[IBSF LETTERHEAD]
July 30, 1997
[Name and Address of
Institution]
Dear ______________:
After reviewing the Institutional Shareholder Services ("ISS") report
received yesterday, there are several issues that we would like to address
and have you consider before you decide how to vote your shares of IBS
Financial ("IBSF") common stock.
The Seidman Group's Agenda Is Not Necessarily A Sale of IBSF
The Seidman group's proxy materials indicate they want IBSF to retain
the services of an investment banking firm to "assist in the formulation of
a program to maximize shareholder value," which may merely consist of
attempting to increase earnings per share and deposits and accelerating our
stock repurchase program.
Ryan Beck & Co. has served as our investment banker since 1994 and has
assisted us on a number of matters, including ways to maximize shareholder
value. We are already working to increase our earnings per share and
deposits (we are #4 in market share in our primary market). In addition,
our stock repurchases started well before the Seidman group filed its first
Schedule 13D and will continue in the future. Each year we have
repurchased more shares than permitted by the OTS conversion regulations
for companies converted less than three years, and these restrictions
expire for us in October 1997.
We Beleive the Seidman Group Is Attempting to Acquire Control
Based on the absolute refusal of the Seidman group to be satisfied
with the one Board seat that we were prepared to give them, based on the
change in control applications previously filed by Seidman regarding HUBCO
and Crestmont Federal and based on the change in control filing recently
made by the Seidman group regarding Wayne Bancorp a mere three months after
the Seidman group agreed with Wayne Bancorp not to do so, we believe
Seidman and the members of his group intend to acquire control of the Board
of Directors and a controlling interest in our common stock.
<PAGE>
2
In each of the prior change in control filings made by Seidman and the
members of his group, Seidman acquired (or proposed to acquire in Wayne) a
controlling stock interest by making open market purchases at prevailing
market prices, with no control premium paid to the existing stockholders of
------------------------------------------------------------
such companies.
- --------------
We do not believe this is the best interests of all of our
stockholders. In its report, ISS ignored the control filings made by
Seidman and his group in the three companies referred to above, and ISS
discounted the control argument by simply stating "this election of two out
of seven directors cannot result in a change in control of the board."
Based on our discussions with Seidman and Whitman and their past and recent
history, we fully expect that they will conduct another expensive and
disruptive proxy contest again next year, at which time they can obtain
majority control of the Board if they win this year.
We Are Positioning IBSF to Maximize Stockholder Value
Our aggressive stock repurchases of nearly $50 million and the
multiple increases in our cash dividends have been designed to reduce our
excess capital and increase the franchise value of IBSF. Acquirors do not
pay a premium for excess capital.
Because of the OTS requirements regarding the amount of stock we
needed to sell in our conversion from mutual to stock form in October 1994,
our tangible capital was 22.2% of total assets at December 31, 1994. We
have managed to decrease our capital ratio to 17.4% and intend to reduce it
further in order to increase our franchise value.
The Current Directors Have a Strong Financial Incentive to Maximize
Stockholder Value
Each member of the current Board of Directors (other than
Mr. Lockhart, who is retiring) has purchased with his own personal funds
more shares of IBSF common stock than Messrs. Seidman and Whitman combined,
despite Whitman's assertions to the contrary. Our numbers were based on
cost basis rather than market value and excluded shares held by spouses and
related companies. Whitman attempted to confuse the issue by comparing the
market value of their shares (including those of spouses, partners and
spouses of partners) with the cost basis of our shares. Using Whitman's
numbers, the market value of the shares beneficially owned by the six
members of the Board (excluding Mr. Lockhart and excluding exercisable
stock options) aggregate over $13 million.
We intend to maximize the value of our investment and the investment
of ALL our stockholders.
The Board Will Consider All Competitive Offers
In addition to its very substantial financial stake in IBSF, the Board
of Directors is aware of its fiduciary duties to stockholders. We do not
intend to remain independent for the indefinite future as claimed by
Seidman and Whitman, and the Board will fully consider
<PAGE>
3
and carefully review any bona fide, competitive offer that is made to
acquire IBSF. However, we do not believe it is in the best interests of
all of our stockholders to give the Seidman group multiple seats on the
Board and then let them purchase up to 24.9% of our stock in the open
market as they have recently proposed to do in Wayne Bancorp.
We need your support and urge you to carefully consider this letter
and our position, as well as the true intent of the Seidman group. If you
have any questions or comments, please contact me.
With kind regards, I am
Sincerely,
Joseph M. Ochman, Sr.
cc: IBSF Board of Directors
