelity Bancorp Inc. IL NASDAQ 24.313 26.000 9.500 8.66 2.10 18.77 177.06 NA
FFBI First Financial Bancorp Inc. IL NASDAQ 23.500 24.500 9.000 8.05 11.90 18.37 199.04 0.00
FMBD First Mutual Bancorp Inc. IL NASDAQ 17.188 25.000 11.125 0.73 -3.84 15.72 107.50 0.32
FSFF First SecurityFed Financial IL NASDAQ 15.250 17.250 14.500 -9.63 -7.93 14.05 51.66 NA
GTPS Great American Bancorp IL NASDAQ 21.375 23.000 11.875 -1.72 0.59 17.07 93.39 0.41
HMLK Hemlock Federal Financial Corp IL NASDAQ 16.813 19.000 12.500 0.38 -10.92 14.81 97.84 0.26
HBEI Home Bancorp of Elgin Inc. IL NASDAQ 14.875 19.313 11.813 -5.56 -16.20 14.00 53.63 0.40
KNK Kankakee Bancorp Inc. IL AMSE 30.875 37.750 13.625 -6.44 -13.64 28.43 291.26 0.48
MAFB MAF Bancorp Inc. IL NASDAQ 22.125 28.833 1.212 -9.69 -14.90 12.40 158.11 0.21
NBSI North Bancshares Inc. IL NASDAQ 12.750 18.833 7.333 -12.82 -23.31 10.55 97.50 0.36
PFED Park Bancorp Inc. IL NASDAQ 17.688 19.750 10.188 -3.08 -7.51 16.55 81.40 0.00
PSFI PS Financial Inc. IL NASDAQ 11.375 22.375 11.250 -10.78 -21.55 11.28 42.11 4.44
SPBC St. Paul Bancorp Inc. IL NASDAQ 23.000 28.500 2.044 -5.88 -8.34 12.75 132.86 0.40
WCBI Westco Bancorp Inc. IL NASDAQ 27.000 30.500 7.667 -6.90 -9.62 20.18 128.83 0.66
FBCV 1ST Bancorp IN NASDAQ 44.250 45.000 2.533 2.91 47.50 21.49 238.17 0.26
AMFC AMB Financial Corp. IN NASDAQ 15.750 19.375 9.750 -8.70 -15.44 15.42 121.60 0.27
ASBI Ameriana Bancorp IN NASDAQ 18.500 22.000 2.750 -3.27 -11.38 14.03 115.38 0.64
ATSB AmTrust Capital Corp. IN NASDAQ 15.250 15.250 7.750 3.39 10.91 14.66 135.41 0.20
BRBI Blue River Bancshares Inc. IN NASDAQ 9.938 12.000 9.938 -9.65 NA NA NA NA
CITZ CFS Bancorp Inc. IN NASDAQ 10.375 11.438 10.313 NA NA NA NA NA
FFWC FFW Corp. IN NASDAQ 18.375 21.500 6.250 5.00 -3.29 13.12 139.44 0.38
FFED Fidelity Federal Bancorp IN NASDAQ 5.875 14.773 1.534 -6.94 -24.19 4.28 63.13 0.40
FISB First Indiana Corp. IN NASDAQ 22.906 30.000 1.368 -15.94 -6.03 12.54 136.98 0.44
HFGI Harrington Financial Group IN NASDAQ 10.500 13.750 9.750 -4.55 -5.62 6.92 147.87 0.12
HBFW Home Bancorp IN NASDAQ 28.250 37.625 12.500 -0.88 -19.57 18.27 153.25 0.28
HBBI Home Building Bancorp IN NASDAQ 24.000 24.000 10.000 9.09 12.94 20.61 136.14 0.30
HOMF Home Federal Bancorp IN NASDAQ 26.250 33.750 1.432 -11.39 -16.67 13.03 140.01 0.37
HWEN Home Financial Bancorp IN NASDAQ 7.875 9.750 4.938 -4.55 -14.86 8.08 45.81 0.10
LOGN Logansport Financial Corp. IN NASDAQ 15.000 19.625 11.125 -4.76 -18.92 13.46 71.55 0.41
LSBI LSB Financial Corp. IN NASDAQ 31.500 32.000 10.204 2.44 1.77 20.46 229.29 0.35
MARN Marion Capital Holdings IN NASDAQ 22.750 29.500 14.250 -16.51 -20.18 22.09 113.81 0.88
MFBC MFB Corp. IN NASDAQ 23.750 30.375 10.500 -2.06 -9.52 20.81 182.95 0.42
MONT Montgomery Financial Corp. IN NASDAQ 11.500 14.000 10.000 -6.12 -11.97 12.05 66.02 NA
NEIB Northeast Indiana Bancorp IN NASDAQ 22.000 22.750 11.250 0.00 1.73 16.07 123.22 0.34
PFDC Peoples Bancorp IN NASDAQ 21.500 25.000 3.583 -2.82 -2.55 13.57 90.66 0.44
PERM Permanent Bancorp Inc. IN NASDAQ 13.375 18.250 4.875 -15.08 -18.94 10.83 122.68 0.22
RIVR River Valley Bancorp IN NASDAQ 17.500 20.750 13.250 -7.28 -15.15 15.34 112.45 0.18
</TABLE>
<PAGE>
FGHC First Georgia Holding Inc. GA 27.96 346.09 28.20 27.96
FLFC First Liberty Financial Corp. GA 25.00 245.04 18.01 24.14
FLAG FLAG Financial Corp. GA 24.08 219.50 19.13 32.75
NTBK Net.B@nk Inc. GA NM 370.68 56.05 NM
CASH First Midwest Financial Inc. IA 18.87 119.66 12.18 21.10
HZFS Horizon Financial Svcs Corp. IA 17.20 166.67 15.19 22.22
MIFC Mid-Iowa Financial Corp. IA 15.91 158.47 15.74 16.12
MWBI Midwest Bancshares Inc. IA 10.31 124.42 8.90 12.86
FFFD North Central Bancshares Inc. IA 13.72 116.02 17.23 14.37
SFFC StateFed Financial Corp. IA 19.32 124.15 22.23 19.32
FBNW FirstBank Corp. ID NA 114.19 19.26 NA
ABCL Alliance Bancorp IL 17.19 139.24 12.16 14.97
AVND Avondale Financial Corp. IL NM 101.16 8.46 NM
BFFC Big Foot Financial Corp. IL 29.72 103.35 18.89 34.24
CBCI Calumet Bancorp Inc. IL 10.84 109.05 19.34 10.77
CBK Citizens First Financial Corp. IL 22.24 110.27 15.39 39.83
CSBF CSB Financial Group Inc. IL 28.38 78.71 18.25 30.00
EGLB Eagle BancGroup Inc. IL 33.64 103.82 12.51 97.37
EFC EFC Bancorp Inc. IL NA 90.57 21.43 NA
FBCI Fidelity Bancorp Inc. IL NA 129.53 13.73 NA
FFBI First Financial Bancorp Inc. IL 78.33 127.93 11.81 38.52
FMBD First Mutual Bancorp Inc. IL 40.92 109.34 15.99 52.08
FSFF First SecurityFed Financial IL NA 108.54 29.52 NA
GTPS Great American Bancorp IL 35.04 125.22 22.89 35.04
HMLK Hemlock Federal Financial Corp IL 19.33 113.52 17.18 19.55
HBEI Home Bancorp of Elgin Inc. IL 38.14 106.25 27.74 38.14
KNK Kankakee Bancorp Inc. IL 15.91 108.60 10.60 16.60
MAFB MAF Bancorp Inc. IL 13.92 178.43 13.99 14.56
NBSI North Bancshares Inc. IL 38.64 120.85 13.08 42.50
PFED Park Bancorp Inc. IL 23.27 106.88 21.73 22.68
PSFI PS Financial Inc. IL 24.73 100.84 27.01 16.73
SPBC St. Paul Bancorp Inc. IL 16.20 180.39 17.31 16.67
WCBI Westco Bancorp Inc. IL 15.34 133.80 20.96 16.27
FBCV 1ST Bancorp IN 24.45 205.91 18.58 35.98
AMFC AMB Financial Corp. IN 16.58 102.14 12.95 25.82
ASBI Ameriana Bancorp IN 15.95 131.86 16.03 18.50
ATSB AmTrust Capital Corp. IN 26.75 104.02 11.26 61.00
BRBI Blue River Bancshares Inc. IN NA NA NA NA
CITZ CFS Bancorp Inc. IN NA NA NA NA
FFWC FFW Corp. IN 13.92 140.05 13.18 15.98
FFED Fidelity Federal Bancorp IN NM 137.27 9.31 NM
FISB First Indiana Corp. IN 16.13 182.66 16.72 22.91
HFGI Harrington Financial Group IN NM 151.73 7.10 NM
HBFW Home Bancorp IN 22.07 154.63 18.43 22.60
HBBI Home Building Bancorp IN 21.05 116.45 17.63 22.02
HOMF Home Federal Bancorp IN 13.82 201.46 18.75 17.62
HWEN Home Financial Bancorp IN 16.76 97.46 17.19 21.88
LOGN Logansport Financial Corp. IN 15.00 111.44 20.96 14.71
LSBI LSB Financial Corp. IN 16.67 153.96 13.74 19.33
MARN Marion Capital Holdings IN 17.91 102.99 19.99 17.91
MFBC MFB Corp. IN 18.41 114.13 12.98 18.85
MONT Montgomery Financial Corp. IN NA 95.44 17.42 NA
NEIB Northeast Indiana Bancorp IN 15.49 136.90 17.85 15.49
PFDC Peoples Bancorp IN 17.06 158.44 23.71 17.06
PERM Permanent Bancorp Inc. IN 21.93 123.50 10.90 23.06
RIVR River Valley Bancorp IN 14.96 114.08 15.56 16.67
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOBI Sobieski Bancorp Inc. IN NASDAQ 17.250 24.250 10.000 -8.00 -9.21 17.84 117.58 0.31
UCBC Union Community Bancorp IN NASDAQ 13.500 15.813 13.500 -6.90 -10.74 14.31 35.53 NA
FFSL First Independence Corp. KS NASDAQ 11.625 15.625 5.438 -14.68 -16.96 12.34 128.87 0.28
FKAN First Kansas Financial Corp. KS NASDAQ 11.000 12.500 10.875 -9.75 NA 13.46 68.21 NA
LARK Landmark Bancshares Inc. KS NASDAQ 22.063 29.250 9.750 -17.13 -18.29 19.34 148.02 0.55
CKFB CKF Bancorp Inc. KY NASDAQ 16.500 21.250 11.375 -13.73 -13.73 17.29 74.42 0.50
CLAS Classic Bancshares Inc. KY NASDAQ 15.625 21.500 10.375 -7.41 -10.71 15.79 106.18 0.28
CFKY Columbia Financial of Kentucky KY NASDAQ 14.000 17.125 13.688 0.90 -13.85 14.02 44.53 NA
FFKY First Federal Financial Corp. KY NASDAQ 24.875 28.750 3.063 -10.56 -11.16 13.24 99.20 0.56
FLKY First Lancaster Bancshares KY NASDAQ 14.250 16.375 13.125 0.88 -8.80 14.92 56.00 0.50
FTSB Fort Thomas Financial Corp. KY NASDAQ 13.500 17.750 9.250 -8.09 -13.60 11.05 68.74 0.30
FKKY Frankfort First Bancorp Inc. KY NASDAQ 14.750 31.750 13.750 -1.67 -11.28 14.02 83.06 0.78
HFFB Harrodsburg First Fin Bancorp KY NASDAQ 15.375 19.000 12.375 -1.60 -9.56 16.18 56.48 0.60
HFBC HopFed Bancorp Inc. KY NASDAQ 17.500 21.875 16.000 -3.45 -15.66 14.46 54.01 NA
KYF Kentucky First Bancorp Inc. KY AMSE 14.250 15.875 10.563 -4.61 -7.32 11.24 65.99 0.50
ANA Acadiana Bancshares Inc. LA AMSE 22.000 25.625 11.690 0.00 -6.38 17.52 119.01 0.42
GSLA GS Financial Corp. LA NASDAQ 13.250 21.000 13.250 -19.08 -30.72 16.01 44.44 0.28
HSTD Homestead Bancorp Inc. LA NASDAQ 8.313 9.313 3.407 -2.41 -2.41 NA NA NA
TSH Teche Holding Co. LA AMSE 17.375 23.500 11.375 -6.08 -13.66 16.38 118.43 0.50
ABBK Abington Bancorp Inc. MA NASDAQ 17.500 22.250 0.625 -9.68 -10.26 9.85 154.65 0.30
ANDB Andover Bancorp Inc. MA NASDAQ 34.500 39.875 1.250 -12.10 -1.15 17.61 214.84 0.62
BYS Bay State Bancorp MA AMSE 23.625 32.625 23.375 -17.11 -18.53 27.24 113.45 NA
BFD BostonFed Bancorp Inc. MA AMSE 18.750 24.875 10.000 -20.63 -21.67 16.18 196.21 0.31
CEBK Central Co-operative Bank MA NASDAQ 22.000 33.500 2.000 -11.11 -23.48 18.72 191.38 0.32
FCB Falmouth Bancorp Inc. MA AMSE 18.500 23.875 10.250 -8.07 -7.50 16.24 75.97 0.22
FESX First Essex Bancorp Inc. MA NASDAQ 21.250 26.125 1.000 -6.85 -6.08 12.41 174.12 0.54
FAB FIRSTFED AMERICA BANCORP INC. MA AMSE 16.875 23.250 13.625 -10.60 -21.05 15.76 159.06 0.05
HIFS Hingham Instit. for Savings MA NASDAQ 26.250 37.000 1.625 -9.87 -25.53 17.29 183.47 0.64
HPBC Home Port Bancorp Inc. MA NASDAQ 24.250 27.625 3.000 -9.35 -2.02 12.32 141.41 0.80
IPSW Ipswich Savings Bank MA NASDAQ 14.500 20.750 1.100 -14.07 -24.68 5.46 97.78 0.15
LSBX Lawrence Savings Bank MA NASDAQ 14.313 19.313 0.500 -5.76 -19.36 9.62 79.70 0.00
MASB MASSBANK Corp. MA NASDAQ 48.000 54.250 6.375 -2.04 -6.34 30.44 258.77 0.98
MFLR Mayflower Co-operative Bank MA NASDAQ 23.000 27.500 2.000 -2.13 -10.68 14.41 150.64 0.69
MDBK Medford Bancorp Inc. MA NASDAQ 40.750 44.250 3.250 -0.91 -4.96 22.78 254.85 0.94
MWBX MetroWest Bank MA NASDAQ 7.250 18.125 0.750 -4.92 -9.38 3.39 46.20 0.17
MYST Mystic Financial Inc. MA NASDAQ 13.625 18.563 13.625 -6.84 -17.42 13.33 73.42 NA
PBKB People's Bancshares Inc. MA NASDAQ 19.625 27.750 0.750 -19.07 -25.94 9.79 258.86 0.47
SWCB Sandwich Bancorp Inc. MA NASDAQ 60.500 64.500 1.875 -4.35 -5.47 21.81 259.86 1.35
SISB SIS Bancorp Inc. MA NASDAQ 43.250 52.625 9.625 1.17 2.67 18.57 264.54 0.60
WRNB Warren Bancorp Inc. MA NASDAQ 10.750 14.375 0.250 -14.43 -20.37 5.02 47.84 0.67
EQSB Equitable Federal Savings Bank MD NASDAQ 28.250 34.000 5.625 -11.02 -14.39 14.67 286.54 0.00
HRBF Harbor Federal Bancorp Inc. MD NASDAQ 18.250 23.409 8.864 -12.72 -17.21 15.94 126.55 0.45
MFSL Maryland Federal Bancorp MD NASDAQ 40.000 42.250 2.165 -3.32 0.00 16.34 180.79 0.44
WSB Washington Savings Bank, FSB MD AMSE 5.688 9.500 0.281 -18.74 -26.61 5.21 61.88 0.10
WHGB WHG Bancshares Corp. MD NASDAQ 11.000 19.000 10.875 -30.16 -37.14 14.52 95.01 0.29
FCME First Coastal Corp. ME NASDAQ 12.000 15.750 1.500 -2.04 -11.93 11.30 126.22 0.00
KSBK KSB Bancorp Inc. ME NASDAQ 16.500 22.500 3.712 -8.33 -10.81 9.97 125.33 0.05
MCBN Mid-Coast Bancorp Inc. ME NASDAQ 10.000 14.000 2.698 -9.09 -14.89 7.50 88.51 0.17
NBN Northeast Bancorp ME AMSE 13.875 19.500 3.083 -11.20 -21.28 9.72 138.88 0.21
PHBK Peoples Heritage Finl Group ME NASDAQ 20.000 26.500 0.938 -23.08 -14.89 8.27 111.55 0.42
BWFC Bank West Financial Corp. MI NASDAQ 11.375 17.500 5.667 -19.47 -19.47 8.93 68.74 0.21
CFSB CFSB Bancorp Inc. MI NASDAQ 23.500 28.750 1.746 -16.81 -7.68 8.08 103.80 0.46
DNFC D & N Financial Corp. MI NASDAQ 23.625 29.750 2.273 -9.57 -12.90 11.55 207.27 0.19
FLGS Flagstar Bancorp Inc. MI NASDAQ 27.250 28.375 13.000 8.19 2.83 10.44 188.24 0.19
MSBF MSB Financial Inc. MI NASDAQ 14.000 17.727 4.886 -3.75 -13.24 9.95 59.76 0.26
MSBK Mutual Savings Bank FSB MI NASDAQ 10.000 25.500 3.000 -12.09 -17.53 7.95 143.08 0.00
OFCP Ottawa Financial Corp. MI NASDAQ 23.875 30.909 8.471 -6.21 -9.83 13.23 160.90 0.36
THR Three Rivers Financial Corp. MI AMSE 15.750 23.500 11.375 -17.11 -17.65 16.08 118.93 0.40
BDJI First Federal Bancorp. MN NASDAQ 16.500 22.000 7.083 -14.29 -13.16 12.70 121.52 0.00
FFHH FSF Financial Corp. MN NASDAQ 17.125 21.250 7.750 -4.86 -15.17 16.37 141.18 0.50
HMNF HMN Financial Inc. MN NASDAQ 14.000 21.667 6.209 -9.68 -22.22 13.04 133.54 0.04
MIVI Mississippi View Holding Co. MN NASDAQ 19.125 19.750 8.500 2.00 9.29 16.85 92.70 0.16
QCFB QCF Bancorp Inc. MN NASDAQ 30.000 31.750 11.000 -1.64 -0.83 19.98 112.89 0.00
WEFC Wells Financial Corp. MN NASDAQ 17.750 22.000 9.000 -17.44 -19.09 15.43 100.42 0.51
</TABLE>
<PAGE>
SOBI Sobieski Bancorp Inc. IN 26.54 96.69 14.67 26.95
UCBC Union Community Bancorp IN NA 94.34 38.00 NA
FFSL First Independence Corp. KS 13.68 94.21 9.02 13.68
FKAN First Kansas Financial Corp. KS NA 81.72 16.13 NA
LARK Landmark Bancshares Inc. KS 15.65 114.08 14.91 18.54
CKFB CKF Bancorp Inc. KY 16.50 95.43 22.17 16.50
CLAS Classic Bancshares Inc. KY 19.78 98.96 14.72 25.61
CFKY Columbia Financial of Kentucky KY NA 99.86 31.44 NA
FFKY First Federal Financial Corp. KY 16.26 187.88 25.08 16.92
FLKY First Lancaster Bancshares KY 26.89 95.51 25.45 26.89
FTSB Fort Thomas Financial Corp. KY 16.67 122.17 19.64 16.67
FKKY Frankfort First Bancorp Inc. KY 15.36 105.21 17.76 15.36
HFFB Harrodsburg First Fin Bancorp KY 18.98 95.02 27.22 18.98
HFBC HopFed Bancorp Inc. KY NA 121.02 32.40 NA
KYF Kentucky First Bancorp Inc. KY 18.27 126.78 21.59 18.51
ANA Acadiana Bancshares Inc. LA 18.03 125.57 18.49 19.30
GSLA GS Financial Corp. LA 27.04 82.76 29.82 30.81
HSTD Homestead Bancorp Inc. LA NA NA NA NA
TSH Teche Holding Co. LA 15.11 106.07 14.67 15.24
ABBK Abington Bancorp Inc. MA 14.96 177.66 11.32 19.89
ANDB Andover Bancorp Inc. MA 14.68 195.91 16.06 15.07
BYS Bay State Bancorp MA NA 86.73 20.82 NA
BFD BostonFed Bancorp Inc. MA 14.53 115.88 9.56 18.03
CEBK Central Co-operative Bank MA 14.10 117.52 11.50 18.18
FCB Falmouth Bancorp Inc. MA 22.84 113.92 24.35 30.83
FESX First Essex Bancorp Inc. MA 15.98 171.23 12.20 18.48
FAB FIRSTFED AMERICA BANCORP INC. MA 19.62 107.07 10.61 24.11
HIFS Hingham Instit. for Savings MA 12.50 151.82 14.31 12.62
HPBC Home Port Bancorp Inc. MA 14.18 196.83 17.15 13.04
IPSW Ipswich Savings Bank MA 13.94 265.57 14.83 13.94
LSBX Lawrence Savings Bank MA 7.05 148.78 17.96 7.16
MASB MASSBANK Corp. MA 16.44 157.69 18.55 19.05
MFLR Mayflower Co-operative Bank MA 14.11 159.61 15.27 16.55
MDBK Medford Bancorp Inc. MA 16.24 178.88 15.99 17.05
MWBX MetroWest Bank MA 13.43 213.86 15.69 13.43
MYST Mystic Financial Inc. MA NA 102.21 18.56 NA
PBKB People's Bancshares Inc. MA 11.97 200.46 7.58 29.73
SWCB Sandwich Bancorp Inc. MA 24.49 277.40 23.28 26.08
SISB SIS Bancorp Inc. MA 23.51 232.90 16.35 18.89
WRNB Warren Bancorp Inc. MA 13.61 214.14 22.47 15.14
EQSB Equitable Federal Savings Bank MD 16.24 192.57 9.86 17.02
HRBF Harbor Federal Bancorp Inc. MD 18.62 114.49 14.42 19.21
MFSL Maryland Federal Bancorp MD 30.30 244.80 22.13 31.25
WSB Washington Savings Bank, FSB MD 13.23 109.17 9.19 18.96
WHGB WHG Bancshares Corp. MD 22.92 75.76 11.58 22.45
FCME First Coastal Corp. ME 13.64 106.19 9.51 15.00
KSBK KSB Bancorp Inc. ME 11.70 165.50 13.17 11.96
MCBN Mid-Coast Bancorp Inc. ME 14.93 133.33 11.30 16.13
NBN Northeast Bancorp ME 17.79 142.75 9.99 18.50
PHBK Peoples Heritage Finl Group ME 17.54 241.84 17.93 14.60
BWFC Bank West Financial Corp. MI 27.08 127.38 16.55 34.47
CFSB CFSB Bancorp Inc. MI 17.54 290.84 22.64 19.42
DNFC D & N Financial Corp. MI 14.49 204.55 11.40 17.63
FLGS Flagstar Bancorp Inc. MI 12.67 261.02 14.48 12.67
MSBF MSB Financial Inc. MI 14.89 140.70 23.43 17.28
MSBK Mutual Savings Bank FSB MI NM 125.79 6.99 NM
OFCP Ottawa Financial Corp. MI 18.80 180.46 14.84 20.94
THR Three Rivers Financial Corp. MI 14.58 97.95 13.24 15.75
BDJI First Federal Bancorp. MN 17.01 129.92 13.58 16.84
FFHH FSF Financial Corp. MN 15.57 104.61 12.13 16.31
HMNF HMN Financial Inc. MN 15.91 107.36 10.48 22.22
MIVI Mississippi View Holding Co. MN 20.13 113.50 20.63 20.35
QCFB QCF Bancorp Inc. MN 13.70 150.15 26.57 13.89
WEFC Wells Financial Corp. MN 14.20 115.04 17.68 15.43
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CMRN Cameron Financial Corp MO NASDAQ 17.250 22.188 10.688 -10.39 -18.82 18.02 90.72 0.28
CBES CBES Bancorp Inc. MO NASDAQ 20.750 26.000 12.625 3.75 -4.60 17.94 131.66 0.42
CNSB CNS Bancorp Inc. MO NASDAQ 15.000 21.500 11.000 -13.67 -14.89 14.76 59.58 0.24
EBI Equality Bancorp Inc. MO AMSE 13.313 16.000 11.000 -11.25 -11.25 10.40 108.58 NA
FBSI First Bancshares Inc. MO NASDAQ 13.000 17.500 5.125 -3.70 -7.14 10.81 80.50 0.11
FTNB Fulton Bancorp Inc. MO NASDAQ 18.000 26.500 12.500 -11.11 -17.71 15.06 64.46 0.21
GFED Guaranty Federal Bcshs Inc. MO NASDAQ 13.000 14.436 4.143 -2.35 -0.95 12.01 41.75 NA
HFSA Hardin Bancorp Inc. MO NASDAQ 17.000 20.000 11.000 -11.69 -10.53 16.51 163.31 0.51
JSBA Jefferson Savings Bancorp MO NASDAQ 23.438 31.875 6.625 -16.48 -24.24 13.03 124.52 0.26
LXMO Lexington B&L Financial Corp. MO NASDAQ 15.031 17.875 9.500 -5.32 -11.58 15.17 94.48 0.30
MBLF MBLA Financial Corp. MO NASDAQ 20.250 30.625 12.750 -10.99 -18.18 22.38 165.82 0.40
NASB NASB Financial Inc. MO NASDAQ 65.500 71.000 2.500 -5.07 28.43 27.83 327.77 0.80
NSLB NS&L Bancorp Inc. MO NASDAQ 17.500 19.500 11.750 -3.45 -0.71 16.88 91.34 0.50
PCBC Perry County Financial Corp. MO NASDAQ 20.000 25.000 12.375 -12.09 -14.89 19.69 103.98 0.50
SMBC Southern Missouri Bancorp Inc. MO NASDAQ 17.938 23.250 8.875 -14.58 -12.50 16.24 105.06 0.50
CFTP Community Federal Bancorp MS NASDAQ 16.125 21.000 12.250 -4.44 -9.48 14.85 59.85 0.32
FFBS FFBS BanCorp Inc. MS NASDAQ 22.000 26.000 12.000 4.76 -4.35 15.07 85.83 2.50
EFBC Empire Federal Bancorp Inc. MT NASDAQ 14.109 18.250 12.500 -11.12 -19.38 15.62 43.11 0.31
UBMT United Financial Corp. MT NASDAQ 26.500 31.500 25.625 -5.36 -10.17 17.73 116.16 NA
WSTR WesterFed Financial Corp. MT NASDAQ 20.750 27.000 11.375 -14.87 -17.00 19.64 183.00 0.51
CFNC Carolina Fincorp Inc. NC NASDAQ 10.125 18.875 9.625 -6.90 -44.14 13.90 62.17 0.23
CENB Century Bancorp Inc. NC NASDAQ 14.000 39.000 13.750 -12.50 -31.71 14.58 82.13 10.67
COOP Cooperative Bankshares Inc. NC NASDAQ 14.750 25.000 1.734 -11.94 -13.24 10.00 125.87 0.00
SOPN First Savings Bancorp Inc. NC NASDAQ 23.250 26.000 13.500 -3.13 -1.59 18.73 81.95 0.94
GSFC Green Street Financial Corp. NC NASDAQ 13.500 20.750 12.125 -8.47 -19.40 14.81 42.43 0.60
HBS Haywood Bancshares Inc. NC AMSE 20.500 24.000 9.500 -4.09 -10.38 17.68 121.34 0.59
HFNC HFNC Financial Corp. NC NASDAQ 11.625 22.063 11.250 -1.59 -15.07 9.94 58.63 0.30
KSAV KS Bancorp Inc. NC NASDAQ 24.000 25.500 8.719 0.00 6.67 16.50 128.74 0.83
MBSP Mitchell Bancorp Inc. NC NASDAQ 17.875 18.000 10.190 8.33 5.93 15.72 40.08 0.40
PDB Piedmont Bancorp Inc. NC AMSE 10.000 19.125 9.250 -0.63 -2.44 7.85 47.46 0.42
SSB Scotland Bancorp Inc. NC AMSE 9.000 19.250 8.125 -1.37 2.86 7.96 31.92 6.23
SSFC South Street Financial Corp. NC NASDAQ 9.313 20.000 8.625 -4.48 -6.87 8.50 43.55 6.40
SSM Stone Street Bancorp Inc. NC AMSE 16.750 27.250 16.250 -14.10 -16.77 16.64 60.89 0.46
UFRM United Federal Savings Bank NC NASDAQ 16.750 21.000 1.750 -9.46 -8.84 7.13 91.96 0.24
CFB Commercial Federal Corp. NE NYSE 26.375 38.188 0.722 -16.77 -23.27 15.29 210.50 0.21
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 16.000 22.750 1.750 -13.51 -20.00 12.60 154.84 0.55
FBER 1st Bergen Bancorp NJ NASDAQ 17.625 20.750 9.000 -2.76 -9.03 13.49 116.34 0.20
FSNJ Bayonne Bancshares Inc. NJ NASDAQ 15.250 17.375 3.665 -8.96 -7.58 10.55 77.00 NA
FSLA First Source Bancorp Inc. NJ NASDAQ 9.000 13.927 1.178 -2.70 -11.38 8.17 38.47 NA
FMCO FMS Financial Corp. NJ NASDAQ 13.250 16.667 0.500 -10.42 -11.67 5.69 93.54 0.10
IBSF IBS Financial Corp. NJ NASDAQ 16.125 21.188 7.312 -14.00 -11.03 12.00 67.29 0.40
LVSB Lakeview Financial Corp. NJ NASDAQ 22.750 28.750 3.668 -15.74 -7.14 12.11 124.48 0.16
LFBI Little Falls Bancorp Inc. NJ NASDAQ 16.000 22.250 9.500 -12.33 -20.50 14.63 143.47 0.15
OCFC Ocean Financial Corp. NJ NASDAQ 17.375 20.000 9.813 -10.90 -7.49 13.57 99.02 0.42
PBCI Pamrapo Bancorp Inc. NJ NASDAQ 25.500 32.375 2.563 -10.53 -10.92 17.30 138.69 1.06
PFSB PennFed Financial Services Inc NJ NASDAQ 14.875 19.000 4.532 -9.51 -16.78 11.87 165.35 0.14
TSBS Peoples Bancorp Inc. NJ NASDAQ 8.438 11.832 2.974 -14.55 -19.64 9.40 24.05 NA
PULS Pulse Bancorp NJ NASDAQ 29.000 30.500 4.000 -3.33 5.45 14.71 174.37 0.78
RARB Raritan Bancorp Inc. NJ NASDAQ 27.750 30.250 3.445 -4.31 0.91 13.42 183.15 0.54
SFIN Statewide Financial Corp. NJ NASDAQ 19.750 26.688 11.250 -7.33 -14.59 14.51 149.34 0.44
WYNE Wayne Bancorp Inc. NJ NASDAQ 32.750 37.063 10.750 1.55 3.97 17.47 136.77 0.20
AABC Access Anytime Bancorp Inc. NM NASDAQ 10.250 13.000 1.716 -7.87 -8.89 7.61 96.05 0.00
GUPB GFSB Bancorp Inc. NM NASDAQ 14.250 17.000 8.583 -10.94 -16.18 12.14 98.39 0.27
AFED AFSALA Bancorp Inc. NY NASDAQ 18.000 20.750 11.313 -4.00 -5.88 16.45 120.37 0.21
ALBK ALBANK Financial Corp. NY NASDAQ 60.313 74.625 9.167 -19.18 14.07 28.70 312.42 0.75
ALBC Albion Banc Corp. NY NASDAQ 8.688 14.167 3.500 -2.11 -21.02 8.37 98.50 0.17
AHCI Ambanc Holding Co. NY NASDAQ 16.000 20.000 9.375 -11.11 -13.51 14.27 122.07 0.16
ASFC Astoria Financial Corp. NY NASDAQ 45.063 62.500 12.688 -18.44 -21.29 33.64 436.31 0.70
CNY Carver Bancorp Inc. NY AMSE 12.125 17.125 6.250 -12.61 -16.38 15.51 184.67 0.00
CATB Catskill Financial Corp. NY NASDAQ 16.000 19.125 9.875 -5.88 -11.72 15.72 69.01 0.31
</TABLE>
<PAGE>
CMRN Cameron Financial Corp MO 17.08 95.73 19.01 17.25
CBES CBES Bancorp Inc. MO 18.69 115.66 15.76 25.94
CNSB CNS Bancorp Inc. MO 28.30 101.63 25.18 33.33
EBI Equality Bancorp Inc. MO NA 128.01 12.26 NA
FBSI First Bancshares Inc. MO 15.29 120.26 16.15 15.66
FTNB Fulton Bancorp Inc. MO 23.08 119.52 27.92 30.00
GFED Guaranty Federal Bcshs Inc. MO NA 108.24 31.14 NA
HFSA Hardin Bancorp Inc. MO 16.50 102.97 10.41 18.68
JSBA Jefferson Savings Bancorp MO 26.04 179.88 18.82 30.05
LXMO Lexington B&L Financial Corp. MO 24.24 99.08 15.91 24.24
MBLF MBLA Financial Corp. MO 13.97 90.48 12.21 14.06
NASB NASB Financial Inc. MO 12.17 235.36 19.98 14.92
NSLB NS&L Bancorp Inc. MO 26.12 103.67 19.16 26.92
PCBC Perry County Financial Corp. MO 18.02 101.57 19.23 18.02
SMBC Southern Missouri Bancorp Inc. MO 26.77 110.46 17.07 25.63
CFTP Community Federal Bancorp MS 24.07 108.59 26.94 27.80
FFBS FFBS BanCorp Inc. MS 22.68 129.64 26.20 17.89
EFBC Empire Federal Bancorp Inc. MT 21.06 90.33 32.73 21.06
UBMT United Financial Corp. MT NA 149.46 22.81 NA
WSTR WesterFed Financial Corp. MT 16.09 105.65 11.34 16.09
CFNC Carolina Fincorp Inc. NC 17.16 72.84 16.29 15.58
CENB Century Bancorp Inc. NC 11.76 96.02 17.05 11.76
COOP Cooperative Bankshares Inc. NC 19.93 147.50 11.72 21.69
SOPN First Savings Bancorp Inc. NC 17.88 124.13 28.37 17.88
GSFC Green Street Financial Corp. NC 19.85 91.15 31.82 19.85
HBS Haywood Bancshares Inc. NC 18.14 115.95 16.89 11.58
HFNC HFNC Financial Corp. NC 14.18 116.95 19.83 20.76
KSAV KS Bancorp Inc. NC 18.46 145.45 18.64 18.46
MBSP Mitchell Bancorp Inc. NC 35.75 113.71 44.60 35.75
PDB Piedmont Bancorp Inc. NC 16.39 127.39 21.07 16.95
SSB Scotland Bancorp Inc. NC 18.00 113.07 28.20 18.00
SSFC South Street Financial Corp. NC 31.04 109.56 21.38 NA
SSM Stone Street Bancorp Inc. NC 20.94 100.66 27.51 20.94
UFRM United Federal Savings Bank NC 29.39 234.92 18.21 34.90
CFB Commercial Federal Corp. NE 16.28 172.50 12.53 13.19
NHTB New Hampshire Thrift Bncshrs NH 11.76 126.98 10.33 12.60
FBER 1st Bergen Bancorp NJ 20.98 130.65 15.15 20.98
FSNJ Bayonne Bancshares Inc. NJ NA 144.55 19.81 NA
FSLA First Source Bancorp Inc. NJ NA 110.16 23.39 NA
FMCO FMS Financial Corp. NJ 18.66 232.86 14.17 18.66
IBSF IBS Financial Corp. NJ 29.32 134.38 23.96 29.32
LVSB Lakeview Financial Corp. NJ 11.21 187.86 18.28 22.52
LFBI Little Falls Bancorp Inc. NJ 20.78 109.36 11.15 21.62
OCFC Ocean Financial Corp. NJ 18.10 128.04 17.55 18.10
PBCI Pamrapo Bancorp Inc. NJ 15.36 147.40 18.39 15.94
PFSB PennFed Financial Services Inc NJ 12.82 125.32 9.00 13.28
TSBS Peoples Bancorp Inc. NJ NA 89.77 35.09 NA
PULS Pulse Bancorp NJ 16.86 197.14 16.63 16.86
RARB Raritan Bancorp Inc. NJ 17.68 206.78 15.15 17.68
SFIN Statewide Financial Corp. NJ 15.67 136.11 13.22 16.46
WYNE Wayne Bancorp Inc. NJ 32.75 187.46 23.95 33.76
AABC Access Anytime Bancorp Inc. NM 8.33 134.69 10.67 9.32
GUPB GFSB Bancorp Inc. NM 18.04 117.38 14.48 18.04
AFED AFSALA Bancorp Inc. NY 19.57 109.42 14.95 19.35
ALBK ALBANK Financial Corp. NY 18.62 210.15 19.31 18.67
ALBC Albion Banc Corp. NY 17.04 103.80 8.82 18.10
AHCI Ambanc Holding Co. NY 25.00 112.12 13.11 30.77
ASFC Astoria Financial Corp. NY 13.74 133.96 10.33 15.38
CNY Carver Bancorp Inc. NY 25.26 78.18 6.57 28.87
CATB Catskill Financial Corp. NY 17.58 101.78 23.19 17.78
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DME Dime Bancorp Inc. NY NYSE 26.250 32.688 1.625 -17.49 -10.45 11.72 184.21 0.17
DCOM Dime Community Bancshares Inc. NY NASDAQ 23.750 29.313 11.687 -10.38 -15.18 15.30 133.37 0.23
ESBK Elmira Savings Bank (The) NY NASDAQ 27.750 32.250 8.658 -4.31 -5.93 20.35 318.89 0.62
FIBC Financial Bancorp Inc. NY NASDAQ 36.000 37.625 8.500 7.87 37.80 16.83 199.80 0.45
FFIC Flushing Financial Corp. NY NASDAQ 23.250 29.875 14.125 -19.13 -11.85 17.90 139.80 0.28
GPT GreenPoint Financial Corp. NY NYSE 33.813 42.625 8.813 -18.03 -19.01 17.65 154.15 0.57
GOSB GSB Financial Corp. NY NASDAQ 12.750 18.938 12.750 -23.88 -27.14 14.30 57.42 NA
HAVN Haven Bancorp Inc. NY NASDAQ 20.031 28.750 5.000 -21.06 -22.21 13.33 255.98 0.30
HRBT Hudson River Bancorp NY NASDAQ 12.438 13.688 12.125 -7.44 NA NA NA NA
ICBC Independence Comm. Bank Corp. NY NASDAQ 13.438 19.125 13.438 -20.95 -25.34 12.63 62.94 NA
JSB JSB Financial Inc. NY NYSE 51.250 59.688 10.750 -13.32 -8.99 38.65 159.01 1.50
LISB Long Island Bancorp Inc. NY NASDAQ 50.500 67.625 12.090 -19.36 -20.78 23.88 268.12 0.65
PEEK Peekskill Financial Corp. NY NASDAQ 16.500 18.250 11.125 -6.38 -5.04 14.92 69.19 0.36
QCSB Queens County Bancorp Inc. NY NASDAQ 41.000 47.125 7.111 -7.87 -7.34 13.07 114.79 0.82
RELY Reliance Bancorp Inc. NY NASDAQ 31.000 42.250 8.875 -17.20 -16.08 20.37 259.88 0.68
RCBK Richmond County Financial Corp NY NASDAQ 15.500 19.750 14.813 -15.65 -18.42 12.44 60.39 NA
RSLN Roslyn Bancorp Inc. NY NASDAQ 18.500 30.500 15.000 -18.23 -35.23 14.36 93.07 0.30
SFED SFS Bancorp Inc. NY NASDAQ 27.000 27.500 11.000 28.57 13.68 18.13 147.37 0.30
SKAN Skaneateles Bancorp Inc. NY NASDAQ 16.250 22.250 2.833 -9.41 -13.33 12.70 184.64 0.27
SIB Staten Island Bancorp Inc. NY NYSE 19.500 23.625 18.813 -15.22 -14.29 15.75 66.89 NA
TPNZ Tappan Zee Financial Inc. NY NASDAQ 19.375 22.625 11.250 -1.90 -4.32 14.98 94.51 0.28
ROSE TR Financial Corp. NY NASDAQ 35.500 44.750 4.938 -19.20 -1.05 15.42 234.80 0.66
WSBI Warwick Community Bancorp NY NASDAQ 14.125 18.000 14.125 -18.71 -16.30 12.94 56.13 NA
YFCB Yonkers Financial Corp. NY NASDAQ 16.000 22.000 9.310 -16.88 -15.79 14.91 144.85 0.26
ASBP ASB Financial Corp. OH NASDAQ 12.500 18.250 11.375 -4.76 -13.79 10.68 70.26 0.40
CAFI Camco Financial Corp. OH NASDAQ 17.750 20.667 2.873 -4.05 -8.97 10.61 107.31 0.37
COFI Charter One Financial OH NASDAQ 27.875 36.375 1.563 -21.34 -18.09 11.59 155.23 0.51
CIBI Community Investors Bancorp OH NASDAQ 13.000 15.250 4.778 -8.77 -4.88 8.37 76.22 0.20
DCBI Delphos Citizens Bancorp Inc. OH NASDAQ 16.000 24.250 11.750 -13.51 -24.71 14.84 61.45 0.12
EMLD Emerald Financial Corp. OH NASDAQ 11.500 16.000 3.875 -11.54 -19.48 5.11 60.09 0.13
EFBI Enterprise Federal Bancorp OH NASDAQ 29.125 35.000 11.250 0.43 -2.51 16.57 184.03 1.00
FFDF FFD Financial Corp. OH NASDAQ 17.500 24.000 10.000 -9.09 -25.53 15.43 69.26 0.30
FFYF FFY Financial Corp. OH NASDAQ 35.875 36.875 12.250 9.96 2.50 21.00 162.49 0.78
FFOH Fidelity Financial of Ohio OH NASDAQ 15.375 19.875 3.112 -6.11 -11.51 11.79 95.02 1.30
FDEF First Defiance Financial OH NASDAQ 13.000 16.250 5.790 -8.77 -16.13 12.66 71.36 0.35
FFBZ First Federal Bancorp Inc. OH NASDAQ 12.000 14.500 1.563 -11.93 0.00 5.23 65.82 0.14
FFHS First Franklin Corp. OH NASDAQ 14.500 20.833 2.333 -12.12 -20.55 12.16 133.30 0.28
GFCO Glenway Financial Corp. OH NASDAQ 22.625 24.250 7.710 0.56 10.37 12.60 131.63 0.39
HHFC Harvest Home Financial Corp. OH NASDAQ 13.250 16.750 8.750 -8.62 -11.67 11.70 109.27 0.43
HCFC Home City Financial Corp. OH NASDAQ 14.750 22.750 12.000 0.85 -33.71 11.97 86.27 3.85
HLFC Home Loan Financial Corp. OH NASDAQ 14.000 16.750 14.000 -5.49 -10.40 14.04 36.44 NA
INBI Industrial Bancorp Inc. OH NASDAQ 18.625 25.000 9.875 -1.97 -14.37 12.19 76.34 0.55
LONF London Financial Corp. OH NASDAQ 15.250 21.000 9.750 -1.61 0.00 10.23 74.32 5.24
MRKF Market Financial Corp. OH NASDAQ 13.750 20.250 12.250 3.77 -9.47 11.78 40.17 3.78
METF Metropolitan Financial Corp. OH NASDAQ 12.875 18.875 5.250 -14.88 -17.60 5.61 150.17 0.00
MFFC Milton Federal Financial Corp. OH NASDAQ 13.000 17.125 10.000 -13.33 -17.79 12.58 105.11 0.60
OSFS Ohio State Financial Services OH NASDAQ 15.750 17.000 14.750 4.58 5.92 16.47 60.80 NA
OHSL OHSL Financial Corp. OH NASDAQ 16.000 18.375 5.750 1.59 -7.25 11.02 99.29 0.46
PFFC Peoples Financial Corp. OH NASDAQ 11.000 19.000 10.875 -17.76 -27.87 10.89 62.82 5.53
PSFC Peoples-Sidney Financial Corp. OH NASDAQ 19.750 24.375 12.563 -9.20 -1.25 15.98 59.10 NA
PTRS Potters Financial Corp. OH NASDAQ 14.875 22.250 4.500 -9.85 -23.72 11.49 134.72 0.21
PVFC PVF Capital Corp. OH NASDAQ 24.500 28.250 3.924 -6.67 -12.50 11.34 157.50 0.00
SFSL Security First Corp. OH NASDAQ 22.000 27.875 1.083 -16.98 -11.34 8.77 88.57 0.33
UCFC United Community Finl Corp. OH NASDAQ 15.438 17.938 14.813 3.35 NA NA NA NA
WOFC Western Ohio Financial Corp. OH NASDAQ 23.375 29.250 14.750 -4.59 -9.22 22.58 155.51 1.00
WEHO Westwood Homestead Fin. Corp. OH NASDAQ 12.250 18.125 10.375 -3.92 -16.24 10.16 49.37 3.82
WFI Winton Financial Corp. OH AMSE 14.938 20.625 1.875 -6.27 -14.03 6.49 89.32 0.25
FFWD Wood Bancorp Inc. OH NASDAQ 16.250 27.000 4.266 -14.47 -13.33 8.18 61.95 0.30
LO Local Financial Corp. OK AMSE 11.063 13.750 11.063 -14.07 -14.90 5.01 92.73 NA
KFBI Klamath First Bancorp OR NASDAQ 17.438 24.250 12.500 -10.57 -18.89 16.02 101.72 0.34
OTFC Oregon Trail Financial Corp. OR NASDAQ 15.500 18.500 14.500 0.00 -8.82 15.89 54.63 NA
</TABLE>
<PAGE>
DME Dime Bancorp Inc. NY 16.94 223.98 14.25 27.34
DCOM Dime Community Bancshares Inc. NY 21.79 155.23 17.81 22.84
ESBK Elmira Savings Bank (The) NY 18.50 136.36 8.70 22.56
FIBC Financial Bancorp Inc. NY 20.93 213.90 18.02 21.69
FFIC Flushing Financial Corp. NY 17.75 129.89 16.63 17.35
GPT GreenPoint Financial Corp. NY 17.25 191.58 21.94 16.91
GOSB GSB Financial Corp. NY NA 89.16 22.20 NA
HAVN Haven Bancorp Inc. NY 20.44 150.27 7.83 19.45
HRBT Hudson River Bancorp NY NA NA NA NA
ICBC Independence Comm. Bank Corp. NY NA 106.40 21.35 NA
JSB JSB Financial Inc. NY 11.29 132.60 32.23 13.42
LISB Long Island Bancorp Inc. NY 21.04 211.47 18.83 25.77
PEEK Peekskill Financial Corp. NY 25.00 110.59 23.85 24.63
QCSB Queens County Bancorp Inc. NY 23.84 313.70 35.72 24.26
RELY Reliance Bancorp Inc. NY 15.58 152.18 11.93 16.40
RCBK Richmond County Financial Corp NY NA 124.60 25.67 NA
RSLN Roslyn Bancorp Inc. NY 15.68 128.83 19.88 16.52
SFED SFS Bancorp Inc. NY 27.00 148.92 18.32 27.84
SKAN Skaneateles Bancorp Inc. NY 15.33 127.95 8.80 15.63
SIB Staten Island Bancorp Inc. NY NA 123.81 29.15 NA
TPNZ Tappan Zee Financial Inc. NY 24.53 129.34 20.50 25.49
ROSE TR Financial Corp. NY 15.99 230.22 15.12 18.78
WSBI Warwick Community Bancorp NY NA 109.16 25.16 NA
YFCB Yonkers Financial Corp. NY 14.81 107.31 11.05 16.49
ASBP ASB Financial Corp. OH 18.38 117.04 17.79 18.38
CAFI Camco Financial Corp. OH 15.17 167.30 16.54 20.88
COFI Charter One Financial OH 21.12 240.51 17.96 15.66
CIBI Community Investors Bancorp OH 18.57 155.32 17.06 18.57
DCBI Delphos Citizens Bancorp Inc. OH 17.78 107.82 26.04 17.78
EMLD Emerald Financial Corp. OH 17.97 225.05 19.14 19.49
EFBI Enterprise Federal Bancorp OH 25.11 175.77 15.83 29.42
FFDF FFD Financial Corp. OH 14.96 113.42 25.27 33.65
FFYF FFY Financial Corp. OH 18.12 170.83 22.08 18.49
FFOH Fidelity Financial of Ohio OH 17.47 130.41 16.18 18.09
FDEF First Defiance Financial OH 19.70 102.69 18.22 20.63
FFBZ First Federal Bancorp Inc. OH 24.00 229.45 18.23 25.53
FFHS First Franklin Corp. OH 13.94 119.24 10.88 16.11
GFCO Glenway Financial Corp. OH 20.95 179.56 17.19 20.76
HHFC Harvest Home Financial Corp. OH 22.08 113.25 12.13 23.25
HCFC Home City Financial Corp. OH 14.46 123.22 17.10 14.46
HLFC Home Loan Financial Corp. OH NA 99.72 38.42 NA
INBI Industrial Bancorp Inc. OH 16.93 152.79 24.40 16.93
LONF London Financial Corp. OH 17.73 149.07 20.52 19.06
MRKF Market Financial Corp. OH 27.50 116.72 34.23 27.50
METF Metropolitan Financial Corp. OH 13.84 229.50 8.57 16.09
MFFC Milton Federal Financial Corp. OH 18.31 103.34 12.37 22.81
OSFS Ohio State Financial Services OH NA 95.63 25.90 NA
OHSL OHSL Financial Corp. OH 18.82 145.19 16.11 20.25
PFFC Peoples Financial Corp. OH 17.19 101.01 17.51 29.73
PSFC Peoples-Sidney Financial Corp. OH NA 123.59 33.42 NA
PTRS Potters Financial Corp. OH 15.34 129.46 11.04 16.90
PVFC PVF Capital Corp. OH 13.03 216.05 15.56 13.76
SFSL Security First Corp. OH 19.13 250.86 24.84 19.13
UCFC United Community Finl Corp. OH NA NA NA NA
WOFC Western Ohio Financial Corp. OH 179.81 103.52 15.03 179.81
WEHO Westwood Homestead Fin. Corp. OH 32.24 120.57 24.81 NA
WFI Winton Financial Corp. OH 15.89 230.17 16.72 20.75
FFWD Wood Bancorp Inc. OH 18.90 198.66 26.23 21.96
LO Local Financial Corp. OK NA 220.82 11.93 NA
KFBI Klamath First Bancorp OR 18.75 108.85 17.14 18.75
OTFC Oregon Trail Financial Corp. OR NA 97.55 28.37 NA
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CVAL Chester Valley Bancorp Inc. PA NASDAQ 31.250 37.000 2.955 -0.79 -5.30 13.68 161.98 0.48
CMSB Commonwealth Bancorp Inc. PA NASDAQ 17.750 24.250 5.790 -24.47 -25.07 12.91 153.05 0.30
CRSB Crusader Holding Corp. PA NASDAQ 15.000 17.857 14.048 -7.35 -7.69 6.06 52.72 0.00
ESBF ESB Financial Corp. PA NASDAQ 17.000 20.000 2.768 -7.48 -13.92 11.84 168.78 0.34
FSBI Fidelity Bancorp Inc. PA NASDAQ 20.000 28.000 2.732 -12.09 -20.00 14.02 204.94 0.29
FBBC First Bell Bancorp Inc. PA NASDAQ 17.375 21.625 11.875 -11.46 -16.27 11.78 115.97 0.40
FKFS First Keystone Financial PA NASDAQ 14.250 21.750 5.125 -19.72 -30.70 10.53 162.00 0.15
GAF GA Financial Inc. PA AMSE 16.125 22.250 10.250 -11.95 -19.38 14.94 116.10 0.50
HARL Harleysville Savings Bank PA NASDAQ 30.000 35.000 2.828 -6.98 -8.40 15.14 236.02 0.43
LARL Laurel Capital Group Inc. PA NASDAQ 19.000 23.500 2.418 -5.00 -11.11 10.73 100.84 0.43
NEP Northeast PA Financial Corp. PA AMSE 12.688 16.000 12.500 -9.37 -16.11 14.37 74.34 NA
PVSA Parkvale Financial Corp. PA NASDAQ 33.000 35.000 1.720 -1.12 2.33 16.25 211.76 0.56
PWBK Pennwood Bancorp Inc. PA NASDAQ 12.313 17.438 6.750 -8.79 -15.81 12.34 66.07 0.27
PHFC Pittsburgh Home Financial Corp PA NASDAQ 14.625 20.813 9.500 -12.69 -18.75 13.12 189.16 2.74
PRBC Prestige Bancorp Inc. PA NASDAQ 16.000 22.065 8.478 -8.90 -24.12 15.14 156.53 0.14
PFNC Progress Financial Corp. PA NASDAQ 17.250 21.667 0.680 -7.70 -4.98 7.95 114.82 0.11
PSBI PSB Bancorp Inc. PA NASDAQ 7.875 11.274 4.179 -22.08 -23.91 NA NA NA
SHSB SHS Bancorp Inc. PA NASDAQ 17.000 18.000 14.750 0.00 -5.56 14.93 107.82 NA
SVRN Sovereign Bancorp Inc. PA NASDAQ 15.875 22.188 0.698 -11.50 -12.41 7.02 123.68 0.07
THRD TF Financial Corp. PA NASDAQ 24.625 30.000 9.750 -4.48 -9.43 17.84 215.97 0.44
THTL Thistle Group Holdings Co. PA NASDAQ 9.000 10.063 9.000 -9.44 NA NA NA NA
USAB USABancshares Inc. PA NASDAQ 16.500 17.750 6.000 -1.49 15.79 8.28 89.69 0.00
WVFC WVS Financial Corp. PA NASDAQ 15.500 20.125 6.500 -0.40 -20.26 9.12 82.12 1.50
YFED York Financial Corp. PA NASDAQ 19.000 27.250 3.441 -13.64 -17.39 12.18 137.07 0.50
CFCP Coastal Financial Corp. SC NASDAQ 18.750 20.813 1.079 -3.23 3.63 5.82 98.61 0.27
FFCH First Financial Holdings Inc. SC NASDAQ 22.125 27.000 2.000 2.91 -1.67 8.92 137.49 0.41
FSPT FirstSpartan Financial Corp. SC NASDAQ 37.250 47.250 35.000 -10.65 -19.46 29.57 121.66 NA
PEDE Great Pee Dee Bancorp SC NASDAQ 11.500 17.375 11.500 -26.40 -25.81 14.19 31.45 NA
HBSC Heritage Bancorp Inc. SC NASDAQ 17.875 22.375 17.875 -7.45 -17.34 NA NA NA
SCCB S. Carolina Community Bancshrs SC NASDAQ 22.000 25.250 12.625 -3.83 3.53 16.28 79.88 0.62
SBAN SouthBanc Shares Inc. SC NASDAQ 17.625 23.758 7.101 -6.62 -16.57 17.72 85.38 NA
UFBS Union Financial Bcshs Inc. SC NASDAQ 17.500 18.000 7.333 2.19 12.90 11.56 143.53 0.27
HFFC HF Financial Corp. SD NASDAQ 21.250 24.167 3.667 -5.56 -8.27 12.88 129.70 0.28
CAVB Cavalry Bancorp Inc. TN NASDAQ 19.750 25.250 19.750 -7.33 -16.84 13.37 45.08 NA
TWIN Twin City Bancorp TN NASDAQ 13.063 15.500 7.000 -1.41 -8.33 11.29 89.11 0.41
UTBI United Tennessee Bankshares TN NASDAQ 12.250 16.000 12.250 -13.27 -20.33 13.83 51.17 NA
BNKU Bank United Corp. TX NASDAQ 40.125 56.000 22.500 -17.69 -18.94 21.19 414.49 0.62
CBSA Coastal Bancorp Inc. TX NASDAQ 21.250 26.667 6.583 -10.99 -20.31 15.00 394.12 0.24
ETFS East Texas Financial Services TX NASDAQ 13.438 16.250 7.333 -13.30 -8.89 13.76 79.63 0.15
FBHC Fort Bend Holding Corp. TX NASDAQ 20.000 28.000 5.188 -8.05 -25.23 12.52 175.22 0.35
JXVL Jacksonville Bancorp Inc. TX NASDAQ 17.625 23.250 7.141 -2.08 -16.07 14.48 100.21 0.50
BFSB Bedford Bancshares Inc. VA NASDAQ 14.000 17.375 5.125 -8.94 -3.45 9.02 68.11 0.29
CNIT CENIT Bancorp Inc. VA NASDAQ 21.625 28.583 3.625 -4.16 -16.83 10.84 130.46 0.47
CFFC Community Financial Corp. VA NASDAQ 14.438 16.375 2.125 1.32 -9.76 9.97 71.85 0.28
ESX Essex Bancorp Inc. VA AMSE 2.875 19.250 0.750 4.55 -28.13 -4.04 202.41 0.00
FCBK First Coastal Bankshares VA NASDAQ 18.250 20.875 1.625 -3.95 1.74 9.08 122.33 0.22
TBFC Telebanc Financial Corp. VA NASDAQ 22.500 24.750 2.500 25.87 125.00 6.71 269.07 0.00
CASB Cascade Financial Corp. WA NASDAQ 13.500 16.000 1.704 -11.11 -15.63 7.37 104.12 0.00
FMSB First Mutual Savings Bank WA NASDAQ 14.500 20.167 1.628 -17.73 -17.14 8.02 110.94 0.53
FWWB First Washington Bancorp Inc. WA NASDAQ 23.000 25.966 11.250 -2.69 -0.29 16.35 116.43 0.29
HFWA Heritage Financial Corp. WA NASDAQ 12.563 15.938 12.563 -14.47 -19.60 9.53 33.09 NA
HRZB Horizon Financial Corp. WA NASDAQ 15.375 19.250 1.970 -3.91 -15.75 11.40 73.86 0.84
IWBK InterWest Bancorp Inc. WA NASDAQ 40.000 47.000 8.478 -10.74 -9.48 16.08 225.10 0.73
RVSB Riverview Bancorp Inc. WA NASDAQ 15.125 19.125 3.481 -9.70 -15.38 10.61 43.42 NA
STSA Sterling Financial Corp. WA NASDAQ 19.875 27.625 1.878 -15.43 -25.70 13.90 273.06 0.00
TSBK Timberland Bancorp Inc. WA NASDAQ 15.750 18.500 14.250 -5.26 -12.81 12.88 39.79 NA
WFSL Washington Federal Inc. WA NASDAQ 25.375 30.285 1.424 -8.14 -10.18 14.73 105.99 0.88
WAMU Washington Mutual Inc. WA NASDAQ 36.375 50.917 1.086 -20.27 -27.19 14.89 267.09 0.76
ABCW Anchor BanCorp Wisconsin WI NASDAQ 42.500 46.500 4.900 -1.16 -1.59 14.69 230.67 0.33
FCBF FCB Financial Corp. WI NASDAQ 29.500 34.000 10.000 -2.07 -7.09 19.54 133.65 0.82
FTFC First Federal Capital Corp. WI NASDAQ 16.125 18.375 0.483 -7.19 -6.86 6.42 85.56 0.25
FNGB First Northern Capital Corp. WI NASDAQ 12.875 14.000 1.730 -7.21 -2.83 8.49 77.93 0.34
HALL Hallmark Capital Corp. WI NASDAQ 14.125 18.000 4.938 -5.83 -5.83 12.04 145.98 0.00
NWEQ Northwest Equity Corp. WI NASDAQ 17.625 22.250 6.875 -10.19 -12.96 14.24 116.87 0.58
RELI Reliance Bancshares Inc. WI NASDAQ 9.500 10.125 6.500 -0.66 8.57 9.31 18.63 0.00
STFR St. Francis Capital Corp. WI NASDAQ 40.000 50.750 12.625 -6.43 -6.98 25.78 343.36 0.54
AFBC Advance Financial Bancorp WV NASDAQ 15.875 20.875 12.750 -11.19 -11.19 14.52 103.08 0.40
FOBC Fed One Bancorp WV NASDAQ 38.875 45.500 5.358 -13.13 6.14 17.98 155.67 0.62
CRZY Crazy Woman Creek Bancorp WY NASDAQ 15.875 20.000 10.000 -5.93 -16.45 15.35 65.48 0.40
TRIC Tri-County Bancorp Inc. WY NASDAQ 12.000 16.500 5.688 -2.54 -21.31 12.19 74.13 0.39
</TABLE>
<PAGE>
CVAL Chester Valley Bancorp Inc. PA 20.16 228.44 19.29 21.26
CMSB Commonwealth Bancorp Inc. PA 20.64 137.49 11.60 29.58
CRSB Crusader Holding Corp. PA 11.81 247.52 28.45 12.93
ESBF ESB Financial Corp. PA 16.35 143.58 10.07 16.50
FSBI Fidelity Bancorp Inc. PA 14.39 142.65 9.76 14.60
FBBC First Bell Bancorp Inc. PA 13.57 147.50 14.98 13.68
FKFS First Keystone Financial PA 11.78 135.33 8.80 13.32
GAF GA Financial Inc. PA 14.02 107.93 13.89 15.07
HARL Harleysville Savings Bank PA 14.85 198.15 12.71 14.85
LARL Laurel Capital Group Inc. PA 14.39 177.07 18.84 14.62
NEP Northeast PA Financial Corp. PA NA 88.30 17.07 NA
PVSA Parkvale Financial Corp. PA 15.71 203.08 15.58 15.71
PWBK Pennwood Bancorp Inc. PA 30.03 99.78 18.64 33.28
PHFC Pittsburgh Home Financial Corp PA 12.61 111.47 7.73 14.06
PRBC Prestige Bancorp Inc. PA 21.92 105.68 10.22 22.86
PFNC Progress Financial Corp. PA 20.78 216.98 15.02 23.63
PSBI PSB Bancorp Inc. PA NA NA NA NA
SHSB SHS Bancorp Inc. PA NA 113.86 15.77 NA
SVRN Sovereign Bancorp Inc. PA 26.46 226.14 12.84 19.13
THRD TF Financial Corp. PA 19.70 138.03 11.40 23.91
THTL Thistle Group Holdings Co. PA NA NA NA NA
USAB USABancshares Inc. PA 126.92 199.28 18.40 56.90
WVFC WVS Financial Corp. PA 15.82 169.96 18.87 14.62
YFED York Financial Corp. PA 17.92 155.99 13.86 22.62
CFCP Coastal Financial Corp. SC 18.20 322.16 19.01 22.59
FFCH First Financial Holdings Inc. SC 19.24 248.04 16.09 20.11
FSPT FirstSpartan Financial Corp. SC NA 125.97 30.62 NA
PEDE Great Pee Dee Bancorp SC NA 81.04 36.57 NA
HBSC Heritage Bancorp Inc. SC NA NA NA NA
SCCB S. Carolina Community Bancshrs SC 29.73 135.14 27.54 29.73
SBAN SouthBanc Shares Inc. SC NA 99.46 20.64 NA
UFBS Union Financial Bcshs Inc. SC 14.96 151.38 12.19 18.82
HFFC HF Financial Corp. SD 14.96 164.98 16.38 17.28
CAVB Cavalry Bancorp Inc. TN NA 147.72 43.81 NA
TWIN Twin City Bancorp TN 14.68 115.70 14.66 18.14
UTBI United Tennessee Bankshares TN NA 88.58 23.94 NA
BNKU Bank United Corp. TX 11.73 189.36 9.68 12.46
CBSA Coastal Bancorp Inc. TX 10.73 141.67 5.39 10.47
ETFS East Texas Financial Services TX 31.25 97.66 16.88 36.32
FBHC Fort Bend Holding Corp. TX 21.28 159.74 11.41 31.75
JXVL Jacksonville Bancorp Inc. TX 13.99 121.72 17.59 13.99
BFSB Bedford Bancshares Inc. VA 18.42 155.21 20.55 18.42
CNIT CENIT Bancorp Inc. VA 16.63 199.49 16.58 18.02
CFFC Community Financial Corp. VA 20.63 144.81 20.09 20.63
ESX Essex Bancorp Inc. VA NM NM 1.42 NM
FCBK First Coastal Bankshares VA 22.81 205.98 14.75 28.52
TBFC Telebanc Financial Corp. VA 56.25 335.32 8.36 NA
CASB Cascade Financial Corp. WA 18.00 183.18 12.97 20.15
FMSB First Mutual Savings Bank WA 12.83 180.80 13.07 14.65
FWWB First Washington Bancorp Inc. WA 18.11 140.67 19.75 19.83
HFWA Heritage Financial Corp. WA NA 131.83 37.97 NA
HRZB Horizon Financial Corp. WA 13.73 134.87 20.82 14.11
IWBK InterWest Bancorp Inc. WA 19.14 248.76 17.77 21.86
RVSB Riverview Bancorp Inc. WA NA 142.55 34.83 NA
STSA Sterling Financial Corp. WA 22.59 142.99 7.28 18.75
TSBK Timberland Bancorp Inc. WA NA 122.28 39.58 NA
WFSL Washington Federal Inc. WA 12.08 172.27 23.94 12.44
WAMU Washington Mutual Inc. WA 22.18 244.29 13.62 15.28
ABCW Anchor BanCorp Wisconsin WI 18.64 289.31 18.42 21.46
FCBF FCB Financial Corp. WI 16.39 150.97 22.07 18.55
FTFC First Federal Capital Corp. WI 16.80 251.17 18.85 28.29
FNGB First Northern Capital Corp. WI 17.88 151.65 16.52 19.22
HALL Hallmark Capital Corp. WI 14.56 117.32 9.68 15.69
NWEQ Northwest Equity Corp. WI 11.91 123.77 15.08 12.77
RELI Reliance Bancshares Inc. WI 45.24 102.04 50.99 47.50
STFR St. Francis Capital Corp. WI 14.93 155.16 11.65 18.52
AFBC Advance Financial Bancorp WV 16.71 109.33 15.40 17.84
FOBC Fed One Bancorp WV 30.85 216.21 24.97 31.61
CRZY Crazy Woman Creek Bancorp WY 19.13 103.42 24.24 19.13
TRIC Tri-County Bancorp Inc. WY 16.67 98.44 16.19 16.22
<PAGE>
<TABLE>
<CAPTION>
PRICING RATIOS
PER SHARE
Latest All Time All Monthly QuarterlyBook 12 Month Price/ Price/ Price/ Price/Cor
Time
Price High Low Change Change Value Assets Div. EarningsBk. Assets Earnings
Value
($) ($) ($) (%) (%) ($) ($) ($) (X) (%) (%) (X)
--------------- --------------- ----------------------- -------- ---------------- -------- --------
ALL THRIFTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 19.612 26.566 7.670 -8.35 -11.26 13.90 130.35 0.57 20.40 146.62 17.70 22.78
MEDIAN 17.125 22.250 8.471 -8.74 -12.72 13.76 114.82 0.33 17.59 129.61 16.58 18.68
HIGH 82.500 589.500 35.000 28.57 125.00 50.76 678.36 10.67 179.81 370.68 56.05 179.81
LOW 2.875 4.750 0.250 -43.69 -49.57 -4.04 18.63 0.00 5.41 69.34 1.42 5.20
AVERAGE FOR STATE
IN 18.709 22.501 8.134 -4.69 -6.93 14.75 123.43 0.35 18.497 131.633 16.648 22.860
AVERAGE BY REGION
MIDWEST 18.449 23.168 8.299 -6.73 -10.39 14.06 112.97 0.54 21.19 136.31 18.33 23.65
NEW ENGLAND 23.120 29.235 4.305 -8.87 -12.42 14.04 160.66 0.43 15.85 169.31 14.84 19.04
MID ATLANTIC 21.163 26.523 7.521 -10.24 -12.27 14.38 144.13 0.42 20.24 151.87 16.61 21.33
SOUTHEAST 17.513 23.268 8.177 -6.47 -6.70 11.98 100.09 1.11 24.06 158.23 20.93 26.17
SOUTHWEST 17.741 22.784 9.019 -9.13 -14.56 13.71 145.69 0.35 17.87 138.25 16.05 19.84
WEST 21.031 41.636 7.691 -12.12 -16.46 15.06 172.20 0.45 18.58 137.92 16.27 23.29
AVERAGE BY EXCHANGE
NYSE 33.412 91.630 5.724 -20.73 -20.88 20.50 236.78 0.94 18.84 169.39 17.20 28.51
AMEX 15.892 21.826 9.409 -8.89 -14.67 13.43 116.00 0.58 18.29 123.82 15.66 21.22
OTC/NASDAQ 19.433 24.581 7.587 -7.84 -10.59 13.69 127.62 0.55 20.65 147.77 17.90 22.70
</TABLE>
<PAGE>
EXHIBIT 32
KELLER & COMPANY
Dublin, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, FDIC-INSURED THRIFT INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF AUGUST 14, 1998
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
* *
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. AL 179,893 17,798 16,436 0.89 0.89 9.22 9.22
SRN Southern Banc Co. AL 105,719 18,392 18,252 0.49 0.49 2.84 2.84
SCBS Southern Community Bancshares AL 67,920 11,778 11,778 1.22 1.22 6.45 6.49
SZB SouthFirst Bancshares Inc. AL 162,975 16,202 15,800 0.46 0.41 4.19 3.71
FFBH First Federal Bancshares of AR AR 578,142 85,031 85,031 1.00 0.99 6.71 6.63
HCBB HCB Bancshares Inc. AR 221,631 38,220 37,770 0.33 0.32 1.86 1.79
PFSL Pocahontas Bancorp Inc. AR 404,606 58,454 56,591 0.69 0.69 7.30 7.25
FTF Texarkana First Financial Corp AR 189,557 28,210 28,210 1.74 1.66 11.41 10.88
BPLS Bank Plus Corp. CA 4,286,237 185,196 169,969 0.18 0.28 4.18 6.33
BVCC Bay View Capital Corp. CA 5,720,109 393,902 255,413 0.34 0.58 5.05 8.57
BYFC Broadway Financial Corp. CA 137,642 13,623 13,623 0.46 0.19 4.33 1.77
DSL Downey Financial Corp. CA 5,832,102 458,962 454,103 0.97 0.82 13.28 11.21
FSSB First FS&LA of San Bernardino CA 103,674 4,492 4,329 -1.18 -1.18 -24.70 -24.76
FED FirstFed Financial Corp. CA 4,010,381 240,295 238,753 0.72 0.68 13.22 12.49
GSB Golden State Bancorp Inc. CA 18,116,737 1,238,677 1,058,214 0.78 0.86 11.42 12.62
GDW Golden West Financial CA 39,067,229 2,923,551 2,923,551 1.02 1.00 14.92 14.59
AHM H.F. Ahmanson & Co. CA 52,826,336 3,463,986 2,696,445 0.90 0.89 16.24 16.10
HTHR Hawthorne Financial Corp. CA 1,201,331 47,737 47,737 1.02 1.18 20.59 23.83
HEMT HF Bancorp Inc. CA 1,045,837 83,778 71,660 0.01 0.06 0.13 0.73
HBNK Highland Bancorp Inc. CA 573,412 45,103 45,103 1.36 1.20 17.66 15.59
ITLA ITLA Capital Corp. CA 1,021,343 106,576 NA 1.44 1.44 13.80 13.80
LFCO Life Financial Corp. CA 472,437 59,718 59,718 3.66 3.81 25.64 26.68
MBBC Monterey Bay Bancorp Inc. CA 436,193 46,953 42,974 0.31 0.31 2.80 2.82
PBOC PBOC Holdings Inc. CA 3,201,513 184,309 184,309 NA NA NA NA
PFFB PFF Bancorp Inc. CA 3,007,845 241,978 239,464 0.61 0.56 6.43 5.94
PROV Provident Financial Holdings CA 817,402 86,649 86,649 0.70 0.29 5.83 2.44
QCBC Quaker City Bancorp Inc. CA 887,480 77,259 77,259 0.78 0.76 8.96 8.80
SGVB SGV Bancorp Inc. CA 408,346 32,233 31,847 0.36 0.36 4.79 4.69
UPFC United PanAm Financial Corp. CA 411,798 82,065 81,670 NA NA NA NA
WES Westcorp CA 3,663,771 332,300 331,496 0.20 -0.87 2.19 -9.64
FFBA First Colorado Bancorp Inc. CO 1,546,630 218,156 214,116 1.30 1.32 9.68 9.83
HCBC High Country Bancorp Inc. CO 92,258 18,047 18,047 0.38 0.42 3.22 3.59
ANE Alliance Bncp of New England CT 252,287 19,696 19,262 0.95 0.46 12.84 6.20
BKC American Bank of Connecticut CT 685,545 59,306 57,523 1.36 1.15 16.14 13.62
BKCT Bancorp Connecticut Inc. CT 495,178 48,996 48,996 1.44 1.22 14.00 11.90
DIBK Dime Financial Corp. CT 1,018,779 85,052 83,158 1.45 1.46 17.88 17.91
FFES First Federal of East Hartford CT 980,415 70,566 70,566 0.59 0.64 8.70 9.39
MECH MECH Financial Inc. CT 954,671 92,698 92,698 0.97 0.96 9.71 9.63
NMSB NewMil Bancorp Inc. CT 367,569 33,409 33,409 0.88 0.69 9.04 7.10
NSSY NSS Bancorp Inc. CT 668,671 54,268 52,826 0.91 0.73 11.01 8.89
NTMG Nutmeg Federal S&LA CT 111,539 9,006 9,006 0.89 0.56 11.08 6.93
WBST Webster Financial Corp. CT 9,189,143 548,426 464,876 0.65 0.73 12.08 13.54
IFSB Independence Federal Svgs Bank DC 274,539 19,806 17,917 0.78 0.12 11.10 1.75
WSFS WSFS Financial Corp. DE 1,551,631 95,457 94,999 1.13 1.09 19.29 18.58
BANC BankAtlantic Bancorp Inc. FL 3,756,571 255,251 197,486 0.84 0.38 13.98 6.43
BKUNA BankUnited Financial Corp. FL 3,584,123 194,962 164,973 0.29 0.19 5.56 3.66
FDTR Federal Trust Corp. FL 147,815 12,691 12,691 NA NA NA NA
FFLC FFLC Bancorp Inc. FL 412,443 52,790 52,790 1.00 0.95 7.62 7.23
FFPB First Palm Beach Bancorp Inc. FL 1,764,026 120,828 118,343 0.45 0.24 6.94 3.73
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
Number of Mkt.
Value
IPO Shares of
Shares
Date Exchange Outstg. ($M)
------------------------------------------
<S> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. 11/19/91 NASDAQ 2,434,420 29.21
SRN Southern Banc Co. 10/05/95 AMSE 1,230,313 20.61
SCBS Southern Community Bancshares 12/23/96 NASDAQ 1,137,350 16.78
SZB SouthFirst Bancshares Inc. 02/14/95 AMSE 967,444 18.38
FFBH First Federal Bancshares of AR 05/03/96 NASDAQ 4,871,063 128.47
HCBB HCB Bancshares Inc. 05/07/97 NASDAQ 2,645,000 39.01
PFSL Pocahontas Bancorp Inc. 04/01/98 NASDAQ 6,685,283 65.18
FTF Texarkana First Financial Corp 07/07/95 AMSE 1,737,692 49.31
BPLS Bank Plus Corp. NA NASDAQ 19,386,715 237.49
BVCC Bay View Capital Corp. 05/09/86 NASDAQ 20,276,298 643.77
BYFC Broadway Financial Corp. 01/09/96 NASDAQ 932,523 9.44
DSL Downey Financial Corp. 01/01/71 NYSE 28,104,618 918.68
FSSB First FS&LA of San Bernardino 02/02/93 NASDAQ 328,296 3.20
FED FirstFed Financial Corp. 12/16/83 NYSE 21,215,080 551.59
GSB Golden State Bancorp Inc. 10/01/83 NYSE 55,485,151 1650.68
GDW Golden West Financial 05/29/59 NYSE 57,590,999 6122.67
AHM H.F. Ahmanson & Co. 10/25/72 NYSE 112,747,641 8005.08
HTHR Hawthorne Financial Corp. NA NASDAQ 3,170,296 53.90
HEMT HF Bancorp Inc. 06/30/95 NASDAQ 6,369,103 112.66
HBNK Highland Bancorp Inc. NA NASDAQ 2,329,427 95.51
ITLA ITLA Capital Corp. 10/24/95 NASDAQ 7,696,984 159.71
LFCO Life Financial Corp. NA NASDAQ 6,555,896 119.65
MBBC Monterey Bay Bancorp Inc. 02/15/95 NASDAQ 3,923,204 58.06
PBOC PBOC Holdings Inc. NA NASDAQ 21,876,205 302.18
PFFB PFF Bancorp Inc. 03/29/96 NASDAQ 16,214,283 301.99
PROV Provident Financial Holdings 06/28/96 NASDAQ 4,854,125 100.72
QCBC Quaker City Bancorp Inc. 12/30/93 NASDAQ 5,826,883 107.21
SGVB SGV Bancorp Inc. 06/29/95 NASDAQ 2,348,068 41.68
UPFC United PanAm Financial Corp. NA NASDAQ 17,275,000 177.07
WES Westcorp 05/01/86 NYSE 26,373,861 362.64
FFBA First Colorado Bancorp Inc. 01/02/96 NASDAQ 16,894,636 468.83
HCBC High Country Bancorp Inc. 12/10/97 NASDAQ 1,322,500 20.17
ANE Alliance Bncp of New England 12/19/86 AMSE 2,492,552 39.26
BKC American Bank of Connecticut 12/01/81 AMSE 4,686,700 127.71
BKCT Bancorp Connecticut Inc. 07/03/86 NASDAQ 5,113,808 98.44
DIBK Dime Financial Corp. 07/09/86 NASDAQ 5,294,000 188.60
FFES First Federal of East Hartford 06/23/87 NASDAQ 2,742,761 96.00
MECH MECH Financial Inc. 06/26/96 NASDAQ 5,295,266 153.56
NMSB NewMil Bancorp Inc. 02/01/86 NASDAQ 3,834,000 48.88
NSSY NSS Bancorp Inc. 06/16/94 NASDAQ 2,395,071 113.17
NTMG Nutmeg Federal S&LA NA NASDAQ 989,081 10.88
WBST Webster Financial Corp. 12/12/86 NASDAQ 38,326,963 1274.37
IFSB Independence Federal Svgs Bank 06/06/85 NASDAQ 1,281,083 25.14
WSFS WSFS Financial Corp. 11/26/86 NASDAQ 12,524,879 256.76
BANC BankAtlantic Bancorp Inc. 11/29/83 NASDAQ 36,676,121 472.21
BKUNA BankUnited Financial Corp. 12/11/85 NASDAQ 17,785,620 293.46
FDTR Federal Trust Corp. NA NASDAQ 4,941,547 21.31
FFLC FFLC Bancorp Inc. 01/04/94 NASDAQ 3,741,739 72.50
FFPB First Palm Beach Bancorp Inc. 09/29/93 NASDAQ 5,136,459 223.44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
HARB Harbor Florida Bancshares Inc. FL 1,318,792 258,626 255,748 1.38 1.30 11.30 10.66
OCN Ocwen Financial Corp. FL 3,505,579 427,299 390,927 0.84 0.21 6.98 1.75
CCFH CCF Holding Co. GA 158,539 11,540 11,540 0.14 -0.01 1.73 -0.14
EBSI Eagle Bancshares GA 1,120,232 77,551 77,551 0.88 0.86 11.83 11.54
FSTC First Citizens Corp. GA 379,694 37,909 31,106 NA NA NA NA
FGHC First Georgia Holding Inc. GA 180,806 14,738 13,792 1.16 1.16 14.15 14.15
FLFC First Liberty Financial Corp. GA 1,355,001 99,649 91,108 0.78 0.81 10.36 10.79
FLAG FLAG Financial Corp. GA 442,879 38,582 38,582 0.91 0.68 10.36 7.69
NTBK Net.B@nk Inc. GA 246,714 37,319 37,319 0.66 0.66 2.52 2.52
CASH First Midwest Financial Inc. IA 421,258 42,886 38,297 0.71 0.64 6.60 5.95
HZFS Horizon Financial Svcs Corp. IA 92,710 8,446 8,446 0.91 0.70 9.15 7.11
MIFC Mid-Iowa Financial Corp. IA 135,040 13,412 13,401 1.02 1.01 10.95 10.82
MWBI Midwest Bancshares Inc. IA 159,460 11,400 11,400 0.95 0.76 13.56 10.90
FFFD North Central Bancshares Inc. IA 331,124 49,187 42,623 1.56 1.49 8.58 8.18
SFFC StateFed Financial Corp. IA 89,802 16,084 16,084 1.16 1.16 6.49 6.49
FBNW FirstBank Corp. ID 194,432 30,391 30,391 1.12 0.63 7.62 4.33
ABCL Alliance Bancorp IL 2,068,197 180,635 179,180 0.75 0.89 8.15 9.76
AVND Avondale Financial Corp. IL 520,132 43,475 43,475 -0.90 -0.66 -10.69 -7.88
BFFC Big Foot Financial Corp. IL 209,474 38,288 38,288 0.58 0.51 3.30 2.90
CBCI Calumet Bancorp Inc. IL 491,961 87,250 87,250 1.95 1.97 11.77 11.86
CBK Citizens First Financial Corp. IL 281,068 39,216 39,216 0.71 0.41 5.13 2.93
CSBF CSB Financial Group Inc. IL 47,218 10,953 10,338 0.63 0.60 2.68 2.55
EGLB Eagle BancGroup Inc. IL 174,085 20,976 20,976 0.35 0.12 3.00 1.07
EFC EFC Bancorp Inc. IL 397,644 94,118 94,118 -0.14 0.84 -1.27 7.76
FBCI Fidelity Bancorp Inc. IL 501,708 53,174 53,099 NA NA NA NA
FFBI First Financial Bancorp Inc. IL 82,682 7,631 7,631 0.14 0.28 1.65 3.34
FMBD First Mutual Bancorp Inc. IL 379,534 55,490 43,201 0.35 0.27 2.51 1.92
FSFF First SecurityFed Financial IL 331,044 90,026 89,765 1.12 1.68 4.87 7.29
GTPS Great American Bancorp IL 148,342 27,111 27,111 0.70 0.70 3.60 3.60
HMLK Hemlock Federal Financial Corp IL 192,271 29,109 29,109 0.93 0.92 5.36 5.28
HBEI Home Bancorp of Elgin Inc. IL 367,656 96,012 96,012 0.68 0.68 2.57 2.57
KNK Kankakee Bancorp Inc. IL 401,934 39,232 33,519 0.78 0.75 7.51 7.21
MAFB MAF Bancorp Inc. IL 3,569,656 279,893 249,818 1.08 1.04 14.00 13.42
NBSI North Bancshares Inc. IL 123,311 13,343 13,343 0.37 0.34 2.94 2.67
PFED Park Bancorp Inc. IL 196,812 40,025 40,025 0.92 0.93 4.28 4.36
PSFI PS Financial Inc. IL 85,000 22,763 22,763 0.99 1.71 3.20 5.51
SPBC St. Paul Bancorp Inc. IL 4,564,869 438,101 436,358 1.08 1.04 11.81 11.38
WCBI Westco Bancorp Inc. IL 320,295 50,171 50,171 1.49 1.40 9.64 9.05
FBCV 1ST Bancorp IN 259,562 23,417 23,028 0.75 0.52 8.79 6.00
AMFC AMB Financial Corp. IN 111,338 14,118 14,118 0.84 0.53 5.93 3.77
ASBI Ameriana Bancorp IN 375,297 45,641 44,835 0.98 0.83 8.55 7.28
ATSB AmTrust Capital Corp. IN 69,106 7,481 7,407 0.41 0.18 3.87 1.68
BRBI Blue River Bancshares Inc. IN 350,208 -156,133 -156,133 NA NA NA NA
CITZ CFS Bancorp Inc. IN 1,098,105 68,645 NA NA NA NA NA
FFWC FFW Corp. IN 203,311 19,129 17,598 0.99 0.86 10.33 9.02
FFED Fidelity Federal Bancorp IN 197,436 13,385 13,385 -0.34 -0.26 -5.30 -4.07
FISB First Indiana Corp. IN 1,750,819 160,223 158,500 1.17 0.83 12.23 8.69
HFGI Harrington Financial Group IN 484,397 22,664 22,664 -0.34 -0.13 -7.56 -2.80
HBFW Home Bancorp IN 360,286 42,947 42,947 0.85 0.83 6.84 6.68
HBBI Home Building Bancorp IN 42,430 5,967 5,967 0.75 0.72 5.70 5.48
HOMF Home Federal Bancorp IN 719,549 66,952 65,255 1.47 1.16 16.66 13.09
HWEN Home Financial Bancorp IN 42,560 7,506 7,506 0.93 0.71 5.34 4.09
LOGN Logansport Financial Corp. IN 90,264 16,987 16,987 1.48 1.50 7.79 7.90
LSBI LSB Financial Corp. IN 218,633 18,376 18,376 0.84 0.73 9.91 8.53
MARN Marion Capital Holdings IN 193,963 37,657 36,854 1.25 1.25 5.94 5.94
MFBC MFB Corp. IN 290,936 33,100 33,100 0.80 0.78 6.44 6.28
MONT Montgomery Financial Corp. IN 109,134 19,923 19,923 0.81 0.81 4.55 4.55
NEIB Northeast Indiana Bancorp IN 203,263 26,512 26,512 1.18 1.18 8.55 8.55
PFDC Peoples Bancorp IN 304,320 45,545 45,545 1.45 1.45 9.56 9.56
PERM Permanent Bancorp Inc. IN 506,725 43,463 35,460 0.61 0.58 6.30 5.97
RIVR River Valley Bancorp IN 133,848 18,261 18,022 0.93 0.83 7.28 6.48
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
HARB Harbor Florida Bancshares Inc. 03/19/98 NASDAQ 30,739,518 366.97
OCN Ocwen Financial Corp. NA NYSE 60,771,897 1633.24
CCFH CCF Holding Co. 07/12/95 NASDAQ 894,700 19.57
EBSI Eagle Bancshares 04/01/86 NASDAQ 5,805,764 139.34
FSTC First Citizens Corp. 03/01/86 NASDAQ 2,794,869 89.09
FGHC First Georgia Holding Inc. 02/11/87 NASDAQ 4,798,972 50.39
FLFC First Liberty Financial Corp. 12/06/83 NASDAQ 11,622,342 259.56
FLAG FLAG Financial Corp. 12/11/86 NASDAQ 5,174,807 86.03
NTBK Net.B@nk Inc. NA NASDAQ 6,145,962 181.31
CASH First Midwest Financial Inc. 09/20/93 NASDAQ 2,614,471 61.44
HZFS Horizon Financial Svcs Corp. 06/30/94 NASDAQ 879,942 13.86
MIFC Mid-Iowa Financial Corp. 10/14/92 NASDAQ 1,734,548 19.08
MWBI Midwest Bancshares Inc. 11/12/92 NASDAQ 1,050,669 15.76
FFFD North Central Bancshares Inc. 03/21/96 NASDAQ 3,126,383 66.24
SFFC StateFed Financial Corp. 01/05/94 NASDAQ 1,565,892 21.92
FBNW FirstBank Corp. 07/02/97 NASDAQ 1,983,750 44.14
ABCL Alliance Bancorp 07/07/92 NASDAQ 11,434,554 273.00
AVND Avondale Financial Corp. 04/07/95 NASDAQ 3,059,566 53.16
BFFC Big Foot Financial Corp. 12/20/96 NASDAQ 2,512,750 52.77
CBCI Calumet Bancorp Inc. 02/20/92 NASDAQ 3,144,861 104.57
CBK Citizens First Financial Corp. 05/01/96 AMSE 2,526,021 46.42
CSBF CSB Financial Group Inc. 10/09/95 NASDAQ 820,870 10.67
EGLB Eagle BancGroup Inc. 07/01/96 NASDAQ 1,177,005 22.51
EFC EFC Bancorp Inc. 04/07/98 AMSE 7,491,434 103.48
FBCI Fidelity Bancorp Inc. 12/15/93 NASDAQ 2,833,468 64.11
FFBI First Financial Bancorp Inc. 10/04/93 NASDAQ 415,399 8.72
FMBD First Mutual Bancorp Inc. 07/05/95 NASDAQ 3,530,570 62.67
FSFF First SecurityFed Financial 10/31/97 NASDAQ 6,408,000 106.14
GTPS Great American Bancorp 06/30/95 NASDAQ 1,588,378 34.55
HMLK Hemlock Federal Financial Corp 04/02/97 NASDAQ 1,965,208 35.37
HBEI Home Bancorp of Elgin Inc. 09/27/96 NASDAQ 6,855,799 106.26
KNK Kankakee Bancorp Inc. 01/06/93 AMSE 1,379,988 45.54
MAFB MAF Bancorp Inc. 01/12/90 NASDAQ 22,576,705 547.49
NBSI North Bancshares Inc. 12/21/93 NASDAQ 1,264,694 19.44
PFED Park Bancorp Inc. 08/12/96 NASDAQ 2,417,789 43.52
PSFI PS Financial Inc. 11/27/96 NASDAQ 2,018,708 27.00
SPBC St. Paul Bancorp Inc. 05/18/87 NASDAQ 34,357,418 776.27
WCBI Westco Bancorp Inc. 06/26/92 NASDAQ 2,486,263 70.86
FBCV 1ST Bancorp 04/07/87 NASDAQ 1,089,840 28.88
AMFC AMB Financial Corp. 04/01/96 NASDAQ 915,609 16.02
ASBI Ameriana Bancorp 03/02/87 NASDAQ 3,252,815 60.58
ATSB AmTrust Capital Corp. 03/28/95 NASDAQ 510,354 7.08
BRBI Blue River Bancshares Inc. NA NASDAQ NA NA
CITZ CFS Bancorp Inc. 07/24/98 NASDAQ NA NA
FFWC FFW Corp. 04/05/93 NASDAQ 1,458,032 25.33
FFED Fidelity Federal Bancorp 08/31/87 NASDAQ 3,127,210 30.69
FISB First Indiana Corp. 08/02/83 NASDAQ 12,781,125 333.91
HFGI Harrington Financial Group NA NASDAQ 3,275,886 36.85
HBFW Home Bancorp 03/30/95 NASDAQ 2,351,021 69.06
HBBI Home Building Bancorp 02/08/95 NASDAQ 311,660 6.62
HOMF Home Federal Bancorp 01/23/88 NASDAQ 5,139,176 155.46
HWEN Home Financial Bancorp 07/02/96 NASDAQ 929,052 8.36
LOGN Logansport Financial Corp. 06/14/95 NASDAQ 1,261,600 20.82
LSBI LSB Financial Corp. 02/03/95 NASDAQ 953,531 29.32
MARN Marion Capital Holdings 03/18/93 NASDAQ 1,704,307 48.57
MFBC MFB Corp. 03/25/94 NASDAQ 1,590,217 38.17
MONT Montgomery Financial Corp. 07/01/97 NASDAQ 1,653,032 21.28
NEIB Northeast Indiana Bancorp 06/28/95 NASDAQ 1,649,617 34.85
PFDC Peoples Bancorp 07/07/87 NASDAQ 3,356,699 76.36
PERM Permanent Bancorp Inc. 04/04/94 NASDAQ 4,130,350 64.02
RIVR River Valley Bancorp 12/20/96 NASDAQ 1,190,250 23.51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SOBI Sobieski Bancorp Inc. IN 89,848 12,669 12,669 0.58 0.57 3.93 3.89
UCBC Union Community Bancorp IN 108,088 43,537 43,537 NA NA NA NA
FFSL First Independence Corp. KS 123,366 11,815 11,815 0.72 0.72 7.31 7.31
FKAN First Kansas Financial Corp. KS 106,001 20,913 20,643 NA NA NA NA
LARK Landmark Bancshares Inc. KS 229,337 29,967 29,967 1.06 0.90 7.64 6.45
CKFB CKF Bancorp Inc. KY 62,759 13,536 13,536 1.34 1.34 5.97 5.97
CLAS Classic Bancshares Inc. KY 137,984 20,515 17,643 0.74 0.56 4.90 3.72
CFKY Columbia Financial of Kentucky KY 118,968 37,464 37,464 NA NA NA NA
FFKY First Federal Financial Corp. KY 409,651 54,688 51,904 1.60 1.53 11.84 11.38
FLKY First Lancaster Bancshares KY 53,002 14,124 14,124 1.04 1.04 3.46 3.46
FTSB Fort Thomas Financial Corp. KY 101,352 16,292 16,292 1.18 1.18 7.39 7.39
FKKY Frankfort First Bancorp Inc. KY 134,485 22,705 22,705 1.19 1.19 7.01 7.01
HFFB Harrodsburg First Fin Bancorp KY 109,033 28,934 28,934 1.36 1.35 5.07 5.06
HFBC HopFed Bancorp Inc. KY 217,837 58,321 58,321 1.11 1.11 7.58 7.58
KYF Kentucky First Bancorp Inc. KY 81,800 13,934 13,934 1.13 1.11 6.74 6.67
ANA Acadiana Bancshares Inc. LA 298,148 43,900 43,900 1.05 0.98 6.49 6.08
GSLA GS Financial Corp. LA 145,151 52,308 52,308 1.16 1.00 2.78 2.41
HSTD Homestead Bancorp Inc. LA 82,198 5,925 5,925 0.53 0.36 5.67 3.81
TSH Teche Holding Co. LA 407,265 56,329 56,329 0.94 0.93 6.91 6.84
ABBK Abington Bancorp Inc. MA 546,208 34,779 31,706 0.85 0.65 12.78 9.70
ANDB Andover Bancorp Inc. MA 1,392,342 114,145 114,145 1.19 1.16 15.04 14.67
BYS Bay State Bancorp MA 287,617 64,089 64,089 -0.62 0.28 -3.98 1.80
BFD BostonFed Bancorp Inc. MA 1,058,207 82,554 79,676 0.72 0.58 8.46 6.81
CEBK Central Co-operative Bank MA 376,063 36,786 33,402 0.87 0.68 8.64 6.70
FCB Falmouth Bancorp Inc. MA 110,523 23,631 23,631 1.11 0.84 4.72 3.59
FESX First Essex Bancorp Inc. MA 1,316,782 93,816 67,820 0.85 0.73 11.55 9.96
FAB FIRSTFED AMERICA BANCORP INC. MA 1,315,743 116,603 116,603 0.60 0.48 5.47 4.44
HIFS Hingham Instit. for Savings MA 239,148 22,544 22,544 1.26 1.25 13.06 12.94
HPBC Home Port Bancorp Inc. MA 260,456 22,689 22,689 1.45 1.57 14.53 15.76
IPSW Ipswich Savings Bank MA 233,662 13,044 13,044 1.19 1.18 21.98 21.92
LSBX Lawrence Savings Bank MA 344,874 41,626 41,626 2.59 2.55 25.22 24.85
MASB MASSBANK Corp. MA 929,672 109,368 107,931 1.16 1.00 10.40 8.98
MFLR Mayflower Co-operative Bank MA 135,518 12,960 12,770 1.15 0.98 12.01 10.22
MDBK Medford Bancorp Inc. MA 1,135,299 101,498 96,311 1.07 1.02 11.84 11.25
MWBX MetroWest Bank MA 658,462 48,338 48,338 1.27 1.26 17.13 16.88
MYST Mystic Financial Inc. MA 199,049 36,127 36,127 0.90 0.80 6.70 5.96
PBKB People's Bancshares Inc. MA 858,377 32,463 31,095 0.74 0.30 17.97 7.18
SWCB Sandwich Bancorp Inc. MA 531,013 44,556 43,319 0.97 0.91 12.32 11.57
SISB SIS Bancorp Inc. MA 1,841,662 131,537 131,537 0.72 0.89 10.12 12.55
WRNB Warren Bancorp Inc. MA 378,137 39,668 39,668 1.72 1.54 15.99 14.31
EQSB Equitable Federal Savings Bank MD 350,555 17,946 17,946 0.70 0.66 13.60 12.91
HRBF Harbor Federal Bancorp Inc. MD 235,733 29,699 29,699 0.78 0.75 6.09 5.88
MFSL Maryland Federal Bancorp MD 1,188,121 107,361 106,439 0.75 0.73 8.62 8.36
WSB Washington Savings Bank, FSB MD 273,549 23,039 23,039 0.74 0.50 8.67 5.92
WHGB WHG Bancshares Corp. MD 131,967 20,172 20,172 0.58 0.59 3.16 3.21
FCME First Coastal Corp. ME 171,719 15,372 15,372 0.80 0.73 8.23 7.42
KSBK KSB Bancorp Inc. ME 157,745 12,549 11,031 1.13 1.11 14.97 14.65
MCBN Mid-Coast Bancorp Inc. ME 63,015 5,341 5,341 0.78 0.72 9.04 8.36
NBN Northeast Bancorp ME 310,623 23,745 21,747 0.73 0.72 9.36 9.20
PHBK Peoples Heritage Finl Group ME 9,768,079 724,041 601,717 0.93 1.23 12.72 16.88
BWFC Bank West Financial Corp. MI 180,354 23,431 23,431 0.66 0.53 4.69 3.76
CFSB CFSB Bancorp Inc. MI 847,769 65,957 65,957 1.37 1.23 17.50 15.79
DNFC D & N Financial Corp. MI 1,898,004 105,729 104,888 0.86 0.71 15.71 12.86
FLGS Flagstar Bancorp Inc. MI 2,573,280 142,775 138,906 1.37 1.37 23.46 23.46
MSBF MSB Financial Inc. MI 79,967 13,313 13,313 1.57 1.35 9.39 8.10
MSBK Mutual Savings Bank FSB MI 613,798 34,084 34,084 -1.26 -0.44 -22.54 -7.90
OFCP Ottawa Financial Corp. MI 919,865 75,662 62,022 0.89 0.79 10.42 9.30
THR Three Rivers Financial Corp. MI 98,063 13,262 13,220 0.88 0.81 6.45 5.97
BDJI First Federal Bancorp. MN 121,315 12,681 12,681 0.71 0.71 6.67 6.72
FFHH FSF Financial Corp. MN 414,072 43,214 43,214 0.79 0.75 7.31 6.91
HMNF HMN Financial Inc. MN 725,180 70,797 64,963 0.80 0.57 6.34 4.50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SOBI Sobieski Bancorp Inc. 03/31/95 NASDAQ 764,130 15.47
UCBC Union Community Bancorp 12/29/97 NASDAQ 3,041,750 44.11
FFSL First Independence Corp. 10/08/93 NASDAQ 957,319 13.04
FKAN First Kansas Financial Corp. 06/29/98 NASDAQ 1,553,938 19.04
LARK Landmark Bancshares Inc. 03/28/94 NASDAQ 1,549,363 41.45
CKFB CKF Bancorp Inc. 01/04/95 NASDAQ 843,355 16.08
CLAS Classic Bancshares Inc. 12/29/95 NASDAQ 1,299,590 20.79
CFKY Columbia Financial of Kentucky 04/15/98 NASDAQ 2,671,450 38.40
FFKY First Federal Financial Corp. 07/15/87 NASDAQ 4,129,612 117.69
FLKY First Lancaster Bancshares 07/01/96 NASDAQ 946,545 14.43
FTSB Fort Thomas Financial Corp. 06/28/95 NASDAQ 1,474,321 21.75
FKKY Frankfort First Bancorp Inc. 07/10/95 NASDAQ 1,619,111 25.10
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 1,930,443 30.89
HFBC HopFed Bancorp Inc. 02/09/98 NASDAQ 4,033,625 76.13
KYF Kentucky First Bancorp Inc. 08/29/95 AMSE 1,239,605 17.35
ANA Acadiana Bancshares Inc. 07/16/96 AMSE 2,505,313 56.37
GSLA GS Financial Corp. 04/01/97 NASDAQ 3,266,575 54.72
HSTD Homestead Bancorp Inc. 07/20/98 NASDAQ NA NA
TSH Teche Holding Co. 04/19/95 AMSE 3,438,880 76.94
ABBK Abington Bancorp Inc. 06/10/86 NASDAQ 3,532,000 66.22
ANDB Andover Bancorp Inc. 05/08/86 NASDAQ 6,480,736 221.97
BYS Bay State Bancorp 03/30/98 AMSE 2,535,232 68.45
BFD BostonFed Bancorp Inc. 10/24/95 AMSE 5,393,137 126.06
CEBK Central Co-operative Bank 10/24/86 NASDAQ 1,965,000 61.16
FCB Falmouth Bancorp Inc. 03/28/96 AMSE 1,454,750 28.73
FESX First Essex Bancorp Inc. 08/04/87 NASDAQ 7,562,336 169.21
FAB FIRSTFED AMERICA BANCORP INC. 01/15/97 AMSE 8,271,794 160.27
HIFS Hingham Instit. for Savings 12/20/88 NASDAQ 1,303,500 39.43
HPBC Home Port Bancorp Inc. 08/25/88 NASDAQ 1,841,890 46.05
IPSW Ipswich Savings Bank 05/26/93 NASDAQ 2,389,736 41.52
LSBX Lawrence Savings Bank 05/02/86 NASDAQ 4,327,050 67.34
MASB MASSBANK Corp. 05/28/86 NASDAQ 3,592,594 176.04
MFLR Mayflower Co-operative Bank 12/23/87 NASDAQ 899,600 23.84
MDBK Medford Bancorp Inc. 03/18/86 NASDAQ 4,454,714 182.64
MWBX MetroWest Bank 10/10/86 NASDAQ 14,251,535 111.35
MYST Mystic Financial Inc. 01/09/98 NASDAQ 2,711,125 39.65
PBKB People's Bancshares Inc. 10/30/86 NASDAQ 3,316,000 76.89
SWCB Sandwich Bancorp Inc. 07/25/86 NASDAQ 2,043,475 129.76
SISB SIS Bancorp Inc. 02/08/95 NASDAQ 6,961,724 269.77
WRNB Warren Bancorp Inc. 07/09/86 NASDAQ 7,904,694 104.74
EQSB Equitable Federal Savings Bank 09/10/93 NASDAQ 1,223,400 37.31
HRBF Harbor Federal Bancorp Inc. 08/12/94 NASDAQ 1,862,762 36.83
MFSL Maryland Federal Bancorp 06/02/87 NASDAQ 6,571,961 256.31
WSB Washington Savings Bank, FSB NA AMSE 4,420,606 35.09
WHGB WHG Bancshares Corp. 04/01/96 NASDAQ 1,389,002 21.88
FCME First Coastal Corp. NA NASDAQ 1,360,527 17.35
KSBK KSB Bancorp Inc. 06/24/93 NASDAQ 1,258,614 22.03
MCBN Mid-Coast Bancorp Inc. 11/02/89 NASDAQ 711,960 9.85
NBN Northeast Bancorp 08/19/87 AMSE 2,236,668 40.54
PHBK Peoples Heritage Finl Group 12/04/86 NASDAQ 87,565,134 2068.73
BWFC Bank West Financial Corp. 03/30/95 NASDAQ 2,623,629 37.06
CFSB CFSB Bancorp Inc. 06/22/90 NASDAQ 8,166,983 234.80
DNFC D & N Financial Corp. 02/13/85 NASDAQ 9,157,226 245.53
FLGS Flagstar Bancorp Inc. NA NASDAQ 13,670,000 333.21
MSBF MSB Financial Inc. 02/06/95 NASDAQ 1,338,051 19.46
MSBK Mutual Savings Bank FSB 07/17/92 NASDAQ 4,289,914 48.80
OFCP Ottawa Financial Corp. 08/19/94 NASDAQ 5,717,096 150.07
THR Three Rivers Financial Corp. 08/24/95 AMSE 824,540 17.21
BDJI First Federal Bancorp. 04/04/95 NASDAQ 998,275 18.47
FFHH FSF Financial Corp. 10/07/94 NASDAQ 2,932,958 52.79
HMNF HMN Financial Inc. 06/30/94 NASDAQ 5,430,259 86.21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MIVI Mississippi View Holding Co. MN 68,619 12,476 12,476 1.08 1.06 6.37 6.27
QCFB QCF Bancorp Inc. MN 154,089 27,275 27,275 1.68 1.66 9.66 9.55
WEFC Wells Financial Corp. MN 188,677 28,994 28,994 1.19 1.10 8.19 7.63
CMRN Cameron Financial Corp MO 220,784 43,856 43,856 1.15 1.13 5.45 5.36
CBES CBES Bancorp Inc. MO 123,710 16,857 16,857 0.94 0.67 6.09 4.36
CNSB CNS Bancorp Inc. MO 97,988 24,278 24,278 0.89 0.76 3.62 3.09
EBI Equality Bancorp Inc. MO 273,361 26,182 26,182 0.59 0.02 6.76 0.23
FBSI First Bancshares Inc. MO 177,946 23,889 22,876 1.12 1.10 8.11 7.95
FTNB Fulton Bancorp Inc. MO 109,622 25,615 25,615 1.23 0.95 5.03 3.88
GFED Guaranty Federal Bcshs Inc. MO 260,043 70,690 70,690 1.25 1.23 5.09 5.01
HFSA Hardin Bancorp Inc. MO 133,326 13,475 13,475 0.70 0.61 6.18 5.40
JSBA Jefferson Savings Bancorp MO 1,248,923 121,278 98,232 0.72 0.62 7.71 6.66
LXMO Lexington B&L Financial Corp. MO 95,301 15,304 14,274 0.78 0.77 3.83 3.80
MBLF MBLA Financial Corp. MO 207,453 27,998 27,998 0.87 0.86 6.79 6.74
NASB NASB Financial Inc. MO 734,091 62,335 60,513 1.67 1.36 21.15 17.26
NSLB NS&L Bancorp Inc. MO 62,648 11,575 11,494 0.69 0.67 3.58 3.48
PCBC Perry County Financial Corp. MO 86,081 16,302 16,302 1.03 1.03 5.40 5.40
SMBC Southern Missouri Bancorp Inc. MO 155,924 24,112 24,112 0.67 0.69 4.06 4.23
CFTP Community Federal Bancorp MS 263,246 58,635 58,635 1.23 1.07 4.91 4.28
FFBS FFBS BanCorp Inc. MS 134,952 22,544 22,544 1.41 1.41 7.42 7.42
EFBC Empire Federal Bancorp Inc. MT 106,940 38,736 38,736 1.45 1.45 3.94 3.94
UBMT United Financial Corp. MT 197,271 30,116 29,132 1.16 1.21 7.47 7.82
WSTR WesterFed Financial Corp. MT 1,022,136 109,700 89,420 0.72 0.72 6.73 6.73
CFNC Carolina Fincorp Inc. NC 118,468 26,479 26,479 0.93 1.06 4.07 4.66
CENB Century Bancorp Inc. NC 104,379 18,529 18,529 1.32 1.32 4.63 4.63
COOP Cooperative Bankshares Inc. NC 381,054 30,276 30,276 0.65 0.60 8.36 7.68
SOPN First Savings Bancorp Inc. NC 304,088 69,521 69,521 1.76 1.76 7.64 7.64
GSFC Green Street Financial Corp. NC 173,265 60,463 60,463 1.58 1.58 4.46 4.46
HBS Haywood Bancshares Inc. NC 151,718 22,101 21,400 0.92 1.44 6.34 9.97
HFNC HFNC Financial Corp. NC 1,007,913 170,895 170,895 1.45 0.98 8.11 5.52
KSAV KS Bancorp Inc. NC 113,978 14,606 14,603 1.09 1.09 8.37 8.37
MBSP Mitchell Bancorp Inc. NC 37,306 14,632 14,632 1.23 1.23 2.99 2.99
PDB Piedmont Bancorp Inc. NC 130,541 21,606 21,606 1.27 1.23 7.75 7.50
SSB Scotland Bancorp Inc. NC 61,082 15,226 15,226 1.33 1.33 5.18 5.17
SSFC South Street Financial Corp. NC 203,673 34,474 34,474 0.55 0.53 2.71 2.65
SSM Stone Street Bancorp Inc. NC 112,253 30,675 30,675 1.40 1.40 4.84 4.84
UFRM United Federal Savings Bank NC 301,924 23,413 23,413 0.62 0.52 8.46 7.09
CFB Commercial Federal Corp. NE 8,852,640 643,039 569,894 0.77 0.95 11.41 14.11
NHTB New Hampshire Thrift Bncshrs NH 324,320 26,401 23,064 0.92 0.86 11.74 10.94
FBER 1st Bergen Bancorp NJ 300,755 34,886 34,886 0.72 0.72 5.49 5.49
FSNJ Bayonne Bancshares Inc. NJ 700,293 95,963 95,963 0.74 0.74 5.12 5.13
FSLA First Source Bancorp Inc. NJ 1,221,038 259,320 250,939 1.06 1.03 8.42 8.19
FMCO FMS Financial Corp. NJ 673,699 40,958 40,641 0.85 0.85 13.58 13.56
IBSF IBS Financial Corp. NJ 737,694 131,543 131,543 0.81 0.81 4.60 4.60
LVSB Lakeview Financial Corp. NJ 619,638 60,294 41,130 1.71 0.86 16.24 8.20
LFBI Little Falls Bancorp Inc. NJ 355,443 36,253 33,487 0.58 0.56 4.85 4.64
OCFC Ocean Financial Corp. NJ 1,538,264 210,859 209,829 0.92 0.92 6.38 6.37
PBCI Pamrapo Bancorp Inc. NJ 394,271 49,175 48,932 1.25 1.21 9.69 9.36
PFSB PennFed Financial Services Inc NJ 1,551,938 103,703 90,222 0.78 0.76 10.96 10.63
TSBS Peoples Bancorp Inc. NJ 873,466 341,352 331,153 1.20 1.04 6.08 5.27
PULS Pulse Bancorp NJ 544,102 45,900 45,900 1.04 1.04 12.67 12.67
RARB Raritan Bancorp Inc. NJ 434,606 31,837 31,464 0.98 0.98 12.86 12.82
SFIN Statewide Financial Corp. NJ 656,635 63,810 63,719 0.79 0.75 8.23 7.85
WYNE Wayne Bancorp Inc. NJ 275,335 35,167 35,167 0.70 0.68 5.44 5.26
AABC Access Anytime Bancorp Inc. NM 116,921 9,268 9,268 1.37 1.24 16.61 15.11
GUPB GFSB Bancorp Inc. NM 118,175 14,575 14,575 0.90 0.90 6.67 6.67
AFED AFSALA Bancorp Inc. NY 165,925 20,129 20,129 0.76 0.77 5.85 5.94
ALBK ALBANK Financial Corp. NY 4,130,868 379,445 300,418 1.14 1.13 12.62 12.55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MIVI Mississippi View Holding Co. 03/24/95 NASDAQ 740,243 13.69
QCFB QCF Bancorp Inc. 04/03/95 NASDAQ 1,364,901 38.56
WEFC Wells Financial Corp. 04/11/95 NASDAQ 1,878,860 39.69
CMRN Cameron Financial Corp 04/03/95 NASDAQ 2,433,732 48.22
CBES CBES Bancorp Inc. 09/30/96 NASDAQ 939,607 19.26
CNSB CNS Bancorp Inc. 06/12/96 NASDAQ 1,644,598 28.78
EBI Equality Bancorp Inc. 12/02/97 AMSE 2,517,534 35.87
FBSI First Bancshares Inc. 12/22/93 NASDAQ 2,210,528 34.26
FTNB Fulton Bancorp Inc. 10/18/96 NASDAQ 1,700,650 37.41
GFED Guaranty Federal Bcshs Inc. 12/31/97 NASDAQ 6,228,035 80.58
HFSA Hardin Bancorp Inc. 09/29/95 NASDAQ 816,392 15.72
JSBA Jefferson Savings Bancorp 04/08/93 NASDAQ 10,029,624 313.43
LXMO Lexington B&L Financial Corp. 06/06/96 NASDAQ 1,008,685 16.27
MBLF MBLA Financial Corp. 06/24/93 NASDAQ 1,251,046 34.25
NASB NASB Financial Inc. 09/27/85 NASDAQ 2,239,672 118.98
NSLB NS&L Bancorp Inc. 06/08/95 NASDAQ 685,858 12.00
PCBC Perry County Financial Corp. 02/13/95 NASDAQ 827,897 19.35
SMBC Southern Missouri Bancorp Inc. 04/13/94 NASDAQ 1,484,190 32.65
CFTP Community Federal Bancorp 03/26/96 NASDAQ 4,398,250 75.87
FFBS FFBS BanCorp Inc. 07/01/93 NASDAQ 1,572,244 33.41
EFBC Empire Federal Bancorp Inc. 01/27/97 NASDAQ 2,480,484 37.21
UBMT United Financial Corp. NA NASDAQ 1,698,312 45.85
WSTR WesterFed Financial Corp. 01/10/94 NASDAQ 5,585,303 136.84
CFNC Carolina Fincorp Inc. 11/25/96 NASDAQ 1,905,545 33.59
CENB Century Bancorp Inc. 12/23/96 NASDAQ 1,270,869 47.87
COOP Cooperative Bankshares Inc. 08/21/91 NASDAQ 3,027,440 52.98
SOPN First Savings Bancorp Inc. 01/06/94 NASDAQ 3,710,820 90.92
GSFC Green Street Financial Corp. 04/04/96 NASDAQ 4,083,219 60.23
HBS Haywood Bancshares Inc. 12/18/87 AMSE 1,250,356 27.82
HFNC HFNC Financial Corp. 12/29/95 NASDAQ 17,192,500 193.42
KSAV KS Bancorp Inc. 12/30/93 NASDAQ 885,356 21.91
MBSP Mitchell Bancorp Inc. 07/12/96 NASDAQ 930,902 15.36
PDB Piedmont Bancorp Inc. 12/08/95 AMSE 2,750,800 27.34
SSB Scotland Bancorp Inc. 04/01/96 AMSE 1,913,600 15.79
SSFC South Street Financial Corp. 10/03/96 NASDAQ 4,676,360 46.47
SSM Stone Street Bancorp Inc. 04/01/96 AMSE 1,843,452 35.72
UFRM United Federal Savings Bank 07/01/80 NASDAQ 3,283,314 59.10
CFB Commercial Federal Corp. 12/31/84 NYSE 42,056,132 1330.03
NHTB New Hampshire Thrift Bncshrs 05/22/86 NASDAQ 2,094,555 38.75
FBER 1st Bergen Bancorp 04/01/96 NASDAQ 2,585,243 47.83
FSNJ Bayonne Bancshares Inc. 08/22/97 NASDAQ 9,094,495 143.24
FSLA First Source Bancorp Inc. 04/09/98 NASDAQ 31,740,000 307.50
FMCO FMS Financial Corp. 12/14/88 NASDAQ 7,202,631 102.04
IBSF IBS Financial Corp. 10/13/94 NASDAQ 10,962,116 208.28
LVSB Lakeview Financial Corp. 12/22/93 NASDAQ 4,977,768 115.73
LFBI Little Falls Bancorp Inc. 01/05/96 NASDAQ 2,477,525 49.55
OCFC Ocean Financial Corp. 07/03/96 NASDAQ 15,534,134 297.09
PBCI Pamrapo Bancorp Inc. 11/14/89 NASDAQ 2,842,924 77.47
PFSB PennFed Financial Services Inc 07/15/94 NASDAQ 9,385,988 155.46
TSBS Peoples Bancorp Inc. 04/09/98 NASDAQ 36,325,167 363.25
PULS Pulse Bancorp 09/18/86 NASDAQ 3,120,300 86.59
RARB Raritan Bancorp Inc. 03/01/87 NASDAQ 2,373,007 71.78
SFIN Statewide Financial Corp. 10/02/95 NASDAQ 4,396,821 92.33
WYNE Wayne Bancorp Inc. 06/27/96 NASDAQ 2,013,124 61.15
AABC Access Anytime Bancorp Inc. 08/08/86 NASDAQ 1,217,336 14.61
GUPB GFSB Bancorp Inc. 06/30/95 NASDAQ 1,201,050 18.02
AFED AFSALA Bancorp Inc. 10/01/96 NASDAQ 1,378,440 28.17
ALBK ALBANK Financial Corp. 04/01/92 NASDAQ 13,222,104 932.99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. NY 74,118 6,296 6,296 0.53 0.50 6.18 5.82
AHCI Ambanc Holding Co. NY 519,831 60,754 60,754 0.51 0.41 4.20 3.36
ASFC Astoria Financial Corp. NY 11,575,551 942,476 689,433 0.83 0.76 10.04 9.18
CNY Carver Bancorp Inc. NY 427,371 35,897 34,702 0.25 0.22 2.99 2.65
CATB Catskill Financial Corp. NY 309,566 68,222 68,222 1.32 1.30 5.48 5.39
DME Dime Bancorp Inc. NY 20,913,891 1,330,383 1,094,655 0.83 0.51 14.29 8.82
DCOM Dime Community Bancshares Inc. NY 1,623,926 186,349 162,321 0.90 0.86 7.06 6.75
ESBK Elmira Savings Bank (The) NY 231,725 14,520 14,520 0.47 0.38 7.43 6.11
FIBC Financial Bancorp Inc. NY 340,999 28,730 28,616 0.95 0.92 10.50 10.18
FFIC Flushing Financial Corp. NY 1,091,908 139,802 134,615 0.93 0.95 7.01 7.20
GPT GreenPoint Financial Corp. NY 12,853,902 1,275,645 721,627 1.11 1.14 11.57 11.83
GOSB GSB Financial Corp. NY 129,087 32,157 32,157 0.75 0.71 3.05 2.86
HAVN Haven Bancorp Inc. NY 2,265,248 117,993 112,778 0.45 0.48 7.84 8.32
HRBT Hudson River Bancorp NY 994,055 69,365 69,081 NA NA NA NA
ICBC Independence Comm. Bank Corp. NY 4,785,837 960,300 906,591 NA NA NA NA
JSB JSB Financial Inc. NY 1,563,460 380,011 380,011 3.00 2.52 12.76 10.72
LISB Long Island Bancorp Inc. NY 6,483,887 577,496 572,729 0.91 0.74 10.06 8.21
PEEK Peekskill Financial Corp. NY 200,341 43,206 43,206 0.98 1.01 4.02 4.11
QCSB Queens County Bancorp Inc. NY 1,715,164 169,633 169,633 1.51 1.49 14.38 14.16
RELY Reliance Bancorp Inc. NY 2,485,729 194,864 135,928 0.86 0.82 10.18 9.66
RCBK Richmond County Financial Corp NY 1,595,844 328,595 327,420 0.36 1.38 2.41 9.15
RSLN Roslyn Bancorp Inc. NY 3,853,282 594,398 591,713 1.30 1.23 7.51 7.13
SFED SFS Bancorp Inc. NY 178,093 21,915 21,915 0.66 0.64 5.37 5.20
SKAN Skaneateles Bancorp Inc. NY 266,730 18,342 17,910 0.62 0.60 8.95 8.73
SIB Staten Island Bancorp Inc. NY 3,018,685 710,578 692,862 1.00 1.63 5.61 9.15
TPNZ Tappan Zee Financial Inc. NY 139,690 22,135 22,135 0.89 0.84 5.26 4.96
ROSE TR Financial Corp. NY 4,115,800 256,233 256,233 1.01 0.87 16.43 14.02
WSBI Warwick Community Bancorp NY 370,842 85,490 85,490 NA NA NA NA
YFCB Yonkers Financial Corp. NY 401,565 41,343 41,343 0.89 0.81 6.79 6.16
ASBP ASB Financial Corp. OH 114,907 17,462 17,462 0.95 0.95 6.12 6.09
CAFI Camco Financial Corp. OH 588,220 58,182 54,705 1.25 0.89 12.89 9.23
COFI Charter One Financial OH 19,813,254 1,479,382 1,392,600 0.89 1.16 12.38 16.13
CIBI Community Investors Bancorp OH 101,734 11,178 11,178 0.95 0.95 8.17 8.17
DCBI Delphos Citizens Bancorp Inc. OH 113,585 27,430 27,430 1.45 1.45 5.56 5.56
EMLD Emerald Financial Corp. OH 617,369 52,485 51,877 1.14 1.04 14.14 12.96
EFBI Enterprise Federal Bancorp OH 406,893 36,630 35,857 0.76 0.66 7.27 6.30
FFDF FFD Financial Corp. OH 100,104 22,302 22,302 1.75 0.79 7.27 3.30
FFYF FFY Financial Corp. OH 651,746 84,216 84,216 1.24 1.21 9.29 9.10
FFOH Fidelity Financial of Ohio OH 531,926 66,015 58,730 0.90 0.86 7.20 6.91
FDEF First Defiance Financial OH 582,124 103,272 103,272 0.93 0.89 4.96 4.72
FFBZ First Federal Bancorp Inc. OH 207,381 16,493 16,479 0.82 0.77 10.73 10.08
FFHS First Franklin Corp. OH 237,679 21,680 21,596 0.81 0.70 8.87 7.65
GFCO Glenway Financial Corp. OH 300,448 28,757 28,495 0.86 0.87 9.12 9.21
HHFC Harvest Home Financial Corp. OH 96,085 10,288 10,288 0.59 0.56 5.26 4.98
HCFC Home City Financial Corp. OH 78,042 10,827 10,827 1.29 1.29 6.94 6.94
HLFC Home Loan Financial Corp. OH 81,915 31,565 31,565 1.29 1.29 4.38 4.38
INBI Industrial Bancorp Inc. OH 382,841 61,156 61,156 1.47 1.47 8.81 8.80
LONF London Financial Corp. OH 37,916 5,218 5,218 1.08 1.00 5.62 5.21
MRKF Market Financial Corp. OH 53,653 15,737 15,737 1.09 1.09 3.15 3.15
METF Metropolitan Financial Corp. OH 1,058,887 39,543 36,688 0.71 0.61 18.08 15.47
MFFC Milton Federal Financial Corp. OH 235,105 26,029 26,029 0.69 0.56 5.80 4.70
OSFS Ohio State Financial Services OH 38,559 10,442 10,442 0.98 0.98 6.13 6.13
OHSL OHSL Financial Corp. OH 247,853 26,854 26,854 0.86 0.79 7.94 7.32
PFFC Peoples Financial Corp. OH 84,906 14,723 14,723 1.06 0.59 5.35 3.00
PSFC Peoples-Sidney Financial Corp. OH 105,522 26,546 26,546 1.23 1.23 5.26 5.26
PTRS Potters Financial Corp. OH 128,149 10,934 10,934 0.77 0.69 8.58 7.69
PVFC PVF Capital Corp. OH 418,928 30,175 30,175 1.34 1.27 18.69 17.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ALBC Albion Banc Corp. 07/26/93 NASDAQ 752,448 6.40
AHCI Ambanc Holding Co. 12/27/95 NASDAQ 4,258,418 80.91
ASFC Astoria Financial Corp. 11/18/93 NASDAQ 26,530,706 1419.39
CNY Carver Bancorp Inc. 10/25/94 AMSE 2,314,275 30.66
CATB Catskill Financial Corp. 04/18/96 NASDAQ 4,486,115 75.70
DME Dime Bancorp Inc. 08/19/86 NYSE 113,533,295 3398.96
DCOM Dime Community Bancshares Inc. 06/26/96 NASDAQ 12,176,513 337.90
ESBK Elmira Savings Bank (The) 03/01/85 NASDAQ 726,660 21.53
FIBC Financial Bancorp Inc. 08/17/94 NASDAQ 1,706,666 55.04
FFIC Flushing Financial Corp. 11/21/95 NASDAQ 7,810,404 222.60
GPT GreenPoint Financial Corp. 01/28/94 NYSE 83,383,000 3137.29
GOSB GSB Financial Corp. 07/09/97 NASDAQ 2,248,250 38.22
HAVN Haven Bancorp Inc. 09/23/93 NASDAQ 8,849,268 226.76
HRBT Hudson River Bancorp 07/01/98 NASDAQ NA NA
ICBC Independence Comm. Bank Corp. 03/17/98 NASDAQ 76,043,750 1292.74
JSB JSB Financial Inc. 06/27/90 NYSE 9,832,590 575.83
LISB Long Island Bancorp Inc. 04/18/94 NASDAQ 24,182,823 1469.11
PEEK Peekskill Financial Corp. 12/29/95 NASDAQ 2,895,569 51.76
QCSB Queens County Bancorp Inc. 11/23/93 NASDAQ 14,941,165 651.81
RELY Reliance Bancorp Inc. 03/31/94 NASDAQ 9,564,988 366.46
RCBK Richmond County Financial Corp 02/18/98 NASDAQ 26,423,550 493.80
RSLN Roslyn Bancorp Inc. 01/13/97 NASDAQ 41,399,959 923.76
SFED SFS Bancorp Inc. 06/30/95 NASDAQ 1,208,472 27.79
SKAN Skaneateles Bancorp Inc. 06/02/86 NASDAQ 1,444,617 26.73
SIB Staten Island Bancorp Inc. 12/22/97 NYSE 45,130,312 1026.71
TPNZ Tappan Zee Financial Inc. 10/05/95 NASDAQ 1,478,062 29.56
ROSE TR Financial Corp. 06/29/93 NASDAQ 17,528,818 734.02
WSBI Warwick Community Bancorp 12/23/97 NASDAQ 6,606,548 105.70
YFCB Yonkers Financial Corp. 04/18/96 NASDAQ 2,772,225 53.37
ASBP ASB Financial Corp. 05/11/95 NASDAQ 1,635,346 23.30
CAFI Camco Financial Corp. NA NASDAQ 5,481,276 105.06
COFI Charter One Financial 01/22/88 NASDAQ 127,634,596 4299.75
CIBI Community Investors Bancorp 02/07/95 NASDAQ 1,334,807 18.02
DCBI Delphos Citizens Bancorp Inc. 11/21/96 NASDAQ 1,848,411 35.93
EMLD Emerald Financial Corp. 10/05/93 NASDAQ 10,274,287 132.28
EFBI Enterprise Federal Bancorp 10/17/94 NASDAQ 2,210,996 60.53
FFDF FFD Financial Corp. 04/03/96 NASDAQ 1,445,350 32.88
FFYF FFY Financial Corp. 06/28/93 NASDAQ 4,010,990 130.36
FFOH Fidelity Financial of Ohio 03/04/96 NASDAQ 5,598,180 89.57
FDEF First Defiance Financial 10/02/95 NASDAQ 8,157,867 115.23
FFBZ First Federal Bancorp Inc. 07/13/92 NASDAQ 3,150,532 42.93
FFHS First Franklin Corp. 01/26/88 NASDAQ 1,783,034 27.86
GFCO Glenway Financial Corp. 11/30/90 NASDAQ 2,282,494 45.65
HHFC Harvest Home Financial Corp. 10/10/94 NASDAQ 879,357 12.97
HCFC Home City Financial Corp. 12/30/96 NASDAQ 904,590 13.57
HLFC Home Loan Financial Corp. 03/26/98 NASDAQ 2,248,250 33.16
INBI Industrial Bancorp Inc. 08/01/95 NASDAQ 5,014,936 95.28
LONF London Financial Corp. 04/01/96 NASDAQ 510,160 8.55
MRKF Market Financial Corp. 03/27/97 NASDAQ 1,335,725 17.70
METF Metropolitan Financial Corp. NA NASDAQ 7,051,270 104.89
MFFC Milton Federal Financial Corp. 10/07/94 NASDAQ 2,236,836 33.55
OSFS Ohio State Financial Services 09/29/97 NASDAQ 634,168 9.83
OHSL OHSL Financial Corp. 02/10/93 NASDAQ 2,496,306 41.19
PFFC Peoples Financial Corp. 09/13/96 NASDAQ 1,351,541 18.08
PSFC Peoples-Sidney Financial Corp. 04/28/97 NASDAQ 1,785,375 32.14
PTRS Potters Financial Corp. 12/31/93 NASDAQ 951,236 16.41
PVFC PVF Capital Corp. 12/30/92 NASDAQ 2,659,827 63.84
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SFSL Security First Corp. OH 696,462 68,943 68,044 1.43 1.43 15.25 15.21
UCFC United Community Finl Corp. OH 1,044,993 141,353 141,353 1.23 1.23 9.68 9.66
WOFC Western Ohio Financial Corp. OH 357,295 51,875 48,516 0.07 0.06 0.49 0.43
WEHO Westwood Homestead Fin. Corp. OH 126,339 26,009 26,009 0.68 0.89 2.72 3.55
WFI Winton Financial Corp. OH 358,573 26,042 25,625 1.17 0.90 16.06 12.34
FFWD Wood Bancorp Inc. OH 165,007 21,787 21,787 1.43 1.23 11.30 9.76
LO Local Financial Corp. OK 1,904,315 102,898 95,152 NA NA NA NA
KFBI Klamath First Bancorp OR 1,008,688 141,037 129,193 0.92 0.92 6.11 6.11
OTFC Oregon Trail Financial Corp. OR 256,460 67,954 67,954 1.09 1.09 4.76 4.76
CVAL Chester Valley Bancorp Inc. PA 377,012 31,849 31,849 1.03 0.98 12.31 11.68
CMSB Commonwealth Bancorp Inc. PA 2,368,247 199,761 157,352 0.58 0.41 6.23 4.42
CRSB Crusader Holding Corp. PA 202,034 23,223 22,004 2.34 2.13 28.61 26.04
ESBF ESB Financial Corp. PA 956,146 67,063 59,892 0.67 0.66 8.73 8.61
FSBI Fidelity Bancorp Inc. PA 402,919 27,553 27,553 0.74 0.73 10.89 10.71
FBBC First Bell Bancorp Inc. PA 756,638 76,869 76,869 1.09 1.08 10.25 10.17
FKFS First Keystone Financial PA 390,970 25,419 25,419 0.75 0.67 11.07 9.82
GAF GA Financial Inc. PA 838,272 107,905 106,901 1.04 0.96 7.21 6.67
HARL Harleysville Savings Bank PA 395,383 25,359 25,359 0.97 0.97 14.71 14.71
LARL Laurel Capital Group Inc. PA 220,986 23,506 23,506 1.41 1.39 13.63 13.42
NEP Northeast PA Financial Corp. PA 477,807 84,958 84,958 NA NA NA NA
PVSA Parkvale Financial Corp. PA 1,095,373 84,060 83,671 1.08 1.08 14.59 14.59
PWBK Pennwood Bancorp Inc. PA 46,080 7,961 7,961 0.59 0.53 3.24 2.91
PHFC Pittsburgh Home Financial Corp PA 372,533 25,835 25,557 0.69 0.62 8.03 7.19
PRBC Prestige Bancorp Inc. PA 164,656 15,925 15,925 0.47 0.45 4.44 4.29
PFNC Progress Financial Corp. PA 602,326 41,699 NA 0.84 0.74 14.86 13.03
PSBI PSB Bancorp Inc. PA 148,841 15,414 15,407 0.55 0.36 4.82 3.16
SHSB SHS Bancorp Inc. PA 88,408 12,241 12,241 0.77 0.72 7.21 6.73
SVRN Sovereign Bancorp Inc. PA 18,847,318 1,037,952 914,606 0.56 0.71 10.10 12.80
THRD TF Financial Corp. PA 689,284 51,638 43,815 0.70 0.57 7.90 6.40
THTL Thistle Group Holdings Co. PA 276,650 28,470 28,470 1.18 0.67 12.41 7.01
USAB USABancshares Inc. PA 134,688 13,113 13,037 0.60 0.73 6.39 7.79
WVFC WVS Financial Corp. PA 297,054 32,978 32,978 1.20 1.29 10.45 11.27
YFED York Financial Corp. PA 1,229,268 109,225 109,225 0.84 0.67 9.61 7.58
CFCP Coastal Financial Corp. SC 616,887 36,378 36,378 1.23 0.99 19.93 16.06
FFCH First Financial Holdings Inc. SC 1,874,198 121,610 121,610 0.89 0.85 14.08 13.51
FSPT FirstSpartan Financial Corp. SC 517,433 125,761 125,761 1.51 1.47 5.92 5.75
PEDE Great Pee Dee Bancorp SC 69,262 31,252 31,252 NA NA NA NA
HBSC Heritage Bancorp Inc. SC 328,319 30,944 30,944 NA NA NA NA
SCCB S. Carolina Community Bancshrs SC 46,305 9,438 9,438 1.01 1.01 4.19 4.19
SBAN SouthBanc Shares Inc. SC 367,666 76,290 76,290 0.86 0.91 7.37 7.78
UFBS Union Financial Bcshs Inc. SC 183,066 14,747 NA 0.88 0.70 11.07 8.86
HFFC HF Financial Corp. SD 570,060 56,601 56,601 1.13 0.98 11.73 10.18
CAVB Cavalry Bancorp Inc. TN 339,846 100,766 100,766 NA NA NA NA
TWIN Twin City Bancorp TN 110,610 14,017 14,017 1.02 0.83 7.91 6.43
UTBI United Tennessee Bankshares TN 74,442 20,124 20,124 1.38 1.38 8.68 8.68
BNKU Bank United Corp. TX 13,095,947 669,411 608,070 0.90 0.84 17.78 16.70
CBSA Coastal Bancorp Inc. TX 2,980,528 114,710 99,936 0.52 0.54 14.63 15.00
ETFS East Texas Financial Services TX 122,594 21,185 21,185 0.53 0.46 3.02 2.62
FBHC Fort Bend Holding Corp. TX 318,348 22,753 21,520 0.66 0.44 10.00 6.65
JXVL Jacksonville Bancorp Inc. TX 242,673 35,079 35,079 1.33 1.33 9.13 9.13
BFSB Bedford Bancshares Inc. VA 156,509 20,732 20,732 1.23 1.23 8.85 8.79
CNIT CENIT Bancorp Inc. VA 651,857 51,575 47,747 0.91 0.84 12.66 11.65
CFFC Community Financial Corp. VA 183,894 25,515 25,407 1.03 1.03 7.39 7.41
ESX Essex Bancorp Inc. VA 214,391 15,055 14,927 -0.24 -0.24 -3.13 -3.12
FCBK First Coastal Bankshares VA 609,753 45,268 45,268 0.69 0.49 9.79 6.89
TBFC Telebanc Financial Corp. VA 1,209,466 45,448 45,141 0.28 0.06 6.21 1.25
CASB Cascade Financial Corp. WA 444,155 31,418 31,418 0.83 0.75 11.99 10.78
FMSB First Mutual Savings Bank WA 470,866 34,059 34,059 1.07 0.93 15.48 13.55
FWWB First Washington Bancorp Inc. WA 1,362,063 171,122 141,446 1.16 1.06 8.59 7.88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SFSL Security First Corp. 01/22/88 NASDAQ 7,863,587 202.49
UCFC United Community Finl Corp. 07/09/98 NASDAQ NA NA
WOFC Western Ohio Financial Corp. 07/29/94 NASDAQ 2,297,589 56.87
WEHO Westwood Homestead Fin. Corp. 09/30/96 NASDAQ 2,559,118 32.31
WFI Winton Financial Corp. 08/04/88 AMSE 4,014,304 65.23
FFWD Wood Bancorp Inc. 08/31/93 NASDAQ 2,663,654 53.27
LO Local Financial Corp. NA AMSE 20,537,209 266.98
KFBI Klamath First Bancorp 10/05/95 NASDAQ 9,916,766 189.04
OTFC Oregon Trail Financial Corp. 10/06/97 NASDAQ 4,694,875 73.94
CVAL Chester Valley Bancorp Inc. 03/27/87 NASDAQ 2,327,478 73.90
CMSB Commonwealth Bancorp Inc. 06/17/96 NASDAQ 15,473,583 354.93
CRSB Crusader Holding Corp. NA NASDAQ 3,832,500 60.68
ESBF ESB Financial Corp. 06/13/90 NASDAQ 5,665,206 103.75
FSBI Fidelity Bancorp Inc. 06/24/88 NASDAQ 1,966,015 49.74
FBBC First Bell Bancorp Inc. 06/29/95 NASDAQ 6,524,557 124.78
FKFS First Keystone Financial 01/26/95 NASDAQ 2,413,416 41.63
GAF GA Financial Inc. 03/26/96 AMSE 7,220,215 132.67
HARL Harleysville Savings Bank 08/04/87 NASDAQ 1,675,199 54.03
LARL Laurel Capital Group Inc. 02/20/87 NASDAQ 2,191,385 43.28
NEP Northeast PA Financial Corp. 04/01/98 AMSE 6,427,350 90.79
PVSA Parkvale Financial Corp. 07/16/87 NASDAQ 5,172,637 166.82
PWBK Pennwood Bancorp Inc. 07/15/96 NASDAQ 697,394 9.41
PHFC Pittsburgh Home Financial Corp 04/01/96 NASDAQ 1,969,369 32.99
PRBC Prestige Bancorp Inc. 06/27/96 NASDAQ 1,051,940 19.20
PFNC Progress Financial Corp. 07/18/83 NASDAQ 5,245,800 95.55
PSBI PSB Bancorp Inc. 07/17/98 NASDAQ NA NA
SHSB SHS Bancorp Inc. 10/01/97 NASDAQ 819,950 13.94
SVRN Sovereign Bancorp Inc. 08/12/86 NASDAQ 152,393,199 2490.71
THRD TF Financial Corp. 07/13/94 NASDAQ 3,191,582 81.78
THTL Thistle Group Holdings Co. 07/14/98 NASDAQ NA NA
USAB USABancshares Inc. NA NASDAQ 1,501,657 21.96
WVFC WVS Financial Corp. 11/29/93 NASDAQ 3,617,120 57.87
YFED York Financial Corp. 02/01/84 NASDAQ 8,968,031 187.21
CFCP Coastal Financial Corp. 09/26/90 NASDAQ 6,255,589 121.20
FFCH First Financial Holdings Inc. 11/10/83 NASDAQ 13,631,739 323.75
FSPT FirstSpartan Financial Corp. 07/09/97 NASDAQ 4,253,160 176.51
PEDE Great Pee Dee Bancorp 12/31/97 NASDAQ 2,202,125 34.68
HBSC Heritage Bancorp Inc. 04/06/98 NASDAQ NA NA
SCCB S. Carolina Community Bancshrs 07/07/94 NASDAQ 579,664 12.54
SBAN SouthBanc Shares Inc. 04/15/98 NASDAQ 4,306,410 83.44
UFBS Union Financial Bcshs Inc. NA NASDAQ 1,275,464 22.00
HFFC HF Financial Corp. 04/08/92 NASDAQ 4,395,205 100.54
CAVB Cavalry Bancorp Inc. 03/17/98 NASDAQ 7,538,250 163.96
TWIN Twin City Bancorp 01/04/95 NASDAQ 1,241,230 16.60
UTBI United Tennessee Bankshares 01/05/98 NASDAQ 1,454,750 19.87
BNKU Bank United Corp. 08/09/96 NASDAQ 31,595,596 1512.64
CBSA Coastal Bancorp Inc. NA NASDAQ 7,562,535 185.28
ETFS East Texas Financial Services 01/10/95 NASDAQ 1,539,461 23.09
FBHC Fort Bend Holding Corp. 06/30/93 NASDAQ 1,816,808 41.79
JXVL Jacksonville Bancorp Inc. 04/01/96 NASDAQ 2,421,747 44.80
BFSB Bedford Bancshares Inc. 08/22/94 NASDAQ 2,297,900 35.62
CNIT CENIT Bancorp Inc. 08/06/92 NASDAQ 4,996,610 114.92
CFFC Community Financial Corp. 03/30/88 NASDAQ 2,559,446 40.63
ESX Essex Bancorp Inc. NA AMSE 1,059,203 3.31
FCBK First Coastal Bankshares 11/01/80 NASDAQ 4,984,420 93.46
TBFC Telebanc Financial Corp. NA NASDAQ 4,494,988 62.93
CASB Cascade Financial Corp. 09/16/92 NASDAQ 4,265,624 61.85
FMSB First Mutual Savings Bank 12/17/85 NASDAQ 4,244,175 74.80
FWWB First Washington Bancorp Inc. 11/01/95 NASDAQ 11,698,980 268.55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HFWA Heritage Financial Corp. WA 322,806 92,957 92,957 NA NA NA NA
HRZB Horizon Financial Corp. WA 553,063 85,382 85,382 1.57 1.53 10.00 9.74
IWBK InterWest Bancorp Inc. WA 2,351,248 167,998 162,840 0.89 0.80 12.98 11.66
RVSB Riverview Bancorp Inc. WA 268,608 61,960 60,039 1.71 1.63 8.52 8.10
STSA Sterling Financial Corp. WA 2,076,759 105,698 41,621 0.37 0.44 6.74 8.04
TSBK Timberland Bancorp Inc. WA 263,112 85,137 85,137 1.83 1.72 8.40 7.87
WFSL Washington Federal Inc. WA 5,558,970 772,672 717,519 1.97 1.92 15.09 14.69
WAMU Washington Mutual Inc. WA 103,396,952 5,635,652 5,306,044 0.64 0.92 11.68 16.78
ABCW Anchor BanCorp Wisconsin WI 2,057,635 130,767 128,798 1.12 0.97 16.96 14.73
FCBF FCB Financial Corp. WI 515,516 75,370 75,370 1.32 1.16 9.29 8.14
FTFC First Federal Capital Corp. WI 1,584,405 118,820 113,140 1.21 0.71 17.39 10.26
FNGB First Northern Capital Corp. WI 690,372 75,208 75,208 0.98 0.91 8.87 8.20
HALL Hallmark Capital Corp. WI 428,237 33,233 33,233 0.67 0.62 8.90 8.30
NWEQ Northwest Equity Corp. WI 96,452 11,754 11,754 1.22 1.13 10.48 9.74
RELI Reliance Bancshares Inc. WI 44,174 22,071 22,071 1.02 0.99 2.06 2.00
STFR St. Francis Capital Corp. WI 1,754,803 130,966 117,173 0.84 0.68 10.66 8.56
AFBC Advance Financial Bancorp WV 110,668 15,594 15,594 0.90 0.84 5.92 5.55
FOBC Fed One Bancorp WV 373,837 41,870 40,281 0.82 0.80 7.44 7.23
CRZY Crazy Woman Creek Bancorp WY 61,478 14,407 14,407 1.22 1.23 5.13 5.15
TRIC Tri-County Bancorp Inc. WY 86,549 14,232 14,232 1.01 1.03 6.46 6.60
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
HFWA Heritage Financial Corp. 01/09/98 NASDAQ 9,755,067 148.76
HRZB Horizon Financial Corp. 08/01/86 NASDAQ 7,487,951 119.81
IWBK InterWest Bancorp Inc. NA NASDAQ 10,445,321 453.07
RVSB Riverview Bancorp Inc. 10/01/97 NASDAQ 6,185,990 102.84
STSA Sterling Financial Corp. NA NASDAQ 7,605,612 173.03
TSBK Timberland Bancorp Inc. 01/13/98 NASDAQ 6,612,500 109.11
WFSL Washington Federal Inc. 11/17/82 NASDAQ 52,447,284 1448.86
WAMU Washington Mutual Inc. 03/11/83 NASDAQ 387,124,870 16815.93
ABCW Anchor BanCorp Wisconsin 07/16/92 NASDAQ 8,920,181 348.45
FCBF FCB Financial Corp. 09/24/93 NASDAQ 3,857,280 117.65
FTFC First Federal Capital Corp. 11/02/89 NASDAQ 18,518,914 332.19
FNGB First Northern Capital Corp. 12/29/83 NASDAQ 8,859,173 118.49
HALL Hallmark Capital Corp. 01/03/94 NASDAQ 2,933,608 41.07
NWEQ Northwest Equity Corp. 10/11/94 NASDAQ 825,301 16.71
RELI Reliance Bancshares Inc. 04/19/96 NASDAQ 2,371,238 21.04
STFR St. Francis Capital Corp. 06/21/93 NASDAQ 5,110,683 198.04
AFBC Advance Financial Bancorp 01/02/97 NASDAQ 1,073,606 20.80
FOBC Fed One Bancorp 01/19/95 NASDAQ 2,401,540 109.27
CRZY Crazy Woman Creek Bancorp 03/29/96 NASDAQ 938,845 15.84
TRIC Tri-County Bancorp Inc. 09/30/93 NASDAQ 1,167,498 14.59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
* *
Total Total Total Core Core
Number of Mkt. Value
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE IPO Shares of Shares
State ($000) ($000) ($000) (%) (%) (%) (%) Date Exchange Outstng ($M)
----- ------------------------------------------------------------------------------------------------------------
ALL THRIFTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 1,594,275 128,975 118,590 0.93 0.88 8.38 7.77 9,201,339 270.92
MEDIAN 344,874 38,220 36,688 0.91 0.86 7.77 7.23 2,895,569 59.10
HIGH 103,396,952 5,635,652 5,306,044 3.66 3.81 28.61 26.68 387,124,870 16,815.93
LOW 37,306 -156,133 -156,133 -1.26 -1.18 -24.70 -24.76 311,660 3.20
AVERAGE FOR STATE
IN 332,537 26,319 23,919 0.84 0.75 6.44 5.75 2,453,794 51.97
AVERAGE BY REGION
MIDWEST 1,113,318 101,463 89,773 0.91 0.86 8.08 7.53 8,281,484 201.18
NEW ENGLAND 787,085 90,509 89,923 0.91 0.71 8.25 6.10 7,367,649 134.25
MID ATLANTIC 1,170,851 121,007 115,490 0.99 0.98 7.94 7.77 9,143,929 246.79
SOUTHEAST 776,229 68,530 63,709 0.96 0.85 8.93 7.94 6,561,829 138.59
SOUTHWEST 270,586 28,589 28,259 0.93 0.88 6.94 6.41 3,536,665 50.55
WEST 4,055,247 291,460 265,016 0.84 0.81 8.48 8.27 12,298,769 562.09
AVERAGE BY EXCHANGE
NYSE 14,518,726 1,118,727 962,712 1.01 0.86 11.16 9.48 54,685,381 2,392.78
AMEX 402,343 43,586 42,739 0.79 0.77 6.37 5.88 3,678,654 62.41
OTC/NASDAQ 1,222,276 99,961 93,809 0.94 0.89 8.45 7.87 7,980,925 209.48
</TABLE>
<PAGE>
EXHIBIT 33
KELLER & COMPANY
Dublin, Ohio
614-766-1426
RECENTLY CONVERTED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
IPO CLOSING RATIOS CURRENT RATIOS
* *
Price/ Price/ Price/ Price/
Price/ Book Tang. Price/ Price/ Book Tang. Price/
Bk. Bk.
IPO EarningsValue Value Assets EarningsValue Value Assets
Date (X) (%) (%) (%) (X) (%) (%) (%)
---------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UTBI United Tennessee Bankshares TN 01/05/98 16.10 78.40 78.40 18.50 15.31 88.58 88.58 23.94
(1) HFWA Heritage Financial Corp. WA 01/09/98 NA 100.00 NA NA NA 131.83 131.83 37.97
MYST Mystic Financial Inc. MA 01/09/98 17.50 77.80 77.75 15.30 18.92 102.21 102.21 18.56
TSBK Timberland Bancorp Inc. WA 01/13/98 10.50 81.50 81.54 24.30 16.41 122.28 122.28 39.58
HFBC HopFed Bancorp Inc. KY 02/09/98 12.40 75.40 75.43 16.60 20.83 121.02 121.02 32.40
RCBK Richmond County Financial Corp NY 02/18/98 14.00 79.60 79.64 19.80 17.61 124.60 125.00 25.67
ICBC Independence Comm. Bank Corp. NY 03/17/98 17.90 77.20 82.65 15.90 22.40 106.40 112.73 21.35
CAVB Cavalry Bancorp Inc. TN 03/17/98 14.30 79.80 79.80 21.50 22.44 147.72 147.72 43.81
(1) HARB Harbor Florida Bancshares Inc. FL 03/19/98 NA 100.00 NA NA 16.75 143.44 144.99 28.12
(2) BRKL Brookline Bancorp (MHC) MA 03/25/98 19.40 122.50 122.48 17.00 17.71 134.64 134.64 44.41
HLFC Home Loan Financial Corp. OH 03/26/98 17.00 75.90 75.95 27.10 23.33 99.72 99.72 38.42
BYS Bay State Bancorp MA 03/30/98 20.90 78.60 78.65 16.80 26.85 86.73 86.73 20.82
NEP Northeast PA Financial Corp. PA 04/01/98 18.70 75.40 75.42 13.90 NA 88.30 88.30 17.07
(1) PFSL Pocahontas Bancorp Inc. AR 04/01/98 NA 100.00 NA NA NA 99.41 102.70 14.36
HBSC Heritage Bancorp Inc. SC 04/06/98 16.10 78.00 78.00 21.90 NA NA NA NA
EFC EFC Bancorp Inc. IL 04/07/98 13.50 76.60 76.63 18.00 NA 90.57 90.57 21.43
(1) FSLA First Source Bancorp Inc. NJ 04/09/98 NA 100.00 NA NA NA 110.16 113.78 23.39
(1) TSBS Peoples Bancorp Inc. NJ 04/09/98 NA 100.00 NA NA NA 89.77 92.52 35.09
(2) GBNK Gaston Federal Bancorp (MHC) NC 04/13/98 24.50 116.80 116.81 10.90 NA 153.17 153.17 31.07
(1) SBAN SouthBanc Shares Inc. SC 04/15/98 NA 100.00 NA NA NA 99.46 99.46 20.64
CFKY Columbia Financial of Kentucky KY 04/15/98 19.60 74.50 74.49 20.40 NA 99.86 99.86 31.44
(2) NBCP Niagara Bancorp Inc. (MHC) NY 04/20/98 20.70 122.10 122.09 10.30 NA 133.72 133.72 25.44
FKAN First Kansas Financial Corp. KS 06/29/98 14.00 78.50 78.54 14.00 NA 81.72 82.77 16.13
(2) LIBB Liberty Bancorp Inc. (MHC) NJ 07/01/98 20.40 121.60 121.62 7.80 NA NA NA NA
HRBT Hudson River Bancorp NY 07/01/98 22.30 80.10 80.14 20.70 NA NA NA NA
(2) BCSB BCSB Bankcorp Inc. (MHC) MD 07/08/98 26.10 142.30 142.26 8.30 NA NA NA NA
UCFC United Community Finl Corp. OH 07/09/98 14.10 77.80 77.81 24.30 NA NA NA NA
(1) THTL Thistle Group Holdings Co. PA 07/14/98 NA 100.00 NA NA NA NA NA NA
(1) PSBI PSB Bancorp Inc. PA 07/17/98 NA 100.00 NA NA NA NA NA NA
(1) HSTD Homestead Bancorp Inc. LA 07/20/98 NA 100.00 NA NA NA NA NA NA
CITZ CFS Bancorp Inc. IN 07/24/98 18.20 71.70 71.66 19.30 NA NA NA NA
AVERAGE (3) 16.30 77.46 77.79 19.31 NA 104.59 105.19 26.97
MEDIAN (3) 16.10 77.80 78.00 19.30 NA 99.86 99.86 23.94
HIGH (3) 22.30 81.50 82.65 27.10 NA 147.72 147.72 43.81
LOW (3) 10.50 71.70 71.66 13.90 NA 81.72 82.77 16.13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRICES AND CHANGE FROM IPO DATE
*
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UTBI United Tennessee Bankshares 10.00 14.75 47.50 13.75 37.50 14.25 42.50
(1) HFWA Heritage Financial Corp. 10.00 13.25 32.50 13.25 32.50 14.25 42.50
MYST Mystic Financial Inc. 10.00 14.44 44.38 15.63 56.25 15.00 50.00
TSBK Timberland Bancorp Inc. 10.00 14.50 45.00 16.00 60.00 16.00 60.00
HFBC HopFed Bancorp Inc. 10.00 16.81 68.13 16.00 60.00 16.75 67.50
RCBK Richmond County Financial Corp 10.00 16.31 63.13 16.44 64.38 17.88 78.75
ICBC Independence Comm. Bank Corp. 10.00 17.25 72.50 17.56 75.63 18.13 81.25
CAVB Cavalry Bancorp Inc. 10.00 20.56 105.63 24.38 143.75 24.00 140.00
(1) HARB Harbor Florida Bancshares Inc. 10.00 12.00 20.00 11.69 16.88 12.63 26.25
(2) BRKL Brookline Bancorp (MHC) 10.00 16.56 65.63 17.00 70.00 17.88 78.75
HLFC Home Loan Financial Corp. 10.00 15.25 52.50 16.19 61.88 16.75 67.50
BYS Bay State Bancorp 20.00 29.38 46.88 29.63 48.13 30.13 50.63
NEP Northeast PA Financial Corp. 10.00 15.50 55.00 15.38 53.75 15.44 54.38
(1) PFSL Pocahontas Bancorp Inc. 10.00 10.44 4.38 10.25 2.50 9.94 (0.62)
HBSC Heritage Bancorp Inc. 15.00 NA NA 21.94 46.25 21.88 45.83
EFC EFC Bancorp Inc. 10.00 14.75 47.50 14.94 49.38 14.13 41.25
(1) FSLA First Source Bancorp Inc. 10.00 10.56 5.63 10.50 5.00 10.50 5.00
(1) TSBS Peoples Bancorp Inc. 10.00 10.44 4.38 10.56 5.63 10.63 6.25
(2) GBNK Gaston Federal Bancorp (MHC) 10.00 18.00 80.00 16.38 63.75 16.75 67.50
(1) SBAN SouthBanc Shares Inc. 20.00 22.75 13.75 22.50 12.50 20.88 4.38
CFKY Columbia Financial of Kentucky 10.00 17.13 71.25 15.94 59.38 16.00 60.00
(2) NBCP Niagara Bancorp Inc. (MHC) 10.00 16.31 63.13 16.56 65.63 16.25 62.50
FKAN First Kansas Financial Corp. 10.00 12.31 23.13 12.25 22.50 11.50 15.00
(2) LIBB Liberty Bancorp Inc. (MHC) 10.00 11.44 14.38 11.63 16.25 11.25 12.50
HRBT Hudson River Bancorp 10.00 12.56 25.63 13.50 35.00 13.38 33.75
(2) BCSB BCSB Bankcorp Inc. (MHC) 10.00 12.56 25.63 12.63 26.25 11.63 16.25
UCFC United Community Finl Corp. 10.00 15.00 50.00 16.00 60.00 15.75 57.50
(1) THTL Thistle Group Holdings Co. 10.00 9.94 (0.62) 9.81 (1.87) 9.00 (10.00)
(1) PSBI PSB Bancorp Inc. 10.00 9.19 (8.12) 9.13 (8.75) 7.88 (21.25)
(1) HSTD Homestead Bancorp Inc. 10.00 9.31 (6.87) 9.25 (7.50) NA NA
CITZ CFS Bancorp Inc. 10.00 11.44 14.38 10.94 9.38 NA NA
52.03 55.48 59.11
48.75 56.25 55.94
105.63 143.75 140.00
14.38 9.38 15.00
</TABLE>
(1) Second stage conversion.
(2) Mutual holding company
(3) Statistics do not include second stage conversions and mutual holding
companies.
<PAGE>
EXHIBIT 34
KELLER & COMPANY
Dublin, Ohio
614-766-1426
ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF LINCOLN FEDERAL SAVINGS BANK
NONE
<PAGE>
EXHIBIT 35
KELLER & COMPANY
Dublin, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED MUTUAL HOLDING COMPANIES
AS OF AUGUST 14, 1998
<TABLE>
<CAPTION>
PER SHARE
*
Latest All Time All Monthly QuarterlyBook 12 Month
Time
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- --------------- --------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT NASDAQ 27.063 41.125 1.250 -22.12 -29.71 13.37 141.98 0.76
CMSV Community Savings Bnkshrs(MHC) FL NASDAQ 30.250 40.750 10.000 -16.84 -19.33 16.66 150.09 0.90
FFFL Fidelity Bankshares Inc. (MHC) FL NASDAQ 25.500 35.375 9.091 -12.82 -16.05 13.28 215.86 0.90
FFSX First Fed SB of Siouxland(MHC) IA NASDAQ 30.000 39.000 8.239 -9.09 -21.05 14.80 194.23 0.48
WCFB Webster City Federal SB (MHC) IA NASDAQ 17.625 22.000 8.813 -3.76 -15.57 10.75 45.93 0.80
JXSB Jacksonville Savings Bk (MHC) IL NASDAQ 16.250 25.500 6.667 -10.96 -30.11 9.38 88.96 0.29
BRKL Brookline Bancorp (MHC) MA NASDAQ 12.750 17.984 12.750 -14.65 -23.31 9.47 28.71 NA
BCSB BCSB Bankcorp Inc. (MHC) MD NASDAQ 11.500 12.625 11.250 -8.91 NA NA NA NA
LFED Leeds Federal Bankshares (MHC) MD NASDAQ 17.000 23.500 6.583 -8.11 -18.07 9.52 57.70 0.53
PULB Pulaski Bank, FSB (MHC) MO NASDAQ 32.000 51.000 10.500 -15.23 -30.81 11.87 88.76 1.10
GBNK Gaston Federal Bancorp (MHC) NC NASDAQ 14.000 18.063 13.188 -5.08 -15.15 9.14 45.06 NA
LIBB Liberty Bancorp Inc. (MHC) NJ NASDAQ 10.125 11.688 9.875 -12.90 NA NA NA NA
PLSK Pulaski Savings Bank (MHC) NJ NASDAQ 14.875 24.500 11.500 -6.30 -21.19 10.53 89.07 0.30
NBCP Niagara Bancorp Inc. (MHC) NY NASDAQ 11.500 17.000 11.500 -21.37 -30.04 8.60 45.21 NA
PBHC Pathfinder Bancorp Inc. (MHC) NY NASDAQ 15.125 26.125 5.500 -29.65 -32.02 8.47 69.96 0.19
SBFL SB of the Finger Lakes (MHC) NY NASDAQ 17.125 24.750 4.063 -9.87 -14.38 6.12 72.38 0.21
WAYN Wayne Savings Bancshares (MHC) OH NASDAQ 23.000 30.000 6.821 -1.08 -12.76 9.94 104.34 0.58
ALLB Alliance Bank (MHC) PA NASDAQ 21.250 39.000 9.250 -19.05 -36.57 9.06 84.78 0.36
SKBO First Carnegie Deposit (MHC) PA NASDAQ 13.625 21.000 11.625 -24.31 -32.72 10.86 64.41 NA
HARS Harris Financial Inc. (MHC) PA NASDAQ 17.750 27.875 4.250 -13.41 -32.30 5.56 68.47 0.21
NWSB Northwest Bancorp Inc. (MHC) PA NASDAQ 12.875 18.000 3.688 -12.71 -26.43 4.65 54.38 0.16
PHSB Peoples Home Savings Bk (MHC) PA NASDAQ 17.000 22.125 13.625 -8.11 -17.07 10.40 82.15 NA
ALL MUTUAL HOLDING COMPANIES
AVERAGE 18.554 26.772 8.638 -13.02 -23.73 10.12 89.62 0.52
MEDIAN 17.000 24.625 9.171 -12.77 -22.25 9.73 77.27 0.48
HIGH 32.000 51.000 13.625 -1.08 -12.76 16.66 215.86 1.10
LOW 10.125 11.688 1.250 -29.65 -36.57 4.65 28.71 0.16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRICING RATIOS
*
Price/ Price/ Price/ Price/Core
Earnings Bk. Assets Earnings
Value
(X) (%) (%) (X)
-------- ---------------- --------
<S> <C> <C> <C> <C>
PBCT People's Bank (MHC) 16.40 202.42 19.06 30.75
CMSV Community Savings Bnkshrs(MHC) 29.95 181.57 20.15 32.53
FFFL Fidelity Bankshares Inc. (MHC) 22.17 192.02 11.81 27.42
FFSX First Fed SB of Siouxland(MHC) 25.21 202.70 15.45 25.86
WCFB Webster City Federal SB (MHC) 27.54 163.95 38.37 27.54
JXSB Jacksonville Savings Bk (MHC) 31.25 173.24 18.27 49.24
BRKL Brookline Bancorp (MHC) NA 134.64 44.41 NA
BCSB BCSB Bankcorp Inc. (MHC) NA NA NA NA
LFED Leeds Federal Bankshares (MHC) 25.76 178.57 29.46 25.76
PULB Pulaski Bank, FSB (MHC) 34.78 269.59 36.05 42.67
GBNK Gaston Federal Bancorp (MHC) NA 153.17 31.07 NA
LIBB Liberty Bancorp Inc. (MHC) NA NA NA NA
PLSK Pulaski Savings Bank (MHC) 30.36 141.26 16.70 28.61
NBCP Niagara Bancorp Inc. (MHC) NA 133.72 25.44 NA
PBHC Pathfinder Bancorp Inc. (MHC) 29.66 178.57 21.62 37.81
SBFL SB of the Finger Lakes (MHC) 61.16 279.82 23.66 77.84
WAYN Wayne Savings Bancshares (MHC) 31.94 231.39 22.04 35.38
ALLB Alliance Bank (MHC) 34.27 234.55 25.06 34.27
SKBO First Carnegie Deposit (MHC) NA 125.46 21.15 NA
HARS Harris Financial Inc. (MHC) 32.87 319.24 25.92 50.71
NWSB Northwest Bancorp Inc. (MHC) 28.61 276.88 23.68 29.94
PHSB Peoples Home Savings Bk (MHC) NA 163.46 20.69 NA
ALL MUTUAL HOLDING COMPANIES
AVERAGE 30.80 196.81 24.50 37.09
MEDIAN 29.95 180.07 22.85 32.53
HIGH 61.16 319.24 44.41 77.84
LOW 16.40 125.46 11.81 25.76
</TABLE>
<PAGE>
EXHIBIT 36
KELLER & COMPANY
Dublin, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, FDIC-INSURED MUTUAL HOLDING COMPANIES
AS OF AUGUST 14, 1998
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
* * *
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT 9,105,200 857,400 738,800 1.24 0.66 13.73 7.30
CMSV Community Savings Bnkshrs(MHC) FL 765,488 83,078 83,078 0.70 0.65 6.31 5.82
FFFL Fidelity Bankshares Inc. (MHC) FL 1,468,351 90,321 NA 0.65 0.52 8.94 7.22
FFSX First Fed SB of Siouxland(MHC) IA 551,593 42,020 33,862 0.67 0.65 8.45 8.22
WCFB Webster City Federal SB (MHC) IA 97,096 22,732 22,732 1.40 1.40 5.96 5.96
JXSB Jacksonville Savings Bk (MHC) IL 169,745 17,894 17,894 0.60 0.38 5.71 3.62
BRKL Brookline Bancorp (MHC) MA 835,329 275,538 275,538 2.10 1.99 8.50 8.06
BCSB BCSB Bankcorp Inc. (MHC) MD 320,627 25,687 25,656 NA NA NA NA
LFED Leeds Federal Bankshares (MHC) MD 298,997 49,310 49,310 1.19 1.19 7.22 7.22
PULB Pulaski Bank, FSB (MHC) MO 186,917 24,988 24,988 1.08 0.87 8.12 6.54
GBNK Gaston Federal Bancorp (MHC) NC 202,615 41,107 41,107 NA NA NA NA
LIBB Liberty Bancorp Inc. (MHC) NJ 217,437 16,541 16,541 0.73 0.69 9.95 9.40
PLSK Pulaski Savings Bank (MHC) NJ 187,776 22,207 22,207 0.54 0.58 4.60 4.89
NBCP Niagara Bancorp Inc. (MHC) NY 1,345,187 256,042 256,042 0.65 0.96 5.04 7.51
PBHC Pathfinder Bancorp Inc. (MHC) NY 198,091 23,544 20,097 0.75 0.58 6.35 4.93
SBFL SB of the Finger Lakes (MHC) NY 258,394 21,850 21,850 0.41 0.32 4.62 3.56
WAYN Wayne Savings Bancshares (MHC) OH 259,402 24,715 24,715 0.72 0.65 7.53 6.81
ALLB Alliance Bank (MHC) PA 277,490 29,634 29,634 0.76 0.76 6.88 6.88
SKBO First Carnegie Deposit (MHC) PA 148,132 24,980 24,980 0.66 0.55 3.95 3.31
HARS Harris Financial Inc. (MHC) PA 2,325,602 188,828 170,664 0.83 0.54 10.28 6.73
NWSB Northwest Bancorp Inc. (MHC) PA 2,547,412 217,879 195,814 0.94 0.91 10.29 9.94
PHSB Peoples Home Savings Bk (MHC) PA 226,742 28,718 28,718 0.81 0.74 6.20 5.72
ALL MUTUAL HOLDING COMPANIES
AVERAGE 999,710 108,410 101,154 0.87 0.78 7.43 6.48
MEDIAN 268,446 29,176 28,718 0.74 0.66 7.05 6.77
HIGH 9,105,200 857,400 738,800 2.10 1.99 13.73 9.94
LOW 97,096 16,541 16,541 0.41 0.32 3.95 3.31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
Number of Mkt.
Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
--------- ------------------------------------
<S> <C> <C> <C> <C>
PBCT People's Bank (MHC) 07/06/88 NASDAQ 64,130,238 2218.52
CMSV Community Savings Bnkshrs(MHC) 10/24/94 NASDAQ 5,100,120 168.30
FFFL Fidelity Bankshares Inc. (MHC) 01/07/94 NASDAQ 6,802,442 194.72
FFSX First Fed SB of Siouxland(MHC) 07/13/92 NASDAQ 2,839,943 102.24
WCFB Webster City Federal SB (MHC) 08/15/94 NASDAQ 2,113,993 40.69
JXSB Jacksonville Savings Bk (MHC) 04/21/95 NASDAQ 1,908,121 40.07
BRKL Brookline Bancorp (MHC) 03/25/98 NASDAQ 29,095,000 432.79
BCSB BCSB Bankcorp Inc. (MHC) 07/08/98 NASDAQ NA NA
LFED Leeds Federal Bankshares (MHC) 05/02/94 NASDAQ 5,182,097 115.30
PULB Pulaski Bank, FSB (MHC) 05/11/94 NASDAQ 2,105,840 78.31
GBNK Gaston Federal Bancorp (MHC) 04/13/98 NASDAQ 4,496,500 68.57
LIBB Liberty Bancorp Inc. (MHC) 07/01/98 NASDAQ NA NA
PLSK Pulaski Savings Bank (MHC) 04/03/97 NASDAQ 2,108,088 33.47
NBCP Niagara Bancorp Inc. (MHC) 04/20/98 NASDAQ 29,756,250 438.90
PBHC Pathfinder Bancorp Inc. (MHC) 11/16/95 NASDAQ 2,831,374 62.29
SBFL SB of the Finger Lakes (MHC) 11/11/94 NASDAQ 3,570,000 66.49
WAYN Wayne Savings Bancshares (MHC) 06/25/93 NASDAQ 2,486,188 64.64
ALLB Alliance Bank (MHC) 03/03/95 NASDAQ 3,273,166 94.51
SKBO First Carnegie Deposit (MHC) 04/04/97 NASDAQ 2,300,000 44.85
HARS Harris Financial Inc. (MHC) 01/25/94 NASDAQ 33,964,950 747.23
NWSB Northwest Bancorp Inc. (MHC) 11/07/94 NASDAQ 46,840,970 740.70
PHSB Peoples Home Savings Bk (MHC) 07/10/97 NASDAQ 2,760,000 50.72
ALL MUTUAL HOLDING COMPANIES
AVERAGE 12,683,264 290.17
MEDIAN 3,421,583 86.41
HIGH 64,130,238 2,218.52
LOW 1,908,121 33.47
</TABLE>
<PAGE>
EXHIBIT 37
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI MO OH
WI
IPO Date: (less than or =) 03/31/97
Asset size: (less than or =) $700,000,000
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
LINCOLN FEDERAL
SAVINGS BANK -- 304,500 13.82 14.49 54.25 66.56 81.05 15.73 14.05
DEFINED PARAMETERS FOR Prior to 25.00 - 45.00 - 65.00 - 7.00 -
INCLUSION IN COMPARABLE GROUP 03/31/97 (less
than
or =) 700,000 30.00 20.00 75.00 90.00 95.00 30.00 20.00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLKY First Lancaster Bancshares KY 07/01/96 53,002 7.51 0.88 54.98 89.50 90.38 25.88 26.65
MRKF Market Financial Corp. OH 03/27/97 53,653 35.65 2.06 NA 60.98 63.04 0.00 29.33
NSLB NS&L Bancorp Inc. MO 06/08/95 62,648 NA NA 45.20 58.51 NA 3.19 18.48
CKFB CKF Bancorp Inc. KY 01/04/95 62,759 8.51 0.47 66.37 89.37 89.84 3.46 21.57
ATSB AmTrust Capital Corp. IN 03/28/95 69,106 NA NA 39.50 69.38 NA 21.51 10.83
HCFC Home City Financial Corp. OH 12/30/96 78,042 6.13 0.79 43.31 90.23 91.02 10.69 13.87
MSBF MSB Financial Inc. MI 02/06/95 79,967 5.55 0.01 53.53 91.74 91.75 27.48 16.65
KYF Kentucky First Bancorp Inc. KY 08/29/95 81,800 13.78 23.11 30.54 60.23 83.34 13.16 17.03
FFBI First Financial Bancorp Inc. IL 10/04/93 82,682 27.69 2.26 71.30 65.88 68.14 8.10 9.23
PFFC Peoples Financial Corp. OH 09/13/96 84,906 NA NA 42.23 72.84 NA 3.53 17.34
PSFI PS Financial Inc. IL 11/27/96 85,000 32.38 10.11 31.49 56.02 66.13 21.82 26.78
PCBC Perry County Financial Corp. MO 02/13/95 86,081 48.02 33.12 12.15 17.74 50.86 7.55 18.94
SFFC StateFed Financial Corp. IA 01/05/94 89,802 16.28 0.00 48.98 76.81 76.81 21.12 17.91
SOBI Sobieski Bancorp Inc. IN 03/31/95 89,848 4.18 13.30 51.33 79.52 92.82 17.75 14.10
LOGN Logansport Financial Corp. IN 06/14/95 90,264 11.35 10.10 44.41 74.28 84.38 8.81 18.82
HZFS Horizon Financial Svcs Corp. IA 06/30/94 92,710 36.39 0.74 35.87 60.32 61.05 25.95 9.11
LXMO Lexington B&L Financial Corp. MO 06/06/96 95,301 29.88 0.99 42.54 65.53 66.53 2.66 16.06
HHFC Harvest Home Financial Corp. OH 10/10/94 96,085 NA NA 39.19 50.66 NA 26.54 10.71
NWEQ Northwest Equity Corp. WI 10/11/94 96,452 8.04 6.34 56.56 81.62 87.95 22.93 12.19
CNSB CNS Bancorp Inc. MO 06/12/96 97,988 19.68 9.76 46.61 65.59 75.35 0.60 24.78
THR Three Rivers Financial Corp. MI 08/24/95 98,063 21.56 9.60 40.29 64.69 74.29 22.17 13.52
FFDF FFD Financial Corp. OH 04/03/96 100,104 15.94 14.91 46.10 67.30 82.20 16.40 22.28
FTSB Fort Thomas Financial Corp. KY 06/28/95 101,352 6.17 0.00 61.78 91.02 91.02 8.47 16.07
CIBI Community Investors Bancorp OH 02/07/95 101,734 15.50 1.52 58.31 81.71 83.22 14.33 10.99
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 109,033 NA NA 61.10 76.34 NA 0.00 26.54
FTNB Fulton Bancorp Inc. MO 10/18/96 109,622 15.06 0.00 49.24 82.15 82.15 11.76 23.37
AMFC AMB Financial Corp. IN 04/01/96 111,338 14.00 2.72 41.16 78.45 81.17 18.03 12.68
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 113,585 2.15 12.87 54.83 83.82 96.69 5.28 24.15
ASBP ASB Financial Corp. OH 05/11/95 114,907 21.96 8.47 42.17 67.69 76.16 3.71 15.20
NBSI North Bancshares Inc. IL 12/21/93 123,311 32.84 4.13 53.54 61.33 65.46 27.65 10.82
CBES CBES Bancorp Inc. MO 09/30/96 123,710 3.41 0.07 43.43 92.82 92.88 15.76 13.63
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 126,339 8.48 1.40 49.59 87.96 89.36 12.47 20.59
PTRS Potters Financial Corp. OH 12/31/93 128,149 11.77 14.27 35.72 71.42 85.69 11.36 8.53
HFSA Hardin Bancorp Inc. MO 09/29/95 133,326 34.71 13.71 33.00 49.14 62.86 29.63 10.11
RIVR River Valley Bancorp IN 12/20/96 133,848 8.71 6.16 48.63 81.18 87.34 0.00 13.64
FKKY Frankfort First Bancorp Inc. KY 07/10/95 134,485 4.45 0.00 78.96 93.93 93.93 21.01 16.88
CLAS Classic Bancshares Inc. KY 12/29/95 137,984 NA NA 42.50 66.92 NA 5.33 14.87
GTPS Great American Bancorp IL 06/30/95 148,342 10.51 0.00 33.85 82.88 82.88 1.35 18.28
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 155,924 14.08 7.41 45.89 76.37 83.78 13.51 15.46
MWBI Midwest Bancshares Inc. IA 11/12/92 159,460 25.12 12.41 39.52 59.46 71.87 25.71 7.15
FFWD Wood Bancorp Inc. OH 08/31/93 165,007 12.60 2.28 58.41 82.78 85.06 7.82 13.20
EGLB Eagle BancGroup Inc. IL 07/01/96 174,085 19.48 11.12 37.53 66.70 77.82 11.49 12.05
FBSI First Bancshares Inc. MO 12/22/93 177,946 15.15 0.42 54.38 81.07 81.49 6.86 13.42
BWFC Bank West Financial Corp. MI 03/30/95 180,354 27.99 0.65 49.65 68.62 69.27 21.19 12.99
MARN Marion Capital Holdings IN 03/18/93 193,963 5.84 0.00 46.31 84.80 84.80 7.05 19.41
PFED Park Bancorp Inc. IL 08/12/96 196,812 47.32 10.56 27.06 37.78 48.35 8.15 20.34
FFED Fidelity Federal Bancorp IN 08/31/87 197,436 7.76 3.28 57.23 81.87 85.15 18.13 6.78
NEIB Northeast Indiana Bancorp IN 06/28/95 203,263 2.84 7.46 49.57 87.52 94.97 26.62 13.04
FFWC FFW Corp. IN 04/05/93 203,311 13.95 15.67 32.88 68.56 84.23 27.79 9.41
FFBZ First Federal Bancorp Inc. OH 07/13/92 207,381 10.35 0.63 49.79 84.70 85.33 24.11 7.95
MBLF MBLA Financial Corp. MO 06/24/93 207,453 32.70 2.38 49.74 64.11 66.49 31.19 13.50
BFFC Big Foot Financial Corp. IL 12/20/96 209,474 7.14 38.29 37.76 51.67 89.97 20.53 18.28
LSBI LSB Financial Corp. IN 02/03/95 218,633 NA NA 44.05 86.45 NA 23.63 8.40
CMRN Cameron Financial Corp MO 04/03/95 220,784 13.39 0.00 50.19 81.65 81.66 18.23 19.86
MFFC Milton Federal Financial Corp. OH 10/07/94 235,105 21.54 7.78 44.44 68.11 75.89 23.11 11.07
FFHS First Franklin Corp. OH 01/26/88 237,679 17.71 16.21 50.27 64.11 80.32 3.87 9.12
OHSL OHSL Financial Corp. OH 02/10/93 247,853 21.82 8.15 41.09 68.17 76.31 13.21 10.83
CBK Citizens First Financial Corp. IL 05/01/96 281,068 11.52 3.40 58.81 80.26 83.66 12.66 13.95
MFBC MFB Corp. IN 03/25/94 290,936 15.64 0.99 50.63 82.03 83.02 27.59 11.38
GFCO Glenway Financial Corp. OH 11/30/90 300,448 6.93 4.34 62.18 85.52 89.86 14.21 9.57
PFDC Peoples Bancorp IN 07/07/87 304,320 14.50 0.13 66.73 83.76 83.90 2.73 14.97
WCBI Westco Bancorp Inc. IL 06/26/92 320,295 22.58 0.00 55.28 76.01 76.01 0.00 15.66
FFFD North Central Bancshares Inc. IA 03/21/96 331,124 NA NA 35.27 75.61 NA 9.77 14.85
WOFC Western Ohio Financial Corp. OH 07/29/94 357,295 23.96 3.32 62.99 69.44 72.77 13.47 14.52
WFI Winton Financial Corp. OH 08/04/88 358,573 NA NA 39.30 87.11 NA 20.89 7.26
HBFW Home Bancorp IN 03/30/95 360,286 10.48 0.00 66.09 88.32 88.32 1.94 11.92
ASBI Ameriana Bancorp IN 03/02/87 375,297 18.42 6.77 60.20 71.22 78.00 3.40 12.16
FMBD First Mutual Bancorp Inc. IL 07/05/95 379,534 13.17 0.00 53.52 79.77 79.77 1.32 14.62
INBI Industrial Bancorp Inc. OH 08/01/95 382,841 10.17 0.09 66.35 87.64 87.73 9.66 15.97
KNK Kankakee Bancorp Inc. IL 01/06/93 401,934 26.95 6.27 38.05 61.65 67.92 5.70 9.76
EFBI Enterprise Federal Bancorp OH 10/17/94 406,893 NA NA 26.19 62.46 NA 40.55 9.00
FFKY First Federal Financial Corp. KY 07/15/87 409,651 8.97 0.48 60.68 86.73 87.21 10.56 13.35
PVFC PVF Capital Corp. OH 12/30/92 418,928 9.22 0.78 26.49 88.23 89.00 11.44 7.20
CASH First Midwest Financial Inc. IA 09/20/93 421,258 NA NA 18.62 61.05 NA 25.10 10.18
HALL Hallmark Capital Corp. WI 01/03/94 428,237 19.10 12.75 42.96 66.07 78.82 27.34 7.76
CBCI Calumet Bancorp Inc. IL 02/20/92 491,961 14.96 2.46 41.29 76.07 78.54 9.16 17.74
FBCI Fidelity Bancorp Inc. IL 12/15/93 501,708 14.03 2.60 55.13 81.62 84.22 21.89 10.60
PERM Permanent Bancorp Inc. IN 04/04/94 506,725 26.98 15.30 29.74 52.81 68.11 16.82 8.58
FCBF FCB Financial Corp. WI 09/24/93 515,516 NA NA 26.78 72.05 NA 20.14 14.62
AVND Avondale Financial Corp. IL 04/07/95 520,132 NA NA 32.36 36.25 NA 20.34 8.36
FFOH Fidelity Financial of Ohio OH 03/04/96 531,926 5.91 10.96 28.17 79.66 90.62 8.24 12.41
FDEF First Defiance Financial OH 10/02/95 582,124 13.31 2.65 42.52 79.97 82.62 11.36 17.74
MSBK Mutual Savings Bank FSB MI 07/17/92 613,798 4.83 40.27 30.85 52.20 92.46 22.74 5.55
EMLD Emerald Financial Corp. OH 10/05/93 617,369 14.84 1.85 49.76 78.99 80.84 4.39 8.50
FFYF FFY Financial Corp. OH 06/28/93 651,746 NA NA 52.19 74.03 NA 15.09 12.92
FNGB First Northern Capital Corp. WI 12/29/83 690,372 6.21 1.38 55.06 88.56 89.94 13.92 10.89
</TABLE>
1
<PAGE>
EXHIBIT 38
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
<TABLE>
<CAPTION>
General Parameters:
States: IA IL IN KY MI MO OH
WI
IPO Date: (less than or =) 03/31/97
Asset size: (less than or =) $700,000,000 OPERATING PERFORMANCE
Most Recent Four Quarters
*
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin (1) Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%)
------------------------ ---------------------------------------------------- -
LINCOLN FEDERAL
SAVINGS BANK -- 304,500 0.69 5.53 2.84 1.82 0.17
DEFINED PARAMETERS FOR Prior to 0.60 - 4.00 - 2.25 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/97 (less
than
or =) 700,000 1.20 12.00 3.60 2.50 0.75
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FLKY First Lancaster Bancshares KY 07/01/96 53,002 1.04 3.46 4.48 2.56 0.00
MRKF Market Financial Corp. OH 03/27/97 53,653 1.09 3.15 3.95 2.27 0.01
NSLB NS&L Bancorp Inc. MO 06/08/95 62,648 0.67 3.48 3.29 2.68 0.58
CKFB CKF Bancorp Inc. KY 01/04/95 62,759 1.34 5.97 3.62 1.62 0.12
ATSB AmTrust Capital Corp. IN 03/28/95 69,106 0.18 1.68 2.82 2.87 0.57
HCFC Home City Financial Corp. OH 12/30/96 78,042 1.29 6.94 4.40 2.47 0.09
MSBF MSB Financial Inc. MI 02/06/95 79,967 1.35 8.10 4.78 2.87 0.50
KYF Kentucky First Bancorp Inc. KY 08/29/95 81,800 1.11 6.67 3.48 1.92 0.21
FFBI First Financial Bancorp Inc. IL 10/04/93 82,682 0.28 3.34 3.08 2.97 0.59
PFFC Peoples Financial Corp. OH 09/13/96 84,906 0.59 3.00 3.60 2.56 0.03
PSFI PS Financial Inc. IL 11/27/96 85,000 1.71 5.51 4.61 1.53 0.09
PCBC Perry County Financial Corp. MO 02/13/95 86,081 1.03 5.40 2.78 1.09 0.04
SFFC StateFed Financial Corp. IA 01/05/94 89,802 1.16 6.49 3.41 1.52 0.10
SOBI Sobieski Bancorp Inc. IN 03/31/95 89,848 0.57 3.89 3.36 2.34 0.13
LOGN Logansport Financial Corp. IN 06/14/95 90,264 1.50 7.90 3.79 1.43 0.23
HZFS Horizon Financial Svcs Corp. IA 06/30/94 92,710 0.70 7.11 3.20 2.28 0.48
LXMO Lexington B&L Financial Corp. MO 06/06/96 95,301 0.77 3.80 3.90 2.91 0.32
HHFC Harvest Home Financial Corp. OH 10/10/94 96,085 0.56 4.98 2.49 1.67 0.06
NWEQ Northwest Equity Corp. WI 10/11/94 96,452 1.13 9.74 3.88 2.46 0.64
CNSB CNS Bancorp Inc. MO 06/12/96 97,988 0.76 3.09 3.61 2.46 0.19
THR Three Rivers Financial Corp. MI 08/24/95 98,063 0.81 5.97 3.68 2.84 0.51
FFDF FFD Financial Corp. OH 04/03/96 100,104 0.79 3.30 3.34 2.07 0.07
FTSB Fort Thomas Financial Corp. KY 06/28/95 101,352 1.18 7.39 4.11 2.31 0.32
CIBI Community Investors Bancorp OH 02/07/95 101,734 0.95 8.17 3.55 2.05 0.17
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 109,033 1.35 5.06 3.64 1.54 0.10
FTNB Fulton Bancorp Inc. MO 10/18/96 109,622 0.95 3.88 3.81 2.56 0.43
AMFC AMB Financial Corp. IN 04/01/96 111,338 0.53 3.77 3.35 2.79 0.51
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 113,585 1.45 5.56 3.91 1.80 0.35
ASBP ASB Financial Corp. OH 05/11/95 114,907 0.95 6.09 3.24 2.04 0.24
NBSI North Bancshares Inc. IL 12/21/93 123,311 0.34 2.67 3.03 2.60 0.21
CBES CBES Bancorp Inc. MO 09/30/96 123,710 0.67 4.36 4.37 3.33 0.33
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 126,339 0.89 3.55 3.65 2.29 0.11
PTRS Potters Financial Corp. OH 12/31/93 128,149 0.69 7.69 3.35 2.48 0.28
HFSA Hardin Bancorp Inc. MO 09/29/95 133,326 0.61 5.40 2.65 1.88 0.26
RIVR River Valley Bancorp IN 12/20/96 133,848 0.83 6.48 3.94 2.83 0.60
FKKY Frankfort First Bancorp Inc. KY 07/10/95 134,485 1.19 7.01 3.12 1.30 0.04
CLAS Classic Bancshares Inc. KY 12/29/95 137,984 0.56 3.72 3.78 3.08 0.37
GTPS Great American Bancorp IL 06/30/95 148,342 0.70 3.60 4.33 3.43 0.70
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 155,924 0.69 4.23 3.38 2.22 0.49
MWBI Midwest Bancshares Inc. IA 11/12/92 159,460 0.76 10.90 2.80 1.78 0.23
FFWD Wood Bancorp Inc. OH 08/31/93 165,007 1.23 9.76 4.36 2.42 0.26
EGLB Eagle BancGroup Inc. IL 07/01/96 174,085 0.12 1.07 2.47 2.24 0.19
FBSI First Bancshares Inc. MO 12/22/93 177,946 1.10 7.95 3.60 2.03 0.29
BWFC Bank West Financial Corp. MI 03/30/95 180,354 0.53 3.76 3.06 2.60 0.50
MARN Marion Capital Holdings IN 03/18/93 193,963 1.25 5.94 4.28 2.47 0.31
PFED Park Bancorp Inc. IL 08/12/96 196,812 0.93 4.36 3.55 2.07 0.11
FFED Fidelity Federal Bancorp IN 08/31/87 197,436 -0.26 -4.07 2.80 3.05 1.38
NEIB Northeast Indiana Bancorp IN 06/28/95 203,263 1.18 8.55 3.57 1.73 0.22
FFWC FFW Corp. IN 04/05/93 203,311 0.86 9.02 3.20 1.98 0.44
FFBZ First Federal Bancorp Inc. OH 07/13/92 207,381 0.77 10.08 3.65 2.42 0.45
MBLF MBLA Financial Corp. MO 06/24/93 207,453 0.86 6.74 2.15 0.71 0.00
BFFC Big Foot Financial Corp. IL 12/20/96 209,474 0.51 2.90 3.12 2.39 0.13
LSBI LSB Financial Corp. IN 02/03/95 218,633 0.73 8.53 3.51 2.45 0.39
CMRN Cameron Financial Corp MO 04/03/95 220,784 1.13 5.36 3.78 1.96 0.11
MFFC Milton Federal Financial Corp. OH 10/07/94 235,105 0.56 4.70 2.76 1.88 0.13
FFHS First Franklin Corp. OH 01/26/88 237,679 0.70 7.65 2.71 1.78 0.20
OHSL OHSL Financial Corp. OH 02/10/93 247,853 0.79 7.32 3.07 1.94 0.17
CBK Citizens First Financial Corp. IL 05/01/96 281,068 0.41 2.93 3.38 2.67 0.33
MFBC MFB Corp. IN 03/25/94 290,936 0.78 6.28 3.23 2.03 0.19
GFCO Glenway Financial Corp. OH 11/30/90 300,448 0.87 9.21 3.22 1.97 0.30
PFDC Peoples Bancorp IN 07/07/87 304,320 1.45 9.56 3.70 1.53 0.23
WCBI Westco Bancorp Inc. IL 06/26/92 320,295 1.40 9.05 3.60 1.54 0.25
FFFD North Central Bancshares Inc. IA 03/21/96 331,124 1.49 8.18 3.64 2.14 0.89
WOFC Western Ohio Financial Corp. OH 07/29/94 357,295 0.06 0.43 2.95 2.41 0.21
WFI Winton Financial Corp. OH 08/04/88 358,573 0.90 12.34 3.10 1.84 0.15
HBFW Home Bancorp IN 03/30/95 360,286 0.83 6.68 2.81 1.39 0.08
ASBI Ameriana Bancorp IN 03/02/87 375,297 0.83 7.28 3.24 2.36 0.63
FMBD First Mutual Bancorp Inc. IL 07/05/95 379,534 0.27 1.92 3.20 2.80 0.44
INBI Industrial Bancorp Inc. OH 08/01/95 382,841 1.47 8.80 3.96 1.75 0.16
KNK Kankakee Bancorp Inc. IL 01/06/93 401,934 0.75 7.21 3.18 2.47 0.49
EFBI Enterprise Federal Bancorp OH 10/17/94 406,893 0.66 6.30 2.53 1.48 0.04
FFKY First Federal Financial Corp. KY 07/15/87 409,651 1.53 11.38 4.02 2.04 0.61
PVFC PVF Capital Corp. OH 12/30/92 418,928 1.27 17.72 3.89 2.17 0.28
CASH First Midwest Financial Inc. IA 09/20/93 421,258 0.64 5.95 3.23 1.98 0.37
HALL Hallmark Capital Corp. WI 01/03/94 428,237 0.62 8.30 2.57 1.63 0.21
CBCI Calumet Bancorp Inc. IL 02/20/92 491,961 1.97 11.86 3.96 0.79 0.25
FBCI Fidelity Bancorp Inc. IL 12/15/93 501,708 NA NA NA NA NA
PERM Permanent Bancorp Inc. IN 04/04/94 506,725 0.58 5.97 2.63 2.05 0.41
FCBF FCB Financial Corp. WI 09/24/93 515,516 1.16 8.14 3.38 1.83 0.42
AVND Avondale Financial Corp. IL 04/07/95 520,132 -0.66 -7.88 3.71 3.71 1.06
FFOH Fidelity Financial of Ohio OH 03/04/96 531,926 0.86 6.91 2.98 1.72 0.21
FDEF First Defiance Financial OH 10/02/95 582,124 0.89 4.72 4.16 2.55 0.26
MSBK Mutual Savings Bank FSB MI 07/17/92 613,798 -0.44 -7.90 1.84 2.20 0.50
EMLD Emerald Financial Corp. OH 10/05/93 617,369 1.04 12.96 2.87 1.57 0.41
FFYF FFY Financial Corp. OH 06/28/93 651,746 1.21 9.10 3.65 1.88 0.23
FNGB First Northern Capital Corp. WI 12/29/83 690,372 0.91 8.20 3.19 2.04 0.45
</TABLE>
<PAGE>
ASSET QUALITY
Most Recent Quarter
*
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
---------------------------
LINCOLN FEDERAL
SAVINGS BANK 0.57 0.03 0.47
DEFINED PARAMETERS FOR
INCLUSION IN COMPARABLE GROUP
1.00 0.15 0.12
FLKY First Lancaster Bancshares 1.70 0.55 0.32
MRKF Market Financial Corp. 0.39 0.00 0.10
NSLB NS&L Bancorp Inc. 0.19 0.00 0.08
CKFB CKF Bancorp Inc. 0.54 0.00 0.22
ATSB AmTrust Capital Corp. 1.81 0.14 0.73
HCFC Home City Financial Corp. NA 0.00 0.57
MSBF MSB Financial Inc. 0.79 0.00 0.49
KYF Kentucky First Bancorp Inc. 0.18 0.00 0.46
FFBI First Financial Bancorp Inc. 1.00 0.00 0.64
PFFC Peoples Financial Corp. NA NA NA
PSFI PS Financial Inc. NA NA 0.21
PCBC Perry County Financial Corp. 0.00 0.00 0.03
SFFC StateFed Financial Corp. NA NA NA
SOBI Sobieski Bancorp Inc. 0.29 0.17 0.22
LOGN Logansport Financial Corp. 0.26 0.00 0.27
HZFS Horizon Financial Svcs Corp. 0.92 0.02 0.42
LXMO Lexington B&L Financial Corp. 0.48 0.00 0.63
HHFC Harvest Home Financial Corp. 0.09 0.00 0.13
NWEQ Northwest Equity Corp. 1.73 0.32 0.49
CNSB CNS Bancorp Inc. 0.07 0.05 0.38
THR Three Rivers Financial Corp. 1.00 0.06 0.48
FFDF FFD Financial Corp. 0.08 0.00 0.27
FTSB Fort Thomas Financial Corp. 1.93 0.00 0.59
CIBI Community Investors Bancorp 0.56 0.01 0.55
HFFB Harrodsburg First Fin Bancorp 0.55 0.00 0.37
FTNB Fulton Bancorp Inc. 0.70 0.18 0.88
AMFC AMB Financial Corp. 0.19 0.00 0.41
DCBI Delphos Citizens Bancorp Inc. NA 0.00 NA
ASBP ASB Financial Corp. 0.14 0.00 0.70
NBSI North Bancshares Inc. 0.00 0.00 0.17
CBES CBES Bancorp Inc. NA 0.04 0.54
WEHO Westwood Homestead Fin. Corp. 0.19 0.00 0.22
PTRS Potters Financial Corp. 0.32 0.00 1.72
HFSA Hardin Bancorp Inc. 0.14 0.00 0.20
RIVR River Valley Bancorp 0.62 0.06 0.82
FKKY Frankfort First Bancorp Inc. NA NA 0.07
CLAS Classic Bancshares Inc. 0.29 0.20 0.62
GTPS Great American Bancorp 0.08 0.00 0.39
SMBC Southern Missouri Bancorp Inc. 1.49 0.12 0.83
MWBI Midwest Bancshares Inc. 0.66 0.12 0.29
FFWD Wood Bancorp Inc. 0.35 0.02 0.38
EGLB Eagle BancGroup Inc. 0.73 0.41 0.55
FBSI First Bancshares Inc. 0.87 0.00 0.29
BWFC Bank West Financial Corp. 0.44 0.08 0.16
MARN Marion Capital Holdings 1.02 0.02 1.08
PFED Park Bancorp Inc. 0.07 0.00 0.25
FFED Fidelity Federal Bancorp 0.38 0.00 2.34
NEIB Northeast Indiana Bancorp 0.18 0.01 0.65
FFWC FFW Corp. 0.33 0.08 0.37
FFBZ First Federal Bancorp Inc. 0.54 0.00 1.02
MBLF MBLA Financial Corp. 0.55 0.00 0.33
BFFC Big Foot Financial Corp. 0.09 0.00 0.14
LSBI LSB Financial Corp. NA 0.00 NA
CMRN Cameron Financial Corp 1.06 0.01 0.72
MFFC Milton Federal Financial Corp. 0.41 0.00 0.28
FFHS First Franklin Corp. 0.90 0.00 0.45
OHSL OHSL Financial Corp. 0.16 0.04 0.22
CBK Citizens First Financial Corp. NA 0.21 0.37
MFBC MFB Corp. 0.11 0.00 0.14
GFCO Glenway Financial Corp. 0.19 0.01 0.35
PFDC Peoples Bancorp 0.18 0.00 0.30
WCBI Westco Bancorp Inc. 0.44 0.00 0.28
FFFD North Central Bancshares Inc. NA NA 0.79
WOFC Western Ohio Financial Corp. 1.29 0.09 0.96
WFI Winton Financial Corp. NA 0.15 NA
HBFW Home Bancorp 0.10 0.00 0.39
ASBI Ameriana Bancorp 0.56 0.04 0.31
FMBD First Mutual Bancorp Inc. 0.33 0.02 0.39
INBI Industrial Bancorp Inc. 0.30 0.00 0.48
KNK Kankakee Bancorp Inc. 1.12 0.34 0.60
EFBI Enterprise Federal Bancorp 0.06 0.00 0.19
FFKY First Federal Financial Corp. 0.53 0.03 0.45
PVFC PVF Capital Corp. 0.69 0.21 0.66
CASH First Midwest Financial Inc. NA 0.26 NA
HALL Hallmark Capital Corp. 0.33 0.00 0.54
CBCI Calumet Bancorp Inc. 1.21 0.45 1.20
FBCI Fidelity Bancorp Inc. 0.24 0.08 0.11
PERM Permanent Bancorp Inc. 0.18 0.02 0.40
FCBF FCB Financial Corp. 0.22 0.01 0.72
AVND Avondale Financial Corp. 1.25 0.19 1.06
FFOH Fidelity Financial of Ohio 0.18 0.03 0.30
FDEF First Defiance Financial 0.29 0.08 0.49
MSBK Mutual Savings Bank FSB 0.09 0.04 0.29
EMLD Emerald Financial Corp. 0.30 0.05 0.26
FFYF FFY Financial Corp. 0.51 0.00 0.42
FNGB First Northern Capital Corp. 0.12 0.03 0.48
(1) Based on average interest-earning assets.
<PAGE>
EXHIBIT 39
KELLER & COMPANY
Dublin, Ohio
614-766-1426
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LINCOLN FEDERAL
SAVINGS BANK -- 304,500 13.82 14.49 54.25 66.56 81.05 15.73 14.05
DEFINED PARAMETERS FOR Prior to 25.00 - 45.00 - 65.00 - 7.00 -
INCLUSION IN COMPARABLE GROUP 03/31/97 * 700,000 & 30.00 & 20.00 75.00 90.00 95.00 & 30.00 20.00
ASBP ASB Financial Corp. OH 05/11/95 114,907 21.96 8.47 42.17 67.69 76.16 3.71 15.20
MWBI Midwest Bancshares Inc. IA 11/12/92 159,460 25.12 12.41 39.52 59.46 71.87 25.71 7.15
NEIB Northeast Indiana Bancorp IN 06/28/95 203,263 2.84 7.46 49.57 87.52 94.97 26.62 13.04
FFWC FFW Corp. IN 04/05/93 203,311 13.95 15.67 32.88 68.56 84.23 27.79 9.41
FFHS First Franklin Corp. OH 01/26/88 237,679 17.71 16.21 50.27 64.11 80.32 3.87 9.12
MFBC MFB Corp. IN 03/25/94 290,936 15.64 0.99 50.63 82.03 83.02 27.59 11.38
ASBI Ameriana Bancorp IN 03/02/87 375,297 18.42 6.77 60.20 71.22 78.00 3.40 12.16
HALL Hallmark Capital Corp. WI 01/03/94 428,237 19.10 12.75 42.96 66.07 78.82 27.34 7.76
FFOH Fidelity Financial of Ohio OH 03/04/96 531,926 5.91 10.96 28.17 79.66 90.62 8.24 12.41
FNGB First Northern Capital Corp. WI 12/29/83 690,372 6.21 1.38 55.06 88.56 89.94 13.92 10.89
AVERAGE 323,539 14.69 9.31 45.14 73.49 82.79 16.82 10.85
MEDIAN 264,308 16.68 9.72 46.26 69.89 81.67 19.82 11.14
HIGH 690,372 25.12 16.21 60.20 88.56 94.97 27.79 15.20
LOW 114,907 2.84 0.99 28.17 59.46 71.87 3.40 7.15
</TABLE>
* less than or = to
& less than
<PAGE>
EXHIBIT 40
KELLER & COMPANY
Dublin, Ohio
614-766-1426
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY
Most Recent Four Quarters Most Recent Quarter
*
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/ NPA/ REO/ Reserves/
Assets ROAA ROAE Margin (1) Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
---------------------------------------------------------------- ------------------------
LINCOLN FEDERAL
SAVINGS BANK -- 304,500 0.69 5.53 2.84 1.82 0.17 0.57 0.03 0.47
DEFINED PARAMETERS FOR Prior to 0.60 - 4.00 - 2.25 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/97 * 700,000 1.20 12.00 3.60 2.50 & 0.75 & 1.00 & 0.15 ^ 0.12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASBP ASB Financial Corp. OH 05/11/95 114,907 0.95 6.09 3.24 2.04 0.24 0.14 0.00 0.70
MWBI Midwest Bancshares Inc. IA 11/12/92 159,460 0.76 10.90 2.80 1.78 0.23 0.66 0.12 0.29
NEIB Northeast Indiana Bancorp IN 06/28/95 203,263 1.18 8.55 3.57 1.73 0.22 0.18 0.01 0.65
FFWC FFW Corp. IN 04/05/93 203,311 0.86 9.02 3.20 1.98 0.44 0.33 0.08 0.37
FFHS First Franklin Corp. OH 01/26/88 237,679 0.70 7.65 2.71 1.78 0.20 0.90 0.00 0.45
MFBC MFB Corp. IN 03/25/94 290,936 0.78 6.28 3.23 2.03 0.19 0.11 0.00 0.14
ASBI Ameriana Bancorp IN 03/02/87 375,297 0.83 7.28 3.24 2.36 0.63 0.56 0.04 0.31
HALL Hallmark Capital Corp. WI 01/03/94 428,237 0.62 8.30 2.57 1.63 0.21 0.33 0.00 0.54
FFOH Fidelity Financial of Ohio OH 03/04/96 531,926 0.86 6.91 2.98 1.72 0.21 0.18 0.03 0.30
FNGB First Northern Capital Corp. WI 12/29/83 690,372 0.91 8.20 3.19 2.04 0.45 0.12 0.03 0.48
AVERAGE 323,539 0.85 7.92 3.07 1.91 0.30 0.35 0.03 0.42
MEDIAN 264,308 0.85 7.93 3.20 1.88 0.22 0.26 0.02 0.41
HIGH 690,372 1.18 10.90 3.57 2.36 0.63 0.90 0.12 0.70
LOW 114,907 0.62 6.09 2.57 1.63 0.19 0.11 0.00 0.14
</TABLE>
(1) Based on average interest-earning assets.
* Less than or equal to
& Less than
^ Greater than
<PAGE>
EXHIBIT 41
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
<TABLE>
<CAPTION>
-
Number Conversion Total Int.
Earning
of (IPO) Assets Assets
Offices Exchange Date ($000) ($000)
-------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C>
SAVINGS BANK Plainfield IN 4 NA NA 304,500 291,833
COMPARABLE GROUP
ASBI Ameriana Bancorp New Castle IN 9 NASDAQ 03/02/87 375,297 362,422
ASBP ASB Financial Corp. Portsmouth OH 1 NASDAQ 05/11/95 114,907 112,765
FFWC FFW Corporation Wabash IN 4 NASDAQ 04/05/93 203,311 196,708
FFOH Fidelity Financial of Ohio, Inc. Cincinnati OH 12 NASDAQ 03/04/96 531,926 515,210
FFHS First Franklin Corporation Cincinnati OH 7 NASDAQ 01/26/88 237,679 229,075
FNGB First Northern Capital Corporation Green Bay WI 19 NASDAQ 12/29/83 690,372 652,328
HALL Hallmark Capital Corp. West Allis WI 3 NASDAQ 01/03/94 428,237 417,965
MFBC MFB Corp. Mishawaka IN 5 NASDAQ 03/25/94 290,936 280,107
MWBI Midwest Bancshares, Inc. Burlington IA 5 NASDAQ 11/12/92 159,460 154,747
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 3 NASDAQ 06/28/95 203,263 198,820
Average 6.8 323,539 312,015
Median 5.0 264,308 254,591
High 19.0 690,372 652,328
Low 1.0 114,907 112,765
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Most Recent Quarter
Total Goodwill
Net and Total Total
Loans Intang. Deposits Equity
($000) ($000) ($000) ($000)
---------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C>
SAVINGS BANK 202,683 0 211,160 42,795
COMPARABLE GROUP
ASBI Ameriana Bancorp 267,304 806 310,624 45,641
ASBP ASB Financial Corp. 77,778 0 91,017 17,462
FFWC FFW Corporation 139,394 1,531 125,256 19,129
FFOH Fidelity Financial of Ohio, Inc. 423,728 7,285 418,404 66,015
FFHS First Franklin Corporation 152,377 84 205,504 21,680
FNGB First Northern Capital Corporation 611,397 0 507,823 75,208
HALL Hallmark Capital Corp. 282,945 0 271,619 33,233
MFBC MFB Corp. 238,657 0 175,594 33,100
MWBI Midwest Bancshares, Inc. 94,809 0 105,806 11,400
NEIB Northeast Indiana Bancorp, Inc. 177,889 0 122,040 26,512
Average 246,628 971 233,369 34,938
Median 208,273 0 190,549 29,806
High 611,397 7,285 507,823 75,208
Low 77,778 0 91,017 11,400
</TABLE>
<PAGE>
EXHIBIT 42
KELLER & COMPANY
Columbus, Ohio
614-766-1426
BALANCE SHEET
ASSET COMPOSITION - MOST RECENT QUARTER
<TABLE>
<CAPTION>
As a Percent of Total Assets
*
Real
Total Cash & Net Loan Estate Goodwill Other High
Loss Risk
Assets Invest. MBS Loans Reserves Owned & Assets R.E.
Intang. Loans
($000) (%) (%) (%) (%) (%) (%) (%) (%)
--------- -------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 304,500 13.82 14.49 66.56 0.47 0.03 0.00 3.77 5.70
COMPARABLE GROUP
ASBI Ameriana Bancorp 375,297 18.42 6.77 71.22 0.31 0.04 0.21 3.12 5.09
ASBP ASB Financial Corp. 114,907 21.96 8.47 67.69 0.70 0.00 0.00 1.88 12.16
FFWC FFW Corp. 203,311 13.95 15.67 68.56 0.37 0.08 0.75 0.99 4.55
FFOH Fidelity Financial of Ohio 531,926 5.91 10.96 79.66 0.30 0.03 1.37 2.07 8.68
FFHS First Franklin Corp. 237,679 17.71 16.21 64.11 0.45 0.00 0.04 1.84 12.39
FNGB First Northern Capital Corp. 690,372 6.21 1.38 88.56 0.48 0.03 0.00 3.76 7.81
HALL Hallmark Capital Corp. 428,237 19.10 12.75 66.07 0.54 0.00 0.00 2.08 12.23
MFBC MFB Corp. 290,936 15.64 0.99 82.03 0.14 0.00 0.00 1.34 2.18
MWBI Midwest Bancshares Inc. 159,460 25.12 12.41 59.46 0.29 0.12 0.00 2.59 6.67
NEIB Northeast Indiana Bancorp 203,263 2.84 7.46 87.52 0.65 0.01 0.00 2.18 11.41
Average 323,539 14.69 9.31 73.49 0.42 0.03 0.24 2.18 8.32
Median 264,308 16.68 9.72 69.89 0.41 0.02 0.00 2.07 8.25
High 690,372 25.12 16.21 88.56 0.70 0.12 1.37 3.76 12.39
Low 114,907 2.84 0.99 59.46 0.14 0.00 0.00 0.99 2.18
ALL THRIFTS (365)
Average 1,594,275 18.63 10.46 66.84 0.58 0.58 0.28 3.01 11.71
MIDWEST THRIFTS (139)
Average 622,390 17.23 6.87 70.92 0.49 0.49 0.21 3.33 11.61
INDIANA THRIFTS (25)
Average 332,537 14.43 6.95 71.85 0.53 0.08 0.16 6.79 10.38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Interest Interest Capitalized
Non-Perf.Earning Bearing Loan
Assets Assets LiabilitiServicing
(%) (%) (%) (%)
------------------------------------------
SUBJECT
LINCOLN FEDERAL
SAVINGS BANK 0.57 95.84 85.07 0.25
COMPARABLE GROUP
<S> <C> <C> <C> <C>
ASBI Ameriana Bancorp 0.56 96.57 84.44 0.20
ASBP ASB Financial Corp. 0.14 98.14 82.40 0.00
FFWC FFW Corp. 0.33 96.75 87.99 0.00
FFOH Fidelity Financial of Ohio 0.18 96.86 87.18 0.00
FFHS First Franklin Corp. 0.90 96.38 88.49 0.10
FNGB First Northern Capital Corp. 0.12 94.49 86.98 0.06
HALL Hallmark Capital Corp. 0.33 97.60 90.20 0.00
MFBC MFB Corp. 0.11 96.28 84.43 0.00
MWBI Midwest Bancshares Inc. 0.66 97.04 90.93 0.00
NEIB Northeast Indiana Bancorp 0.18 97.81 85.72 0.00
Average 0.35 96.79 86.88 0.04
Median 0.26 96.80 87.08 0.00
High 0.90 98.14 90.93 0.20
Low 0.11 94.49 82.40 0.00
ALL THRIFTS (365)
Average 0.62 94.67 82.66 0.13
MIDWEST THRIFTS (139)
Average 0.56 95.48 82.74 0.11
INDIANA THRIFTS (25)
Average 0.58 92.65 82.69 0.05
</TABLE>
<PAGE>
EXHIBIT 43
KELLER & COMPANY
Columbus, Ohio
614-766-1426
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITY - MOST RECENT QUARTER
<TABLE>
<CAPTION>
As a Percent of Assets
*
FASB 115
Total Total Total Total Other Preferred Common Unrealized Retained
Liabilities Equity Deposits BorrowingsLiabilitieEquity Equity Gain Earnings
(Loss)
($000) ($000) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 261,705 42,795 69.35 15.73 0.87 - - 0.18 13.87
COMPARABLE GROUP
ASBI Ameriana Bancorp 329,656 45,641 82.77 3.40 1.67 0.00 12.16 0.00 6.13
ASBP ASB Financial Corp. 97,445 17,462 79.21 3.71 1.89 0.00 15.20 0.65 8.76
FFWC FFW Corp. 184,182 19,129 61.61 27.79 1.19 0.00 9.41 NA 3.97
FFOH Fidelity Financial of Ohio 465,911 66,015 78.66 8.24 0.69 0.00 12.41 NA 4.94
FFHS First Franklin Corp. 215,999 21,680 86.46 3.87 0.54 0.00 9.12 0.09 3.46
FNGB First Northern Capital Corp. 615,164 75,208 73.56 13.92 1.63 0.00 10.89 0.10 7.13
HALL Hallmark Capital Corp. 395,004 33,233 63.43 27.34 1.48 0.00 7.76 NA 3.98
MFBC MFB Corp. 257,836 33,100 60.35 27.59 0.68 0.00 11.38 0.01 7.15
MWBI Midwest Bancshares Inc. 148,060 11,400 66.35 25.71 0.79 0.00 7.15 0.24 2.84
NEIB Northeast Indiana Bancorp 176,751 26,512 60.04 26.62 0.29 0.00 13.04 NA 6.07
Average 288,601 34,938 71.24 16.82 1.08 0.00 10.85 0.18 5.44
Median 236,918 29,806 69.96 19.82 0.99 0.00 11.14 0.10 5.50
High 615,164 75,208 86.46 27.79 1.89 0.00 15.20 0.65 8.76
Low 97,445 11,400 60.04 3.40 0.29 0.00 7.15 0.00 2.84
ALL THRIFTS (365)
Average 1,465,299 128,975 69.16 15.81 2.03 0.04 12.97 0.16 5.22
MIDWEST THRIFTS (139)
Average 564,316 58,074 68.45 15.16 2.26 0.00 14.13 0.15 6.42
INDIANA THRIFTS (25)
Average 306,218 26,319 65.33 18.14 5.72 0.00 10.81 0.02 6.09
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Reg. Reg. Reg.
Total Tangible Core TangibleRisk-Based
Equity Equity Capital Capital Capital
(%) (%) (%) (%) (%)
--------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C>
SAVINGS BANK 14.04 13.87 13.87 13.87 24.68
COMPARABLE GROUP
ASBI Ameriana Bancorp 12.16 11.97 NA NA 19.21
ASBP ASB Financial Corp. 15.20 15.20 12.66 12.66 36.43
FFWC FFW Corp. 9.41 8.72 NA NA 14.71
FFOH Fidelity Financial of Ohio 12.41 11.19 NA NA 31.69
FFHS First Franklin Corp. 9.12 9.09 6.44 6.44 14.47
FNGB First Northern Capital Corp. 10.89 10.89 9.64 9.64 18.75
HALL Hallmark Capital Corp. 7.76 7.76 NA NA NA
MFBC MFB Corp. 11.38 11.38 10.49 10.49 32.65
MWBI Midwest Bancshares Inc. 7.15 7.15 6.40 6.40 15.27
NEIB Northeast Indiana Bancorp 13.04 13.04 NA NA 22.28
Average 10.85 10.64 9.13 9.13 22.83
Median 11.14 11.04 9.64 9.64 19.21
High 15.20 15.20 12.66 12.66 36.43
Low 7.15 7.15 6.40 6.40 14.47
ALL THRIFTS (365)
Average 13.00 12.81 11.07 11.18 23.35
MIDWEST THRIFTS (139)
Average 14.13 14.00 12.38 12.39 24.44
INDIANA THRIFTS (25)
Average 10.81 10.86 10.74 10.74 22.57
</TABLE>
<PAGE>
EXHIBIT 44
KELLER & COMPANY
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
<TABLE>
<CAPTION>
Net Gain Total Goodwill Net Total Non-
Interest Interest Interest Provisio(Loss) Non-Int.& Real Non-Int.Recurrin
Intang. Est.
Income Expense Income for on Sale Income Amtz. Expense Expense Expense
Loss
-----------------------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 23,843 14,762 9,081 656 426 571 0 0 5,981 0
COMPARABLE GROUP
ASBI Ameriana Bancorp 28,627 16,581 12,046 227 868 2,375 62 (34) 9,192 0
ASBP ASB Financial Corp. 8,512 4,911 3,601 (6) 5 274 0 0 2,298 0
FFWC FFW Corp. 14,589 8,591 5,998 705 371 894 164 19 3,800 0
FFOH Fidelity Financial of Ohio 38,449 23,202 15,247 98 301 1,131 687 (139) 9,168 0
FFHS First Franklin Corp. 16,838 10,720 6,118 84 398 486 44 0 4,145 0
FNGB First Northern Capital Corp. 48,483 28,031 20,452 390 755 3,080 0 0 13,629 0
HALL Hallmark Capital Corp. 32,227 21,586 10,641 800 289 919 0 0 6,847 0
MFBC MFB Corp. 20,161 11,717 8,444 57 84 543 0 0 5,439 0
MWBI Midwest Bancshares Inc. 11,202 7,069 4,133 48 437 359 0 29 2,724 0
NEIB Northeast Indiana Bancorp 15,569 8,721 6,848 327 0 635 0 0 3,379 0
Average 23,466 14,113 9,353 273 351 1,070 96 (13) 6,062 0
Median 18,500 11,219 7,646 163 336 765 0 0 4,792 0
High 48,483 28,031 20,452 800 868 3,080 687 29 13,629 0
Low 8,512 4,911 3,601 (6) 0 274 0 (139) 2,298 0
ALL THRIFTS (365)
Average 112,446 68,500 43,946 2,158 2,338 8,903 902 (9) 29,034 2,960
MIDWEST THRIFTS (139)
Average 45,335 27,208 18,127 951 573 4,294 208 (97) 12,314 913
INDIANA THRIFTS (25)
Average 22,639 13,228 9,411 801 665 1,510 (11) 43 6,490 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Net Inc.
Income Before
Before Income ExtraordExtraord.Net Core
Taxes Taxes Items Items Income Income
---------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 3,011 546 2,467 0 2,467 2,284
COMPARABLE GROUP
ASBI Ameriana Bancorp 5,870 2,060 3,810 0 3,810 3,246
ASBP ASB Financial Corp. 1,588 517 1,071 0 1,071 1,067
FFWC FFW Corp. 2,758 858 1,900 0 1,900 1,659
FFOH Fidelity Financial of Ohio 7,413 2,629 4,784 0 4,784 4,588
FFHS First Franklin Corp. 2,773 895 1,878 0 1,878 1,620
FNGB First Northern Capital Corp. 10,268 3,717 6,551 0 6,551 6,060
HALL Hallmark Capital Corp. 4,202 1,403 2,799 0 2,799 2,611
MFBC MFB Corp. 3,575 1,423 2,152 0 2,152 2,098
MWBI Midwest Bancshares Inc. 2,157 709 1,448 0 1,448 1,164
NEIB Northeast Indiana Bancorp 3,777 1,469 2,308 0 2,308 2,308
Average 4,438 1,568 2,870 0 2,870 2,642
Median 3,676 1,413 2,230 0 2,230 2,203
High 10,268 3,717 6,551 0 6,551 6,060
Low 1,588 517 1,071 0 1,071 1,067
ALL THRIFTS (365)
Average 21,088 7,937 13,151 (48) 13,104 13,521
MIDWEST THRIFTS (139)
Average 8,835 3,147 5,688 (22) 5,666 5,896
INDIANA THRIFTS (25)
Average 4,255 1,602 2,653 0 2,653 2,247
</TABLE>
<PAGE>
EXHIBIT 45
KELLER & COMPANY
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
AS A PERCENTAGE OF AVERAGE ASSETS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Net
Net Gain Total Goodwill Net Total Non- Income
Interest Interest InterestProvisio(Loss) Non-Int& Real Non-Int.RecurringBefore
Intang. Est.
Income Expense Income for on Sale Income Amtz. Expense Expense Expense Taxes
Loss
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 7.24 4.48 2.76 0.20 0.13 0.17 0.00 0.00 1.82 0.00 0.91
COMPARABLE GROUP
ASBI Ameriana Bancorp 7.35 4.25 3.09 0.06 0.22 0.61 0.02 (0.01) 2.36 0.00 1.51
ASBP ASB Financial Corp. 7.56 4.36 3.20 (0.01) 0.00 0.24 0.00 0.00 2.04 0.00 1.41
FFWC FFW Corp. 7.60 4.47 3.12 0.37 0.19 0.47 0.09 0.01 1.98 0.00 1.44
FFOH Fidelity Financial of Ohio 7.22 4.36 2.86 0.02 0.06 0.21 0.13 (0.03) 1.72 0.00 1.39
FFHS First Franklin Corp. 7.25 4.61 2.63 0.04 0.17 0.21 0.02 0.00 1.78 0.00 1.19
FNGB First Northern Capital Corp. 7.27 4.20 3.07 0.06 0.11 0.46 0.00 0.00 2.04 0.00 1.54
HALL Hallmark Capital Corp. 7.69 5.15 2.54 0.19 0.07 0.22 0.00 0.00 1.63 0.00 1.00
MFBC MFB Corp. 7.53 4.38 3.16 0.02 0.03 0.20 0.00 0.00 2.03 0.00 1.34
MWBI Midwest Bancshares Inc. 7.32 4.62 2.70 0.03 0.29 0.23 0.00 0.02 1.78 0.00 1.41
NEIB Northeast Indiana Bancorp 7.99 4.47 3.51 0.17 0.00 0.33 0.00 0.00 1.73 0.00 1.94
Average 7.48 4.49 2.99 0.09 0.11 0.32 0.02 (0.00) 1.91 0.00 1.42
Median 7.44 4.43 3.08 0.05 0.09 0.24 0.00 0.00 1.88 0.00 1.41
High 7.99 5.15 3.51 0.37 0.29 0.61 0.13 0.02 2.36 0.00 1.94
Low 7.22 4.20 2.54 (0.01) 0.00 0.20 0.00 (0.03) 1.63 0.00 1.00
ALL THRIFTS (365)
Average 7.44 4.13 3.31 0.13 0.15 0.46 0.03 (0.01) 2.28 0.06 1.45
MIDWEST THRIFTS (139)
Average 7.48 4.19 3.29 0.12 0.13 0.40 0.02 (0.01) 2.19 0.05 1.46
INDIANA THRIFTS (25)
Average 7.57 4.37 3.20 0.18 0.15 0.41 0.01 0.01 2.25 0.02 1.32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Inc.
Before
Income ExtraordExtraord. Net Core
Taxes Items Items Income Income
(%) (%) (%) (%) (%)
--------------------------------------------
SUBJECT
LINCOLN FEDERAL
SAVINGS BANK
<S> <C> <C> <C> <C> <C>
0.17 0.75 0.00 0.75 0.69
COMPARABLE GROUP
ASBI Ameriana Bancorp
ASBP ASB Financial Corp. 0.53 0.98 0.00 0.98 0.83
FFWC FFW Corp. 0.46 0.95 0.00 0.95 0.95
FFOH Fidelity Financial of Ohio 0.45 0.99 0.00 0.99 0.86
FFHS First Franklin Corp. 0.49 0.90 0.00 0.90 0.86
FNGB First Northern Capital Corp. 0.39 0.81 0.00 0.81 0.70
HALL Hallmark Capital Corp. 0.56 0.98 0.00 0.98 0.91
MFBC MFB Corp. 0.33 0.67 0.00 0.67 0.62
MWBI Midwest Bancshares Inc. 0.53 0.80 0.00 0.80 0.78
NEIB Northeast Indiana Bancorp 0.46 0.95 0.00 0.95 0.76
0.75 1.18 0.00 1.18 1.18
Average
Median 0.50 0.92 0.00 0.92 0.85
High 0.48 0.95 0.00 0.95 0.85
Low 0.75 1.18 0.00 1.18 1.18
0.33 0.67 0.00 0.67 0.62
ALL THRIFTS (365)
Average
0.52 0.94 (0.00) 0.93 0.88
MIDWEST THRIFTS (139)
Average
0.53 0.93 (0.00) 0.93 0.88
INDIANA THRIFTS (25)
Average
0.49 0.84 0.00 0.84 0.75
</TABLE>
<PAGE>
EXHIBIT 46
KELLER & COMPANY
Columbus, Ohio
614-766-1426
YIELDS, COSTS AND EARNINGS RATIOS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Yield on Cost of Net Net
Int. Earning Int. Interest Interest Core Core
Bearing
Assets Liabilities Spread Margin * ROAA ROAA ROAE ROAE
(%) (%) (%) (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 7.49 5.23 2.26 2.85 0.75 0.69 5.98 5.53
ASBI Ameriana Bancorp 7.71 5.01 2.70 3.24 0.98 0.83 8.55 7.28
ASBP ASB Financial Corp. 7.67 5.27 2.40 3.24 0.95 0.95 6.12 6.09
FFWC FFW Corp. 7.78 5.01 2.77 3.20 0.99 0.86 10.33 9.02
FFOH Fidelity Financial of Ohio 7.51 5.05 2.46 2.98 0.90 0.86 7.20 6.91
FFHS First Franklin Corp. 7.45 5.13 2.32 2.71 0.81 0.70 8.87 7.65
FNGB First Northern Capital Corp. 7.57 4.78 2.79 3.19 0.98 0.91 8.87 8.20
HALL Hallmark Capital Corp. 7.80 5.66 2.14 2.57 0.67 0.62 8.90 8.30
MFBC MFB Corp. 7.72 5.13 2.59 3.23 0.80 0.78 6.44 6.28
MWBI Midwest Bancshares Inc. 7.58 5.05 2.53 2.80 0.95 0.76 13.56 10.90
NEIB Northeast Indiana Bancorp 8.11 5.22 2.89 3.57 1.18 1.18 8.55 8.55
Average 7.69 5.13 2.56 3.07 0.92 0.85 8.74 7.92
Median 7.69 5.09 2.56 3.20 0.95 0.85 8.71 7.93
High 8.11 5.66 2.89 3.57 1.18 1.18 13.56 10.90
Low 7.45 4.78 2.14 2.57 0.67 0.62 6.12 6.09
ALL THRIFTS (365)
Average 7.74 4.90 2.85 3.44 0.93 0.88 8.38 7.77
MIDWEST THRIFTS (139)
Average 7.75 5.00 2.75 3.41 0.93 0.88 7.32 6.87
INDIANA THRIFTS (25)
Average 7.88 5.09 2.79 3.33 0.84 0.75 6.44 5.75
</TABLE>
<PAGE>
EXHIBIT 47
KELLER & COMPANY
Columbus, Ohio
614-766-1426
DIVIDENDS, RESERVES AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
DIVIDENDS
* *
12 Month 12 Month
12 Month Common Current Dividend Reserves/ Reserves/
Preferred Div./ Dividend Payout Gross Non-Perf.
Dividends Share Yield Ratio Loans Assets
($000) ($) (%) (%) (%) (%)
-----------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
SAVINGS BANK - - - - 0.70 82.25
COMPARABLE GROUP
<S> <C> <C> <C> <C> <C> <C>
ASBI Ameriana Bancorp 0 0.64 3.46 55.17 0.43 54.99
ASBP ASB Financial Corp. 0 2.40 3.20 58.82 1.03 513.38
FFWC FFW Corp. 0 0.38 2.29 28.41 NA NA
FFOH Fidelity Financial of Ohio 0 0.30 2.08 34.09 NA NA
FFHS First Franklin Corp. 0 0.28 2.07 26.45 0.69 49.39
FNGB First Northern Capital Corp. 0 0.35 2.80 47.22 0.54 400.84
HALL Hallmark Capital Corp. 0 0.00 0.00 0.00 0.82 163.10
MFBC MFB Corp. 0 0.34 1.43 32.17 0.18 131.25
MWBI Midwest Bancshares Inc. 0 0.27 2.37 18.32 0.48 43.79
NEIB Northeast Indiana Bancorp 0 0.34 1.55 23.59 0.73 NA
Average 0 0.53 2.12 32.42 0.61 193.82
Median 0 0.34 2.18 30.29 0.62 131.25
High 0 2.40 3.46 58.82 1.03 513.38
Low 0 0.00 0.00 0.00 0.18 43.79
ALL THRIFTS (365)
Average 155 0.36 1.36 24.02 0.72 121.48
MIDWEST THRIFTS (139)
Average 0 0.40 1.69 31.49 0.69 149.09
INDIANA THRIFTS (25)
Average 0 0.30 1.75 31.53 0.69 136.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVES AND SUPPLEMENTAL DATA - MOST RECENT PERIOD
Net
Chargeoffs/Provisions/ 1 Year Total
Average Net Repricing EffectivAssets/
Loans Chargeoffs Gap Tax Employee
Rate
(%) (%) (%) (%) ($000)
----------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C>
SAVINGS BANK 0.15 194 NA 18.13 4,115
COMPARABLE GROUP
ASBI Ameriana Bancorp 0.07 76.60 NA 37.07 NA
ASBP ASB Financial Corp. -0.04 NM NA 33.49 5,745
FFWC FFW Corp. NA NA NA 35.93 NA
FFOH Fidelity Financial of Ohio NA NA NA 36.54 NA
FFHS First Franklin Corp. 0.00 NM NA 32.78 4,571
FNGB First Northern Capital Corp. 0.02 403.85 NA 33.69 3,138
HALL Hallmark Capital Corp. NA NA NA 29.34 NA
MFBC MFB Corp. 0.00 NM NA 51.00 4,098
MWBI Midwest Bancshares Inc. 0.06 85.71 -13.61 31.03 3,797
NEIB Northeast Indiana Bancorp NA NA NA 38.41 NA
Average 0.02 188.72 -13.61 35.93 4,270
Median 0.01 85.71 -13.61 34.81 4,098
High 0.07 403.85 -13.61 51.00 5,745
Low -0.04 76.60 -13.61 29.34 3,138
ALL THRIFTS (365)
Average 0.07 144.13 -4.04 28.83 4,318
MIDWEST THRIFTS (139)
Average 0.09 189.02 -4.38 35.03 3,904
INDIANA THRIFTS (25)
Average 0.09 218.85 -7.45 38.07 3,509
</TABLE>
<PAGE>
EXHIBIT 48
KELLER & COMPANY
Dublin, Ohio
614-766-1426
VALUATION ANALYSIS AND CALCULATION
Lincoln Federal Savings Bank/Lincoln Bancorp
Stock Prices as of August 14, 1998
<TABLE>
<CAPTION>
Valuation assumptions: Comparable Group All Thrifts
Symbol Value Average Median Average Median
---------- ---------------- ------------------------------------------ --------------
<S> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 17.51 15.63 15.72 20.40 17.59
Post conv. price to book value P/B 68.10% 128.30% 127.42% 146.62% 129.61%
Post conv. price to assets P/A 18.75% 14.00% 14.61% 17.70% 16.58%
Post conv. price to core earnings P/CE 18.38 16.92 17.10 22.78 18.68
Pre conversion earnings ($) Y $ 2,467,000 For the twelve months ended June 30, 1998
Pre conversion book value ($) B $ 42,795,000 At June 30, 1998.
Pre conversion assets ($) A $ 304,500,000 At June 30, 1998.
Pre conversion core earnings ($) CY $ 2,284,000 For the twelve months ended June 30, 1998
Conversion expense (%) X 2.07%
Fixed asset allocation (%) FA 0.00%
ESOP stock purchase (%) E 8.00%
ESOP cost of borrowings, net (%) S 0.00%
ESOP term of borrowings (yrs.) T 20
RRP amount (%) M 4.00%
RRP term (yrs.) N 5
Tax rate (%) TAX 34.00%
Investment rate of return, net (%) R 3.47%
Investment rate of return, pretax (%) 5.25%
Foundation (%) FDN 3.70%
Tax benefit ($) BEN $ 850,000
Formulae to indicate value after conversion:
1. P/E method: Value = $ 67,527,704
P/E*Y =
1-P/E*((1-X-E-M-FDN-FA)*R-(1-TAX)*E/T-(1-TAX)*MN))
2. P/B method: Value = P/B*(B+BEN) = $ 67,545,204
1-P/B*(1-X-E-M-FDN)
3. P/A method: Value = P/A*A = $ 67,506,476
1-P/A*(1-X-E-M-FDN)
VALUATION CORRELATION AND CONCLUSIONS:
Gross Proceeds Total Number
Shares Offered Price of Public Shares Issued of Shares TOTAL
to Public Per Share to Foundation VALUE
Offering Issued
Appraised value - midrange 6,500,000 $10.00 $65,000,000 250,000 6,750,000 $67,500,000
Minimum - 85% of midrange 5,487,500 $10.00 $54,875,000 250,000 5,737,500 $57,375,000
Maximum - 115% of midrange 7,512,500 $10.00 $75,125,000 250,000 7,762,500 $77,625,000
Superrange - 115% of maximum 8,676,875 $10.00 $86,768,750 250,000 8,926,875 $89,268,750
</TABLE>
<TABLE>
<CAPTION>
P/E reconciliation: Midpoint Minimum Maximum Supermax
<S> <C> <C> <C> <C>
Appraised value 67,500,000 57,375,000 77,625,000 89,268,750
Value from P/E 57,375,000 77,625,000 89,268,750
Value from P/E - CORE 67,527,704 57,375,000 77,625,000 89,268,750
67,545,204 57,375,000 77,625,000 89,268,750
Offering net of foundation 65,000,000 54,875,000 75,125,000 86,768,750
EARNINGS Y 2,467,000 2,467,000 2,467,000 2,467,000
CORE EARNINGS CY 2,284,000 2,284,000 2,284,000 2,284,000
BOOK VALUE B 42,795,000 42,795,000 42,795,000 42,795,000
ASSETS A 304,500,000 304,500,000 304,500,000 304,500,000
REINV. RATE - NET RR 3.47% 3.47% 3.47% 3.47%
CONV. EXPENSES X 2.07% 0.00% 0.00% 0.00%
TAX RATE TAX 34.00% 34.00% 34.00% 34.00%
ESOP % E 8.00% 8.00% 8.00% 8.00%
ESOP COST OF BORR. S 0.00% 0.00% 0.00% 0.00%
ESOP TERM T 20 20 20 20
RRP % M 4.00% 4.00% 4.00% 4.00%
RRP TERM N 5 5 5 5
FOUNDATION % FDN 3.70% 3.70% 3.70% 3.70%
TAX BENEFIT BEN 850,000
FIXED ASSETS FA 0.00%
P/E PE 17.51
P/B PB 68.10%
P/A PA 18.75%
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 49
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
Stock Prices as of August 14, 1998
<TABLE>
<CAPTION>
Market Data Pricing Ratios
* *
Book Price/ Price/ Price/
Market Price/ 12 Mo. Value/ Price/ Book Price/ Tang. Core
Value Share EPS Share Earnings Value Assets Bk. Earnings
Val.
($M) ($) ($) ($) (X) (%) (%) (%) (%)
--------------------------------- ------------------------------------------
LINCOLN FEDERAL SAVINGS BANK
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appraised value - midpoint 67.50 10.00 0.59 14.69 17.51 68.10 18.75 68.46 18.38
Minimum of range 57.38 10.00 0.65 15.72 15.80 63.61 16.34 63.99 16.64
Maximum of range 77.63 10.00 0.54 13.92 19.02 71.82 21.05 72.18 19.92
Superrange maximum 89.27 10.00 0.50 13.26 20.57 75.42 23.56 75.76 21.48
ALL THRIFTS (365)
Average 233.78 19.61 1.13 13.90 20.40 146.62 17.70 152.58 22.78
Median 56.07 17.13 1.03 13.76 17.59 129.61 16.58 133.85 18.68
INDIANA THRIFTS (24)
Average 54.01 18.71 1.04 14.75 18.50 131.63 16.65 134.15 22.86
Median 34.40 17.50 1.17 14.31 16.76 123.50 16.72 134.25 19.33
COMPARABLE GROUP (10)
Average 46.31 16.55 1.08 13.00 15.63 128.30 14.00 131.43 16.92
Median 37.03 14.94 1.10 12.10 15.72 127.42 14.61 129.34 17.10
COMPARABLE GROUP
ASBI Ameriana Bancorp 60.18 18.50 1.16 14.03 15.95 131.86 16.03 134.25 18.50
ASBP ASB Financial Corp. 20.44 12.50 0.68 10.68 18.38 117.04 17.79 117.04 18.38
FFWC FFW Corp. 26.79 18.38 1.32 13.12 13.92 140.05 13.18 152.24 15.98
FFOH Fidelity Financial of Ohio 86.07 15.38 0.88 11.79 17.47 130.41 16.18 146.57 18.09
FFHS First Franklin Corp. 25.85 14.50 1.04 12.16 13.94 119.24 10.88 119.74 16.11
FNGB First Northern Capital Corp. 114.06 12.88 0.72 8.49 17.88 151.65 16.52 151.65 19.22
HALL Hallmark Capital Corp. 41.44 14.13 0.97 12.04 14.56 117.32 9.68 117.32 15.69
MFBC MFB Corp. 37.77 23.75 1.29 20.81 18.41 114.13 12.98 114.13 18.85
MWBI Midwest Bancshares Inc. 14.18 13.50 1.31 10.85 10.31 124.42 8.90 124.42 12.86
NEIB Northeast Indiana Bancorp 36.29 22.00 1.42 16.07 15.49 136.90 17.85 136.90 15.49
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dividends Financial Ratios
* *
Div./ Dividend Payout Equity/ Core Core
Share Yield Ratio Assets ROAA ROAE
($) (%) (%) (%) (%) (%)
------------------------- -----------------------
LINCOLN FEDERAL SAVINGS BANK
<S> <C> <C> <C> <C> <C> <C>
Appraised value - midpoint 0.00 0.00 0.00 27.54 1.05 3.80
Minimum of range 0.00 0.00 0.00 25.69 1.00 3.91
Maximum of range 0.00 0.00 0.00 29.31 1.09 3.71
Superrange maximum 0.00 0.00 0.00 31.24 1.13 3.62
ALL THRIFTS (365)
Average 0.45 1.67 30.64 13.00 0.88 7.77
Median 0.30 1.65 30.33 10.71 0.86 7.23
INDIANA THRIFTS (24)
Average 0.30 1.75 31.53 10.81 0.75 5.75
Median 0.30 1.55 28.42 11.92 0.80 6.14
COMPARABLE GROUP (10)
Average 0.53 2.12 32.42 10.85 0.85 7.92
Median 0.34 2.18 30.29 11.14 0.85 7.93
COMPARABLE GROUP
ASBI Ameriana Bancorp 0.64 3.46 55.17 12.16 0.83 7.28
ASBP ASB Financial Corp. 2.40 3.20 58.82 15.20 0.95 6.09
FFWC FFW Corp. 0.38 2.29 28.41 9.41 0.86 9.02
FFOH Fidelity Financial of Ohio 0.30 2.08 34.09 12.41 0.86 6.91
FFHS First Franklin Corp. 0.28 2.07 26.45 9.12 0.70 7.65
FNGB First Northern Capital Corp. 0.35 2.80 47.22 10.89 0.91 8.20
HALL Hallmark Capital Corp. 0.00 0.00 0.00 7.76 0.62 8.30
MFBC MFB Corp. 0.34 1.43 32.17 11.38 0.78 6.28
MWBI Midwest Bancshares Inc. 0.27 2.37 18.32 7.15 0.76 10.90
NEIB Northeast Indiana Bancorp 0.34 1.55 23.59 13.04 1.18 8.55
</TABLE>
<PAGE>
EXHIBIT 50
KELLER & COMPANY
Dublin,
Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MINIMUM of the Range
<TABLE>
<CAPTION>
1. Gross Conversion Proceeds
<S> <C>
Minimum market value (1) $ 54,875,000
Less: Estimated conversion expenses 1,304,000
Net conversion proceeds $ 53,571,000
2. Generation of Additional Income
Net conversion proceeds $ 53,571,000
Less: Proceeds not invested (2) 4,590,000
Total conversion proceeds invested $ 48,981,000
Investment rate 3.47%
Earnings increase - return on proceeds invested $ 1,697,192
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 151,470
Less: RRP expense, net of taxes 302,940
Net earnings increase $ 1,242,782
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 06/30/98 $ 2,467,000 2,284,000
Net earnings increase 1,242,782 1,242,782
After conversion $ 3,709,782 3,526,782
</TABLE>
<TABLE>
<CAPTION>
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
<S> <C> <C>
Before conversion - 06/30/98 $ 42,795,000 42,249,000
Net cash conversion proceeds (4) 47,408,500 47,408,500
After conversion $ 90,203,500 89,657,500
5. Comparative Net Assets
Before conversion - 06/30/98 $ 304,500,000
Conversion proceeds (5) 46,686,000
After conversion $ 351,186,000
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 51
KELLER & COMPANY
Dublin, Ohio
614-766-1426
<TABLE>
<CAPTION>
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MIDPOINT of the Range
<S> <C> <C>
1. Gross Conversion Proceeds
Midpoint market value (1) $ 65,000,000
Less: Estimated conversion expenses 1,400,000
Net conversion proceeds $ 63,600,000
2. Generation of Additional Income
Net conversion proceeds $ 63,600,000
Less: Proceeds not invested (2) 5,400,000
Total conversion proceeds invested $ 58,200,000
Investment rate 3.47%
Earnings increase - return on proceeds invested $ 2,016,630
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 178,200
Less: RRP expense, net of taxes 356,400
Net earnings increase $ 1,482,030
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 06/30/98 $ 2,467,000 2,284,000
Net earnings increase 1,482,030 1,482,030
After conversion $ 3,949,030 3,766,030
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
Before conversion - 06/30/98 $ 42,795,000 42,249,000
Conversion proceeds (4) 56,350,000 56,350,000
After conversion $ 99,145,000 98,599,000
5. Comparative Net Assets
Before conversion - 06/30/98 $ 304,500,000
Conversion proceeds (5) 55,500,000
After conversion $ 360,000,000
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 52
KELLER & COMPANY
Dublin, Ohio
614-766-1426
<TABLE>
<CAPTION>
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MAXIMUM of the Range
<S> <C> <C>
1. Gross Conversion Proceeds
Maximum market value (1) $ 75,125,000
Less: Estimated conversion expenses 1,496,000
Net conversion proceeds $ 73,629,000
2. Generation of Additional Income
Net conversion proceeds $ 73,629,000
Less: Proceeds not invested (2) 6,210,000
Total conversion proceeds invested $ 67,419,000
Investment rate 3.47%
Earnings increase - return on proceeds invested $ 2,336,068
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 204,930
Less: RRP expense, net of taxes 409,860
Net earnings increase $ 1,721,278
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 06/30/98 $ 2,467,000 2,284,000
Net earnings increase 1,721,278 1,721,278
After conversion $ 4,188,278 4,005,278
4. Comparative Net Worth (3) Total Tangible
------------- -----------------
Before conversion - 06/30/98 $ 42,795,000 42,249,000
Conversion proceeds (4) 65,291,500 65,291,500
After conversion $ 108,086,500 107,540,500
5. Comparative Net Assets
Before conversion - 06/30/98 $ 304,500,000
Conversion proceeds (5) 64,314,000
After conversion $ 368,814,000
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 53
KELLER & COMPANY
Dublin, Ohio
614-766-1426
<TABLE>
<CAPTION>
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the SUPERRANGE Maximum
<S> <C> <C>
1. Gross Conversion Proceeds
Superrange market value (1) $ 86,768,750
Less: Estimated conversion expenses 1,606,000
Net conversion proceeds $ 85,162,750
2. Generation of Additional Income
Net conversion proceeds $ 85,162,750
Less: Proceeds not invested (2) 7,141,500
Total conversion proceeds invested $ 78,021,250
Investment rate 3.47%
Earnings increase - return on proceeds invested $ 2,703,436
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 235,670
Less: RRP expense, net of taxes 471,339
Net earnings increase $ 1,996,428
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 06/30/98 $ 2,467,000 2,284,000
Net earnings increase 1,996,428 1,996,428
After conversion $ 4,463,428 4,280,428
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
Before conversion - 06/30/98 $ 42,795,000 42,249,000
Conversion proceeds (4) 75,574,625 75,574,625
After conversion $ 118,369,625 117,823,625
5. Comparative Net Assets
Before conversion - 06/30/98 $ 304,500,000
Conversion proceeds (5) 74,450,500
After conversion $ 378,950,500
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 54
KELLER & COMPANY
Dublin, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
Premium or (discount)
from comparable group.
--------------------------
Lincoln Average Median
Federal
Midpoint:
Price/earnings 17.51 x 12.03% 11.40%
Price/book value 68.10 % (46.92)% (46.55)%
Price/assets 18.75 % 33.95% 28.39%
Price/tangible book value 68.46 % (47.91)% (47.07)%
Price/core earnings 18.38 x 8.68% 7.51%
Minimum of range:
Price/earnings 15.80 x 1.11% 0.54%
Price/book value 63.61 % (50.42)% (50.08)%
Price/assets 16.34 % 16.70% 11.86%
Price/tangible book value 63.99 % (51.31)% (50.52)%
Price/core earnings 16.64 x (1.62)% (2.67)%
Maximum of range:
Price/earnings 19.02 x 21.70% 21.01%
Price/book value 71.82 % (44.02)% (43.63)%
Price/assets 21.05 % 50.35% 44.11%
Price/tangible book value 72.18 % (45.08)% (44.19)%
Price/core earnings 19.92 x 17.73% 16.47%
Super maximum of range:
Price/earnings 20.57 x 31.60% 30.85%
Price/book value 75.42 % (41.22)% (40.81)%
Price/assets 23.56 % 68.28% 61.29%
Price/tangible book value 75.76 % (42.35)% (41.42)%
Price/core earnings 21.48 x 26.95% 25.59%
<PAGE>
EXHIBIT A
PROFILE OF THE FIRM
KELLER & COMPANY, INC. is a full service consulting firm to financial
institutions, serving clients throughout the United States from its office
in Dublin, Ohio. The firm consults primarily in the areas of regulatory
and compliance matters, financial analysis and strategic planning, stock
valuations and appraisals, mergers and acquisitions, mutual to stock
conversions, conversion/mergers and branching. Since its inception in
1985, KELLER & COMPANY has provided a wide range of consulting services to
over 100 financial institutions including thrifts, banks, mortgage
companies and holding companies. KELLER & COMPANY is an affiliate member
of the Community Bankers of America, Community Bankers Association of
Ohio, the Ohio League of Financial Institutions, and the Tri State League
of Financial Institutions.
Each of the firm's senior consultants has over eighteen years front line
experience and accomplishment in various areas of the financial
institution and real estate industries. Each consultant provides to
clients distinct and diverse areas of expertise. Specific services and
projects have included financial institution charter and deposit insurance
applications, market studies, institutional mergers and acquisitions,
branch sales and acquisitions, operations and performance analyses,
business plans, strategic planning, financial projections and modeling,
stock valuations, fairness opinions, conversion appraisals, capital plans,
policy development and revision, lending, underwriting and investment
criteria, data processing and management information systems, and
incentive compensation programs.
It is the goal of KELLER & COMPANY to provide specific and ongoing
services that are pertinent and responsive to the needs of the individual
client institution within the changing industry environment, and to offer
those services at reasonable fees on a timely basis. In recent years,
KELLER & COMPANY has become one of the leading consulting firms in the
nation.
<PAGE>
CONSULTANTS IN THE FIRM
MICHAEL R. KELLER has over twenty years experience as a consultant to the
financial institution industry. Immediately following his graduation from
college, he was employed by the Ohio Division of Financial Institutions, working
for two years in the northeastern Ohio district as an examiner of financial
institutions before pursuing graduate studies at the Ohio State University.
Mr. Keller later worked as an associate for a management consulting firm
specializing in services to financial institutions. During his eight years with
the firm, he specialized in mergers and acquisitions, branch acquisitions and
sales, branch feasibility studies, stock valuations, charter applications, and
site selection analyses. By the time of his departure, he had attained the
position of vice president, with experience in almost all facets of banking
operations.
Prior to forming Keller & Company, Mr. Keller also worked as a senior consultant
in a larger consulting firm. In that position, he broadened his activities and
experience, becoming more involved with institutional operations, business and
strategic planning, regulatory policies and procedures, conversion appraisals,
and fairness opinions. Mr. Keller established the firm in November 1985 to
better serve the needs of the financial institution industry.
Mr. Keller graduated from Wooster College with a B.A. in Economics in 1972, and
later received an M.B.A. in Finance in 1976 from the Ohio State University where
he took two courses in corporate stock valuations.
<PAGE>
Consultants in the Firm (cont.)
JOHN A. SHAFFER has over twenty years experience in banking, finance, real
estate lending, and development.
Following his university studies, Mr. Shaffer served as a lending officer for a
large real estate investment trust, specializing in construction and development
loans. Having gained experience in loan underwriting, management and workout, he
later joined Chemical Bank of New York and was appointed Vice President for Loan
Administration of Chemical Mortgage Company in Columbus, Ohio. At Chemical, he
managed all commercial and residential loan servicing, administering a portfolio
in excess of $2 billion. His responsibilities also included the analysis,
management and workout of problem commercial real estate loans and equity
holdings, and the structuring, negotiation, acquisition and sale of loan
servicing, mortgage and equity securities and real estate projects. Mr. Shaffer
later formed and managed an independent real estate and financial consulting
firm, serving corporate and institutional clients, and also investing in and
developing real estate.
Mr. Shaffer's primary activities and responsibilities have included financial
analysis, projection and modeling, asset and liability management, real estate
finance and development, loan management and workout, organizational and
financial administration, budgeting, cash flow management and project design.
Mr. Shaffer graduated from Syracuse University with a B.S. in Business
Administration, later receiving an M.B.A. in Finance and a Ph.D. in Economics
from New York University.
<PAGE>
Consultants in the Firm (cont.)
JAMES E. CAMPBELL has over twenty-five years experience in the banking and
thrift industry. He served in upper management and was involved in asset and
liability management, lending policy, retail management, public policy and
Community Reinvestment Act policy.
From 1969 to 1991, Mr. Campbell was employed by National City Bank of Columbus,
Ohio. He was appointed Executive Vice President of the Retail Banking Group in
1984. He had management responsibility for 135 banking officers with over 1,500
associates in Central and Southern Ohio. He also managed the consumer and real
estate functions of the Bank.
Mr. Campbell became Chairman, President and Chief Executive Officer of Jefferson
Savings Bank, West Jefferson, Ohio in 1993 and remained with them until the bank
was sold in 1997.
Mr. Campbell graduated from Stonier School of Bank, Rutgers University in 1979.
<PAGE>
EXHIBIT B
RB 20
CERTIFICATION
I hereby certify that I have not been the subject of any criminal,
civil or administrative judgments, consents, undertakings or orders, or
any past administrative proceedings (excluding routine or customary
audits, inspections and investigation) issued by any federal or state
court, any department, agency, or commission of the U.S. Government,
any state or municipality, any self-regulatory trade or professional
organization, or any foreign government or governmental entity, which
involve:
(i) commission of a felony, fraud, moral turpitude, dishonesty or
breach of trust;
(ii) violation of securities or commodities laws or regulations;
(iii) violation of depository institution laws or regulations;
(iv) violation of housing authority laws or regulations;
(v) violation of the rules, regulations, codes or conduct or
ethics of a self-regulatory trade or professional
organization;
(vi) adjudication of bankruptcy or insolvency or appointment of a
receiver, conservator, trustee, referee, or guardian.
I hereby certify that the statements I have made herein are true, complete and
correct to the best of my knowledge and belief.
Conversion Appraiser
September 15, 1998 /s/ Michael R. Keller
- ------------------------------ ------------------------------------
Date Michael R. Keller
<PAGE>
EXHIBIT C
AFFIDAVIT OF INDEPENDENCE
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
I, Michael R. Keller, being first duly sworn hereby depose and say
that:
The fee which I received directly from the applicant, Lincoln Federal
Savings Bank, Plainfield, Indiana, in the amount of $25,000 for the performance
of my appraisal was not related to the value determined in the appraisal and
that the undersigned appraiser is independent and has fully disclosed any
relationships which may have a material bearing upon the question of my
independence; and that any indemnity agreement with the applicant has been fully
disclosed.
Further, affiant sayeth naught.
MICHAEL R. KELLER
Sworn to before me and subscribed in my presence this 15th day of
September 1998.
NOTARY PUBLIC
Please Detach, Sign, & Return ALL Proxies in the enclosed blue envelope. Failure
to vote is effectively the same as a "NO" vote.
Lincoln Bancorp
Proposed Holding Company for Lincoln Federal Savings Bank
Conversion Center
P.O. Box 720
1121 East Main Street
Plainfield, Indiana 46168
(317) 837-5036
Stock Order Form
Deadline: The Subscription Offering ends at 12:00 Noon, Plainfield time, on
Xxxxx xx, 1998 (the "Deadline"). Your original Stock Order Form and
Certification Form, properly executed and with the correct payment, must be
received (not postmarked) at the address on the top of this form by the
Deadline, or it will be considered void. Faxes or copies of this form will not
be accepted.
(1) Number of Shares price per share (2) Total Amount Due
x $10.00 =
Minimum - 25 Shares Maximum - See Instructions or Prospectus
- --------------------------------------------------------------------------------
Method of Payment
(3) [ ] Enclosed is a check, bank draft or money order payable to Lincoln
Bancorp, Inc. for $______________.
(4) [ ] I authorize Lincoln Federal Savings Bank to make withdrawals from my
certificate or savings account (s) shown below, and understand that the
amounts will not otherwise be available for withdrawal:
Account Number (s) Amount (s)
----------------------- -----------------------
----------------------- -----------------------
----------------------- -----------------------
----------------------- -----------------------
Total Withdrawal
----------------------- -----------------------
There is NO penalty for early withdrawal.
- --------------------------------------------------------------------------------
(5) [ ] Check here if you are a director, officer or employee of Lincoln
Federal Savings Bank or a member of such person's immediate family
(same household).
- --------------------------------------------------------------------------------
(6) [ ] NASD Affiliation - see description on reverse side hereof.
<PAGE>
- --------------------------------------------------------------------------------
(7) [ ] Associate - Acting in Concert Check here, and complete the reverse side
of this form, if you or any associates or persons acting in concert
with you have submitted other orders for shares in the Subscription
Offering.
- --------------------------------------------------------------------------------
These account numbers correspond to the preprinted registration in the top
left hand corner of this form.
These may not be all of your qualifying accounts.
You must list any account numbers from other stock order forms you have
received in the mail and any other accounts that you have or have had at
Lincoln Bancorp, Inc.
- --------------------------------------------------------------------------------
(8) Purchaser Information (check one)
a. [ ] Eligible Account Holder Check here if you were a depositor with $50.00
or more on deposit with Lincoln Federal Savings Bank as of 6/30/97.
Enter information below for all deposit accounts that you had at
Lincoln Federal Savings Bank on 6/30/97.
b. [ ] Supplemental Eligible Account Holder - Check here if you were a
depositor with $50.00 or more on deposit with Lincoln Federal Savings
Bank as of 9/30/98 but are not an Eligible Account Holder. Enter
information below for all deposit accounts that you had at Lincoln
Federal Savings Bank on 9/30/98
c. [ ] Other Member - Check here if you were a depositor of Lincoln Federal
Savings Bank as of x/xx/98 or a Supplemental Eligible Account Holder or
were a borrower of Lincoln Federal Savings Bank as of xx/xx/98 whose
loan was in existence on 6/19/84, but are not an Eligible Account
Holder or a Supplemental Eligible Account Holder. Enter information
below for all deposit accounts and/or loan accounts that you had at
Lincoln Federal Savings Bank on xx/xx/98.
d. [ ] Local Community - Check here if you are a permanent resident of
Hendricks, Montgomery or Clinton County, Indiana
================================================================================
<PAGE>
================================================================================
Account Title (Names on Account) Account Number (s)
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
Please Note: Failure to list all of your accounts may result in the loss of part
or all of your subscription rights. (additional space provided on back of form)
(9) Stock Registration - Please Print Legibly and Fill Out Completely
(Note: The Stock Certificate and all correspondence related to this
stock order will be mailed to the address provided below)
[ ] Individual
[ ] Joint Tenants
[ ] Tenants in Common
[ ] Uniform Transfer to Minors
[ ] Uniform Gift to Minors
[ ] Corporation
[ ] Partnership
[ ] Individual Retirement Account
[ ] Fiduciary/Trust (Under Agreement Dated _________________)
================================================================================
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Mailing Daytime
Address Telephone
- --------------------------------------------------------------------------------
Zip Evening
City State Code County Telephone
- --------------------------------------------------------------------------------
================================================================================
Acknowledgment By signing below, I acknowledge receipt of the Prospectus dated
Xxxxxxxx xx, 1998 and understand I may not change or revoke my order once it is
received by Lincoln Bancorp. I also certify that this stock order is for my
account and there is no agreement or understanding regarding any further sale or
transfer of these shares. Applicable regulations prohibit any persons 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 person. Lincoln Bancorp, Inc. will pursue
any and all legal and equitable remedies in the event it becomes aware of the
transfer of subscription rights and will not honor orders known by it to involve
such transfer. Under penalties of perjury, I further certify that: (1) the
social security number or taxpayer identification number given above is correct
and (2) I am not subject to backup withholding. You must cross out this item (2)
above if you have been notified by the Internal Revenue Service that you are
subject to backup withholding because of under-reporting interest or dividends
on your tax return. By signing below, I also acknowledge that I have not waived
any rights under the Securities Act of 1933 and the Securities Exchange Act of
1934.
<PAGE>
Signature: THIS FORM MUST BE SIGNED AND DATED TWICE: Here and on the
Certification Form. This order is not valid if the Stock Order Form and
Certification Form are not both signed. Your order will be filled in accordance
with the provisions of the prospectus. An additional signature is required only
if payment is by withdrawal from an account that requires more than one
signature to withdraw funds.
================================== FOR OFFICE
Signature Date USE
Batch #_______
- ----------------------------------
Signature Date Date Rec'd _____/____/_____
Amount $ _______________
================================== - ________________Order #
Check # ___________
Category ___________
Deposit $ ___________
<PAGE>
Lincoln Bancorp
Item (6) continued - NASD Affiliation (This section only applies to those
individuals who meet the delineated criteria) Check box if you are a member of
the National Association of Securities Dealers, Inc. ("NASD"), a person
associated with an NASD member, a member of the immediate family of any such
person to whose support such person contributes, directly or indirectly, or the
holder of an account in which an NASD member or person associated with an NASD
member has a beneficial interest. To comply with conditions under which an
exemption from the NASD's Interpretation With Respect to Free-Riding and
Withholding is available, you agree, if you have checked the NASD affiliation
box: (1) not to sell, transfer or hypothecate the stock for a period of three
months following the issuance and (2) to report this subscription in writing to
the applicable NASD member within one day of the payment therefor.
Item (9) continued; Purchaser Information
Account Title (Names on Account) Account Number (s)
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
Item (7) continued; Associates - Acting in Concert
Number of
Associates Listed on other Stock Orders Shares Ordered
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
-------------------------------------- -----------------------
CERTIFICATION FORM
(This Certification Must Be Signed In Addition to the Stock Order Form On
Reverse Hereof)
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, OF
LINCOLN BANCORP, INC. IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT FEDERALLY
INSURED, AND IS NOT GUARANTEED BY LINCOLN FEDERAL SAVINGS BANK OR BY THE FEDERAL
GOVERNMENT.
If anyone asserts that the shares of common stock are federally insured or
guaranteed, or are as safe as an insured deposit, I should call the Office of
Thrift Supervision Central Regional Director, Ronald N. Karr, at (312) 917-5000.
I further certify that, before purchasing the shares of common stock of Lincoln
Bancorp, Inc., I received a copy of the Prospectus dated Xxxxxxx xx, 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 15 of the Prospectus:
1. Commercial Real Estate and Multi-Family Lending
2. Risks Related to Construction Loans
3. Geographic Concentration of Loans
4. Competition in Primary Market Area
5. Market for Common Stock
6. Allowance for Loan Losses
7. Dependence on New Management
8. Anti-Takeover Provisions and Statutory Provisions That Could Discourage
Hostile Acquisitions of Control
9. Lack of Active Market for Common Stock
10. Decreased Return on Average Equity and Increased Expenses Immediately
After Conversion Which Could Adversely Affect Trading Price of Common
Stock
11. Limited Growth Potential and Difficulty in Fully Leveraging Capital
12. Potential Impact of Changes in Interest Rates and the Current Interest
Rate Environment
13. Possible Voting Control by Directors and Officers
14. Possible Dilutive Effect of RRP and Stock Options
15. Financial Institution Regulation and Future of the Thrift Industry
16. Impact of Proposed Legislation on Holding Company Activities
17. Restrictions on Repurchase of Shares
18. Risk of Delayed Offering
19. Income Tax Consequences of Subscription Rights
20. Year 2000 Compliance
21. Establishment of the Foundation
Signature Date Signature Date
(Note: If shares are to be held jointly, both parties must sign)
THE COMMON SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
Lincoln Bancorp
Stock Ownership Guide and Stock Order Form Instructions
Stock Order Form Instructions
- --------------------------------------------------------------------------------
Item 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 ordered by the subscription price of $10.00 per share. The minimum number
of shares that may be subscribed for is 25. Each eligible Account Holder,
Supplemental Eligible Account Holder and Voting Member may purchase in the
Subscription Offering not more than 25,000 Common Shares. No person, together
with associates of and persons acting in concert with such person may purchase
more than 68,093 shares of the Common Stock offered, exclusive of any shares
issued pursuant to an increase in the Estimated Price Range up to 15% (5,895,000
shares). Except for the ESOP, which may purchase up to 8% of the total Common
Shares sold in the Offering. Lincoln Bancorp, reserves the right to reject any
order received in the Community Offering, if any, in whole or in part.
Item 3 - Payment for shares may be made by check, bank draft or money order
payable to Lincoln Bancorp, DO NOT MAIL CASH. Your funds will earn interest at
Lincoln Federal Savings Bank's passbook rate, which is currently 3.06%.
Item 4 - To pay by withdrawal from a savings account or certificate of deposit
at Lincoln Federal Savings Bank, insert the account number(s) and the amount(s)
you wish to withdraw from each account. If more than one signature is required
to withdraw, each must sign in the signature box on the front of this form. To
withdraw from an account with checking privileges, please write a check. No
early withdrawal penalty will be charged on funds used to purchase stock. A hold
will be placed on the account(s) for the amount(s) you show. Payments will
remain in the account(s) until the stock offering closes. If a partial
withdrawal reduces the balance of a certificate account to less than the
applicable minimum, the remaining balance will be refunded.
Item 5 - Please check this box to indicate whether you are a director, officer
or employee of Lincoln Federal Savings Bank or a member of such person's
immediate family living in the same household.
Item 6 - Please check this box if you are a NASD Affiliate (see definition on
order form).
Item 7- Please check this box and provide the information on the back of the
Stock Order Form regarding orders submitted by your associates or persons acting
in concert with you.
Item 8 - Please check the appropriate box if you were:
a) A depositor with $50.00 or more on deposit at Lincoln Federal
Savings Bank as of xx/xx/98. Enter information below for all
deposit accounts that you had at Lincoln Federal Savings Bank
on 6/30/97.
b) A depositor at Lincoln Federal Savings Bank as of 9/30//98,
but are not an Eligible Account Holder. Enter information
below for all deposit accounts that you had at Lincoln Federal
Savings Bank on 9/30/98.
c) A depositor of Lincoln Federal Savings Bank as of xx/xx/98 or
a Supplemental Eligible Account Holder or were a borrower of
Lincoln Federal Savings Bank as of xx/xx/98 whose loan was in
existence on 6/19/84, but are not an Eligible Account Holder
or a Supplemental Eligible Account Holder. Enter information
below for all deposit accounts and/or loan accounts that you
had at Lincoln Federal Savings Bank on xx/xx/98.
Item 9 - The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of Lincoln Bancorp
common stock. Please complete this section as fully and accurately as possible,
and be certain to supply your social security or Tax I.D. number(s) and your
daytime and evening phone numbers. We will need to call you if we cannot execute
your order as given. If you have any questions regarding the registration of
your stock, please consult your legal advisor. Subscription rights are not
transferable. If you are a qualified member, to protect your priority over other
purchasers as described in the Prospectus, you must take ownership in at least
one of the account holder's names.
Stock Ownership Guide
- --------------------------------------------------------------------------------
Individual - The Stock is to be registered in an individual's name only. You may
not list beneficiaries for this ownership.
Joint Tenants - Joint tenants with rights of survivorship identifies two or more
owners. When stock is held by joint tenants with rights of survivorship,
ownership automatically passes to the surviving joint tenant(s) upon the death
of any joint tenant. You may not list beneficiaries for this ownership.
Tenants in Common - Tenants in common may also identify two or more owners. When
stock is to be 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. You may not list beneficiaries for this
ownership.
Uniform Gift to Minors - For residents of many states, stock may by held in the
name of a custodian for the benefit of a minor under the Uniform Gift to Minors
Act. For residents in other states, stock may be held in a similar type of
ownership under the Uniform Transfer to Minors Act of the individual state. For
either ownership, the minor is the actual owner of the stock with the adult
custodian being responsible for the investment until the child reaches legal
age. FOR PURCHASES IN THE SUBSCRIPTION OFFERING, THE MINOR MUST BE THE ACCOUNT
HOLDER, NOT THE CUSTODIAN. Only one custodian and one minor may be designated.
Instructions: On the first name line, print the first name, middle initial and
last name of the custodian, with the abbreviation "CUST" after the name. Print
the first name, middle initial and last name of the minor on the second Name
line. Use the minor's social security number.
Corporation/Partnership - Corporations and Partnerships may purchase stock.
Please provide the Corporation/Partnership's legal name and Tax I.D. To have
depositor rights, the Corporation/Partnership must have an account in the legal
name. Please contact the Stock Information Center to verify depositor rights and
purchase limitations.
Individual Retirement Account - Individual Retirement Account ("IRA") holders
may make stock purchases from their deposits through a prearranged
"trustee-to-trustee" transfer. Stock may only be held in a self-directed IRA.
Lincoln Federal Savings Bank does not offer a self-directed IRA. Please contact
the Stock Information Center if you have any questions about your IRA account.
Fiduciary/Trust - Generally, fiduciary relationships (such as Trusts, Estates,
Guardianships, etc.) are established under a form of trust agreement or pursuant
to a court order. Without a legal document establishing a fiduciary
relationship, your stock may not be registered in a fiduciary capacity.
Instructions: On the first name line, print the first name, middle initial and
last name of the fiduciary if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the first name line. Following the
name, print the fiduciary title such as trustee, executor, personal
representative, etc. On the second name line, print the name of the maker ,
donor or testator or the name of the beneficiary. Following the name, indicate
the type of legal document establishing the fiduciary relationship (agreement,
court order, etc.). In the blank after "Under Agreement Dated", fill in the date
of the document governing the relationship. The date of the document need not be
provided for a trust created by a will.
APPRAISAL REPORT UPDATE
Prepared for:
Lincoln Federal Savings Bank
and
Lincoln Bancorp
As Of:
October 23, 1998
<PAGE>
October 30, 1998
Board of Directors
Lincoln Federal Savings Bank
1121 East Main Street
Plainfield, IN 46168
Gentlemen:
We hereby submit an independent appraisal update ("Update") of the pro forma
market value of the to-be-issued stock of Lincoln Bancorp (the "Corporation"),
which is the newly formed holding company of Lincoln Federal Savings Bank
("Lincoln Federal" or the "Bank"). The Corporation will hold all of the shares
of the common stock of the Bank. Such stock is to be issued in connection with
the Bank's conversion from a federally chartered mutual savings and loan
association to a federally chartered capital stock savings and loan association
in accordance with the Bank's plan of conversion. This Update of the Bank's pro
forma market value as of October 23, 1998, was prepared after a review of our
original appraisal report as of August 14, 1998, ("Original Appraisal") and is
being submitted to the Office of Thrift Supervision as an update of the Original
Appraisal.
This Update is based on conversations with the management of Lincoln Federal,
the law firm of Barnes & Thornburg, Indianapolis, Indiana, the Bank's conversion
counsel, and Charles Webb & Company, Dublin, Ohio, the Bank's underwriter. As in
the preparation of the Original Appraisal, we believe the data and information
used herein are accurate and reliable, but we cannot guarantee the accuracy of
such data.
In preparing this Update, we have given consideration to current market
conditions, the recent performance of Lincoln Federal and the recent performance
of publicly-traded thrift institutions, including those institutions in Lincoln
Federal's comparable group, and recently converted thrift institutions. The
comparable group was screened to eliminate any institutions involved in
merger/acquisition activities, but none of the comparable group institutions was
eliminated due to such involvement. Further investigation into
merger/acquisition activity involving publicly-traded thrift institutions in
Lincoln Federal's city, county and market area revealed no institutions involved
in such activity, as indicated in Exhibit 1.
<PAGE>
Board of Directors
Lincoln Federal Savings Bank
October 30, 1998
Page 2
We have recognized a lower reinvestment rate of 4.50 percent before taxes in
this Update, decreasing from 5.25 percent in the Original Appraisal, based on
current short term interest rates. We have also recognized a reduction of the
Bank's contribution to the charitable foundation from $2.5 million or 200 shares
in the Original Appraisal to $2.0 million or 200,000 shares in this Update.
We have updated the three valuation methods used in the Original Appraisal based
on Lincoln Federal's September 30, 1998, financials and using the stock prices
of publicly-traded thrift institutions as of October 23, 1998. Exhibits 2 and 3
provide stock prices, key valuation ratios and other pertinent data for all
publicly-traded, FDIC-insured thrift institutions excluding mutual holding
companies. Exhibits 4 and 5 provide stock prices, key valuation ratios and other
pertinent data for all publicly-traded, FDIC-insured mutual holding companies.
Exhibit 6 identifies the Bank's comparable group and provides comparative
operating and financial data on Lincoln Federal and the comparable group
institutions.
Exhibit 7 provides a summary of publicly-traded thrift conversions since January
1, 1998, and the relative movement of their pricing ratios and share prices. The
average first day increase of the eighteen standard conversions closed since
January 1, 1998, was 44.9 percent. It should be noted, however, that the seven
most recent conversions closing since mid-July, 1998, indicate an average
decrease in their first day trading price of 3.0 percent. As of October 23,
1998, six of those seven issues were trading below their $10.00 IPO price, with
one issue, not a standard conversion, trading at $10.0625 per share, just
nominally above its IPO price. Although five of those seven closings were either
mutual holding companies or second stage conversions, the two standard
conversions in that group, CFS Bancorp, Inc. and CNY Financial Corp. experienced
a first day increase of only 14.4 percent and a first day decrease of 5.0
percent, respectively. We have also specifically considered the conversion of
Home Federal Savings and Loan Association of Niles, Niles, Ohio, which is in the
Youngstown, Ohio, market area and the most recent standard conversion to
complete its subscription offering. In that offering, completed on October 14,
1998, Home Federal received total orders, including the ESOP, of approximately
$17.5 million, which was only nominally higher than the $17.0 million minimum of
its valuation range and represented a closing price to book value ratio of 61.69
percent, the lowest closing price to book value of any thrift conversion since
late 1996.
Since August 14, 1998, there have been varying movements in the price to
earnings multiple, the price to core earnings multiple, the price to book value
ratio and the price to assets ratio of Lincoln Federal's comparable group and
all publicly-traded, FDIC-insured thrifts in the United States ("all thrifts").
Exhibit 8 provides a comparison of key valuation ratios from the Original
Appraisal to the date of this Update, October 23, 1998. The average price to
earnings multiple for the comparable group decreased from 15.63 times earnings
as of August 14, 1998, to 13.45 times earnings at October 23, 1998. The average
price to core
<PAGE>
Board of Directors
Lincoln Federal Savings Bank
October 30, 1998
Page 3
earnings multiple for the comparable group decreased from 16.92 times earnings
to 14.76 times earnings during that period. The average market price to book
value ratio for all thrifts decreased from 146.62 percent at August 14, 1998, to
128.43 percent at October 23, 1998, and decreased from 128.30 percent to 112.83
percent for the comparable group. The average price to assets ratio decreased
from 17.70 percent to 15.56 percent for all thrifts and decreased from 14.00
percent to 11.90 percent for the comparable group for the same time period.
Exhibit 8 also presents the values, numerical changes and percentage changes of
the SNL Thrift Index, the Dow Jones Industrial Average (DJIA) and the Standard
and Poors 500 (S & P 500) as of August 14, 1998, and October 23, 1998. As
indicated, from August 14, 1998, to October 23, 1998, the SNL Thrift Index
decreased 8.41 percent, while the DJIA and the S & P 500 increased a nominal
0.32 percent and 0.75 percent, respectively. The disparity between the SNL
Thrift Index and the broader market indices signifies that publicly traded
thrift stocks were outperformed by the overall market even during a period of
general decline in stock prices.
Exhibit 9 presents detailed market, pricing and financial ratios for Lincoln
Federal, all thrifts, the twenty five publicly-traded Indiana thrifts and the
comparable group as of October 23, 1998.
Exhibit 10 provides Lincoln Federal's September 30, 1998, assets and equity and
the Bank's earnings for the twelve months ended September 30, 1998, which are
different from those used in the Original Appraisal. The Bank had assets of
$321,825,000 and equity of $43,239,000 at September 30, 1998, and net income
after taxes for the twelve months ended September 30, 1998, of $2,126,000. Core
or normalized income after taxes was a lower $1,989,000, derived by adding back
$240,000 of its provision for loan losses and its $249,000 FHLB prepayment
penalty for the twelve months ended September 30, 1998, to the Bank's $2,353,000
net income before taxes for the twelve months ended September 30, 1998, and
applying a 30.0 percent tax rate to the resulting $2,842,000. That tax rate
reflects the Bank's lower effective tax rate resulting from low income housing
tax credits. Those core earnings of $1,989,000 are moderately lower than the
Bank's core earnings for the twelve months ended June 30, 1998, resulting from
lower net interest income and an increase in noninterest expense. Such assets,
equity and core income were used in this Update.
The trend in the market price of thrift stocks since the Original Appraisal
indicates a 13.9 percent decrease in the average price per share for all thrifts
and a similar 13.7 percent decrease for the comparable group. Of the ten
institutions in the comparable group, all experienced decreases in their price
per share. As previously detailed, the pricing ratios also demonstrated varying
activity since August 14, 1998. The average price to earnings multiple decreased
by 14.3 percent for all thrifts and decreased by 13.9 percent for the comparable
group, while the price to core earnings multiple decreased by 14.8 percent for
all thrifts and 12.8 percent for the comparable group. The price to book value
ratio decreased by 12.4 percent for all thrifts and by a similar 12.1 percent
for the comparable group; and the price
<PAGE>
Board of Directors
Lincoln Federal Savings Bank
October 30, 1998
Page 4
to assets ratio for all thrifts decreased by 12.1 percent and the comparable
group decreased by 15.0 percent.
This Update is based on a review of each of the adjustments made in the Original
Appraisal relative to the comparable group, with additional attention to trends
and changes in the Bank's performance and financial condition, the pro forma
closing pricing ratios of converting thrift institutions and trends in market
pricing. In determining the value indicated in this Update, we have increased
the downward adjustments for the marketing of the issue and for subscription
interest. Based on those revised adjustments, in our opinion a $14.5 million or
21.5 percent reduction of the pro forma value of the Corporation is warranted at
this time.
This updated valuation of the Corporation is based on the following valuation
ratios as of October 23, 1998:
Price to earnings multiple:
Midpoint 17.68x
Super maximum 21.24x
Price to core earnings multiple:
Midpoint 18.55x
Super maximum 22.16x
Price to book value ratio:
Midpoint 60.79%
Super maximum 68.46%
Price to assets ratio:
Midpoint 14.52%
Super maximum 18.44%
<PAGE>
As indicated above, at the midpoint, the price to book value ratio decreased
from 68.10 percent at August 14, 1998, to 60.79 percent as of October 23, 1998;
the price to net earnings multiple increased slightly from 17.51 to 17.68; the
price to core earnings multiple increased nominally from 18.38 to 18.55; and the
price to assets ratio decreased from 18.75 percent to 14.52 percent of October
23, 1998. At the super maximum, the price to book value ratio decreased from
75.42 percent at August 14, 1998, to 68.46 percent as of October 23, 1998; the
price to net earnings multiple increased from 20.57 to 21.24; the price to core
earnings multiple increased from 21.48 to 22.16; and the price to assets ratio
decreased from 23.56 percent to 18.44 percent of October 23, 1998.
<PAGE>
Board of Directors
Lincoln Federal Savings Bank
October 30, 1998
Page 5
For the institutions in the comparable group, the key valuation ratios indicate
various decreases since the Original Appraisal. The price to book value ratio of
the comparable group decreased 12.06 percent from 128.30 percent to 112.83
percent, while the price to book value ratio of Lincoln Federal decreased by a
lower 10.73 percent from 68.10 percent to 60.79 percent. The price to core
earnings multiple for the comparable group decreased 12.77 percent from 16.92 to
14.76. From August 14, 1998, to October 23, 1998, Lincoln Federal's price to
core earnings multiple increased by a nominal 0.92 percent. The price to assets
ratio of the comparable group decreased 15.00 percent from 14.00 percent to
11.90 percent, while the Bank's price to assets ratio decreased 22.56 percent
from August 14, 1998, to October 23, 1998.
Exhibit 15 details the valuation premium or discount applied to the comparable
group in determining the value. The discount from the comparable group in the
price to book value ratio was 46.12 percent at October 23, 1998, lower than the
discount of 46.92 percent at August 14, 1998. The price core earnings multiple
discount increased significantly from 8.68 percent to 25.69 percent during that
time period, reflecting a decrease in core earnings as previously discussed. The
premium of 33.95 percent in the price to assets ratio at August 14, 1998,
decreased to 22.04 percent at October 23, 1998.
Inclusive of the shares to be issued to the foundation, the valuation range in
the Original Appraisal indicated a midpoint of $67,500,000, with a minimum of
$57,375,000, a maximum of $77,625,000, and a super maximum of $89,268,750. In
our opinion, based on Lincoln Federal's September 30, 1998, financials, pricing
ratios and price fluctuation of the Bank's comparable group, as well as current
pricing ratios and trends in the market since the Original Appraisal, the
midpoint value as of October 23, 1998, indicates a lower $53,000,000, with a
minimum of $45,050,000, a maximum of $60,950,000, and a super maximum of
$70,092,500.
The pro forma market value or appraised value of the Corporation is $53,000,000
at the midpoint as of October 23, 1998.
Sincerely,
KELLER & COMPANY, IN.
<PAGE>
EXHIBIT 1
KELLER & COMPANY
Dublin, Ohio
614-766-1426
ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF LINCOLN FEDERAL SAVINGS BANK
NONE
<PAGE>
EXHIBIT 2
KELLER & COMPANY
Dublin, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED THRIFT INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF OCTOBER 23, 1998
<TABLE>
<CAPTION>
PER SHARE
*
Latest All Time All Monthly Quarterly Book 12
Time Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- --------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. AL NASDAQ 9.750 15.938 4.250 -18.75 -27.78 7.31 73.90 0.25
SRN Southern Banc Co. AL AMSE 12.875 19.125 11.375 -7.21 -17.27 15.09 85.41 0.35
SCBS Southern Community Bancshares AL NASDAQ 13.000 20.750 12.000 -11.86 -22.96 10.36 59.72 2.73
SZB SouthFirst Bancshares Inc. AL AMSE 15.625 22.750 10.625 -6.02 -12.59 16.75 168.46 0.55
FFBH First Federal Bancshares of AR AR NASDAQ 17.750 30.250 10.000 -8.68 -26.80 17.46 118.69 0.26
HCBBE HCB Bancshares Inc. AR NASDAQ 8.625 16.125 8.625 -25.00 -39.34 14.45 83.79 NA
PFSL Pocahontas Bancorp Inc. AR NASDAQ 9.000 11.430 2.361 7.46 -4.64 8.74 60.52 NA
FTF Texarkana First Financial Corp AR AMSE 21.750 30.625 10.000 -2.52 -22.32 16.36 113.04 0.58
BPLS Bank Plus Corp. CA NASDAQ 4.938 16.125 2.281 2.60 -60.10 9.55 221.09 0.00
BVCC Bay View Capital Corp. CA NASDAQ 17.375 38.000 5.625 -11.46 -42.44 19.45 281.95 0.40
BYFC Broadway Financial Corp. CA NASDAQ 6.750 12.731 6.750 -22.86 -34.11 14.02 147.60 0.19
DSL Downey Financial Corp. CA NYSE 26.250 35.000 1.258 4.74 -25.00 16.74 210.10 0.31
FSSB First FS&LA of San Bernardino CA NASDAQ 9.625 14.500 6.875 1.32 16.67 13.68 315.79 0.00
FED FirstFed Financial Corp. CA NYSE 17.500 26.938 1.067 -11.39 -27.37 11.79 180.61 0.00
GSB Golden State Bancorp CA NYSE 17.750 21.750 11.938 -16.47 NA 11.93 412.43 NA
GDW Golden West Financial CA NYSE 88.813 114.250 3.875 4.26 -8.62 52.23 688.85 0.50
HTHR Hawthorne Financial Corp. CA NASDAQ 15.125 35.500 2.250 -0.82 -18.79 15.07 378.93 0.00
HEMT HF Bancorp Inc. CA NASDAQ 16.000 18.250 8.188 -2.29 -9.22 13.13 165.79 0.00
HBNK Highland Bancorp Inc. CA NASDAQ 36.125 43.500 11.000 -4.62 -13.99 19.11 272.86 0.38
ITLA ITLA Capital Corp. CA NASDAQ 14.125 24.000 9.000 -0.88 -33.53 14.27 132.32 0.00
LFCO Life Financial Corp. CA NASDAQ 4.125 25.375 2.250 -32.65 -73.81 9.38 57.96 0.00
MBBC Monterey Bay Bancorp Inc. CA NASDAQ 11.625 21.400 7.000 -19.13 -24.51 12.79 111.18 0.10
PBOC PBOC Holdings Inc. CA NASDAQ 10.125 14.500 8.000 -1.52 -26.70 8.01 146.78 0.00
PFFB PFF Bancorp Inc. CA NASDAQ 13.375 21.500 10.375 -7.76 -29.61 14.96 197.18 0.00
PROV Provident Financial Holdings CA NASDAQ 15.500 24.250 10.125 -3.13 -23.46 18.11 181.74 0.00
QCBC Quaker City Bancorp Inc. CA NASDAQ 15.313 21.250 4.800 -2.77 -18.33 13.66 154.07 0.00
SGVB SGV Bancorp Inc. CA NASDAQ 12.000 19.375 7.750 -4.00 -28.36 13.73 173.91 0.00
UPFC United PanAm Financial Corp. CA NASDAQ 5.125 13.938 3.375 -22.64 -54.95 5.02 25.31 0.00
WES Westcorp CA NYSE 5.813 23.875 3.703 -44.64 -53.26 12.62 155.32 0.30
HCBC High Country Bancorp Inc. CO NASDAQ 11.750 15.500 10.250 -2.08 -17.54 13.82 76.06 NA
ANE Alliance Bncp of New England CT AMSE 9.875 16.083 1.375 -3.66 -25.47 7.90 101.22 0.13
BKC American Bank of Connecticut CT AMSE 22.375 32.563 2.688 8.48 -18.45 13.08 137.85 0.83
BKCT Bancorp Connecticut Inc. CT NASDAQ 17.000 25.000 1.013 3.03 -6.85 9.58 96.83 0.52
FFES First Federal of East Hartford CT NASDAQ 24.563 42.250 4.000 -2.72 -30.81 25.73 357.46 0.64
MECH MECH Financial Inc. CT NASDAQ 24.125 31.813 11.000 -6.99 -23.57 17.83 181.30 0.15
NMSB NewMil Bancorp Inc. CT NASDAQ 13.000 15.500 1.250 2.97 0.97 9.01 96.37 0.24
NSSY NSS Bancorp Inc. CT NASDAQ 46.000 58.750 9.875 -8.00 -17.67 23.19 274.10 0.43
NTMG Nutmeg Federal S&LA CT NASDAQ 12.000 13.000 3.484 -4.00 5.49 6.32 104.13 0.19
WBST Webster Financial Corp. CT NASDAQ 21.063 36.250 1.932 -17.40 -34.43 14.91 241.51 0.42
IFSB Independence Federal Svgs Bank DC NASDAQ 12.500 21.625 0.250 -18.03 -18.70 16.52 207.59 0.25
WSFS WSFS Financial Corp. DE NASDAQ 18.250 23.875 1.250 6.96 -12.57 7.77 130.44 0.06
BANC BankAtlantic Bancorp Inc. FL NASDAQ 9.625 17.125 0.278 -5.53 -21.83 6.96 102.43 8.05
BKUNA BankUnited Financial Corp. FL NASDAQ 8.438 18.500 2.320 -27.81 -41.81 10.29 201.52 0.00
FDTR Federal Trust Corp. FL NASDAQ 2.500 4.750 2.375 -9.09 -40.31 2.60 30.75 NA
FFLC FFLC Bancorp Inc. FL NASDAQ 16.750 23.500 7.650 -4.29 -12.99 14.30 114.30 0.34
FFPB First Palm Beach Bancorp Inc. FL NASDAQ 35.375 44.938 14.000 9.90 -15.77 23.52 343.43 0.68
HARB Harbor Florida Bancshares Inc. FL NASDAQ 10.625 13.500 1.976 -1.74 -15.43 8.41 42.90 NA
OCN Ocwen Financial Corp. FL NYSE 11.625 30.375 6.000 8.77 -56.44 7.03 57.68 0.00
EBSI Eagle Bancshares GA NASDAQ 18.000 27.250 1.875 -5.26 -27.27 13.36 192.95 0.61
FSTC First Citizens Corp. GA NASDAQ 28.125 35.500 1.970 8.17 -5.46 13.56 135.85 0.31
FGHC First Georgia Holding Inc. GA NASDAQ 8.500 15.750 0.543 -4.23 -39.29 3.07 37.68 0.07
FLFC First Liberty Financial Corp. GA NASDAQ 18.938 25.500 1.778 -3.81 -21.91 8.78 113.08 0.29
FLAG FLAG Financial Corp. GA NASDAQ 12.000 19.375 2.133 -9.43 -34.25 7.46 85.58 0.23
NTBK Net.B@nk Inc. GA NASDAQ 17.563 34.250 8.750 -16.37 -48.72 6.07 40.14 0.00
CASH First Midwest Financial Inc. IA NASDAQ 16.500 24.875 8.833 -8.33 -28.65 16.40 161.13 0.45
HZFS Horizon Financial Svcs Corp. IA NASDAQ 14.250 16.875 5.188 -7.32 -13.64 9.65 102.22 0.18
MIFC Mid-Iowa Financial Corp. IA NASDAQ 13.438 14.000 2.474 -4.01 20.79 7.73 77.85 0.08
MWBI Midwest Bancshares Inc. IA NASDAQ 12.000 19.500 3.917 9.09 -18.64 11.03 149.87 0.27
FFFD North Central Bancshares Inc. IA NASDAQ 16.750 24.875 8.071 -2.90 -17.79 16.02 107.83 0.30
SFFC StateFed Financial Corp. IA NASDAQ 11.625 15.000 5.250 -2.11 -13.89 10.27 57.35 0.20
FBNW FirstBank Corp. ID NASDAQ 15.750 23.750 13.250 -10.64 -23.87 16.53 98.01 NA
ABCL Alliance Bancorp IL NASDAQ 18.125 29.250 6.000 -0.68 -25.64 16.20 183.26 0.44
AVND Avondale Financial Corp. IL NASDAQ 13.125 18.875 8.375 11.70 -24.46 14.21 170.00 0.00
BFFC Big Foot Financial Corp. IL NASDAQ 13.500 23.938 12.313 -5.26 -19.40 15.16 87.79 0.00
CBCI Calumet Bancorp Inc. IL NASDAQ 29.750 39.000 6.889 0.00 -4.80 27.74 156.43 0.00
CBK Citizens First Financial Corp. IL AMSE 15.000 22.375 9.500 2.56 -16.08 15.53 111.27 0.00
CSBF CSB Financial Group Inc. IL NASDAQ 10.500 14.000 8.810 7.69 -12.50 13.34 57.52 0.00
EGLB Eagle BancGroup Inc. IL NASDAQ 18.063 21.125 10.500 24.57 -5.55 17.82 147.91 0.00
EFC EFC Bancorp Inc. IL AMSE 10.688 14.938 9.063 -0.58 -19.72 12.56 53.08 NA
FBCI Fidelity Bancorp Inc. IL NASDAQ 19.500 26.000 9.500 -8.24 -9.83 18.77 177.06 NA
FFBI First Financial Bancorp Inc. IL NASDAQ 23.500 24.500 9.000 8.05 11.90 18.37 199.04 0.00
FMBD First Mutual Bancorp Inc. IL NASDAQ 16.875 25.000 11.125 -0.74 -2.17 15.88 105.18 0.32
FSFF First SecurityFed Financial IL NASDAQ 14.125 17.250 10.688 13.00 -15.04 14.05 51.66 NA
GTPS Great American Bancorp IL NASDAQ 16.000 23.000 11.875 -7.91 -28.09 16.97 108.78 0.42
HMLK Hemlock Federal Financial Corp IL NASDAQ 13.875 19.000 12.500 -0.89 -16.23 14.91 105.23 0.28
HBEI Home Bancorp of Elgin Inc. IL NASDAQ 12.750 19.313 10.500 -2.86 -18.73 14.01 57.98 0.40
KNK Kankakee Bancorp Inc. IL AMSE 25.500 37.750 13.625 0.99 -23.02 28.43 291.26 0.48
MAFB MAF Bancorp Inc. IL NASDAQ 23.000 28.833 1.212 1.66 -2.90 12.56 161.03 0.23
NBSI North Bancshares Inc. IL NASDAQ 11.000 18.833 7.333 -5.38 -21.43 10.43 98.32 0.38
PFED Park Bancorp Inc. IL NASDAQ 14.375 19.750 10.188 2.68 -18.44 16.55 81.40 0.00
PSFI PS Financial Inc. IL NASDAQ 10.000 22.375 8.500 -9.09 -22.33 11.28 42.11 4.44
SPBC St. Paul Bancorp Inc. IL NASDAQ 20.938 28.500 2.044 -4.83 -13.66 12.35 146.52 0.45
WCBI Westco Bancorp Inc. IL NASDAQ 30.000 32.500 7.667 1.48 5.73 19.95 132.43 0.68
FBCV 1ST Bancorp IN NASDAQ 38.750 45.500 2.533 -11.81 -8.82 21.85 238.29 0.26
AMFC AMB Financial Corp. IN NASDAQ 11.875 19.375 9.750 -20.83 -28.57 15.42 121.60 0.27
ASBI Ameriana Bancorp IN NASDAQ 18.000 22.000 2.750 0.00 -6.49 14.03 115.38 0.64
ATSB AmTrust Capital Corp. IN NASDAQ 15.250 15.250 7.750 3.39 10.91 14.66 135.41 0.20
BRBI Blue River Bancshares Inc. IN NASDAQ 8.500 12.000 7.500 -12.82 -24.44 NA NA NA
CITZ CFS Bancorp Inc. IN NASDAQ 9.750 11.438 8.313 -1.57 NA NA NA NA
FFWC FFW Corp. IN NASDAQ 14.625 21.500 6.250 -4.88 -20.95 13.12 139.44 0.38
FFED Fidelity Federal Bancorp IN NASDAQ 5.000 14.773 1.534 2.56 -20.00 2.40 63.01 0.35
FISB First Indiana Corp. IN NASDAQ 19.000 30.000 1.368 -8.43 -29.30 12.83 136.81 0.46
HFGI Harrington Financial Group IN NASDAQ 8.500 13.750 8.125 -1.45 -22.73 5.98 176.55 0.12
HBFW Home Bancorp IN NASDAQ 26.625 37.625 12.500 -0.93 -3.18 18.27 153.25 0.28
HBBI Home Building Bancorp IN NASDAQ 24.000 24.000 10.000 9.09 12.94 20.61 136.14 0.30
HOMF Home Federal Bancorp IN NASDAQ 23.750 33.750 1.432 -5.00 -18.80 13.03 140.01 0.37
HWEN Home Financial Bancorp IN NASDAQ 6.500 9.750 4.938 -21.21 -18.75 8.08 45.81 0.10
LOGN Logansport Financial Corp. IN NASDAQ 13.750 19.625 11.125 -16.67 -8.33 13.46 71.55 0.41
LSBI LSB Financial Corp. IN NASDAQ 28.500 32.000 10.204 -4.20 -9.52 20.46 229.29 0.35
MARN Marion Capital Holdings IN NASDAQ 22.625 29.500 14.250 -6.70 -11.27 22.16 114.14 0.88
MFBC MFB Corp. IN NASDAQ 20.000 30.375 10.500 0.00 -20.00 20.95 210.30 0.34
MONT Montgomery Financial Corp. IN NASDAQ 10.500 14.000 9.750 -5.62 -12.50 12.14 70.88 NA
NEIB Northeast Indiana Bancorp IN NASDAQ 16.875 22.750 11.250 0.00 -24.16 16.07 123.22 0.34
PFDC Peoples Bancorp IN NASDAQ 20.125 25.000 3.583 -0.62 -5.85 13.57 90.66 0.44
PERM Permanent Bancorp Inc. IN NASDAQ 12.000 18.250 4.875 1.05 -25.00 10.52 119.25 0.27
RIVR River Valley Bancorp IN NASDAQ 13.375 20.750 13.250 -10.08 -27.21 15.53 114.00 0.20
SOBI Sobieski Bancorp Inc. IN NASDAQ 14.500 24.250 10.000 -5.69 -21.62 18.02 121.04 0.32
UCBC Union Community Bancorp IN NASDAQ 12.500 15.813 10.625 -0.99 -13.79 14.31 35.53 NA
FFSL First Independence Corp. KS NASDAQ 9.750 15.625 5.438 -6.02 -23.53 12.34 128.87 0.28
FKAN First Kansas Financial Corp. KS NASDAQ 10.000 12.500 9.000 -3.61 -19.19 13.46 68.21 NA
LARK Landmark Bancshares Inc. KS NASDAQ 21.000 29.250 9.750 -8.20 -20.75 19.34 148.02 0.55
CKFB CKF Bancorp Inc. KY NASDAQ 15.250 21.250 11.375 -8.27 -21.29 17.29 74.42 0.50
CLAS Classic Bancshares Inc. KY NASDAQ 14.875 21.500 10.375 -0.83 -13.46 15.79 106.18 0.28
CFKY Columbia Financial of Kentucky KY NASDAQ 12.875 17.125 11.625 -0.96 -9.65 14.02 44.53 NA
FFKY First Federal Financial Corp. KY NASDAQ 25.500 28.750 3.063 9.09 -7.27 13.24 99.20 0.56
FLKY First Lancaster Bancshares KY NASDAQ 12.250 16.375 12.000 -2.00 -7.11 14.73 56.06 0.50
FTSB Fort Thomas Financial Corp. KY NASDAQ 11.000 17.750 9.250 -16.19 -25.74 11.05 68.74 0.30
FKKY Frankfort First Bancorp Inc. KY NASDAQ 14.250 31.750 13.625 -0.87 -6.56 14.08 85.06 0.80
HFFB Harrodsburg First Fin Bancorp KY NASDAQ 14.500 19.000 12.375 -4.92 -7.94 16.18 56.48 0.60
HFBC HopFed Bancorp Inc. KY NASDAQ 17.063 21.875 15.250 6.23 -0.73 14.46 54.01 NA
KYF Kentucky First Bancorp Inc. KY AMSE 12.250 15.875 10.563 -9.26 -16.24 11.61 66.11 0.50
ANA Acadiana Bancshares Inc. LA AMSE 17.500 25.625 11.690 2.19 -21.79 17.32 126.91 0.44
GSLA GS Financial Corp. LA NASDAQ 12.750 21.000 10.375 -2.86 -18.40 16.01 44.44 0.28
HSTD Homestead Bancorp Inc. LA NASDAQ 7.875 9.313 3.407 4.13 -15.44 NA NA NA
TSH Teche Holding Co. LA AMSE 14.875 23.500 11.375 1.71 -20.13 16.97 132.09 0.50
ABBK Abington Bancorp Inc. MA NASDAQ 15.125 22.250 0.625 6.14 -20.92 9.85 154.65 0.30
ANDB Andover Bancorp Inc. MA NASDAQ 30.750 39.875 1.250 -0.81 -16.04 18.23 210.77 0.66
BYS Bay State Bancorp MA AMSE 23.125 32.625 19.250 2.78 -17.04 27.24 120.85 NA
BFD BostonFed Bancorp Inc. MA AMSE 17.875 24.875 10.000 2.14 -23.12 16.52 204.24 0.34
CEBK Central Co-operative Bank MA NASDAQ 19.875 33.500 2.000 -3.93 -22.82 18.94 194.33 0.32
FCB Falmouth Bancorp Inc. MA AMSE 15.250 23.875 10.250 -8.96 -25.15 16.24 75.97 0.22
FESX First Essex Bancorp Inc. MA NASDAQ 16.500 26.125 1.000 -2.94 -28.65 12.41 173.86 0.54
FAB FIRSTFED AMERICA BANCORP INC. MA AMSE 14.750 23.250 10.750 -3.28 -23.38 15.73 164.51 0.05
HIFS Hingham Instit. for Savings MA NASDAQ 17.250 24.667 1.083 3.50 -13.75 11.91 125.67 0.41
HPBC Home Port Bancorp Inc. MA NASDAQ 19.875 27.625 3.000 -0.63 -20.50 12.32 141.41 0.80
IPSW Ipswich Savings Bank MA NASDAQ 13.000 20.750 1.100 -5.45 -25.18 5.74 104.28 0.16
LSBX Lawrence Savings Bank MA NASDAQ 13.500 19.313 0.500 1.89 -10.74 10.27 78.47 0.00
MASB MASSBANK Corp. MA NASDAQ 35.500 54.250 6.375 -8.97 -26.04 31.06 262.96 0.99
MFLR Mayflower Co-operative Bank MA NASDAQ 21.000 27.500 2.000 6.33 -10.64 14.67 158.92 0.74
MDBK Medford Bancorp Inc. MA NASDAQ 17.375 22.125 1.625 0.00 -17.26 11.83 130.10 0.48
MWBX MetroWest Bank MA NASDAQ 6.125 18.125 0.750 -1.02 -17.65 3.49 46.93 0.19
MYST Mystic Financial Inc. MA NASDAQ 12.250 18.563 9.750 7.69 -15.52 13.33 73.42 NA
PBKB People's Bancshares Inc. MA NASDAQ 20.500 27.750 0.750 21.03 -11.35 9.80 268.75 0.50
SWCB Sandwich Bancorp Inc. MA NASDAQ 54.500 64.500 1.875 -6.44 -13.49 21.81 259.86 1.35
SISB SIS Bancorp Inc. MA NASDAQ 38.125 52.625 9.625 -1.77 -24.88 19.29 265.02 0.62
WRNB Warren Bancorp Inc. MA NASDAQ 9.875 14.375 0.250 6.76 -21.78 5.14 48.52 0.70
EQSB Equitable Federal Savings Bank MD NASDAQ 19.125 34.000 5.625 -25.37 -33.48 14.67 286.54 0.00
HRBF Harbor Federal Bancorp Inc. MD NASDAQ 20.000 23.409 8.864 0.00 -3.30 15.89 124.38 0.48
WSB Washington Savings Bank, FSB MD AMSE 4.313 9.500 0.281 -4.16 -32.35 5.21 61.88 0.10
WHGB WHG Bancshares Corp. MD NASDAQ 10.250 19.000 10.125 -18.00 -34.92 14.52 95.01 0.29
FCME First Coastal Corp. ME NASDAQ 8.438 15.750 1.500 -17.18 -30.41 11.30 126.22 0.00
KSBK KSB Bancorp Inc. ME NASDAQ 13.375 22.500 3.712 -16.41 -26.71 10.37 129.13 0.05
MCBN Mid-Coast Bancorp Inc. ME NASDAQ 8.000 14.000 2.698 -5.88 -30.43 7.35 91.60 0.19
NBN Northeast Bancorp ME AMSE 10.750 19.500 3.083 -2.27 -28.33 9.23 123.37 0.21
PHBK Peoples Heritage Finl Group ME NASDAQ 17.563 26.500 0.938 -3.44 -25.46 8.56 112.58 0.44
BWFC Bank West Financial Corp. MI NASDAQ 9.234 17.500 5.667 -16.05 -31.60 8.87 69.17 0.22
CFSB CFSB Bancorp Inc. MI NASDAQ 22.875 28.750 1.746 -0.54 -11.27 8.08 103.80 0.46
DNFC D & N Financial Corp. MI NASDAQ 19.000 29.750 2.273 -0.98 -25.12 12.22 218.06 0.20
FLGS Flagstar Bancorp Inc. MI NASDAQ 23.625 28.375 13.000 3.28 -9.13 10.44 188.24 0.19
MSBF MSB Financial Inc. MI NASDAQ 14.000 17.727 4.886 -1.75 -9.41 9.95 59.76 0.26
MSBK Mutual Savings Bank FSB MI NASDAQ 7.250 25.500 3.000 -10.77 -34.47 8.27 136.55 0.00
OFCP Ottawa Financial Corp. MI NASDAQ 20.000 30.909 8.471 -6.98 -20.00 13.23 160.90 0.36
THR Three Rivers Financial Corp. MI AMSE 15.500 23.500 11.375 -7.46 -16.78 16.20 126.24 0.42
BDJI First Federal Bancorp. MN NASDAQ 13.500 22.000 7.083 -1.82 -27.03 12.70 121.52 0.00
FFHH FSF Financial Corp. MN NASDAQ 14.750 21.250 7.750 0.00 -17.48 16.37 141.18 0.50
HMNF HMN Financial Inc. MN NASDAQ 11.875 21.667 6.209 -19.49 -22.13 13.04 133.54 0.04
MIVI Mississippi View Holding Co. MN NASDAQ 19.125 19.750 8.500 2.00 9.29 16.85 92.70 0.16
QCFB QCF Bancorp Inc. MN NASDAQ 26.000 31.750 11.000 -5.45 -15.79 19.93 113.92 0.00
WEFC Wells Financial Corp. MN NASDAQ 18.000 22.000 9.000 10.77 -13.77 15.25 112.51 0.54
CMRN Cameron Financial Corp MO NASDAQ 15.500 22.188 10.688 -8.15 -20.19 18.02 90.72 0.28
CBES CBES Bancorp Inc. MO NASDAQ 15.875 26.000 12.625 -8.63 -21.67 17.94 131.82 0.42
CNSB CNS Bancorp Inc. MO NASDAQ 13.000 21.500 11.000 -1.89 -24.64 14.76 59.58 0.24
EBI Equality Bancorp Inc. MO AMSE 12.000 16.000 11.000 -5.88 -17.24 10.40 108.58 NA
FBSI First Bancshares Inc. MO NASDAQ 12.750 17.500 5.125 -3.77 -7.27 11.01 77.78 0.11
FTNB Fulton Bancorp Inc. MO NASDAQ 16.000 26.500 12.500 -5.88 -14.67 14.83 64.05 0.22
GFED Guaranty Federal Bcshs Inc. MO NASDAQ 10.375 14.436 4.143 -4.60 -20.95 12.01 41.75 NA
HFSA Hardin Bancorp Inc. MO NASDAQ 16.000 20.000 11.000 -4.48 -11.26 16.77 162.91 0.54
JSBA Jefferson Savings Bancorp Inc. MO NASDAQ 15.500 31.875 6.625 -7.46 -43.05 13.03 124.52 0.26
LXMO Lexington B&L Financial Corp. MO NASDAQ 11.750 17.875 9.500 -9.62 -26.28 15.17 94.48 0.30
MBLF MBLA Financial Corp. MO NASDAQ 20.500 30.625 12.750 7.89 -9.89 22.33 162.97 0.50
NASB NASB Financial Inc. MO NASDAQ 65.500 71.000 2.500 -5.07 28.43 27.83 327.77 0.80
NSLB NS&L Bancorp Inc. MO NASDAQ 13.250 19.500 11.750 -13.73 -27.65 16.88 91.34 0.50
PCBC Perry County Financial Corp. MO NASDAQ 20.750 25.000 12.375 5.73 -8.29 20.02 108.42 0.50
SMBC Southern Missouri Bancorp Inc. MO NASDAQ 16.500 23.250 8.875 -2.94 -21.89 16.24 105.06 0.50
CFTP Community Federal Bancorp MS NASDAQ 14.500 21.000 12.250 -1.69 -15.33 14.85 59.85 0.32
FFBS FFBS BanCorp Inc. MS NASDAQ 22.000 26.000 12.000 4.76 -4.35 15.07 85.83 2.50
EFBC Empire Federal Bancorp Inc. MT NASDAQ 12.688 18.250 10.625 -14.70 -16.80 15.62 43.11 0.31
UBMT United Financial Corp. MT NASDAQ 23.000 31.500 21.750 -4.66 -18.40 17.83 120.91 NA
WSTR WesterFed Financial Corp. MT NASDAQ 18.125 27.000 11.375 -4.61 -26.02 19.94 178.85 0.49
CFNC Carolina Fincorp Inc. NC NASDAQ 8.000 18.875 8.000 -9.23 -26.44 8.08 59.78 6.24
CENB Century Bancorp Inc. NC NASDAQ 14.000 39.000 12.000 3.70 -12.50 14.74 76.22 10.67
COOP Cooperative Bankshares Inc. NC NASDAQ 13.000 25.000 1.734 -13.33 -21.21 10.00 125.87 0.00
SOPN First Savings Bancorp Inc. NC NASDAQ 23.250 26.000 13.500 3.33 -2.11 18.73 81.97 0.94
GSFC Green Street Financial Corp. NC NASDAQ 13.500 20.750 11.250 5.88 -6.90 14.81 42.43 0.60
HBS Haywood Bancshares Inc. NC AMSE 17.750 24.000 9.500 -4.05 -16.96 17.68 121.34 0.59
KSAV KS Bancorp Inc. NC NASDAQ 24.000 25.500 8.719 0.00 6.67 16.50 128.74 0.83
MBSP Mitchell Bancorp Inc. NC NASDAQ 14.000 18.500 10.190 -10.40 -16.42 15.72 40.08 0.40
PDB Piedmont Bancorp Inc. NC AMSE 9.375 19.125 9.000 -3.85 -1.32 7.90 47.47 0.44
SSB Scotland Bancorp Inc. NC AMSE 11.188 19.250 8.125 1.13 24.31 7.96 31.92 6.23
SSFC South Street Financial Corp. NC NASDAQ 8.375 20.000 8.000 -1.47 -14.65 8.50 43.55 6.40
SSM Stone Street Bancorp Inc. NC AMSE 14.625 27.250 14.000 -4.10 -24.03 16.64 60.89 0.46
UFRM United Federal Savings Bank NC NASDAQ 17.250 21.000 1.750 0.00 -6.76 7.13 91.96 0.24
CFB Commercial Federal Corp. NE NYSE 23.250 38.188 0.722 -4.37 -23.14 15.29 210.50 0.21
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 17.500 22.750 1.750 20.69 -4.76 12.60 154.84 0.55
FBER 1st Bergen Bancorp NJ NASDAQ 22.500 22.500 9.000 20.81 23.29 13.49 116.34 0.20
FSNJ Bayonne Bancshares Inc. NJ NASDAQ 15.000 17.375 3.665 0.84 -11.76 10.54 76.99 NA
FSLA First Source Bancorp Inc. NJ NASDAQ 8.313 13.927 1.178 -7.63 -16.87 8.17 38.47 NA
FMCO FMS Financial Corp. NJ NASDAQ 10.000 16.667 0.500 -12.09 -33.33 5.88 92.44 0.11
LVSB Lakeview Financial Corp. NJ NASDAQ 17.438 28.750 3.668 -20.74 -32.93 11.60 121.69 0.19
LFBI Little Falls Bancorp Inc. NJ NASDAQ 14.500 22.250 9.500 0.87 -27.50 14.91 141.81 0.20
OCFC Ocean Financial Corp. NJ NASDAQ 14.250 20.000 9.813 -7.32 -23.75 13.32 104.65 0.44
PBCI Pamrapo Bancorp Inc. NJ NASDAQ 23.000 32.375 2.563 -8.00 -26.98 17.30 138.69 1.06
PFSB PennFed Financial Services Inc NJ NASDAQ 12.625 19.000 4.532 -7.34 -24.06 11.87 165.35 0.14
TSBS Peoples Bancorp Inc. NJ NASDAQ 10.000 11.832 2.974 0.00 2.56 9.41 23.99 NA
PULS Pulse Bancorp NJ NASDAQ 26.000 30.500 4.000 -7.96 -14.58 14.71 174.37 0.78
RARB Raritan Bancorp Inc. NJ NASDAQ 34.000 34.313 3.445 -0.91 16.74 13.42 183.15 0.54
SFIN Statewide Financial Corp. NJ NASDAQ 16.625 26.688 11.250 -8.28 -21.76 14.51 149.34 0.44
AABC Access Anytime Bancorp Inc. NM NASDAQ 7.000 13.000 1.716 -3.45 -30.00 7.61 96.05 0.00
GUPB GFSB Bancorp Inc. NM NASDAQ 14.250 17.000 8.583 1.79 -5.79 12.19 105.71 0.28
AFED AFSALA Bancorp Inc. NY NASDAQ 13.750 20.750 11.313 -1.79 -25.68 16.23 126.84 0.24
ALBK ALBANK Financial Corp. NY NASDAQ 60.250 74.625 9.167 8.07 -13.77 29.39 310.58 0.78
ALBC Albion Banc Corp. NY NASDAQ 7.750 14.167 3.500 -8.82 -11.43 8.37 98.50 0.17
AHCI Ambanc Holding Co. NY NASDAQ 13.500 20.000 9.375 1.40 -21.74 14.22 137.73 0.22
ASFC Astoria Financial Corp. NY NASDAQ 41.625 62.500 12.688 -8.52 -21.09 34.25 478.05 0.75
CNY Carver Bancorp Inc. NY AMSE 9.125 17.125 6.250 2.82 -29.13 15.51 184.67 0.00
CATB Catskill Financial Corp. NY NASDAQ 13.625 19.125 9.875 -1.80 -18.05 15.72 69.01 0.31
CNYF CNY Financial Corp. NY NASDAQ 9.875 9.875 8.875 NA NA NA NA NA
DME Dime Bancorp Inc. NY NYSE 24.188 32.688 1.625 -8.72 -23.06 11.96 189.62 0.18
DCOM Dime Community Bancshares Inc. NY NASDAQ 23.000 29.313 11.687 20.26 -6.84 15.37 148.85 0.33
ESBK Elmira Savings Bank (The) NY NASDAQ 20.750 32.250 8.658 -13.54 -27.55 20.35 318.89 0.62
FIBC Financial Bancorp Inc. NY NASDAQ 35.250 37.625 8.500 10.16 -4.73 16.83 199.80 0.45
FFIC Flushing Financial Corp. NY NASDAQ 15.000 19.917 9.417 4.65 -18.55 12.10 100.83 0.21
GPT GreenPoint Financial Corp. NY NYSE 31.313 42.625 8.813 5.03 -21.96 21.40 143.11 0.61
GOSB GSB Financial Corp. NY NASDAQ 13.000 18.938 8.313 0.00 -21.80 14.30 57.42 NA
HAVN Haven Bancorp Inc. NY NASDAQ 13.688 28.750 5.000 -19.48 -38.31 13.33 255.98 0.30
HRBT Hudson River Bancorp NY NASDAQ 10.063 13.688 8.875 -8.52 -21.07 13.76 46.54 NA
ICBC Independence Comm. Bank Corp. NY NASDAQ 13.250 19.125 11.000 -1.85 -16.87 12.35 67.82 NA
JSB JSB Financial Inc. NY NYSE 51.875 59.688 10.750 0.61 -11.89 38.65 159.01 1.50
PEEK Peekskill Financial Corp. NY NASDAQ 13.063 18.250 11.125 -9.91 -25.35 14.92 69.19 0.36
QCSB Queens County Bancorp Inc. NY NASDAQ 30.000 31.417 4.741 13.38 1.98 7.99 79.68 0.60
RELY Reliance Bancorp Inc. NY NASDAQ 24.750 42.250 8.875 -16.46 -31.96 20.65 277.52 0.70
RCBK Richmond County Financial Corp NY NASDAQ 14.813 19.750 11.313 -1.25 -12.86 12.48 64.06 NA
RSLN Roslyn Bancorp Inc. NY NASDAQ 17.250 30.500 13.313 1.10 -15.34 14.30 89.84 0.34
SFED SFS Bancorp Inc. NY NASDAQ 24.250 27.875 11.000 -9.35 21.25 18.13 147.37 0.30
SKAN Skaneateles Bancorp Inc. NY NASDAQ 13.375 22.250 2.833 3.88 -23.57 12.70 184.64 0.27
SIB Staten Island Bancorp Inc. NY NYSE 17.875 23.625 14.125 2.14 -17.10 15.33 74.26 NA
ROSE TR Financial Corp. NY NASDAQ 29.625 44.750 4.938 1.93 -26.05 15.87 237.29 0.71
WSBI Warwick Community Bancorp NY NASDAQ 12.500 18.000 10.375 4.17 -28.06 13.04 62.12 NA
YFCB Yonkers Financial Corp. NY NASDAQ 14.250 22.000 9.310 -2.56 -24.50 14.91 144.85 0.26
ASBP ASB Financial Corp. OH NASDAQ 11.875 18.250 9.813 -7.77 -6.86 8.76 70.36 2.40
CAFI Camco Financial Corp. OH NASDAQ 15.375 20.667 2.873 -4.65 -20.82 10.61 107.31 0.37
COFI Charter One Financial OH NASDAQ 26.813 34.643 1.489 6.72 -14.69 11.34 149.70 0.50
CIBI Community Investors Bancorp OH NASDAQ 11.500 15.250 4.778 -11.54 -22.03 8.17 80.97 0.21
DCBI Delphos Citizens Bancorp Inc. OH NASDAQ 17.500 24.250 11.750 8.53 -5.73 14.83 66.00 0.18
EMLD Emerald Financial Corp. OH NASDAQ 10.500 16.000 3.875 -4.55 -16.83 5.22 62.45 0.19
EFBI Enterprise Federal Bancorp OH NASDAQ 42.125 43.375 11.250 44.64 47.81 16.57 184.03 1.00
FFDF FFD Financial Corp. OH NASDAQ 16.000 24.000 10.000 -3.03 -17.42 10.95 62.94 4.80
FFYF FFY Financial Corp. OH NASDAQ 28.000 36.875 12.250 3.70 -16.42 21.00 162.49 0.78
FFOH Fidelity Financial of Ohio OH NASDAQ 13.875 19.875 3.112 12.12 -9.76 11.79 95.02 1.30
FDEF First Defiance Financial OH NASDAQ 12.625 16.250 5.790 1.50 -10.62 12.66 71.36 0.35
FFBZ First Federal Bancorp Inc. OH NASDAQ 10.375 14.500 1.563 3.75 -28.45 5.23 65.82 0.14
FFHS First Franklin Corp. OH NASDAQ 13.500 20.833 2.333 -10.00 -18.18 12.24 136.05 0.28
GFCO Glenway Financial Corp. OH NASDAQ 19.000 24.250 7.710 -12.14 -13.64 12.80 132.84 0.41
HHFC Harvest Home Financial Corp. OH NASDAQ 12.000 16.750 8.750 -6.80 -21.31 11.70 109.27 0.43
HCFC Home City Financial Corp. OH NASDAQ 12.500 22.750 11.000 -10.71 -14.53 11.97 86.27 3.85
HLFC Home Loan Financial Corp. OH NASDAQ 12.063 16.750 11.453 -8.96 -20.24 14.20 37.67 NA
INBI Industrial Bancorp Inc. OH NASDAQ 18.500 25.000 9.875 6.47 -3.90 12.44 77.74 0.58
LONF London Financial Corp. OH NASDAQ 15.250 21.000 9.750 -1.61 0.00 10.23 74.32 5.24
MRKF Market Financial Corp. OH NASDAQ 11.000 20.250 10.000 -5.38 -15.38 11.78 40.17 3.78
METF Metropolitan Financial Corp. OH NASDAQ 10.125 18.875 5.250 -7.95 -31.36 5.61 150.17 0.00
MFFC Milton Federal Financial Corp. OH NASDAQ 13.000 17.125 10.000 0.00 -12.61 12.58 105.11 0.60
OSFS Ohio State Financial Services OH NASDAQ 15.750 17.000 14.750 4.58 5.92 16.47 60.80 NA
OHSL OHSL Financial Corp. OH NASDAQ 14.625 18.375 5.750 11.43 -13.97 11.12 101.12 0.47
PFFC Peoples Financial Corp. OH NASDAQ 10.000 19.000 10.000 -13.04 -25.23 10.89 62.82 5.53
PSFC Peoples-Sidney Financial Corp. OH NASDAQ 16.500 24.375 12.563 -9.59 -22.35 11.96 59.32 4.26
PTRS Potters Financial Corp. OH NASDAQ 13.000 22.250 4.500 -6.31 -20.00 11.49 134.72 0.21
PVFC PVF Capital Corp. OH NASDAQ 11.250 18.833 2.616 -6.25 -39.19 7.82 108.57 0.00
SFSL Security First Corp. OH NASDAQ 22.250 27.875 1.083 6.59 -14.42 8.77 88.57 0.33
UCFC United Community Finl Corp. OH NASDAQ 14.250 17.938 13.000 -3.80 -17.99 NA NA NA
WOFC Western Ohio Financial Corp. OH NASDAQ 21.000 29.250 14.750 3.07 -12.50 22.58 155.51 1.00
WEHO Westwood Homestead Fin. Corp. OH NASDAQ 10.375 18.125 10.000 0.00 -16.16 10.20 52.34 3.85
WFI Winton Financial Corp. OH AMSE 12.375 20.625 1.875 15.12 -17.50 6.70 88.23 0.25
FFWD Wood Bancorp Inc. OH NASDAQ 13.750 27.000 4.266 -5.17 -18.52 8.45 62.26 0.33
LO Local Financial Corp. OK AMSE 9.313 13.750 6.938 6.43 -26.60 5.01 92.73 NA
KFBI Klamath First Bancorp OR NASDAQ 17.875 24.250 12.500 7.11 -7.74 16.02 101.72 0.34
OTFC Oregon Trail Financial Corp. OR NASDAQ 13.000 18.500 11.000 -1.89 -16.13 15.89 54.63 NA
CVAL Chester Valley Bancorp Inc. PA NASDAQ 27.875 35.238 2.814 3.24 -7.08 13.03 154.27 0.46
CMSB Commonwealth Bancorp Inc. PA NASDAQ 13.813 24.250 5.790 -10.71 -37.21 12.93 154.28 0.31
CRSB Crusader Holding Corp. PA NASDAQ 11.125 17.857 11.125 -6.32 -28.66 6.06 52.72 0.00
ESBF ESB Financial Corp. PA NASDAQ 16.000 20.000 2.768 -1.54 -10.49 11.84 168.78 0.34
FSBI Fidelity Bancorp Inc. PA NASDAQ 16.875 28.000 2.732 -15.63 -25.00 14.23 200.70 0.31
FBBC First Bell Bancorp Inc. PA NASDAQ 14.250 21.625 11.875 -8.06 -26.92 11.90 120.47 0.40
FKFS First Keystone Financial PA NASDAQ 15.000 21.750 5.125 15.38 -14.59 10.53 162.00 0.15
GAF GA Financial Inc. PA AMSE 15.000 22.250 10.250 -0.83 -18.37 15.45 114.64 0.52
HARL Harleysville Savings Bank PA NASDAQ 29.125 35.000 2.828 -0.85 -7.54 15.14 236.02 0.43
LARL Laurel Capital Group Inc. PA NASDAQ 17.375 23.500 2.418 -4.79 -17.26 11.13 100.33 0.50
NEP Northeast PA Financial Corp. PA AMSE 11.250 16.000 8.938 -9.09 -18.92 14.37 74.34 NA
PVSA Parkvale Financial Corp. PA NASDAQ 21.750 28.000 1.376 -7.84 -22.32 13.16 176.04 0.46
PWBK Pennwood Bancorp Inc. PA NASDAQ 9.875 17.438 6.750 -1.25 -19.39 12.34 66.07 0.27
PHFC Pittsburgh Home Financial Corp PA NASDAQ 13.250 20.813 9.500 -5.36 -23.74 13.12 189.16 2.74
PRBC Prestige Bancorp Inc. PA NASDAQ 13.500 22.065 8.478 -8.47 -19.40 15.14 156.53 0.14
PFNC Progress Financial Corp. PA NASDAQ 12.375 21.667 0.680 -5.71 -30.70 8.10 119.04 0.12
PSBI PSB Bancorp Inc. PA NASDAQ 7.500 11.274 4.179 -3.23 -18.37 NA NA NA
SHSB SHS Bancorp Inc. PA NASDAQ 17.000 18.000 14.750 0.00 -5.56 14.93 107.82 NA
SVRN Sovereign Bancorp Inc. PA NASDAQ 13.250 22.188 0.698 -0.93 -24.02 7.21 131.30 0.08
THRD TF Financial Corp. PA NASDAQ 17.250 30.000 9.750 -10.39 -31.68 17.84 215.98 0.44
THTL Thistle Group Holdings Co. PA NASDAQ 9.125 10.063 7.625 -1.35 -6.41 NA NA NA
USAB USABancshares Inc. PA NASDAQ 8.000 13.313 4.500 -5.88 -31.18 6.21 67.27 0.00
WVFC WVS Financial Corp. PA NASDAQ 15.188 20.125 6.500 -1.62 -2.01 9.13 86.18 1.55
YFED York Financial Corp. PA NASDAQ 21.875 27.250 3.441 25.00 4.17 12.18 137.07 0.50
CFCP Coastal Financial Corp. SC NASDAQ 18.125 20.813 1.079 3.57 -4.61 5.82 98.61 0.27
FFCH First Financial Holdings Inc. SC NASDAQ 19.000 27.000 2.000 0.16 -13.64 9.16 134.69 0.42
FSPT FirstSpartan Financial Corp. SC NASDAQ 31.250 47.250 24.500 2.46 -23.08 28.57 126.02 0.60
PEDE Great Pee Dee Bancorp SC NASDAQ 12.375 17.375 10.625 -1.00 -14.66 14.29 31.06 NA
HBSC Heritage Bancorp Inc. SC NASDAQ 17.250 22.375 14.000 -1.08 -9.21 20.46 65.00 NA
SCCB S. Carolina Community Bancshrs SC NASDAQ 16.000 25.250 12.625 -13.51 -25.15 16.24 82.79 0.64
SBAN SouthBanc Shares Inc. SC NASDAQ 17.844 23.758 7.101 -3.55 -11.33 17.72 85.38 NA
UFBS Union Financial Bcshs Inc. SC NASDAQ 15.000 18.000 7.333 7.14 -10.45 11.56 143.53 0.27
HFFC HF Financial Corp. SD NASDAQ 14.000 24.167 3.667 -9.68 -37.08 12.86 130.87 0.30
CAVB Cavalry Bancorp Inc. TN NASDAQ 18.813 25.250 18.500 -0.98 -9.88 13.53 46.93 NA
TWIN Twin City Bancorp TN NASDAQ 13.125 15.500 7.000 0.96 -1.41 11.29 89.11 0.41
UTBI United Tennessee Bankshares TN NASDAQ 10.875 16.000 9.875 -6.96 -27.50 13.83 51.17 NA
BNKU Bank United Corp. TX NASDAQ 36.375 56.000 22.500 -1.69 -21.25 21.67 432.67 0.64
CBSA Coastal Bancorp Inc. TX NASDAQ 20.000 26.667 6.583 22.14 -21.18 15.47 424.67 0.32
ETFS East Texas Financial Services TX NASDAQ 10.500 16.250 7.333 -20.75 -23.64 13.76 79.63 0.15
FBHC Fort Bend Holding Corp. TX NASDAQ 20.000 28.000 5.188 -1.23 -4.76 12.52 175.22 0.35
JXVL Jacksonville Bancorp Inc. TX NASDAQ 15.000 23.250 7.141 -3.23 -17.81 14.48 100.21 0.50
BFSB Bedford Bancshares Inc. VA NASDAQ 12.000 17.375 5.125 9.09 -20.66 9.02 68.02 0.29
CNIT CENIT Bancorp Inc. VA NASDAQ 17.500 28.583 3.625 -21.35 -24.32 10.84 130.46 0.37
CFFC Community Financial Corp. VA NASDAQ 12.250 16.375 2.125 2.08 -18.33 10.05 71.32 0.28
ESX Essex Bancorp Inc. VA AMSE 2.063 19.250 0.750 0.00 -32.65 -4.04 202.41 0.00
FCBK First Coastal Bankshares VA NASDAQ 18.250 20.875 1.625 -3.95 1.74 9.08 121.13 0.22
TBFC Telebanc Financial Corp. VA NASDAQ 14.375 24.750 2.500 -11.20 -35.75 6.71 269.07 0.00
CASB Cascade Financial Corp. WA NASDAQ 12.000 16.000 1.704 -3.03 -19.33 7.57 106.87 0.00
FMSB First Mutual Savings Bank WA NASDAQ 14.000 20.167 1.628 15.46 -13.85 8.02 110.94 0.53
FWWB First Washington Bancorp Inc. WA NASDAQ 22.625 25.966 11.250 1.97 1.07 16.35 116.43 0.29
HFWA Heritage Financial Corp. WA NASDAQ 10.375 15.938 9.625 -3.49 -25.89 9.72 43.07 NA
HRZB Horizon Financial Corp. WA NASDAQ 13.188 19.250 1.970 -0.47 -16.27 11.40 73.86 0.84
IWBK InterWest Bancorp Inc. WA NASDAQ 26.000 31.333 5.652 1.46 -11.24 11.00 156.43 0.52
RVSB Riverview Bancorp Inc. WA NASDAQ 12.375 19.125 3.481 -10.81 -26.12 10.61 43.42 NA
STSA Sterling Financial Corp. WA NASDAQ 15.250 27.625 1.878 -11.59 -30.68 14.73 273.77 0.00
TSBK Timberland Bancorp Inc. WA NASDAQ 12.000 18.500 10.750 -4.00 -24.71 12.88 39.79 NA
WFSL Washington Federal Inc. WA NASDAQ 25.813 30.285 1.424 0.00 -8.63 14.91 109.57 0.90
WAMU Washington Mutual Inc. WA NASDAQ 35.625 50.917 1.086 0.17 -20.50 15.44 279.56 0.79
ABCW Anchor BanCorp Wisconsin WI NASDAQ 22.625 23.875 2.450 -2.16 6.86 7.35 115.34 0.17
FCBF FCB Financial Corp. WI NASDAQ 24.750 34.000 10.000 -8.33 -17.15 19.54 133.65 0.82
FTFC First Federal Capital Corp. WI NASDAQ 14.750 18.375 0.483 -7.09 -10.61 6.63 94.01 0.26
FNGB First Northern Capital Corp. WI NASDAQ 10.250 14.000 1.730 -2.38 -23.36 8.57 80.71 0.35
HALL Hallmark Capital Corp. WI NASDAQ 11.875 18.000 4.938 0.00 -19.49 12.35 157.12 0.00
NWEQ Northwest Equity Corp. WI NASDAQ 17.000 22.250 6.875 7.94 -13.38 14.24 116.87 0.58
RELI Reliance Bancshares Inc. WI NASDAQ 9.000 10.125 6.500 0.00 -7.10 9.34 17.65 0.00
STFR St. Francis Capital Corp. WI NASDAQ 36.125 50.750 12.625 2.48 -11.89 25.52 389.37 0.56
AFBC Advance Financial Bancorp WV NASDAQ 13.375 20.875 12.375 -4.46 -26.21 14.48 110.79 0.32
CRZY Crazy Woman Creek Bancorp WY NASDAQ 13.125 20.000 10.000 3.96 -23.36 15.35 65.48 0.40
TRIC Tri-County Bancorp Inc. WY NASDAQ 12.750 16.500 5.688 9.68 3.55 12.19 74.13 0.39
ALL THRIFTS
AVERAGE 16.890 24.233 7.180 -2.82 -17.64 13.69 128.83 0.61
MEDIAN 14.750 22.000 7.750 -2.54 -18.45 13.44 113.50 0.33
HIGH 88.813 114.250 24.500 44.64 47.81 52.23 688.85 10.67
LOW 2.063 4.750 0.250 -44.64 -73.81 -4.04 17.65 0.00
AVERAGE FOR STATE
IN 16.595 22.521 7.766 -4.94 -14.89 14.67 126.16 0.35
AVERAGE BY REGION
MIDWEST 16.492 23.010 7.993 -2.27 -14.81 13.92 113.36 0.62
NEW ENGLAND 19.382 28.076 4.003 -1.08 -19.52 13.69 155.33 0.42
MID ATLANTIC 17.931 25.051 6.890 -2.99 -18.11 14.06 142.12 0.43
SOUTHEAST 15.013 22.874 7.475 -3.80 -18.52 11.94 97.91 1.25
SOUTHWEST 15.168 22.220 8.698 0.24 -18.79 13.90 157.20 0.35
WEST 17.224 26.022 6.853 -5.65 -23.45 14.53 167.56 0.24
AVERAGE BY EXCHANGE
NYSE 28.750 40.818 5.807 -5.46 -26.78 19.54 225.59 0.40
AMEX 13.929 21.826 8.741 -1.27 -19.23 13.50 116.93 0.59
OTC/NASDAQ 16.749 23.876 7.084 -2.87 -17.20 13.49 126.50 0.61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRICING RATIOS
*
Price/ Price/ Price/ Price/Core
Earnings Bk. Assets Earnings
Value
State (X) (%) (%) (X)
----- -------- -------- -------- --------
<S> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. AL 14.77 133.38 13.19 14.77
SRN Southern Banc Co. AL 26.28 85.32 15.07 26.28
SCBS Southern Community Bancshares AL 14.44 125.48 21.77 14.29
SZB SouthFirst Bancshares Inc. AL 21.40 93.28 9.28 23.67
FFBH First Federal Bancshares of AR AR 14.79 101.66 14.95 15.04
HCBBE HCB Bancshares Inc. AR NA 59.69 10.29 NA
PFSL Pocahontas Bancorp Inc. AR NA 102.97 14.87 NA
FTF Texarkana First Financial Corp AR 11.10 132.95 19.24 11.69
BPLS Bank Plus Corp. CA 13.35 51.71 2.23 8.98
BVCC Bay View Capital Corp. CA 20.93 89.33 6.16 12.59
BYFC Broadway Financial Corp. CA 11.07 48.15 4.57 30.68
DSL Downey Financial Corp. CA 12.50 156.81 12.49 14.75
FSSB First FS&LA of San Bernardino CA NM 70.36 3.05 NM
FED FirstFed Financial Corp. CA 11.67 148.43 9.69 12.59
GSB Golden State Bancorp CA NM 148.78 4.30 NA
GDW Golden West Financial CA 12.40 170.04 12.89 12.62
HTHR Hawthorne Financial Corp. CA 9.89 100.36 3.99 8.40
HEMT HF Bancorp Inc. CA NM 121.86 9.65 NM
HBNK Highland Bancorp Inc. CA 10.78 189.04 13.24 12.37
ITLA ITLA Capital Corp. CA 7.89 98.98 10.67 7.89
LFCO Life Financial Corp. CA 2.41 43.98 7.12 2.30
MBBC Monterey Bay Bancorp Inc. CA 36.33 90.89 10.46 36.33
PBOC PBOC Holdings Inc. CA 23.01 126.40 6.90 13.32
PFFB PFF Bancorp Inc. CA 12.38 89.41 6.78 12.99
PROV Provident Financial Holdings CA 13.36 85.59 8.53 36.90
QCBC Quaker City Bancorp Inc. CA 11.78 112.10 9.94 12.55
SGVB SGV Bancorp Inc. CA 20.00 87.40 6.90 20.34
UPFC United PanAm Financial Corp. CA 5.89 102.09 20.25 NM
WES Westcorp CA NM 46.06 3.74 NM
HCBC High Country Bancorp Inc. CO NA 85.02 15.45 NA
ANE Alliance Bncp of New England CT 10.97 125.00 9.76 22.44
BKC American Bank of Connecticut CT 10.31 171.06 16.23 11.84
BKCT Bancorp Connecticut Inc. CT 14.78 177.45 17.56 17.17
FFES First Federal of East Hartford CT 11.75 95.46 6.87 10.87
MECH MECH Financial Inc. CT 13.71 135.31 13.31 13.79
NMSB NewMil Bancorp Inc. CT 17.11 144.28 13.49 22.41
NSSY NSS Bancorp Inc. CT 19.66 198.36 16.78 24.21
NTMG Nutmeg Federal S&LA CT 21.82 189.87 11.52 46.15
WBST Webster Financial Corp. CT 11.45 141.27 8.72 11.39
IFSB Independence Federal Svgs Bank DC 4.86 75.67 6.02 18.94
WSFS WSFS Financial Corp. DE 13.22 234.88 13.99 13.62
BANC BankAtlantic Bancorp Inc. FL 14.37 138.29 9.40 32.08
BKUNA BankUnited Financial Corp. FL 17.95 82.00 4.19 30.14
FDTR Federal Trust Corp. FL NA 96.15 8.13 NA
FFLC FFLC Bancorp Inc. FL 15.23 117.13 14.65 15.23
FFPB First Palm Beach Bancorp Inc. FL 22.68 150.40 10.30 42.62
HARB Harbor Florida Bancshares Inc. FL NA 126.34 24.77 NA
OCN Ocwen Financial Corp. FL 25.27 165.36 20.15 89.42
EBSI Eagle Bancshares GA 12.24 134.73 9.33 12.59
FSTC First Citizens Corp. GA 15.80 207.41 20.70 18.63
FGHC First Georgia Holding Inc. GA 22.37 276.87 22.56 22.37
FLFC First Liberty Financial Corp. GA 25.94 215.69 16.75 23.38
FLAG FLAG Financial Corp. GA 17.65 160.86 14.02 24.00
NTBK Net.B@nk Inc. GA NM 289.34 43.75 NM
CASH First Midwest Financial Inc. IA 15.87 100.61 10.24 17.74
HZFS Horizon Financial Svcs Corp. IA 20.65 147.67 13.94 17.38
MIFC Mid-Iowa Financial Corp. IA 17.45 173.84 17.26 17.68
MWBI Midwest Bancshares Inc. IA 9.76 108.79 8.01 11.21
FFFD North Central Bancshares Inc. IA 12.14 104.56 15.53 12.69
SFFC StateFed Financial Corp. IA 17.61 113.19 20.27 17.61
FBNW FirstBank Corp. ID NA 95.28 16.07 NA
ABCL Alliance Bancorp IL 14.98 111.88 9.89 13.53
AVND Avondale Financial Corp. IL NM 92.36 7.72 NM
BFFC Big Foot Financial Corp. IL 27.55 89.05 15.38 37.50
CBCI Calumet Bancorp Inc. IL 10.66 107.25 19.02 10.59
CBK Citizens First Financial Corp. IL 19.48 96.59 13.48 34.88
CSBF CSB Financial Group Inc. IL 28.38 78.71 18.25 30.00
EGLB Eagle BancGroup Inc. IL 32.84 101.36 12.21 95.07
EFC EFC Bancorp Inc. IL NA 85.10 20.14 NA
FBCI Fidelity Bancorp Inc. IL NA 103.89 11.01 NA
FFBI First Financial Bancorp Inc. IL 78.33 127.93 11.81 38.52
FMBD First Mutual Bancorp Inc. IL 34.44 106.27 16.04 51.14
FSFF First SecurityFed Financial IL NA 100.53 27.34 NA
GTPS Great American Bancorp IL 24.24 94.28 14.71 24.24
HMLK Hemlock Federal Financial Corp IL 15.95 93.06 13.19 16.13
HBEI Home Bancorp of Elgin Inc. IL 31.10 91.01 21.99 31.10
KNK Kankakee Bancorp Inc. IL 13.14 89.69 8.76 13.71
MAFB MAF Bancorp Inc. IL 14.20 183.12 14.28 14.84
NBSI North Bancshares Inc. IL 32.35 105.47 11.19 36.67
PFED Park Bancorp Inc. IL 18.91 86.86 17.66 18.43
PSFI PS Financial Inc. IL 21.74 88.65 23.75 14.71
SPBC St. Paul Bancorp Inc. IL 26.84 169.54 14.29 16.49
WCBI Westco Bancorp Inc. IL 17.75 150.38 22.65 17.75
FBCV 1ST Bancorp IN 22.40 177.35 16.26 31.76
AMFC AMB Financial Corp. IN 12.50 77.01 9.77 19.47
ASBI Ameriana Bancorp IN 15.52 128.30 15.60 18.00
ATSB AmTrust Capital Corp. IN 26.75 104.02 11.26 61.00
BRBI Blue River Bancshares Inc. IN NA NA NA NA
CITZ CFS Bancorp Inc. IN NA NA NA NA
FFWC FFW Corp. IN 11.08 111.47 10.49 12.72
FFED Fidelity Federal Bancorp IN NM 208.33 7.94 NM
FISB First Indiana Corp. IN 13.19 148.09 13.89 20.43
HFGI Harrington Financial Group IN NM 142.14 4.81 NM
HBFW Home Bancorp IN 20.80 145.73 17.37 21.30
HBBI Home Building Bancorp IN 21.05 116.45 17.63 22.02
HOMF Home Federal Bancorp IN 12.50 182.27 16.96 15.94
HWEN Home Financial Bancorp IN 13.83 80.45 14.19 18.06
LOGN Logansport Financial Corp. IN 13.75 102.15 19.22 13.48
LSBI LSB Financial Corp. IN 15.08 139.30 12.43 17.48
MARN Marion Capital Holdings IN 17.54 102.10 19.82 17.54
MFBC MFB Corp. IN 14.39 95.47 9.51 16.00
MONT Montgomery Financial Corp. IN NA 86.49 14.81 NA
NEIB Northeast Indiana Bancorp IN 11.88 105.01 13.70 11.88
PFDC Peoples Bancorp IN 15.97 148.31 22.20 15.97
PERM Permanent Bancorp Inc. IN 19.67 114.07 10.06 20.69
RIVR River Valley Bancorp IN 11.63 86.12 11.73 13.11
SOBI Sobieski Bancorp Inc. IN 19.33 80.47 11.98 19.86
UCBC Union Community Bancorp IN NA 87.35 35.18 NA
FFSL First Independence Corp. KS 11.47 79.01 7.57 11.47
FKAN First Kansas Financial Corp. KS NA 74.29 14.66 NA
LARK Landmark Bancshares Inc. KS 14.89 108.58 14.19 17.65
CKFB CKF Bancorp Inc. KY 15.25 88.20 20.49 15.25
CLAS Classic Bancshares Inc. KY 18.83 94.21 14.01 24.39
CFKY Columbia Financial of Kentucky KY NA 91.83 28.91 NA
FFKY First Federal Financial Corp. KY 16.78 192.60 25.71 17.47
FLKY First Lancaster Bancshares KY 21.49 83.16 21.85 21.49
FTSB Fort Thomas Financial Corp. KY 13.58 99.55 16.00 13.58
FKKY Frankfort First Bancorp Inc. KY 14.69 101.21 16.75 14.69
HFFB Harrodsburg First Fin Bancorp KY 17.90 89.62 25.67 17.90
HFBC HopFed Bancorp Inc. KY NA 118.00 31.59 NA
KYF Kentucky First Bancorp Inc. KY 16.33 105.51 18.53 16.55
ANA Acadiana Bancshares Inc. LA 14.83 101.04 13.79 15.09
GSLA GS Financial Corp. LA 26.02 79.64 28.69 29.65
HSTD Homestead Bancorp Inc. LA NA NA NA NA
TSH Teche Holding Co. LA 12.71 87.65 11.26 13.05
ABBK Abington Bancorp Inc. MA 12.93 153.55 9.78 17.19
ANDB Andover Bancorp Inc. MA 12.20 168.68 14.59 12.30
BYS Bay State Bancorp MA NA 84.89 19.14 NA
BFD BostonFed Bancorp Inc. MA 13.24 108.20 8.75 17.02
CEBK Central Co-operative Bank MA 12.50 104.94 10.23 16.56
FCB Falmouth Bancorp Inc. MA 18.83 93.90 20.07 25.42
FESX First Essex Bancorp Inc. MA 12.41 132.96 9.49 14.35
FAB FIRSTFED AMERICA BANCORP INC. MA 16.95 93.77 8.97 20.49
HIFS Hingham Instit. for Savings MA 12.15 144.84 13.73 12.32
HPBC Home Port Bancorp Inc. MA 11.62 161.32 14.05 10.46
IPSW Ipswich Savings Bank MA 12.26 226.48 12.47 12.38
LSBX Lawrence Savings Bank MA 5.97 131.45 17.20 6.11
MASB MASSBANK Corp. MA 12.03 114.29 13.50 13.98
MFLR Mayflower Co-operative Bank MA 12.88 143.15 13.21 15.79
MDBK Medford Bancorp Inc. MA 13.57 146.87 13.36 14.48
MWBX MetroWest Bank MA 11.14 175.50 13.05 11.14
MYST Mystic Financial Inc. MA NA 91.90 16.68 NA
PBKB People's Bancshares Inc. MA 10.57 209.18 7.63 25.63
SWCB Sandwich Bancorp Inc. MA 22.06 249.89 20.97 23.49
SISB SIS Bancorp Inc. MA 20.07 197.64 14.39 16.29
WRNB Warren Bancorp Inc. MA 13.34 192.12 20.35 14.11
EQSB Equitable Federal Savings Bank MD 10.99 130.37 6.67 11.52
HRBF Harbor Federal Bancorp Inc. MD 19.61 125.87 16.08 20.20
WSB Washington Savings Bank, FSB MD 10.03 82.78 6.97 14.38
WHGB WHG Bancshares Corp. MD 21.35 70.59 10.79 20.92
FCME First Coastal Corp. ME 9.59 74.67 6.69 10.55
KSBK KSB Bancorp Inc. ME 9.49 128.98 10.36 9.55
MCBN Mid-Coast Bancorp Inc. ME 13.11 108.84 8.73 15.09
NBN Northeast Bancorp ME 12.50 116.47 8.71 13.61
PHBK Peoples Heritage Finl Group ME 15.68 205.18 15.60 13.11
BWFC Bank West Financial Corp. MI 27.98 104.10 13.35 27.16
CFSB CFSB Bancorp Inc. MI 17.07 283.11 22.04 18.90
DNFC D & N Financial Corp. MI 11.45 155.48 8.71 14.96
FLGS Flagstar Bancorp Inc. MI 10.99 226.29 12.55 10.99
MSBF MSB Financial Inc. MI 14.89 140.70 23.43 17.28
MSBK Mutual Savings Bank FSB MI NM 87.67 5.31 NM
OFCP Ottawa Financial Corp. MI 15.75 151.17 12.43 17.54
THR Three Rivers Financial Corp. MI 14.49 95.68 12.28 16.15
BDJI First Federal Bancorp. MN 13.92 106.30 11.11 13.78
FFHH FSF Financial Corp. MN 13.41 90.10 10.45 14.05
HMNF HMN Financial Inc. MN 13.49 91.07 8.89 18.85
MIVI Mississippi View Holding Co. MN 20.13 113.50 20.63 20.35
QCFB QCF Bancorp Inc. MN 11.30 130.46 22.82 11.61
WEFC Wells Financial Corp. MN 13.95 118.03 16.00 15.38
CMRN Cameron Financial Corp MO 15.35 86.02 17.09 15.50
CBES CBES Bancorp Inc. MO 14.30 88.49 12.04 19.84
CNSB CNS Bancorp Inc. MO 24.07 88.08 21.82 28.26
EBI Equality Bancorp Inc. MO NA 115.38 11.05 NA
FBSI First Bancshares Inc. MO 15.00 115.80 16.39 15.00
FTNB Fulton Bancorp Inc. MO 22.86 107.89 24.98 29.63
GFED Guaranty Federal Bcshs Inc. MO NA 86.39 24.85 NA
HFSA Hardin Bancorp Inc. MO 14.29 95.41 9.82 17.58
JSBA Jefferson Savings Bancorp Inc. MO 17.22 118.96 12.45 19.87
LXMO Lexington B&L Financial Corp. MO 18.95 77.46 12.44 18.95
MBLF MBLA Financial Corp. MO 14.24 91.80 12.58 14.44
NASB NASB Financial Inc. MO 12.17 235.36 19.98 14.92
NSLB NS&L Bancorp Inc. MO 19.78 78.50 14.51 20.38
PCBC Perry County Financial Corp. MO 19.39 103.65 19.14 19.39
SMBC Southern Missouri Bancorp Inc. MO 24.63 101.60 15.71 23.57
CFTP Community Federal Bancorp MS 21.64 97.64 24.23 25.00
FFBS FFBS BanCorp Inc. MS 22.68 129.64 26.20 17.89
EFBC Empire Federal Bancorp Inc. MT 18.94 81.23 29.43 18.94
UBMT United Financial Corp. MT 34.33 129.00 19.02 NA
WSTR WesterFed Financial Corp. MT 14.27 90.90 10.13 14.50
CFNC Carolina Fincorp Inc. NC 13.11 99.01 13.38 11.76
CENB Century Bancorp Inc. NC 13.21 94.98 18.37 13.33
COOP Cooperative Bankshares Inc. NC 17.57 130.00 10.33 19.12
SOPN First Savings Bancorp Inc. NC 17.88 124.13 28.36 17.88
GSFC Green Street Financial Corp. NC 19.85 91.15 31.82 19.85
HBS Haywood Bancshares Inc. NC 15.71 100.40 14.63 10.03
KSAV KS Bancorp Inc. NC 18.46 145.45 18.64 18.46
MBSP Mitchell Bancorp Inc. NC 28.00 89.06 34.93 28.00
PDB Piedmont Bancorp Inc. NC 15.89 118.67 19.75 16.45
SSB Scotland Bancorp Inc. NC 22.38 140.55 35.05 22.38
SSFC South Street Financial Corp. NC 27.92 98.53 19.23 NA
SSM Stone Street Bancorp Inc. NC 18.28 87.89 24.02 18.28
UFRM United Federal Savings Bank NC 30.26 241.94 18.76 35.94
CFB Commercial Federal Corp. NE 14.35 152.06 11.05 11.63
NHTB New Hampshire Thrift Bncshrs NH 12.87 138.89 11.30 13.78
FBER 1st Bergen Bancorp NJ 26.79 166.79 19.34 26.79
FSNJ Bayonne Bancshares Inc. NJ NA 142.31 19.48 NA
FSLA First Source Bancorp Inc. NJ NA 101.75 21.61 NA
FMCO FMS Financial Corp. NJ 14.08 170.07 10.82 14.08
LVSB Lakeview Financial Corp. NJ 7.65 150.33 14.33 17.61
LFBI Little Falls Bancorp Inc. NJ 18.13 97.25 10.22 18.13
OCFC Ocean Financial Corp. NJ 14.69 106.98 13.62 14.69
PBCI Pamrapo Bancorp Inc. NJ 13.86 132.95 16.58 14.38
PFSB PennFed Financial Services Inc NJ 10.88 106.36 7.64 11.27
TSBS Peoples Bancorp Inc. NJ NA 106.27 41.68 NA
PULS Pulse Bancorp NJ 15.12 176.75 14.91 15.12
RARB Raritan Bancorp Inc. NJ 21.66 253.35 18.56 21.66
SFIN Statewide Financial Corp. NJ 13.19 114.58 11.13 13.85
AABC Access Anytime Bancorp Inc. NM 5.74 91.98 7.29 6.36
GUPB GFSB Bancorp Inc. NM 18.75 116.90 13.48 18.75
AFED AFSALA Bancorp Inc. NY 17.63 84.72 10.84 16.18
ALBK ALBANK Financial Corp. NY 18.04 205.00 19.40 18.09
ALBC Albion Banc Corp. NY 15.20 92.59 7.87 16.15
AHCI Ambanc Holding Co. NY 25.47 94.94 9.80 23.68
ASFC Astoria Financial Corp. NY 12.58 121.53 8.71 13.69
CNY Carver Bancorp Inc. NY 19.01 58.83 4.94 21.73
CATB Catskill Financial Corp. NY 14.97 86.67 19.74 15.14
CNYF CNY Financial Corp. NY NA NA NA NA
DME Dime Bancorp Inc. NY 14.31 202.24 12.76 32.25
DCOM Dime Community Bancshares Inc. NY 19.01 149.64 15.45 20.00
ESBK Elmira Savings Bank (The) NY 13.83 101.97 6.51 16.87
FIBC Financial Bancorp Inc. NY 20.49 209.45 17.64 21.23
FFIC Flushing Financial Corp. NY 16.48 123.97 14.88 15.63
GPT GreenPoint Financial Corp. NY 15.50 146.32 21.88 15.13
GOSB GSB Financial Corp. NY NA 90.91 22.64 NA
HAVN Haven Bancorp Inc. NY 13.97 102.69 5.35 13.29
HRBT Hudson River Bancorp NY NA 73.13 21.62 NA
ICBC Independence Comm. Bank Corp. NY NA 107.29 19.54 NA
JSB JSB Financial Inc. NY 11.43 134.22 32.62 13.58
PEEK Peekskill Financial Corp. NY 19.79 87.55 18.88 19.50
QCSB Queens County Bancorp Inc. NY 24.39 375.47 37.65 24.59
RELY Reliance Bancorp Inc. NY 12.76 119.85 8.92 12.82
RCBK Richmond County Financial Corp NY NA 118.69 23.12 NA
RSLN Roslyn Bancorp Inc. NY 13.80 120.63 19.20 14.74
SFED SFS Bancorp Inc. NY 24.25 133.76 16.46 25.00
SKAN Skaneateles Bancorp Inc. NY 12.62 105.31 7.24 12.86
SIB Staten Island Bancorp Inc. NY NA 116.60 24.07 NA
ROSE TR Financial Corp. NY 12.50 186.67 12.48 14.81
WSBI Warwick Community Bancorp NY NA 95.86 20.12 NA
YFCB Yonkers Financial Corp. NY 13.19 95.57 9.84 14.69
ASBP ASB Financial Corp. OH 17.72 135.56 16.88 17.99
CAFI Camco Financial Corp. OH 12.11 144.91 14.33 16.71
COFI Charter One Financial OH 19.57 236.45 17.91 14.81
CIBI Community Investors Bancorp OH 16.91 140.76 14.20 16.91
DCBI Delphos Citizens Bancorp Inc. OH 18.42 118.00 26.52 18.42
EMLD Emerald Financial Corp. OH 15.91 201.15 16.81 17.50
EFBI Enterprise Federal Bancorp OH 36.31 254.22 22.89 42.55
FFDF FFD Financial Corp. OH 22.54 146.12 25.42 32.00
FFYF FFY Financial Corp. OH 14.14 133.33 17.23 14.43
FFOH Fidelity Financial of Ohio OH 15.77 117.68 14.60 16.32
FDEF First Defiance Financial OH 19.13 99.72 17.69 20.04
FFBZ First Federal Bancorp Inc. OH 20.75 198.37 15.76 22.07
FFHS First Franklin Corp. OH 12.74 110.29 9.92 15.17
GFCO Glenway Financial Corp. OH 16.38 148.44 14.30 16.38
HHFC Harvest Home Financial Corp. OH 20.00 102.56 10.98 21.05
HCFC Home City Financial Corp. OH 12.25 104.43 14.49 12.25
HLFC Home Loan Financial Corp. OH NA 84.95 32.02 NA
INBI Industrial Bancorp Inc. OH 15.95 148.71 23.80 15.95
LONF London Financial Corp. OH 17.73 149.07 20.52 19.06
MRKF Market Financial Corp. OH 21.57 93.38 27.38 21.57
METF Metropolitan Financial Corp. OH 10.89 180.48 6.74 12.66
MFFC Milton Federal Financial Corp. OH 18.31 103.34 12.37 22.81
OSFS Ohio State Financial Services OH NA 95.63 25.90 NA
OHSL OHSL Financial Corp. OH 17.21 131.52 14.46 18.99
PFFC Peoples Financial Corp. OH 15.63 91.83 15.92 27.03
PSFC Peoples-Sidney Financial Corp. OH 22.30 137.96 27.82 22.30
PTRS Potters Financial Corp. OH 13.40 113.14 9.65 14.77
PVFC PVF Capital Corp. OH 9.38 143.86 10.36 10.04
SFSL Security First Corp. OH 19.18 253.71 25.12 19.18
UCFC United Community Finl Corp. OH NA NA NA NA
WOFC Western Ohio Financial Corp. OH 161.54 93.00 13.50 161.54
WEHO Westwood Homestead Fin. Corp. OH 24.13 101.72 19.82 NA
WFI Winton Financial Corp. OH 12.89 184.70 14.03 17.19
FFWD Wood Bancorp Inc. OH 15.99 162.72 22.08 19.64
LO Local Financial Corp. OK NA 185.89 10.04 NA
KFBI Klamath First Bancorp OR 19.22 111.58 17.57 19.43
OTFC Oregon Trail Financial Corp. OR NA 81.81 23.80 NA
CVAL Chester Valley Bancorp Inc. PA 18.83 213.93 18.07 19.91
CMSB Commonwealth Bancorp Inc. PA 17.27 106.83 8.95 27.08
CRSB Crusader Holding Corp. PA 8.76 183.58 21.10 9.59
ESBF ESB Financial Corp. PA 15.38 135.14 9.48 15.53
FSBI Fidelity Bancorp Inc. PA 11.88 118.59 8.41 12.14
FBBC First Bell Bancorp Inc. PA 10.88 119.75 11.83 10.96
FKFS First Keystone Financial PA 12.40 142.45 9.26 14.02
GAF GA Financial Inc. PA 12.10 97.09 13.08 13.76
HARL Harleysville Savings Bank PA 14.42 192.37 12.34 14.42
LARL Laurel Capital Group Inc. PA 13.06 156.11 17.32 12.87
NEP Northeast PA Financial Corp. PA NA 78.29 15.13 NA
PVSA Parkvale Financial Corp. PA 12.65 165.27 12.36 12.87
PWBK Pennwood Bancorp Inc. PA 24.09 80.02 14.95 26.69
PHFC Pittsburgh Home Financial Corp PA 11.42 100.99 7.00 12.74
PRBC Prestige Bancorp Inc. PA 18.75 89.17 8.62 19.57
PFNC Progress Financial Corp. PA 14.22 152.78 10.40 16.72
PSBI PSB Bancorp Inc. PA NA NA NA NA
SHSB SHS Bancorp Inc. PA NA 113.86 15.77 NA
SVRN Sovereign Bancorp Inc. PA 16.36 183.77 10.09 14.56
THRD TF Financial Corp. PA 13.80 96.69 7.99 16.75
THTL Thistle Group Holdings Co. PA NA NA NA NA
USAB USABancshares Inc. PA 80.00 128.82 11.89 36.36
WVFC WVS Financial Corp. PA 15.50 166.35 17.62 14.19
YFED York Financial Corp. PA 20.64 179.60 15.96 26.04
CFCP Coastal Financial Corp. SC 17.60 311.43 18.38 21.84
FFCH First Financial Holdings Inc. SC 16.24 207.42 14.11 16.52
FSPT FirstSpartan Financial Corp. SC 17.56 109.38 24.80 18.71
PEDE Great Pee Dee Bancorp SC NA 86.60 39.84 NA
HBSC Heritage Bancorp Inc. SC NA 84.31 26.54 NA
SCCB S. Carolina Community Bancshrs SC 23.53 98.52 19.33 23.53
SBAN SouthBanc Shares Inc. SC NA 100.70 20.90 NA
UFBS Union Financial Bcshs Inc. SC 12.82 129.76 10.45 16.13
HFFC HF Financial Corp. SD 10.37 108.86 10.70 12.07
CAVB Cavalry Bancorp Inc. TN NA 139.05 40.09 NA
TWIN Twin City Bancorp TN 14.75 116.25 14.73 18.23
UTBI United Tennessee Bankshares TN NA 78.63 21.25 NA
BNKU Bank United Corp. TX 10.28 167.86 8.41 11.19
CBSA Coastal Bancorp Inc. TX 9.48 129.28 4.71 9.22
ETFS East Texas Financial Services TX 24.42 76.31 13.19 28.38
FBHC Fort Bend Holding Corp. TX 21.28 159.74 11.41 31.75
JXVL Jacksonville Bancorp Inc. TX 11.90 103.59 14.97 11.90
BFSB Bedford Bancshares Inc. VA 15.58 133.04 17.64 15.58
CNIT CENIT Bancorp Inc. VA 13.46 161.44 13.41 14.58
CFFC Community Financial Corp. VA 17.75 121.89 17.18 18.56
ESX Essex Bancorp Inc. VA NM NM 1.02 NM
FCBK First Coastal Bankshares VA 22.81 205.98 14.75 28.52
TBFC Telebanc Financial Corp. VA 35.94 214.23 5.34 NA
CASB Cascade Financial Corp. WA 15.00 158.52 11.23 17.65
FMSB First Mutual Savings Bank WA 12.39 174.56 12.62 14.14
FWWB First Washington Bancorp Inc. WA 17.81 138.38 19.43 19.50
HFWA Heritage Financial Corp. WA NA 106.74 24.09 NA
HRZB Horizon Financial Corp. WA 11.88 115.68 17.86 12.21
IWBK InterWest Bancorp Inc. WA 18.57 236.36 16.62 22.22
RVSB Riverview Bancorp Inc. WA NA 116.64 28.50 NA
STSA Sterling Financial Corp. WA 16.76 103.53 5.57 11.55
TSBK Timberland Bancorp Inc. WA NA 93.17 30.16 NA
WFSL Washington Federal Inc. WA 12.18 173.13 23.56 12.59
WAMU Washington Mutual Inc. WA 13.05 230.73 12.74 13.34
ABCW Anchor BanCorp Wisconsin WI 19.67 307.82 19.62 22.63
FCBF FCB Financial Corp. WI 13.75 126.66 18.52 15.57
FTFC First Federal Capital Corp. WI 15.36 222.47 15.69 28.37
FNGB First Northern Capital Corp. WI 13.67 119.60 12.70 14.64
HALL Hallmark Capital Corp. WI 11.99 96.15 7.56 13.65
NWEQ Northwest Equity Corp. WI 11.49 119.38 14.55 12.32
RELI Reliance Bancshares Inc. WI 37.50 96.36 50.99 39.13
STFR St. Francis Capital Corp. WI 12.68 141.56 9.28 17.12
AFBC Advance Financial Bancorp WV 15.74 92.37 12.07 18.07
CRZY Crazy Woman Creek Bancorp WY 15.81 85.50 20.04 15.81
TRIC Tri-County Bancorp Inc. WY 17.71 104.59 17.20 17.23
ALL THRIFTS
AVERAGE 17.49 128.43 15.56 19.41
MEDIAN 15.36 115.38 14.43 16.74
HIGH 161.54 375.47 50.99 161.54
LOW 2.41 43.98 1.02 2.30
AVERAGE FOR STATE
IN 16.256 120.367 14.644 20.353
AVERAGE BY REGION
MIDWEST 19.21 123.77 16.39 21.39
NEW ENGLAND 13.57 146.57 12.98 16.34
MID ATLANTIC 16.61 132.71 14.69 17.38
SOUTHEAST 19.04 135.38 18.65 21.97
SOUTHWEST 15.54 115.41 12.72 17.53
WEST 15.28 115.13 13.23 16.02
AVERAGE BY EXCHANGE
NYSE 14.68 144.27 15.06 25.25
AMEX 15.60 107.73 13.90 18.09
OTC/NASDAQ 17.74 129.74 15.73 19.35
<PAGE>
EXHIBIT 3
KELLER & COMPANY
Dublin, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, FDIC-INSURED THRIFT INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF OCTOBER 23, 1998
ASSETS AND EQUITY PROFITABILITY
* *
Total Total Total Core Core
Assets Equity Tang. ROAA ROAA ROAE ROAE
Equity
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- --------------------------------------
FFDB FirstFed Bancorp Inc. AL 179,893 17,798 16,436 0.89 0.89 9.22 9.22
SRN Southern Banc Co. AL 105,087 18,570 18,433 0.52 0.52 2.96 2.96
SCBS Southern Community Bancshares AL 67,920 11,778 11,778 1.22 1.22 6.45 6.49
SZB SouthFirst Bancshares Inc. AL 162,975 16,202 15,800 0.46 0.41 4.19 3.71
FFBH First Federal Bancshares of AR AR 578,142 85,031 85,031 1.00 0.99 6.71 6.63
HCBBE HCB Bancshares Inc. AR 221,631 38,220 37,770 0.33 0.32 1.86 1.79
PFSL Pocahontas Bancorp Inc. AR 404,606 58,454 56,591 0.69 0.69 7.30 7.25
FTF Texarkana First Financial Corp AR 189,451 27,416 27,416 1.78 1.69 11.85 11.24
BPLS Bank Plus Corp. CA 4,286,237 185,196 169,969 0.18 0.27 4.19 6.35
BVCC Bay View Capital Corp. CA 5,522,374 381,031 245,257 0.34 0.53 5.09 8.03
BYFC Broadway Financial Corp. CA 137,642 13,623 13,623 0.46 0.19 4.33 1.77
DSL Downey Financial Corp. CA 5,910,579 470,815 466,081 1.01 0.86 13.38 11.35
FSSB First FS&LA of San Bernardino CA 103,674 4,492 4,329 -1.18 -1.18 -24.70 -24.76
FED FirstFed Financial Corp. CA 3,826,779 249,910 248,489 0.80 0.74 13.91 12.92
GSB Golden State Bancorp CA 53,017,790 1,666,782 726,051 1.41 1.34 21.78 20.64
GDW Golden West Financial CA 39,383,006 2,985,866 2,985,866 1.05 1.04 14.83 14.58
HTHR Hawthorne Financial Corp. CA 1,201,331 47,737 47,737 1.02 1.18 20.59 23.83
HEMT HF Bancorp Inc. CA 1,059,600 83,927 72,397 -0.02 0.02 -0.25 0.29
HBNK Highland Bancorp Inc. CA 594,672 41,642 41,642 1.46 1.27 19.01 16.58
ITLA ITLA Capital Corp. CA 1,007,042 108,624 NA 1.45 1.45 13.93 13.93
LFCO Life Financial Corp. CA 380,343 61,544 61,544 2.66 2.79 20.44 21.42
MBBC Monterey Bay Bancorp Inc. CA 436,193 46,953 42,974 0.31 0.31 2.80 2.82
PBOC PBOC Holdings Inc. CA 3,210,974 175,290 175,290 0.15 0.37 3.52 8.65
PFFB PFF Bancorp Inc. CA 3,044,586 230,943 228,514 0.60 0.58 6.84 6.53
PROV Provident Financial Holdings CA 840,639 83,753 83,753 0.68 0.25 6.09 2.25
QCBC Quaker City Bancorp Inc. CA 893,511 79,240 79,240 0.87 0.81 9.97 9.29
SGVB SGV Bancorp Inc. CA 408,346 32,233 31,847 0.37 0.36 4.80 4.70
UPFC United PanAm Financial Corp. CA 437,276 86,719 86,356 3.38 -6.01 27.65 -49.18
WES Westcorp CA 4,100,104 333,023 332,240 -0.14 -0.87 -1.59 -9.79
HCBC High Country Bancorp Inc. CO 100,589 18,279 18,279 0.74 0.74 5.22 5.22
ANE Alliance Bncp of New England CT 252,287 19,696 19,262 0.95 0.46 12.84 6.20
BKC American Bank of Connecticut CT 648,245 61,488 59,848 1.62 1.41 19.13 16.66
BKCT Bancorp Connecticut Inc. CT 495,178 48,996 48,996 1.44 1.22 14.00 11.90
FFES First Federal of East Hartford CT 980,415 70,566 70,566 0.59 0.64 8.70 9.39
MECH MECH Financial Inc. CT 960,017 94,422 94,422 1.02 1.01 10.32 10.25
NMSB NewMil Bancorp Inc. CT 369,777 34,574 34,574 0.87 0.67 9.23 7.13
NSSY NSS Bancorp Inc. CT 651,825 55,141 53,781 0.90 0.73 10.77 8.71
NTMG Nutmeg Federal S&LA CT 112,113 9,301 9,301 1.02 0.64 12.39 7.71
WBST Webster Financial Corp. CT 9,163,686 565,916 484,879 0.73 0.75 13.06 13.35
IFSB Independence Federal Svgs Bank DC 265,940 21,169 19,338 1.24 0.32 17.15 4.39
WSFS WSFS Financial Corp. DE 1,595,692 95,087 94,677 1.14 1.10 18.88 18.26
BANC BankAtlantic Bancorp Inc. FL 3,756,571 255,251 197,486 0.84 0.38 13.98 6.43
BKUNA BankUnited Financial Corp. FL 3,584,123 194,962 164,973 0.29 0.19 5.62 3.70
FDTR Federal Trust Corp. FL 151,934 12,838 12,838 NA NA NA NA
FFLC FFLC Bancorp Inc. FL 422,228 52,829 52,829 1.03 1.03 7.99 7.99
FFPB First Palm Beach Bancorp Inc. FL 1,764,026 120,828 118,343 0.45 0.24 6.96 3.74
HARB Harbor Florida Bancshares Inc. FL 1,318,792 258,626 255,748 1.38 1.30 11.30 10.66
OCN Ocwen Financial Corp. FL 3,505,579 427,299 390,927 0.84 0.21 6.98 1.75
EBSI Eagle Bancshares GA 1,120,232 77,551 77,551 0.91 0.89 11.80 11.51
FSTC First Citizens Corp. GA 379,694 37,909 31,106 1.50 1.28 15.02 12.77
FGHC First Georgia Holding Inc. GA 180,806 14,738 13,792 1.16 1.16 14.15 14.15
FLFC First Liberty Financial Corp. GA 1,511,776 117,316 107,417 0.69 0.76 9.13 10.18
FLAG FLAG Financial Corp. GA 442,879 38,582 38,582 0.91 0.68 10.36 7.69
NTBK Net.B@nk Inc. GA 246,714 37,319 36,975 0.66 0.65 2.52 2.50
CASH First Midwest Financial Inc. IA 421,258 42,886 38,297 0.71 0.64 6.60 5.95
HZFS Horizon Financial Svcs Corp. IA 89,947 8,488 8,488 0.67 0.79 6.97 8.26
MIFC Mid-Iowa Financial Corp. IA 135,040 13,412 13,401 1.02 1.01 10.95 10.82
MWBI Midwest Bancshares Inc. IA 160,583 11,820 11,820 0.87 0.76 12.35 10.74
FFFD North Central Bancshares Inc. IA 334,718 49,735 43,229 1.44 1.38 8.73 8.34
SFFC StateFed Financial Corp. IA 89,802 16,084 16,084 1.16 1.16 6.49 6.50
FBNW FirstBank Corp. ID 194,432 30,391 30,391 1.12 0.63 7.62 4.33
ABCL Alliance Bancorp IL 2,099,559 185,602 184,167 0.71 0.81 7.73 8.89
AVND Avondale Financial Corp. IL 520,132 43,475 43,475 -0.90 -0.66 -10.69 -7.88
BFFC Big Foot Financial Corp. IL 220,604 38,094 38,094 0.53 0.40 3.10 2.30
CBCI Calumet Bancorp Inc. IL 491,961 87,250 87,250 1.95 1.97 11.77 11.86
CBK Citizens First Financial Corp. IL 281,068 39,216 39,216 0.71 0.41 5.13 2.93
CSBF CSB Financial Group Inc. IL 47,218 10,953 10,338 0.63 0.60 2.68 2.55
EGLB Eagle BancGroup Inc. IL 174,085 20,976 20,976 0.35 0.12 3.00 1.07
EFC EFC Bancorp Inc. IL 397,644 94,118 94,118 -0.14 0.84 -1.27 7.76
FBCI Fidelity Bancorp Inc. IL 501,708 53,174 53,099 NA NA NA NA
FFBI First Financial Bancorp Inc. IL 82,682 7,631 7,631 0.14 0.28 1.65 3.34
FMBD First Mutual Bancorp Inc. IL 371,357 56,073 43,962 0.42 0.28 2.94 1.94
FSFF First SecurityFed Financial IL 331,044 90,026 89,765 1.12 1.68 4.87 7.29
GTPS Great American Bancorp IL 149,114 23,264 23,264 0.71 0.71 3.82 3.81
HMLK Hemlock Federal Financial Corp IL 197,580 27,994 27,994 0.86 0.85 5.31 5.24
HBEI Home Bancorp of Elgin Inc. IL 386,105 93,310 93,310 0.70 0.70 2.72 2.72
KNK Kankakee Bancorp Inc. IL 401,934 39,232 33,519 0.78 0.75 7.51 7.21
MAFB MAF Bancorp Inc. IL 3,605,904 281,156 251,659 1.09 1.04 13.99 13.38
NBSI North Bancshares Inc. IL 124,940 13,253 13,253 0.37 0.32 3.12 2.71
PFED Park Bancorp Inc. IL 196,813 40,025 40,025 0.92 0.93 4.28 4.36
PSFI PS Financial Inc. IL 85,000 22,763 22,763 1.00 1.72 3.20 5.52
SPBC St. Paul Bancorp Inc. IL 5,948,226 501,428 NA 0.53 0.93 5.71 10.11
WCBI Westco Bancorp Inc. IL 318,500 47,991 47,991 1.41 1.41 9.13 9.08
FBCV 1ST Bancorp IN 260,149 23,855 23,397 0.73 0.52 8.30 5.86
AMFC AMB Financial Corp. IN 111,338 14,118 14,118 0.84 0.53 5.93 3.77
ASBI Ameriana Bancorp IN 375,297 45,641 44,835 0.98 0.84 8.55 7.33
ATSB AmTrust Capital Corp. IN 69,106 7,481 7,407 0.41 0.18 3.87 1.68
BRBI Blue River Bancshares Inc. IN 350,208 -156,133 -156,133 NA NA NA NA
CITZ CFS Bancorp Inc. IN 1,098,105 68,645 68,645 NA NA NA NA
FFWC FFW Corp. IN 203,311 19,129 17,598 1.00 0.87 10.51 9.17
FFED Fidelity Federal Bancorp IN 197,046 7,514 7,514 -3.12 -0.47 -50.68 -7.71
FISB First Indiana Corp. IN 1,738,652 163,061 161,355 1.14 0.74 12.14 7.90
HFGI Harrington Financial Group IN 565,918 19,159 19,159 -0.88 -0.25 -20.62 -5.82
HBFW Home Bancorp IN 360,286 42,947 42,947 0.85 0.83 6.84 6.68
HBBI Home Building Bancorp IN 42,430 5,967 5,967 0.75 0.72 5.70 5.48
HOMF Home Federal Bancorp IN 719,549 66,952 65,255 1.47 1.16 16.66 13.09
HWEN Home Financial Bancorp IN 42,560 7,506 7,506 0.93 0.71 5.34 4.09
LOGN Logansport Financial Corp. IN 90,264 16,987 16,987 1.48 1.50 7.79 7.90
LSBI LSB Financial Corp. IN 218,633 18,376 18,376 0.84 0.72 9.90 8.52
MARN Marion Capital Holdings IN 193,963 37,657 36,854 1.25 1.25 5.94 5.94
MFBC MFB Corp. IN 310,030 30,886 30,886 0.79 0.71 6.94 6.24
MONT Montgomery Financial Corp. IN 117,163 20,065 20,065 0.92 0.92 4.97 4.97
NEIB Northeast Indiana Bancorp IN 203,263 26,512 26,512 1.18 1.18 8.55 8.55
PFDC Peoples Bancorp IN 304,320 45,545 45,545 1.45 1.45 9.56 9.56
PERM Permanent Bancorp Inc. IN 506,725 43,463 35,460 0.61 0.58 6.30 5.97
RIVR River Valley Bancorp IN 135,683 18,490 18,258 0.93 0.82 7.11 6.27
SOBI Sobieski Bancorp Inc. IN 92,497 12,864 12,864 0.62 0.61 4.32 4.22
UCBC Union Community Bancorp IN 108,088 43,537 43,537 NA NA NA NA
FFSL First Independence Corp. KS 123,366 11,815 11,815 0.72 0.72 7.31 7.31
FKAN First Kansas Financial Corp. KS 106,001 20,913 20,643 0.68 0.61 7.98 7.19
LARK Landmark Bancshares Inc. KS 229,337 29,967 29,967 1.06 0.90 7.64 6.45
CKFB CKF Bancorp Inc. KY 62,759 13,536 13,536 1.34 1.34 5.97 5.97
CLAS Classic Bancshares Inc. KY 137,984 20,515 17,643 0.74 0.56 4.90 3.72
CFKY Columbia Financial of Kentucky KY 118,968 37,464 37,464 NA NA NA NA
FFKY First Federal Financial Corp. KY 409,651 54,688 51,904 1.60 1.53 11.84 11.38
FLKY First Lancaster Bancshares KY 53,747 14,123 14,123 0.95 0.95 4.08 4.08
FTSB Fort Thomas Financial Corp. KY 101,352 16,292 16,292 1.18 1.18 7.39 7.39
FKKY Frankfort First Bancorp Inc. KY 134,734 22,298 22,298 1.20 1.20 6.82 6.82
HFFB Harrodsburg First Fin Bancorp KY 109,033 28,934 28,934 1.36 1.35 5.07 5.06
HFBC HopFed Bancorp Inc. KY 217,837 58,321 58,321 1.11 1.11 8.63 8.63
KYF Kentucky First Bancorp Inc. KY 82,046 14,408 14,408 1.07 1.06 6.35 6.28
ANA Acadiana Bancshares Inc. LA 289,187 39,474 39,474 0.96 0.94 6.28 6.13
GSLA GS Financial Corp. LA 145,151 52,308 52,308 1.16 1.01 2.78 2.41
HSTD Homestead Bancorp Inc. LA 82,198 5,925 5,925 0.53 0.36 5.67 3.81
TSH Teche Holding Co. LA 408,823 52,527 52,527 0.94 0.92 7.13 6.97
ABBK Abington Bancorp Inc. MA 546,208 34,779 31,706 0.85 0.65 12.78 9.70
ANDB Andover Bancorp Inc. MA 1,366,375 118,186 118,186 1.25 1.24 15.53 15.45
BYS Bay State Bancorp MA 306,392 64,089 64,089 -0.48 0.47 -2.80 2.75
BFD BostonFed Bancorp Inc. MA 1,096,441 84,190 NA 0.72 0.56 8.73 6.80
CEBK Central Co-operative Bank MA 381,857 37,211 33,899 0.85 0.63 8.64 6.45
FCB Falmouth Bancorp Inc. MA 110,523 23,631 23,631 1.11 0.84 4.72 3.59
FESX First Essex Bancorp Inc. MA 1,314,752 93,816 68,094 0.85 0.73 11.55 9.96
FAB FIRSTFED AMERICA BANCORP INC. MA 1,292,730 111,194 111,194 0.55 0.45 5.50 4.49
HIFS Hingham Instit. for Savings MA 246,844 23,391 23,391 1.25 1.23 12.89 12.72
HPBC Home Port Bancorp Inc. MA 260,456 22,689 22,689 1.45 1.60 14.53 16.07
IPSW Ipswich Savings Bank MA 249,459 13,738 13,738 1.14 1.13 21.21 21.02
LSBX Lawrence Savings Bank MA 339,832 44,486 44,486 2.91 2.85 26.29 25.76
MASB MASSBANK Corp. MA 934,458 110,368 108,956 1.17 1.01 10.22 8.82
MFLR Mayflower Co-operative Bank MA 142,965 13,201 13,016 1.13 0.93 11.78 9.67
MDBK Medford Bancorp Inc. MA 1,134,102 103,101 98,006 1.07 1.01 11.83 11.17
MWBX MetroWest Bank MA 669,111 49,730 49,730 1.25 1.23 16.85 16.51
MYST Mystic Financial Inc. MA 199,049 36,127 36,127 0.90 0.80 6.70 5.96
PBKB People's Bancshares Inc. MA 891,442 32,525 NA 0.81 0.33 20.78 8.48
SWCB Sandwich Bancorp Inc. MA 531,013 44,556 43,319 0.97 0.91 12.32 11.57
SISB SIS Bancorp Inc. MA 1,900,418 139,140 139,140 0.76 0.91 10.59 12.76
WRNB Warren Bancorp Inc. MA 383,814 40,696 40,696 1.61 1.51 15.00 14.05
EQSB Equitable Federal Savings Bank MD 350,555 17,946 17,946 0.70 0.66 13.60 12.91
HRBF Harbor Federal Bancorp Inc. MD 231,693 29,603 29,603 0.79 0.77 6.24 6.03
WSB Washington Savings Bank, FSB MD 273,549 23,039 23,039 0.74 0.50 8.67 5.92
WHGB WHG Bancshares Corp. MD 131,967 20,172 20,172 0.58 0.59 3.16 3.21
FCME First Coastal Corp. ME 171,719 15,372 15,372 0.80 0.73 8.23 7.42
KSBK KSB Bancorp Inc. ME 162,885 13,076 11,611 1.15 1.14 14.83 14.72
MCBN Mid-Coast Bancorp Inc. ME 65,309 5,241 5,241 0.69 0.61 8.30 7.27
NBN Northeast Bancorp ME 322,533 25,140 23,216 0.83 0.76 10.35 9.53
PHBK Peoples Heritage Finl Group ME 9,882,729 750,654 631,214 0.98 1.22 13.25 16.36
BWFC Bank West Financial Corp. MI 181,469 23,275 23,275 0.49 0.51 3.57 3.72
CFSB CFSB Bancorp Inc. MI 847,769 65,957 65,957 1.37 1.23 17.50 15.80
DNFC D & N Financial Corp. MI 1,998,299 111,975 NA 0.85 0.65 15.32 11.72
FLGS Flagstar Bancorp Inc. MI 2,573,280 142,775 138,905 1.37 1.37 23.46 23.46
MSBF MSB Financial Inc. MI 79,967 13,313 13,313 1.57 1.35 9.39 8.10
MSBK Mutual Savings Bank FSB MI 585,875 35,493 35,493 -1.21 -0.40 -22.20 -7.40
OFCP Ottawa Financial Corp. MI 919,865 75,662 62,022 0.89 0.79 10.46 9.33
THR Three Rivers Financial Corp. MI 98,885 12,688 12,648 0.85 0.76 6.45 5.80
BDJI First Federal Bancorp. MN 121,315 12,681 12,681 0.71 0.71 6.67 6.72
FFHH FSF Financial Corp. MN 414,072 43,214 43,214 0.79 0.75 7.31 6.91
HMNF HMN Financial Inc. MN 725,180 70,797 64,963 0.80 0.57 6.34 4.50
MIVI Mississippi View Holding Co. MN 68,619 12,476 12,476 1.08 1.06 6.37 6.27
QCFB QCF Bancorp Inc. MN 150,486 26,328 26,328 1.72 1.67 9.82 9.55
WEFC Wells Financial Corp. MN 185,891 25,189 25,189 1.22 1.11 8.37 7.65
CMRN Cameron Financial Corp MO 220,784 43,856 43,856 1.14 1.12 5.45 5.36
CBES CBES Bancorp Inc. MO 123,856 16,857 16,857 0.94 0.67 6.09 4.36
CNSB CNS Bancorp Inc. MO 97,988 24,278 24,278 0.89 0.76 3.62 3.09
EBI Equality Bancorp Inc. MO 273,361 26,182 26,182 0.59 0.02 6.76 0.23
FBSI First Bancshares Inc. MO 172,173 24,365 23,362 1.08 1.08 7.83 7.79
FTNB Fulton Bancorp Inc. MO 110,110 25,495 25,495 1.06 0.82 4.44 3.45
GFED Guaranty Federal Bcshs Inc. MO 260,043 70,690 70,690 1.25 1.23 5.81 5.72
HFSA Hardin Bancorp Inc. MO 132,997 13,690 13,690 0.71 0.58 6.66 5.39
JSBA Jefferson Savings Bancorp Inc. MO 1,248,923 121,278 98,232 0.72 0.62 7.71 6.66
LXMO Lexington B&L Financial Corp. MO 95,301 15,304 14,274 0.78 0.77 3.83 3.80
MBLF MBLA Financial Corp. MO 203,228 27,841 27,841 0.86 0.85 6.65 6.57
NASB NASB Financial Inc. MO 734,091 62,335 60,513 1.67 1.36 21.15 17.26
NSLB NS&L Bancorp Inc. MO 62,648 11,575 11,494 0.69 0.67 3.58 3.48
PCBC Perry County Financial Corp. MO 89,761 16,577 16,577 0.98 0.97 5.14 5.11
SMBC Southern Missouri Bancorp Inc. MO 155,924 24,112 24,112 0.67 0.69 4.06 4.23
CFTP Community Federal Bancorp MS 263,246 58,635 58,635 1.23 1.07 4.91 4.27
FFBS FFBS BanCorp Inc. MS 134,952 22,544 22,544 1.41 1.41 7.42 7.42
EFBC Empire Federal Bancorp Inc. MT 106,940 38,736 38,736 1.45 1.45 3.94 3.94
UBMT United Financial Corp. MT 205,345 30,277 29,265 1.10 1.14 7.96 8.22
WSTR WesterFed Financial Corp. MT 999,595 111,446 91,538 0.71 0.69 6.60 6.46
CFNC Carolina Fincorp Inc. NC 113,911 15,388 15,388 0.93 1.03 4.24 4.74
CENB Century Bancorp Inc. NC 96,866 18,732 18,732 1.19 1.18 4.51 4.48
COOP Cooperative Bankshares Inc. NC 381,054 30,276 30,276 0.65 0.60 8.36 7.68
SOPN First Savings Bancorp Inc. NC 304,168 69,521 69,521 1.76 1.76 7.64 7.64
GSFC Green Street Financial Corp. NC 173,265 60,463 60,463 1.58 1.58 4.46 4.46
HBS Haywood Bancshares Inc. NC 151,718 22,101 21,400 0.92 1.44 6.34 9.97
KSAV KS Bancorp Inc. NC 113,978 14,606 14,603 1.09 1.09 8.37 8.37
MBSP Mitchell Bancorp Inc. NC 37,306 14,632 14,632 1.23 1.23 3.11 3.11
PDB Piedmont Bancorp Inc. NC 127,607 21,247 21,247 1.26 1.22 7.67 7.42
SSB Scotland Bancorp Inc. NC 61,082 15,226 15,226 1.33 1.33 5.18 5.17
SSFC South Street Financial Corp. NC 203,673 34,474 34,474 0.55 0.53 2.71 2.65
SSM Stone Street Bancorp Inc. NC 112,253 30,675 30,675 1.40 1.40 4.84 4.84
UFRM United Federal Savings Bank NC 301,924 23,413 23,413 0.62 0.52 8.46 7.09
CFB Commercial Federal Corp. NE 8,852,640 643,039 569,894 0.77 0.95 11.41 14.11
NHTB New Hampshire Thrift Bncshrs NH 324,320 26,401 23,064 0.92 0.86 11.82 11.02
FBER 1st Bergen Bancorp NJ 300,755 34,885 34,885 0.72 0.72 5.49 5.49
FSNJ Bayonne Bancshares Inc. NJ 700,225 95,895 95,895 0.74 0.74 5.12 5.13
FSLA First Source Bancorp Inc. NJ 1,221,038 259,320 250,939 1.06 1.03 8.42 8.19
FMCO FMS Financial Corp. NJ 667,423 42,445 42,204 0.81 0.81 13.17 13.16
LVSB Lakeview Financial Corp. NJ 593,856 56,607 37,964 1.72 0.75 15.95 6.96
LFBI Little Falls Bancorp Inc. NJ 351,347 36,928 34,252 0.57 0.57 5.01 5.01
OCFC Ocean Financial Corp. NJ 1,544,344 196,586 NA 0.89 0.89 6.42 6.39
PBCI Pamrapo Bancorp Inc. NJ 394,271 49,175 48,932 1.25 1.21 9.69 9.36
PFSB PennFed Financial Services Inc NJ 1,551,938 103,703 90,222 0.78 0.76 10.96 10.63
TSBS Peoples Bancorp Inc. NJ 872,478 342,136 332,158 1.32 1.29 5.09 4.98
PULS Pulse Bancorp NJ 544,102 45,900 45,900 1.04 1.04 12.66 12.66
RARB Raritan Bancorp Inc. NJ 434,606 31,837 31,464 0.98 0.98 12.86 12.82
SFIN Statewide Financial Corp. NJ 656,635 63,810 63,719 0.79 0.75 8.23 7.85
AABC Access Anytime Bancorp Inc. NM 116,921 9,268 9,268 1.37 1.24 16.61 15.11
GUPB GFSB Bancorp Inc. NM 123,209 14,209 14,209 0.85 0.84 6.00 5.97
AFED AFSALA Bancorp Inc. NY 167,301 19,075 19,075 0.63 0.69 5.01 5.52
ALBK ALBANK Financial Corp. NY 4,156,852 393,296 315,851 1.14 1.13 12.60 12.54
ALBC Albion Banc Corp. NY 74,118 6,296 6,296 0.53 0.50 6.18 5.82
AHCI Ambanc Holding Co. NY 565,387 58,370 58,370 0.41 0.41 3.45 3.52
ASFC Astoria Financial Corp. NY 12,713,056 960,923 712,746 0.83 0.76 10.02 9.24
CNY Carver Bancorp Inc. NY 427,371 35,897 34,702 0.25 0.22 3.00 2.65
CATB Catskill Financial Corp. NY 309,566 68,222 68,222 1.32 1.30 5.48 5.39
CNYF CNY Financial Corp. NY 232,388 31,394 31,394 NA NA NA NA
DME Dime Bancorp Inc. NY 21,242,833 1,339,802 1,106,802 0.92 0.41 15.04 6.78
DCOM Dime Community Bancshares Inc. NY 1,743,657 180,074 156,647 0.93 0.88 7.74 7.38
ESBK Elmira Savings Bank (The) NY 231,725 14,520 14,520 0.47 0.38 7.43 6.11
FIBC Financial Bancorp Inc. NY 340,999 28,730 28,616 0.96 0.93 10.50 10.18
FFIC Flushing Financial Corp. NY 1,143,182 137,137 132,042 0.91 0.95 7.15 7.47
GPT GreenPoint Financial Corp. NY 13,612,611 1,792,301 768,240 1.17 1.20 11.54 11.83
GOSB GSB Financial Corp. NY 129,087 32,157 32,157 0.75 0.71 3.06 2.87
HAVN Haven Bancorp Inc. NY 2,265,248 117,993 112,778 0.45 0.48 7.84 8.32
HRBT Hudson River Bancorp NY 830,966 225,942 225,670 NA NA NA NA
ICBC Independence Comm. Bank Corp. NY 5,156,958 939,055 887,501 -0.05 0.76 -0.29 4.81
JSB JSB Financial Inc. NY 1,563,460 380,011 380,011 3.00 2.52 12.76 10.72
PEEK Peekskill Financial Corp. NY 200,341 43,206 43,206 0.98 1.01 4.02 4.11
QCSB Queens County Bancorp Inc. NY 1,706,583 147,919 147,919 1.56 1.54 15.63 15.43
RELY Reliance Bancorp Inc. NY 2,493,186 185,555 127,760 0.82 0.81 9.84 9.78
RCBK Richmond County Financial Corp NY 1,692,615 329,826 328,729 0.50 1.35 2.87 7.82
RSLN Roslyn Bancorp Inc. NY 3,719,166 591,860 589,293 1.31 1.24 7.98 7.52
SFED SFS Bancorp Inc. NY 178,093 21,915 21,915 0.66 0.64 5.40 5.23
SKAN Skaneateles Bancorp Inc. NY 266,730 18,342 17,910 0.62 0.61 8.92 8.69
SIB Staten Island Bancorp Inc. NY 3,351,470 691,716 674,534 1.07 1.63 5.22 8.00
ROSE TR Financial Corp. NY 4,183,362 266,200 266,200 1.04 0.88 16.84 14.19
WSBI Warwick Community Bancorp NY 410,394 86,150 86,150 0.57 0.97 3.72 6.31
YFCB Yonkers Financial Corp. NY 401,565 41,343 41,343 0.89 0.81 6.79 6.16
ASBP ASB Financial Corp. OH 116,437 14,490 14,490 0.95 0.94 6.38 6.29
CAFI Camco Financial Corp. OH 588,220 58,182 54,705 1.25 0.89 12.89 9.23
COFI Charter One Financial OH 19,841,639 1,503,433 1,418,496 0.95 1.21 13.08 16.56
CIBI Community Investors Bancorp OH 102,535 10,343 10,343 0.90 0.90 8.22 8.22
DCBI Delphos Citizens Bancorp Inc. OH 115,901 26,041 26,041 1.48 1.48 6.03 6.03
EMLD Emerald Financial Corp. OH 642,991 53,703 53,122 1.17 1.05 14.21 12.68
EFBI Enterprise Federal Bancorp OH 406,893 36,630 35,857 0.76 0.66 7.27 6.30
FFDF FFD Financial Corp. OH 90,966 15,825 15,825 1.06 0.75 4.65 3.29
FFYF FFY Financial Corp. OH 651,746 84,216 84,216 1.25 1.22 9.28 9.08
FFOH Fidelity Financial of Ohio OH 531,926 66,015 58,730 0.90 0.86 7.20 6.90
FDEF First Defiance Financial OH 582,124 103,272 103,272 0.93 0.89 4.96 4.72
FFBZ First Federal Bancorp Inc. OH 207,381 16,493 16,479 0.82 0.77 10.73 10.08
FFHS First Franklin Corp. OH 231,879 20,864 20,791 0.81 0.68 8.83 7.39
GFCO Glenway Financial Corp. OH 303,332 29,221 28,995 0.91 0.91 9.62 9.60
HHFC Harvest Home Financial Corp. OH 96,085 10,288 10,288 0.59 0.56 5.26 4.98
HCFC Home City Financial Corp. OH 78,042 10,827 10,827 1.29 1.29 6.94 6.93
HLFC Home Loan Financial Corp. OH 84,691 31,933 31,933 1.49 1.49 4.64 4.64
INBI Industrial Bancorp Inc. OH 388,649 62,174 62,174 1.50 1.50 9.18 9.16
LONF London Financial Corp. OH 37,916 5,218 5,218 1.08 1.00 5.62 5.21
MRKF Market Financial Corp. OH 53,653 15,737 15,737 1.09 1.09 3.15 3.15
METF Metropolitan Financial Corp. OH 1,058,887 39,543 36,688 0.71 0.61 18.08 15.47
MFFC Milton Federal Financial Corp. OH 235,105 26,029 26,029 0.69 0.56 5.80 4.70
OSFS Ohio State Financial Services OH 38,559 10,442 10,442 0.98 0.98 6.13 6.13
OHSL OHSL Financial Corp. OH 252,396 27,172 27,172 0.86 0.78 7.93 7.17
PFFC Peoples Financial Corp. OH 84,906 14,723 14,723 1.06 0.59 5.35 3.00
PSFC Peoples-Sidney Financial Corp. OH 105,903 19,626 19,626 1.18 1.18 5.44 5.44
PTRS Potters Financial Corp. OH 128,149 10,934 10,934 0.77 0.69 8.58 7.69
PVFC PVF Capital Corp. OH 433,279 31,209 31,209 1.23 1.15 17.11 16.01
SFSL Security First Corp. OH 696,462 68,943 68,044 1.43 1.43 15.25 15.21
UCFC United Community Finl Corp. OH 1,692,707 147,500 147,500 NA NA NA NA
WOFC Western Ohio Financial Corp. OH 357,295 51,875 48,516 0.07 0.06 0.49 0.43
WEHO Westwood Homestead Fin. Corp. OH 127,471 24,865 24,865 0.76 0.84 3.31 3.63
WFI Winton Financial Corp. OH 354,193 26,892 26,490 1.20 0.90 16.17 12.12
FFWD Wood Bancorp Inc. OH 166,150 22,551 22,551 1.43 1.17 11.12 9.09
LO Local Financial Corp. OK 1,904,315 102,898 95,152 NA NA NA NA
KFBI Klamath First Bancorp OR 1,008,688 141,037 129,193 0.92 0.91 6.11 6.03
OTFC Oregon Trail Financial Corp. OR 256,460 67,954 67,954 1.09 1.09 4.76 4.76
CVAL Chester Valley Bancorp Inc. PA 377,012 31,849 31,849 1.07 1.01 12.31 11.66
CMSB Commonwealth Bancorp Inc. PA 2,277,725 190,883 149,763 0.52 0.34 5.77 3.74
CRSB Crusader Holding Corp. PA 202,034 23,223 22,004 2.24 2.04 36.72 33.43
ESBF ESB Financial Corp. PA 956,146 67,063 59,892 0.67 0.66 8.73 8.61
FSBI Fidelity Bancorp Inc. PA 396,180 28,082 28,082 0.74 0.72 10.77 10.49
FBBC First Bell Bancorp Inc. PA 750,365 74,138 74,138 1.09 1.08 10.33 10.25
FKFS First Keystone Financial PA 390,970 25,419 25,419 0.75 0.67 11.13 9.87
GAF GA Financial Inc. PA 818,893 110,383 109,425 1.06 0.93 7.72 6.76
HARL Harleysville Savings Bank PA 395,383 25,359 25,359 0.97 0.97 14.71 14.71
LARL Laurel Capital Group Inc. PA 221,369 24,561 24,561 1.42 1.45 13.48 13.73
NEP Northeast PA Financial Corp. PA 477,807 84,958 84,958 -0.36 0.51 -2.92 4.21
PVSA Parkvale Financial Corp. PA 1,123,324 83,990 83,613 1.08 1.06 14.61 14.36
PWBK Pennwood Bancorp Inc. PA 46,080 7,961 7,961 0.59 0.53 3.24 2.91
PHFC Pittsburgh Home Financial Corp PA 372,533 25,835 25,557 0.69 0.62 8.03 7.19
PRBC Prestige Bancorp Inc. PA 164,656 15,925 15,925 0.47 0.45 4.44 4.29
PFNC Progress Financial Corp. PA 618,049 41,857 NA 0.86 0.74 13.98 12.03
PSBI PSB Bancorp Inc. PA 148,841 15,414 15,407 0.55 0.36 4.82 3.16
SHSB SHS Bancorp Inc. PA 88,408 12,241 12,241 0.77 0.72 7.21 6.73
SVRN Sovereign Bancorp Inc. PA 21,496,822 1,147,222 703,292 0.69 0.75 12.45 13.53
THRD TF Financial Corp. PA 689,284 51,638 43,815 0.70 0.57 7.90 6.40
THTL Thistle Group Holdings Co. PA 343,956 29,525 29,525 NA NA NA NA
USAB USABancshares Inc. PA 134,688 13,113 13,037 0.60 0.73 6.39 7.79
WVFC WVS Financial Corp. PA 311,509 32,989 32,989 1.19 1.29 10.56 11.44
YFED York Financial Corp. PA 1,229,268 109,225 109,225 0.84 0.67 9.61 7.58
CFCP Coastal Financial Corp. SC 616,887 36,378 36,378 1.23 0.99 19.93 16.06
FFCH First Financial Holdings Inc. SC 1,839,708 125,163 125,163 0.92 0.90 13.98 13.71
FSPT FirstSpartan Financial Corp. SC 530,412 120,250 120,250 1.42 1.34 5.58 5.26
PEDE Great Pee Dee Bancorp SC 68,400 31,475 31,475 1.40 1.61 5.27 6.02
HBSC Heritage Bancorp Inc. SC 300,868 94,689 94,689 0.95 0.95 6.91 6.88
SCCB S. Carolina Community Bancshrs SC 47,992 9,414 9,414 0.88 0.88 4.00 4.00
SBAN SouthBanc Shares Inc. SC 367,666 76,290 76,290 0.86 0.91 7.37 7.78
UFBS Union Financial Bcshs Inc. SC 183,066 14,747 NA 0.88 0.70 11.07 8.86
HFFC HF Financial Corp. SD 560,648 55,091 55,091 1.07 0.92 10.97 9.46
CAVB Cavalry Bancorp Inc. TN 353,743 101,969 101,969 1.62 1.20 7.05 5.20
TWIN Twin City Bancorp TN 110,610 14,017 14,017 1.02 0.82 7.89 6.41
UTBI United Tennessee Bankshares TN 74,442 20,124 20,124 1.38 1.38 8.68 8.68
BNKU Bank United Corp. TX 13,664,992 684,412 624,821 0.90 0.82 17.78 16.31
CBSA Coastal Bancorp Inc. TX 3,126,286 115,413 83,958 0.55 0.57 15.05 15.48
ETFS East Texas Financial Services TX 122,594 21,185 21,185 0.53 0.46 3.02 2.62
FBHC Fort Bend Holding Corp. TX 318,348 22,753 21,520 0.66 0.44 10.00 6.65
JXVL Jacksonville Bancorp Inc. TX 242,673 35,079 35,079 1.33 1.33 9.13 9.13
BFSB Bedford Bancshares Inc. VA 156,308 20,732 20,732 1.23 1.23 8.85 8.79
CNIT CENIT Bancorp Inc. VA 651,857 51,575 47,747 0.91 0.84 12.66 11.65
CFFC Community Financial Corp. VA 183,230 25,817 25,711 1.00 0.96 7.30 7.01
ESX Essex Bancorp Inc. VA 214,391 15,055 14,927 -0.24 -0.24 -3.13 -3.12
FCBK First Coastal Bankshares VA 603,753 45,268 45,268 0.69 0.49 9.79 6.89
TBFC Telebanc Financial Corp. VA 1,209,466 45,448 43,368 0.29 0.06 6.34 1.27
CASB Cascade Financial Corp. WA 460,469 32,616 32,616 0.87 0.73 12.40 10.40
FMSB First Mutual Savings Bank WA 470,866 34,059 34,059 1.07 0.93 15.48 13.55
FWWB First Washington Bancorp Inc. WA 1,362,063 171,122 141,446 1.16 1.06 8.59 7.88
HFWA Heritage Financial Corp. WA 415,851 93,887 85,256 1.24 0.67 6.15 3.33
HRZB Horizon Financial Corp. WA 553,063 85,382 85,382 1.57 1.53 10.00 9.74
IWBK InterWest Bancorp Inc. WA 2,448,386 172,190 157,626 0.93 0.78 13.60 11.36
RVSB Riverview Bancorp Inc. WA 268,608 61,960 60,039 1.71 1.63 8.52 8.10
STSA Sterling Financial Corp. WA 2,082,182 111,996 49,368 0.36 0.52 6.72 9.59
TSBK Timberland Bancorp Inc. WA 263,112 85,137 85,137 1.84 1.72 8.40 7.88
WFSL Washington Federal Inc. WA 5,637,011 767,172 713,533 2.00 1.94 15.06 14.58
WAMU Washington Mutual Inc. WA 108,359,066 5,800,987 5,484,589 1.03 1.00 18.79 18.35
ABCW Anchor BanCorp Wisconsin WI 2,057,635 130,767 128,798 1.12 0.97 16.96 14.73
FCBF FCB Financial Corp. WI 515,516 75,370 75,370 1.32 1.16 9.29 8.14
FTFC First Federal Capital Corp. WI 1,736,593 122,495 116,936 1.19 0.64 16.78 8.96
FNGB First Northern Capital Corp. WI 710,428 75,418 75,418 0.99 0.91 9.04 8.32
HALL Hallmark Capital Corp. WI 461,715 34,393 34,393 0.67 0.60 8.86 7.86
NWEQ Northwest Equity Corp. WI 96,452 11,754 11,754 1.22 1.13 10.48 9.74
RELI Reliance Bancshares Inc. WI 42,289 22,372 22,372 1.24 1.20 2.43 2.36
STFR St. Francis Capital Corp. WI 1,864,176 121,545 108,022 0.87 0.64 11.29 8.35
AFBC Advance Financial Bancorp WV 114,185 14,928 14,928 0.78 0.68 5.34 4.62
CRZY Crazy Woman Creek Bancorp WY 61,478 14,407 14,407 1.22 1.23 5.13 5.15
TRIC Tri-County Bancorp Inc. WY 86,549 14,232 14,232 1.01 1.03 6.46 6.60
ALL THRIFTS
AVERAGE 1,595,643 123,500 109,407 0.93 0.86 8.24 7.58
MEDIAN 340,999 37,657 35,857 0.92 0.84 7.72 7.20
HIGH 108,359,066 5,800,987 5,484,589 3.38 2.85 36.72 33.43
LOW 37,306 -156,133 -156,133 -3.12 -6.01 -50.68 -49.18
AVERAGE FOR STATE
IN 336,583 26,009 25,397 0.69 0.73 3.81 5.44
AVERAGE BY REGION
MIDWEST 1,037,666 103,681 86,560 0.84 0.85 7.00 7.18
NEW ENGLAND 550,908 51,065 50,057 1.10 0.95 11.97 10.18
MID ATLANTIC 983,332 101,409 95,264 1.02 1.00 8.30 8.04
SOUTHEAST 737,268 66,651 61,677 0.96 0.85 9.00 7.86
SOUTHWEST 842,527 79,358 78,551 1.08 0.02 10.67 1.35
WEST 4,084,728 233,322 197,472 0.82 0.79 7.96 7.78
AVERAGE BY EXCHANGE
NYSE 14,396,986 998,233 786,285 1.08 0.91 11.39 9.35
AMEX 401,476 43,374 41,151 0.76 0.77 6.26 5.97
OTC/NASDAQ 1,258,551 100,331 91,438 0.94 0.86 8.31 7.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
*
Number of Mkt.
Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- ---------------------------------- -------------
<S> <C> <C> <C> <C>
FFDB FirstFed Bancorp Inc. AL 11/19/91 NASDAQ 2,434,420 29.21
SRN Southern Banc Co. AL 10/05/95 AMSE 1,230,313 19.07
SCBS Southern Community Bancshares AL 12/23/96 NASDAQ 1,137,350 16.78
SZB SouthFirst Bancshares Inc. AL 02/14/95 AMSE 967,444 18.38
FFBH First Federal Bancshares of AR AR 05/03/96 NASDAQ 4,871,063 128.47
HCBBE HCB Bancshares Inc. AR 05/07/97 NASDAQ 2,645,000 39.01
PFSL Pocahontas Bancorp Inc. AR 04/01/98 NASDAQ 6,685,283 65.18
FTF Texarkana First Financial Corp AR 07/07/95 AMSE 1,675,992 37.50
BPLS Bank Plus Corp. CA NA NASDAQ 19,386,715 237.49
BVCC Bay View Capital Corp. CA 05/09/86 NASDAQ 19,586,498 357.45
BYFC Broadway Financial Corp. CA 01/09/96 NASDAQ 932,523 9.44
DSL Downey Financial Corp. CA 01/01/71 NYSE 28,131,776 669.90
FSSB First FS&LA of San Bernardino CA 02/02/93 NASDAQ 328,296 3.20
FED FirstFed Financial Corp. CA 12/16/83 NYSE 21,187,799 361.53
GSB Golden State Bancorp CA NA NYSE 128,548,958 2563.01
GDW Golden West Financial CA 05/29/59 NYSE 57,172,249 4677.43
HTHR Hawthorne Financial Corp. CA NA NASDAQ 3,170,296 53.90
HEMT HF Bancorp Inc. CA 06/30/95 NASDAQ 6,391,303 102.26
HBNK Highland Bancorp Inc. CA NA NASDAQ 2,179,427 82.55
ITLA ITLA Capital Corp. CA 10/24/95 NASDAQ 7,610,484 106.55
LFCO Life Financial Corp. CA NA NASDAQ 6,562,396 33.23
MBBC Monterey Bay Bancorp Inc. CA 02/15/95 NASDAQ 3,923,204 58.06
PBOC PBOC Holdings Inc. CA NA NASDAQ 21,876,205 240.64
PFFB PFF Bancorp Inc. CA 03/29/96 NASDAQ 15,440,497 235.47
PROV Provident Financial Holdings CA 06/28/96 NASDAQ 4,625,414 75.16
QCBC Quaker City Bancorp Inc. CA 12/30/93 NASDAQ 5,799,226 88.44
SGVB SGV Bancorp Inc. CA 06/29/95 NASDAQ 2,348,068 41.68
UPFC United PanAm Financial Corp. CA NA NASDAQ 17,275,000 97.17
WES Westcorp CA 05/01/86 NYSE 26,397,498 227.68
HCBC High Country Bancorp Inc. CO 12/10/97 NASDAQ 1,322,500 18.85
ANE Alliance Bncp of New England CT 12/19/86 AMSE 2,492,552 39.26
BKC American Bank of Connecticut CT 12/01/81 AMSE 4,702,700 84.06
BKCT Bancorp Connecticut Inc. CT 07/03/86 NASDAQ 5,113,808 98.44
FFES First Federal of East Hartford CT 06/23/87 NASDAQ 2,742,761 96.00
MECH MECH Financial Inc. CT 06/26/96 NASDAQ 5,295,266 132.38
NMSB NewMil Bancorp Inc. CT 02/01/86 NASDAQ 3,837,000 55.16
NSSY NSS Bancorp Inc. CT 06/16/94 NASDAQ 2,378,085 133.17
NTMG Nutmeg Federal S&LA CT NA NASDAQ 1,076,667 11.71
WBST Webster Financial Corp. CT 12/12/86 NASDAQ 37,943,394 924.87
IFSB Independence Federal Svgs Bank DC 06/06/85 NASDAQ 1,281,083 21.78
WSFS WSFS Financial Corp. DE 11/26/86 NASDAQ 12,232,879 196.50
BANC BankAtlantic Bancorp Inc. FL 11/29/83 NASDAQ 36,676,121 472.21
BKUNA BankUnited Financial Corp. FL 12/11/85 NASDAQ 17,785,620 293.46
FDTR Federal Trust Corp. FL NA NASDAQ 4,941,547 22.55
FFLC FFLC Bancorp Inc. FL 01/04/94 NASDAQ 3,693,977 64.18
FFPB First Palm Beach Bancorp Inc. FL 09/29/93 NASDAQ 5,136,459 223.44
HARB Harbor Florida Bancshares Inc. FL 03/19/98 NASDAQ 30,739,518 366.97
OCN Ocwen Financial Corp. FL NA NYSE 60,771,897 1633.24
EBSI Eagle Bancshares GA 04/01/86 NASDAQ 5,805,764 139.34
FSTC First Citizens Corp. GA 03/01/86 NASDAQ 2,794,869 89.09
FGHC First Georgia Holding Inc. GA 02/11/87 NASDAQ 4,798,972 50.39
FLFC First Liberty Financial Corp. GA 12/06/83 NASDAQ 13,368,840 327.54
FLAG FLAG Financial Corp. GA 12/11/86 NASDAQ 5,174,807 86.03
NTBK Net.B@nk Inc. GA NA NASDAQ 6,145,962 181.31
CASH First Midwest Financial Inc. IA 09/20/93 NASDAQ 2,614,471 61.44
HZFS Horizon Financial Svcs Corp. IA 06/30/94 NASDAQ 879,942 13.86
MIFC Mid-Iowa Financial Corp. IA 10/14/92 NASDAQ 1,734,548 19.08
MWBI Midwest Bancshares Inc. IA 11/12/92 NASDAQ 1,071,453 12.59
FFFD North Central Bancshares Inc. IA 03/21/96 NASDAQ 3,104,159 56.65
SFFC StateFed Financial Corp. IA 01/05/94 NASDAQ 1,565,892 21.92
FBNW FirstBank Corp. ID 07/02/97 NASDAQ 1,983,750 44.14
ABCL Alliance Bancorp IL 07/07/92 NASDAQ 11,457,035 210.52
AVND Avondale Financial Corp. IL 04/07/95 NASDAQ 3,059,566 53.16
BFFC Big Foot Financial Corp. IL 12/20/96 NASDAQ 2,512,750 45.23
CBCI Calumet Bancorp Inc. IL 02/20/92 NASDAQ 3,144,861 104.57
CBK Citizens First Financial Corp. IL 05/01/96 AMSE 2,526,021 46.42
CSBF CSB Financial Group Inc. IL 10/09/95 NASDAQ 820,870 10.67
EGLB Eagle BancGroup Inc. IL 07/01/96 NASDAQ 1,177,005 22.51
EFC EFC Bancorp Inc. IL 04/07/98 AMSE 7,491,434 103.48
FBCI Fidelity Bancorp Inc. IL 12/15/93 NASDAQ 2,833,468 64.11
FFBI First Financial Bancorp Inc. IL 10/04/93 NASDAQ 415,399 8.72
FMBD First Mutual Bancorp Inc. IL 07/05/95 NASDAQ 3,530,570 59.14
FSFF First SecurityFed Financial IL 10/31/97 NASDAQ 6,408,000 106.14
GTPS Great American Bancorp IL 06/30/95 NASDAQ 1,370,759 24.50
HMLK Hemlock Federal Financial Corp IL 04/02/97 NASDAQ 1,877,530 26.52
HBEI Home Bancorp of Elgin Inc. IL 09/27/96 NASDAQ 6,658,799 90.73
KNK Kankakee Bancorp Inc. IL 01/06/93 AMSE 1,379,988 45.54
MAFB MAF Bancorp Inc. IL 01/12/90 NASDAQ 22,392,947 523.44
NBSI North Bancshares Inc. IL 12/21/93 NASDAQ 1,270,693 15.25
PFED Park Bancorp Inc. IL 08/12/96 NASDAQ 2,417,789 43.52
PSFI PS Financial Inc. IL 11/27/96 NASDAQ 2,018,708 27.00
SPBC St. Paul Bancorp Inc. IL 05/18/87 NASDAQ 40,597,914 885.56
WCBI Westco Bancorp Inc. IL 06/26/92 NASDAQ 2,405,093 75.16
FBCV 1ST Bancorp IN 04/07/87 NASDAQ 1,091,710 46.40
AMFC AMB Financial Corp. IN 04/01/96 NASDAQ 915,609 16.02
ASBI Ameriana Bancorp IN 03/02/87 NASDAQ 3,252,815 60.58
ATSB AmTrust Capital Corp. IN 03/28/95 NASDAQ 510,354 7.08
BRBI Blue River Bancshares Inc. IN NA NASDAQ NA NA
CITZ CFS Bancorp Inc. IN 07/24/98 NASDAQ NA NA
FFWC FFW Corp. IN 04/05/93 NASDAQ 1,458,032 25.33
FFED Fidelity Federal Bancorp IN 08/31/87 NASDAQ 3,127,208 20.33
FISB First Indiana Corp. IN 08/02/83 NASDAQ 12,708,125 266.87
HFGI Harrington Financial Group IN NA NASDAQ 3,205,339 28.85
HBFW Home Bancorp IN 03/30/95 NASDAQ 2,351,021 69.06
HBBI Home Building Bancorp IN 02/08/95 NASDAQ 311,660 6.62
HOMF Home Federal Bancorp IN 01/23/88 NASDAQ 5,139,176 155.46
HWEN Home Financial Bancorp IN 07/02/96 NASDAQ 929,052 8.36
LOGN Logansport Financial Corp. IN 06/14/95 NASDAQ 1,261,600 20.82
LSBI LSB Financial Corp. IN 02/03/95 NASDAQ 953,531 29.32
MARN Marion Capital Holdings IN 03/18/93 NASDAQ 1,699,307 48.43
MFBC MFB Corp. IN 03/25/94 NASDAQ 1,474,217 30.22
MONT Montgomery Financial Corp. IN 07/01/97 NASDAQ 1,653,032 20.25
NEIB Northeast Indiana Bancorp IN 06/28/95 NASDAQ 1,649,617 34.85
PFDC Peoples Bancorp IN 07/07/87 NASDAQ 3,356,699 76.36
PERM Permanent Bancorp Inc. IN 04/04/94 NASDAQ 4,249,290 65.86
RIVR River Valley Bancorp IN 12/20/96 NASDAQ 1,190,250 22.76
SOBI Sobieski Bancorp Inc. IN 03/31/95 NASDAQ 764,179 14.33
UCBC Union Community Bancorp IN 12/29/97 NASDAQ 3,041,750 44.11
FFSL First Independence Corp. KS 10/08/93 NASDAQ 957,319 13.04
FKAN First Kansas Financial Corp. KS 06/29/98 NASDAQ 1,553,938 19.04
LARK Landmark Bancshares Inc. KS 03/28/94 NASDAQ 1,549,363 41.45
CKFB CKF Bancorp Inc. KY 01/04/95 NASDAQ 843,355 16.08
CLAS Classic Bancshares Inc. KY 12/29/95 NASDAQ 1,299,590 20.79
CFKY Columbia Financial of Kentucky KY 04/15/98 NASDAQ 2,671,450 38.40
FFKY First Federal Financial Corp. KY 07/15/87 NASDAQ 4,129,612 117.69
FLKY First Lancaster Bancshares KY 07/01/96 NASDAQ 958,812 13.90
FTSB Fort Thomas Financial Corp. KY 06/28/95 NASDAQ 1,474,321 21.75
FKKY Frankfort First Bancorp Inc. KY 07/10/95 NASDAQ 1,583,948 22.57
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 NASDAQ 1,930,443 30.89
HFBC HopFed Bancorp Inc. KY 02/09/98 NASDAQ 4,033,625 76.13
KYF Kentucky First Bancorp Inc. KY 08/29/95 AMSE 1,241,105 18.46
ANA Acadiana Bancshares Inc. LA 07/16/96 AMSE 2,278,632 38.74
GSLA GS Financial Corp. LA 04/01/97 NASDAQ 3,266,575 54.72
HSTD Homestead Bancorp Inc. LA 07/20/98 NASDAQ NA NA
TSH Teche Holding Co. LA 04/19/95 AMSE 3,095,080 46.81
ABBK Abington Bancorp Inc. MA 06/10/86 NASDAQ 3,532,000 66.22
ANDB Andover Bancorp Inc. MA 05/08/86 NASDAQ 6,482,836 202.59
BYS Bay State Bancorp MA 03/30/98 AMSE 2,535,232 56.41
BFD BostonFed Bancorp Inc. MA 10/24/95 AMSE 5,368,341 90.93
CEBK Central Co-operative Bank MA 10/24/86 NASDAQ 1,965,000 52.07
FCB Falmouth Bancorp Inc. MA 03/28/96 AMSE 1,454,750 28.73
FESX First Essex Bancorp Inc. MA 08/04/87 NASDAQ 7,562,336 169.21
FAB FIRSTFED AMERICA BANCORP INC. MA 01/15/97 AMSE 7,858,204 111.98
HIFS Hingham Instit. for Savings MA 12/20/88 NASDAQ 1,964,250 32.74
HPBC Home Port Bancorp Inc. MA 08/25/88 NASDAQ 1,841,890 46.05
IPSW Ipswich Savings Bank MA 05/26/93 NASDAQ 2,392,286 31.10
LSBX Lawrence Savings Bank MA 05/02/86 NASDAQ 4,330,800 51.97
MASB MASSBANK Corp. MA 05/28/86 NASDAQ 3,553,610 137.70
MFLR Mayflower Co-operative Bank MA 12/23/87 NASDAQ 899,600 21.14
MDBK Medford Bancorp Inc. MA 03/18/86 NASDAQ 8,717,328 140.57
MWBX MetroWest Bank MA 10/10/86 NASDAQ 14,257,535 87.33
MYST Mystic Financial Inc. MA 01/09/98 NASDAQ 2,711,125 39.65
PBKB People's Bancshares Inc. MA 10/30/86 NASDAQ 3,317,000 56.39
SWCB Sandwich Bancorp Inc. MA 07/25/86 NASDAQ 2,043,475 129.76
SISB SIS Bancorp Inc. MA 02/08/95 NASDAQ 7,170,956 276.98
WRNB Warren Bancorp Inc. MA 07/09/86 NASDAQ 7,910,554 73.17
EQSB Equitable Federal Savings Bank MD 09/10/93 NASDAQ 1,223,400 37.31
HRBF Harbor Federal Bancorp Inc. MD 08/12/94 NASDAQ 1,862,795 39.35
WSB Washington Savings Bank, FSB MD NA AMSE 4,420,606 35.09
WHGB WHG Bancshares Corp. MD 04/01/96 NASDAQ 1,389,002 21.88
FCME First Coastal Corp. ME NA NASDAQ 1,360,527 17.35
KSBK KSB Bancorp Inc. ME 06/24/93 NASDAQ 1,261,447 20.18
MCBN Mid-Coast Bancorp Inc. ME 11/02/89 NASDAQ 713,015 9.00
NBN Northeast Bancorp ME 08/19/87 AMSE 2,614,285 39.21
PHBK Peoples Heritage Finl Group ME 12/04/86 NASDAQ 87,783,810 1574.67
BWFC Bank West Financial Corp. MI 03/30/95 NASDAQ 2,623,629 37.06
CFSB CFSB Bancorp Inc. MI 06/22/90 NASDAQ 8,166,983 234.80
DNFC D & N Financial Corp. MI 02/13/85 NASDAQ 9,164,146 182.14
FLGS Flagstar Bancorp Inc. MI NA NASDAQ 13,670,000 333.21
MSBF MSB Financial Inc. MI 02/06/95 NASDAQ 1,338,051 19.46
MSBK Mutual Savings Bank FSB MI 07/17/92 NASDAQ 4,290,414 32.18
OFCP Ottawa Financial Corp. MI 08/19/94 NASDAQ 5,717,096 150.07
THR Three Rivers Financial Corp. MI 08/24/95 AMSE 783,313 15.18
BDJI First Federal Bancorp. MN 04/04/95 NASDAQ 998,275 18.47
FFHH FSF Financial Corp. MN 10/07/94 NASDAQ 2,932,958 52.79
HMNF HMN Financial Inc. MN 06/30/94 NASDAQ 5,430,259 86.21
MIVI Mississippi View Holding Co. MN 03/24/95 NASDAQ 740,243 13.69
QCFB QCF Bancorp Inc. MN 04/03/95 NASDAQ 1,321,034 40.29
WEFC Wells Financial Corp. MN 04/11/95 NASDAQ 1,652,160 28.09
CMRN Cameron Financial Corp MO 04/03/95 NASDAQ 2,433,732 48.22
CBES CBES Bancorp Inc. MO 09/30/96 NASDAQ 939,607 19.26
CNSB CNS Bancorp Inc. MO 06/12/96 NASDAQ 1,644,598 28.78
EBI Equality Bancorp Inc. MO 12/02/97 AMSE 2,517,534 35.87
FBSI First Bancshares Inc. MO 12/22/93 NASDAQ 2,213,600 29.33
FTNB Fulton Bancorp Inc. MO 10/18/96 NASDAQ 1,719,250 31.59
GFED Guaranty Federal Bcshs Inc. MO 12/31/97 NASDAQ 6,228,035 80.58
HFSA Hardin Bancorp Inc. MO 09/29/95 NASDAQ 816,392 13.37
JSBA Jefferson Savings Bancorp Inc. MO 04/08/93 NASDAQ 10,029,624 313.43
LXMO Lexington B&L Financial Corp. MO 06/06/96 NASDAQ 1,008,685 16.27
MBLF MBLA Financial Corp. MO 06/24/93 NASDAQ 1,247,021 29.62
NASB NASB Financial Inc. MO 09/27/85 NASDAQ 2,239,672 118.98
NSLB NS&L Bancorp Inc. MO 06/08/95 NASDAQ 685,858 12.00
PCBC Perry County Financial Corp. MO 02/13/95 NASDAQ 827,897 18.94
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 NASDAQ 1,484,190 32.65
CFTP Community Federal Bancorp MS 03/26/96 NASDAQ 4,398,250 75.87
FFBS FFBS BanCorp Inc. MS 07/01/93 NASDAQ 1,572,244 33.41
EFBC Empire Federal Bancorp Inc. MT 01/27/97 NASDAQ 2,480,484 37.21
UBMT United Financial Corp. MT NA NASDAQ 1,698,312 47.98
WSTR WesterFed Financial Corp. MT 01/10/94 NASDAQ 5,588,862 115.97
CFNC Carolina Fincorp Inc. NC 11/25/96 NASDAQ 1,905,545 20.01
CENB Century Bancorp Inc. NC 12/23/96 NASDAQ 1,270,869 21.60
COOP Cooperative Bankshares Inc. NC 08/21/91 NASDAQ 3,027,440 52.98
SOPN First Savings Bancorp Inc. NC 01/06/94 NASDAQ 3,710,820 90.92
GSFC Green Street Financial Corp. NC 04/04/96 NASDAQ 4,083,219 60.23
HBS Haywood Bancshares Inc. NC 12/18/87 AMSE 1,250,356 27.82
KSAV KS Bancorp Inc. NC 12/30/93 NASDAQ 885,356 21.91
MBSP Mitchell Bancorp Inc. NC 07/12/96 NASDAQ 930,902 15.36
PDB Piedmont Bancorp Inc. NC 12/08/95 AMSE 2,688,000 26.04
SSB Scotland Bancorp Inc. NC 04/01/96 AMSE 1,913,600 15.79
SSFC South Street Financial Corp. NC 10/03/96 NASDAQ 4,676,360 46.47
SSM Stone Street Bancorp Inc. NC 04/01/96 AMSE 1,843,452 35.72
UFRM United Federal Savings Bank NC 07/01/80 NASDAQ 3,283,314 59.10
CFB Commercial Federal Corp. NE 12/31/84 NYSE 42,056,132 1330.03
NHTB New Hampshire Thrift Bncshrs NH 05/22/86 NASDAQ 2,094,555 38.75
FBER 1st Bergen Bancorp NJ 04/01/96 NASDAQ 2,585,243 47.83
FSNJ Bayonne Bancshares Inc. NJ 08/22/97 NASDAQ 9,094,495 143.24
FSLA First Source Bancorp Inc. NJ 04/09/98 NASDAQ 31,739,555 307.49
FMCO FMS Financial Corp. NJ 12/14/88 NASDAQ 7,220,184 74.01
LVSB Lakeview Financial Corp. NJ 12/22/93 NASDAQ 4,880,268 122.01
LFBI Little Falls Bancorp Inc. NJ 01/05/96 NASDAQ 2,477,525 45.83
OCFC Ocean Financial Corp. NJ 07/03/96 NASDAQ 14,757,000 221.36
PBCI Pamrapo Bancorp Inc. NJ 11/14/89 NASDAQ 2,842,924 77.47
PFSB PennFed Financial Services Inc NJ 07/15/94 NASDAQ 9,385,988 155.46
TSBS Peoples Bancorp Inc. NJ 04/09/98 NASDAQ 36,373,038 359.18
PULS Pulse Bancorp NJ 09/18/86 NASDAQ 3,120,300 86.59
RARB Raritan Bancorp Inc. NJ 03/01/87 NASDAQ 2,373,007 71.78
SFIN Statewide Financial Corp. NJ 10/02/95 NASDAQ 4,396,821 92.33
AABC Access Anytime Bancorp Inc. NM 08/08/86 NASDAQ 1,217,336 14.61
GUPB GFSB Bancorp Inc. NM 06/30/95 NASDAQ 1,165,537 18.79
AFED AFSALA Bancorp Inc. NY 10/01/96 NASDAQ 1,319,018 25.06
ALBK ALBANK Financial Corp. NY 04/01/92 NASDAQ 13,384,214 746.17
ALBC Albion Banc Corp. NY 07/26/93 NASDAQ 752,448 6.40
AHCI Ambanc Holding Co. NY 12/27/95 NASDAQ 4,105,164 72.87
ASFC Astoria Financial Corp. NY 11/18/93 NASDAQ 26,593,495 1120.25
CNY Carver Bancorp Inc. NY 10/25/94 AMSE 2,314,275 30.66
CATB Catskill Financial Corp. NY 04/18/96 NASDAQ 4,486,115 75.70
CNYF CNY Financial Corp. NY 10/06/98 NASDAQ NA NA
DME Dime Bancorp Inc. NY 08/19/86 NYSE 112,027,000 2835.74
DCOM Dime Community Bancshares Inc. NY 06/26/96 NASDAQ 11,714,008 243.07
ESBK Elmira Savings Bank (The) NY 03/01/85 NASDAQ 726,660 21.53
FIBC Financial Bancorp Inc. NY 08/17/94 NASDAQ 1,706,666 55.04
FFIC Flushing Financial Corp. NY 11/21/95 NASDAQ 11,337,307 166.28
GPT GreenPoint Financial Corp. NY 01/28/94 NYSE 95,123,000 3032.05
GOSB GSB Financial Corp. NY 07/09/97 NASDAQ 2,248,250 38.22
HAVN Haven Bancorp Inc. NY 09/23/93 NASDAQ 8,849,268 226.76
HRBT Hudson River Bancorp NY 07/01/98 NASDAQ 17,853,750 180.77
ICBC Independence Comm. Bank Corp. NY 03/17/98 NASDAQ 76,043,750 1069.40
JSB JSB Financial Inc. NY 06/27/90 NYSE 9,832,590 575.83
PEEK Peekskill Financial Corp. NY 12/29/95 NASDAQ 2,895,569 51.76
QCSB Queens County Bancorp Inc. NY 11/23/93 NASDAQ 21,418,928 572.96
RELY Reliance Bancorp Inc. NY 03/31/94 NASDAQ 8,983,938 253.80
RCBK Richmond County Financial Corp NY 02/18/98 NASDAQ 26,423,550 396.35
RSLN Roslyn Bancorp Inc. NY 01/13/97 NASDAQ 41,399,959 667.57
SFED SFS Bancorp Inc. NY 06/30/95 NASDAQ 1,208,472 27.79
SKAN Skaneateles Bancorp Inc. NY 06/02/86 NASDAQ 1,444,617 26.73
SIB Staten Island Bancorp Inc. NY 12/22/97 NYSE 45,130,312 812.35
ROSE TR Financial Corp. NY 06/29/93 NASDAQ 17,629,854 469.39
WSBI Warwick Community Bancorp NY 12/23/97 NASDAQ 6,606,548 112.31
YFCB Yonkers Financial Corp. NY 04/18/96 NASDAQ 2,772,225 53.37
ASBP ASB Financial Corp. OH 05/11/95 NASDAQ 1,654,788 22.13
CAFI Camco Financial Corp. OH NA NASDAQ 5,481,276 105.06
COFI Charter One Financial OH 01/22/88 NASDAQ 132,541,371 3296.97
CIBI Community Investors Bancorp OH 02/07/95 NASDAQ 1,266,320 18.84
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 NASDAQ 1,755,991 28.32
EMLD Emerald Financial Corp. OH 10/05/93 NASDAQ 10,296,527 118.41
EFBI Enterprise Federal Bancorp OH 10/17/94 NASDAQ 2,210,996 60.53
FFDF FFD Financial Corp. OH 04/03/96 NASDAQ 1,445,350 27.82
FFYF FFY Financial Corp. OH 06/28/93 NASDAQ 4,010,990 130.36
FFOH Fidelity Financial of Ohio OH 03/04/96 NASDAQ 5,598,180 89.57
FDEF First Defiance Financial OH 10/02/95 NASDAQ 8,157,867 115.23
FFBZ First Federal Bancorp Inc. OH 07/13/92 NASDAQ 3,150,532 42.93
FFHS First Franklin Corp. OH 01/26/88 NASDAQ 1,704,373 27.06
GFCO Glenway Financial Corp. OH 11/30/90 NASDAQ 2,283,494 50.24
HHFC Harvest Home Financial Corp. OH 10/10/94 NASDAQ 879,357 12.97
HCFC Home City Financial Corp. OH 12/30/96 NASDAQ 904,590 13.57
HLFC Home Loan Financial Corp. OH 03/26/98 NASDAQ 2,248,250 29.23
INBI Industrial Bancorp Inc. OH 08/01/95 NASDAQ 4,999,436 89.99
LONF London Financial Corp. OH 04/01/96 NASDAQ 510,160 8.55
MRKF Market Financial Corp. OH 03/27/97 NASDAQ 1,335,725 17.70
METF Metropolitan Financial Corp. OH NA NASDAQ 7,051,270 104.89
MFFC Milton Federal Financial Corp. OH 10/07/94 NASDAQ 2,236,836 33.55
OSFS Ohio State Financial Services OH 09/29/97 NASDAQ 634,168 9.83
OHSL OHSL Financial Corp. OH 02/10/93 NASDAQ 2,495,972 34.94
PFFC Peoples Financial Corp. OH 09/13/96 NASDAQ 1,351,541 18.08
PSFC Peoples-Sidney Financial Corp. OH 04/28/97 NASDAQ 1,785,375 31.91
PTRS Potters Financial Corp. OH 12/31/93 NASDAQ 951,236 16.41
PVFC PVF Capital Corp. OH 12/30/92 NASDAQ 3,990,808 69.17
SFSL Security First Corp. OH 01/22/88 NASDAQ 7,863,587 202.49
UCFC United Community Finl Corp. OH 07/09/98 NASDAQ NA NA
WOFC Western Ohio Financial Corp. OH 07/29/94 NASDAQ 2,297,589 56.87
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 NASDAQ 2,435,618 25.27
WFI Winton Financial Corp. OH 08/04/88 AMSE 4,014,304 47.67
FFWD Wood Bancorp Inc. OH 08/31/93 NASDAQ 2,668,750 42.70
LO Local Financial Corp. OK NA AMSE 20,537,209 266.98
KFBI Klamath First Bancorp OR 10/05/95 NASDAQ 9,916,766 189.04
OTFC Oregon Trail Financial Corp. OR 10/06/97 NASDAQ 4,694,875 73.94
CVAL Chester Valley Bancorp Inc. PA 03/27/87 NASDAQ 2,443,852 73.90
CMSB Commonwealth Bancorp Inc. PA 06/17/96 NASDAQ 14,763,505 226.99
CRSB Crusader Holding Corp. PA NA NASDAQ 3,832,500 60.68
ESBF ESB Financial Corp. PA 06/13/90 NASDAQ 5,665,206 103.75
FSBI Fidelity Bancorp Inc. PA 06/24/88 NASDAQ 1,973,987 44.41
FBBC First Bell Bancorp Inc. PA 06/29/95 NASDAQ 6,228,820 93.82
FKFS First Keystone Financial PA 01/26/95 NASDAQ 2,413,416 41.63
GAF GA Financial Inc. PA 03/26/96 AMSE 7,142,975 109.38
HARL Harleysville Savings Bank PA 08/04/87 NASDAQ 1,675,199 54.03
LARL Laurel Capital Group Inc. PA 02/20/87 NASDAQ 2,206,385 39.71
NEP Northeast PA Financial Corp. PA 04/01/98 AMSE 6,427,350 90.79
PVSA Parkvale Financial Corp. PA 07/16/87 NASDAQ 6,380,961 151.87
PWBK Pennwood Bancorp Inc. PA 07/15/96 NASDAQ 697,394 9.41
PHFC Pittsburgh Home Financial Corp PA 04/01/96 NASDAQ 1,969,369 32.99
PRBC Prestige Bancorp Inc. PA 06/27/96 NASDAQ 1,051,940 19.20
PFNC Progress Financial Corp. PA 07/18/83 NASDAQ 5,192,000 67.50
PSBI PSB Bancorp Inc. PA 07/17/98 NASDAQ NA NA
SHSB SHS Bancorp Inc. PA 10/01/97 NASDAQ 819,950 13.94
SVRN Sovereign Bancorp Inc. PA 08/12/86 NASDAQ 163,725,461 2179.68
THRD TF Financial Corp. PA 07/13/94 NASDAQ 3,191,449 81.78
THTL Thistle Group Holdings Co. PA 07/14/98 NASDAQ NA NA
USAB USABancshares Inc. PA NA NASDAQ 2,002,209 21.96
WVFC WVS Financial Corp. PA 11/29/93 NASDAQ 3,614,720 55.12
YFED York Financial Corp. PA 02/01/84 NASDAQ 8,968,031 187.21
CFCP Coastal Financial Corp. SC 09/26/90 NASDAQ 6,255,589 121.20
FFCH First Financial Holdings Inc. SC 11/10/83 NASDAQ 13,659,000 232.20
FSPT FirstSpartan Financial Corp. SC 07/09/97 NASDAQ 4,208,856 126.27
PEDE Great Pee Dee Bancorp SC 12/31/97 NASDAQ 2,202,125 38.26
HBSC Heritage Bancorp Inc. SC 04/07/98 NASDAQ 4,628,750 87.95
SCCB S. Carolina Community Bancshrs SC 07/07/94 NASDAQ 579,664 12.39
SBAN SouthBanc Shares Inc. SC 04/15/98 NASDAQ 4,306,410 83.44
UFBS Union Financial Bcshs Inc. SC NA NASDAQ 1,275,464 22.00
HFFC HF Financial Corp. SD 04/08/92 NASDAQ 4,283,958 62.12
CAVB Cavalry Bancorp Inc. TN 03/17/98 NASDAQ 7,538,250 141.34
TWIN Twin City Bancorp TN 01/04/95 NASDAQ 1,241,230 16.60
UTBI United Tennessee Bankshares TN 01/05/98 NASDAQ 1,454,750 19.87
BNKU Bank United Corp. TX 08/09/96 NASDAQ 31,582,896 1131.08
CBSA Coastal Bancorp Inc. TX NA NASDAQ 7,361,757 116.87
ETFS East Texas Financial Services TX 01/10/95 NASDAQ 1,539,461 23.09
FBHC Fort Bend Holding Corp. TX 06/30/93 NASDAQ 1,816,808 41.79
JXVL Jacksonville Bancorp Inc. TX 04/01/96 NASDAQ 2,421,747 44.80
BFSB Bedford Bancshares Inc. VA 08/22/94 NASDAQ 2,297,900 35.62
CNIT CENIT Bancorp Inc. VA 08/06/92 NASDAQ 4,996,610 114.92
CFFC Community Financial Corp. VA 03/30/88 NASDAQ 2,568,946 38.53
ESX Essex Bancorp Inc. VA NA AMSE 1,059,203 3.31
FCBK First Coastal Bankshares VA 11/01/80 NASDAQ 4,984,420 93.46
TBFC Telebanc Financial Corp. VA NA NASDAQ 4,494,988 62.93
CASB Cascade Financial Corp. WA 09/16/92 NASDAQ 4,308,509 57.09
FMSB First Mutual Savings Bank WA 12/17/85 NASDAQ 4,244,175 74.80
FWWB First Washington Bancorp Inc. WA 11/01/95 NASDAQ 11,698,980 268.55
HFWA Heritage Financial Corp. WA 01/09/98 NASDAQ 9,656,176 142.43
HRZB Horizon Financial Corp. WA 08/01/86 NASDAQ 7,487,951 119.81
IWBK InterWest Bancorp Inc. WA NA NASDAQ 15,651,345 358.02
RVSB Riverview Bancorp Inc. WA 10/01/97 NASDAQ 6,185,990 102.84
STSA Sterling Financial Corp. WA NA NASDAQ 7,605,612 131.20
TSBK Timberland Bancorp Inc. WA 01/13/98 NASDAQ 6,612,500 109.11
WFSL Washington Federal Inc. WA 11/17/82 NASDAQ 51,446,129 1286.15
WAMU Washington Mutual Inc. WA 03/11/83 NASDAQ 387,599,422 13081.48
ABCW Anchor BanCorp Wisconsin WI 07/16/92 NASDAQ 17,840,362 348.46
FCBF FCB Financial Corp. WI 09/24/93 NASDAQ 3,857,280 117.65
FTFC First Federal Capital Corp. WI 11/02/89 NASDAQ 18,472,249 267.85
FNGB First Northern Capital Corp. WI 12/29/83 NASDAQ 8,801,945 96.82
HALL Hallmark Capital Corp. WI 01/03/94 NASDAQ 2,938,608 33.79
NWEQ Northwest Equity Corp. WI 10/11/94 NASDAQ 825,301 16.71
RELI Reliance Bancshares Inc. WI 04/19/96 NASDAQ 2,395,564 19.76
STFR St. Francis Capital Corp. WI 06/21/93 NASDAQ 4,787,683 172.36
AFBC Advance Financial Bancorp WV 01/02/97 NASDAQ 1,030,648 18.81
CRZY Crazy Woman Creek Bancorp WY 03/29/96 NASDAQ 938,845 15.84
TRIC Tri-County Bancorp Inc. WY 09/30/93 NASDAQ 1,167,498 14.59
ALL THRIFTS
AVERAGE 9,302,862 211.29
MEDIAN 2,914,264 53.97
HIGH 387,599,422 13,081.48
LOW 311,660 3.20
AVERAGE FOR STATE
IN 2,447,547 48.62
AVERAGE BY REGION
MIDWEST 7,623,622 169.11
NEW ENGLAND 3,645,466 81.55
MID ATLANTIC 8,145,399 163.09
SOUTHEAST 6,391,850 123.28
SOUTHWEST 7,178,684 86.13
WEST 15,877,411 366.34
AVERAGE BY EXCHANGE
NYSE 56,943,565 1,701.71
AMEX 3,649,112 53.98
OTC/NASDAQ 8,133,742 172.87
</TABLE>
<PAGE>
EXHIBIT 4
KELLER & COMPANY
Dublin, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED MUTUAL HOLDING COMPANIES
AS OF OCTOBER 23, 1998
<TABLE>
<CAPTION>
PER SHARE
*
Latest All Time All Monthly Quarterly Book 12
Time Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- --------------- ---------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT NASDAQ 24.125 41.125 1.250 -5.63 -29.43 13.36 149.96 0.80
CMSV Community Savings Bnkshrs(MHC) FL NASDAQ 20.750 40.750 10.000 -11.23 -42.56 16.66 150.09 0.90
FFFL Fidelity Bankshares Inc. (MHC) FL NASDAQ 22.750 35.375 9.091 -3.19 -21.55 13.28 215.86 0.90
FFSX First Fed SB of Siouxland(MHC) IA NASDAQ 20.250 39.000 8.239 -22.12 -37.69 14.80 194.23 0.48
WCFB Webster City Federal SB (MHC) IA NASDAQ 16.000 22.000 8.813 6.67 -11.72 10.75 45.93 0.80
JXSB Jacksonville Savings Bk (MHC) IL NASDAQ 13.500 25.500 6.667 -15.63 -26.03 9.38 88.96 0.29
BRKL Brookline Bancorp (MHC) MA NASDAQ 12.688 17.984 9.875 2.53 -16.46 9.47 28.71 NA
BCSB BCSB Bankcorp Inc. (MHC) MD NASDAQ 10.000 12.625 9.250 -9.09 -16.67 NA NA NA
LFED Leeds Federal Bankshares (MHC) MD NASDAQ 14.500 23.500 6.583 -6.45 -20.55 9.49 58.27 0.55
PULB Pulaski Bank, FSB (MHC) MO NASDAQ 19.000 51.000 10.500 -13.64 -50.00 11.87 88.76 1.10
GBNK Gaston Federal Bancorp (MHC) NC NASDAQ 12.875 18.063 10.000 -0.96 -12.71 9.14 45.06 NA
LIBB Liberty Bancorp Inc. (MHC) NJ NASDAQ 9.250 11.688 7.250 -2.63 -18.68 NA NA NA
PLSK Pulaski Savings Bank (MHC) NJ NASDAQ 10.500 24.500 10.125 -12.50 -31.71 10.53 89.07 0.30
WEBK West Essex Bancorp (MHC) NJ NASDAQ 10.063 10.063 8.406 NA NA NA NA NA
SBFL Finger Lakes Financial (MHC) NY NASDAQ 9.625 24.750 4.063 -19.79 -47.97 6.12 72.38 0.21
NBCP Niagara Bancorp Inc. (MHC) NY NASDAQ 10.000 17.000 8.500 -4.20 -24.53 8.60 45.21 NA
PBHC Pathfinder Bancorp Inc. (MHC) NY NASDAQ 11.250 26.125 5.500 -15.89 -45.12 8.47 69.96 0.19
SFFS Sound Federal Bancorp (MHC) NY NASDAQ 9.750 9.750 8.500 NA NA NA NA NA
WAYN Wayne Savings Bancshares (MHC) OH NASDAQ 18.000 30.000 6.821 -2.70 -19.10 9.94 104.34 0.58
ALLB Alliance Bank (MHC) PA NASDAQ 13.250 39.000 9.250 -7.02 -51.38 9.06 84.78 0.36
SKBO First Carnegie Deposit (MHC) PA NASDAQ 11.250 21.000 10.125 -2.17 -33.82 10.63 63.30 0.38
HARS Harris Financial Inc. (MHC) PA NASDAQ 14.875 27.875 4.250 -4.42 -26.09 5.56 68.47 0.21
NWSB Northwest Bancorp Inc. (MHC) PA NASDAQ 10.250 18.000 3.688 -8.38 -31.95 4.65 54.71 0.16
PHSB Peoples Home Savings Bk (MHC) PA NASDAQ 12.125 22.125 11.500 -12.61 -34.46 10.62 85.84 0.19
ALL MUTUAL HOLDING COMPANIES
AVERAGE 14.026 25.367 7.844 -7.78 -29.55 10.12 90.19 0.49
MEDIAN 12.782 24.000 8.500 -6.74 -27.76 9.72 78.58 0.38
HIGH 24.125 51.000 11.500 6.67 -11.72 16.66 215.86 1.10
LOW 9.250 9.750 1.250 -22.12 -51.38 4.65 28.71 0.16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRICING RATIOS
*
Price/ Price/ Price/ Price/Core
Earnings Bk. Assets Earnings
Value
State (X) (%) (%) (X)
----- -------- -------- -------- --------
<S> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT 14.19 180.58 16.09 23.20
CMSV Community Savings Bnkshrs(MHC) FL 20.54 124.55 13.83 22.31
FFFL Fidelity Bankshares Inc. (MHC) FL 19.78 171.31 10.54 24.46
FFSX First Fed SB of Siouxland(MHC) IA 17.02 136.82 10.43 17.46
WCFB Webster City Federal SB (MHC) IA 25.00 148.84 34.84 25.00
JXSB Jacksonville Savings Bk (MHC) IL 25.96 143.92 15.18 40.91
BRKL Brookline Bancorp (MHC) MA NA 133.98 44.19 NA
BCSB BCSB Bankcorp Inc. (MHC) MD NA NA NA NA
LFED Leeds Federal Bankshares (MHC) MD 22.66 152.79 24.88 22.66
PULB Pulaski Bank, FSB (MHC) MO 20.65 160.07 21.41 25.33
GBNK Gaston Federal Bancorp (MHC) NC NA 140.86 28.57 NA
LIBB Liberty Bancorp Inc. (MHC) NJ NA NA NA NA
PLSK Pulaski Savings Bank (MHC) NJ 21.43 99.72 11.79 20.19
WEBK West Essex Bancorp (MHC) NJ NA NA NA NA
SBFL Finger Lakes Financial (MHC) NY 35.65 157.27 13.30 45.83
NBCP Niagara Bancorp Inc. (MHC) NY NA 116.28 22.12 NA
PBHC Pathfinder Bancorp Inc. (MHC) NY 22.06 132.82 16.08 28.13
SFFS Sound Federal Bancorp (MHC) NY NA NA NA NA
WAYN Wayne Savings Bancshares (MHC) OH 25.00 181.09 17.25 27.69
ALLB Alliance Bank (MHC) PA 21.37 146.25 15.63 21.37
SKBO First Carnegie Deposit (MHC) PA 30.41 105.83 17.77 37.50
HARS Harris Financial Inc. (MHC) PA 27.55 267.54 21.72 42.50
NWSB Northwest Bancorp Inc. (MHC) PA 22.78 220.43 18.74 23.84
PHSB Peoples Home Savings Bk (MHC) PA 20.21 114.17 14.13 22.05
ALL MUTUAL HOLDING COMPANIES
AVERAGE 23.07 151.76 19.42 27.67
MEDIAN 22.06 145.09 16.67 24.46
HIGH 35.65 267.54 44.19 45.83
LOW 14.19 99.72 10.43 17.46
</TABLE>
<PAGE>
EXHIBIT 5
KELLER & COMPANY
Dublin, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, FDIC-INSURED MUTUAL HOLDING COMPANIES
AS OF OCTOBER 23, 1998
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
* *
Total Total Total Core Core
Assets Equity Tang. ROAA ROAA ROAE ROAE
Equity
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT 9,619,500 856,700 717,900 1.24 0.76 13.54 8.26
CMSV Community Savings Bnkshrs(MHC) FL 765,488 83,078 83,078 0.70 0.65 6.31 5.82
FFFL Fidelity Bankshares Inc. (MHC) FL 1,468,351 90,321 87,742 0.65 0.52 8.94 7.22
FFSX First Fed SB of Siouxland(MHC) IA 551,593 42,020 33,862 0.71 0.69 8.39 8.16
WCFB Webster City Federal SB (MHC) IA 97,096 22,732 22,732 1.40 1.40 5.96 5.96
JXSB Jacksonville Savings Bk (MHC) IL 169,745 17,894 17,894 0.60 0.38 5.71 3.62
BRKL Brookline Bancorp (MHC) MA 835,329 275,538 275,538 2.10 1.99 8.50 8.06
BCSB BCSB Bankcorp Inc. (MHC) MD 320,627 25,687 25,656 0.76 0.68 8.14 7.25
LFED Leeds Federal Bankshares (MHC) MD 302,737 49,308 49,308 1.13 1.13 6.86 6.86
PULB Pulaski Bank, FSB (MHC) MO 186,917 24,988 24,988 1.08 0.87 8.12 6.54
GBNK Gaston Federal Bancorp (MHC) NC 202,615 41,107 41,107 NA NA NA NA
LIBB Liberty Bancorp Inc. (MHC) NJ 255,357 33,523 33,523 0.62 0.58 7.96 7.45
PLSK Pulaski Savings Bank (MHC) NJ 187,776 22,207 22,207 0.54 0.58 4.60 4.89
WEBK West Essex Bancorp (MHC) NJ 312,522 29,802 24,121 NA NA NA NA
SBFL Finger Lakes Financial (MHC) NY 258,394 21,850 21,850 0.41 0.32 4.62 3.56
NBCP Niagara Bancorp Inc. (MHC) NY 1,345,187 256,042 256,042 0.65 0.96 5.04 7.51
PBHC Pathfinder Bancorp Inc. (MHC) NY 198,091 23,544 20,097 0.75 0.58 6.38 4.96
SFFS Sound Federal Bancorp (MHC) NY 280,949 33,307 33,307 NA NA NA NA
WAYN Wayne Savings Bancshares (MHC) OH 259,402 24,715 24,715 0.72 0.65 7.53 6.81
ALLB Alliance Bank (MHC) PA 277,490 29,634 29,634 0.76 0.76 6.88 6.88
SKBO First Carnegie Deposit (MHC) PA 145,590 24,457 24,457 0.56 0.45 3.36 2.69
HARS Harris Financial Inc. (MHC) PA 2,325,602 188,828 170,664 0.83 0.54 10.28 6.73
NWSB Northwest Bancorp Inc. (MHC) PA 2,562,584 217,879 195,814 0.94 0.91 10.29 9.94
PHSB Peoples Home Savings Bk (MHC) PA 236,916 29,312 29,312 0.72 0.66 5.61 5.14
ALL MUTUAL HOLDING COMPANIES
AVERAGE 965,244 102,686 94,398 0.85 0.76 7.29 6.40
MEDIAN 279,220 31,555 31,471 0.72 0.66 6.88 6.81
HIGH 9,619,500 856,700 717,900 2.10 1.99 13.54 9.94
LOW 97,096 17,894 17,894 0.41 0.32 3.36 2.69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
*
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- ---------------------------------------------
<S> <C> <C> <C> <C>
PBCT People's Bank (MHC) CT 07/06/88 NASDAQ 64,146,566 1563.57
CMSV Community Savings Bnkshrs(MHC) FL 10/24/94 NASDAQ 5,100,120 168.30
FFFL Fidelity Bankshares Inc. (MHC) FL 01/07/94 NASDAQ 6,802,442 194.72
FFSX First Fed SB of Siouxland(MHC) IA 07/13/92 NASDAQ 2,839,943 102.24
WCFB Webster City Federal SB (MHC) IA 08/15/94 NASDAQ 2,113,993 40.69
JXSB Jacksonville Savings Bk (MHC) IL 04/21/95 NASDAQ 1,908,121 40.07
BRKL Brookline Bancorp (MHC) MA 03/25/98 NASDAQ 29,095,000 432.79
BCSB BCSB Bankcorp Inc. (MHC) MD 07/08/98 NASDAQ NA NA
LFED Leeds Federal Bankshares (MHC) MD 05/02/94 NASDAQ 5,195,597 98.72
PULB Pulaski Bank, FSB (MHC) MO 05/11/94 NASDAQ 2,105,840 78.31
GBNK Gaston Federal Bancorp (MHC) NC 04/13/98 NASDAQ 4,496,500 68.57
LIBB Liberty Bancorp Inc. (MHC) NJ 07/01/98 NASDAQ NA NA
PLSK Pulaski Savings Bank (MHC) NJ 04/03/97 NASDAQ 2,108,088 33.47
WEBK West Essex Bancorp (MHC) NJ 10/05/98 NASDAQ NA NA
SBFL Finger Lakes Financial (MHC) NY 11/11/94 NASDAQ 3,570,000 66.49
NBCP Niagara Bancorp Inc. (MHC) NY 04/20/98 NASDAQ 29,756,250 438.90
PBHC Pathfinder Bancorp Inc. (MHC) NY 11/16/95 NASDAQ 2,831,374 62.29
SFFS Sound Federal Bancorp (MHC) NY 10/08/98 NASDAQ NA NA
WAYN Wayne Savings Bancshares (MHC) OH 06/25/93 NASDAQ 2,486,188 64.64
ALLB Alliance Bank (MHC) PA 03/03/95 NASDAQ 3,273,166 94.51
SKBO First Carnegie Deposit (MHC) PA 04/04/97 NASDAQ 2,300,000 43.70
HARS Harris Financial Inc. (MHC) PA 01/25/94 NASDAQ 33,964,950 747.23
NWSB Northwest Bancorp Inc. (MHC) PA 11/07/94 NASDAQ 46,840,970 740.70
PHSB Peoples Home Savings Bk (MHC) PA 07/10/97 NASDAQ 2,760,000 41.40
ALL MUTUAL HOLDING COMPANIES
AVERAGE 12,684,755 256.07
MEDIAN 3,421,583 86.41
HIGH 64,146,566 1,563.57
LOW 1,908,121 33.47
</TABLE>
<PAGE>
EXHIBIT 6
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
<TABLE>
<CAPTION>
Number Conversion
of (IPO)
Offices Exchange Date
----------------------------------
SUBJECT
LINCOLN FEDERAL
SAVINGS BANK Plainfield IN 4 NA NA
COMPARABLE GROUP
<S> <C> <C> <C>
ASBI Ameriana New IN 9 NASDAQ 03/02/87
Bancorp Castle
ASBP ASB Financial Portsmouth OH 1 NASDAQ 05/11/95
Corp.
FFWC FFW Wabash IN 4 NASDAQ 04/05/93
Corporation
FFOH Fidelity Financial of Ohio, Cincinnati OH 12 NASDAQ 03/04/96
Inc.
FFHS First Franklin Cincinnati OH 7 NASDAQ 01/26/88
Corporation
FNGB First Northern Capital Green WI 19 NASDAQ 12/29/83
Corporation Bay
HALL Hallmark Capital West WI 3 NASDAQ 01/03/94
Corp. Allis
MFBC MFB Mishawaka IN 5 NASDAQ 03/25/94
Corp.
MWBI Midwest Bancshares, Burlington IA 5 NASDAQ 11/12/92
Inc.
NEIB Northeast Indiana Bancorp, Huntington IN 3 NASDAQ 06/28/95
Inc.
Average 6.8
Median 5.0
High 19.0
Low 1.0
</TABLE>
<TABLE>
<CAPTION>
Most Recent Quarter
-
Total Goodwill
Total Int. Net and Total Total
Earning
Assets Assets Loans Intang. Deposits Equity
($000) ($000) ($000) ($000) ($000) ($000)
-------------------------------------------------------------------
SUBJECT
LINCOLN FEDERAL
<S> <C> <C> <C> <C> <C> <C>
SAVINGS BANK 321,825 308,147 186,015 0 212,623 43,239
COMPARABLE GROUP
ASBI Ameriana 375,297 362,422 267,304 806 310,624 45,641
Bancorp
ASBP ASB Financial 116,437 114,122 76,550 0 93,477 14,490
Corp.
FFWC FFW 203,311 196,708 139,394 1,531 125,256 19,129
Corporation
FFOH Fidelity Financial of Ohio, 531,926 516,200 423,728 7,285 418,404 66,015
Inc.
FFHS First Franklin 231,879 228,811 149,524 73 198,830 20,864
Corporation
FNGB First Northern Capital 710,428 674,004 621,916 0 524,431 75,418
Corporation
HALL Hallmark Capital 461,715 440,431 284,693 0 292,122 34,393
Corp.
MFBC MFB 310,030 296,839 246,348 0 180,666 30,886
Corp.
MWBI Midwest Bancshares, 160,583 155,658 94,931 0 104,712 11,820
Inc.
NEIB Northeast Indiana Bancorp, 203,263 198,820 177,889 0 122,040 26,512
Inc.
Average 330,487 318,402 248,228 970 237,056 34,517
Median 270,955 262,825 212,119 0 189,748 28,699
High 710,428 674,004 621,916 7,285 524,431 75,418
Low 116,437 114,122 76,550 0 93,477 11,820
</TABLE>
<PAGE>
EXHIBIT 7
KELLER & COMPANY
Dublin, Ohio
614-766-1426
RECENTLY CONVERTED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
IPO CLOSING RATIOS CURRENT RATIOS
* *
Price/ Price/ Price/ Price/
Price/ Book Tang. Price/ Price/ Book Tang. Price/
Bk. Bk.
IPO EarningsValue Value Assets EarningsValue Value Assets
Date (X) (%) (%) (%) (X) (%) (%) (%)
--------------------------------- -------- ----------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UTBI United Tennessee Bankshares TN 01/05/98 16.10 78.40 78.40 18.50 13.59 78.63 78.63 21.25
(1) HFWA Heritage Financial Corp. WA 01/09/98 NA 100.00 NA NA 21.61 106.74 117.50 24.09
MYST Mystic Financial Inc. MA 01/09/98 17.50 77.80 77.75 15.30 17.01 91.90 91.90 16.68
TSBK Timberland Bancorp Inc. WA 01/13/98 10.50 81.50 81.54 24.30 12.50 93.17 93.17 30.16
HFBC HopFed Bancorp Inc. KY 02/09/98 12.40 75.40 NA 16.60 20.31 118.00 118.00 31.59
RCBK Richmond County Financial Corp NY 02/18/98 14.00 79.60 79.64 19.80 16.83 118.69 119.08 23.12
ICBC Independence Comm. Bank Corp. NY 03/17/98 17.90 77.20 82.65 15.90 22.08 107.29 113.54 19.54
CAVB Cavalry Bancorp Inc. TN 03/17/98 14.30 79.80 NA 21.50 23.52 139.05 139.05 40.09
(1) HARB Harbor Florida Bancshares Inc. FL 03/19/98 NA 100.00 NA NA 14.76 126.34 127.70 24.77
(2) BRKL Brookline Bancorp (MHC) MA 03/25/98 19.40 122.50 122.48 17.00 17.62 133.98 133.98 44.19
HLFC Home Loan Financial Corp. OH 03/26/98 17.00 75.90 NA 27.10 15.87 84.95 84.95 32.02
BYS Bay State Bancorp MA 03/30/98 20.90 78.60 78.65 16.80 22.24 84.89 84.89 19.14
NEP Northeast PA Financial Corp. PA 04/01/98 18.70 75.40 75.42 13.90 NA 78.29 78.29 15.13
(1) PFSL Pocahontas Bancorp Inc. AR 04/01/98 NA 100.00 NA NA NA 102.97 106.38 14.87
EFC EFC Bancorp Inc. IL 04/07/98 13.50 76.60 76.63 18.00 NA 85.10 85.10 20.14
HBSC Heritage Bancorp Inc. SC 04/07/98 16.10 78.00 NA 21.90 NA 84.31 84.31 26.54
(1) TSBS Peoples Bancorp Inc. NJ 04/09/98 NA 100.00 NA NA 27.78 106.27 109.41 41.68
(1) FSLA First Source Bancorp Inc. NJ 04/09/98 NA 100.00 NA NA NA 101.75 105.09 21.61
(2) GBNK Gaston Federal Bancorp (MHC) NC 04/13/98 24.50 116.80 NA 10.90 NA 140.86 140.86 28.57
(1) CFKY Columbia Financial of Kentucky KY 04/15/98 19.60 74.50 74.49 20.40 NA 91.83 91.83 28.91
SBAN SouthBanc Shares Inc. SC 04/15/98 NA 100.00 NA NA NA 100.70 100.70 20.90
(2) NBCP Niagara Bancorp Inc. (MHC) NY 04/20/98 20.70 122.10 122.09 10.30 NA 116.28 116.28 22.12
FKAN First Kansas Financial Corp. KS 06/29/98 14.00 78.50 78.54 14.00 NA 74.29 75.24 14.66
(2) HRBT Hudson River Bancorp NY 07/01/98 22.30 80.10 NA 20.70 NA 73.13 73.24 21.62
LIBB Liberty Bancorp Inc. (MHC) NJ 07/01/98 20.40 121.60 121.62 7.80 NA NA NA NA
(2) BCSB BCSB Bankcorp Inc. (MHC) MD 07/08/98 26.10 142.30 142.26 8.30 NA NA NA NA
UCFC United Community Finl Corp. OH 07/09/98 14.10 77.80 77.81 24.30 NA NA NA NA
(1) THTL Thistle Group Holdings Co. PA 07/14/98 NA 100.00 NA NA NA NA NA NA
(1) PSBI PSB Bancorp Inc. PA 07/17/98 NA 100.00 NA NA NA NA NA NA
(1) HSTD Homestead Bancorp Inc. LA 07/20/98 NA 100.00 NA NA NA NA NA NA
CITZ CFS Bancorp Inc. IN 07/24/98 18.20 71.70 NA 19.30 NA NA NA NA
(2) WEBK West Essex Bancorp (MHC) NJ 10/05/98 40.20 95.40 95.41 5.60 NA NA NA NA
CNYF CNY Financial Corp. NY 10/06/98 47.20 69.90 69.95 18.30 NA NA NA NA
(2) SFFS Sound Federal Bancorp (MHC) NY 10/08/98 15.60 100.00 99.97 8.30 NA NA NA NA
AVERAGE (3) 17.81 80.76 81.55 18.43 NA 95.66 96.20 23.64
MEDIAN (3) 16.10 77.90 78.47 18.30 NA 88.50 88.50 21.08
HIGH (3) 47.20 121.60 121.62 27.10 NA 139.05 139.05 40.09
LOW (3) 10.50 69.90 69.95 7.80 NA 74.29 75.24 14.66
</TABLE>
(1) Second stage conversion.
(2) Mutual holding company
(3) Statistics do not include second stage conversions and mutual holding
companies.
<PAGE>
<TABLE>
<CAPTION>
PRICES AND CHANGE FROM IPO DATE
*
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
----------------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
UTBI United Tennessee Bankshares TN 10.00 14.75 47.50 13.75 37.50 14.25 42.50
(1) HFWA Heritage Financial Corp. WA 10.00 13.25 32.50 13.25 32.50 14.25 42.50
MYST Mystic Financial Inc. MA 10.00 14.44 44.38 15.63 56.25 15.00 50.00
TSBK Timberland Bancorp Inc. WA 10.00 14.50 45.00 16.00 60.00 16.00 60.00
HFBC HopFed Bancorp Inc. KY 10.00 16.81 68.13 16.00 60.00 16.75 67.50
RCBK Richmond County Financial Corp NY 10.00 16.31 63.13 16.44 64.38 17.88 78.75
ICBC Independence Comm. Bank Corp. NY 10.00 17.25 72.50 17.56 75.63 18.13 81.25
CAVB Cavalry Bancorp Inc. TN 10.00 20.56 105.63 24.38 143.75 24.00 140.00
(1) HARB Harbor Florida Bancshares Inc. FL 10.00 12.00 20.00 11.69 16.88 12.63 26.25
(2) BRKL Brookline Bancorp (MHC) MA 10.00 16.56 65.63 17.00 70.00 17.88 78.75
HLFC Home Loan Financial Corp. OH 10.00 15.25 52.50 16.19 61.88 16.75 67.50
BYS Bay State Bancorp MA 20.00 29.38 46.88 29.63 48.13 30.13 50.63
NEP Northeast PA Financial Corp. PA 10.00 15.50 55.00 15.38 53.75 15.44 54.38
(1) PFSL Pocahontas Bancorp Inc. AR 10.00 10.44 4.38 10.25 2.50 9.94 (0.62)
EFC EFC Bancorp Inc. IL 10.00 14.75 47.50 14.94 49.38 14.13 41.25
HBSC Heritage Bancorp Inc. SC 15.00 22.31 48.75 22.00 46.67 22.00 46.67
(1) TSBS Peoples Bancorp Inc. NJ 10.00 10.44 4.38 10.56 5.63 10.63 6.25
(1) FSLA First Source Bancorp Inc. NJ 10.00 10.56 5.63 10.50 5.00 10.50 5.00
(2) GBNK Gaston Federal Bancorp (MHC) NC 10.00 18.00 80.00 16.38 63.75 16.75 67.50
(1) CFKY Columbia Financial of Kentucky KY 10.00 17.13 71.25 15.94 59.38 16.00 60.00
SBAN SouthBanc Shares Inc. SC 20.00 22.75 13.75 22.50 12.50 20.88 4.38
(2) NBCP Niagara Bancorp Inc. (MHC) NY 10.00 16.31 63.13 16.56 65.63 16.25 62.50
FKAN First Kansas Financial Corp. KS 10.00 12.31 23.13 12.25 22.50 11.50 15.00
(2) HRBT Hudson River Bancorp NY 10.00 12.56 25.63 13.50 35.00 13.38 33.75
LIBB Liberty Bancorp Inc. (MHC) NJ 10.00 11.44 14.38 11.63 16.25 11.25 12.50
(2) BCSB BCSB Bankcorp Inc. (MHC) MD 10.00 12.56 25.63 12.63 26.25 11.63 16.25
UCFC United Community Finl Corp. OH 10.00 15.00 50.00 16.00 60.00 15.75 57.50
(1) THTL Thistle Group Holdings Co. PA 10.00 9.94 (0.62) 9.81 (1.87) 9.00 (10.00)
(1) PSBI PSB Bancorp Inc. PA 10.00 9.19 (8.12) 9.13 (8.75) 7.81 (21.87)
(1) HSTD Homestead Bancorp Inc. LA 10.00 9.31 (6.87) 9.25 (7.50) 8.50 (15.00)
CITZ CFS Bancorp Inc. IN 10.00 11.44 14.38 10.94 9.38 9.75 (2.50)
(2) WEBK West Essex Bancorp (MHC) NJ 10.00 10.00 0.00 9.94 (0.62) NA NA
CNYF CNY Financial Corp. NY 10.00 9.50 (5.00) 9.50 (5.00) NA NA
(2) SFFS Sound Federal Bancorp (MHC) NY 10.00 8.50 (15.00) 8.94 (10.62) NA NA
AVERAGE 44.86 48.50 51.02
MEDIAN 47.50 51.57 50.63
HIGH 105.63 143.75 140.00
LOW -5.00 -5.00 -2.50
</TABLE>
(1) Second stage conversion.
(2) Mutual holding company
(3) Statistics do not include second stage conversions and mutual holding
companies.
<PAGE>
EXHIBIT 8
KELLER & COMPANY
Columbus, Ohio
614-766-1426
VALUATION RATIOS
August 14, 1998
SNL Thrift Index 716.85
DJIA 8,425.00
S & P 500 1,062.75
<TABLE>
<CAPTION>
Price/ Price/Core Price/ Price/
Earnings Earnings Book Value Assets
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
All U.S. thrifts 20.40x 22.78x 146.62% 17.70%
NASDAQ-OTC traded thrifts 20.65x 22.70x 147.77% 17.90%
Comparable group 15.63x 16.92x 128.30% 14.00%
</TABLE>
October 23, 1998
SNL Thrift Index 656.53
% change (8.41)%
DJIA 8,452.29
% change 0.32%
S & P 500 1,070.67
% change 0.75%
<TABLE>
<CAPTION>
Price/ Price/Core Price/ Price/
Earnings Earnings Book Value Assets
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
All U.S. thrifts 17.49x 19.41x 128.43% 15.56%
NASDAQ-OTC traded thrifts 17.74x 19.35x 129.74% 15.73%
Comparable group 13.45x 14.76x 112.83% 11.90%
</TABLE>
<PAGE>
EXHIBIT 9
KELLER & COMPANY
Dublin, Ohio
614-766-1426
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
Stock Prices as of October 23, 1998
<TABLE>
<CAPTION>
Market Data Pricing Ratios
* *
Book Price/ Price/ Price/
Market Price/ 12 Mo. Value/ Price/ Book Price/ Tang. Core
Value Share EPS Share Earnings Value Assets Bk. Earnings
Val.
($M) ($) ($) ($) (X) (%) (%) (%) (%)
---------------------------------- ------------------------------------------
LINCOLN FEDERAL SAVINGS BANK
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appraised value - midpoint 53.00 10.00 0.58 16.47 17.68 60.79 14.52 61.10 18.55
Minimum of range 45.05 10.00 0.64 17.82 15.80 56.13 12.57 56.51 16.60
Maximum of range 60.95 10.00 0.53 15.47 19.43 64.63 16.38 65.01 20.32
Maximum, as adjusted 70.09 10.00 0.48 14.61 21.24 68.46 18.44 68.83 22.16
ALL THRIFTS (355)
Average 222.10 16.89 1.10 13.69 17.49 128.43 15.56 134.64 19.41
Median 46.04 14.75 1.00 13.44 15.36 115.38 14.43 118.02 16.74
INDIANA THRIFTS (24)
Average 47.76 16.60 0.90 14.67 16.26 120.37 14.64 122.62 20.35
Median 27.25 14.63 1.16 14.31 15.08 111.47 13.89 116.45 18.00
COMPARABLE GROUP (10)
Average 39.51 14.29 1.09 12.89 13.45 112.83 11.90 115.53 14.76
Median 28.44 13.69 1.11 12.30 13.21 110.88 11.60 115.13 14.91
COMPARABLE GROUP
ASBI Ameriana Bancorp 58.55 18.00 1.16 14.03 15.52 128.30 15.60 130.62 18.00
ASBP ASB Financial Corp. 19.65 11.88 0.67 8.76 17.72 135.56 16.88 135.56 17.99
FFWC FFW Corp. 21.32 14.63 1.32 13.12 11.08 111.47 10.49 121.17 12.72
FFOH Fidelity Financial of Ohio 77.69 13.88 0.88 11.79 15.77 117.68 14.60 132.27 16.32
FFHS First Franklin Corp. 23.01 13.50 1.06 12.24 12.74 110.29 9.92 110.66 15.17
FNGB First Northern Capital Corp. 90.22 10.25 0.75 8.57 13.67 119.60 12.70 119.60 14.64
HALL Hallmark Capital Corp. 34.90 11.88 0.99 12.35 11.99 96.15 7.56 96.15 13.65
MFBC MFB Corp. 29.48 20.00 1.39 20.95 14.39 95.47 9.51 95.47 16.00
MWBI Midwest Bancshares Inc. 12.86 12.00 1.23 11.03 9.76 108.79 8.01 108.79 11.21
NEIB Northeast Indiana Bancorp 27.39 16.88 1.42 16.07 11.88 105.01 13.70 105.01 11.88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dividends Financial Ratios
* *
Div./ Dividend Payout Equity/ Core Core
Share Yield Ratio Assets ROAA ROAE
($) (%) (%) (%) (%) (%)
-------------------------- -------------------------
LINCOLN FEDERAL SAVINGS BANK
<S> <C> <C> <C> <C> <C>
Appraised value - midpoint 0.00 0.00 0.00 #### 0.80 3.35
Minimum of range 0.00 0.00 0.00 22.40 0.77 3.45
Maximum of range 0.00 0.00 0.00 25.34 0.83 3.26
Maximum, as adjusted 0.00 0.00 0.00 26.94 0.85 3.17
ALL THRIFTS (355)
Average 0.43 1.97 30.73 12.96 0.86 7.58
Median 0.31 2.03 30.33 10.60 0.84 7.20
INDIANA THRIFTS (24)
Average 0.31 1.97 31.44 10.54 0.73 5.44
Median 0.28 2.00 28.41 11.92 0.73 6.11
COMPARABLE GROUP (10)
Average 0.34 2.46 32.16 10.39 0.84 7.88
Median 0.34 2.59 27.58 10.29 0.85 7.63
COMPARABLE GROUP
ASBI Ameriana Bancorp 0.64 3.56 55.17 12.16 0.84 7.33
ASBP ASB Financial Corp. 0.40 3.37 59.70 12.44 0.94 6.29
FFWC FFW Corp. 0.39 2.87 28.41 9.41 0.87 9.17
FFOH Fidelity Financial of Ohio 0.31 2.31 35.23 12.41 0.86 6.90
FFHS First Franklin Corp. 0.28 2.22 26.74 9.00 0.68 7.39
FNGB First Northern Capital Corp. 0.36 3.51 46.67 10.62 0.91 8.32
HALL Hallmark Capital Corp. 0.00 0.00 0.00 7.45 0.60 7.86
MFBC MFB Corp. 0.34 1.70 24.10 9.96 0.71 6.24
MWBI Midwest Bancshares Inc. 0.30 3.00 21.95 7.36 0.76 10.74
NEIB Northeast Indiana Bancorp 0.34 2.02 23.59 13.04 1.18 8.55
</TABLE>
<PAGE>
EXHIBIT 10
KELLER & COMPANY
Dublin, Ohio
614-766-1426
VALUATION ANALYSIS AND CALCULATION
Lincoln Federal Savings Bank/Lincoln Bancorp
Stock Prices as of October 23, 1998
<TABLE>
<CAPTION>
Valuation assumptions: Comparable Group All Thrifts
Symbol Value Average Median Average Median
---------- ---------------- ------------------------------------------ --------------
<S> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 17.68 13.45 13.21 17.49 15.36
Post conv. price to book value P/B 60.79% 112.83% 110.88% 128.43% 115.38%
Post conv. price to assets P/A 14.52% 11.90% 11.60% 15.56% 14.43%
Post conv. price to core earnings P/CE 18.55 14.76 14.91 19.41 16.74
Pre conversion earnings ($) Y $ 2,126,000 For the twelve months ended September 30, 1998
Pre conversion book value ($) B $ 43,239,000 At September 30, 1998.
Pre conversion assets ($) A $ 321,825,000 At September 30, 1998.
Pre conversion core earnings ($) CY $ 1,989,000 For the twelve months ended September 30, 1998
Conversion expense (%) X 2.41%
Fixed asset allocation (%) FA 0.00%
ESOP stock purchase (%) E 8.00%
ESOP cost of borrowings, net (%) S 0.00%
ESOP term of borrowings (yrs.) T 20
RRP amount (%) M 4.00%
RRP term (yrs.) N 5
Tax rate (%) TAX 34.00%
Investment rate of return, net (%) R 2.97%
Investment rate of return, pretax (%) 4.50%
Foundation (%) FDN 3.77%
Tax benefit ($) BEN $ 680,000
Formulae to indicate value after conversion:
1. P/E method: Value = $ 52,915,644
P/E*Y =
1-P/E*((1-X-E-M-FDN-FA)*R-(1-TAX)*E/T-(1-TAX)*MN))
2. P/B method: Value = P/B*(B+BEN) = $ 53,124,507
1-P/B*(1-X-E-M-FDN)
3. P/A method: Value = P/A*A = $ 53,023,123
1-P/A*(1-X-E-M-FDN)
VALUATION CORRELATION AND CONCLUSIONS:
Gross Proceeds Total Number
Shares Price of Public Shares Issued of Shares TOTAL
Offered
to Per Share to Foundation VALUE
Public Offering Issued
Appraised value - midrange 5,100,000 $10.00 $51,000,000 200,000 5,300,000 $53,000,000
Minimum - 85% of midrange 4,305,000 $10.00 $43,050,000 200,000 4,505,000 $45,050,000
Maximum - 115% of midrange 5,895,000 $10.00 $58,950,000 200,000 6,095,000 $60,950,000
Superrange - 115% of maximum 6,809,250 $10.00 $68,092,500 200,000 7,009,250 $70,092,500
</TABLE>
<PAGE>
EXHIBIT 11
KELLER & COMPANY
Dublin, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MINIMUM of the Range
<TABLE>
<CAPTION>
1. Gross Conversion Proceeds
<S> <C> <C>
Minimum market value (1) $ 43,050,000
Less: Estimated conversion expenses 1,200,889
Net conversion proceeds $ 41,849,111
2. Generation of Additional Income
Net conversion proceeds $ 41,849,111
Less: Proceeds not invested (2) 3,604,000
Total conversion proceeds invested $ 38,245,111
Investment rate 2.97%
Earnings increase - return on proceeds invested $ 1,135,880
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 118,932
Less: RRP expense, net of taxes 237,864
Net earnings increase $ 779,084
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 09/30/98 $ 2,126,000 1,989,000
Net earnings increase 779,084 779,084
After conversion $ 2,905,084 2,768,084
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
Before conversion - 09/30/98 $ 43,239,000 42,693,000
Net cash conversion proceeds (4) 37,021,111 37,021,111
After conversion $ 80,260,111 79,714,111
5. Comparative Net Assets
Before conversion - 09/30/98 $ 321,825,000
Conversion proceeds (5) 36,443,111
After conversion $ 358,268,111
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 12
KELLER & COMPANY
Dublin, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MIDPOINT of the Range
<TABLE>
<CAPTION>
1. Gross Conversion Proceeds
<S> <C> <C>
Midpoint market value (1) $ 51,000,000
Less: Estimated conversion expenses 1,276,267
Net conversion proceeds $ 49,723,733
2. Generation of Additional Income
Net conversion proceeds $ 49,723,733
Less: Proceeds not invested (2) 4,240,000
Total conversion proceeds invested $ 45,483,733
Investment rate 2.97%
Earnings increase - return on proceeds invested $ 1,350,867
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 139,920
Less: RRP expense, net of taxes 279,840
Net earnings increase $ 931,107
3. Comparative Earnings
Regular Core
----------------- ------------------
Before conversion - 12 months ended 09/30/98 $ 2,126,000 1,989,000
Net earnings increase 931,107 931,107
After conversion $ 3,057,107 2,920,107
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
Before conversion - 09/30/98 $ 43,239,000 42,693,000
Conversion proceeds (4) 44,043,733 44,043,733
After conversion $ 87,282,733 86,736,733
5. Comparative Net Assets
Before conversion - 09/30/98 $ 321,825,000
Conversion proceeds (5) 43,363,733
After conversion $ 365,188,733
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 13
KELLER & COMPANY
Dublin, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the MAXIMUM of the Range
<TABLE>
<CAPTION>
1. Gross Conversion Proceeds
<S> <C> <C>
Maximum market value (1) $ 58,950,000
Less: Estimated conversion expenses 1,351,644
Net conversion proceeds $ 57,598,356
2. Generation of Additional Income
Net conversion proceeds $ 57,598,356
Less: Proceeds not invested (2) 4,876,000
Total conversion proceeds invested $ 52,722,356
Investment rate 2.97%
Earnings increase - return on proceeds invested $ 1,565,854
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 160,908
Less: RRP expense, net of taxes 321,816
Net earnings increase $ 1,083,130
3. Comparative Earnings
Regular Core
----------------- -----------------
Before conversion - 12 months ended 09/30/98 $ 2,126,000 1,989,000
Net earnings increase 1,083,130 1,083,130
After conversion $ 3,209,130 3,072,130
4. Comparative Net Worth (3) Total Tangible
----------------- -----------------
Before conversion - $ 43,239,000 42,693,000
09/30/98
Conversion proceeds (4) 51,066,356 51,066,356
After conversion $ 94,305,356 93,759,356
5. Comparative Net Assets
Before conversion - $ 321,825,000
09/30/98
Conversion proceeds (5) 50,284,356
After conversion $ 372,109,356
</TABLE>
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
<PAGE>
EXHIBIT 14
KELLER & COMPANY
Dublin, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Lincoln Federal Savings Bank/Lincoln Bancorp
At the SUPERRANGE Maximum
<TABLE>
<CAPTION>
1. Gross Conversion Proceeds
<S> <C> <C>
Superrange market value (1) $ 68,092,500
Less: Estimated conversion expenses 1,438,015
Net conversion proceeds $ 66,654,485
2. Generation of Additional Income
Net conversion proceeds $ 66,654,485
Less: Proceeds not invested (2) 5,607,400
Total conversion proceeds invested $ 61,047,085
Investment rate 2.97%
Earnings increase - return on proceeds invested $ 1,813,098
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings, net of taxes 185,044
Less: RRP expense, net of taxes 370,088
Net earnings increase $ 1,257,966
3. Comparative Earnings
Regular Core
------------------ -----------------
Before conversion - 12 months ended 09/30/98 $ 2,126,000 1,989,000
Net earnings increase 1,257,966 1,257,966
After conversion $ 3,383,966 3,246,966
4. Comparative Net Worth (3) Total Tangible
----------------- ------------------
Before conversion - 09/30/98 $ 43,239,000 42,693,000
Conversion proceeds (4) 59,142,685 59,142,685
After conversion $ 102,381,685 101,835,685
5. Comparative Net Assets
Before conversion - 09/30/98 $ 321,825,000
Conversion proceeds (5) 58,243,385
After conversion $ 380,068,385
(1) Represents gross proceeds of public offering.
(2) Includes ESOP and proceeds invested in fixed assets.
(3) ESOP and RRP are omitted from net worth.
(4) Includes addition of tax benefit of stock contribution to foundation.
(5) Net cash conversion proceeds less tax benefit of stock contribution to
foundation.
</TABLE>
<PAGE>
EXHIBIT 15
KELLER & COMPANY
Dublin, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
<TABLE>
<CAPTION>
Premium or (discount)
from comparable group.
-----------------------------
Average Median
Lincoln Federal
Midpoint:
<S> <C> <C> <C>
Price/earnings 17.68 x 31.44% 33.90%
Price/book value 60.79 % (46.12)% (45.17)%
Price/assets 14.52 % 22.04% 25.21%
Price/tangible book value 61.10 % (47.11)% (46.93)%
Price/core earnings 18.55 x 25.69% 24.45%
Minimum of range:
Price/earnings 15.80 x 17.44% 19.64%
Price/book value 56.13 % (50.25)% (49.38)%
Price/assets 12.57 % 5.69% 8.45%
Price/tangible book value 56.51 % (51.08)% (50.91)%
Price/core earnings 16.60 x 12.45% 11.34%
Maximum of range:
Price/earnings 19.43 x 44.45% 47.15%
Price/book value 64.63 % (42.72)% (41.71)%
Price/assets 16.38 % 37.68% 41.26%
Price/tangible book value 65.01 % (43.73)% (43.54)%
Price/core earnings 20.32 x 37.68% 36.32%
Super maximum of range:
Price/earnings 21.24 x 57.86% 60.82%
Price/book value 68.46 % (39.32)% (38.26)%
Price/assets 18.44 % 55.01% 59.05%
Price/tangible book value 68.83 % (40.42)% (40.22)%
Price/core earnings 22.16 x 50.12% 48.64%
</TABLE>
Exhibit 99(4)
GIFT INSTRUMENT
CHARITABLE GIFT TO THE LINCOLN BANCORP FOUNDATION
Lincoln Bancorp, 1121 E. Main Street, P.O. Box 510, Plainfield, Indiana
(the "Company"), desires to make a gift of its common stock, without par value
(the "Common Stock"), to the Lincoln Bancorp Foundation (the "Foundation"), a
non-stock corporation organized under the laws of the State of Indiana. The
purpose of the donation is to establish a bond between Lincoln Bancorp and the
community in which it and its affiliates operate to enable the community to
share in the potential growth and success of the Company and its affiliates over
the long term. To that end, the Company now gives, transfers, and delivers to
the Foundation 200,000 shares of its Common Stock, subject to the following
conditions:
1. The Foundation shall use the donation solely for charitable
purposes as provided by Section 503(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"), including, but not limited to,
community development, in the communities in which the Company and its
affiliates operate in accordance with the provisions of the
Foundation's Articles of Incorporation.
2. Consistent with the Company's intent to form a long-term
bond between the Company and the community, the amount of Common Stock
that may be sold by the Foundation in any one year shall not exceed 5%
of the market value (measured as of the first business day of each
year), of the assets held by the Foundation or such amount as may be
necessary to maintain the Foundation's designation as a tax-exempt
organization under Section 501(c)(3) of the Code, except that this
restriction shall not prohibit the Board of Directors of the Foundation
from selling a greater amount of Common Stock in any one year if the
Board of Directors of the Foundation determines that the failure to
sell a greater amount of the Common Stock held by the Foundation would
result in the long-term reduction in the value of the Foundation's
assets relative to their then current value that would jeopardize the
Foundation's capacity to carry out its charitable purposes.
3. The Common Stock contributed to the Foundation by the
Company shall, for so long as such shares are held by the Foundation,
be considered by the Company to be voted in the same ratio as all other
shares of Common Stock of the Company which are voted on each and every
proposal considered by shareholders of the Company, provided, however,
that if this Condition No. 3 is waived by the Office of Thrift
Supervision pursuant to Office of Thrift Supervision Order No. ____,
dated _________, 1998 (a copy of which is attached hereto), then this
Condition No. 3 shall become void and of no effect.
Dated: , 1998 LINCOLN BANCORP
By:
T. Tim Unger, President and
Chief Executive Officer
-1-
